Introduction

The Anti-dumping Agreement under GATT (“Agreement”) laid down the

principles to be followed by the member countries for imposition of anti-dumping and
countervailing duties as well as safeguard measures. Accordingly, Indian laws were amended
with effect from January 1, 1995 to bring them in-line with the provisions of the Agreement.
In India, sections 9A, 9B and 9C of the Customs Tariff Act, 1975 (“Act”) and the Customs
Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped
Articles and for Determination of Injury) Rules, 1995 (“Rules”) framed thereunder form the
legal basis for anti-dumping investigations and for the levy of anti-dumping duties.
The present bulletin will provide an overview of the provisions dealing with the antidumping law in
India.

Economic liberalization and internationalization seem to have

become the mainstream trends for international trade after the
establishment of World Trade Organization (WTO) in 1995.
Nonetheless after years of operation, developing and lesserdeveloped countries gradually realize
that market opening does
not bring relatively direct economic and trade benefits so they
protest against market opening. On the other hand, developing
countries and developed countries apply safeguarding policies
for import to practice protectionism, such as antidumping policy.
It is defined in Article 6 of General Agreement on Tariffs and
Trade that dumping refers to the price of a product when sold in
the importing country is less than the price of that product in the
market of the exporting country. According to the “Antidumping
Agreement” of WTO, when dumping competing countries of trade
becomes a fact and the said dumping behavior has caused material
injury to the home-country industries, the countries suffering from
dumping may impose specific antidumping duty on the dumping
suppliers. For the last 30 years, antidumping policy comes one of
the primary trade policy tools for many countries.
In general, literature related to studies of the economic effect of
antidumping policies can be summarized in three categories, as
described below. The first category refers to the “empirical analysis
on the effect of antidumping duty on upstream and downstream
industries.” Relevant research include the study conducted by
Webb (1992), he suggested that the imposition of antidumping
duty will reduce the amount of import to the importing countries
and increase output and profits. Consequent, the domestic related
upstream industries of importing countries will benefit from such
policy, protecting the industries in home country but not necessarily
in favor of the downstream industries and consumers’ benefits
in the importing countries. Kelly and Morkre (1998) discovered
the response of import quantity of foreign products in importing
country is related to the elasticity of substitution between foreign
and domestic goods. The second category refers to the “analysis of
effect of antidumping duty on welfare.” Relevant research includes
the study conducted by Prusa (1996), where he applied regression
analysis and discovered that lower antidumping duty does not
affect import after the imposition of antidumping duty while higher
antidumping duty has significant and negative impact on import.
Another study conducted by Prusa (1999) revealed substantial impact of antidumping duty on
import, and showed the increase
in antidumping duty will reduce import quantity and rising import
price. The study of Staiger and Wolak (1994) revealed the impact
of US antidumping duty on the amount of transactions, and found
that the investigation effect, termination effect and cancellation
effect of antidumping duty imposition will affect (or constrain)
trade amount. Anderson et al. (1995) discovered in their research
that in the existence of actual trade barrier, antidumping policy will
drive the social welfare of importing countries to rise on contrary.
The last category refers to the “analysis of effect of antidumping
on international trade.” Relevant research includes the study
conducted by Feinberg and Kaplan (1993), where they proposed
forming industry protection through antidumping policy. The
findings suggested that the compliant will have curbing effect on the
import once filed, even if the outcome of antidumping investigation
is overruled at the end. Krupp and Pollard (1996) explored into
the case, where ruling outcome will have effect on the involving
export and the import quantity of non-involving countries during
the investigation period of all antidumping cases. In case the final
verdict of antidumping case is affirmative at the time when the
complaining country is conducting investigation on the dumping
cases, the export quantity of the home country of involved supplier
to the complaining country will face significant reduction during the
investigation period and after the investigation. Prusa (1999; 2001)
analyzed the frequent use of antidumping system by industrial
countries to protect their industries while developing countries also
adopt the same pace actively. Antidumping duty has tremendous
impact on import and among the cases imposed with taxes, the
export quantity were reduced by 70% while the import price rose
by 30%. In terms of overruled antidumping cases, the manipulation
of trade investigation alone can reduce the import quantity by 20%.
Durling and Prusa (2006) discovered that antidumping duty will
significantly reduce the export quantity of involving suppliers in
the export to complaining country, namely antidumping will have
significantly destructive effect on trade.

The Rise of Antidumping

Historically, countries seeking to keep out imports relied heavily on tariffs and quotas.18 Much of
the postwar effort toward liberalizing trade therefore has been focused on eliminating quotas and
lowering tariffs. In the
Uruguay Round, which concluded in 1994, countries agreed to cut their
average tariffs on industrial products by forty percent, with even greater cuts
required in several areas.19 Since then, a series of preferential trade agreements have required
additional tariff cuts.20
Prior to the Uruguay Round, countries that had cut tariffs could turn to
non-tariff barriers to protect domestic industry. However, the Uruguay
Round imposed significant restrictions on the use of non-tariff instruments.21 Still, the Uruguay
Round did not eliminate all forms of trade protectionism. Instead, it legitimized antidumping and
other contingent forms of protection.22 Of these, antidumping is by far the most popular. Part I
provides an overview of why is the case.

The Dumping Investigation

Determination of dumping
As per the explanation to section 9A of the Act, the following need to be established
to determine dumping:
1.2.1 The existence of dumping: To establish dumping, a comparison should be made
between the export price and normal value. The Act defines export price as the price at which the
product is exported to India and normal value as the price at which like articles are sold in the
country of the exporter.1
If the normal value cannot be determined by means of domestic sales of the exporting country the
following shall be taken into consideration while
determining normal value: (a) export price of a third country, or (b) cost of production in the
country of origin. A product shall be considered dumped if its export price is less than the
normal price of a similar product in the exporting country.2
This is termed as dumping
margin under the Act.
1.2.2 Ordinary course of trade: A transaction in the ordinary course of trade refers to one
between an independent buyer and seller where the buyer and seller are not related and price
is the sole consideration for the sale. If there is a special or favoured buyer from whom the
seller charges an especially low price, it can be termed as dumping.
1.2.3 Like products: The term like product is a product which is identical in all respects to
the product under consideration, or in the absence of such a product, another product,
which has characteristics closely resembling those of the product under consideration. If
material injury is caused to the Indian domestic industry producing the like product due to
the low pricing of the imported goods, it can be termed as dumping.

Antidumping duties are purportedly meant to act as a remedy against

imports unfairly “dumped” into another market. Theoretically, such duties
are economically justifiable when a foreign producer charges unfair predatory prices. Predatory
pricing occurs when a firm prices a good below cost
with the objective of driving away competitors and capturing a dominant
market position from which it can then extract supernormal profits.34 Foreign firms that engage in
such behavior often enjoy the benefit of government policies that create a sanctuary market in their
home country; this
creates the impression that the foreign government is fostering unfair
trade.35 If antidumping rules were enacted with the goal of combating predatory pricing, then
antidumping laws would operate as a parallel remedy to
domestic antitrust laws. International law would equate “dumping” with
any situation where a foreign import’s price falls below its short-run marginal cost (that is, its
average variable cost).36 Were this the actual legal standard, then instances of “dumping” would be
relatively rare. Indeed, one
study found that only two percent of the EU’s antidumping cases were plausibly targeting predatory
pricing.37
To make it easier to apply antidumping duties, the United States pushed
for a looser legal standard for “dumping” under international law.38 Instead
of requiring evidence of pricing below average variable cost, international law only requires evidence
of pricing below the product’s “normal value.”39
Normal value is a legally-constructed term defined as “the comparable
price, in the ordinary course of trade, for the like product.”40 Most often,
normal value equals the price charged by the foreign producer in its home
market. In other words, under the existing standard, any firm that charges
less for its product overseas than it does at home can be found guilty of
“dumping.”
However, in many instances, firms that engage in this type of pricing
strategy are behaving perfectly rationally. For example, a firm may be making a strategic decision to
earn less profit in an export market than its home
market. This could be for a variety of reasons: the firm does not have an
established reputation overseas; the firm is seeking to gain overseas market
share; the competitive structure of the firm’s home and export markets are
different; and/or the firm is seeking to exploit differences in elasticity of
demand across countries. Provided that the firm is pricing above its average
variable costs, its behavior should not be considered problematic, and according to economic
theory, no remedy is necessary. Moreover, the net effect
for the importing country is often positive since consumers experience welfare gains from lower
prices. Nevertheless, under existing WTO law, a government can impose antidumping duties in such
circumstances. Not all
governments will necessarily take such action. But those that do are acting
as protectionists—benefiting domestic producers at the expense of domestic
consumers and foreign producers, without an economic justification for doing so. And this
protectionist policy is considered legally permissible, as a
result of the “normal value” approach to defining dumping.
By itself, this is troubling. After all, WTO law is commonly thought to
promote free trade rather than endorse protectionism.41 But it becomes even
more problematic when one considers the additional complexities in the existing legal standard.
What happens if the home market price fails to yield a
“normal value” low enough for a government to impose antidumping duties? One would expect the
law would require a negative finding of “dumping,” but that is not the case.
When the conventional method (that is, the method of using home market prices as “normal value”)
fails to yield a positive finding, the WTO
allows governments to examine whether one of three exceptions applies: (1)
whether the goods are not sold in the “ordinary course of trade,”42 (2)
whether less than five percent of the goods are sold in the home market,43
and (3) whether the “particular market situation” in the home market does
not “permit a proper comparison.”44 Together, these exceptions cover a
broad array of circumstances. Provided that one of these amorphous exceptions applies, a
government may use a different approach to calculate “normal value.” The permissible approaches
include calculating “normal value”
based on the price in another export market45 and constructing normal value
de novo.46 For so-called non-market economies,47 normal value can also be
based on a third approach that uses factor costs in surrogate countries.48
Again, these approaches are entirely divorced from economic theory49 and
written to allow governments to manipulate figures to arrive at a “normal
value” that is sufficiently inflated so as to support a finding of dumping.
The net result of these various exceptions and alternative calculation
methodologies is that governments have wide latitude to manipulate figures
to arrive at a determination of “dumping” for rational, non-predatory behavior, which should not be
punished according to economic theory. In
other words, the lax legal standard for “dumping” serves a protectionist
purpose.

Antidumping’s Rapid Global Proliferation

Over the past two decades, use of antidumping laws has expanded rapidly. While the international
law on antidumping may have been originally
drafted for the benefit of the four traditional users, it no longer exclusively
benefits these countries. Between 1985 and 2000, over fifty new countries—
mainly in the developing world—adopted antidumping laws.72 Unlike in
the past, these laws were not simply put on the books, but were quickly
applied. During that fifteen-year period, more than thirty countries, including India and China,
initiated their first antidumping investigation.73
Collectively, these countries have been branded the “new users” of
antidumping.
Table 2 highlights the dramatic shift in the composition base of users of
antidumping law. Whereas the four traditional users (the United States, EU,
Canada, and Australia) once accounted for ninety-seven percent of all antidumping cases filed, they
now account for a mere twenty-seven percent.
Antidumping’s global proliferation began in the late 1980s. In the seven
years immediately preceding the Uruguay Round’s completion
(1987–1994), the antidumping caseload of new users rose more than thirteen-fold. A number of
developing countries—Argentina, Brazil, Mexico,
South Africa, South Korea, and Turkey—began to experiment with antidumping measures.
Only after the Uruguay Round, for the reasons explained earlier, did use
of antidumping laws really take off in the developing world. Since the
WTO’s inception in 1995, new users have initiated over 2,300 antidumping
investigations and enacted more than 1,500 antidumping measures. India,
China, and scores of other developing countries have joined the antidumping “club.” Indeed, the rise
of the new users of antidumping is a phenomenon that has captured the attention of trade
policymakers and scholars
(mainly economists). Yet, the majority of scholarship on this phenomenon
has examined the behavior of new users as a collective group.74 As a result, much of what we
presume to be true about India and China’s relatively new
antidumping regimes is based not on country-specific research, but rather
on findings about the new users collectively.
I suggest that this is a mistake. Among the new users, India and China
stand out. There is clear reason to consider them separately. Most scholars
researching the new users of antidumping examine the statistics for the
group as a whole. If one does this, then the level of antidumping use by new
users appears to be fairly consistent since the Uruguay Round. In the first
seven years following the Agreement (1995–2001), new users (including
India and China) initiated 1,153 antidumping cases. In the next seven years
(2002–2008), they initiated roughly the same amount—1,123 cases. However, if we separate out
India and China, as I have done in Table 2, then we
reach a different conclusion. What Table 2 shows is that, excluding India
and China, use of antidumping measures by this subgroup of new users has
actually declined. New initiations by new users (excluding India and China)
for the period 2002–2008 fell by twenty-three percent as compared to
1995–2001. Only in India and China is the use of antidumping sanctions
still rising.
Indeed, over the past decade, India and China have rapidly ascended to
the top tier of users of antidumping laws. This ascension can be seen in the
annual WTO ranking of the leading initiators of antidumping cases. India
ranked as the top initiator of cases in eight of the nine years between 2001
and 2009.75 China ranked in the top three between 2002 and 2005, and
since has ranked in the top five in two more years.76 Among other WTO
members, only the EU appears with such frequency.
The WTO also annually ranks its members by the number of new antidumping measures levied
against trading partners. This statistic differs
from new initiations in that not every case results in the levying of duties,
and, furthermore, many cases require one to two years to adjudicate. Therefore, while there is
expected overlap between the members on the new initiation and new measures list, those on each
list for a given year do differ.
Again, the results from the annual rankings are striking. Since 2000, India
has ranked first in all but one year.77 Next to India, since 2003, China has
placed in the top five more frequently than any other WTO member.78
India and China’s new antidumping regimes are modeled largely on international norms. Rather than
challenging the legal standard originally put in
place by the United States and EU, India and China have readily embraced

Pillars of Anti-Dumping

As mentioned above, remedy under anti-dumping

provisions is available only in such situations, where
dumping margin of goods from an exporting country into
the importing country has resulted in injury to the domestic
industry of that good in the importing country. Thus,
imposition of AD duties involves detailed examination of 3
principal factors – Dumping, Injury and Causal Link.
Dumping
Rule 10 of the AD Rules states that an article shall be considered as being dumped if it is
exported from a country or territory to India at a price less than its normal value. This means
that ‘dumping margin’ is the difference between the ‘normal’ value of such product and its
corresponding export price.
Dumping Margin = Normal value – Export price
Where,
Normal Value:
Q Domestic price for the like product in the exporting country; OR
Q Representative price of the like product when exported to any appropriate third
country; OR
Q Cost of Production + SGA + Profit
Export price : Price of the article exported from the exporting country or territory.
Comment: Comparison of normal value and export price is normally done at ex-factory level.
Due allowances have to be made with respect to factors affecting fair comparison.
Injury
A domestic industry is said to be injured when its vital signs attributable to the product
concerned, collectively show a significant deterioration. In terms of Section 9B, anti-dumping
duties shall be imposed only when the dumped imports cause material injury to the domestic
industry. The term ‘material injury’ includes threat of material injury and material retardation of
the establishment of the domestic industry. While threat of material injury implies that domestic
industry, though may not be suffering any injury at present, but injury is likely if unfair imports
are allowed to enter into India without a check, material retardation on the other hand means
injury to the domestic industry, which is at a nascent stage of its evolution and has not fully
developed.
Injury to domestic industry is
ascertained by DGAD by broadly
examining two aspects – Volume
effect and price effect of imports
coming into India.
Once injury to domestic industry
is established by examining all the
relevant economic parameters,
DGAD quantifies the extent of injury
by arriving at an injury margin. Injury
margin is determined as the difference between the Non-Injurious Price (or Fair Selling Price)
of the domestic industry and the landed value of imports coming into the country. This tells the
extent to which the imported goods are ‘underselling’ as compared to the fair selling price of
the domestic industry.
Comment: In Bridge Stone Tire Manufacturing (Thailand) vs. DA [2011(270) E.L.T.696 (TriDel)], the
tribunal discussed at length what constitutes ‘Injury’. It noted that the domestic
industry was suffering losses even before the period of investigation (POI) and in fact the
losses had come down to the lowest level during the POI. Further, despite the alleged price
undercutting by imports and claimed potential decline in sales, a number of parameters such
as capacity, production, capacity utilization, sales, selling prices and profitability of return on
investment, wages, employment, productivity etc. recorded an improvement during the POI.
Consequently, the conclusion of DA that the domestic industry was not growing at a higher
rate was found not sufficient. The Tribunal pertinently concluded that in the absence of injury
to the domestic industry, an ADD merely increases the prices of the imported goods for the
domestic consumer and also provides a cushion to the domestic industry to increase their
prices, while the ultimate sufferer is the domestic consumer. It was hence held that imposition
of ADD in such a scenario cannot be considered to be in public interest.
Causal Link
The third and final requirement in any antidumping
investigation is the establishment of causal link
between dumping and material injury to the
domestic industry. It must be demonstrated that
the dumped imports are, through the effects of
dumping, causing injury to the domestic industry.
The demonstration of the causal relationship
shall be based on an examination of all relevant
evidence before DGAD. The use of the words through the effects of dumping” indicates a clear
causal link between the dumped imports
and the material injury. In Agfa Gevaert A.G. vs. DA [2001 (130) E.L.T. 741 (Tri. - Del.)], the
Tribunal concluded that only if causal link between dumping of imported goods and injury
to domestic industry is established, imposition of ADD can be resorted to. Thus, injury to
domestic industry and causal link between that injury and dumped imports is a sine qua non
for imposition of ADD.
Comment: While determining a causal nexus, a question may arise as to whether dumped
imports must be the only cause of injury or the dumped imports should be predominant
cause of injury or is it enough if the dumped imports can be traced as a cause (howsoever
small)? There is no guidance, either in WTO:ADA or the Indian legislation. The view of DGAD
in all the investigations that had taken place so far is to see whether the status of the domestic
industry deteriorated during the Period of Investigation as compared to the previous year/s. In
particular, DGAD examines whether the price of the dumped imports had forced the domestic
industry to match their price to that of the dumped imports and whether such a matching had
caused material injury. The verdict on causal link has also been positive in all the cases except
in a few cases of reviews.

Safeguard measures
Imposition of safeguard duty is governed by
Section 8B of the Customs Tariff Act, 1975
read with the Customs Tariff (Identification
and Assessment of Safeguard Duty) Rules,
1997. Section 8B provides that where
the Central Government, after conducting
such enquiry, is satisfied that any article is
imported into India in increased quantities
and under certain conditions so as to
cause or threatening to cause serious injury
to domestic industry, then, it may impose a
safeguard duty on that article.
Safeguard duty is levied for a period of four years. If the Central Government is of the
opinion that the domestic industry has taken measures to adjust to such injury or threat
thereof and it is necessary that the safeguard duty should continue to be imposed, it
may extend the period of imposition beyond four years. However, safeguard duty can
be continued for a maximum period of ten years from the date on which it was first
imposed.
Unlike anti-dumping and countervailing duties, which cover only specific countries alleged
to be exporting dumped or subsidized goods, safeguard duty is normally imposed on all
the imports coming into India, irrespective of the source. Safeguard duty is a temporary
measure, which allows domestic industry to adjust to sudden increase in volume of
imports coming into India. Exceptional case is with respect to imports from China PR,
wherein WTO members can conduct a special Transitional Product Special Safeguard
Measure on imports from China alone. Safeguard investigation against imports from China
PR are conducted in terms of Section 8C of the Customs Tariff Act read with Customs
Tariff (Transitional Product Specific Safeguard Duty) Rules, 2002. Safeguard duty under
this special mechanism arises due to obligations entered into by China, while acceding to
WTO membership. It may however be noted that this obligation will cease to have effect
after 10th December 2013 in terms of Article 16 of China’s Protocol of Accession to
WTO.

Anti-subsidy measures
India has enacted Section 9 to the Customs Tariff Act 1975 and has also established the
required procedural provisions in the form of Customs Tariff (Identification, Assessment and
Collection of Countervailing Duty on Subsidized Articles And For Determination Of Injury)
Rules, 1995 for levying countervailing duties on imports of subsidized articles that cause
or threaten material injury to the Indian domestic industry. India has so far conducted only
1 countervailing duty investigation against imports of Sodium Nitrite from China PR (2009).
However, the investigation was terminated and no countervailing duty was imposed.
Relief to the domestic industry

The Act protects the domestic industry from any material injury caused by the
dumping of products. Anti-dumping action can be taken in case of (a) material injury, (b)
threat of material injury3
and (c) retardation of the establishment of a domestic industry.4
The determination of injury is based on the examination of the volume of the dumped
imports and its effect on the prices in the domestic market for like products. Such injury
must be proved by the domestic producers. In doing so, evidence towards decline in sales,
profits, output, market share, productivity, etc. can be put forth by the domestic industry

Relief can be provided to the Indian domestic industry in the form of anti-dumping
duties or price undertakings. Under Rule 18 of the Rules, anti-dumping duty is imposed by
the Central Government within 3 months of the date of receipt of the final finding from the
designated authority. The anti-dumping duty levied is either on the dumping margin or the
injury margin,10 whichever is lower.11 The Act allows the levying of duty retrospectively if (a)
there is a history of dumping which caused the injury or that the importer was, or, should
have been aware that the exporter practices dumping and that such dumping would cause
injury, and (b) the injury is caused by massive dumping, in a relatively short time, so as to
seriously undermine the remedial effect of anti-dumping duty.12
Rule 15 of the Rules empowers the designated authority to suspend or terminate the
investigation if the exporter concerned furnishes an undertaking to revise his price to
remove the dumping or the injurious effect of dumping. In case the exporter issues a price
undertaking, no anti-dumping duties are levied on the exporter. No undertaking can be
accepted before preliminary determination is made.

Conclusion

Anti-dumping is a major threat to several countries like India, where often Chinese
goods or goods manufactured by other countries are dumped. Accordingly, adequate antidumping
legislations are necessary to protect the domestic industry. Bearing in mind that the
existing anti-dumping law in India is based on the Agreement, it still is not an independent
legislation dealing solely with the issue of anti-dumping. Enacting a single legislation dealing
with anti-dumping will assist the judiciary by providing all the rules and regulations
pertaining to anti-dumping in one place. Thus, India should enact an independent statute
only to deal with anti-dumping issues.
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