BACKGROUND

The modern trade system emerged from the ruins of the Second World War and
was principally the creation of the United Kingdom and the United States. The
Bretton Woods Conference (July 1944) created the International Monetary Fund
and the World Bank, the Dumbarton Oaks Conference (August to October
1944) formulated the United Nations organisation and the Havana Conference
(November 1947 to March 1948) fashioned the Havana Charter for an
International Trade Organization (ITO).

In 1947, the General Agreement on Tariffs and Trade (the GATT 1947) was
negotiated as a stopgap measure. Though the GATT 1947 was drafted, the ITO
was never created because of inaction on the part of the United States Congress.
Since inception, the primary objective of GATT 1947 has been to reduce tariffs,
enhance international trade and transparency. As tariff rates were lowered over
time following the GATT 1947 agreement, member countries realised the need
to reform the existing framework. From 1947 to 1994, the GATT contracting
parties engaged in eight rounds of negotiations, the last of which was the
Uruguay Round (1986–1994). The Uruguay Round agreements were signed in
Marrakesh, Morocco on 15 April 1994 and on the same date the World Trade
Organization (WTO) was born when the agreement establishing the WTO (the
WTO Agreement) was signed.

The WTO Agreement, inter alia, included the GATT 1994 as an integral part,
which is binding on all members. The GATT 1994, in turn, encompassed the
provisions of the GATT 1947, as well as the provisions of the legal instruments
in force under the GATT 1947.

One of the cardinal principles of the GATT 1994 and the WTO is the most-
favoured-nation (MFN) treatment. MFN means that each member nation is
required to apply tariffs equally to all trading partners. Where, on one hand, the
GATT and WTO regimes mandate equal treatment and non-discrimination, on
the other, the WTO Agreement provides exceptions by allowing use of trade
remedy instruments, among others, namely:

1. anti-dumping measures targeted against unfair-priced imports;

2. subsidy or countervailing measures targeted to offset subsidy given by

exporting governments; and

3. emergency safeguard measures adopted to combat unforeseen surges in

imports.

Pursuant to the GATT 1994, detailed guidelines have been prescribed under the
specific agreements that have also been incorporated in the national legislation
of the member countries of the WTO. Indian laws were amended with effect
from 1 January 1995 by introducing a procedural framework for initiation and
conduct of trade remedial investigation, the imposition of measure and judicial
review. From 1995 to 2017, India initiated 888 anti-dumping investigations, the
highest number among the member states. In 2017 alone, India initiated 49 anti-
dumping investigations and imposed measures in 47 investigations. As at March
2019, anti-dumping measures on 139 products from multiple countries and
countervailing duty measures on two products were in force. To enhance the
accessibility of trade remedial measures to the domestic industry, the Indian
government merged investigating agencies conducting anti-dumping,
countervailing duties and safeguard investigation under one umbrella
institution, the Directorate General of Trade Remedies.
 LEGAL FRAMEWORK
i) Anti-dumping measures

Under international law, anti-dumping measures are regulated by Article VI of

the GATT and the Agreement on Implementation of Article VI of the GATT
1994 (the Anti-Dumping Agreement). Anti-dumping laws allow a country to
impose temporary duties on goods exported by a foreign producer when the
export price of such goods is less than the normal value of 'like articles' sold in
the exporter's domestic market and is causing injury to the domestic producers.

In India, anti-dumping actions are governed by Sections 9A, 9AA, 9B and 9C of

the Customs Tariff Act, 1975 (the Act) and Customs Tariff (Identification,
Assessment and Collection of Anti-dumping Duty on Dumped Articles and for
Determination of Injury) Rules, 1995 (the Anti-dumping Rules) as amended
from time to time.

The government agency entrusted with the determination of dumping and injury
is the Designated Authority (DA), Directorate General of Trade Remedies,
Ministry of Commerce and Industry. However, the DA only conducts trade
remedial investigations and recommends anti-dumping duties. The actual
responsibility for imposition and collection of duties lies with the Ministry of
Finance.

India's domestic law envisages that where any article is exported from any
country or territory to India at less than its normal value, then, upon the
importation of such an article into India, the Indian government, through the
Ministry of Finance, may, by notification in the Official Gazette, impose an
anti-dumping duty not exceeding the margin of dumping in relation to such an
article.
Since dumping per se is not actionable, there is a further requirement to
establish that there exists a causal link between dumped imports and injury
caused to the domestic industry. The injury margin is arrived at by calculating
the difference between the non-injurious price and the landed cost of the
imported product. India follows the WTO's lesser duty rule; that is, the Indian
government imposes anti-dumping duty equal to the margin of dumping or
margin of injury, whichever is lower.

Anti-dumping duty ceases to have effect on the expiry of five years from the
date of its imposition unless revoked earlier. However, if the DA, in a review, is
of the opinion that the cessation of such a duty is likely to lead to continuation
or recurrence of dumping and injury, it may from time to time extend the period
of such an imposition for a further period of five years (known as a 'sunset
review'). During the five-year period, the DA may carry out a 'changed
circumstances' review, which is called a 'midterm review'.

India also allows 'new shipper' reviews. In such a review, any exporter who has
not exported the product to India during the period of investigation may request
a determination of individual dumping duty. However, a new shipper review is
only permissible if the applying exporter is not related to an exporter or
producer in the exporting country who is subject to the anti-dumping duties.

The recommendation and imposition of anti-dumping duty is appealable to a

specialised tribunal, the Customs, Excise and Service Tax Appellate Tribunal
(CESTAT), constituted under Section 129 of the Customs Act 1962.
 ii) Subsidies and countervailing measures

Article XVI of the GATT 1994 and the Agreement on Subsidies and
Countervailing Measures (ASCM) deal with the regulation of subsidies and the
use of countervailing measures to offset the injury caused by subsidised
imports. Pursuant to the ASCM, a subsidy is deemed to exist if there is a
financial contribution by a government or any public body within the territory
of a member or there is a form of price support and a benefit is thereby
conferred.

In India, countervailing actions are governed by Sections 9, 9B and 9C of the

Act. In 1995, the Customs Tariff (Identification, Assessment and Collection of
Countervailing Duty on Subsidised Articles and for Determination of Injury)
Rules, 1995 (the Countervailing Rules) were enacted to determine the manner in
which the subsidised articles liable for countervailing duty are to be identified,
the manner in which subsidy provided is to be determined and the manner in
which the duty is to be collected and assessed under the Act.

As with anti-dumping, the DA conducts countervailing investigations and

recommends duties pursuant to the provisions given under the Act and the
Countervailing Rules. The responsibility for the imposition and collection of
duties as recommended by the DA lies with the Ministry of Finance.

Indian law on countervailing measures is similar to the ASCM and provides that
where any country or territory pays, bestows – directly or indirectly – any
subsidy upon the manufacture or production therein or the exportation
therefrom of any article, including any subsidy on transportation of such an
article, then, upon the importation of any such article into India, whether the
same is imported directly from the country of manufacture, production or
otherwise, and whether it is imported in the same condition as when exported
from the country of manufacture or production or has been changed in condition
by manufacture, production or otherwise, the central government may, by
notification in the Official Gazette, impose a countervailing duty not exceeding
the amount of such a subsidy.

The DA in determining the subsidy shall ascertain whether it:

1. relates to export performance;

2. relates to the use of domestic goods over imported goods in the export
article; or

3. has been conferred on a limited number of persons engaged in

manufacturing, producing or exporting the article unless such a subsidy is
for:

o research activities conducted by or on behalf of persons engaged in

the manufacture, production or export;

o assistance to disadvantaged regions within the territory of the

exporting country; or

o assistance to promote adaptation of existing facilities to new

environmental requirements.

As with anti-dumping practices, the DA is required to assess and accord a

finding that the import of a subsidised article into India causes or threatens to
cause material injury to the domestic industry. The principles for the
determination of injury are set out in Rule 13 read with Annexure I of the
Countervailing Rules. Rule 12 read with Annexure IV of the Countervailing
Rules provides for the calculation of the amount of countervailable subsidies.
However, in a scenario where an article subject to countervailing duty already
attracts an anti-dumping duty, a countervailing duty for the amount equivalent
to the difference between the quantum of countervailing duty and the anti-
dumping duty payable may be imposed by the government.
The countervailing duty ceases to have effect on the expiry of five years from
the date of its imposition, unless revoked earlier. However, if the central
government, in a review, is of the opinion that the cessation of such a duty is
likely to lead to continuation or recurrence of subsidisation and injury, it may,
from time to time, extend the period of such an imposition for a further period
of five years. An appeal against the order of determination or DA review
regarding the existence, degree and effect of subsidy in relation to the import of
any article is made to CESTAT.

iii) Safeguard measures

Article XIX of the GATT 1994 read with the Agreement on Safeguards (AOS)
provides the ground rules for safeguard actions. According to the AOS, a
member may apply safeguard measures to a product if the member has
determined that it is being imported into its territory in such increased
quantities, absolute or relative to domestic production, as to cause serious injury
to the domestic industry that produces identical or similar, or directly
competitive products. Article 9 of the AOS provides for a special and
differential treatment for developing countries.

The national legislation to implement the provisions of AOS has been enacted
under Section 8B of the Act. The Customs Tariff (Identification and Assessment
of Safeguard Duty) Rules, 1997 (the Safeguard Rules) govern the procedural
aspects. Further, Section 8C of the Act and the Customs Tariff (Transitional
Products Specific Safeguard Duty) Rules, 2002 have been specifically enacted
for imposing safeguard duty on any article imported into India from China in
such increased quantities and under such conditions as to cause market
disruption to the domestic industry.
The safeguard duty investigations were earlier conducted by the Directorate
General of Safeguards (DGS) of the Department of Revenue, Ministry of
Finance. Post-2018, the safeguard investigations are conducted under the aegis
of the DA, the Directorate General of Trade Remedies (DGTR).

Similar to the provisions of the AOS, Indian law provides that if the central
government, after conducting an enquiry, is satisfied that any article is imported
into India in such increased quantities and under such conditions as to cause or
threaten to cause serious injury to domestic industry, then it may, by notification
in the Official Gazette, impose a safeguard duty on that article. It may be noted
that any safeguard duty imposed under the Safeguard Rules shall be on a non-
discriminatory basis and applicable to all imports of such an article irrespective
of its source.

The safeguard duty ceases to have effect on the expiry of four years from the
date of its imposition unless revoked earlier. The DA also conducts a review of
the need for continuance of safeguard duty. In no case shall the safeguard duty
continue to be imposed beyond a period of 10 years from the date on which it
was first imposed.
 WHAT IS CVD?
Countervailing duty (CVD) is a specific form of duty that the government
imposes in order to protect domestic producers by countering the negative
impact of import subsidies. CVD is thus an import tax by the importing country
on imported products.

To make their products cheaper and boost their demand in other countries,
foreign governments sometimes provide subsidy to their producers. To avoid
flooding of the market in the importing country with these goods, the
government of the importing country imposes countervailing duty, charging a
specific amount on import of such goods.

Countervailing duty (CVD) is an additional import duty imposed on imported

products (by the importing country) when such products enjoy benefits like
export subsidies and tax concessions in the country of their origin (ie., where it
is produced and exported). CVD is thus an import tax by the importing country
on imported products. It is an attempt to ensure fair and market-oriented pricing
of imported products and thereby protecting domestic industries and firms.  The
most popular example for CVD is the imposition of additional duty by an
importing country when the product has given export subsidy by the
exporter/producer country.
Non-actionable subsidies under ASCM

Article VI of GATT 1947 regulates the imposition of Anti-dumping Duties and

Countervailing Duties. Part-V of the ASCM provides the provisions governing
the investigation of countervailable subsidies and the levy of countervailing
duty. At the time of coming into force of the ASCM, it recognised three types of
subsidies, viz., Prohibited (Part –II), Actionable (Part –III) and Non-actionable
(Part- IV).

Prohibited subsidies include export subsidies and subsidies for import

substitution (i.e. use of domestic over imported goods). Actionable subsidies
included subsidies that would cause or threaten material injury to the domestic
industry of other member, or nullify or impair benefits accruing directly or
indirectly to other members, or cause serious prejudice to other members. Non-
actionable subsidies are not countervailable. In terms of Article 8 of the ASCM,
non-actionable subsidies included subsidies that were not specific under Article
2 of the ASCM and also subsidies for research and development, subsidies for
assistance to dis-advantageous region and subsidies for new environmental
requirements

When the ASCM agreement was signed, Article 8 of the said Agreement,
dealing with non-actionable subsidies, was applied provisionally for five year
period in terms of Article 31 of the ASCM. Article 31 provided that not later
than 180 days before the end of the said five year period, the Committee shall
review the operation of those provisions, with a view to determining whether to
extend their application, either as presently drafted or in a modified form, for a
further period. However, the provisions of Article 8 were not extended as no
consensus was reached between the members [see end note 6] for extension or
modification of the said provision. Thus, the category of non-actionable
subsidies ceased to exist as of 31 December 1999, as per ASCM Article 31

Non-actionable subsidies under Indian law

Indian law relating to imposition of CVD is contained in Section 9 of the

Customs Tariff Act 1975 (the “Act”) and the Customs Tariff (Identification,
Assessment, and Collection of Countervailing Duty on Subsidized Articles and
for Determination of Injury) Rules, 1995 (the “CVD Rules”). Section 9, sub-
clause (3) of the Act, provides that the Central Government shall not levy
countervailing duty unless it is determined that the subsidies are – (a) export
oriented, or (b) contingent upon use of domestic goods over imported ones or
(c) conferred on limited number of persons engaged in manufacturing,
producing and exporting the article. Further, clause (c) of sub-section (3) of
Section 9 dealing with the determination of specificity of subsidies in question,
provides that duty shall not be imposed if, the subsidy is falling under Section
9(3)(c) if it is for (a) research activities conducted by or on behalf of persons
engaged in the manufacture, production or exporting; or (b) assistance to
disadvantaged regions within the territory of the exporting country; or (c)
assistance to promote adaptation of existing facilities to environmental
requirements. Thus, the concept of non-actionable subsidies is fully
incorporated in the Indian laws.

Apart from the express prohibition contained in Section 9(3)(c) of the Act, an
indirect reference may also be found in the CVD Rules. Rule 4(i) enjoins a duty
on the designated authority to determine the nature and amount of subsidy. Rule
11 provides that the Authority, need not ascertain as to the nature of subsidies if
they are related to (a) Research activities conducted by or on behalf of persons
engaged in the manufacture, production or exporting; or (b) Assistance to
disadvantaged regions within the territory of the exporting country; or (c)
assistance to promote adaptation of existing facilities to environmental
requirements. Without examining whether the subsidies are specific within the
meaning of Article 2 of ASCM, no CVD can be levied in respect thereof.
Accordingly, by excluding the three types of subsidies from the scope of the
specificity analysis, the Indian laws effectively provide a window for excluding
non-actionable subsidies from the levy of CVD.

Section 9(3)(c) of the Customs Tariff Act, 1975 and the relevant CVD Rules
mentioned above were enacted with effect from 1-1-1995, by Section 2, of the
Customs Tariff (Amendment) Act, 1994 (12 of 1994), the said provision have
not however been amended in keeping with the existing provisions on non-
actionable subsidies under the ASCM. Despite the fact that the WTO law no
longer recognises non-actionable subsidies, the Indian law continues to
recognise them under Section 9(3) of the Custom Tariff Act 1975. This
provision is more beneficial to other Members of the WTO and therefore, none
of them have raised any objections.
 Purpose of Countervailing Duty
The objective of CVD is to nullify or eliminate the price advantage (low price)
enjoyed by an imported product when it is given subsidies or exempted from
domestic taxes in the country where they are manufactures. Often countries give
subsidies to their exported products so that they can compete in the international
market at a reduced price. Similarly, several countries exempt exportable
products from excise duties (production tax) at home. In the home market, often
domestic commodities may not get subsidies and they have to pay excise duties.
The CVD as a tax raises the price of the imported products. It brings price of an
imported product to its true market price. In this way, it provides a level playing
field for the domestic products.
 When CVD can be imposed?
The WTO permits member countries to impose countervailing duty when the
exporting country gives export subsidy. Export subsidy will help the exporters
to sell the product at a lower price in the international market. A parity between
the price of imported products (that enjoys export subsidy) and the domestic
products (that doesn’t enjoy any subsidy) has to be ensured. For this, a CVD is
essential as it can raise the price of the imported product. Here, CVD is imposed
to countervail (overcome) export subsidy.

CVD to countervail excise duty exemption enjoyed by an imported product

In India, the CVD is imposed as additional duty of customs on imported

products when such products are given tax concession at the country of their
origin. On the other hand, the Indian goods have to give excise duties. The CVD
effectively nullifies the low-price advantage of the imported products (that
doesn’t pay any excise duties in the foreign country).

Countervailing Measures
Part V of the SCM Agreement sets forth certain substantive requirements that
must be fulfilled in order to impose a countervailing measure, as well as in-
depth procedural requirements regarding the conduct of a countervailing
investigation and the imposition and maintenance in place of countervailing
measures. A failure to respect either the substantive or procedural requirements
of Part V can be taken to dispute settlement and may be the basis for
invalidation of the measure.

Substantive rules A Member may not impose a countervailing measure unless it

determines that there are subsidized imports, injury to a domestic industry, and
a causal link between the subsidized imports and the injury. As previously
noted, the existence of a specific subsidy must be determined in accordance
with the criteria in Part I of the Agreement. However, the criteria regarding
injury and causation are found in Part V. One significant development of the
new SCM Agreement in this area is the explicit authorization of cumulation of
the effects of subsidized imports from more than one Member where specified
criteria are fulfilled. In addition, Part V contains rules regarding the
determination of the existence and amount of a benefit.

Procedural rules Part V of the SCM Agreement contains detailed rules

regarding the initiation and conduct of countervailing investigations, the
imposition of preliminary and final measures, the use of undertakings, and the
duration of measures. A key objective of these rules is to ensure that
investigations are conducted in a transparent manner, that all interested parties
have a full opportunity to defend their interests, and that investigating
authorities adequately explain the bases for their determinations. A few of the
more important innovations in the WTO SCM Agreement are identified below:
Standing- The Agreement defines in numeric terms the circumstances under
which there is sufficient support from a domestic industry to justify initiation of
an investigation.

Preliminary investigation- The Agreement ensures the conduct of a

preliminary investigation before a preliminary measure can be imposed.

Undertakings- The Agreement places limitations on the use of undertakings to

settle CVD investigations, in order to avoid Voluntary Restraint Agreements or
similar measures masquerading as undertakings

Sunset- The Agreement requires that a countervailing measure be terminated

after five years unless it is determined that continuation of the measure is
necessary to avoid the continuation or recurrence of subsidization and injury.

Judicial review- The Agreement requires that Members create an independent

tribunal to review the consistency of determinations of the investigating
authority with domestic law.