Dumping is, in general, a situation of international price discrimination where the price of a product which is sold to the importing country is less than the price of the same product when sold in the market of the exporting country. It is generally perceived that dumping would result in unfair trade.
The purpose of an anti-dumping investigation is to ascertain whether dumping has taken place and has caused injury to the domestic industry of the country importing the allegedly dumped products. In other words, the process focuses on
- (i) Establishing a normal value of the product when sold in the domestic market of the exporting country
- (ii) Establishing the export price of the product
- (iii) Comparing the export price with the normal value established and
- (iv) Ascertaining whether the domestic industry of the importing country has suffered injury of the dumped imports
The rules of the multilateral trading system require anti-dumping investigations to be conducted with due cognizance of the principles of “due process” i.e anti-dumping investigations have to be conducted in a transparent, objective and equitable way, with all interested parties given adequate opportunity to defend their interests.
Nature And Scope
This project intends to give a broad overview of initiation of anti-dumping investigations. The concept of dumping shall be discussed, followed by a discussion on the existing multilateral legal framework. The pre-initiation phase and final determination phase shall also be discussed briefly.
Dumping per se is not against GATT obligations. This practice is condemned only when it causes injury to the domestic industry. Dumping can be explained in three contexts:
- In a layman’s view, ‘dumping’ is selling a product at low prices in the international market
- In legal terms, under Article VI of the GATT and ADA, dumping is defined as the sale of a product at a price less than its ‘normal value’. The ‘normal value’ is the domestic price of the goods in the country of export.
- In the pre-world war II period, dumping was defined as a form of either monopolistic price discrimination or predatory behavior on the part of oligopolists to preserve cartels and drive competitors out of business. Anti-dumping was considered as a derivative of anti-trust.
The first internationally accepted definition of dumping is provided in Article VI of the GATT.
Rationale For Dumping
The general objectives of dumping is the maximization of profits of a company, the driving out of competitors from the market or the sale of surplus stock lending to a price rise in a monopolistic market. Subsidies provided to the goods in the domestic market can also be a reason for the price difference in the domestic and international markets. The difference in variable costs of goods and competitive edge of a particular industry in reducing production costs can cause variations in the prices of products. Exchange rate fluctuations can also be a reason for the price difference and subsequent finding of dumping. In short, the reasons for dumping can vary from case to case.
Multilateral Legal Framework
Since 1 January 1995, the rules of the multilateral trading system relating to anti-dumping are found in the following WTO provisions:
- Article VI of the General Agreement on Tariffs and Trade 1994
Article VI which is the “enabling provision” contains the basic provisions relating to anti-dumping action
- The Agreement on Implementation of Article VI of GATT, 1994 (the anti-dumping agreement or the AD Agreement)
The AD agreement contains detailed provisions relating to methodologies and procedural issues. These two legal instruments are to be read together.
The three basic preconditions which have to be met before anti-dumping action can be taken are set out in Article VI of GATT, 1994. In particular, the WTO member taking such measures must have determined: (i) that the imports in question are dumped; (ii) that its own industry is materially injured or is threatened with material injury or that the establishment of a domestic industry is being materially retarded; and (iii) that the injury under (ii) is being caused by dumped imports. Dumping may only be counteracted if all the three requirements are met.
Although all members of the WTO are parties to the AD agreement, it is not mandatory for members to have in place a legal framework for anti-dumping action, or to take anti-dumping action when, or if, injurious dumping occurs. However, the AD Agreement specifies that if a member chooses to take anti-dumping action, such action must be consistent with the rules set out therein and shall be preceded by the required investigation conducted on the basis of the provisions of the AD Agreement.
In particular, Article I provides that:
“An anti-dumping measure shall be applied only under the circumstances provided for in Article VI of GATT, 1994 and pursuant to investigations initiated and conducted in accordance with the provisions of this Agreement.”
Therefore, the imposition of anti-dumping measures is subject to the following conditions:
- an investigation must have been initiated and conducted in accordance with the provisions of the AD Agreement
- As a result of that investigation it must have been determined that the concerned imports concerned are dumped
- that the domestic industry is suffering material injury, a threat of material injury or that the establishment of a domestic industry is materially retarded
- that the injury being suffered by the domestic industry is causally linked to the dumped imports.
WTO members are precluded from taking action against injurious dumped imports other than the application of anti-dumping measures. Article 18.1 of the AD Agreement provides:
“No specific action against dumping of exports from another member can be taken except in accordance with the provisions of GATT 1994, as interpreted by this Agreement”.
The measures allowed by the AD Agreement are (i) provisional measures (ii) definitive anti-dumping duties and (iii) price undertakings.
The AD agreement contains detailed procedural rules which have to be observed in conducting investigations. It also contains substantive rules regarding the methodologies to be applied in calculating the dumping margin, determining the existence of injury and establishing the existence of causal link between dumping and the injury.
The Pre-Initiation Phase Of The Investigation
Basis Of Initiation
The AD Agreement provides that the anti-dumping proceedings can be initiated on satisfaction of the following:
- a written application by, or behalf of the domestic industry affected by the alleged dumped imports or
- in “special circumstances” by the investigating authorities of the country concerned acting on their own motion
For instance, the authorities might decide to initiate an investigation on their own where the domestic industry is so fragmented that, although is suffering material injury, is not possible for domestic producers to coordinate their efforts to meet the standing requirements to bring an application due to a lack of cooperation amongst the producers.
B) Lodging Of A Complaint
In the normal course of events, a domestic producer, or a number of producers, will approach the concerned Ministry or institution with a complaint that dumped imports are causing injury to the industry. After consultations, and if it appears, on the face of it, that there is substance to the claim, the domestic producers will normally prepare an application for the initiation of an anti-dumping investigation on the basis of a pro forma document. It is the experience of many investigating authorities that the domestic industries do not always have an adequate understanding of the legal, substantive and procedural requirements that have to be met before the process can be set into motion. This lack of understanding may lead to confusion and frustration with the process, especially regarding the information required to be submitted as supporting evidence when lodging an application. Some investigating authorities may appear to have found it useful to develop step-by-step guides to assist the domestic industries in filing applications.
In the case of a written application by the domestic industry, the application has to be supported by evidence to substantiate the allegations made therein. In the case where the process is activated by the authorities concerned without having received a written application by or on behalf of the domestic industry, the authorities also have to ensure that they have the evidence, as described in Article 5.2, at their disposal to justify the initiation of the investigation. In either case, therefore, an investigation cannot be initiated unless the investigating authorities have sufficient evidence regarding the existence of dumping, injury and a causal link between dumping and injury. Thus, if the investigating authorities have not received an application, but wish to initiate an investigation, they must nonetheless ensure that there is sufficient evidence to justify the initiation. Although the AD Agreement does not go into detail in this regard, the requirement for sufficient evidence in the context of self-initiation would imply that the investigating authorities have undertaken some kind of information gathering exercise on their own in order to be able to conclude that the requirement is met.
If there is insufficient evidence of dumping and/or consequent injury, the investigation has to be terminated. If the preliminary determination is in the affirmative, and if the authorities have found that it is necessary to take action to prevent injury being caused while the investigation is still in progress, they may, but are not obligated to, impose preliminary measures. Preliminary measures may take the form of a provisional duty, or preferably, a security by cash deposit or bond which may be equal to, but not higher than, the amount of the dumping margin provisionally estimated. Preliminary measures may not be applied sooner than 60 days after initiation of the investigation. Provisional measures are not applied for a period longer than 4 months, or 6 months if the investigating authorities examine whether a duty lower than the margin of dumping would be sufficient to remove the injury being suffered by the applicant industry.
C) Minimum Information Required For An Application
An application has to provide certain minimum information. Article 5.2 states that applications containing simple assertions, unsubstantiated by relevant evidence cannot be considered sufficient. As noted above, this minimum information must indicate the existence of dumping, injury and a causal link between the alleged dumping and injury. Article 5.2 lays out the specific requirements which applications have to meet. These requirements can be grouped into 4 mains categories:
- The identity of the applicant(s) and a description of the volume and the value of domestic production of the like product produced by the applicant(s).
- The characteristics of the allegedly dumped product and its source, names of exporters and importers.
- Specific information supporting the allegations of dumping
- Specific information supporting the allegations of injury and causality.
Sources Of Information Substantiating The Allegations Of Dumping And Injury
The Identity Of The Applicant(S) And A Description Of The Volume And Value Of Domestic Production Of The Like Product Produced By The Applicant(S)
By its very nature, this information is readily available to the applicant. In the case where the applicant is bringing the application on behalf of the domestic industry, it will usually have some indication of the production accounted for by the other domestic producers, either through direct knowledge or through industry publications etc.
The Characteristics Of The Allegedly Dumped Product, Countries Involved, Names Of Known Foreign Producers/Exporters And Known Importers
Normally, the applicant does not encounter any problems regarding information on the characteristics of the alleged dumped product, although it might sometimes be problematic to obtain details on the manufacturing process and raw materials used in the production process. Applicants also normally experience few problems in identifying the country of export, although it might be difficult in some instances to identify the country of origin if it differs from the country of export, especially when repackaging etc is involved.
The more problematic aspect is usually for the applicant to identify the exporters/foreign producers and the importers. Potential sources of this information might be the trade office of the exporting country, the relevant embassy or marketing information sources.
Information Concerning Dumping
The information required under this category is generally not freely available to the applicant. The applicant usually has to make a special effort to satisfy the requirements of Article 5.2, especially regarding the information relating to the price of the like product when sold for consumption in the domestic industry of the exporting country (normal value information). This has led authorities to have different requirements on the sufficiency of evidence to substantiate the allegation of dumping, depending to a large degree on the facts of the case regarding access by the applicant to necessary information. It is common practice for applicants to substantiate dumping allegations by submitting recent price lists, price quotations or invoices as proof of the prices at which sales in the country of export and sales from the country of export into the country of import are made, or on the basis of pricing studies or market research. It is also common practice to use official trade statistics in determining the export price for purposes of initiation of an investigation.
Information Relating To Injury And Causality
The information required under this category relates to the domestic industry itself and applicants therefore generally have fewer difficulties obtaining information in support of the injury and causality allegations. As noted above, Article 5.2 provides that the injury information in an application must concern changes in the volume of the allegedly dumped imports, their effect on domestic prices and their impact on the performance of the domestic producers, in terms of the relevant economic factors such as output, sales, revenue etc.
Properly Documented Application
The first formal step in the process is for the applicant to lodge the application. If the applicant has provided in writing the information required under Article 5.2, the investigating authorities may accept the application as being a “properly documented” application. This is merely an acknowledgement that all the required information and documents have been submitted.
Once the completed application, together with substantiating evidence, has been submitted, the authorities are required under Article 5.3 to determine whether there is sufficient evidence to justify the initiation of an investigation. In making the determination on the sufficiency of the information, the authorities have to examine the accuracy and adequacy of the information. As the examination is by nature case specific, the AD Agreement does not provide further guidance.
Decision To Initiate
The investigating authorities can proceed with the process of initiating an investigation, provided that:
- the applicants filing the application have standing as outlined in Article 5.4
- the application contains the information required by Article 5.2
- the investigating authorities conclude that there is “sufficient evidence” to justify initiation as set forth in Article 5.3 and
- the calculated dumping margin is not de minimis, the imports to be investigated are not negligible and the injury is not negligible as provided for in Article 5.8.
Some members seek to minimize the number of deficient applications by informally screening draft applications and identifying the problem areas or deficiencies in the application. This informal process is normally separate from the formal process of deciding on initiation of an investigation and applicants should be made aware that the screening process should not be interpreted as an official approval of the application. Such screening can take the form of reviewing draft applications, meetings to discuss applications, or more formal processes involving written guidance as the aspects of applications that are considered to be unsatisfactory. Once the deficiencies have been addressed, the application is submitted to the authorities for the decision whether to initiate an investigation. It is the practice in some jurisdictions that if the deficiencies are not satisfactorily addressed, the application is dismissed. It is not clear at this stage of the process whether an investigation will be initiated or not. Considering the potential disruptive effect which the initiation of an investigation might have on the market, Article 5.5 requires authorities to avoid publicizing the application before the actual decision to initiate an investigation has been taken.
Notice Of Initiation
Once the authorities have decided to initiate an investigation, Article 12.1 requires giving public notice of the initiation of the investigation. The common practice of Members is to publish a notice in an official government publication, usually the official gazette of the member concerned. Many members also publish the notice in newspapers of broad circulation.
The public notice of initiation shall, pursuant to Article 12.1.1, contain adequate information with respect to the following:
- the product involved
- the name of the exporting country or countries involved
- the date of initiation of the investigation
- the basis on which dumping is alleged in the application
- a summary of the factors on which the allegation of injury is based
- the address to which representations by interested parties should be directed
- the time limits allowed to interested parties for marking their views known
However, the members are given the option of either publishing all the above required information in the notice itself, or in a separate report. If the option of a separate report is followed, the authorities shall ensure that the report is readily available to the public.
The Final Determination Phase Of Anti-Dumping Investigation
After the preliminary determination stage, the investigation is continued and the information submitted is verified (if verification was not done before the preliminary determination). During final determination, the parties have the opportunity to comment on the factual and legal basis of the preliminary determination and to submit further evidence. At the conclusion of the investigative phase, a final determination has to be made, based on all the evidence obtained by the investigating authorities. Once the authorities have made a final determination on existence of dumping and suffering of material injury by the domestic industry, definitive (final) anti-dumping duties may be imposed. Dumping margins are normally calculated on an exporter- specific basis. As a rule, they are based on the information each individual exporter submits in its questionnaire response, or otherwise in writing. However, non-cooperating exporters (i.e those who do not submit a questionnaire response, or provide incomplete and/or incorrect data) may be assessed on a dumping margin based, partly or wholly on “facts available”, which might include information as submitted by the applicant.
In terms of the AD Agreement, the imposition of definitive anti-dumping measures is not mandatory, i.e the authorities have the option not to impose measures, even if all the requirements for its imposition have been met. Final measures are applied in the form of final anti-dumping duties, i.e duties in addition to the normal applicable import duties and are imposed by public notice. Alternatively, the authorities may enter into price undertakings, whereby individual exporters undertake to revise their export prices, or case exports at dumped prices so that the injurious effect of the dumping is eliminated. As in the case of preliminary anti-dumping measures, definitive duties may be imposed at a level equal to, but not higher than the dumping margin. However, it is desirable that the duty be lesser than the margin of dumping if such lesser duty would be adequate to remove the injury to the domestic industry. Price undertakings are also subject to these two provisions. If the final determination is negative with respect to dumping, injury or causal link, the investigation is terminated. Public notice of the final determination, whether affirmative or negative, has to be given under Article 12.2. Public notice has also to be given of any decision to accept a price undertaking, termination of an undertaking and termination of a definitive anti-dumping duty.
Throughout the process, the authorities are under an obligation to protect the confidentiality of “confidential” information submitted to it by interested parties in the context of the investigation.
Duration Of Investigation
As a rule, anti-dumping investigations are to be concluded within a period of one year after initiation, unless special circumstances are found to prevail. However, in no case can a period of 18 months be exceeded.
Duration Of Final Anti-Dumping Duties
The maximum duration of anti-dumping duties is 5 years, unless a review (called a “sunset” or “expiry review”) covering both dumping and injury, is initiated before the expiry of the 5 years and it is determined that the expiry of the duty would be likely so lead to continuation or recurrence of dumping and injury.
Any party can request the authorities to review the continued imposition of anti-dumping duties if they submit positive evidence substantiating the need for a review, inter alia, information indicating that circumstances have changed and that either dumping is no longer taking place, and/or that the original applicant industry is no longer suffering material injury as a result of dumping – sometimes called a “changed circumstances review”. The authorities can also, on their own initiate a review.
The AD Agreement provides that the amount of the anti-dumping duty shall not exceed the margin of dumping established. Therefore, in addition to a review under Article 11.2, dumping margins may be updated periodically, with subsequent adjustments to the duties imposed, so as to avoid collecting definitive duties in excess of the dumping margins. Since definitive duties collected correspond to the dumping margins originally calculated, they may not reflect current dumping margins over time. In order to avoid this situation, investigating authorities shall, upon request for a refund by either the exporter or importer, re-calculate the dumping margins based on more recent data. On the basis of such re-assessments, definitive duties paid in excess of the actual dumping margins must be reimbursed. Normally, such procedures must be completed within 12 months.
ADA is silent on certain aspects which may have inequitable results. The AD Agreement does not set deadlines for pre-initiation procedures. There is no rule regarding the time that the investigating authorities can take after the filing of an application to decide whether or not it is properly documented, and whether or not to initiate the requested investigation. If an application is re-submitted for whatever reason, the review process will begin all over again. Hence from the date of filing a “proper” application, some investigating authorities take several weeks to consider the issues of standing, de minimis dumping margins, negligible import volumes, and whether there is sufficient evidence to justify initiation. While Article 5.5 prohibits investigating authorities from publicizing an application prior to initiation, information often leaks out from the applicant itself or from the foreign government which is notified pursuant to Article 5.5, with consequent potential trade effects. Therefore, regardless of whether statutory deadlines are applicable or not, authorities should proceed as expeditiously as possible to ensure that market disruption is minimized.
Dumping may appear as a case of comparing prices in two markets. However, as evident from this discussion, it is necessary to undertake a series of complex analytical steps for determining the appropriate export price and the appropriate price in the domestic market of the exporting country to make a fair comparison between the two prices to ascertain if dumping exists. Furthermore, a detailed analysis of the state of the domestic industry of the importing country has to be undertaken to ascertain whether it has suffered injury and whether the injury is caused by allegedly dumped imports.
The quality and success of anti-dumping investigation largely depends on the analysis of evidence collected. Where a price comparison is concerned, the complex rules are needed to determine how cost and accounting calculations are to be made. Where injury is concerned, equally complex rules and methods are needed to identify various injury factors and to outline the level of causative effect and the methodology by which causation is to be identified. Developed countries like the US and the EU use econometric models for the calculation of injury and threat to the domestic injury. However, such resources may not be available with developing and least developed countries. Thus there is a need to equip these countries with adequate manpower and infrastructure to deal with such issues.
Article 2 of the AD Agreement should be amended to provide that authorities may initiate dumping investigation only if they determine, on the basis of credible evidence provided by the domestic industry that the price discrimination reflects the existence of underlying market distortions as alleged in the petition. The indicators of market distortion are to be determined by consensus. The following may be considered to be indicators of market distortion: (i) tariffs significantly higher than those in the export market under investigation, (ii) Non-tariff barriers significantly higher than those in the export market under investigation (iii) government restrictions on competition in the home market or (iv) government acquiescence in private anti-competitive conduct.
As compared to other developing countries, India has a robust mechanism to protect its domestic industry from dumping. The Customs Tariff Act of 1975 was amended in 1995 to comply with the AD Agreement. Though India had an anti-dumping legislation since 1985, no case was initiated until 1992. Since then, India has initiated 474 investigations against various countries.
According to Indian law, dumping is said to have taken place when an exporter sells a product in India at a price ‘less than its normal value’ prevailing in the exporter’s domestic market. Upon the importation of such article into India, the Central government may impose duty ‘not exceeding’ the margin of dumping in relation to such goods. However, the action is limited to dumping which causes or threatens to cause material injury to the domestic industry of India. The Indian law contains three actionable elements for an initiation of investigation, i.e, dumping, injury and a causal link between injury to the domestic industry and the dumping. The price at which articles are sold in the domestic market of the exporter is referred to as the normal value of those articles.
The Directorate General of Anti-dumping and Allied Duties (DGAD) was set up in 1998 to administer anti-dumping law in India. The DGAD functions under the Department of Commerce in the Ministry of Commerce and Industry and is headed by the Designated Authority (DA) who is an Additional Secretary to the Government of India. The DA’s function however, is only to conduct anti-dumping investigations against the exporting companies of other countries and make recommendations to the Central government for the imposition of anti-dumping or anti-subsidy measures. The duty is finally imposed by a notification of the Ministry of Finance. While the Department of Commerce recommends the anti-dumping duty, the Ministry of Finance collects the duty. Thus, like in the US, India has adopted the dual system for the administration of anti-dumping duties. Against the final findings, appeal lies before Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and thereafter before the Supreme Court of India.
Aradhna Aggarwal, “The Anti-dumping Agreement and developing countries”, Oxford University Press, New Delhi (2007)
Judith Czako, Johanna Human and Jorge Miranda, “A handbook on anti-dumping investigation”, Cambridge University Press, London (2003).
K.D.Raju, “WTO Agreement on Anti-dumping”, Kluwer Law International, London (2008).
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