Anti-Dumping Duty and Countervailing Duty: Trade Defense Mechanisms under Indian Customs Law

                                        

Introduction

International trade has witnessed exponential growth over recent decades, bringing with it complex challenges related to fair competition and market protection. Among these challenges, dumping and subsidization by foreign governments pose significant threats to domestic industries. India, as a prominent trading nation and member of the World Trade Organization, has established a robust legal framework to address these unfair trade practices through the imposition of anti-dumping duties and countervailing duties. These trade remedy measures serve as critical instruments to protect domestic manufacturers from injury caused by artificially low-priced imports while maintaining compliance with international obligations under the General Agreement on Tariffs and Trade 1994 and associated WTO agreements.

The Customs Tariff Act, 1975, as amended in 1995, provides the statutory foundation for implementing these protective measures in India [1]. This legislative framework operates in consonance with Article VI of the GATT 1994, the Agreement on Implementation of Article VI (commonly known as the Anti-Dumping Agreement), and the Agreement on Subsidies and Countervailing Measures. The implementation of these duties represents a delicate balance between protecting domestic industry interests and adhering to principles of free trade that govern international commerce.

Understanding Anti-Dumping Duty

Dumping occurs when a foreign producer exports goods to India at prices lower than the normal value in its home market or below the cost of production. This practice constitutes international price discrimination and can severely damage domestic industries by creating unfair competitive advantages for foreign manufacturers. Anti-dumping duty serves as a corrective mechanism to neutralize this unfair pricing advantage and restore competitive equilibrium in the market.

The fundamental principle underlying anti-dumping measures is that while competition should be encouraged, it must occur on fair terms. When foreign companies deliberately undercut prices to gain market share or eliminate competition, domestic producers face the prospect of business failure despite operating efficiently. The imposition of anti-dumping duty ensures that imported goods compete on merit rather than through artificial price manipulation.

Legal Framework Governing Anti-Dumping Duty in India

Anti-dumping duties in India are governed by Section 9A of the Customs Tariff Act, 1975, read with the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 [2]. These provisions were introduced through amendments that brought Indian legislation into conformity with WTO obligations following the Uruguay Round negotiations.

Section 9A empowers the Central Government to impose anti-dumping duty on articles imported into India if such imports cause or threaten material injury to an established industry in India or materially retard the establishment of domestic industry. The duty cannot exceed the margin of dumping, which represents the difference between the normal value of the article in the exporting country and the export price to India. This limitation ensures that the duty serves its protective purpose without becoming punitive or creating excessive market distortion.

The procedural framework for anti-dumping investigations is elaborate and ensures transparency and fairness. The Directorate General of Trade Remedies, functioning under the Ministry of Commerce and Industry, serves as the designated authority responsible for conducting anti-dumping investigations. The DGTR operates as a quasi-judicial body, examining evidence of dumping, assessing injury to domestic industry, and establishing causal links between dumped imports and the injury suffered.

An investigation typically commences upon receiving a written application from or on behalf of the domestic industry. The application must contain sufficient evidence of dumping, injury, and causation. Once initiated, the investigation follows strict timelines and procedural requirements, including providing opportunities to interested parties to present evidence and arguments. The authority examines import volumes, price effects, and economic impact on domestic producers before reaching conclusions.

Upon completion of investigation, the DGTR issues final findings containing its recommendation to the Ministry of Finance. It is crucial to note that the Central Government retains discretion in accepting or rejecting these recommendations. The word “may” in Section 9A clarifies this discretionary power, enabling the government to consider broader policy considerations and public interest before imposing duties.

Anti-dumping duties imposed under this framework typically remain in force for five years unless revoked earlier or extended through sunset reviews. The five-year limitation reflects the temporary nature of these measures, which should protect domestic industry only until it can compete on equal footing. Sunset reviews assess whether expiry of the duty would likely lead to continuation or recurrence of dumping and injury, thereby justifying extension for an additional period.

Understanding Countervailing Duty

While anti-dumping duty addresses pricing practices by private companies, countervailing duty tackles a different form of unfair trade practice involving government intervention. Countervailing duty is imposed on imports that have benefited from subsidies provided directly or indirectly by the government of the exporting country. These subsidies can take various forms including direct grants, tax concessions, preferential loans at below-market interest rates, provision of raw materials at concessional prices, or debt forgiveness.

Government subsidies distort international trade by enabling exporters to sell goods at prices that do not reflect true production costs. This artificial cost advantage allows subsidized imports to undercut domestic producers who operate without such government support. Countervailing duty operates to offset this unfair advantage by levying an import duty equivalent to the subsidy margin, thereby restoring competitive parity.

Legal Framework Governing Countervailing Duty in India

Countervailing duties in India are governed by Section 9 of the Customs Tariff Act, 1975, supplemented by the Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidised Articles and for Determination of Injury) Rules, 1995 [3]. This framework implements India’s obligations under Article XVI of GATT 1994 and the Agreement on Subsidies and Countervailing Measures.

Section 9 authorizes the Central Government to impose countervailing duty on subsidized articles imported into India from countries outside India. The duty aims to counteract the effect of subsidies that cause or threaten material injury to domestic industry. Similar to anti-dumping duty, countervailing duty cannot exceed the amount of subsidy granted to the imported article.

The procedural framework for countervailing duty investigations mirrors that of anti-dumping investigations. The DGTR conducts detailed examinations to identify subsidized products, determine the quantum of subsidy, assess injury to domestic industry, and establish causation. The investigation requires cooperation from the exporting country government, as subsidy information often involves governmental financial records and policy decisions.

Calculating countervailable subsidies presents unique challenges. The investigating authority must determine whether a financial contribution by a government or public body exists and whether this contribution confers a benefit. Under the SCM Agreement, subsidies are categorized as prohibited, actionable, or permitted. Prohibited subsidies include export subsidies and import substitution subsidies, which are subject to immediate countervailing action. Actionable subsidies, which cause adverse effects to other members’ interests, may be countervailed if they cause injury to domestic industry.

The duration of countervailing duties follows the same five-year framework as anti-dumping duties, subject to sunset reviews that evaluate whether subsidy and injury would likely continue or recur upon duty expiry. This temporal limitation ensures that protective measures do not become permanent trade barriers inconsistent with WTO principles.

Appellate Remedies and Judicial Oversight

Section 9C of the Customs Tariff Act, 1975 provides that appeals against orders of determination or review regarding anti-dumping or countervailing duties lie before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) constituted under Section 129 of the Customs Act, 1962 [4]. This appellate mechanism ensures judicial oversight of administrative decisions while respecting the technical expertise of investigating authorities.

Appeals must be filed within ninety days from the date of the impugned order. The CESTAT, after providing opportunities for hearing to all parties, may confirm, modify, or annul the order under appeal. This appellate jurisdiction extends to both preliminary and final findings issued by the designated authority.

Indian courts have developed jurisprudence that balances deference to technical expertise with ensuring procedural fairness and statutory compliance. Judicial review in anti-dumping and countervailing duty matters operates on limited grounds, primarily examining whether investigating authorities followed prescribed procedures, considered relevant evidence, provided adequate reasoning for conclusions, and acted within statutory authority.

Courts have emphasized that technical determinations regarding dumping margins, injury assessment, causation analysis, and economic impact fall within the domain of specialized authorities. However, judicial intervention is warranted when authorities breach principles of natural justice, fail to provide adequate disclosure of information to interested parties, reject recommendations without proper reasoning, or conduct flawed sunset reviews.

Key Principles and Judicial Trends

Several fundamental principles guide the operation of India’s trade remedy regime. The principle of fair comparison requires that dumping margins be calculated using transparent methodologies with appropriate adjustments for differences affecting price comparability. Factors such as freight costs, commissions, product specifications, and levels of trade must be accounted for to ensure accurate dumping margin determination.

The non-injurious price concept, unique to Indian practice, ensures that anti-dumping duties do not exceed what is necessary for removing injury to domestic industry. This approach implements the lesser duty rule, whereby even if the dumping margin is substantial, the duty imposed should only be sufficient to offset the injury margin if it is lower than the dumping margin.

Indian authorities occasionally consider public interest factors when deciding whether to impose recommended duties. Although not explicitly mandated by statute, considerations of consumer welfare, availability of essential products, and impact on downstream industries may influence final policy decisions, particularly for sensitive or essential commodities.

Judicial decisions have emphasized the importance of confidentiality safeguards balanced with rights of defense. Investigating authorities must protect business confidential information while ensuring that interested parties receive meaningful non-confidential summaries enabling them to defend their interests. Inadequate non-confidential summaries that prevent effective participation in investigations constitute violations of principles of natural justice.

Recent judicial trends stress the requirement for evidence-based methodology in all determinations. Investigating authorities must base conclusions on positive evidence and conduct objective examinations. Shortcuts in methodology, reliance on assumptions without evidentiary support, or failure to examine all relevant factors do not withstand judicial scrutiny.

The causal link analysis has received particular attention in judicial pronouncements. Authorities must demonstrate that dumped or subsidized imports, as opposed to other known factors, caused the injury to domestic industry. Where multiple factors contribute to injury, the analysis must distinguish and not attribute injury from other causes to the subject imports.

Interaction with International Obligations

India’s anti-dumping and countervailing duty framework operates within the context of multilateral trading rules established by the WTO [5]. The Anti-Dumping Agreement and SCM Agreement establish detailed disciplines governing investigations, determinations, and imposition of duties. These agreements require transparency, procedural fairness, and substantive compliance with international standards.

While WTO dispute settlement rulings are not automatically enforceable in Indian courts, they carry persuasive value when interpreting ambiguous provisions of domestic law. Indian authorities and courts increasingly reference WTO jurisprudence to ensure consistency between domestic practice and international obligations. This convergence strengthens the legitimacy and predictability of India’s trade remedy regime.

The prohibition on simultaneous imposition of anti-dumping and countervailing duties to compensate for the same situation of dumping or subsidization, as specified in Article VI.5 of GATT, prevents double remedies. Where both dumping and subsidization exist, investigating authorities must carefully analyze whether duties under both regimes are warranted or whether one remedy suffices to address the injury.

Practical Challenges and Contemporary Issues

Implementation of anti-dumping and countervailing duties faces several practical challenges. Determining normal value in non-market economies or countries with distorted pricing mechanisms requires special methodologies. Surrogate country approaches or constructed value methods may be employed, raising questions about fairness and accuracy.

The increasing complexity of global value chains complicates injury analysis. When production occurs across multiple countries and imported components constitute significant portions of final products, isolating the impact of dumped or subsidized imports becomes analytically challenging. Authorities must carefully examine whether domestic industry produces like articles and whether injury stems from subject imports rather than other competitive factors.

Sunset reviews have emerged as contentious areas. The requirement that authorities assess likelihood of continuation or recurrence of dumping and injury, rather than merely examining historical data, demands forward-looking analysis based on evidence. Inadequate sunset review determinations frequently face appeals, with tribunals requiring authorities to provide reasoned analysis of changed circumstances and future prospects.

The discretion of the Ministry of Finance to accept or reject DGTR recommendations has generated debate. While policy considerations and public interest may justify departures from technical recommendations, unexplained rejections undermine the integrity of the investigative process. Recent judicial decisions have emphasized that such decisions must be reasoned and taken after considering relevant factors rather than through terse rejection without explanation.

Conclusion

Anti-dumping duties and countervailing duties constitute essential components of India’s trade policy toolkit, enabling protection of domestic industries from unfair international trade practices while maintaining adherence to WTO disciplines. The legal framework under the Customs Tariff Act, 1975 and associated rules provides detailed procedures ensuring transparency, fairness, and technical rigor in investigations and determinations [6].

The balance between protecting domestic industry interests and promoting fair competition requires continuous refinement as global trade evolves. Judicial oversight ensures that administrative authorities exercise their powers within statutory limits while respecting principles of natural justice. The interaction between domestic law and international obligations creates a dynamic system responsive to changing trade patterns and legal developments.

Looking forward, India’s trade remedy regime faces challenges from increasingly sophisticated trade practices, complex global supply chains, and evolving WTO jurisprudence. The system must adapt while maintaining its core objective of providing fair protection to domestic industry against unfair trade practices. Transparency in decision-making, evidence-based analysis, and reasoned determinations will remain essential to the legitimacy and effectiveness of these protective measures in fostering a competitive and fair trading environment.

References

[1] Customs Tariff Act, 1975 (Act 51 of 1975), India Code. Available at: https://www.indiacode.nic.in/handle/123456789/8774 

[2] Anti-Dumping and Countervailing Duties in India: Statutory Mandate and Judicial Review, TaxTMI (December 12, 2025). Available at: https://www.taxtmi.com/article/detailed?id=15589 

[3] Ministry of Commerce and Industry, Manual on Anti-dumping Duties, Countervailing Duties and Safeguard Measures. Available at: https://www.caaa.in/Image/03%20hbantidumpunpro.pdf 

[4] The Customs Tariff Act, 1975 – Section 9C (Appeal), Indian Kanoon. Available at: https://indiankanoon.org/doc/442204/ 

[5] World Trade Organization, Anti-Dumping Agreement – Agreement on Implementation of Article VI of GATT 1994. Available at: https://www.wto.org/english/tratop_e/adp_e/antidum2_e.htm 

[6] Indian Customs – Anti-Dumping Duty Introduction, Exim Guru (November 14, 2025). Available at: https://www.eximguru.com/exim/indian-customs/anti-dumping-duty/anti-dumping-duty-introduction.aspx