Anti-Dumping Duty And Countervailing Duty Under the Customs Tariff Act: Regulatory Framework, Legal Provisions, and Judicial Interpretation

Introduction

International trade operates within a complex framework designed to balance free commerce with protection against unfair practices. Two critical instruments in this framework are Anti-Dumping Duty and Countervailing Duty, both governed under the Customs Tariff Act, 1975. These trade remedial measures serve as shields for domestic industries against injurious pricing practices and subsidized imports that threaten to undermine fair competition. India, as one of the most active users of trade remedy measures globally, has developed a sophisticated legal and administrative apparatus to implement these duties in accordance with World Trade Organization obligations.

The genesis of these duties lies in the recognition that unrestricted trade, while beneficial, can be weaponized through predatory pricing or government subsidization. When foreign producers dump goods below their normal value or benefit from export subsidies, domestic industries face unfair competition that can devastate local manufacturing, employment, and economic stability. The legislative response through the Customs Tariff Act and associated rules provides a structured mechanism for investigation, determination, and imposition of protective duties.

Understanding Anti-Dumping Duty

Anti-dumping duty represents a protective tariff imposed on foreign imports when goods are sold in India at prices lower than their normal value in the country of origin, causing material injury to domestic industry. The legal foundation rests on Section 9A of the Customs Tariff Act, 1975, which empowers the Central Government to impose such duties after proper investigation and determination [1].

Dumping occurs when an article is exported from any country or territory to India at less than its normal value. Normal value typically refers to the comparable price in the ordinary course of trade for consumption in the exporting country. The margin of dumping is calculated as the difference between the export price and this normal value. When such dumping causes or threatens material injury to an established domestic industry, or materially retards the establishment of a domestic industry, anti-dumping duty becomes applicable.

The procedural framework for anti-dumping investigations is detailed in the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995. These rules, formulated in consonance with the WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, establish the investigative process [2]. The Directorate General of Trade Remedies, functioning as the designated authority, conducts quasi-judicial investigations to determine the existence, degree, and effect of alleged dumping.

An investigation typically commences upon written application by or on behalf of the domestic industry. The application must contain sufficient evidence of dumping, injury within the meaning of Article VI of GATT 1994, and a causal link between dumped imports and the alleged injury. The designated authority issues a public notice initiating investigation, providing opportunities to all interested parties including exporters, importers, and domestic producers to present their case.

The Supreme Court of India has examined anti-dumping provisions on multiple occasions, establishing important interpretative principles. In Reliance Industries Limited v. Designated Authority, the Court clarified the quasi-judicial nature of anti-dumping proceedings and emphasized the need for fair procedures and reasoned orders [3]. The judgment underscored that while the designated authority conducts investigations and makes recommendations, the final decision on imposing duties rests with the Central Government, which must exercise this discretion judiciously.

Provisional anti-dumping measures deserve special attention as they provide interim protection during ongoing investigations. Section 9A(2) of the Customs Tariff Act read with Rules 12 and 13 permits the Central Government to impose provisional duty not exceeding the margin of dumping, though such duty cannot be imposed before sixty days from the date of public notice initiating investigation. Provisional duties remain in force for six months, extendable by three months, providing a protective shield to domestic industry while investigations conclude.

Understanding Countervailing Duty

Countervailing duty addresses a different dimension of unfair trade – subsidization. Section 9 of the Customs Tariff Act, 1975, provides the statutory basis for imposing countervailing duty when any country or territory pays, bestows, directly or indirectly, any subsidy upon manufacture, production, or exportation of articles subsequently imported into India [4]. The duty aims to offset the advantage conferred by foreign government subsidies, thereby leveling the playing field for domestic producers.

A subsidy, as defined in the Act, exists when there is financial contribution by a government or any public body within the territory of a member country, or any form of income or price support, which confers a benefit. This definition aligns with the WTO Agreement on Subsidies and Countervailing Measures, which categorizes subsidies into prohibited subsidies (export subsidies and import substitution subsidies) and actionable subsidies (those causing adverse effects to other members’ interests).

The Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidised Articles and for Determination of Injury) Rules, 1995, provide the procedural framework for countervailing duty investigations. Like anti-dumping investigations, these follow a structured process involving application, initiation, investigation, preliminary findings, final findings, and duty imposition. The designated authority must determine not only the existence and amount of subsidy but also establish that subsidized imports are causing material injury to domestic industry.

Material injury determination forms a critical component of both anti-dumping and countervailing duty investigations. The designated authority must base its determination on positive evidence and objective examination of the volume of dumped or subsidized imports, their effect on prices in the domestic market for like products, and the consequent impact on domestic producers. The injury analysis considers factors including actual and potential decline in sales, profits, output, market share, productivity, return on investments, capacity utilization, cash flow, inventories, employment, wages, growth, and ability to raise capital.

Regulatory Framework and Institutional Mechanism

The Directorate General of Trade Remedies, established in May 2018, serves as India’s single national authority for administering all trade remedial measures including anti-dumping, countervailing duties, and safeguard measures. Prior to this consolidation, the Directorate General of Anti-Dumping and Allied Duties handled anti-dumping and countervailing investigations, while the Directorate General of Safeguards managed safeguard investigations. The creation of DGTR streamlined the regulatory regime, providing a unified platform for trade remedy administration [5].

DGTR operates as a quasi-judicial body under the Ministry of Commerce and Industry, conducting independent investigations before making recommendations to the Central Government. The Director General functions as the designated authority under both anti-dumping and countervailing duty rules. The investigative process adheres to principles of natural justice, transparency, and due process, ensuring all interested parties receive adequate opportunities to defend their interests.

The investigation timeline provides structure to the process. Anti-dumping investigations should ordinarily conclude within twelve months from initiation, with a possible six-month extension in special circumstances. Preliminary findings, which form the basis for provisional measures, should preferably be issued within one hundred days from initiation, though this is not a statutory requirement. These timelines balance the need for thorough investigation against the urgency of providing relief to injured domestic industries.

A sunset review mechanism ensures anti-dumping and countervailing duties do not remain in force indefinitely. Unless terminated earlier, such duties normally expire five years from their imposition. However, if a review initiated before expiry determines that duty expiration would likely lead to continuation or recurrence of dumping or subsidization and injury, the duty may be extended for another five years. The Delhi High Court in India Metal and Ferro Alloys Ltd. v. Designated Authority held that sunset review is mandatory and must be conducted at the end of five years [6].

Lesser Duty Rule and Public Interest Considerations

Indian practice follows the lesser duty rule, unlike some jurisdictions that impose the full margin of dumping. The Central Government may impose anti-dumping duty not exceeding the margin of dumping, but the quantum should be sufficient to remove injury to the domestic industry. The designated authority calculates a non-injurious price, representing the price at which imports could enter without causing injury, and recommends duty equal to the difference between this non-injurious price and the landed value of imports, if this amount is less than the dumping margin.

Public interest considerations have gained increasing importance in duty imposition decisions. While the Customs Tariff Act does not explicitly mandate public interest examination, the designated authority may consider whether imposition of duty would be against the larger public interest. Factors examined include impact on consumers, downstream industries using the product as raw material, and the overall economy. In several recent cases, the Ministry of Finance has declined to impose duties recommended by DGTR citing superior public interest considerations.

This discretion exercised by the Central Government has sparked significant legal debate. The Customs Excise and Service Tax Appellate Tribunal in Jubilant Ingrevia Ltd. v. Union of India held that the Central Government’s function in deciding whether to impose recommended duties is quasi-judicial in nature, requiring reasoned orders [7]. The Tribunal mandated that the government must record reasons when rejecting DGTR recommendations, as arbitrary decisions violate Article 14 of the Constitution of India, which enshrines equality before law.

Judicial Review and Appellate Remedies

Section 9C of the Customs Tariff Act provides that appeals against orders determining the existence, degree, and effect of dumping or subsidization lie before the Customs, Excise and Service Tax Appellate Tribunal. However, only final findings and duties imposed pursuant to such findings are appealable – preliminary findings and provisional duties cannot be challenged through appeal, though writ jurisdiction under Articles 226 and 227 of the Constitution remains available in exceptional circumstances involving jurisdictional errors or natural justice violations.

The Supreme Court has consistently held that judicial review of anti-dumping and countervailing duty determinations should be limited, given the technical and specialized nature of these investigations. Courts should not substitute their judgment for that of the designated authority on factual and technical matters. However, review is appropriate when determinations suffer from procedural irregularities, violations of natural justice, manifest errors of law, or arbitrary exercise of discretion.

Steel Authority of India Limited v. Designated Authority illustrates the scope of judicial review. The Court held that once the Supreme Court has examined and upheld the methodology used by the designated authority for determining normal value and dumping margin, the same issue cannot be re-litigated in subsequent proceedings on grounds of the rules being ultra vires the Act [8]. This principle of res judicata applies to prevent endless challenges to established legal positions.

The requirement of transparency in investigation and determination processes stems from both statutory provisions and principles of natural justice. The designated authority must provide non-confidential summaries of confidential information submitted by parties, ensuring other interested parties can defend their interests. The final findings must contain sufficient reasoning explaining the methodology used for dumping margin calculation, injury determination, and causal link analysis. Inadequate disclosure or unreasoned rejection of contentions may render the determination vulnerable to judicial challenge.

Circumvention and Anti-Absorption Provisions

Trade remedy measures must adapt to evolving circumvention practices. Anti-circumvention provisions, strengthened through amendments to the anti-dumping rules in 2012, address situations where anti-dumping duties are circumvented through assembly operations, minor modifications to the product, or routing through third countries. The designated authority may extend anti-dumping duty to products that are slightly modified or assembled in India or third countries if such products circumvent the duty in force.

Anti-absorption provisions, introduced in 2021, address scenarios where exporters absorb the anti-dumping duty by reducing their prices, thereby maintaining the dumping margin. When the designated authority determines that anti-dumping duty has been absorbed wholly or partially through price reductions, it may recommend enhancement of duty to ensure effective injury removal. These provisions ensure that trade remedy measures achieve their intended protective effect [9].

The refund mechanism for excess anti-dumping or countervailing duty paid provides relief to importers. The Refund of Anti-Dumping Duty (Paid in Excess of Actual Margin of Dumping) Rules, 2012, establish procedures for claiming refunds when duty paid exceeds the actual dumping margin. Importers must file applications within three months of determination of the actual margin, accompanied by evidence of duty payment. The Assistant Commissioner or Deputy Commissioner of Customs examines the claim and orders refund if satisfied that excess duty was paid and not passed on to consumers.

Contemporary Challenges and Future Directions

Indian anti-dumping and countervailing duty law faces several contemporary challenges. The tension between the designated authority’s technical recommendations and the government’s discretion in imposing duties has intensified, with increasing instances of recommendations being rejected on public interest grounds. This trend raises questions about the balance between protecting domestic industry and promoting consumer welfare, competitiveness, and economic efficiency.

The COVID-19 pandemic and subsequent global supply chain disruptions have added complexity to trade remedy investigations. Determining normal periods for injury analysis, accounting for pandemic-related distortions in trade flows, and assessing genuine injury from dumping versus injury from force majeure events require nuanced analysis. The designated authority has adapted by considering multiple periods, excluding aberrational data, and focusing on structural rather than temporary injury factors.

Digital transformation offers opportunities for enhanced efficiency and transparency. The DGTR has introduced online filing systems for applications and questionnaires, reducing compliance burden and processing time. Digital hearings conducted during the pandemic demonstrated the feasibility of remote participation, potentially broadening stakeholder engagement in investigations. However, concerns about data security, confidentiality protection, and equitable access to technology require careful attention.

India’s engagement with international trade remedy jurisprudence through WTO dispute settlement has enriched domestic understanding and practice. Panel and Appellate Body reports interpreting the Anti-Dumping Agreement and SCM Agreement provide authoritative guidance on contested issues. Indian authorities have generally sought to align domestic practice with evolving WTO jurisprudence, though occasional divergences exist where domestic law provides more stringent requirements or broader discretion.

Conclusion

Anti-dumping and countervailing duties constitute essential instruments in India’s trade policy toolkit, balancing the imperatives of market openness with protection against unfair trade practices. The legal framework under the Customs Tariff Act, 1975, supported by detailed rules and institutional mechanisms, provides a robust system for investigating and remedying injurious dumping and subsidization. The Directorate General of Trade Remedies, functioning as a quasi-judicial authority, conducts technically sophisticated investigations applying WTO-consistent methodologies.

Judicial interpretation by the Supreme Court and tribunals has clarified the scope and limits of trade remedy measures, establishing principles of transparency, reasoned decision-making, and limited judicial review. The tension between protecting domestic industry and promoting broader public interest continues to animate debates about duty imposition, with the government’s discretion to reject recommendations raising important questions about the purpose and effectiveness of trade remedies.

As global trade evolves with digitalization, climate considerations, and shifting production patterns, India’s trade remedy regime must adapt while maintaining fidelity to WTO obligations and domestic legal requirements. The challenge lies in striking the right balance – vigorous enough to protect legitimate industry interests from unfair practices, yet restrained enough to avoid protectionism that harms consumers, downstream industries, and economic efficiency. Through continuous refinement of law, procedure, and practice, informed by international best practices and domestic realities, India can maintain a trade remedy system that serves as an effective safeguard for fair and competitive markets.

References

[1] Customs Tariff Act, 1975, Section 9A. Available at: https://www.indiacode.nic.in/show-data?actid=AC_CEN_2_2_00039_197551_1554713855359&orderno=14 

[2] WTO, Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994. Available at: https://www.wto.org/english/docs_e/legal_e/19-adp_01_e.htm 

[3] Reliance Industries Limited v. Designated Authority, (2006) 202 ELT 23 (SC). Available at: https://link.springer.com/article/10.1007/s40901-018-0070-2 

[4] Customs Tariff Act, 1975, Section 9. Available at: https://thc.nic.in/Central%20Governmental%20Acts/Customs%20Tariff%20Act,%201975.pdf 

[5] Ministry of Commerce and Industry, Directorate General of Trade Remedies. Available at: https://www.commerce.gov.in/about-us/attached-offices/directorate-general-of-trade-remedies-dgtr/ 

[6] India Metal and Ferro Alloys Ltd. v. Designated Authority, 2008 (224) E.L.T. 375 (Del.). Available at: https://www.lakshmisri.com/Media/Uploads/Documents/INDIAN%20ANTI-DUMPING%20LAW%20&%20PRACTICE%20-%20A%20MONOGRAPH.pdf 

[7] Jubilant Ingrevia Ltd. v. Union of India (CESTAT). Available at: https://www.lakshmisri.com/insights/articles/finance-ministry-s-decision-not-to-impose-anti-dumping-duty-blurred-lines/ 

[8] Steel Authority of India Limited v. Designated Authority. Available at: https://www.latestlaws.com/judgements/delhi-hc/2018/february/2018-latest-caselaw-1036-del 

[9] Ministry of Finance, Notification on Anti-Absorption Provisions, 2021. Available at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=1792557