CUSTOM TARIFF ACT: ANTI-DUMPING DUTY (ADD) AND COUNTERVAILING DUTY (CD)
With the increase in trade among the countries around the world, the need for free and fair trade has also developed. Free trade refers to the property of smooth trade without any hurdles among the buyer and seller in different countries. Fair trade ensures that both developed and developing countries are on the same pedestal while contracting with each other and the producers of developing countries are receiving fair prices for their products by the companies of developed nations.
To ensure fair trade countries around the world have developed different measures. Anti-dumping duty and Countervailing duty are two such measures that safeguards the interest of domestic producers.
ANTI- DUMPING DUTY:
What is dumping?
World trade organisation defines dumping as “Dumping is, in general, a situation of international price discrimination, where 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.”
Dumping puts the producers of the importing country in a disadvantageous position as customers naturally prefer cheaper products and the domestic producers are generally not able to reduce the prices of their products artificially like MNCs or producers of exporting countries.
Anti dumping duty is imposed by the government of such importing countries to curb the effects of dumping and protect the domestic producers, condition being it should not exceed the margin of dumping of the concerned commodity.
Member countries of WTO are allowed to impose anti dumping duties. Article VI of the General Agreement on Tariffs and Trade, 1994 supplemented by the Agreement on Implementation of Article VI of the GATT 1994, also known as anti-dumping agreement grants the power on the member nations to import anti- dumping duties on the dumped products in case they become a threat for domestic businesses. Further, it states the elaborate rules to govern the “investigation, determination, and application of anti-dumping duties”.
Legal Framework Governing Imposition of Anti-dumping Duty in India
i.) Governing Laws-
As India is a signatory to Uruguay Round negotiation under GATT that drafted Article VI of the General Agreement on Tariffs and Trade, 1994, the parliament amended the Custom Tariff Act, 1975 in 1955 and added Section 9A, 9B and 9C to the act and enacted Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, to bring India’s anti- dumping law regime in consonance with the Article VI of the General Agreement on Tariffs and Trade, 1994. Both these laws get amended from time to time and currently 4 sections of the Custom Tariff Act deal with anti dumping duty 9A, 9AA, 9B and 9C.
ii) Investigating and Implementing Authorities-
Directorate General of Trade Remedies (“DGTR”) carries out the anti-dumping investigations in India. It is a quasi judicial body that works under the Ministry of Commerce and Industry. DGTR derives its powers through Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 ( “Anti- Dumping Rules”). But as per Rule 17(1) of Anti- Dumping Rules the findings of DGTR are not binding but mere recommendations.
As per Anti- Dumping Rules and Custom Tariff Act, 1975 the apex authority to impose anti- dumping duties in India is the Ministry of Finance(“MoF”). Rule 18(1) of Anti- Dumping Rules lays down the procedure for the same. It states that “The Central Government may, within three months of the date of publication of final findings by the designated authority under rule 17, impose by notification in the Official Gazette, upon importation into India of the article covered by the final finding, anti-dumping duty not exceeding the margin of dumping as determined under rule 17”
The MoF has the discretionary power to accept or reject the recommendations of DGTR as the word “may” clarifies in the above section.
The recommendations of DGTR are applicable for 5 years unless revoked before or Extended by the DGTR for further 5 years because in its opinion the dumping will continue or recur after the expiry of five year period and will cause injury to the domestic producers.
Appeal against the recommendation and imposition of Anti Dumping Duty–
As per Section 9C of the Custom Tariff Act, 1975, one can appeal against the recommendation and imposition of Anti Dumping Duty in Customs, Excise and Service Tax Appellate Tribunal (CESTAT), established under Section 129 of the Customs Act 1962.
What is Subsidy?
World Trade Organization, Agreement on Subsidies and Countervailing Measures (“ASCM”) defines subsidy as follows:
“(i) a financial contribution (ii) by a government or any public body within the territory of a Member (iii) which confers a benefit.”
Sometimes , governments of various countries support the producers in their country by providing subsidies. This help by the government makes the products cheaper and as the customer will prefer these foreign products above domestic products because of their cheap prices ultimately boost their demand in importing countries, which could ultimately result in losses to the domestic producers of the importing country.
Therefore, the governments of the importing countries impose Countervailing duties on such subsidized products to nullify the effect of subsidy and protect the domestic producers from bearing losses.
Article XVI of the GATT 1994 and the Agreement on Subsidies and Countervailing Measures (“ASCM”) lays down the rules to regulate subsidies and Countervailing measures among the member countries of WTO.
Legal Framework Governing Imposition of Anti-dumping Duty in India
i) Governing Laws-
In India Anti- Dumping duties are governed by Section 9, 9B and 9C of the Custom Tariff Act 1975. This is further supplemented by the Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules 1995, (the Countervailing Rules). It lays down the rules with regards to identification of the subsidized products, the manner of determining subsidy provided, and the collection and assessing of the duty under the act.
ii) Supervising and Implementing Authority-
Similar to anti- dumping regulationsDirectorate General of Trade Remedies (“DGTR”) carries out the anti-dumping investigations in India and gives recommendations regarding imposition of duty. Again the Ministry of Finance has the discretion to accept or reject those recommendations and impose the countervailing duty not exceeding the amount of subsidy.
Again there is a need to establish that the subsidized articles are either causing injury or are a threat to the domestic producers. Rule 13 read with Annexure I of the Countervailing Rules provides for the principles to determine injury and Rule 12 read with Annexure IV of the Countervailing Rules Countervailing Rules lay down the rules for the calculation of the amount of countervailable subsidies. Further in case an item already subjected to anti- dumping duty also attracts countervailing duty,the government may impose countervailing duty on such product for an amount equivalent to the difference between margin of countervailing duty and anti dumping duty imposed.
Again similar to the anti- dumping rules, the recommendations of DGTR are applicable for 5 years unless revoked before or Extended by the DGTR for further 5 years because in its opinion the subsidization will continue or recur after the expiry of five year period and will cause injury to the domestic producers.
iii) Appeal with regards to the countervailing duty-
Again, as per Section 9C of the Custom Tariff Act, 1975, any appeal with regards to the countervailing duty will lie in Customs Excise and Service Tax Appellate Tribunal (CESTAT), established under Section 129 of the Customs Act 1962.
The Custom Tariff Act 1975, provides for the imposition of ,both Anti- dumping duty as well as Countervailing duty when the need arises and it can be safely concluded that in both the cases the legal framework is similar and both the remedies protects the interest of domestic business of India as well as promotes fair trade in consonance with the WTO guidelines and Gate agreement.