Anti-dumping: GATT Article VI, the Uruguay Round code and Indian law

1. What dumping is

A product is dumped when it is introduced into the commerce of another country at less than its normal value, that is, at an export price lower than the comparable price for the like product when destined for consumption in the exporting country (GATT Article VI:1; Anti-Dumping Agreement, Article 2.1). It is a form of international price discrimination by a private firm, typically one protected in its home market and able to sell abroad below home prices or below cost to gain market share. Dumping itself is not prohibited. What GATT allows is a remedy by the importing State: an anti-dumping duty, not greater than the margin of dumping, where dumping causes or threatens material injury to a domestic industry (Article VI:2).

2. From the Kennedy Round to the Uruguay Round code

Article VI gave few procedural rules, and duties were open to abuse. The Kennedy Round produced the first Anti-Dumping Code (1967), and the Tokyo Round a revised code (1979), each binding only on its signatories. The Uruguay Round produced the Agreement on Implementation of Article VI of GATT 1994, commonly called the Anti-Dumping Agreement, which binds all members as part of the single undertaking. Its main contributions were detailed rules on calculating dumping, a definition of injury and causation, procedural guarantees, a de minimis rule, a sunset clause, and a special standard of review for panels (Article 17.6).

3. Determination of dumping (Article 2)

• Normal value: the price of the like product in the ordinary course of trade in the exporting country. Where there are no such sales, or they are too few (normally under 5 per cent of export sales), or are below cost, normal value may be based on the export price to an appropriate third country, or on a constructed value (cost of production plus reasonable selling, general and administrative costs and profit) (Article 2.2).
• Export price: the price paid by the importer; where unreliable because of association between exporter and importer, a constructed export price based on the first resale to an independent buyer (Article 2.3).
• Fair comparison (Article 2.4): at the same level of trade, normally ex-factory, at nearly the same time, with allowances for differences in conditions of sale, taxes, quantities and physical characteristics. The practice of “zeroing” negative margins was held inconsistent with Article 2.4.2 in EC – Bed Linen (Appellate Body, 2001), a dispute India brought and won.
• Margin of dumping: normal value minus export price, usually expressed as a percentage of export price.

4. Injury and causation (Articles 3 and 4)

• Injury means material injury to a domestic industry, threat of material injury, or material retardation of the establishment of an industry (footnote 9).
• The determination must rest on positive evidence and an objective examination of (a) the volume of dumped imports, (b) their effect on domestic prices (price undercutting, depression or suppression), and (c) their impact on domestic producers, evaluating all relevant economic factors: sales, profits, output, market share, productivity, return on investment, capacity utilisation, cash flow, inventories, employment, wages and growth (Article 3.1, 3.2, 3.4).
• Causation (Article 3.5): the dumped imports must be causing injury; injury from other known factors (non-dumped imports, contraction of demand, technology, export performance) must not be attributed to them (the non-attribution rule).
• Cumulation of imports from several countries is allowed if each margin is above de minimis and conditions of competition justify it (Article 3.3).
• Domestic industry (Article 4): domestic producers of the like product as a whole, or those whose output is a major proportion of total production.

5. Procedure, measures and review

• Initiation (Article 5): on a written application by or on behalf of the domestic industry. The application is supported by producers accounting for more than 50 per cent of the output of those expressing a view, and not less than 25 per cent of total production (Article 5.4). The investigation is terminated if the margin is de minimis (less than 2 per cent) or the volume of dumped imports is negligible (less than 3 per cent of imports, unless countries under 3 per cent together exceed 7 per cent) (Article 5.8). Investigations are concluded within one year, and never more than 18 months (Article 5.10).
• Evidence (Article 6): notice, opportunity to present evidence, access to non-confidential information, verification visits, and “facts available” against non-cooperating parties.
• Provisional measures (Article 7): not before 60 days from initiation, for normally not more than four months (up to six), or nine months where a lesser duty is examined.
• Price undertakings (Article 8): the exporter agrees to raise prices.
• Imposition (Article 9): the duty must not exceed the margin; a lesser duty adequate to remove the injury is desirable.
• Duration and review (Article 11): a duty remains only as long as necessary; it terminates after five years (sunset) unless a review finds that expiry would be likely to lead to continuation or recurrence of dumping and injury.
• Public notice and judicial review (Articles 12 and 13); developing-country interests to be considered before applying duties (Article 15).

6. Indian law

Section 9A of the Customs Tariff Act, 1975 provides that where an article is exported to India at less than its normal value, the Central Government may, by notification, impose an anti-dumping duty not exceeding the margin of dumping. The Explanation defines margin of dumping, export price and normal value in terms that follow Article 2. Duty may be imposed provisionally, may be retrospective in limited cases, and under section 9A(5) ceases after five years unless extended on review. Section 9B bars levy unless injury is determined and bars double levy under sections 9 and 9A for the same situation. Section 9C provides an appeal to the Customs, Excise and Service Tax Appellate Tribunal. The details are in the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995. Investigations are conducted by the Designated Authority, now the Directorate General of Trade Remedies (DGTR) in the Ministry of Commerce, which recommends a duty to the Ministry of Finance. India is one of the most frequent users of anti-dumping action, mostly against chemicals, steel and other imports from China.

• Reliance Industries Ltd. v. Designated Authority, 2006 INSC 591, (2006) 10 SCC 368: proceedings before the Designated Authority are quasi-judicial, so it must follow natural justice and disclose its reasons, including the basis of the non-injurious price, and cannot hide behind a blanket claim of confidentiality.
• Automotive Tyre Manufacturers Association v. Designated Authority, 2011 INSC 22, (2011) 2 SCC 258: the Authority performs quasi-judicial functions and is bound to act judicially; final findings given by an officer who did not hear the parties violated natural justice.
• Commissioner of Customs, Bangalore v. G.M. Exports, 2015 INSC 693, (2016) 1 SCC 91: the Rules were construed in the light of the Anti-Dumping Agreement, which India's law implements, and no anti-dumping duty could be levied on imports made in the gap between the lapse of a provisional duty and the imposition of the final duty.

7. Problem

Indian manufacturers of a chemical, producing 60 per cent of national output, complain that exporters from Country X sell it in India at ₹80 per kg while selling it at home at ₹100. Their sales and profits have fallen. The exporters reply that demand in India has collapsed because of a slump in the user industry. Can an anti-dumping duty be imposed?

Issue. Whether dumping, material injury and a causal link are established under section 9A and the Anti-Dumping Agreement.

Law. Dumping exists where the export price is below normal value (Article 2; section 9A). Injury must be shown on positive evidence of volume, price effects and impact (Article 3.1 to 3.4), and the injury caused by other factors, including contraction in demand, must not be attributed to the dumped imports (Article 3.5). The applicants have standing (Article 5.4).

Application. After adjustments for fair comparison, the margin is about 25 per cent of export price, well above de minimis. The fall in sales and profits is evidence of injury. But the Designated Authority must separate the effect of the slump in demand from that of the imports: if Indian producers lost market share to the dumped imports and prices were undercut, causation is made out even though demand also fell; if the whole decline is explained by demand, it is not.

Conclusion. A duty may be imposed, not exceeding the margin and preferably at the level that removes injury, only if the Authority's findings show that the dumped imports themselves caused material injury after excluding the effect of the demand slump. Its findings must be reasoned (Reliance Industries) and are appealable to CESTAT under section 9C.

How this is examined

For the August 2024 essay: definition, the three conditions, the factors in Article 3.4 listed in full, causation and non-attribution, then the Indian law and procedure. For a short note on the Uruguay Round code: the history of the 1967 and 1979 codes, what the 1994 Agreement added (methods, injury, de minimis, sunset, standard of review), and its implementation by section 9A.