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Saturday, May 12, 2012

Anti-dumping and international trade - Business

Dumping takes place when a company sells goods at a lower price in the foreign market then the price it charges in its domestic market. This is an unfair trade practice which can have a distorted effect on international trade.There are two fundamental parameters used for determination of dumping, namely, the normal value and the export price. Both these elements have to be compared at the same level of trade, generally at ex-factory level, for assessment of dumping.The normal value is generally the price of the product at issue, in the ordinary course of trade, when destined for consumption in the exporting country market.Export price of goods means the price at which the goods are sold to importing country. It is generally the cost, insurance and freight (CIF) value minus the adjustments account of ocean freight, insurance, commission etc. so as to arrive at the value of ex-factory level.There is nothing inherently illegal about dumping as long as it does not cause materi al injury to domestic industries. However, when dumping causes or threatens to cause material injury to the domestic industry, the anti-dumping authorities initiate necessary action for investigations and subsequent imposition of anti-dumping duties.Under Article VI of GATT 1994, and the Anti-Dumping Agreement, WTO Members can impose anti-dumping measures, if, after investigation in accordance with the Agreement, a determination is made (a) that dumping is occurring, (b) that the domestic industry producing the like product in the importing country is suffering material injury, and (c) that there is a causal link between the two.However, in order to take anti-dumping action, anti-dumping authorities have to show that dumping is taking place, calculate the extent of dumping, and show that dumping is causing injury or threatening to do so to the domestic industries.

Therefore, the agreement clearly lays down the principle that anti-dumping duties on dumped imports cannot be levied solely on the ground that a product is being sold at a lower price to the importing country. They can be levied only if it is established, that the dumping is causing material injury to that industry.Broadly, injury may be analyzed in terms of the volume effect and price effect of the dumped imports. The parameters by which injury to the domestic industry is to be assessed in the anti-dumping proceedings are such economic indicators having a bearing upon the state of industry as the magnitude of dumping, and the decline in sales, selling price, profits, market share, production, utilization of capacity etcAnti-dumping action involves charging extra import duty i.e. anti-dumping duty on the particular product that is being exported from a particular country in order to bring its price closer to the domestic price or to remove the injury to the domestic indust ry in importing country.Under the GATT provisions, anti-dumping duties cannot exceed dumping margin. However, it is suggested to impose a lesser duty, which is adequate to remove the injury caused to domestic industry. Under Indian laws, the authorities are obliged to restrict the anti-dumping duty to lower of the two i.e. dumping margin and injury margin.Any exporter whose margin of dumping is less than 2% of the export price shall be excluded from the purview of anti-dumping duties even if the existence of dumping, injury as well as the causal link is establishedExtensive investigation against any country is required to be terminated if the volume of the dumped imports, actual or potential, from a particular country accounts for less than 3% of the total imports provided the cumulative imports from all those countries who individually account for less than 3%, are not more than 7%.

Furthermore, it is imperative to prove that the dumping has caused injury to the domestic industry.Disputes in the anti-dumping area are subject to binding dispute settlement before the Dispute Settlement Body of the WTO, in accordance with the provisions of the Dispute Settlement Understanding ("DSU") (Article 17).

Members may challenge the imposition of anti-dumping measures, in some cases may challenge the imposition of preliminary anti-dumping measures, and can raise all issues of compliance with the requirements of the Agreement, before a panel established under the DSU.Apart from dumping, some of the countries also resort to subsidization of their exports to other countries. Export subsidies, under the WTO agreement, are treated as unfair trade practice and such subsidies are actionable by way of levy of anti-subsidy countervailing duty. However such duties can be levied only if preliminary investigations have established that subsidization is actually taking place.The Agreement on Safeguards authorizes importing countries to restrict imports for temporary periods, if after investigation it has been established that imports are causing serious injury to the domestic industry. Safeguard measures include increasing tariffs over bound rates or imposing quantitative restrictions.

Anti-dumping & Anti-subsidy cases in IndiaThe countries prominently figuring in the anti-dumping investigations by India are China PR, EU, Chinese Taipei, Korea RP, Japan, USA, Singapore, Indonesia, Thailand, Russia etc. Investigations were carried in 188 cases from various sectors like Chemicals and Petrochemicals, Pharmaceuticals, Textiles, Steel and other materials, Consumer goods etc. involving 35 countries/ territories.EU, US, Canada and South Africa account for almost 60% of anti-dumping cases initiated against Indian exports.Indian exports are also facing number of anti-subsidy cases by other member countries of WTO. EU, USA and South Africa account for 83% of the anti-subsidy cases initiated against Indian exports.

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