Anti-Dumping

[bhart b sharma]

Post 1.6.07, CBEC instruction no. B1/16/2007-TRU dated 22.5.2007 states that “contracts which are treated as works contract for the purpose of levy of VAT/sales tax shall also be treated as works contract for the purpose of levy of service tax.” Earlier category of “Commercial or industrial construction’ under Section 65(25b) Finance Act, 1994 existed which continues in view of Large Bench judgment in case of Larsen and Toubro [2015 (3) TMI 748 - CESTAT NEW DELHI (LB)]. There is also ‘Composition Scheme’ at much lower rates but it cannot be availed if a person had paid service tax under construction category.

Under Section 65(25b) Finance Act, 1994, “Commercial or industrial construction’ means -

(a) Construction of a new building or a civil structure or a part thereof; or

(b) Construction of pipeline or conduit; or

(c) Completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or

(d) Repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is ....

(i) used, or to be used, primarily for; or

(ii) occupied, or to be occupied, primarily with; or

(iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.

The taxable service is defined in Section 65(105)(zzq) reads as follows :

(zzq) to any person, by any other person, in relation to commercial or industrial construction;

Explanation : For the purposes of this sub-clause, the construction of a new building which is intended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorised by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force shall be deemed to be service provided by the builder to the buyer.

Word “manufacture” in Section 2(f) of Central Excise Act, 1944 means production of article from raw or prepared materials, by giving new form, quality, properties or combinations including any process incidental or ancillary. Every type of change in shape, cutting etc does not amount to “manufacture”, as held in number of decisions of Court

In the era of globalization, the goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect on international trade. Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Thus, the purpose of anti dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade. The use of anti dumping measure as an instrument of fair competition is permitted by the WTO. In fact, anti dumping is an instrument for ensuring fair trade and is not a measure of protection per se for the domestic industry. It provides relief to the domestic industry against the injury caused by dumping.It does not mean low prices. Dumping, in its legal sense, means export of goods by a country to another country at a price lower than its normal value. Thus, dumping implies low priced imports only in the relative sense (relative to the normal value), and not in absolute sense.

Although anti dumping duty is levied and collected by the Customs Authorities, it is entirely different from the Customs duties not only in concept and substance, but also in purpose and operation. The following are the main differences between the two: -

• Conceptually, anti dumping and the like measures in their essence are linked to the notion of fair trade. The object of these duties is to guard against the situation arising out of unfair trade practices while customs duties are there as a means of raising revenue and for overall development of the economy.
• Customs duties fall in the realm of trade and fiscal policies of the Government while anti dumping and anti subsidy measures are there as trade remedial measures.
• The object of anti dumping and allied duties is to offset the injurious effect of international price discrimination while customs duties have implications for the government revenue and for overall development of the economy.
• Anti dumping duties are not necessarily in the nature of a tax measure inasmuch as the Authority is empowered to suspend these duties in case of an exporter offering a price undertaking. Thus such measures are not always in the form of duties/tax.
• Anti dumping and anti subsidy duties are levied against exporter / country inasmuch as they are country specific and exporter specific as against the customs duties which are general and universally applicable to all imports irrespective of the country of origin and the exporter.
• Following the recommendation of the Designated Authority in the Commerce Ministry in its final findings in the sunset review investigations, The Finance Ministry has imposed definitive anti-dumping duty on Potassium Carbonate imports from Taiwan and South Korea. In its final findings, the Authority had concluded that Potassium Carbonate imports from Taiwan are entering in the Indian market at dumped prices. Furthermore, there was also likelihood of recurring of dumping and injury from South Korea, the Authority said. However, it concluded that there is no likelihood of recurrence of dumping and injury from China and European Union.

The legal perspective

Sections 9, 9A, 9B and 9C of the Customs Tariff Act, 1975 as amended in 1995 and the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 and Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidised Articles and for Determination of Injury) Rules, 1995 framed there under form the legal basis for anti-dumping and anti subsidy investigations and for the levy of anti-dumping and countervailing duties. These laws are in consonance with the WTO Agreements on Anti Dumping and Anti Subsidy countervailing measures.

Terms often used in anti-Dumping:-

Normal Value: Normal value is the comparable price at which the goods under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country.

If the normal value can not be determined by means of the domestic sales, the following two alternative methods may be employed to determine the normal value: -

• Comparable representative export price to an appropriate third country.
• Constructed normal value, i.e. the cost of production in the country of origin with reasonable addition for administrative, selling and general costs and reasonable profits.

Export price: The Export price of the goods allegedly dumped into India means the price at which it is exported to India. It is generally the CIF value minus the adjustments on account of ocean freight, insurance, commission, etc. so as to arrive at the value at ex-factory level.

Dumping Margin: The margin of dumping is the difference between the Normal value and the export price of the goods under complaint. It is generally expressed as a percentage of the export price.

Under the WTO arrangement, the National Authorities can impose duties upto the margin of dumping i.e. the difference between the normal value and the export price. The Indian law also provides that the anti dumping duty to be recommended/levied shall not exceed the dumping margin. The Authority may terminate or suspend investigation after the preliminary findings if the exporter concerned furnished an undertaking to revise his price to remove the dumping or the injurious effect of dumping as the case may be. No anti dumping duty is recommended on such exporters from whom price undertaking has been accepted.

Anti-dumping duty is a measure to correct the situation arising out of the dumping of goods and its distorting effect on domestic producers of similar goods. Rapid industrialization has resulted in large-scale production – and in this situation dumping enables the producer to establish a dominant position in the market. This is common in international commercial practice for export prices to be lower than the domestic ones. Therefore there is nothing inherently immoral about the practice of dumping. However, when dumping causes or threatens to cause, material injury to the domestic industry it is viewed gravely.

Substantive Rules:
"Dumping" means export of goods by one territory to the market of another territory at a price lower than the normal value. If the export price is lower than the normal value, it constitutes dumping. Therefore, there are two fundamental parameters used for determination of dumping, namely, the export price and the normal value. Both these elements have to be compared at the same level of trade, normally at ex-factory level, for assessment of dumping." Normal value" is the comparable price at which the goods under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country.

Practice and Procedure:
One main objective of the procedural requirements is to ensure transparency of proceedings, a full opportunity for parties to protect their interests, and adequate explanations by investigating authorities of their determinations. The wide-ranging and detailed procedural requirements relating to investigations focus on the sufficiency of petitions to ensure that merit fewer investigations are not initiated, on the establishment of time periods for the completion of investigations, and on the provision of access to information to all interested parties, along with rational opportunities to present their views and arguments. The Rules and regulations also provide for the timing of the imposition of anti-dumping duties, the duration of such duties, and oblige Designated Authority to periodically review the continuing need for anti-dumping duties and price undertakings. It is also provided at its discretion, take anti-dumping actions at the request of a third country, which is a member of the World Trade Organization. The anti-dumping procedures are based on an application made by the concerned domestic industry to die Designated Authority in the Department of Commerce for an investigation into alleged dumping of a product into India. Under the Rules a valid application can be made only by those petitioners/domestic producers, who expressly support the application, and account for more than 25% of total domestic production of the like article in question.

It protects domestic industry

Anti dumping, in common parlance, is understood as a measure of protection for domestic industry. However, anti dumping measures do not provide protection per se to the domestic industry. It only serves the purpose of providing remedy to the domestic industry against the injury caused by the unfair trade practice of dumping. In fact, anti dumping is a trade remedial measure to counteract the trade distortion caused by dumping and the consequential injury to the domestic industry. Only in this sense, it can be seen as a protective measure. It can never be regarded as a protectionist measure.

Vs. normal cus duty

Although anti dumping duty is levied and collected by the Customs Authorities, it is entirely different from the Customs duties not only in concept and substance, but also in purpose and operation. The following are the main differences between the two: -

• Conceptually, anti dumping and the like measures in their essence are linked to the notion of fair trade. The object of these duties is to guard against the situation arising out of unfair trade practices while customs duties are there as a means of raising revenue and for overall development of the economy.
• Customs duties fall in the realm of trade and fiscal policies of the Government while anti dumping and anti subsidy measures are there as trade remedial measures.
• The object of anti dumping and allied duties is to offset the injurious effect of international price discrimination while customs duties have implications for the government revenue and for overall development of the economy.
• Anti dumping duties are not necessarily in the nature of a tax measure inasmuch as the Authority is empowered to suspend these duties in case of an exporter offering a price undertaking. Thus such measures are not always in the form of duties/tax.
• Anti dumping and anti subsidy duties are levied against exporter / country inasmuch as they are country specific and exporter specific as against the customs duties which are general and universally applicable to all imports irrespective of the country of origin and the exporter.

Thus, there are basic conceptual and operational differences between the customs duty and the anti dumping duty. The anti dumping duty is levied over and above the normal customs duty chargeable on the import of goods in question.

Following the recommendation of the Designated Authority in the Commerce Ministry in its final findings in the sunset review investigations, The Finance Ministry has imposed definitive anti-dumping duty on Potassium Carbonate imports from Taiwan and South Korea. In its final findings, the Authority had concluded that Potassium Carbonate imports from Taiwan are entering in the Indian market at dumped prices. Furthermore, there was also likelihood of recurring of dumping and injury from South Korea, the Authority said. However, it concluded that there is no likelihood of recurrence of dumping and injury from China and European Union.

Potassium Carbonate is a white inorganic compound - available in powder and granules form - soluble in water and insoluble in alcohol.

It is primarily used in the manufacture of TV picture tubes, GLS Lamps, Ophthalmic glasses.

Potassium Carbonate also finds application in fertilizer industry, rubber industry, drugs and pharmaceuticals and Dyes and Potassium based chemical industries.

Gujarat Alkalies & Chemicals Ltd had filed the petition seeking review of the anti-dumping duty imposed on Potassium Carbonate imports from Taiwan, South Korea, China and the European Union.

The revenue department has now imposed anti-dumping duty of $ 153 per tonne on Potassium Carbonate imports from Taiwan.

In the case of South Korea, an anti-dumping duty of $ 9.45 per tonne has been imposed on Potassium Carbonate exported by UNID Co Ltd.

For all other exporters from South Korea, the revenue department has imposed anti-dumping duty of $ 123.86 per tonne.

The anti-dumping duty will be valid for period of five years, unless revoked earlier.

[email protected]

(This article was published in Business Line, The Hindu, on August 15, 2015)

The legal perspective

Sections 9, 9A, 9B and 9C of the Customs Tariff Act, 1975  as amended in 1995 and the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 and Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidised Articles and for Determination of Injury) Rules, 1995 framed there under form the legal basis for anti-dumping and anti subsidy investigations and for the levy of anti-dumping and countervailing duties. These laws are in consonance with the WTO Agreements on Anti Dumping and Anti Subsidy countervailing measures.

How to arrive at correct anti-D duty

Dumping means export of goods by one country / territory to the market of another country / territory at a price lower than the normal value. If the export price is lower than the normal value, it constitutes dumping. Thus, 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.

Terms often used in anti-D

Normal Value: Normal value is the comparable price at which the goods under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country.

If the normal value can not be determined by means of the domestic sales, the following two alternative methods may be employed to determine the normal value: -

• Comparable representative export price to an appropriate third country.
• Constructed normal value, i.e. the cost of production in the country of origin with reasonable addition for administrative, selling and general costs and reasonable profits.

Export price: The Export price of the goods allegedly dumped into India means the price at which it is exported to India. It is generally the CIF value minus the adjustments on account of ocean freight, insurance, commission, etc. so as to arrive at the value at ex-factory level.

Dumping Margin: The margin of dumping is the difference between the Normal value and the export price of the goods under complaint. It is generally expressed as a percentage of the export price.

Illustration: Normal value US$ 110 per kg.
Export price US$ 100 per kg.

There is dumping in this case as export price is lower than normal value and dumping margin in this case is US$ 10 per kg., i.e. 10% of the export price.

Dumping is a function of two variables, namely Normal Value and Export Price, which must be compared at the same level of trade i.e. at the ex-factory level.

Notif no. 41/2015 dt. 17.8.2015 imposed anti-dumping duty as follows:

Table

Sl.No.	Heading	Description of goods	Specifications	Country of origin	Country of export	Producer	Exporter	Amount	Unit	Currency
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)
1	3204 or 3206	Diketopyrrolo pyrrole Pigment Red 254 (DPP Red 254)	Any Specification	People's Republic of China	People's Republic of China	CINIC Chemicals Co Ltd., Shanghai	CINIC Chemicals Co Ltd., Shanghai	6.26	Kg	US Dollar
2	3204 or 3206	Diketopyrrolo pyrrole Pigment Red 254 (DPP Red 254)	Any Specification	People's Republic of China	People's Republic of China	Any combination other than Sl. No 1		7.58	Kg	US Dollar
3	3204 or 3206	Diketopyrrolo pyrrole Pigment Red 254 (DPP Red 254)	Any Specification	People's Republic of China	Any country other than People's Republic of China	Any	Any	7.58	Kg	US Dollar
4	3204 or 3206	Diketopyrrolo pyrrole Pigment Red 254 (DPP Red 254)	Any Specification	Any country other than subject countries	People's Republic of China	Any	Any	7.58	Kg	US Dollar
5	3204 or 3206	Diketopyrrolo pyrrole Pigment Red 254 (DPP Red 254)	Any Specification	Switzerland	Switzerland	Any	Any	3.61	Kg	US Dollar
6	3204 or 3206	Diketopyrrolo pyrrole Pigment Red 254 (DPP Red 254)	Any Specification	Any country other than subject countries	Switzerland	Any	Any	3.61	Kg	US Dollar
7	3204 or 3206	Diketopyrrolo pyrrole Pigment Red 254 (DPP Red 254)	Any Specification	Switzerland	Any country other than Switzerland	Any	Any	3.61	Kg	US Dollar

 

The anti-dumping duty imposed under this notification shall be effective for a period of five years (unless revoked, superseded or amended earlier) from the date of publication of this notification in the Official Gazette and shall be paid in Indian currency.

Investigations:

The following are essential for initiating an anti dumping investigation: -

a. Sufficient evidence to the effect that ;

• there is dumping
• there is injury to the domestic industry; and
• there is a causal link between the dumping and the injury, that is to say, that the dumped imports have caused the alleged injury.

b. The domestic producers expressly supporting the anti dumping application must account for not less than 25% of the total production of the like article by the domestic industry.

The application is deemed to have been made by or on behalf of the domestic industry, if it is supported by those domestic producers whose collective output constitute more than 50% of the total production of the like article produced by that portion of the domestic industry expressing either support for or opposition as the case may be, to the application.

Note: This is to further clarify that a domestic industry, which seeks relief, should give sufficient evidence with respect to the above parameters. Unless the above parameters are satisfied, it will not be possible for the Authority to initiate an anti-dumping investigation.

Injury to domestic ind

Broadly, injury may be analysed 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, utilisation of capacity etc.

Dumping vs. injury to domestic ind

In the anti dumping proceedings, it is imperative to prove that the dumping has caused injury to the domestic industry. No anti dumping duty shall be recommended without a finding of this causal relationship. That is to say,

Dumping should lead to Injury

The causal link is to be established generally in terms of the following effects of dumped imports on domestic industry: -

•  volume effect
•  price effect

The volume effect of dumping relates to the market share of the domestic industry vis-à-vis the dumped imports from the subject country/ies while with regard to the price effect, the Designated Authority shall consider whether there has been a significant price under cutting by the dumped imports as compared with the price of the like product in India, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increase which otherwise would have occurred to a significant degree.

How much duty to be imposed – after investign?

Under the WTO arrangement, the National Authorities can impose duties upto the margin of dumping i.e. the difference between the normal value and the export price. The Indian law also provides that the anti dumping duty to be recommended/levied shall not exceed the dumping margin. The Authority may terminate or suspend investigation after the preliminary findings if the exporter concerned furnished an undertaking to revise his price to remove the dumping or the injurious effect of dumping as the case may be. No anti dumping duty is recommended on such exporters from whom price undertaking has been accepted.

Apart from dumping, some of the countries also resort to subsidisation 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.

There is one more trade remedial measure called "safeguards" which are applied as an emergency measure in response to surge in imports of a particular item.

· Anti subsidy countervailing measure is in the form of countervailing duty which is to be imposed only after the determination that:

a. the subsidy is a specific subsidy

b. the subsidy relates to export performance;

c. the subsidy relates to the use of domestic goods over imported goods in the export article; or

d. the subsidy has been conferred on a limited number of persons engaged in manufacturing, producing or exporting the article.

What is subsidy for this purpose?

A subsidy is said to exist;

a. if there is a financial contribution by the Government or any public body within the territory of the exporting country, i.e. where-

• there is a direct transfer of funds (including grants, loans and equity) by the Government;
• government revenue i.e. otherwise due is foregone and not collected (including fiscal incentives, I.T. exemption
• a government provides goods or services other than general infrastructure;

b. a government grants or maintains any form of income or price support which operates directly or indirectly to increase export of any article from its territory.

What is not a subsidy?

• However the subsidy which is for research activities conducted by the persons engaged in manufacture or export or the subsidy which is for assistance to disadvantaged regions with the territory of the exporting country is not actionable. Thus, no countervailing duty is to be levied on such subsidies.
• In anti subsidy countervailing investigation, the Government of the exporting country/ies is a party to the investigation in addition to the exporters from these countries. The countervailing duty imposed on the subsidised exports from a country shall not exceed the amount of such subsidy/ies.
• In India the Designated Authority for anti dumping is also the Authority for administering anti subsidy countervailing measures.

What it Safeguards?

•  Safeguards, on the other hand, are applied when :

a. there is a surge in imports of a particular product irrespective of a particular country/ies and,

b. it causes serious injury to the domestic industry.

•  Safeguard measures are applied to all imports of the product in question irrespective of the countries in which it originates or from which it is exported. This aspect distinguishes Safeguards from anti dumping and anti subsidy measures which are always country specific and exporter specific.
•  Safeguards are applied in the form of either safeguard duty or in the form of safeguard QRs (import licenses). These measures are administered in India by an Authority called Director General (Safeguards) who functions in the jurisdiction of the Department of Revenue, Ministry of Finance.
• India's trade ministry has recommended anti-dumping duties ranging from $180 to $306 per tonne for some industrial-grade stainless steel imported from China, Malaysia and South Korea in a bid to protect local industry.
• After a year-long investigation based on complaints from Jindal Stainless Ltd, the trade ministry said it found that the domestic industry was suffering "material injury due to such dumped imports" and that a definitive measure was required to stop it. (bit.ly/18AnkfU)
• The recommendations, made public on Wednesday, are expected to be implemented by the finance ministry within three weeks and will stem the flow of surging imports, N.C. Mathur, president of the Indian Stainless Steel Development Association, said.
• Mathur said the grades subject to the dumping duty can cost $1,270-$2,070 per tonne and are used mainly to make equipment for industries like dairy, oil refinery and railways.
• India consumes about 1 million tonne of this type of stainless steel and more than 40 percent of that is imported, mainly from China, a trade which is growing at up to 15 percent a year.
• China's annual stainless steel surplus is more than 4 million tonnes, compared with India's annual demand of about 2.6 million tonnes and which leads to cheap supplies coming in from China, Mathur said.
• Steelmakers from Asia to Europe are facing increasing pressure from a rise in cheap imports as Russia and Ukraine, armed with weaker currencies, join China in pushing surplus output on to world markets.
• Many steel companies in India, such as Tata Steel, JSW Steel and Kalyani Steels, have seen profits come under pressure.
• Jindal Stainless shares ended up 10 percent at 40.50 rupees on Wednesday on the duty recommendations, their highest closing price in 2.5 months.
• Mathur said the steel industry also welcomed the government's decision to provide for an increase in the import duty on steel to 15 percent without any major procedural delays. Earlier, the government had set a limit of 10 percent while the actual duties are below that.
• The provision will allow the government to raise the duty whenever it wants just with a notification, Mathur said.

Import of cheap products through illegal trade channels like smuggling do not fall within the purview of anti-dumping measures.