India: Government imposes Anti-Dumping duty on the import of an inert gas commonly used as a refrigerant

October 10, 2016

The Indian Government vide Notification No. 30/2016- Customs (ADD) dated July 11, 2016 in exercise of its powers under the Customs Tariff Act, 1975 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 has imposed an anti-dumping duty on the import of 1,1,1,2- Tetrafluroethane or R-134a into India, originating in or exported from China. 1,1,1,2- Tetrafluroethane or R-134a is an inert gas which is commonly used as a refrigerant in refrigerators and automobile air conditioners.

The Indian Government had first implemented an anti-dumping duty on the import of 1,1,1,2- Tetrafluroethane vide Notification No. G.S.R 539(E) dated July 15, 2011. The Indian Government had found that the import of 1,1,1,2- Tetrafluroethane was causing material injury to the domestic market as the imports were undercutting the prices of domestic manufacturers. This had resulted in a corresponding reduction in prices in the domestic market which was having a negative effect on the financial performance of domestic manufacturers.

The Indian Government had initiated a review in April, 2015 vide Notification No. 15/23/2014-DGAD on the continuation of the anti-dumping duty and had found that the situations were still persisting in the market which had led to the imposition of the original duty and a continued imposition of the anti-dumping duty was required to protect the interests of the domestic industry.

The anti-dumping duty has been imposed for a period of five years, though it can be revoked or amended earlier, based on the situation prevalent in the market.

    1. Meaning of Dumping

      • Dumping occurs when goods are exported from one country to another at a price lower than at which the goods are normally sold.
      • Dumping is considered to be an unfair trade practice which can have a distortive effect on domestic and international trade. The imposition of an anti-dumping duty is a means of remedying the situation that has been created in the market due to the dumping of goods and its trade distortive effect.
      • The use of anti-dumping duty as a tool of maintaining fair competition is allowed by the World Trade Organization (WTO).
    2. Rationale for Imposition of Anti-Dumping Duty

The rationale behind imposing an anti-dumping duty is to correct the trade distortive effect of dumping and re-establish fair trade in the market.

    • In Reliance Industries v. Designated Authority [2006 10 SCC 368], the Supreme Court observed the following:
      “The Anti-dumping legislation is meant for protection of the domestic industries as a whole against unfair practice of dumping, irrespective of whether they are backwardly integrated or not. The Anti-Dumping Law is, therefore, a salutary measure which prevents destruction of our industries which were built up after independence under the guidance of our patriotic, modern minded leaders at that time and it is the task of everyone today to see to it that there is further rapid industrialization in our country, to make India a modern, powerful, highly industrialized nation”.
  1. Institutional Arrangement for Anti-Dumping
    • Anti-dumping measures in India are administered by the Directorate General of Anti-dumping and Allied Duties (DGAD) functioning under the Dept. of Commerce in the Ministry of Commerce and Industry and the same is headed by the “Designated Authority”.
    • The Designated Authority’s function, however, is only to conduct the anti-dumping duty investigation and make recommendation to the Government for imposition of anti-dumping or anti subsidy measures. Such duty is finally imposed/levied by a Notification of the Ministry of Finance.
  2. Applicable Laws
    • The laws applicable for the implementation of an anti-dumping duty to maintain fair trade in the Indian market are the Customs Tariff Act, 1975 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (hereinafter referred to as the “1995 Rules”).
  3. Persons who can make an application for Anti-Dumping
    • Applications can be made by or on behalf of the concerned domestic industry to the Designated Authority in the Department of Commerce for an investigation into alleged dumping of a product into India. Under Rule 5 of the 1995 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 article in question. Further, 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 constitutes more than fifty percent 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. However, such producers may exclude those who are related to the exporters or importers of the alleged dumped article or are themselves importers thereof. In other words, a domestic producer who is related to the exporter or importer of the dumped article or is himself an importer thereof, may not be treated as part of the domestic industry even if he files or supports an anti-dumping petition.
    • Rule 5(4) of the 1995 Rules allows suo motu initiation of anti-dumping proceedings by the Designated Authority on the basis of information received from the Collector of Customs appointed under the Customs Act, 1962 or from any other source. In such circumstances, the Authority initiates the anti-dumping investigation on its own without any complaint/petition filed in this regard, provided the Authority is satisfied that sufficient evidence exists as to the existence of dumping, injury and causal link between the dumped imports and the alleged injury.
    • An application can also be made by the party that is seeking to export products into the country to request the Designated Authority for determination of dumping margin under Rule 22 of 1995 Rules. A request can be made to initiate a new Shipper’ review in case an anti-dumping duty has been imposed on the product that is sought to be exported. In such cases a declaration has to be made by the party making the application that they are not related to any of the exporters/producers subject to the anti-dumping measures in force with regard to the product concerned. Further, they also have to declare that they have not exported the product concerned during the original period of investigation.
  4. How to determine Dumping
    • Rule 10 of the 1995 Rules provides two of the essential factors that are taken into account for the determination of dumping, namely, the export price and the normal value.
    • The export price of goods is the price at which the goods are exported into India from another country or territory.
    • “Normal value” is the equivalent price at which the goods are sold, in the ordinary course of business, in the domestic market of the exporting country.
    • The export price and the normal value are then compared at the same level of trade, for the assessment of dumping. The difference between the normal value and the export price is known as the margin of dumping.
    • Section 9B of the Customs Tariff Act, 1975 provides that the central government will not impose an anti-dumping duty without first determining whether there is some material injury that is caused or threatened to be caused to any established industry in India or there is likely to be material retardation in the establishment of an industry in India. To determine the material injury caused to the industry the authority may look at the following factors-
      •  Volume of the goods coming into India;
      • Price at which the goods are sold; and
      • Demand of the product during the last three years and whether there has been a change in the demand due to the dumping of goods.
    • The volume of the goods coming into India will have an effect on the demand of the goods in the market, the quantity that is consumed, and the capacity utilization of domestic manufacturers of the goods, changes in the market share held by domestic manufacturers and inventory available with dealers of the goods.
    • The Price at which the goods are sold will have an affect on the profit margin of domestic manufacturers as they may have to sell the goods at a lower price to match the price of the imported goods, may result in a reduced or flat turnover, loss of contracts, decline in sales and may result in reduction in employment and wages as domestic manufacturers may look to cut costs due to reduction in prices and capacity utilization.
    • On the basis of the margin of dumping and the material injury caused or threatened to be caused, the authority will then proceed to determine the injury margin. If it can be proved that the dumping of imported goods has caused material injury to the domestic industry, the authority can impose an anti-dumping duty. In Agfa Gevaert A.G. v. Designated Authority [2001(130) E.L.T. 741 (Tri.-Del.)], it was observed that only if the causal link between the import of goods and material injury to domestic industry is established, an anti-dumping duty can be imposed to remove the injury to the domestic industry. Therefore, it is pertinent to note that injury to domestic industry and causal link between that injury and dumped imports is a sine qua non for imposition of anti-dumping duty.
    • The anti-dumping duty will be imposed in order to be sufficient to remove the injury caused to the domestic industry by the dumping of goods.
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