ITL - M7

MODULE 7
ANTI DUMPING POLICIES

7.1 INTRODUCTION

“Dumping” is defined as a situation in which the export price of a product is lower than its
selling price in the exporting country. Dumping is a process where a company exports a
product at a price lower than the price it normally charges in its own home market. For
protection, many countries impose stiff duties on products they believe are being dumped in
their national market, undercutting local businesses and markets. An anti-dumping duty is a
protectionist tariff that a domestic government imposes on foreign imports that it believes are
priced below fair market value.

Where it is demonstrated that the dumped imports are causing injury to the importing country
within the meaning of the WTO Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 (“Anti-dumping Agreement”), pursuant to and by
investigation under that Agreement, the importing country can impose antidumping measures
to provide relief to domestic industries injured by imports.
The country’s imposition of an anti-dumping duty is determined by the dumping margin
which is the difference between the export price and the domestic selling price in the
exporting country. By adding dumping margin to export price, the dumped price can be
rendered a “fair” trade price. When it is impossible to obtain a comparable domestic price
because there are none or low volume sales in the ordinary course of trade in the domestic
market, either export prices to third countries or a “constructed value” is used in price
comparison. A “constructed value” is the cost of production in the country of origin plus a
reasonable amount for administrative, selling and general costs and for profits. Similarly,
when the export price is found to be unreliable, the price at which the product is first resold to
independent buyers, or another price according to a reasonable basis determined by the
authorities may be used in price comparison.

Anti-dumping measures are an exception to the rule of most-favoured-nation treatment. It is
imperative that nations take utmost care must be taken in invoking them. The implementation

of anti-dumping measures does not require the government to provide offsetting concessions
or consent to counter -measures taken by the trading partner. This has increasingly led to the
abuse of anti-dumping measures. For example, anti-dumping investigations are often
commenced based on insufficient evidence, and anti-dumping duties may be retained long
after the conditions for their levy have been eliminated. Some countries have applied anti-
dumping measures in an arbitrary manner to restrict imports, rather than to achieve the
limited, remedial objective authorized in the Agreement. This is a great fallacy which
attaches itself to this practise.

One of the most prominent cases of anti-dumping measures is the conflict between USA and
China which has been a threat to the very establishment of the WTO itself. In June 2015,
American steel companies United States Steel Corp., Nucor Corp., Steel Dynamics Inc.,
ArcelorMittal USA, AK Steel Corp., and California Steel Industries filed a complaint with
the Department of Commerce and the ITC alleging that China (and other countries) were
dumping steel on the U.S. market and keeping prices unfairly low. A year later, the United
States, after a review and much public debate, announced that it would be imposing a 500%
import duty on certain steel imported from China. In 2018, China filed a complaint with the
WTO challenging the tariffs imposed by President Donald Trump. The White House's trade
agenda for 2019 said it would continue to use the WTO to challenge what it called unfair
trading practices with China and other trading partners.

7.2 ANTI-DUMPING AND THE WTO

The General Agreement on Tariffs and Trade lays down the principles to be followed by the member
countries for imposition of anti-dumping duties, countervailing duties and safeguard measures.
Pursuant to the GATT, 1994, detailed guidelines have been prescribed under the specific agreements,
which have also been incorporated in the national legislation of the member countries of the WTO.

The international anti-dumping rules are provided by the General Agreement on Tariffs and
Trade Article VI and the Anti-Dumping Agreement under the WTO. While permitted by the
WTO, Article VI of the GATT allows countries the option of taking action against dumping.

The Anti-Dumping Agreement clarifies and expands Article VI, and the two operate together.
They allow countries to act in a way that would normally break the GATT principles of
binding a tariff and not discriminating between trading partners—typically anti-dumping
action means charging extra import duty on the particular product from the particular

exporting country in order to bring its price closer to the “normal value” or to remove the
injury to domestic industry in the importing country.

In the Tokyo Round, Anti-Dumping Code was revised to become the new Anti-Dumping
Agreement as a result of the Uruguay Round negotiation. These measures lacked a formal
backing and were seemingly less effective which brought about the amendment of the code.
This was also called for because the procedures for investigating prices and costs in order to
measure the damage to domestic industry and calculate dumping margins were extremely
technical and complex, there was a lacuna in the required technical knowhow and therefore,
stringent rules and methods of calculations were put in place. The Code's lack of detail
resulted in a dearth of effective disciplines and exacerbated the tendency to abuse the Anti-
dumping provisions, thus requiring a revision to the Code. This ultimately was incorporated
in the WTO’s Agreement in relation to Anti-Dumping which forms the basis of most of the
anti-dumping policies of the global trading regime. The WTO holds two meetings of the
Anti-Dumping Committee each year to provide a forum for discussion of anti-dumping
measures.
Among the business of the committee is the review of countries’ anti-dumping
implementation laws for conformity to the Agreement, the hearing of reports on countries’
anti-dumping measures, and the study of issues in anti-dumping policies and practice. The
committee is directly subordinate to the Council for Trade in Goods and reports to it each
year on the implementation and administration of the Agreement.

The committee has also organized meetings on particular topics. These are on an ad hoc basis
for discussions of specific points of contention. The first is the meeting of the Informal Group
on Anti circumvention. The second is the meeting of the Ad Hoc Group on Implementation,
which discusses ways to harmonize national discretion in the agreement where the
interpretation is or could be vague.

Having separate fora to discuss specific issues of concern has enabled the WTO to deal with
anti-dumping problems on an ongoing basis. Countries have been amending their domestic
anti-dumping implementation legislation to bring it into conformity with the new AD
Agreement.

The committee is charged with reviewing national legislation, and countries are required both
to notify the relevant laws to the Committee and to respond to questions from other countries
about their systems. If there are any problems found, countries are obliged to bring their
national laws in line with the Agreement

If an anti-dumping measure is suspected of violating the GATT and/or Antidumping
Agreement, resolution should be sought through the GATT/WTO in dealing with the
increased abuse of anti-dumping measures by certain countries. If resolution cannot be
reached through bilateral consultations, the abuses should be referred to WTO panels.

Many cases for resolving disputes were expected to arise due to the newly introduced
automaticity in the WTO dispute settlement system, therefore, it was considered necessary to
specify standards of review for anti-dumping measures. As a result of the Uruguay Round
negotiations, the new Anti-Dumping Agreement also introduced new standards of review for
factual determinations and legal interpretations by the panel. How the standards of review are
applied to procedures for resolving disputes will depend on the specific facts of the future
actions and on the panellists themselves.

7.3 CALCULATION OF DUMPING

There are many different ways of calculating whether a particular product is being dumped
heavily or only lightly. There are broadly three methods to calculate a product's “normal
value”. The main one is based on the price in the exporter's domestic market. This is the
preferred valuation as it gives the exact measure of the product. Normal value cannot be
based on the price in the exporter's domestic market when there are no domestic sales. If the
products are only sold on the foreign market, the normal value will have to be determined on
another basis. Additionally, some products may be sold on both markets but the quantity sold
on the domestic market may be small compared to quantity sold on foreign market. This
situation happens often in countries with small domestic markets though similar
circumstances may also happen in larger markets. This is because of differences in factors
like consumer taste and maintenance.

Since the calculation of the normal value of a product may not always be available,
alternatives for calculation are given. These alternatives relate to the price charged by the
exporter in another country, or a calculation based on the combination of the exporter's
production costs, other expenses and normal profit margins. The agreement also specifies

how a fair comparison can be made between the export price and what would be a normal
price.

According to footnote 2 of the Anti-Dumping Agreement, domestic sales of the like product
are sufficient to base normal value on if they account for 5 percent or more of the sales of the
product under consideration to the importing country market. This is often called the five-
percent or home-market-viability test. This test is applied globally by comparing the quantity
sold of a like product on the domestic market with the quantity sold to the importing market.

Calculating the extent of dumping on a product is not enough to establish the actual effect
such an action has. Mere dumping is not enough to call for a challenge. A hurt or a grievance
necessarily needs to exist as well. Anti-dumping measures can only be applied if the act of
dumping is hurting the industry in the importing country. Therefore, a detailed investigation
must first be conducted according to specified rules. The investigation must evaluate all
relevant economic factors that have a bearing on the state of the industry in question; if it is
revealed that dumping is taking place and hurting domestic industry, the exporting company
can raise its price to an agreed level in order to avoid anti-dumping import duties.

7.4 PROCEDURES AND INVESTIGATION OF ANTI DUMPING MEASURES

The WTO Agreement came out of a dire need for a detailed process which would ensure that
these anti-dumping measures take place in accordance to the established guidelines and
methods that are chartered out in the agreement itself. Detailed procedures are set out on how
anti-dumping cases are to be initiated, how the investigations are to be conducted, and the
conditions for ensuring that all interested parties are given an opportunity to present evidence.
Anti-dumping measures must expire five years after the date of imposition, unless a review
shows that ending the measure would lead to injury.

Generally speaking, an anti-dumping investigation usually develop in accordance to the steps
laid down. The domestic producer makes a request to the relevant authority to initiate an anti-
dumping investigation. The investigation is then conducted upon the foreign producer to
determine if the allegation is valid. This method incorporates the usage of questionnaires
completed by the interested parties to compare the foreign producer’s export price to the
normal value. The usage of questionnaires are not standard and other methods as prescribed
may also be used. If the foreign producer's export price is lower than the normal price and the
investigating body which establishes a link between the alleged dumping and the injury

suffered by the domestic industry, it comes to a conclusion that the foreign producer is
dumping its products.

According to Article VI of GATT, dumping investigations shall, except in special
circumstances, be concluded within one year, and in no case more than 18 months after
initiation. Anti-dumping measures must expire five years after the date of imposition, unless
a review shows that ending the measure would lead to injury.

Anti-dumping investigations are to end immediately in cases where the authorities determine
that the margin of dumping is, insignificantly small (defined as less than 2% of the export
price of the product). Other conditions are also set. For example, the investigations also have
to end if the volume of dumped imports is almost negligible (i.e., if the volume from one
country is less than 3% of total imports of that product—although investigations can proceed
if several countries, each supplying less than 3% of the imports, together account for 7% or
more of total imports).

The agreement says member countries must inform the Committee on Anti-Dumping
Practices about all preliminary and final anti-dumping actions, promptly and in detail. They
must also report on all investigations twice a year. When differences arise, members are
encouraged to consult each other. They can also use the WTO's dispute settlement procedure
and many a times countries have resorted to this.

7.5 HISTORY OF ANTI DUMPING
The first anti-dumping legislation dates to Canada’s legislation in 1904. However, the
modern history of anti-dumping starts off with the 1947 GATT agreement. Largely at the
insistence of the US, the original GATT agreement included provisions for the imposition of
duties that related to anti-dumping. The 1947 GATT agreement defined dumping as the
practice whereby the “products of one country are introduced into the commerce of another
country at less than the normal value of the products,” and permitted dumping duties only if
such action caused “material injury” to a domestic industry.

Despite its long history, disputes in relation to the same, were relatively few and far between
until 1980. GATT did not require countries to report when they initiated anti-dumping actions
which was a drawback. In fact, there is no guarantee that some early users have any record of

their pre-1980 anti-dumping use which was taken advantage of by countries to enforce
improper practises that could hamper other nations

However, with the exception of a few, the major players in the anti-dumping appeared to be
The US, the EU, Australia, Canada, South Africa and New Zealand. They, however filed at
most two or three-dozen cases per year. This was also because the GATT rules for imposing
duties were difficult to satisfy which made the process too complex for certain economies and
nations. The high standards meant that there was very little protection among all contracting
parties.

In 1958, the parties finally brought to light their wants and a need for a system of protection
from Anti-Dumping. Up until the mid-1970s it appears that in many years only a handful of
cases were initiated worldwide, and in most years no investigations led to duties but the
phenomenon of negotiated settlements was not common until the late 1970s. In addition,
preliminary duties were not imposed until after the Tokyo Round, so the “investigation
effect”) is not likely a serious issue in the earlier era.

The small number of filings, along with the high standards for awarding protection, meant
that the impact on trade was negligible. The constant change and evolution of this type of law
has brought to light several changes. These changes were made and realised in thee Tokyo
Round which resulted in a surge in the number of filings. The early 1990s, witnessed new
users accounting for almost a quarter of the cases filed. Further, several features were added
to the implementation and the actual realisation of the law by the WTO Agreement on Anti-
Dumping, which forms the basis of several domestic anti-dumping policy measures across
the world.

7.6 ANTI DUMPING ACROSS THE GLOBE

Each member state implements their national anti-dumping policies in accordance with the
general guidelines specified by GATT/WTO code. The WTO guidelines, however, are
seemingly quite vague, and it is up to each country’s implementing legislation to interpret the
guidelines. Not surprisingly, there is substantial variation among anti-dumping statutes s,
with each country insisting that its procedures are the “fairest.” This has also caused severe
violations of the code in several spheres.

The current set of anti-dumping laws in India is defined by Section 9A and 9B of Customs
and Tariffs Act, 1975 (Amended 1995) and The Anti-dumping rules such as (Identification,
Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination
of Injury) Rules of 1995 as well as Section 9A of customs and tariffs Act 1975. This states
that “If any article is exported from any country or territory to India at less than its normal
value, then, upon the importation of such article into India, the central government may by
notification in the official gazette, impose an anti-dumping duty not exceeding the margin of
dumping in relation to such article.”

India has imposed anti-dumping duty on certain stainless steel products from the European
Union and other nations including China and Korea, in order to protect the domestic industry
from cheap imports. The duty was imposed by the Revenue department following the
recommendation by the Directorate General of Anti-Dumping and Allied Duties (DGAD).

The Common Agriculture Policy of the European Union has often been accused of dumping
despite significant reforms, as part of the agreement on Agriculture of the Uruguyay Round
of the GATT negotiations in 1992 and in subsequent incremental reforms, notably
Luxemberg Agreement in 2003. Initially, this policy sought to increase European agricultural
production and provide support to European farmers through a process of market intervention
whereby a special fund, the Guidance and Guarantee fund would buy up surplus agricultural
produce if the price fell below the centrally-determined intervention level.

European farmers were given a "guaranteed" price for their produce when it was sold in the
European Community, and a system of export reimbursements ensured that European exports
would sell at or below world prices, at no detriment to the European producer. The policy
was heavily criticised as distorting world trade, and since 1992, the policy has moved away
from market intervention and towards direct payments to farmers regardless of production,
called "decoupling". Furthermore, the payments are generally dependent on farmers fulfilling
certain environmental or animal welfare requirements to encourage responsible, sustainable
farming in what is termed "multifunctional” agricultural subsidies. Social, environmental and
other benefits of subsidies would no longer not include a simple increase in production. This
was seen to be a gross violation of the measures.

In the US, domestic firms can file an anti-dumping petition under the regulations determined
by the Department of Commerce which determines "less than fair value" and the under the
International Trade Commission, which determines "injury". These proceedings operate and

are governed by U.S. law. The Department of Commerce has regularly found that products
have been sold at less than fair value in U.S. markets. If the domestic industry is able to
establish that it is being injured by the dumping, then anti-dumping duties are imposed on
goods imported from the dumpers' country at a percentage rate calculated to counteract the
dumping margin.

7.7 CONCLUSION

Anti-dumping duties are imposed on like products found by investigators to be dumped on
domestic markets (GATT Article VI). However, depending on how the scope of these
products and their definitions, there could be cases in which anti-dumping duties are imposed
on products that are in fact different from the product subject to investigation.

The main drawback of the law in relation to the policies is the wording of the WTO
agreement is vague and leaves a great deal of scope for interpretation. This in turn causes
policies to differ amongst nations. Therefore, care must be taken with regard to policy
measures being implemented specially in relation to those products that could or will be
developed in the future so that the definition cannot be expanded beyond those products that
are currently causing injury. There are cases where the definition has even been expanded to
apply to future generation products not even existing at the time of the original investigation.

As the economy becomes more global in scope, companies are transferring their production
overseas to their export markets or to developing countries where costs are lower. However,
when such transfers take place for products that are subject to anti-dumping levies, they are
often assumed to be attempts at circumvention.

Anti-circumvention measures which inadequately distinguish between production shifting
for legitimate commercial reasons and for circumvention purposes, risk not only distorting
trade but also shrinking investment. The economic effects of abusive anti-dumping measures
can be substantial in terms of trade volume and critical to a wide range of business activities.
Unfortunately, importing countries can easily resort to such practices because they can be
accomplished under the guise of measures sanctioned by the GATT/WTO and the
Antidumping Agreement. For these reasons, use of Anti-dumping measures as a means of
restricting imports has increased substantially in recent years. It should also be noted that

often the most serious victims of abusive anti-dumping measures are the consumers and user
industries in the importing country. Antidumping trade protection has a variety of unique
features that set it apart from more traditional forms of trade policy. Although anti-dumping
measure has been provided as a vital role in preventing protectionism and promote free trade,
many instances of anti-dumping practices suggest that anti-dumping measures have been
used as a tool of protectionism. India and China have been alleged to have used Anti-
Dumping Duty (ADD) as a form of “safety valves” – to ease competitive pressure in
domestic market. Anti-dumping measures have also been used as a form of “retaliation”
against products of countries that impose ADDs against the products of the host country. The
USA has been consistently alleged to have abused anti-dumping measures with its practice of
Zeroing. Similarly, in only around 2% cases the EU has been found to have imposed ADDs
to offset dumping. In the remaining 98% cases of anti-dumping have been used for purposes
other than offsetting dumping.

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