Source: cnbc tv18
There is a growing concern in Indian industry about the opacity in the imposition of Anti-dumping duty (ADD). The general trend has been of rejecting the request and recommendation for imposition of ADD. No reasons are given; worse there is also no recourse for appeal to a Tribunal, with the only option being the High Court.
By way of background, it may be mentioned that the World Trade Organisation (WTO) that deals with the rules of trade between nations, is in a state of crisis -or arthritis, as economist Richard Baldwin has generously termed it. Its rules are being flouted with impunity. It still exists-because it does provide a useful forum for negotiations and a framework and methodology to regulate trade. One such framework which the WTO provides is the Anti-Dumping provision.
The legal framework for imposing ADD is provided in Article VI of the GATT/WTO and the anti-dumping agreement which implements it. Three critical requirements of arriving at the conclusion of dumping are prescribed—export price of a product should be lesser than the price of that product in the exporting country; exports of such products must cause material injury to the domestic industry of the country where the goods are imported; and finally there must be a causal relationship between such dumping and injury. (It must be emphasised that dumping does not imply; ’cheap‘goods — it only means that the price at which the goods are being exported are lesser than the ‘normal’ price of the goods.)
These are high standards — and prescribed to ensure that a country does not resort to anti-dumping routinely to thwart legitimate trade. These are resorted to in terms of the WTO prescription for encouraging fair trade. These are levied over and above the normal customs duty imposed on imports.
Every contracting country has accordingly put in place a legal basis for imposition of ADD and an anti-dumping mechanism. In India, Sections 9A, AA, B, C of the Customs Tariff Act (CTA) deals with Anti-Dumping. Section 9A (6) stipulates that the margin of dumping shall be ascertained and determined by the Central Government after such enquiry as may be necessary. While the Department of Revenue (DoR) / Central Board of Indirect Taxes & Customs (CBIC) exercises jurisdiction and powers under the CTA, the Central Government exercises the power of enquiry and determination through the Directorate General of Trade Remedies (DGTR).
Domestic industry representing at least 25% of the total domestic production who fear they are suffering unfair import competition can file a complaint with DGTR. The application must be accompanied with proof of dumping, material injury, causal link. The DGTR verifies and initiates investigation — both of the domestic manufacturing unit, the complainant, as also of the foreign entity which is said to be dumping. The DGTR has to issue preliminary findings within 60-90 days and in case there is a prima facie case recommends interim anti-dumping duties. Final orders are issued thereafter and DGTR recommends the quantum of duty aimed at reducing/eliminating the ‘injury’ caused to domestic industry by the dumping.
The findings/recommendations are examined by the CBIC with whom vests the authority to accept or reject. In case after due diligence the Central Government does accept they can go ahead and impose the duty. Such duty is valid for a period of five years unless the Government on a review determined that cessation of the duty would lead to recurrence of dumping and injury — in which case the ADD could be extended for a further period of five years.
The word used in Rule 18 of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty) Rules, 1995, is ‘may’ which does indicate that the Central Government has the discretion to accept, modify, reject. The Rule also indicates the time period within which this should be done — three months from the date of publication of the findings. A quaint situation is created when the Central Government does neither but apparently keep mulling over it for over three months resulting in the recommendation effectively lapsing.
Typically, any order is subject to an appeal. The principles of natural justice demand this. Rule 9C of the CTA permits an appeal against the order of determination or review to the Tribunal. However, an explanation introduced in the Budget of 2023 to Rule 9C suggested that appeal if any could be against the determination by the DGTR — the word ‘order’ which was there previously has been deleted. Thus, in effect no appeal can be filed against the decision of the CBIC which has merely considered (and not determined) the application of measures recommended by the DGTR. (Incidentally it has been made applicable retrospectively from 1 January 1995— in effect also making previous decisions of the Tribunals on the issue redundant).
Available data suggests that previously CBIC accepted nearly 95% of the DGTR’s recommendations. But there has been a steep fall these last few years of acceptance of the recommendations to under 60%. It is not as if they are rejected — it is just that no decisions are taken and they ‘die’ a natural death after the prescribed 60-day period. This flies in the face of the present accepted position of the Government of India of seeking to protect /promote domestic manufacturing. The reasons as to why the recommendation is not being accepted are not known either to the DGTR or the domestic entity/applicant who had apparently made a strong enough case for its case to be recommended.
India has the dubious distinction of being among the countries which has issued the maximum number of anti-dumping orders. But this may not be the best way of setting that record straight. There needs to be closer coordination between the DGTR and CBIC. Perhaps before the recommendation is issued DGTR could have discussions with the CBIC to understand concerns and avoid the embarrassment of their recommendations not being acted upon. DGTR would also need to relook at the robustness of their recommendations and not got swayed too easily by the industry presenting a case of perceived injury. It is a moot point whether the segregation of powers and responsibility between DGTR and CBIC has caused the tension— both were vested earlier with CBIC.
Undoubtedly there are competing interests at work here. On the one hand is the domestic industry which seeks to eliminate what it thinks is unfair competition and in effect seeking to promote domestic manufacture. On the other hand, users of imported items would now have to bear the brunt of higher duties which would make imports unviable. Further with the plethora of free trade agreements there is an increasing possibility of the item also falling in the preferential duty regime.
The CBIC obviously would seek to address public interest concerns, prevent domestic monopolies and strike a balance between various competing interests. However, it leaves industry bemused, for they are clueless about the reasons. Transparency after all should b e the sine qua-non of any tax administration. Executive discretion cannot be questioned; as also that the final decision should be with the CBIC. The CBIC should not shy away from placing in the public place the reasons for doing so instead of letting the recommendations fall in an abyss.
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