Anti dumping duty   

Figure 3: No Copyright Infringement Intended

Context:

• According to notifications issued by the Central Board of Indirect Taxes and Customs (CBIC), India has imposed anti-dumping duty on five Chinese products, for five years.

About anti dumping duty: 

• Anti-dumping duty is imposed to rectify the situation arising out of the dumping of goods and its trade distortive effect.
• According to global trade norms, including the World Trade Organization (WTO) regime, a country is allowed to impose tariffs on such dumped products to provide a level-playing field to domestic manufacturers.

WTO norms for anti dumping duties:

• Validity: An anti-dumping duty is valid for a period of five years from the date of imposition unless revoked earlier.
• Sunset Review: It can be extended for a further period of five years through a sunset or expiry review investigation.

Benefits of anti dumping duties:

• Imposition of Anti-dumping duty is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect.
• In the long-term, anti-dumping duties can reduce the international competition of domestic companies producing similar goods.
• It is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
• The use of anti-dumping measures as an instrument of fair competition is permitted by the World Trade Organisation.

Challenges with levying the anti dumping: 

Under-staffing 

• The Directorate General of Trade Remedies (DGTR) that looks at unfair trade practices by exporters from other countries, is inadequately staffed.DGTR has just seven costing officers and five investigating officers and the allocation of work is uneven among them.
• This has resulted in delay and arbitrariness in decision-making.

Duty Imposition 

• Generally, once initial investigation reveals injury on account of dumping, an interim duty is levied for immediate relief.
• Imposition of interim and final duties are also invariably delayed.This has resulted in shutting down of MSMEs who are unable to compete in the market.e.g In many case, getting the case initiated itself takes about a year, which is followed by Finance Ministry taking another 3 months to impose ADD.

Sunset review 

• ADD is applicable only for a selective period.If dumping still continues, the industry can apply for a sunset review at the end of 5 years.Globally, once a sunset review is applied for, the ADD is extended for 1 year pending investigation.
• In India, industries has been asked to apply for sunset review 9 months before the expiry of ADD.This made the Indian players getting deprived of protection for a year compared to their peers across the world.

Difference of opinion 

• In 2018, only one of seven reviews was duty extended.DGTR is increasingly hesitant to extend ADD beyond 10 years on the grounds that this period is good enough for the industry to become competitive.
• But the industry players argue that as long as dumping continues ADDs need to be in place to protect the domestic industry.

Duty calculation 

• Dumping margin is the difference between the normal value and the export price of the goods under complaint.India follows a ‘lesser duty’ rule.Also, at times, even when DGTR recommends ADD, the Finance Ministry declines on the ground that low-priced imports are good for the country.

Countervailing duties:

• Countervailing duties (CVDs) are trade import tariffs imposed to nullify the adverse effects of subsidies.
• They are imposed only under WTO rules and are also called anti-subsidy duties.
• They are levied if a country investigates and finds out that a foreign country is subsidizing its imports to the home country thus harming domestic suppliers.

Difference Between anti dumping and Counter Vailing duties:

• Anti-dumping duties are levied on goods that are imported at a substantially low price whereas countervailing duties are levied on subsidized products in the originating or exporting country.

Criticism

Narrowed Choices for Domestic Consumers:

• While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.

Higher Prices and Inflation: 

• While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.Tool of Protectionism:  Often the anti-dumping Duties have been used to impose subtle protectionism.

A form of “retaliation”: 

• Many countries have imposed Anti Dumping Duties (ADDs) 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% of cases, the EU has been found to have imposed ADDs to offset dumping.The remaining 98% of cases of anti-dumping have been used for purposes other than offsetting dumping.

Way Ahead

• Developed and Developing Countries need to discuss the issues again.The rules like the 5 per cent rule which is already under footnote 2 of the Anti-Dumping Agreement should be properly and openly evaluated by a 3rd party agreed by both states.