Introduction:
Dumping, in economics terminology, means to injure pricing in terms of global trade. This happens when manufacturers export a product to other nations at a value lower than usual with an injuring effect. The objective of this process is to increase the share in the market of such nations by cancelling the competition and at the same time creation of a monopoly where the manufacturer would be in a situation to control the rate and features of the product.
Several nations throughout the world have recognised this issue of dumping and therefore to guard the local manufacturers, the respective governments have formulated the anti-dumping laws. The main objective of these laws is to make the market a safe place for domestic producers and at the same time to control the monopoly of foreign exporters. Therefore this law is mainly applicable to such exporters who try to dominate the market using unfair means.
Stand of World Trade Organisation (WTO)
As per the World Trade Organisation Antidumping Agreement, dumping is not prohibited until and unless it threatens to cause material injury to a domestic industry in the importing country.[1] Dumping is prohibited when it leads to the creation of troubles in the establishment of an industry in the domestic market.
The WTO agreement does not deliver judgement. It emphasises on the ways in which the governments can react or cannot react to this issue. However, this agreement permits the governments to act against dumping where the injury is evident to the competition with the local industry. But in that case, the government has to establish that dumping exists in the nation; estimate the level of dumping in terms of the price difference in the manufacturer’s domestic country and export country; and that this dumping is harming the industry.
The WTO agreement provides for three ways to calculate the level of dumping. The primary method is based on the price of the domestic country of manufacturer. If this method cannot be followed then dumping can be calculated using the price charged in other export nations or an estimate of the sum of exporter’s production costs, other expenses and profit margin.
Actions in India
In India, the Directorate General of Anti-Dumping and Allied Duties (DGAD) has the power to take Suo moto cognizance to impose anti-dumping duty on an importer when it is satisfied that serious injury has been caused to the local industry.
Actions regarding dumping of foreign produce in India are taken as per the Customs and Tariffs Act, 1975 (amended in 1995). Sections 9A and 9B of the mentioned Act and The Anti-Dumping rules of 1995 define the anti-dumping laws.[2] Section 9A of Customs and Tariffs Act 1975 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.”[3]
In India, anti-dumping duty is valid only for a period of five years and its applicability comes to an end if the duty is not reviewed and renewed. The duty of initiating the probe into anti-dumping cases has been vested with DGAD.
Procedure to file complaint
- A complaint regarding dumping of finished products can be lodged by the domestic industry engaged in such goods. It is to be noted that the domestic/local industry means the manufacturers who constitute a majority portion of the entire domestic industry of dumped goods.
- The request for anti-dumping duty must be backed by producers who collectively manufacture at least 50% of total production. The investigation must be supported by manufacturers who constitute 25% of total local or national production.
- Meanwhile, the investigation is being carried; the provisional anti-dumping duty is levied on the basis of initial findings. The time period to carry out the entire investigation has been fixed to twelve months from the date of filing the petition. However, this time period can be extended by six months thus making the maximum time to be eighteen months.
- An application for appeal can be filed against the final verdict in the Customs, Excise and Service Tax Appellate Tribunal along with ₹15000 within the period of 90 days.
In January 2017, the Indian government levied anti-dumping duty on colour-coated steel products imported from the European Union and China for six months.[4] India also imposed anti-dumping duty on stainless steel from the United States, European Union, Korea and China. The tax was imposed by the Department of Revenue on the suggestions of the DGAD.
Laws in United States of America
In the USA, domestic firms can file an anti-dumping petition as per the rules determined by the U.S. Department of Commerce and International Trade Commission. The former finds out “less than fair value” and the latter determines the “injury” to the local manufacturers. The Department of Commerce has repeatedly found that the manufactured goods have been retailed at less than fair value in U.S. markets.
In the U.S.A. also similar to India, the local industrialists have to prove the damage. If the local industry is successful in establishing the fact that it is being harmed by dumping, then anti-dumping taxes are imposed on the products imported from the dumper’s country at a percentage calculated to counter the dumping margin.
Laws in European Union
European Union anti-dumping is under the purview of the European Commission. It is ruled by Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community[5] and the Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community.[6] The anti-dumping steps are taken only after the voting by committees with member state representation.
Directorate General Trade (DG Trade) in Brussels is the bureaucratic entity which is responsible for advising member states on anti-dumping actions. DG Trade examines the standing of the complainants. If they are found to symbolize a minimum 25% of community industry, the investigation in all probability commences. After this, the DG Trade recommends to Anti-Dumping Advisory Committee, on which each member state has one vote. Member states who abstain from the process of voting are treated as if they voted in favour of industrial protection, a voting system which has come under considerable criticism.[7]
The anti-dumping actions of the European Union are primarily regarded as a part of a “trade defence” portfolio. Consumer and community interests are not focused on during the investigation. An investigation generally tries to find out the damage caused by dumping to community producers, and the level of tariff set is based on the damage done to local manufacturers by dumping. If consensus is not found then the issue is referred to the European Council.
An instance of an anti-dumping duty action taken by the European Union is that of the duty imposed upon bicycle imports from China into the EU, which has recently be continued at a rate of 48.5%.[8] Similarly, this taxation has also been applied to the imports from countries like Indonesia, Malaysia, Sri Lanka and Tunisia.[9]
Conclusion
It is the duty of each government to protect the domestic industries from external forces investing for establishing their monopoly. Dumping of manufactured goods leads to unfair competition. Protecting businesses from such practices helps the local industry to alleviate their harsh outcomes.
For the economic development and prosperity of the nation, it is very important on the part of the government to keep an eye on the prices of imported products and the agenda of their manufacturers. It is so because India has already seen the consequences of dumping during the British Raj. The British use to export raw material from India and use to dump back the cheap manufactured industrial goods of good quality and this adversely affected the Indian businessmen. Later on, the British manufacturers began controlling the market and the same product was sold at very high prices and Indians were not left with any option except to buy these expensive products. This led to the stagnation of the economy during that era.
Therefore, governments throughout the world should take care that such history does not repeat itself and the local producers do not suffer adversely due to the flooding of less expensive finished products from foreign lands.
References:
[1] Van den Bossche, Peter (2005). The Law and Policy of the World Trade Organization. Cambridge, UK: Cambridge University Press. p. 42.
[2] Excise and Customs, Central Board. “Customs Tariff”.
[3] Customs and Tariffs Act, 1975, No. 5, Acts of Parliament, 1975(India)
[4] Suresh p Iyengar, Govt levies dumping duty on colour coated steel, THE HINDU BUSINESS LINE (January, 13, 2017), https://www.thehindubusinessline.com/economy/policy/govt-levies-dumping-duty-on-colour-coated-steel/article9479020.ece
[5] https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996R0384:en:HTML
[6] https://sites.uclouvain.be/econ/DP/IRES/2011021.pdf
[7] Eggert, J. “Observations of the EU Anti-Dumping Regulation FTA Position for the Expert Meeting”
[8] VAN SCHAIK, JAN WILLEM. “Anti-Dumping Duty for China Imports to Continue”.
[9] Stearns, Jonathan. “EU China-Bike Duty Hits Indonesia, Malaysia, Sri Lanka, Tunisia”
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