Application of lesser duty rule in anti-dumping investigations

The Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade (the “WTO Anti-Dumping Agreement”) provides that anti-dumping duties can be imposed on dumped imports that cause injury to the domestic industry. It also provides guidance to determine the level of remedy which, in any case, cannot be higher than the margin of dumping.

Lesser duty rule in WTO Anti-Dumping Agreement

Article 9 of the WTO Anti-Dumping Agreement dealing with the application and collection of the anti-dumping duties provides for the possibility to limit the amount of duty that can be applied to remedy dumping to the amount necessary to remove injury to the domestic industry, i.e. to limit the level of duty to the injury margin. This rule is known as the lesser duty rule and is not binding upon WTO Members.

A thorough analysis of Article 9.1 of the WTO Anti-Dumping Agreement demonstrates that the imposition of anti-dumping duties is governed by three general principles:

-          First, it leaves it to the discretion of the Authority whether or not to impose an anti-dumping duty in cases where all requirements for the imposition have been fulfilled;
-          Second, the question whether the amount of anti-dumping duty to be imposed shall be the full dumping margin or less is decided by the Authority;
-          Third, it states that the duty may be less than the margin if such lesser duty would be adequate to remove the injury to the domestic industry.

In EC – Fasteners (China), the Appellate Body observed that the second sentence of Article 9.1 expresses a “preference […] for duties lesser than the margin of dumping, if lesser duties are adequate to remove the injury to the domestic industry. To express such a preference, Article 9.1 uses the expression ‘it is desirable’.” [see end note 1]

Article 9.1 of the WTO Anti-Dumping Agreement thus establishes a mandatory maximum (the full dumping margin) and a recommended minimum (the injury margin) for determining the level of anti-dumping duty and leave WTO Members with the option to choose whether to apply the lesser duty rule.

Lesser duty rule in India

The level of anti-dumping duties is recommended by the Designated Authority and the decision to impose anti-dumping duties is decided by the Ministry of Finance. In determining the appropriate level of duties, the Designated Authority has to follow the so-called lesser duty rule.

The lesser duty rule was introduced in India in 1999 with Customs Notification No. 44/99-Cus. (N.T.), dated 15-7-1999. A paragraph (d) was added to Rule 4 of the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (the “AD Rules”) which provides that “[i]t shall be the duty of the designated authority in accordance with [the anti-dumping] rules”

“(d) to recommend the amount of anti-dumping duty equal to the margin of dumping or less, which if levied, would remove the injury to the domestic industry, and the date of commencement of such duty”.

India has long been a h4 supporter of the mandatory application of the lesser duty rule. In 2005, India submitted a proposal on the mandatory application of the lesser duty rule to WTO Members [see end note 2]. However, the discussions have been stalled and the lesser duty rule still remains optional for WTO Members.

In accordance with Rule 4(d) of the AD Rules, the Designated Authority is therefore under the obligation to recommend an amount of anti-dumping duty equal to the dumping margin or the injury margin, whichever is the lowest. The AD Rules provide for a strict application of the lesser duty rule and no exception is foreseen.

Example of utilization of the lesser duty rule

As mentioned above, the lesser duty rule is not binding upon WTO Members and its application is optional. A majority of WTO Members apply the lesser duty rule with two notable exceptions: the United States and China. Other countries like Australia and Canada have chosen a middle road approach and apply the lesser duty rule with limitations. For instance, Australia modified its anti-dumping legislation in 2013 to restrict the application of the lesser duty rule in specific cases. The lesser duty rule may be disregarded where the Australian industry includes at least two small-medium enterprises, and/or, where the normal value of the goods cannot be determined by reference to the exporting country’s market  [see end note 3]. In Canada, the duties are generally set at a level equal to the dumping margin.

However, the application of a lesser duty is possible pursuant to a public interest test, i.e., if the authority is of the opinion that the imposition of anti-dumping duties in the full amount might not be in the public interest. Other countries like the European Union, Brazil and India strictly apply the lesser duty rule and do not provide for any exceptions. However, it is worth mentioning that the EU has been engaged in a process to modernize its trade defence legislation since 2013. The European Commission has proposed to remove the lesser duty rule in cases of circumvention, subsidization or where structural raw material distortions have been found to exist [see end note 4].This proposal is currently debated by the European Parliament and the European Union might soon have exceptions to the lesser duty rule.

[The author is a Principal Associate, International Trade Practice, Lakshmikumaran & Sridharan, Delhi ]

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