Introduction
Requests for product exclusions made to the Directorate General of Trade Remedies (‘DGTR’) are a salient aspect of trade remedies investigation process. Most often, the request for product exclusion is made on the basis that the domestic industry does not produce a particular product. Depending on the merits of the request, the Authority decides whether or not to exclude the particular product from the scope of the product under consideration (‘PUC’).
This article examines the recent Final Findings dated 8 February 2022 issued by the DGTR in the Mid-Term Review (‘MTR’) of countervailing duty on imports of Welded Stainless-Steel Pipes and Tubes (product under consideration, PUC) from China PR and Vietnam. While the DGTR recommended the imposition of countervailing duty on the subject imports vide final findings dated 31 July 2021, the Finance Ministry imposed countervailing duty on the subject imports vide Customs Notification dated 17 September 2021.
Applicant’s request for product exclusion
The MTR was initiated subsequent to an application filed by Kunshan Kinglai Hygienic Materials Co., Ltd. (‘Applicant’), a producer/exporter of the PUC from Vietnam. The Applicant requested for exclusion of specific grades of the PUC compliant with American Society of Mechanical Engineers-Bioprocessing Equipment (ASME-BPE) standards.
The Applicant requested for exclusion of this particular product on the basis that the domestic industry in India did not produce ASME-BPE compliant PUC, which the Applicant contended was a special grade used in bioprocessing and pharmaceutical sectors that was required to possess specific and unique qualities and designs serving high level of hygiene requirements for bioprocessing and pharmaceutical sectors. The Applicant contended that the said product was neither technically nor commercially substitutable to the product of the Indian industry and that the cost and the price of this product was much higher than that produced by the producers in India.
Analysis of the Authority’s findings on product exclusion
Before delving into the Authority’s decision on merits of the application, it is relevant to note that the Authority rejected the submissions / comments made by the domestic producers on the MTR request of applicant for the reason that domestic producers had not registered themselves as an ‘interested party’ with the Authority and had filed the submissions belatedly. The Authority had taken a strict view that these interested parties should have adhered to the timelines prescribed by the Authority.
This is an aspect that remains to be tested for its validity given the Supreme Court’s decision of extending limitations and timelines in all judicial and quasi-judicial matters all over the country in light of the constraints caused due to the pandemic.
Proceeding to the merits, it may be noted that the Authority rejected the Applicant’s request for product exclusion for three main reasons, as discussed below.
Firstly, the Authority observed that the only distinguishing feature that the Applicant was able to identify between ASME-BPE certified and non-certified product is the price of the product. The Authority considered that significant difference in the price alone cannot be a relevant parameter for exclusion of this product from the scope of the PUC. The Authority clarified that any request for product exclusion must be based on criterion which distinguishes such product in terms of technical specifications and characteristics.
Secondly, apart from the price, the Authority observed that the only other difference between the certified and non-certified product was in processing of such product. In this regard, the Authority was of the view that the Applicant provided no verifiable evidence to substantiate that the additional processing requirements are so high as to justify a price differential of 10 times.
What emerges from this finding is that it becomes critical to establish the technical differences in products with relevant evidences resulting in the price difference. It is this technical difference due to which the product is not competing and substitutable with the product of the Indian industry. Mere price difference does not suffice since a high-priced product may still be substitutable to the product of the domestic industry.
Thirdly, the Authority observed that the Applicant was not able to provide any evidence that ASME-BPE compliant products are mandatorily required in the bio-pharmaceutical industry. The Authority observed that there is no governmental regulation which necessitates the use of only ASME-BPE products for use in bio-processing and pharma industry. This reason flows from the understanding that if any law requires ASME certification, then the law should recognize the technical differences and make certification mandatory.
In connection to the third reason, the Authority observed that the absence of participation by the actual users validated the notion that there is no mandatory requirement for these AMSE-BPE compliant products.
What flows from the above reasons is the reiteration of the age-old principle that ‘direct competition’ and ‘substitutability’ is pre-requisite to show that the product is a ‘like article’. The findings in the above case provides certain ways in which the same can be proved i.e., by establishing the technical differences, or showing legal requirements or showing that the user industry is only using a specific item and not the others. These findings are relevant especially since product exclusions are being argued by the interested parties in various investigations before the DGTR.
Conclusion
Determinations issued by the investigating authority concerning product scope are important in that they are most often peculiar to the facts and circumstances of the case. In this case as well, the Authority has established some interesting jurisprudence regarding requests for product exclusion.
While holding that the Applicant’s submissions regarding price difference, however significant, could not be the reason for product exclusions, the Authority has correctly emphasized on the need for evidence to substantiate differences between the exclusion product and the PUC on the basis of technical and physical characteristics of such products. Such determination is in line of the Authority’s own jurisprudence and also WTO’s jurisprudence on the notion of ‘like article’.
The Authority’s findings in this MTR are also important in that it highlights the importance of user participation in trade remedial proceedings, particularly when requests for product exclusion are to be made. As the users are the ones who are directly affected by the imposition of trade remedial measures, their participation in investigations to determine product exclusions is of utmost importance.
[The author is a Senior Associate in WTO and International Trade practice team at Lakshmikumaran & Sridharan Attorneys, New Delhi]
