By Manoj Gupta
India has joined the select group of countries that have put in place anti-circumvention law to address issues relating to circumvention of anti-dumping duties. The law has been introduced in two stages. First, sub-section (1A) was inserted into Section 9A of the Customs Tariff Act, 1975 through the Finance Act, 2011 that came into force from 8th April 2011. Secondly, the relevant rules have now been framed vide Customs Notification No. 6/2012-Cus. (N.T.), dated 19th January, 2012. Four new rules 25 to 28 have been added to address anti-circumvention issues. Section 9A(1A) read with the rules grant the power to the Indian Central Government to impose anti-dumping duty in case it finds that the same is being circumvented.
Circumvention can arise in three situations, as per the new rules. First, when an article liable to anti-dumping duty is imported into India in an unassembled, unfinished or incomplete form and is assembled, finished or completed in India. Alternately, export from the countries subject to anti-dumping duty may be made in an unassembled, unfinished or incomplete form to any other country not subject to anti-dumping duty and the assembly, finishing or completion operation is carried out in that country from where the goods are imported into India. In both the cases, value addition in India or the third country concerned shall not be less than 35%. Further, such operation should have started or increased after or just prior to the levy of anti-dumping duty. For calculation of value addition, payments relating to intellectual property rights, royalty, technical know-how fees and consultancy charges are not to be taken into account.
Secondly, the goods are held to be circumventing anti-dumping duty when even minor alteration in form or appearance of the article has been made when they are imported from countries earlier notified for the purpose of the levy [Rule 25(2)].
Thirdly, when the goods are routed through any other exporter or country which was earlier not notified for such duty, the goods would be held as circumventing the duty if it is proved that the goods were so routed because of the change in trade practice or pattern. It has to be established that there was no justification, other than imposition of anti-dumping duty, for such changed trade pattern and that the remedial effect of the anti-dumping duty was undermined [Rule 25(3)].
The designated authority can suo motu or pursuant to an application in this regard by the domestic industry initiate investigation to determine the existence and effect of any alleged circumvention where it is satisfied that such imports are dumped.
Scenario around the world
Anti-dumping Agreement (ADA) of the WTO, on the basis of which the Indian rules are framed, does not provide for such provisions. This was considered before the Ministers of the representing countries in the WTO where no consensus was reached during the Uruguay Round. The matter was referred to Committee on Anti-dumping Practices which has further established an Informal Group on Anti-Circumvention to carry out the task of defining uniform rules in this regard. Hence, it is very much doubtful as to what would be the fate of such provisions if challenged in the DSB of the WTO (Article XX of GATT though provides for measures to prevent deceptive practices). However, US, EU, Australia, New Zealand, Japan and some of the Latin American countries like Mexico already have such set of provisions to levy anti-dumping duty on articles found to be circumventing such duty and till date no case has been brought before the WTO in this regard (in DS89 the measures by US were challenged but the request for panel was withdrawn by Korea). These provisions, in fact, form the backbone of the basic anti-dumping investigations around the world. India has notified such provisions only now though industry had pointed out the requirement as early as in 2002.
Effect
Will there be a sudden spurt in anti-dumping investigations, findings and notifications with the domestic industry making a bee-line to the designated authority’s office? Ministry of Finance has also allotted separate suffix for anti-dumping notifications starting from 2012 and such notifications will no longer be issued under the usual Customs head. Was this done to accommodate such rise in the number of notifications? There are also number of issues such as, whether the product after minor alteration [as in Rule 25(2)] will conform to “like article” theory for the purpose of calculation of normal value and what would be the scope of the alteration in the article to still be considered the same. Normal value calculation would also be a problematic issue when parts alone are imported. Routing of parts or components through third country also requires some consideration, as thorough understanding of even some of the FTAs is required. Only time will tell how the provisions are interpreted by courts and tribunals and how they really affect the trade.
[The author is Assistant Manager, Lakshmikumaran & Sridharan, New Delhi]
India has joined the select group of countries that have put in place anti-circumvention law to address issues relating to circumvention of anti-dumping duties. The law has been introduced in two stages. First, sub-section (1A) was inserted into Section 9A of the Customs Tariff Act, 1975 through the Finance Act, 2011 that came into force from 8th April 2011. Secondly, the relevant rules have now been framed vide Customs Notification No. 6/2012-Cus. (N.T.), dated 19th January, 2012. Four new rules 25 to 28 have been added to address anti-circumvention issues. Section 9A(1A) read with the rules grant the power to the Indian Central Government to impose anti-dumping duty in case it finds that the same is being circumvented.
Circumvention can arise in three situations, as per the new rules. First, when an article liable to anti-dumping duty is imported into India in an unassembled, unfinished or incomplete form and is assembled, finished or completed in India. Alternately, export from the countries subject to anti-dumping duty may be made in an unassembled, unfinished or incomplete form to any other country not subject to anti-dumping duty and the assembly, finishing or completion operation is carried out in that country from where the goods are imported into India. In both the cases, value addition in India or the third country concerned shall not be less than 35%. Further, such operation should have started or increased after or just prior to the levy of anti-dumping duty. For calculation of value addition, payments relating to intellectual property rights, royalty, technical know-how fees and consultancy charges are not to be taken into account.
Secondly, the goods are held to be circumventing anti-dumping duty when even minor alteration in form or appearance of the article has been made when they are imported from countries earlier notified for the purpose of the levy [Rule 25(2)].
Thirdly, when the goods are routed through any other exporter or country which was earlier not notified for such duty, the goods would be held as circumventing the duty if it is proved that the goods were so routed because of the change in trade practice or pattern. It has to be established that there was no justification, other than imposition of anti-dumping duty, for such changed trade pattern and that the remedial effect of the anti-dumping duty was undermined [Rule 25(3)].
The designated authority can suo motu or pursuant to an application in this regard by the domestic industry initiate investigation to determine the existence and effect of any alleged circumvention where it is satisfied that such imports are dumped.
Scenario around the world
Anti-dumping Agreement (ADA) of the WTO, on the basis of which the Indian rules are framed, does not provide for such provisions. This was considered before the Ministers of the representing countries in the WTO where no consensus was reached during the Uruguay Round. The matter was referred to Committee on Anti-dumping Practices which has further established an Informal Group on Anti-Circumvention to carry out the task of defining uniform rules in this regard. Hence, it is very much doubtful as to what would be the fate of such provisions if challenged in the DSB of the WTO (Article XX of GATT though provides for measures to prevent deceptive practices). However, US, EU, Australia, New Zealand, Japan and some of the Latin American countries like Mexico already have such set of provisions to levy anti-dumping duty on articles found to be circumventing such duty and till date no case has been brought before the WTO in this regard (in DS89 the measures by US were challenged but the request for panel was withdrawn by Korea). These provisions, in fact, form the backbone of the basic anti-dumping investigations around the world. India has notified such provisions only now though industry had pointed out the requirement as early as in 2002.
Effect
Will there be a sudden spurt in anti-dumping investigations, findings and notifications with the domestic industry making a bee-line to the designated authority’s office? Ministry of Finance has also allotted separate suffix for anti-dumping notifications starting from 2012 and such notifications will no longer be issued under the usual Customs head. Was this done to accommodate such rise in the number of notifications? There are also number of issues such as, whether the product after minor alteration [as in Rule 25(2)] will conform to “like article” theory for the purpose of calculation of normal value and what would be the scope of the alteration in the article to still be considered the same. Normal value calculation would also be a problematic issue when parts alone are imported. Routing of parts or components through third country also requires some consideration, as thorough understanding of even some of the FTAs is required. Only time will tell how the provisions are interpreted by courts and tribunals and how they really affect the trade.
[The author is Assistant Manager, Lakshmikumaran & Sridharan, New Delhi]