In the 2021-2022 budget, the Minister of Finance announced the introduction of legislative provisions to control the absorption of anti-dumping duties (‘ADD‘) and countervailing duty (‘CVD‘) measures imposed by the central government. These provisions were incorporated into Articles 9 and 9A of the Customs Tariff Act 1975.

Recently, the Ministry of Finance notified the Customs Tariff (Identification, Valuation and Collection of Anti-Dumping Duties on Dumped Items and for Injury Determination) Second Amendment Rules, 2021, and the Customs Tariff (Identification, Valuation and Collection of Countervailing Duties on Subsidized Items and for Injury Determination) Second Amendment Rules, 2021 detailing the procedure for determining and imposing anti-absorption measures.

This article aims to give a brief overview of the anti-absorption provisions which have been introduced by these provisions.

What is absorption?

The fundamental objective of the application of anti-dumping or countervailing measures is to correct unfair import prices, and thereby ensure that the unfair price advantage to foreign exporters resulting from unfair dumping or subsidizing is nullified. The measures generally result in an increase in domestic selling prices due to the increased landed value of imported goods, which creates a level playing field for domestic producers.

However, the imposition of ADD / CVD measures is not a guarantee that it will lead to an increase in price levels. In order to ensure that the ADD or countervailing duty imposed does not remove the undue advantage to the exporter, an exporter may reduce its export price so as to absorb the price effect of the measure applied. . Indeed, this will prevent any increase in the landed prices of imported goods and will therefore lead to the absorption of ADD or CVD. It is to combat this practice that the central government has introduced anti-absorption provisions to strengthen the effectiveness of the measures applied and thus protect the national industry against the continuation of unfair practices.

It is important to note that before the adoption of the anti-absorption rules, the DGTR had published the provisional version of the anti-absorption rules in both ADD and CVD frameworks. The DGTR had also solicited comments from all stakeholders on this draft rule. It would appear that the DGTR has taken the comments into account, as most of the anti-absorption provisions of the ADD and CVD rules have been harmonized with each other.

Overview of anti-absorption provisions

Rule 29 (1) of the anti-dumping absorption rule states that ADD may be considered absorbed if the export price of the item decreases without a proportional change in –

• the cost of production (of the producer); Where
• export price to third countries; Where
• resale price of the item imported to India.

Under Rule 25 (1) of the Countervailing Duty Absorption Rules, countervailing duties may be considered absorbed if the export price of the item decreases without the resale price of said item imported into India. does not change significantly.

The ADD and CVD anti-absorption rules provide for a fast-track structure for the review of applied trade remedies. They state that an investigation must be completed within six months of its initiation and that only a three-month extension can be granted. Even while the investigation is ongoing, the rules allow the Authority to recommend a provisional valuation of imports until the Authority has reached its conclusion. On such recommendation, the central government may order the provisional valuation of imports and may require importers to provide bank guarantees covering the differential duty payable, if any, upon the final decision. This would provide interim relief to the domestic industry while the Authority investigates.

The rules limited the scope of the anti-absorption review to the reassessment of the dumping / subsidy and the injury margin. This would mean that if the export price and the normal value and the non-injurious price of the domestic industry would be recalculated, the injury and causation need not be restored.

This limitation in the scope of the review distinguishes an anti-absorption review from a sunset or mid-term review. In a mid-term review, if the domestic industry or any other interested party was harmed by the absorption of duties, it could have gone to the Authority and requested a mid-term review. But during a mid-term review, the Authority can neither recommend a provisional assessment nor restrict the scope of the review to the sole reassessment of the dumping / subsidy and the injury margin.

Also, while a midterm review cannot take more than twelve to eighteen months to conclude, an anti-absorption review cannot take more than six to nine months to be completed.

The anti-absorption provisions allow any interested party to request the initiation of a review within two years of the imposition of an ADD or countervailing measure. The Authority can even accept a request after two years by recording the reasons for its decision, but there is a total ban on accepting a request in cases where there are less than twelve months left for the expiration of the ADD / CVD. . This provision was inserted because during this period the Authority may have already initiated a sunset review. A similar practice is followed by the Authority when examining new shippers; the Authority does not accept NSR requests filed twelve months before the expiration of the ADD / CVD measure.

The general practice of the Authority is to recalculate the dumping / subsidy and injury margins in a sunset review. The reassessment allows the Authority to recommend that the measure be maintained on the basis of the reassessed margins. Therefore, if the duties imposed are absorbed, even a sunset review could remedy it in the last twelve months.

Like a mid-term review, even the anti-absorption provisions allow any interested party and not just the domestic industry to request a review. Thus, if an exporter is of the opinion that its exporting competitors are underestimating it by absorbing the ADD / CVD after the imposition, then even those exporters can apply to the Authority for an anti-absorption review.

If, after the conclusion of its investigation, the Authority concludes that the measure imposed has been absorbed, then it may recommend –

• Modification of the form or base of the ADD / CVD
• ADD / CVD quantum change

The modification of the existing rights can be made retroactive from the date of opening of the examination of the absorption.

Conclusion

The inclusion of anti-absorption provisions in India’s ADD and CVD rules is a welcome step in strengthening the framework for trade remedies. The ADD and CVD rules now provide an additional mechanism for the domestic industry to ensure that imposed ADD / CVD are not canceled by the absorption practice of exporters.

WTO provisions do not expressly prohibit or provide for a review mechanism to verify absorption of duties. Therefore, apart from India, only a handful of countries like the EU, UK and US have anti-absorption provisions in their laws. While the European Union has detailed procedures for an anti-absorption review, the United States verifies the absorption of duties through administrative reviews. South Africa and Australia, unlike India, view absorption as a form of bypass. Indian provisions seem to be largely modeled on the European Union.