Paragraph 5 of Article VI of the General Agreements on Tariffs and Trade, 1994 (hereinafter referred to as “GATT”) states that “No product of the territory of any contracting party imported into the territory of any other contracting party shall be subject to both anti-dumping and countervailing duties to compensate for the same situation of dumping or export subsidization”. As is evident from the text of the provision, Article VI:5 prevents a situation of double remedy/compensation for the “same situation” of “dumping” or “export subsidization” (and not “domestic subsidization”) in relation to concurrent anti-dumping (AD) and countervailing duty (CVD) investigations.

It must be noted that an export subsidy will result in a pro rata reduction in the export price of a product, but will not affect the price of domestic sales of that product; and the subsidy will lead to a higher margin of dumping. In such circumstances, the situation of subsidization and the situation of dumping are the ‘same situation’. In other words, the dumping margin already accounts for the export subsidy in such cases; and the application of concurrent duties would amount to the application of ‘double remedies’ to compensate for, or offset, a same situation. It is, therefore, also logical to see why there is an express prohibition in connection with situations of export subsidization and not domestic subsidization [see end note 1]. Such an interpretation is supported by the Report of the Appellate Body (hereinafter referred to as the “AB”) of the World Trade Organization (hereinafter referred to as “WTO”) in the United States — Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WT/DS379/AB/R, 11th March 2011 (hereinafter referred to as “US — Anti-Dumping and Countervailing Duties (China)”). The relevant extract of the AB Report is reproduced below:

Article VI:5 prohibits the concurrent application of antidumping and countervailing duties to compensate for the same situation of dumping or export subsidization. In our view, the term ‘same situation’ is central to an understanding of the rationale underpinning the prohibition contained in Article VI:5, which in turn sheds light on the reason why, in the case of domestic subsidies, an express prohibition is absent.

We recall that, in principle, an export subsidy will result in a pro rata reduction in the export price of a product, but will not affect the price of domestic sales of that product. That is, the subsidy will lead to increased price discrimination and a higher margin of dumping. In such circumstances, the situation of subsidization and the situation of dumping are the ‘same situation’, and the application of concurrent duties would amount to the application of ‘double remedies’ to compensate for, or offset, that situation. By comparison, domestic subsidies will, in principle, affect the prices at which a producer sells its goods in the domestic market and in export markets in the same way and to the same extent. Since any lowering of prices attributable to the subsidy will be reflected on both sides of the dumping margin calculation, the overall dumping margin will not be affected by the subsidization. In such circumstances, the concurrent application of duties would not compensate for the same situation, because no part of the dumping margin would be attributable to the subsidization. Only the countervailing duty would offset such subsidization.

To the extent that these assumptions hold true, then the presence, in Article VI, of an express prohibition on the concurrent application of duties to counteract the ‘same situation’ of dumping or export subsidization, along with the absence of an express prohibition in connection with situations of domestic subsidization, appears logical — at least when normal value is calculated on the basis of domestic sales prices [see end note 2].

Section 9B(1)(a) of the Customs Tariffs Act, 1975 in India (hereinafter referred to as “Customs Tariff Act”) incorporates Article VI:5 of GATT. However, there is no jurisprudence in relation to this issue in India.

This Article discusses that in order to avoid the “double compensation” pursuant to Article VI:5 of GATT and Section 9B(1)(a) of the Customs Tariff Act – the Period of Investigation (hereinafter referred to as “POI”) in the AD and CVD Investigations should be aligned when the AD and CVD investigations are initiated in relation to the same imported product.

The need for alignment of POI

As mentioned above, to avoid compensation for the same situation of dumping and export subsidization in the form of both AD and the CVD measures, it is necessary to use the same POI in both AD and CVD investigations.

If the POI is not aligned and kept common for both the AD and CVD investigations, it would be difficult to determine the amount of duty to be imposed especially taking into account the requirements of ‘Lesser Duty Rule’ applicable in jurisdictions like India and the European Union. If the amount of injury margin determined in Period A for say AD investigation is to be compared with the amount of injury margin determined for Period B in CVD investigation, it would be difficult to determine at what level the ceiling would operate – injury margin of Period A or the injury margin of Period B. Assuming Period A is an earlier period and Period B is a later period, dumping margin and/or subsidy margins in the two periods will not remain the same. And if AD duty is imposed to the full extent of injury margin for Period A and in the subsequent Period B, if the injury margin is higher, one can still impose CVD to the extent of the difference between the injury margin for Period B and that of Period A, though there would not have been any CV Duty if Period A had remained the POI for both the investigations.

To implement the aforesaid provision, members of the WTO select a common POI in both the investigations to avoid any complications in respecting its obligations under Article VI:5 of the GATT. As an illustration, one can see the practice of the European Union which has maintained a common POI for both AD and CVD Investigations in pursuance of its obligation under Article VI:5 GATT equivalent under EU law [i.e. paragraph 1 of Article XIV of Regulation (EU) 2016/1036 of the European Parliament and the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (codification)]. In the instances cited below the European Authority had initiated the AD and CVD Investigation for the same POI for the same product under consideration:

  • In a) Council Regulation (EC) No. 2603/2000 of 27 November 2000 imposing a definitive countervailing duty and collecting definitively the provisional duty imposed on imports of certain polyethylene terephthalate originating in India, Malaysia and Thailand and b) Council Regulation (EC) No. 2604/2000 of 27 November 2000 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain polyethylene terephthalate originating in India, Indonesia, Malaysia, the Republic of Korea, Taiwan and Thailand. The POI in both the cases was 1st October 1998 to 30th September 1999.
  • In a) Council Regulation (EC) No. 1628/2004 of 13 September 2004 imposing a definitive countervailing duty and collecting definitively the provisional duty imposed on imports of certain graphite electrode systems originating in India and b) Council Regulation (EC) No. 1629/2004 of 13 September 2004 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain graphite electrode systems originating in India. The POI in both the cases was 1st April 2002 to 31st March 2003.
  • In a) Council Regulation (EC) No. 599/2009 of 7 July 2009 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of biodiesel originating in the United States of America and b) Council Regulation (EC) No. 598/2009 of 7 July 2009 imposing a definitive countervailing duty and collecting definitively the provisional duty imposed on imports of biodiesel originating in the United States of America. The POI in both the cases was 1st April 2007 to 31st March 2008.
  • In a) Council Regulation (EC) No. 452/2011 of 6 May 2011 imposing a definitive anti-subsidy duty on imports of coated fine paper originating in the People's Republic of China and Council Regulation (EC) No 452/2011 of 6 May 2011 and b) Council Regulation (EC) No. 451/2011 of 6 May 2011 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of coated fine paper originating in the People's Republic of China. The POI in both the cases was 1st January 2009 to 31st December 2009.
  • In Commission Implementing Regulation (EU) No. 1379/2014 of 16 December 2014 imposing a definitive countervailing duty on imports of certain filament glass fibre products originating in the People's Republic of China and amending Council Implementing Regulation (EU) No. 248/2011 imposing a definitive anti-dumping duty on imports of certain continuous filament glass fibre products originating in the People's Republic of China. The POI in both the cases was 1st October 2012 to 30th September 2013.

Therefore, to avoid double remedy that Article VI:5 and Section 9B(1)(a) of the Customs Tariff Act prohibit, it is important that the concerned authorities of the AD and the CVD Investigations should align the POIs to make any “set off” of AD and CVD possible, especially in jurisdictions like India which follow the “lesser duty rule”.