Introduction
Meaning of "absorption of duties"
When can an application for anti-absorption review be filed?
Initiation of investigations
Investigation procedure
Determination of absorption
Comment
The Budget 2021 introduced anti-absorption provisions with respect to anti-subsidy and anti-dumping by inserting section 9(1B) and section 9A(1B) in the Customs Tariff Act (the Act). This amendment was long overdue since trade remedial laws in other jurisdictions (eg, the European Union and the United States) have had such provisions in place since their inception.
Recently, the Indian government introduced rules for conducting anti-absorption reviews.(1) The rules set out the procedural requirements for conducting an anti-absorption investigation. This article provides an overview of the procedural rules introduced by the Indian government.
Meaning of "absorption of duties"
Under the rules, anti-dumping duties or countervailing duties are "absorbed" when the export prices of an article from the exporting country (or countries) decrease following the imposition of the anti-dumping duty without any commensurate change in:
- the cost of the production of such article;
- the export prices of such article to countries other than India; or
- the resale price of such article in India imported from the exporting country (or countries).
The definition of "absorption of duties" provided in the Act and the rules only considers a situation where the export price has declined. However, there can be a situation where the resale price of the imported goods does not increase sufficiently after the imposition of duty. For example, assuming that, after the imposition of duty, the export price has remained the same, but the importer, having imported the goods after payment of duty, does not increase its own resale price sufficiently to reflect the impact of the anti-dumping duty, this would result in the anti-dumping duty being ineffective, as the importer did not pass on the price increases to the consumer. As a result, the price in the market remains low, and does not allow the desired price increase in the market.
When can an application for anti-absorption review be filed?
The rules provide that the domestic industry, or any other interested party, can normally file an application seeking the initiation of a review within two years from the date of the imposition of the definitive anti-dumping duty. The use of the word "normally" ensures flexibility in the time limits prescribed, provided that the reasons for the consideration of the application after two years are recorded by the authority before the acceptance thereof. The rules, however, also state that the application of anti-absorption shall not be accepted in cases where the anti-dumping duty is to expire within 12 months.
The authority may initiate investigations either upon the receipt of a written application or suo moto based on information received from the principal commissioner of customs, the commissioner of customs or any other source. The application should contain sufficient evidence as to the existence of the circumstances pointing to the absorption of the anti-dumping duty in force. The requirement of sufficient evidence can be met easily in cases where the export price has declined. However, in cases where the resale price has not increased sufficiently, the interested parties can at best provide sample sales invoices by importers as evidence. Whether these sample sales invoices will be sufficient evidence is for the designated authority to decide on a case-by-case basis. Further, the response from the importers will be equally as important as the response from the exporters in an anti-absorption investigation.
The anti-absorption review procedure will be similar to that of anti-dumping duty and anti-subsidy investigations governed by rule 6 and rule 7. However, the following specific procedural rules are set out for anti-absorption reviews:
- The designated authority may make a recommendation to the government for a provisional assessment of the imports of an article alleged to be absorbing an anti-dumping duty, pending the conclusion of the review. The government, upon a recommendation by the designated authority, may ask for a guarantee from the importer until the time that the determination of absorption is made.
- Investigations will be limited only to the re-computation of the dumping and injury margin. There is no requirement to establish injury or a causal link since this would have already been established in the original investigation.
- Investigations shall be concluded within six months from the date of initiation. However, in special circumstances, after recording reasons in writing, the time limit for the completion of the investigation can be extended for another three months.
Once the designated authority concludes that the anti-dumping duty has been absorbed, it may recommend the modification of:
- the form or basis of duties;
- the quantum of duties; or
- both.
Such modifications may apply retrospectively from the date of initiation of the investigation.
The introduction of anti-absorption rules is a welcome step towards ensuring the effectiveness of India's trade remedial measures. Now that the rules have been introduced, interested parties, including the domestic industry, can seek remedy against such practices.
Previously, where duties were absorbed by exporters, the domestic industry had to seek remedy either by filing an application for mid-term review or wait for a sunset review. Since the practice of the Indian authority is to conduct a full investigation in reviews, including the determination of dumping, injury and causal links, this imposed a greater burden on the domestic industry to address the situation of absorption of duties.
With the introduction of the new rules, the domestic industry can seek relief in an expedited manner.
For further information on this topic please contact Namrita Raghuwanshi at TPM Solicitors & Consultants by telephone (+91 11 4989 2200) or email ([email protected]). The TPM Solicitors & Consultants' website can be accessed at www.tpm.in.
Endnotes
(1) Notification No. 84/2021-Customs (NT) dated 27 October 2021.