On 22 January 2021, the Indian trade remedial authority, the Directorate General of Trade Remedies (DGTR), initiated an investigation on whether there was a need for continuation of duties on the import of porcelain tiles from China. The request was based on the fact that the expiry of the measures was likely to result in the continuation or recurrence of dumping and consequent injury to the domestic industry.
Although the application was filed by four associations of domestic producers, the case was initiated by the DGTR suo motu due to the fragmented nature of the ceramic tiles industry in India, largely comprising of small-scale producers located in Morbi and Himmatnagar in Gujarat. In total, there are 244 producers of porcelain tiles in India. The small-scale producers, belonging to the micro, small and medium enterprises sector, were not able to provide injury and costing data in such a short period of time, especially considering that a large number of producers would have had to provide data to constitute a major proportion of the domestic production. Therefore, producers that would soon become a part of the domestic industry were not identifiable at the stage of initiation.
The DGTR therefore initiated the investigation suo motu, as permitted by Rule 23(18) of the Anti-Dumping Rules, which allows the authority to initiate a review investigation on its own initiative or pursuant to an application filed by or on behalf of the domestic industry.
India usually follows the "lesser duty" rule, which provides that the domestic industry should offer detailed costing information to help determine the margin of injury.(1) However, due to the small-scale nature of the operations and the fact that producers were not in a position to provide detailed costing information, the DGTR was satisfied with sampling and requested information from 13 producers – this was the only data considered in order to determine the margin of injury.
The investigation was covered by Trade Notice 9/2021, as amended by Trade Notice 11/2021, which concerns applications filed by fragmented industries. According to the DGTR, "genuine difficulties are many a times encountered by such domestic producers in complying with the existing procedures and consequently they remain deprived of the relief from trade remedy measures". Consequently, the trade notices provided that:
Where the industry is fragmented and consists of excessively large number of domestic producers, the application for AD/CVD investigation can be filed by an Association on behalf of domestic industry. Such domestic producers must constitute a major proportion of the total eligible domestic production of like article . . .
The association shall provide all relevant information to demonstrate that the association has acted on behalf of domestic producers and the members of the association have expressly supported the request for imposition duty.
In order to satisfy this requirement, 56 producers provided injury information. These producers accounted for 26.38% of domestic production, which was considered to be a major proportion of the production.
Extension of duties during investigation
The duties that were already in force were to continue until 28 March 2021. However, according to the Customs Tariff Act, duties may be continued for a period of one year pending the conclusion of a sunset review. Indian law further states that the findings in the sunset review must be issued at least three months before the expiry of duty. Therefore, pending a conclusion of the review, the central government extended the duties until 28 February 2022.
Notice to exporters
A notice was served to all exporters asking them to provide information. However, only one producer from China, Foshan Chancheng Jinyi Ceramics Company Limited, responded to the request.
During the course of the investigation, the DGTR found that there was continued dumping of tiles from China. Further, it was likely that dumping would continue, and that injury would recur if duties were withdrawn. The final findings reported in the Gazette of India Extraordinary(2) showed that this would be due to the following factors:
- There was a history of dumping by producers in China, who were also facing trade remedial measures by other countries.
- The producers in subject countries had huge idle capacities.
- Due to the imposition of trade remedial measures by other countries, the export of tiles from China had declined.
- Imports into India had declined only due to the duties in force. Porcelain tiles had attracted duties in the past, but when such duties had lapsed, the imports had increased again after 2013-14. Such trends were likely to recur if duties lapsed again.
- India had been a key market for producers in China before the imposition of duty.
- If imports into India were made at the price at which Chinese producers were exporting to third countries, such prices would be injurious to the domestic industry.
Following these findings, the DGTR recommended a continuation of the existing anti-dumping duties. However, a producer that had participated in the original investigation but had not cooperated in the sunset review would be given residual duties.
In the past, there have been very few cases concerning fragmented industries, largely due to the difficulty faced in collecting detailed costing data from a large number of producers. The aforementioned investigation set an important precedent in relation to a number of aspects, such as:
- a suo motu initiation by the DGTR that considered genuine difficulties faced by fragmented industries; and
- sampling undertaken in order to address the challenges faced by small-scale producers in collecting data.
If the DGTR takes a similar approach in future investigations, this will ease the path for fragmented industries comprising of smaller producers to approach the authority for imposition of duties – especially in light of the more liberal procedural requirements notified by the DGTR in the Trade Notice 9/2021.
For further information on this topic please contact Aastha Gupta 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.
(1) For more information, see article 9 of the WTO Anti-Dumping Agreement.
(2) Case No. AD (SSR) – 20/2020, the Gazette of India Extraordinary, 26 November 2021; in particular, see the findings at paragraphs 104 to 117.