Suspension of ADD and CVD
Finance Act 2021 and current developments
Anti-dumping duties (ADD) are intended to counteract the practice of dumping by foreign exporters and protect domestic producers from unfairly low-priced imports, whereas countervailing duties (CVD) are imposed to neutralise the adverse effects of export subsidies on the domestic industry of importing countries. As such, the imposition of these duties is governed by elaborate statutory provisions and prescribed procedures, which must be adhered to in the application of duties. Most duties, once imposed, subsist in principle for five years, unless reviewed.
Where significant changes have occurred in the market after the imposition of duties, various World Trade Organization (WTO) members have resorted to a temporary revocation of duties. This suspension of duties has been invoked in different situations, such as alterations in the market conditions, including shortages in supply, excessive pricing by the domestic producers, public interest and force majeure, among other conditions.
However, in the absence of a specific provision in both the WTO Anti-dumping Agreement and the WTO Subsidies and Countervailing Agreement, countries have adopted different suspension provisions in their anti-dumping laws suited to their particular needs. While most countries have shied away from incorporating suspension clauses, others have implemented a detailed and structured provision on suspension. India, along with countries in the Gulf Cooperation Council, has incorporated suspension clauses, empowering the concerned authorities to suspend duties, but has not provided an established procedure for the suspension.
The essential criteria for suspending duties can be summarised as follows:
- an existing anti-dumping duty in force;
- a temporary change in the market conditions – what constitutes as temporary change may vary from case to case;
- no likelihood of recurrence of injury resulting from suspension; and
- the domestic industry's participation and interest.
Finance Act 2021 and current developments
The introduction of a provision relating to the suspension of duties in India was brought about by the Finance Act 2021. Under this amended provision, the central government suspended three anti-dumping duties (straight length bars and rods of alloy steel from China, high-speed steel of non-cobalt grade from Brazil, China and Germany and flat-rolled product of steel, plated or coated with alloy of aluminium or zinc from China, Vietnam and South Korea) and one countervailing duty (certain hot rolled and cold rolled stainless steel flat products from China), which were in force.
Despite the enabling provision on suspension of duties in the Finance Act 2021, the rules laying down the procedure or a review mechanism for such suspension of duties are yet to be enacted. Currently, the suspension of duties is guided by the provision added to the recently amended sections 9(6) and 9A (5), which reads as follows: "Provided also that if the said duty is revoked temporarily, the period of such revocation shall not exceed one year at a time."
Given the lack of procedural law, the orders issued by the Ministry of Finance suspending duties for the steel imports were silent on the reasons or need for such revocation or the "change in the market condition". However, in the annual budget for the financial year of 2022, the government announced that such suspension of duties arose due to a spike in global and domestic prices that has affected micro, small and medium-sized enterprises and other user industries.
The current regime of suspension of duties in India looks bleak, given the lack of codified rules. The interested parties have not been provided with an opportunity to represent or defend their interests. While the duties were imposed following a detailed investigation, they were suspended without examining the recurrence of dumping or injury following the suspension. The suspended duties on the steel imports were expected to be back in force by September 2021 but the suspension has been further extended until January 2022. By not providing an opportunity to the domestic industry to defend their interests and failing to provide a speaking order, the current application of suspension laws in India violates principles of natural justice.
A structured and elaborate amendment governing the process and grounds for suspension of duties is quintessential in India. Not only would it cater to user industry by allowing them to apply for a temporary revocation of duties in the event of any significant change in the market condition, but it would also provide the domestic industry an opportunity to defend its interests. It would also be a reassurance that in the event of an "altered market condition", duties shall not be a hinderance in catering to the economy. Therefore, such provisions would cater to superior public interest.
Additionally, to conclude on the necessity to temporarily suspend duties, it is essential that a thorough examination be carried out on the likelihood of injury, the possible effect of such suspension in the domestic industry and the duration for such revocation. Such quantified information will enable the interested parties to actively defend their interests and pursue further recourse, including an appeal, in the event that they feel the suspension of duties adversely impacts the domestic industry.
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.