3 Trade Defence Instruments Presentation on Anti Dumping WTO - PDF document

3 Trade Defence Instruments Presentation on Anti Dumping  WTO provides for 3 trade defence and Safeguards Agreement instruments for imposing duties beyond the bound rate  Anti-Dumping duty  Countervailing duty Shashank Priya  Safeguard duty Professor  Detailed investigation procedure has to be Centre for WTO Studies followed before imposition of any of the IIFT above duties. 1 2 Where Does Trade Remedy What is not dumping? Measusres Fit In?  WTO system allows “protection” in specific  Sale of goods at low prices per se cases by means of trade remedy measures  Sale of goods which are unwanted or  Anti-Dumping-Additional import duties  Anti Dumping Additional import duties unsaleable in home market nsaleable in home market  Countervailing-Additional import duties  Fundamental notion of dumping- Price  Safeguards-Additional import duties or quotas discrimination  First two permit violation of MFN and binding tariff principle of WTO whereas the third permits violation of binding tariff principle 3 4 Anti-dumping Agreement: Introduction Essential Features  Injurious dumping considered to be unfair trade  Specific action against dumping is required practice to be taken in accordance with Article VI  Deals with the price behaviour of exporters and  Deals with the price behaviour of exporters and of GATT 1994 and the Anti-Dumping f GATT 1994 d th A ti D i not the exporting country as a whole Agreement  Dumping exists when Export Price is less than the  DGAD responsible for conducting Normal Value investigations and recommending duty  Injury to domestic industry & Causal link are level required to be proved  Duty imposed by DOR 5 6 1

What is Dumping? Preconditions For AD Action  Dumping-When exporter sells a product for  Dumping export to the importing country at a lower price,  Injury than the price at which the same (or similar) product is sold on its own domestic market- product is sold on its own domestic market  Causal link between injury and dumping called Normal Value  Dumping is essentially Price discrimination between national markets  Dumping per se is not objectionable  Injurious dumping has been condemned and remedy provided for under ADA 7 8 Test of Sales in Ordinary Course of Determination of Normal Value Trade  NV defined as:  Normal Value established only if goods are sold in exporting country market in “ordinary course of trade” The comparable price i.  Sales are not regarded to be in “ordinary course of trade” in ii. In the ordinary course of trade following situations: following situations: iii. For the like product Where sales are made at prices below per unit fixed and a. iv. When destined for consumption in the exporting variable costs plus administrative, selling and general costs; country (i.e. home market) Such sales are made within an extended period of time b.  NV can be rejected when no sale of like product (normally one year, but not less than six months) or when such sales do not permit a proper Such sales are made in substantial quantities (tests: weighted c. comparison. NV can then be average SP below weighted average cost or 20% of sales by Export price to a third country; or volume below costs) i. ii. A constructed value  Such sales are disregarded in determination of Normal Value 9 10 Fair Comparison between NV and Sufficiency of Volume Test Export Price  For price comparison to be fair, a number of  If sales in home market is very low in volume, adjustments need to be made. such sale price is not suitable for comparison with  Comparison must be made at the same level of export price trade (normally ex factory level) and in respect of trade (normally ex-factory level) and in respect of  Volume sufficiency test: sales made at as nearly as possible the same time. If home market sales constitute 5% or more of  Due allowance to be made for differences which a. affect price comparability, including differences the export sales in the country conducting the in: Conditions and terms of sale; taxations, investigation; quantities; physical characteristics; levels of A lower ratio “should” be accepted if the volume b. trade; any other difference demonstrably affecting of domestic sales nevertheless is “of sufficient price comparison. magnitude” to provide for a fair comparison 11 12 2

Alternative Bases for Calculating NV in Non-Market Economies NV  Two alternatives:  Applies to economies where Government The price at which the product (or like product) is sold to a. has complete or substantially complete a third country; monopoly of its trade and where all monopoly of its trade and where all The “constructed value” of the product, calculated on the b. domestic prices are fixed by the State basis of cost of production, plus selling, general, and administrative expenses, and profits  Strict comparison with home market prices  The Agreement has detailed and specific rules for may not be appropriate determination of constructed value  Importing countries can exercise  No hierarchy between two significant discretion in calculation of NV  DA of importing country free to choose either of the two methods 13 14 Fair Comparison of NV and Determination of Export Price Export Value  General rule is that export price be based on  Basic requirement is that prices being compared transaction price at which foreign producer sells be those of sales made at the same level of trade the product to an importer in the importing (normally ex-factory level) and as nearly as country possible, the same time  This condition may not be fulfilled if export  Investigating authorities required to inform transaction is not a sale but an internal transfer or parties of the information needed to ensure a fair barter sale or sale involves a compensatory comparison arrangement between exporter and importer  e.g. Information regarding adjustments,  In such cases, alternative method to be adopted allowances and currency conversion 15 16 Allowances Calculation of Dumping Margins  Allowances be made in NV or export price  The Agreement provides for two methods: or both for differences in conditions and a. Comparison of the weighted average terms of sale taxation quantities physical terms of sale, taxation, quantities, physical normal al e to the normal value to the weighted average of all eighted a erage of all characteristics, and other differences comparable export prices; or demonstrated to affect price comparability b. A transaction-to-transaction comparison of normal value and export price  Strongly disputed issue is zeroing of negative dumping margins 17 18 3