Alerts & Updates 25th Apr 2022

Trade Update – April 25, 2022

Authors

Sanjay Notani Partner | Mumbai
Parthsarathi Jha Partner | New Delhi | Noida
Naghm Ghei Principal Associate | Delhi NCR
Harika Bakaraju Principal Associate | Mumbai

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  • Introduction

    In a recent decision, the Hon’ble High Court of Gauhati (High Court) reaffirmed that the investigating authority under Rule 2 (b) of the Customs Tariff (Identification, Assessment and Collection of Antidumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (AD Rules) has the discretion to include or exclude domestic producers related to the exporters or importers of the dumped article or are importers themselves from the scope of “domestic industry”. However, it has been noted that such discretion is not absolute but circumstantial discretion.

    The High Court also reaffirmed that the non-injurious price should be determined in terms of INR.

    The present note discusses these issues in detail in the paragraphs below.

  • Factual Background

    Anti-dumping applications were filed by Gujarat State Fertilizers & Chemicals Ltd. (GSFC) before the investigating authority i.e., the Directorate General of Trade Remedies (DGTR) for levy of anti-dumping duty on imports of Melamine originating in or exported from European Union, Indonesia, Iran, Japan and People’s Republic of China. Pursuant to the same, the DGTR issued its final findings recommending anti-dumping duty. Consequently, the customs notifications were issued to levy the recommended anti-dumping duty.

    One of the contentions before the DGTR in these investigations was “whether GSFC, which is an importer of subject goods, is eligible to constitute domestic industry” and the DGTR in this behalf decided in the affirmative.

    Upon being aggrieved by the aforementioned final findings, an importer Century Plyboards (I) Ltd (Century) among others filed a writ petition before the High Court. After considering the facts in their entirety, the High Court upheld the finding of the DGTR that GSFC constitutes domestic Industry within the meaning of Rule 2(b) of AD Rules despite importing subject goods. While the High Court categorically observed that the DGTR has discretion in this behalf, it noted that such discretion should not be arbitrary or in violation of Article 14 of the Constitution of India.[1]

    Concerning the issue of determination of Non -injurious price (NIP) in USD, the High Court noted that the DGTR may take its own decision to render the imposition of anti-dumping duty consistent with the Customs Tariff Act 1975.

    Against the said decision of the High Court, Century filed a review petition[2] before the High Court.

    Analysis of Key Findings of the Court pursuant to Review Petition

    a. Discretion to include or exclude from the ambit of ‘domestic industry’ a domestic producer who is related to an exporter or importer of the dumped article or an importer themselves

    Century averred that no discretion is vested on the DGTR to consider producers who are related to the exporters or importers of the dumped article. It further averred that nowhere does the AD Rules prescribe that the importers of the dumped article can be included in the ambit of ‘domestic industry’.

    The DGTR, on the other hand, averred that Rule 2(b) of the AD Rules through its successive amendments makes it explicit that the producers who are importers themselves can be considered ‘domestic industry’.

    The High Court while affirming the DGTR’s position observed as follows:

    • The initial definition of domestic industry explicitly excludes producers who are related to exporters or importers or are importers themselves from the scope of ‘domestic industry’ as the definition categorically prescribed that such producers ‘shall be deemed not to form part of ‘domestic industry’’.
    • The initial definition was amended in 1999[3] whereby the word ‘shall’ was replaced by the word ‘may’. It is an accepted position that the use of the word ‘may’ in ‘may be deemed not to form part of ‘domestic industry’’ denotes discretion. Accordingly, the DGTR was conferred with discretion to include or exclude producers who are related to exporters/importers or are importers themselves from the scope of domestic industry.
    • The definition of domestic industry was further amended in 2010[4], whereby the words ‘may be deemed not to form part of ‘domestic industry’ were replaced with ‘may be constructed as referring to the rest of the producers only’. The inclusion of the word only after the rest of the producers would give an interpretation that the ‘domestic industry’ includes only those producers who are not related to exporters/importers or are importers themselves of the dumped articles.
    • By virtue of the last amendment made to the definition of domestic industry in 2011[5], the word ‘only’ was removed, whereby the use of the words ‘‘domestic industry’ may be construed as referring to the rest of the producers’ clarifies that it is not an absolute exclusion of domestic producers who are related to exporters/importers of dumped article or importers thereof from the ambit of domestic industry. In other words, there may be certain circumstances where the inclusion of such producers under the ambit of ‘domestic industry’ is contemplated under the law.

    The High Court noted that it is discernable from the aforementioned amendments that the legislature intended to bring back the inclusion of exporters or importers of the dumped article or are importers themselves by providing discretion to the DGTR. However, it observed that such discretion is not an absolute discretion but a circumstantial discretion to be exercised on a case-to-case basis.

    b. Whether non-injurious price is to be determined in terms of INR or USD?

    Century averred that the NIP should be determined in terms of INR and not USD. It also averred that if any comparison requires NIP in INR to be converted to another currency, it can be made by using the exchange rate of the date of sale or the transaction.

    The DGTR, on the other hand, averred that since all the input elements for determining the export price and the normal value are in terms of USD, the NIP should also be determined in USD.

    The High Court observed that, as per the principles prescribed under the AD Rules for the determination of NIP, the input parameters for determining NIP are calculated and maintained in INR, and hence, the resulting NIP would also be in INR. It further observed that if NIP so determined is required to be used for determining the anti-dumping duty, such NIP can be converted to USD by applying the exchange rate prevailing on the date when the NIP so determined is required to be acted upon by the DGTR for arriving at the anti-dumping duty that may be levied.

  • Conclusion

    The DGTR in several investigations has held that it has the discretion to determine whether a domestic producer who is related to exporters/importers of the dumped article or is an importer itself can constitute a domestic industry under Rule 2(b) of the AD Rules. With regard to NIP, the DGTR has determined NIP in terms of INR. Thereafter, if the said NIP is relevant to determining the anti-dumping duty to be levied, it has converted the NIP in INR to USD.

    The High Court’s decision seems to reaffirm the above-mentioned practice of the DGTR. By specifying that the discretion under Rule 2(b) of the AD Rules is circumstantial, the High Court seems to only emphasize that the DGTR, which is a quasi-judicial body, has to make an objective assessment of whether a domestic producer (who is related to an exporter/importer or an importer itself) constitutes a ‘domestic industry’ in the facts and circumstances of a given case. However, the High Court fails to clarify that such discretion should also be exercised by the DGTR before the initiation. Given that the issue of standing is a necessary prerequisite for a prima facie assessment of injury and initiation, it is pertinent that the DGTR exercises its discretion in an objective manner to determine the standing of the domestic industry at the initiation.

  • KEY TRADE REMEDIAL UPDATES
    Product Subject countries Investigation Particulars
    USA (Department of Commerce/International Trade Commission)
    Vertical Shaft Engines China Circumvention Inquiry of the Anti-dumping (AD) and Countervailing Duty (CVD) Orders Initiation of Circumvention Inquiry of the AD & CVD orders
    Organic Soybean Meal India Injury determination Determined by USITC to be subsidized and sold at less than fair value
    Walk-Behind Snow Throwers China Injury determination Determined by USITC to be subsidized and sold at less than fair value
    EU (European Commission)
    Continuous filament glass fibre China AD Notice of initiation of an expiry review of the AD measures
  • WTO, FTAs

    India

  • NON-TARIFF BARRIERS
  • CUSTOMS
  • SANCTIONS AND EXPORT CONTROL

    USA

    UK

    European Union

  • References

    [1] Century Plyboards I Ltd. and Anr Vs The Union of India and Ors, WP(C) 6568/2017, Order dated August 26, 2019
    [2] Century Plyboards I Ltd. and Anr Vs The Union of India and Ors, Review. Pet./9/2020, Order dated April 6, 2022
    [3] Notification No. 44/1999 dated July 15, 1999
    [4] Notification No. 18/2010 dated February 27, 2010
    [5] Notification No. 86/2011 dated December 1, 2011

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice