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India’s stand before WTO as an instance of evidence in trade remedy investigations

By Ankur Sharma

Introduction


This article presents a short analysis of the recently issued final findings in the safeguard review investigation on imports of PX-13 also known as 6 PPD into India, issued by the Directorate General of Safeguards (“DG”) on 24 April 2014. This case is significant and unique in the sense that despite the existence of serious injury to the domestic industry, the DG refused to extend the safeguard measure on two grounds, which are:
  • Non-compliance with adjustment plan; and
  • Extension of safeguard measure would have been inconsistent with India’s stand before the WTO.
This short piece explains the DG’s analysis on the second ground mentioned above and the implication of reliance of Indian authorities on state practice as evidence in trade remedy investigations.

Facts

Safeguard measures were applied on imports of PX-13 into India with effect from 30 August 2011 for two years. The measure was set to expire on 29 August 2013. On 29 August 2013, the Directorate General of Safeguards initiated a review investigation for continued imposition of safeguard measures.

Key issues and analysis

Among several issues that were raised by the domestic industry and other interested parties, one key issue was that India had in the past objected to Turkey’s extension of safeguard measures before the WTO in a similar set of facts in DS 428 titled Turkey – Safeguards Measures on Imports of Cotton Yarn (other than sewing thread), in short, Turkey – Cotton Yarn.

Turkey had applied safeguard measures on imports of cotton yarn that were set to expire on 14 July 2011. Turkey conducted a review proceeding and extended the safeguard measure post expiry on 28 January 2012.

India, in its consultation request, objected to such an extension of safeguard measure after its expiry under Article 7.5 of the Agreement on Safeguards (“AoS”). Article 7.5 of the AoS mandates that a safeguard measure on a product shall not be applied again for a period of time equal to that during which such measure had been previously applied, and the minimum period of non-application or the cooling-off period shall be two years.

India contended that since Turkey had applied the measure for two years, and failed to extend the measure before its expiry on 14 July 2011, therefore, Turkey could not extend the measure within the cooling-off period of two years. The crux of India’s argument was that extension of safeguard measure as contemplated under Article 7.2 of the AoS [see end note 1] is that there should be no gap in the continuation of the measure. If there is a gap, continuity is broken, and any application of safeguard measures would not be an extension of the measure but a fresh application of the measure. But as per Article 7.5 of the AoS, a fresh application of safeguard measure could kick-off only after the mandatory cooling-off period is over. Since Turkey had applied the safeguard measures post its expiry within the cooling-off period, it was in violation of Article 7.5. Also, the Agreement on Safeguards does not contemplate retrospective levy of safeguard measures.

Now the matter becomes interesting at this point. There is no WTO Panel Report in Turkey – Cotton Yarn. This point was a major bone of contention before the DG. While the domestic industry argued that firstly, provisions of AoS could not be applied as the Indian Safeguard Rules is a complete code in itself. Secondly, even if provisions of AoS are applied, Turkey – Cotton Yarn could not be relied upon as there was no WTO Panel Report on this case, but only a mere consultation request by India which only had India’s claims against Turkey.

The interested parties argued that WTO DSU procedures allow members to enter into bilateral consultations to settle a dispute. It was argued that since India had bilaterally reached an understanding with Turkey, wherein Turkey agreed to withdraw its safeguard measures, therefore, there was no need for a WTO Panel to intervene. The interested parties argued that since India had taken an official stand before the WTO that once a safeguard duty has expired, and a recommendation of extension had not been made before expiry of the measure, the measure could not be extended unless the requirement of Article 7.5 of AoS is met.

The DG also invited views from the Department of Commerce, India on the above issue. The Department of Commerce reiterated the argument taken by the interested parties above. The DG, therefore, concluded that, among other reasons, any further action in the case would only be contrary to India’s stand at the WTO and decided to terminate the investigation.

Conclusion

The above determination sets an important example in terms of the nature of evidence that could be brought before Indian authorities conducting trade remedy investigations. It is clear that Indian authorities may rely upon evidences of India’s state practice, as it is only prudent that India’s state practice and domestic administration of law are in consonance with each other. This also gives parties a clearer view of what to expect from authorities in trade remedy investigations. India’s other investigating authority, such as the Directorate General of Anti-dumping and Allies Duties may also borrow useful cues from the above determination while conducting anti-dumping and anti-subsidy investigations.

[The author is an Associate, International Trade Team, Lakshmikumaran & Sridharan, New Delhi]

End Note:
  1. Article 7.2 of AoS reads: “The period mentioned in paragraph 1 may be extended provided that the competent authorities of the importing Member have determined, in conformity with the procedures set out in Articles 2, 3, 4 and 5, that the safeguard measure continues to be necessary to prevent or remedy serious injury and that there is evidence that the industry is adjusting, and provided that the pertinent provisions of Articles 8 and 12 are observed.”
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