Circumvention of anti-dumping duty is one of the foremost challenges for investigating authorities. In spite of the absence of normative provisions concerning circumvention in the WTO’s Anti-Dumping Agreement, Member nations of the WTO have developed their own frameworks for dealing with anti-circumvention.
In India, even though the provisions concerning anti-circumvention have been in place since 2011, there have been a very limited number of anti-circumvention investigations. As a result, the jurisprudence and the Designated Authority’s practice concerning anti-circumvention investigations is still developing. This article discusses the Indian Authority’s practice and jurisprudence concerning various aspects of an anti-circumvention investigations, particularly the requirement for determination of material injury.
In an investigation of circumvention under sub-rule (3) of Rule 25, the investigating authority examines whether there has been a change in trade practice, pattern of trade or channel of sales by the notified exporters/producers. This examination is done by analyzing whether there is (a) an absence of a justification for such a change, economic or otherwise, other than imposition of anti-dumping duty; (b) evidence that the remedial effects of the anti-dumping duty are undermined in terms of the price and the quantity of the like articles. However, the crucial issue is whether an analysis of "undermining remedial effects" requires the Authority to conduct a detailed examination of material injury to the domestic industry, as is done in an original investigation. Even though the relevant explanation to sub-rule (3) does not stipulate such a requirement, the Indian Authority’s practice in its anti-circumvention investigations on this aspect has been inconsistent.
On 30th July 2018, the Designated Authority notified the final findings in an investigation into alleged circumvention of anti-dumping duty on imports of Glass Fibre from China PR by imports of Chopped Strand Mats ("CSM"), one of the types of Glass Fibre (the product subject to anti-dumping duty). The investigation was initiated subsequent to the domestic industry’s complaint that M/s Asia Composite Materials (Thailand) Co. Ltd. ("ACM Thailand"), was importing Assembled Glass Roving ("AR", also a type of glass fibre) from China PR into Thailand, converting it into CSM, and thereafter exporting it to India. The domestic industry contended that CSM was being imported into India from Thailand to circumvent the anti-dumping duty on imports of Glass Fibre from China PR, that was notified in the original investigation.
In the course of the investigation, it was determined that ACM Thailand was a step-down subsidiary of Sichuan Weibo New Material Group Co. Ltd. (China), which was a non-cooperating entity during the original investigation and was thus assigned a residual duty rate of 47%. The Authority determined that the manufacturing setup in Thailand was a continuation of Sichuan Weibo’s production line, where AR manufactured by it was simply sent to its affiliate company in Thailand for final conversion to CSM.
Against this background, the Authority examined whether there was a change in trade pattern and undermining of remedial effects in terms of sub-rule (3) of Rule 25. The Authority’s analysis regarding the same are discussed below.
Change in pattern of trade
In this investigation, the Authority noted that after imposition of the anti-dumping duty, the volume of AR imported from China PR into Thailand increased. At the same time, the volume of CSM exported by ACM to India from Thailand increased. The Authority further noted that in the injury investigation period, there was a steady decline in the market share of CSM imported from China PR into India, while that of CSM imported from Thailand into India increased in the same period. The Authority thus came to the inevitable conclusion that there was a very clear and distinct change in the pattern of trade amongst India, China PR and Thailand.
In the investigation, the Authority noted that it had been advertised on ACM Thailand’s website regarding its ability to provide 'good (export) service to customers world-over, particularly in areas where anti-dumping duty was imposed on CSM made in China'. The Authority took note of this statement as evidence, which was not rebutted by ACM Thailand.
Undermining remedial effects of anti-dumping duty
In order to determine whether the remedial effects of the subject measure were being undermined, the Authority first compared the landed value of CSM exports by ACM Thailand to India with the domestic industry’s selling prices of CSM. The Authority found that price undercutting was quite significant, being in the range of 20-30%.
The Authority also noted that 'preventing deterioration of the domestic industry’s market share' is an important objective of anti-dumping duty and therefore considered it important in a determination of "undermining remedial effects". In its examination, the Authority found that while the market shares of both the domestic industry and imports from China PR had decreased, that of the exports from Thailand had increased. The Authority thus concluded that the remedial effects of the original anti-dumping duty were being undermined in terms of quantity as well.
Analysis of material injury to the domestic industry
In the course of the investigation, ACM Thailand submitted that a determination of "undermining remedial effects" required a detailed analysis of material injury under Annexure II to the AD Rules. ACM Thailand seemed to suggest that an examination of the domestic industry’s economic parameters such as capacity, capacity utilization, profits, sales, etc. was required in an anti-circumvention investigation. In support of its submissions, ACM Thailand relied upon the final findings in Indolinone from China PR where the Authority examined injury to the domestic industry as per Rule 11 and Annexure II by evaluating these factors. The Authority’s analysis seems to have been based on Rule 6 (1) (iv) which requires summarization of factors of alleged injury, and Rule 26 (5), which stipulates that provisions regarding evidence and procedure under Rule 6 would apply mutatis mutandis to anti-circumvention investigations.
However, in the subsequent anti-circumvention investigation on Cold-Rolled Stainless Steel from China PR, Korea, European Union, South Africa, Taiwan, Thailand and USA, the Authority adopted a contrary approach. In this investigation, the Authority stated that the AD Rules do not have explicit provisions of either Rule 11 or Annexure II for anti-circumvention investigation. The Authority limited its examination of "undermining remedial effects" by examining only price effect and volume effect. Even though the Authority’s practice in Cold-Rolled Stainless Steel seems consistent with the provisions of AD Rules, the result was that the practice on examining "undermining remedial effects" had become inconsistent and conflicting.
This ambiguity has however been resolved in the present investigation where the Authority has expressed the view that, in an anti-circumvention investigation, the AD Rules require only a determination of whether the remedial effects are being undermined in terms of price effect and volume effect; the AD Rules do not require a detailed material injury analysis to be conducted by the Authority in an anti-circumvention investigation. Therefore, no detailed examination of material injury was carried out in this investigation. The Authority has confirmed its interpretation and practice in Cold-Rolled Stainless Steel, and thus settled the ambiguities that existed earlier.
The AD Rules are clear that the Authority should determine "undermining remedial effects" by examining only price effect and volume effect in an anti-circumvention investigation. The inconsistency in practice regarding examination of material injury in the context of "undermining remedial effects" has now been clarified. The Authority’s findings are consistent with the approach of other investigating authorities in countries such as the European Union and Australia. This approach is also a logical one since the purpose of an anti-circumvention investigation is merely to determine whether the existing measures are being circumvented, thus frustrating the objectives of anti-dumping duty. It remains to be seen whether the Authority will maintain this consistent approach given that the Authority is conducting a number of anti-circumvention investigations at present.
[The author is Senior Associate, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi]