In the summer of 2017, the Supreme Court delivered a judgment that dealt with sunset reviews of anti-dumping duty. The case was Union of India v. Kumho Petrochemicals Company Ltd. (“Kumho”). To give some background, sunset review of an anti-dumping duty is conducted at the end of five years of an existing anti-dumping duty in terms of Section 9A of the Customs Tariff Act, 1975 read with Rule 23(1B) of the Customs Tariff (Identification, Assessment and Collection of Anti-dumping duty on Dumped Articles and for Determination of Injury) Rules, 1995 (“AD Rules”).
In a nutshell, the above provisions mandate that the Directorate General of Anti-dumping & Allied Duties (“DGAD”) shall initiate a sunset review suo motu or upon receiving a duly substantiated petition from the domestic industry, before expiry of the five-year duty period, to decide whether in the absence of anti-dumping duty, dumping of an article and material injury to the domestic industry manufacturing the like article are likely to continue or recur. The provisions also allow anti-dumping duty to continue for a period not exceeding one year during which the sunset review is underway. Till here, all seems perfect with the scheme of things for sunset reviews.
However, Kumho presented a unique problem for the Apex Court. Apparently, the Designated Authority in practice had been initiating reviews for many products on the very last day of their respective five-year anti-dumping duty levy. Thereafter, Ministry of Finance would issue an amendment to the customs notification of the original five-year duty, extending the levy for a full one year during the sunset review phase. On many occasions, it would result in a time-gap between the last day of the five-year levy and the extension notification of the duty. In the facts of Kumho, this gap was more than 20 days. Among other questions, the Supreme Court had to answer whether a Customs notification levying anti-dumping duty for five years could be amended to extend the duty for a further period, when the original five-year notification had already lapsed. To illustrate this question further, consider the following scenario:
1. Anti-dumping duty on an article commences on 1 January 2009 for a five-year period.
2. This duty shall lapse on 31 December 2014 i.e. at the end of five years.
3. DGAD initiates a sunset review on 31 December 2014 to decide whether the existing duty should continue for another five years.
4. A sunset review should ideally complete in twelve months as per the AD Rules.
5. The Ministry of Finance extends the duty for complete one year to cover the sunset review phase by amending notification dated 1 January 2009, but such extension notification is issued in the Official Gazette only on 20 January 2015. However, the original anti-dumping duty has already lapsed on 31 December 2014.
The Supreme Court in Kumho dealt with two questions among others:
a. First, whether extension of anti-dumping duty is automatic during the sunset review phase when such review is initiated before expiry of the five-year levy.
b. Second, whether the Ministry of Finance is required to issue the extension notification before expiry of the original five-year period.
The Supreme Court answered the above questions as follows:
1. If a sunset review review is initiated before expiry of five-year levy, extension of anti-dumping duty during the sunset review phase is not automatic.
2. The Ministry of Finance is required to issue the extension notification before expiry of the five-year levy. The duty that has already lapsed cannot be extended by another notification at a later date. Therefore, in the above illustration, the extension notification dated 20 January 2015 is illegal.
However, this decision raised several questions that remained unanswered until recently, viz. i) is the domestic industry required to be given protection for one full year during the sunset review phase?; ii) if a sunset review which is initiated on the last date of original anti-dumping duty is not completed in one year, the review phase gets extended under the AD Rules, but the extension of anti-dumping duty shall not exceed one year under the AD Rules. In such a scenario, should the domestic industry be left unprotected for the rest of the sunset review phase?; iii) why can’t sunset reviews be initiated much before the expiry of the five-year levy so that they could be completed well within time, and definitely within the extended period of anti-dumping duty?
The DGAD has tried to address these questions in the Trade Notice No. 2/2017 issued on 12 December 2017 (“Trade Notice”). Before delving into the substance of the Trade Notice, let us look at the object and purpose clauses of the Trade Notice, which are extracted below:
2. Vide Trade Notice No. 1/2008 dated 10th March, 2008 and Trade Notice No. 2/2011 dated 6th June, 2011, Directorate General of Anti-Dumping & Allied Duties (DGAD) had prescribed procedure and timelines for initiating a Sunset Review investigations (SSR) under the aforesaid Rules. However, it has been observed that while sometime these timelines are not adhered to by the Domestic industry or else on account of petition being deficient requiring additional data/clarification, the decision on initiation of the requested SSR is delayed. The delay in initiation adversely impacts timely completion of SSR and thereby invariably requiring extension of existing Anti-Dumping Duties on the product under consideration for complete one year beyond five years as permitted under Rules.
3. Keeping in view the above situations and to ensure timely examination of SSR, the Authority hereby prescribes…
Clearly, the DGAD acknowledges here that the delay in initiation of sunset reviews results in invariably requiring extension of anti-dumping duty for complete one year during the sunset review phase. This is a bold statement from the DGAD. Implicit here is the appreciation that if sunset reviews initiate on time, it may not be required to extend the duty for a complete one year to protect the domestic industry. To implement this, the DGAD has laid down the following key procedures in the Trade Notice for initiating a sunset review:
1. The domestic industry should file the sunset review petition 270 days before the expiry of anti-dumping duty.
2. The domestic industry can also file the sunset review petition 240 days before the expiry of anti-dumping duty on payment of late fee.
3. The DGAD shall not entertain sunset review petitions filed with less than 240 days remaining for the anti-dumping duty to expire.
4. The DGAD shall examine a petition within 15 working days and highlight deficiencies in the petition to the petitioner. The petitioner shall address such deficiencies within 5 working days from the date of issue of the deficiency letter from the DGAD.
5. On receipt of the petition, the DGAD shall issue an order in almost all cases within 45 days regarding initiation of the sunset review or rejection of the petition. In unavoidable circumstances due to administrative exigencies or policy/technical scrutiny, DGAD may not follow the above timeline.
6. The DGAD may also provide a personal hearing to the petitioner at a stipulated date and time before deciding whether to initiate the sunset review.
7. Final findings shall be issued at least 45 days before expiry of the existing anti-dumping duty.
If the procedures prescribed in the Trade Notice are fully implemented, it would ensure that:
1. The petitioner gets an opportunity to justify the claims in the petition in a personal hearing. This is the first time the DGAD has formally provided for a personal hearing during pre-initiation stage.
2. A petitioner can expect a written order from the DGAD detailing reasons for rejection of the petition in a defined timeline of 45 days from receipt of the petition by the DGAD. This again is a first for the DGAD in prescribing a timeline for issuing rejection orders. This will ensure predictability and consistency in the procedure.
3. Sunset reviews would be initiated at least six months prior to expiry of existing anti-dumping duty.
4. There is no time-gap between expiry of existing anti-dumping and extension of this duty for a further period during the review phase.
5. Final findings are issued well within time and in any case, at least 45 days before expiry of the existing anti-dumping duty. This again is a first for the DGAD to prescribe a timeline for issuing final recommendations in sunset reviews.
6. The anti-dumping duty extended upon completion of a sunset review gets implemented without much delay.
The industry will welcome the above changes and additions to the sunset review procedures. It is hoped that the DGAD issues a similar Trade Notice regarding fresh anti-dumping investigations as well.
However, the DGAD has also adopted a cautious approach in restricting application of the above procedures for anti-dumping measures expiring till 31 December 2018. As per the Trade Notice, the following timelines shall apply:
|S.No.||Expiry date of anti-dumping duty||Last date to file sunset review petition|
|1.||Till 31 March 2018||31 December 2017|
|2.||1 April 2018 – 30 September 2018||31 January 2018|
|3.||1 October 2018 – 31 December 2018||31 March 2018|
The DGAD has also introduced a few bones of contention in the Trade Notice. First is the ‘late fee’ on sunset review petitions that are filed 240 days prior to the expiry of existing anti-dumping duty. It would be a first for the DGAD to levy late fee on receipt of sunset review petitions. At present, the procedures do not require parties to provide any fee to DGAD at any stage of an investigation. The second peculiarity is the introduction of ‘application fee’ in paragraph 7 of the Trade Notice. The aforesaid application fee will be levied as notified by the Designated Authority. It is not clear whether the ‘application fee’ is same as ‘late fee’ or if it is a separate fee on sunset review petitions. The legality of such fees is also questionable. Third, courts may also question DGAD’s power to refuse to entertain sunset review petitions that are filed with less than 240 days from the date of expiry of existing anti-dumping duty on an article.
While the Trade Notice is a bold move to set straight the procedures regarding sunset reviews, it leaves much room for legal challenge. New Year 2018 will tell whether the DGAD’s Trade Notice succeeds in its well-intentioned endeavour to address the gaps in sunset reviews or it faces legal challenge.
[The author is a Principal Associate, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi]