Background
Final anti-dumping duty was imposed on cold rolled flat products of stainless steel of width between 600mm to 1250mm with certain exclusions (Product Under Consideration, hereinafter ‘PUC’) exported from China, Korea, EU, South Africa, Taiwan, Thailand and USA (hereinafter ‘subject countries’) in 2010 [see end note i], and continued after the sunset review final findings in 2015 [see end note ii] .
The Domestic Industry noticed a trend of shifting imports of PUC to imports of cold rolled flat products of stainless steel of width above 1250mm (Product Under Investigation, hereinafter ‘PUI’). Circumvention was alleged to be occurring in terms of the PUC being imported in altered, unfinished or incomplete form into India. Cold rolled flat products of stainless steel of width above 1250mm were being imported into India and thereafter were slit into flat sheets of width up to 1250mm. It was suspected that imports of PUI were undermining the remedial effects of the anti-dumping duty imposed on PUC.
The designated authority found substance in the allegations made by the petitioners and initiated an anti-circumvention investigation in 2016 [see end note iii], to examine the existence and effect of the alleged circumvention of the anti-dumping duty levied and to consider recommendation of extension of anti-dumping duty on imports of PUC to imports of PUI. Final findings of the abovementioned investigation were issued on 19th August 2017 [see end note iv].
Applicable Provisions
Section 9A of the Customs Tariff Act, 1975 and Rules 25-28 of Customs Tariff (Identification, Assessment and Collection of Antidumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (hereinafter the ADD rules) govern circumvention of anti-dumping duty in India.
The relevant parts of the Customs Tariff Act and the ADD Rules are reproduced below:
S.9A (1A), Customs Tariff Act, 1975
“Where the Central Government, on such inquiry as it may consider necessary, is of the opinion that circumvention of anti-dumping duty imposed under sub-section (1) has taken place, either by altering the description or name or composition of the article subject to such anti-dumping duty or by import of such article in an unassembled or disassembled form or by changing the country of its origin or export or in any other manner, whereby the anti-dumping duty so imposed is rendered ineffective, it may extend the anti-dumping duty to such article or an article originating in or exported from such country, as the case may be.”
ADD Rules:
“Rule 25 Circumvention of anti dumping duty. - (1) Where an article subject to anti dumping duty is imported into India from any country including the country of origin or country of export notified for the purposes of levy of anti dumping duty, in an unassembled, unfinished or incomplete form and is assembled, finished or completed in India or in such country, such assembly, finishing or completion shall be considered to circumvent the anti dumping duty in force if,-
(a) the operation started or increased after, or just prior to, the anti dumping investigations and the parts and components are imported from the country of origin or country of export notified for purposes of levy of anti-dumping duty; and
(b) the value consequent to assembly, finishing or completion operation is less than thirty-five percent of the cost of assembled, finished or complete article.
…
(3) Where an article subject to anti dumping duty is imported into India through exporters or producers or country not subject to anti dumping duty, such exports shall be considered to circumvent the anti dumping duty in force if the exporters or producers notified for the levy of anti-dumping duty change their trade practice, pattern of trade or channels of sales of the article in order to have their products exported to India through exporters or producers or country not subject to anti dumping duty.
Explanation.- For the purposes of this sub-rule, it shall be established that there has been a change in trade practice, pattern of trade or channels of sales if the following conditions are satisfied, namely:-
(a) absence of a justification, economic or otherwise, other than imposition of anti-dumping duty;
(b) evidence that the remedial effects of the anti-dumping duties are undermined in terms of the price and or the quality of like products.”
“Rule 26 Initiation of investigation to determine circumvention.- (1) Except as provided herein below, the designated authority may initiate an investigation to determine the existence and effect of any alleged circumvention of the anti dumping duty levied under section 9A of the Act , upon receipt of a written application by or on behalf of the domestic industry.”
Analysis
The designated authority examined the evidence of circumvention by referring to the trade pattern shift of PUC to PUI for the subject countries since 2008-2009 until the Period of Investigation (hereinafter ‘POI’). The POI was considered from 1st July 2014 to 30th September 2015 (15 months). More particularly, the authority examined whether there has been a change in pattern of trade and whether this change has stemmed from a practice, process or work for which there was insufficient due cause or economic justification other than the imposition of anti-dumping duty. The following observations were made:
· A change in the product mix of PUC and PUI from 2008-09 through POI: volume of imports of PUC from subject countries declined since the imposition of anti-dumping duty, with a simultaneous rise in the volume of imports in significant amounts of PUI from subject countries.
· A closer examination of the pattern of imports within the PUI revealed that majority of the imports were just above the threshold limit (1250mm) and only a small portion of imports were well above 1250mm.
· Such change in pattern of trade was not seen in imports from countries other than subject countries. The volume of imports of PUC remained more or less the same in POI, implying no change in consumption pattern so as to justify the change in import pattern from subject countries.
· The change in pattern of trade from PUC to PUI was not noticed in sales of exporters to countries other than India and in their domestic market.
· The quantum of value added after slitting PUI into PUC was not more than 5%, which is well within the threshold of 35% [as per Rule 25 (1)].
Based on the above observations, the designated authority found that there was change in pattern of trade which stemmed from a practice, process or work for which there was insufficient due cause or economic justification other than the imposition of anti-dumping duty.
After establishing the existence of circumvention, the designated authority moved on to examine its effect. The following observations were made in this regard:
· The landed value of imported PUC (with anti-dumping duty) was higher than that of the PUI (with no measure) from subject countries during POI.
· There was a price depressing effect on the net sales realisation of PUC of domestic industry, which undermined the remedial effect of the levied anti-dumping duty.
The designated authority considered the above effect to be undermining the previously levied anti-dumping duty.
Recommendations
On the basis of the abovementioned analysis and observations, the designated authority found that:
· the imports of PUI have increased post levy of anti-dumping duty;
· the value addition in converting PUI to PUC is less than the prescribed threshold in the Rules;
· the PUI has been exported at dumped prices during the POI; and
· the imports of PUI have undermined the existing AD measure on PUC.
Based on the above findings, it has been recommended that the existing anti-dumping duty imposed on PUC be extended to PUI from date of its notification by the Ministry of Finance. Such imposition would be co-terminus with the anti-dumping duty on PUC levied through Custom Notification No. 61/2015-Customs (ADD), dated 11th December 2015.
Balancing the interests of parties
It was also observed by the designated authority that not all PUI were converted into PUC products after importation into India. In this regard, the designated authority extended the imposition of anti-dumping duty to PUI in the following manner:
· The PUI which is imported by an importer for end use in the same form without slitting will not be liable for payment of the applicable anti-dumping duty.
· In case a PUI is slit into 2 or more PUI only i.e. sizes above 1250 mm, it will not be subjected to any anti-dumping duty (for example, a 2600mm piece slit into two 1300mm size pieces).
· If PUI is slit for a combination of PUI and PUC sizes, it will be liable for applicable AD Duty (for example a 1800 mm piece being slit into a 1400 mm and a 400 mm piece or a 2200 mm piece is slit into 1400 mm and 800 mm or a 1400 mm piece being slit into 600, 500 & 300 mm sizes).
· The importer will give a legally enforceable undertaking to the concerned Custom Authorities that the PUI being imported will be used without any slitting of PUI into PUC.
· The Ministry of Finance may put in place an appropriate monitoring mechanism to monitor the genuineness of the usage of the PUI so imported for categories not leviable with anti-dumping duty, based on the aforesaid undertaking.
Conclusion:
Therefore, the designated authority adopted a balanced approach in extending the anti-dumping duty levied on PUC to PUI, by not imposing anti-dumping duty in an unfair manner. In the absence of such a balance, there was risk of creation of a back-door entry for the domestic industry to broaden the scope of the original investigation, to include products that were originally excluded from the scope of imposition of anti-dumping duty.
[The author is an Associate, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi]