11 January 2016

Initiation of investigation: Issue of cumulation

by Atul Gupta

Article 5 of WTO:ADA provides for initiation and subsequent investigation. Clause (ii) of Article 5.2 provides that the application shall contain the information relating to the names of the country or countries of origin or export in question. Article 5.4 prohibits initiation of an Anti-dumping Duty investigation unless the Investigating Authority (“IA”) determines the eligibility of the applicant to file application by or on behalf of the Domestic Industry. The Designated Authority will also determine the “like article” to the alleged dumped goods. Those who produce like article will be the domestic producers for the investigation and those domestic producers will be considered for determining the domestic industry and the eligibility of the applicant. Unless such a determination is reached, though may be prima facie, the IA may not proceed to make a determination about the adequacy and accuracy of evidences regarding dumping, injury and causal link.

Therefore, it seems that the need for determination of the domestic industry comes at the stage of initiation of an investigation. At that stage, the eligibility of the applicant domestic producer to be considered as part of the domestic industry may be determined. A domestic producer may be disqualified to be considered as part of the domestic industry, if such domestic producer is related to the exporters or importers or is itself an importer of the allegedly dumped product. However, through the practice and interpretation of the Agreement, such domestic producer may not be disqualified to be part of the domestic industry on satisfaction of such conditions per se. But the IA will use its discretion on certain objective criteria such as (i) whether the behaviour of the domestic producer is like a trader; or (ii) whether the domestic producer is opposing the investigation to continue to secure benefit of dumping at the expense of other domestic producers; or (iii) the share in the volume of the alleged dumped imports made by such domestic producer, etc.

Only on determination of the constituents of the domestic industry, the IA may determine whether the alleged dumped imported article from a country caused any injury to the Domestic Industry.

At the stage of determination of injury from the alleged dumped imports, the IA may consider applicability of Article 3.3 of WTO:ADA which mandates fulfilment of certain conditions before the IA could cumulatively assess the effect of imports from countries which are simultaneously subject to Anti-dumping Duty investigation. Such conditions are that the IA determines that (a) the margin of dumping established in relation to imports from each country is more than de minimis  as defined in paragraph 8 of Article 5, and the volume of imports from each country is not negligible and (b) a cumulative assessment of the effects of the imports is appropriate in light of the conditions of competition between the imported products and the conditions of competition between the imported products and the like domestic product. It may also be noted that even in situations where such conditions are satisfied, it is not mandatory for the IA to cumulatively asses the effect of imports.

One of the conditions is determination of dumping margin for the country as a whole. It may be noted that the requirement to determine dumping margin for the purposes of Article 5.8 is restricted for each exporter. If de minimis dumping margin is found in respect of a particular exporter, then investigation shall be terminated qua that exporter. However, for the purposes of Article 3.3, the dumping margin for the country as a whole must be above the de minimis level. It is possible that dumping margin for an exporter may be below de minimis level, but the dumping margin for the country as a whole may be above it (though it may be doubted whether the undumped imports should be excluded for such determination of de minimis dumping margin for the country). In cases, where one or more exporters are found cooperating and the dumping margin is determined for all others on facts available, then the weighted average of such dumping margins of cooperating and non-cooperating exporters may not satisfy the requirement regarding dumping margin for the country as a whole. This is because of the reason that the Designated Authority in India calculates the dumping margin for the non-cooperating exporters based on the lowest export price of the cooperating exporter.

It may also be noted that the clause used in Article 3.3 “where imports of a product from more than one country are simultaneously subject to anti dumping investigations” indicates that the stage for decision to do cumulative assessment comes only when simultaneous investigations are underway, instead of at the time of initiation of the investigation. It also indicates that the IA may initiate more than one Anti-dumping investigation by a single Initiation Notice. However, it seems that it may not be possible to do cumulative assessment for investigations initiated with some gap.
Practically also the IAs make determination regarding satisfaction of conditions under Article 3.3 after the expiry of the period specified for receiving data from the exporters.

The issue may be examined from another angle with the help of an example. There are four domestic producers A, B, C and D of a product. If domestic producer A, B and C (except D) have technological limitation on production of the product, say in terms of width upto 100 units where the width has a significant importance in use of the product and determination of interchangeability of the product with width higher than 100 units. Alleged dumped Imports above the de minimis volume are taking place from countries X, Y and Z. One related exporter of D is situated in country X and is exporting significant alleged dumped quantity of the goods. If the domestic producers A, B and C only are considered to be forming part of Domestic Industry, then the product exceeding width 100 units may not be covered in the PUC. If the domestic producer D is included in the domestic industry, then complete product may be included in the investigation.

In such a case, IA may examine and determine the domestic industry based on the country to be subjected to investigation and accordingly after considering A, B and C as Domestic Industry may initiate investigation against country X. Thereafter, considering all the four as Domestic Industry, IA may initiate investigation against countries Y and Z also. However, at the time of arriving at the decision to cumulatively assess the effect of the imports from such countries which are simultaneously subjected to investigation, i.e., X, Y and Z, the IA is required to examine only conditions provided under Article 3.3. Further, on fulfilment of the condition of Article 3.3, the IA is not at liberty to again re-determine the scope of the Domestic Industry for achieving the goal of Article 3.3.

From the initiation notices issued by the Designated Authority in India, it does not appear that the Designated Authority makes determination of the conditions as required under Article 3.3 for cumulative assessment. Further, without examining the data received from the exporters, such determination is meaningless because only on receipt of the data from exporters a determination regarding condition (b) may be made. It seems that the investigations are conducted cumulatively ab initio without fulfilment of prior conditions or Article 3.3. The Designated Authority may determine this issue as and when the same turns up for its consideration in an investigation conducted by it.
[The author is a Joint Partner, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi]

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