30 October 2013

Safeguard measures - Extension post-expiry, not correct

by Atul Gupta

The framework for duration and review of safeguard measures is provided under Article 7 of the Agreement on Safeguards (AoSG). In this regard Article 7.2 and Article 7.5 of the AOSG are relevant. While Article 7.2 provides for extension of the measure, Article 7.5 provides for levying duty "once again" i.e. a fresh levy after the expiry of time for which the previous safeguard measure was applied. The relevant provisions are extracted below:        

“2. 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.”   

“5. No safeguard measure shall be applied again to the import of a product which has been subject to such a measure, taken after the date of entry into force of the WTO Agreement, for a period of time equal to that during which such measure had been previously applied, provided that the period of non‑application is at least two years.”        

Import of Article 7.2 is that the period of original safeguard measure may be extended only after the competent authority of the importing member has determined need for continuation of the measure after following the procedures set out in Articles 2, 3, 4 and 5 of the AoSG. Initiation of review is at no stretch equated with the extension of measure.        

As per the Oxford Dictionary of English, 3rd Edition (2010), the term "continues" means:        

"continue: verb (continues, continuing, continued) - persist in an activity or process; remain in existence or operation; remain in a specified position or state; recommence or resume after interruption..."          

The term "continues" in this Article 7.2 has to be given a contextual interpretation with respect to other provisions of Article 7 of the AoSG. Dictionary meaning of the term "continues" provides two different meanings. One meaning is "remain in existence or operation" while another meaning is "recommence or resume after interruption". The former meaning can only be adopted for interpreting Article 7.2 because if the latter meaning is adopted for a reading of this Article, then the prohibition placed in Article 7.5 will become meaningless.

Article 7.5 prohibits resumption of application of a safeguard measure unless there is a gap of a certain time period (known as the "cooling off period") between the expiry of the previous period and resumption of the application. Any interpretation, which suggests that a gap between the expiry of the period for which the measure was previously applied and its resumption is permissible, is inconsistent with Article 7.5 of the AoSG because such an interpretation will allow importing Member to bypass the prohibition contained in Article 7.5.

The initiation of review before or after the expiry of the period for which a safeguard measure was previously in force is inconsequential, unless the determination for an extension of period of such measure itself has been made before such previous period is over and the measure is actually extended before its expiry. It is therefore incorrect to state that if an investigation is initiated before the expiry, then a determination for the continuation of duty may be made before or after expiry.          

If the above proposition was true, such an interpretation will be correct even for the situation where the Authority for Safeguards initiates an investigation at any time, say in 1 or 2 years, where the expired measure was in force for a total period of four years in a developed country, after expiry of the period for which the previous safeguard measure was in force and further determine with regard to the continuation of the duty after some time from the date of initiation. However, such a situation is clearly covered and prohibited by the provisions of Article 7.5 of AoSG.              

It is a well settled legal proposition that an interpretation shall be made in a manner which gives meaning to each provision of the Agreement and does not result in an absurd situation. An interpretation which would render Article 7.5 redundant cannot be adopted.   Therefore, Article 7.2 applies when a safeguard measure is to continue without a gap and Article 7.5 applies when a safeguard measure is to be applied "once again" or "applied afresh" after a gap, subject to a minimum gap of two years.


Indian practice and its consistency with AoSG  

In the past, the DG Safeguards prudently adopted the practice consistent with the above interpretation of AoSG. However, of late the DG Safeguards has been deviating from its well-established past practice; perhaps with the rationale that India has not enacted a legal provision corresponding to Article 7.5 of AoSG. The DG Safeguards initiates a review at the fag-end of the investigation, the DG Safeguards may take some time to complete the review (so as to fulfill the procedure in Articles 2, 3, 4 and 5 of AoSG) and as a result, the measure will recommence or be applied again after a gap. Here it is pertinent to note that neither the legal provision relating to safeguard duty nor the AoSG provide for retrospective levy of duty.            

Retrospective levy of duty is possible only if such power is expressly provided in the statute. Therefore, the decision to levy safeguard duty as a result of a review cannot ‘relate back’ to the date on which the duty previously in force expired.  The higher judiciary while interpreting  pari materia legal provisions held that once the decision to extend the time has not been taken before its expiry, continuity is broken and a subsequent decision is illegal. For a valid decision, not only a request for extension of time has to be made before the expiry of the period but the order to extend also has to be passed within such time [ see end note 1].

In conclusion, it may be suggested that India needs to review its practice regarding review of safeguard measures in order to be fully compliant with its obligations under the WTO covered agreements, in particular the AoSG.

[ The author is a Principal Associate, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi ]  

End Note:

1. See Tarsem Kumar v. Collector of Central Excise, Chandigarh, AIR 1972 P&H 444; Ambali Karthikeyan v. Collector of  Customs and Central Excise, 2000 (125) ELT 50; Babu Verghese & Ors. v. Bar Council of Kerala & Ors., AIR 1999 SC 1281.  



Browse articles