The defining feature of any trade remedial investigation is the product under consideration (‘PUC’). The PUC is not just the starting point of a trade remedial investigation but also the heart of it. In fact, when an application for initiation of an original investigation or even a review investigation is to be filed, the first aspect that needs to be clarified to the investigating authority is the scope of PUC. Therefore, the definition of PUC is of extreme importance.
Where an investigation is initiated based on a petition filed by the domestic industry, the investigation authority defines the scope of the PUC in the initiation notification primarily based on the definition given in the petition. To avoid any ambiguities in identifying import/export transactions concerning the PUC that may arise due to the tariff codes, primacy is given to the description of the PUC given in the initiation notification.
However, sometimes, it may so happen that the PUC is such that there are many types and grades of the PUC in question which are imported vis-à-vis the types and grades produced by the domestic industry. The domestic industry may not be producing all types and grades of the PUC, particularly if the domestic industry is a recent entrant in the market. Therefore, it becomes necessary for the other interested parties to assist the investigating authority in clarifying the scope of the PUC and identifying product exclusions. This article is intended to discuss certain general aspects of the practice of investigating authorities in defining the scope of the PUC and identifying the product exclusions.
General basis for requesting product exclusions from PUC
In order to ascertain the scope of the PUC and identify the product exclusions, certain criteria have to be kept in mind. Firstly, the product produced by the domestic industry does not have to be identical to the subject goods under import, but only ‘like article’ to the subject goods. Though there are no criteria either in the Customs Tariff Act, 1975 or the AD/CVD rules made thereinunder for establishing likeness, some of the criteria recognized under WTO jurisprudence for establishing likeness are similarity of product characteristics, user/consumer preferences or choices; tariff classification; commercial and technical inter-changeability of the products and its applications.
Secondly, the examination of the scope of the PUC and the product exclusions/inclusions is always made in relation to the period of investigation (‘POI’) defined by the Authority in the subject investigation. In this regard, it needs to be ascertained whether the domestic industry produced and sold the particular product in the POI defined for the particular investigation.
Thirdly, it needs to be ascertained whether the domestic industry produced the particular product in commercial quantities. Therefore, even if the domestic industry had installed capacity for producing a particular product, if that product was not produced in commercial quantities during the POI, such product can be excluded from the scope of the PUC considering the user industry’s interests.
It is important to ascertain whether the like article was produced and sold by the domestic industry in commercial quantities to demonstrate that injury to the domestic industry has been caused by unfair competition between such imported product and the like article.
It is also important to note that the need to prove commercial production and sale of a product for which exclusion has been requested are relevant only where the domestic industry has made an allegation of material injury or threat of material injury due to the subject imports. These conditions are not required to be proven where the domestic industry has made an allegation of material retardation due to the subject imports.
Other considerations for product exclusions
One of the grievances often made by the user/importers of a PUC against the inclusion of particular product(s) from the scope of the PUC is that such product(s) manufactured by the domestic industry is of inferior quality. However, past experience shows that the investigating authority has generally not entertained such requests for exclusion since quality is a subjective criterion that cannot be used to distinguish a like article from the PUC.
Sometimes even if the domestic industry has produced and sold the like article during the POI, it needs to be examined whether the domestic industry is producing the same in sufficient quantities to cater to the domestic demand. Such aspect was examined in the recent anti-dumping investigation on imports of Newsprint from Australia, Canada, EU, Hong Kong, Russia, Singapore and the UAE (Final Findings dated 19 January 2021), where the user industry vehemently argued for the exclusion of a particular grade of newsprint (viz. 42 gsm) from the scope of the PUC on the ground that the domestic industry did not produce this product.
Though the Designated Authority (‘Authority’) did not initially exclude this grade from the scope of the PUC since the domestic industry had produced sufficient evidence of production and sale of the same during the POI, the Authority noted that the domestic supply of this grade was not sufficient to match the domestic demand.
On this basis, the Authority cited user interest and excluded this product from the scope of its recommendation for the levy of anti-dumping duty. Thus, while the Authority did not initially exclude this product from the scope of the PUC or for the purposes of determination of dumping margin, injury margin, and injury analysis, the Authority excluded this grade of the PUC from the scope of levy of anti-dumping duty as part of its final recommendation.
Role of importer/user in influencing product exclusions
Trade remedial investigations usually pit importers/users of the PUC against the domestic producers of the like article. Though importers/users do not have any role in determining the margin of dumping/ subsidization or injury that the investigation authority ascertains, the importers/users can play an important role in assisting the investigating authority to define the scope of the PUC. Submissions made by the importers/users are vital in assisting the Authority in determining whether or not to exclude a particular product from the scope of the PUC.
Sometimes it may so happen that a particular product may not have been produced by the domestic industry during the POI of a particular investigation. However, unless the domestic industry itself admits that it is not producing the particular product, or a request for exclusion is made by an interested party during the investigation, the Authority may not suo moto exclude that product from the scope of the PUC. Therefore, the participation of importers/users in an investigation is vital when requests for particular product exclusion is made.
Most often, importers/users usually request the exclusion of a particular product(s) from the scope of the PUC for various reasons. The most common reason cited by importers/users for requesting product exclusion is the absence of production and/or sale of the particular grade of PUC by the domestic industry during the POI. In this regard, importers/users may also need to prove that the PUC produced by the domestic industry is not like the imported product.
In order to substantiate the request for a product exclusion, importers/users may be required to provide empirical evidence of non-production or non-sale of such product by way of rejection/refusal to supply emails/letters issued on behalf of the domestic industry. They would also need to substantiate the absence of likeness by way of product brochures, evidence of usage, etc. Based on the requests made for exclusions, the Authority is also required to verify such claims by asking the domestic industry to show the evidence of production and sale of claimed grades in commercial quantities.
Importers/users also frequently cite quality as an issue when requesting product exclusions. However, since quality is a very subjective criterion, the investigating authority usually does not consider quality as a parameter for determining product exclusions.
The process of defining the scope of the PUC and identifying product exclusions is an important exercise in any trade remedial investigation, particularly where there is a universe of the types and grades of the PUC that are imported and produced domestically. This exercise is important in order to ensure that products not commercially produced and sold by the domestic industry during the POI are not included within the scope of the PUC.
This is also important since the scope of the PUC is usually not revised during review investigations, unless it is a mid-term review initiated specifically to determine a product exclusion. In absence of such valid product exclusions, the importers/users may have to pay anti-dumping duty/countervailing duty on such products for the next five years. This would provide the domestic industry protection more than that is required to be provided under the scheme of the trade remedial framework.
Therefore, where products of different types and grades can be produced, importers/users of the PUC must pay attention to the description of the scope of the PUC and make timely submissions with necessary evidence to demonstrate that the domestic industry is not producing a particular type or grade of a PUC.
[The authors are Joint Partner and Principal Associate, respectively, in WTO and International Trade practice team at Lakshmikumaran & Sridharan Attorneys, New Delhi]
 In case of anti-dumping investigations, the participation of related importers is important for completing the value chain when determining the dumping margin.