With the new BJP government expressing its commitment to protect domestic manufacturers from unfair global competition, all eyes are focussed on the the single-most import instrument for ensuring this: anti-dumping duties.Currently, steel is the most-talked-about commodity for anti-dumping duty, though investigations are far from over. Till late last year, industry protests were written off as bogeys born of a protectionist mindset. But on October 6, the newly-formed anti-dumping cell (the Designated Authority) of the Union commerce ministry finally consented to investigate a complaint jointly lodged by the Steel Authority of India Ltd (SAIL) and Essar Steel.
The Authority has also initiated investigations in respect of a dozen other cases. These include the import of polystyrene from South Korea, Japan, Taiwan and Malaysia, of vitamin-C from China and Japan, of metallurgical coke from China, of acrylic fibres from Spain, Portugal, Japan and Italy and of choloroquine phosphate and artho chloro butadienefrom China.
The Authority is also reviewing three cases of import from China, including potassium permanganate and theophylline caffeine. Investigations in respect of these had been initiated in March 1997 and January. In respect of five cases, the Authority has already recommended provisional duties and investigations are in progress.
The Authority has recommended provisional anti-dumping duties on newsprint ranging from Rs 2,513 to Rs 6,250 a tonne on imports from the US and Rs 3,191 on those from Russia. In respect of imports from Canada, the duties range from Rs 3,089 a tonne to Rs 5,160 a tonne. As for Vitamin-C, it has suggested a provisional anti-dumping duty of Rs 62 per kg in the case of China and Rs 28 per kg in the case of imports from Japan.
Among the investigations in progress, the most important is certainly steel. A couple of years ago, the Union steel ministry had dismissed a petition by SAIL alleging dumping of finished steel from the CIS countries. The single largest steel producer athome had not been able to substantiate its claim with data.
This time the steelmakers' protest has the support of the steel ministry, which is determined not to leave any stone unturned in its bid to rejuvenate a flagging industry. Essar Steel and SAIL have alleged that Russia, Ukraine and Kazakhstan have been dumping hot rolled (HR) coils, HR sheets, plates and strips since the 1996-97 fiscal. That year tube manufacturers and cold rolled (CR) steel producers imported 0.64 million tonnes of hot rolled coils, a fifth of which came from the CIS countries. The home industry produced roughly five million tonnes of HR coils.
Essar Steel and SAIL, along with Tata Steel, are the key producers of hot rolled coils, but the petition was also supported by Lloyds Steel Industries. Tata Steel (Tisco) does not really make the grade of HR coils that the CIS countries are shipping into India, but chose to make "sympathetic noises," perhaps as a demonstration of industry solidarity.
The petition is still underinvestigation, and industry sources say this is the difference between the way anti-dumping measures are decided at home and in the developed West. They add that time is only one of the factors that goes against the home industry. The onus of having to prove that overseas producers were shipping in steel at "unfair prices," made the battle tough for them too.
Within the European Union, as in other parts of the West, the onus of proving dumping lies with the exporter, or the accused. At home, the onus of proving the unfair trade practice lies with those who accuse. In other words, industries hurt by the dumping of cheap products have to prove that overseas manufacturers were exporting at a price that was lower than their domestic price.
This definition of a "domestic price," has also become a bone of contention among the "designated" government authorities that are investigating dumping. Domestic price is usually considered the cost of production plus a profit margin. The margin is known to vary from fiveper cent to 45 per cent. Steel producers at home would like their exports to be assessed in terms of the "market price" at home rather than the domestic price. The bland market for steel and the resulting slide in prices obviously does not leave much room for a realistic profit margin.
At the moment the European Union, which is the destination of most of the country's trade, is investigating eight petitions alleging dumping by manufacturers here. India is investigating five complaints of dumping by manufacturers in the EU.
Steelmakers at home face only two investigations of dumping, one from Canada and one within the EU. Both the complaints are against cheap exports of stainless steel and bright bars from India. The joint petition by SAIL and Essar Steel is the solitary complaint against dumping of steel, out of the 80 dumping complaints being investigated by the Union commerce ministry.
The Steel Authority of India has also petitioned for a "safeguard duty" on hot-rolled coils in a bid to pre-emptcheap imports from south-east Asia. A massive overcapacity in flat steels in Asia, particularly in South Korea and other countries in which depreciating currencies provide a double incentive for exports, have swamped the home market with inexpensive steels.
The Cold Rolled Steel Manufacturers' Association (Corsma) has sought a price cap on imports of both hot rolled coils and cold rolled products.
The Corsma plea is for a ban on imports beyond a price band. The application to the commerce ministry has been provoked by a steady increase in the imports of cold rolled "seconds."
Cold rolled "seconds" come in at prices that are almost 50 per cent below that of prime grades and the percentage of "seconds" in cold rolled steel imports have gone up by at least 10 per cent in the last five years. Seconds comprised 23 per cent of the 1.3 lakh tonnes of cold rolled products imported in 1993-94, but last year "seconds" made up 33 per cent of the 3.2 lakh tonnes of cold rolled steel imports.
The Corsma plea isnot for an anti-dumping duty, however. It is for an import ban beyond a particular price. The two SAIL applications are pleas for a penalising duty on cheap imports, of which one is likely to materialise into, what will prove to be, the first anti-dumping measure taken on steel imports.
While the anti-dumping investigations in the European Union seem to lack transparency, the private corporate sector in India is still in the dark about the level of information required to be forwarded to the Designated Authority set up in the commerce ministry to probe dumping cases.
The determination of injury resulting from dumping by the EU is different from that followed by the US, both of which are India's major trading partners. India, the US and EU are signatories to the 1994 Anti-Dumping Agreement under Article VI of Gatt. But Indian industry is not aware about the information/data that will be collected by the Designated Authority, on its own, during investigations.
Further, the affected industries find itdifficult to collect data, particularly relating to determination of normal value, one of the main factors that is taken into account by the Designated Authority to prima facie establish dumping.
In addition, their efforts to collect information/data from Indian diplomatic missions overseas have often proved futile. And the apex chambers such as the Confederation of Indian Industry (CII) and Ficci feel very strongly about the procedures and the pace of investigations by the Designated Authority.
The domestic industry, maintains Ficci, considers the process of investigations too "lengthy" and that there is an "inordinate" delay in arriving at preliminary/final findings. The general view is that the entire set of anti-dumping laws and procedures needs to be "overhauled".
CII strongly recommends the strengthening of the anti-dumping cell (Designated Authority office), timely imposition of anti-dumping measures and simplified rules to expedite cases. It has also called for a proactive anti-dumping cellwhich is vigilant to dumping activities and takes action without waiting for formal complaints. The government should help in giving data/information to the affected parties.
Anti-dumping investigations lack transparency primarily because Indian companies affected by these investigations are not given an opportunity to present their viewpoints, unlike the practice in India.
And Indian companies -- mostly in the medium and small scale sector -- do not have the wherewithal to defend themselves against anti-dumping investigations due to what they consider exorbitant legal costs. These companies also have a weak presence in EU countries and do not have effective representation to counter the charges.
An "advance warning system", suggested by the additional secretary in the commerce ministry dealing with EU matters, Nripendra Misra, will to some extent help affected Indian companies.
The suggestion, thrown up at a recent seminar in the capital, assumes added significance as the mere fact of initiation ofdumping investigations against Indian goods tends to affect the image of Indian merchandise in the EU markets. The impact could even be felt in other countries, specially when Indian exporters were trying to break into new markets.
Finding that the legal costs involved are rather "prohibitive", some companies even prefer to withdraw altogether from markets where their products had otherwise been well received, affecting their overall turnover.
In India, anti-dumping duty is levied only after proper investigations to establish prima facie dumping of goods, injury to the domestic industry and a casual link between dumping and injury. A product is to be considered as being dumped if it is sold at the export market at a price lower than the normal value. Normal value is the price at which goods under complaint are sold in the ordinary course of trade in the domestic market of the country of export.
Investigations are launched after receiving representations from or on behalf of the domestic industry. Theconditions are two-fold: First, the domestic prducers expressly supporting the application should account for not less than 25 per cent of the total producers of like products by the domestic industry. Second, domestic producers expressly supporting the application should account for more than 50 per cent of the total production of like products by those expressly supporting and opposing the application.
Once it is decided by the Desginated Authority that there is prima facie evidence to initiate investigations, a public notice is issued notifying such a decision. A copy of the notice is also sent to known exporters and the governments of the exporting countries for giving them an opportuntiy of being heard.
Thereafter, the Authority proceeds to record prelimiary findings regarding the export price, normal value and margin of dumping. It also records further findings regarding injury to the domestic industry. The Authority also issues a public notice recording its preliminary findings.
Within one yearfrom the date of initiation of an investigation, the Authority determines whether or not the article under investigation is being dumped and submits its report to the government on its final findings. In appropriate cases, the Authority makes preliminary findings and recommends provisional duty not exceeding the margin of dumping. Thereafter, it continues with the investigations for final findings and determination of final duty.
Currently, the Authority is probing alleged dumping of hot rolled coils by CIS countries. Developed countries have also initiated anti-dumping investigations against some Indian products and imposed anti-dumping duties on others.
After withdrawing provisional anti-dumping duties on cotton grey fabrics imported from India on two previous occasions, the EU has now decided to impose levies ranging from 16 to 18 per cent. A number of other anti-dumping investigations are also under way on Indian goods. These include synthetic fibre ropes, potassium permanganate, antibiotics, stainlessteel fasteners, and steel bright bars.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
