Dumping

Dumping

Subject :Economy

Context:

The commerce ministry has terminated an anti-dumping investigation into import of solar cells from China, Thailand and Vietnam following a request from the Indian Solar Manufacturers Association(ISMA).

Concept:

Dumping and Anti-dumping measures:

• In international trade parlance, dumping happens when a country or a firm exports an item at a price lower than the price of that product in its domestic market.
• Dumping impacts the price of that product in the importing country, hitting the margins and profits of manufacturing firms.
• Dumping is legal: Under World Trade Organization (WTO) rules, dumping is illegal only if the foreign country can reliably show the negative effects the exporting firm has caused its domestic producers.
• Anti-dumping duties are imposed when it is conclusively proved that a particular item is being exported at a price lower than what is prevailing in the domestic market of the exporter and is leading to disruption in the domestic market, injuring the local producers
  • An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
  • The duty is imposed only after a thorough investigation by a quasi-judicial body–the Directorate General of Trade Remedies-in India. It is aimed at ensuring fair trade practices and creating a level-playing field for domestic producers.
    • Post initiation of the probe, the government can levy customs duties..
• The DGTR recommends the duty, and the Department of Revenue takes the final decision to impose it.
• The imposition of anti-dumping duty is permissible under the World Trade Organization (WTO) regime.
• Anti-Dumping Duty is applicable only for a selective period. If dumping still continues, the industry can apply for a sunset review at the end of 5 years.
  • Globally, once a sunset review is applied for, the duty is extended for 1 year pending investigation.
  • In India, industries have been asked to apply for sunset review 9 months before the expiry of the duty.
• Anti-dumping rules, 1995 provide for termination of a probe in certain situations which include withdrawal of application by the affected domestic industry at whose instance the investigation was initiated.
• Different from Countervailing Duties – ADD is a customs duty on imports providing a protection against the dumping of goods at prices substantially lower than the normal value whereas countervailing duty is a customs duty on goods that have received government subsidies in the originating or exporting country.

WTO’s Provisions Related to Anti-Dumping Duty:

• Validity: An anti-dumping duty is valid for a period of five years from the date of imposition unless revoked earlier.
• Sunset Review: It can be extended for a further period of five years through a sunset or expiry review investigation.
• A Sunset review/ expiry review is an evaluation of the need for the continued existence of a program or an agency. It allows for an assessment of the effectiveness and performance of the program or agency.
• Such a review can be initiated suo moto or on the basis of a duly substantiated request received from or on behalf of the domestic industry.

Directorate General of Trade Remedies, the apex national authority under the Ministry of Commerce and Industry administers all trade remedial measures.

• Trade remedial measures include anti-dumping, countervailing duties and safeguard measures.
• Its job is to provide trade defence support to the domestic industry.
• It provides safeguards to the exporters in dealing with increasing instances of trade remedy investigations instituted against them by other countries.