For context, it’s worth noting that the World Trade Organisation (WTO), which governs international trade rules, is currently experiencing a crisis—referred to as “arthritis” by economist Richard Baldwin. Its regulations are frequently ignored, yet it remains functional as it provides a crucial negotiation platform and a framework for regulating trade. One such framework is the Anti-Dumping provision established by the WTO.
The legal backbone for imposing ADD is outlined in Article VI of the GATT/WTO and the anti-dumping agreement stemming from it. There are three essential criteria for determining instances of dumping: the export price of a product must be lower than the price of that product in the exporting country; these exports must inflict material injury on the domestic industry of the importing country; and there must be a causal link between the dumping and the injury. It’s important to clarify that dumping does not equate to ‘cheap’ goods; rather, it signifies that the export price is below the ‘normal’ price of the goods.
These stringent standards are designed to prevent countries from misusing anti-dumping measures to obstruct legitimate trade, in accordance with WTO guidelines promoting fair competition. ADDs are applied in addition to standard customs duties imposed on imports.
Each contracting nation has established a legal foundation for implementing ADD and an anti-dumping framework. In India, Sections 9A, AA, B, and C of the Customs Tariff Act (CTA) handle Anti-Dumping matters. Section 9A (6) mandates that the margin of dumping be identified and validated by the Central Government following necessary inquiries. While the Department of Revenue (DoR) and the Central Board of Indirect Taxes & Customs (CBIC) hold jurisdiction under the CTA, the power of inquiry and determination rests with the Directorate General of Trade Remedies (DGTR).
Domestic industries comprising at least 25% of total production facing unfair import competition can file complaints with the DGTR. These applications must include evidence of dumping, material injury, and a causal link. The DGTR verifies these claims and initiates an investigation covering both the domestic manufacturer and the foreign party allegedly engaged in dumping. The DGTR is required to issue preliminary findings within 60-90 days, and if a prima facie case is established, recommend interim anti-dumping duties. Final orders follow, with the DGTR suggesting the duty amount aimed at alleviating the ‘injury’ caused to the domestic industry by the dumping.
The recommendations are reviewed by the CBIC, which possesses the authority to accept or reject them. If the Central Government consents after thorough examination, they may proceed to impose the duty. Such duties remain valid for five years unless the Government finds that revoking the duty could lead to renewed dumping and injury, in which case the ADD could be extended for another five years.
The wording in Rule 18 of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty) Rules, 1995, uses ‘may’, implying that the Central Government has discretion in accepting, modifying, or rejecting findings. The Rule also specifies a required timeline—three months from the publication of findings. A peculiar scenario arises when the Central Government neither acts nor makes a decision, leading to recommendations effectively lapsing after three months.
Typically, orders are subject to appeal, adhering to principles of natural justice. Rule 9C of the CTA allows for appeals against determination or review orders to a Tribunal. However, a clarification in the 2023 Budget regarding Rule 9C suggested that appeals could only be made against determinations by the DGTR, following the deletion of the word ‘order’. Consequently, no appeals can be lodged against the CBIC’s evaluations, which merely consider—not determine—the DGTR’s recommended measures. Notably, this change is retroactive to January 1, 1995, rendering prior Tribunal decisions on the matter obsolete.
Data indicates that previously, the CBIC accepted around 95% of the DGTR’s suggestions. However, acceptance rates have notably declined to below 60% in recent years. It’s not that recommendations are outright rejected; rather, decisions are not made, causing them to ‘fade away’ after the stipulated 60 days. This undermines the current Government of India’s position to support and protect domestic manufacturing. The reasons for non-acceptance of recommendations remain undisclosed to both the DGTR and the domestic parties that presented their cases for consideration.
India now holds the questionable distinction of issuing one of the highest numbers of anti-dumping orders globally. However, this approach may not be the optimal solution. Closer collaboration between the DGTR and CBIC is essential. Prior to issuing recommendations, the DGTR could engage in discussions with the CBIC to resolve concerns and avoid the embarrassment of unaddressed recommendations. Additionally, the DGTR should reassess the strength of its recommendations and not be easily swayed by industry claims of perceived injury. The division of powers and responsibilities between the DGTR and CBIC may be a contributing factor to the ongoing tension—both bodies were previously unified under the CBIC.
There are undeniably conflicting interests at play. On one hand, the domestic industry aims to eliminate perceived unfair competition to foster domestic production. Conversely, consumers of imported goods will face increased duties that could make imports impractical. Moreover, with numerous free trade agreements established, there is a growing risk that these items may also benefit from preferential duty treatments.
The CBIC is undoubtedly cautious in balancing public interest, preventing domestic monopolies, and reconciling diverse competing interests. However, the lack of clarity leaves industries confused about the rationale behind decisions. Transparency should be a fundamental principle of any tax administration. While executive discretion is legitimate, the final decision-making should rest with the CBIC. The CBIC ought to be forthcoming about the reasons for its actions instead of allowing recommendations to vanish without explanation.
—The author, Najib Shah, is former Chairman, Central Board of Indirect Taxes & Customs (CBIC). The views expressed are personal.
