1. LEGAL PROVISIONS

 

WTO Provisions

 

It may be noted that neither the ADA nor any other legal instrument under the WTO has provisions concerning anti-circumvention of anti-dumping duty. Nonetheless, many countries apart from India, such as the European Union, the United States, Australia, and Canada have anti-circumvention provisions within their domestic anti-dumping frameworks.

 

National Provisions

 

In India, the provisions concerning anti-circumvention were introduced vide Section 58 of the Finance Act, 2011. Accordingly, Section 9A(1A) was inserted in the Act which is reproduced below.

 

Where the Central Government, on such inquiry as it may consider necessary, is of the opinion that circumvention of anti-dumping duty imposed under sub-section (1) has taken place, either by altering the description or name or composition of the article subject to such anti-dumping duty or by import of such article in an unassembled or disassembled form or by changing the country of its origin or export or in any other manner, whereby the anti- dumping duty so imposed is rendered ineffective, it may extend the anti-dumping duty to such article or an article originating in or exported from such country, as the case may be.

 

Provisions in the Rules

 

Rules 25-28 of the Anti-dumping Rules covering anti-circumvention were introduced in 2012.

 

25. Circumvention of anti-dumping duty.  –

 

(1) Where an article subject to anti-dumping duty is imported into India from any country including the country of origin or country of export notified for the purposes of levy of anti-dumping duty, in an unassembled, unfinished or incomplete form and is assembled, finished or completed in India or in such country, such assembly, finishing or completion shall be considered to circumvent the anti-dumping duty in force if,  -

 

(a) the operation started or increased after, or just prior to, the anti- dumping investigations and the parts and components are imported from the country of origin or country of export notified for purposes of levy of anti -dumping duty; and

 

(b) the value consequent to assembly, finishing or completion operation is less than thirty-five percent of the cost of assembled, finished or complete article.

 

Explanation I. – ‘Value’ means the cost of assembled, complete or finished article less value of imported parts or components.

 

Explanation II. - For the purposes of calculating the ‘value’, expenses on account of payments relating to intellectual property rights, royalty, technical know- how fees and consultancy charges, shall not be taken into  account.

 

(2) Where an article subject to anti-dumping duty is imported into India from country of origin or country of export notified for the levy of anti- dumping duty after being subjected to any process involving alteration of the description, name or composition of an article, such alteration shall be considered to circumvent the anti-dumping duty in force if the alteration of the description or name or composition of the article subject to anti- dumping duty results in the article being altered in form or appearance even in minor forms regardless of the variation of tariff classification, if any.

 

(3) Where an article subject to anti-dumping duty is imported into India through exporters or producers or country not subject to anti-dumping duty, such exports shall be considered to circumvent the anti-dumping duty in force if the exporters or producers notified for the levy of anti-dumping duty change their trade practice, pattern of trade or channels of sales of the article in order to have their products exported to India through exporters or producers or country not subject to anti-dumping  duty.

 

Explanation.- For the purposes of this sub-rule, it shall be established that there has been a change in trade practice, pattern of trade or channels of sales if the following conditions are satisfied, namely: -

 

(a) absence of a justification, economic or otherwise, other than imposition of anti-dumping duty;

 

(b) evidence that the remedial effects of the anti-dumping duties are undermined in terms of the price and or the quality of like  products.

 

Rule 26: Initiation of investigation to determine circumvention. –

 

 

(1) Except as provided herein below, the designated authority may initiate an investigation to determine the existence and effect of any alleged circumvention of the anti-dumping duty levied under section 9A of the Act, upon receipt of a written application by or on behalf of the domestic industry.

 

(2) The application shall, inter-alia, contain sufficient evidence as regards the existence of the circumstances to justify initiation of an anti- circumvention investigation.

 

(3) Notwithstanding anything contained in sub-rule (1), the designated authority may initiate an investigation suo-motu if it is  satisfied from the information received from the Commissioner of Customs appointed under the Customs Act, 1962 ( 52 of 1962) or any other source that sufficient evidence exists as to the existence of the circumstances pointing to circumvention of anti-dumping duty in force.

 

(4) The designated authority may initiate an investigation to determine the existence and effect of any alleged circumvention of the antidumping duty in force where it is satisfied that imports of the article circumventing an anti-dumping duty in force are found to be dumped:

 

Provided that, the designated authority shall notify the government of the exporting country before proceeding to initiate such an investigation.

 

 

(5) The provisions regarding evidence and procedures under rule 6 shall apply mutatis mutandis to any investigation carried out under this rule.

 

(6) Any such investigation shall be concluded within 12 months and in no case more than 18 months of the date of initiation of investigation for reasons to be recorded in writing by the designated authority.

 

Rule 27: Determination of circumvention -

 

(1) The designated authority, upon determination that circumvention of anti-dumping duty exists, may recommend imposition of anti- dumping duty to imports of articles found to be circumventing an existing anti-dumping duty or to imports of article originating in or exported from countries other than those which are already notified for the purpose of levy of the antidumping duty and such levy may apply retrospectively from the date of initiation of the investigation under rule 26.

 

(2) The designated authority shall issue a public notice recording its findings.

 

(3) The Central Government may, pursuant to the recommendations made by the designated authority, extend the anti-dumping duty to imports of article including imports of such article from the date of initiation of the investigation under rule 26 or such date as may be recommended by the designated authority.

 

Rule 28: Review of circumvention.-

 

(1) The designated authority may review the need for the continued imposition of the duty, where warranted, on its own initiative or provided that a reasonable period of time has elapsed since the imposition of the measures, upon request by any interested party which submits positive information substantiating the need for the review.

 

(2) Any review initiated under sub-rule (1) shall be concluded within a period not exceeding twelve months from the date of initiation of review.

 

2. OPERATING PRACTICES

 

Initiation

 

An anti-circumvention investigation can be initiated subsequent to receipt of an application from the domestic industry containing sufficient evidence regarding the existence of the circumstances of circumvention. An anti-circumvention investigation can also be initiated suo moto by the Authority if it has received information from the Customs Commissioner or any other reliable source and is satisfied from such information that sufficient circumstances of circumvention exist.

 

In circumstances of circumvention defined under sub-rule (2), the product alleged to be circumventing the existing ADD is usually different from the product that was the subject of the original investigation. Therefore, to avoid confusion and for clarity of all concerned, it is the practice of the Directorate to term the goods currently under investigation as the “Product under Investigation (PUI)” and distinguish it from the product that was under consideration (PUC) in the original investigation. Therefore, it is important to clearly define the PUI (besides identifying the PUC and the like article)in the Initiation Notification and follow all guidelines for identification as mentioned in Chapter 3 of this Manual.

 

It has been recognized under sub-rule (3), that the producer/exporter notified for the purpose of ADD may attempt to circumvent the ADD by exporting through a different country and/or changing the country of origin (subject country) from the one notified for the purposes of ADD. In such instances, the changed country of origin or export must be clearly identified in the Initiation Notification as the country under investigation (CUI) for clarity and to avoid confusion.

 

It has also been recognized in sub-rule (3), that the producer/exporter notified for the purpose of ADD may attempt to circumvent the ADD by exporting through a producer/exporter who has not been notified as liable to pay duty. In such instance, such producer/exporter or both such producers/exporters will be investigated by the Authority.

 

The procedure and conditions pertaining to standing of the domestic industry are the same as in other anti-dumping investigations and details are as given in Chapter 4 of this Manual.

 

The Period of Investigation in this investigation will have to be subsequent to the original period of investigation and should be notified clearly.

 

The other necessary requirements of Initiation Notification, Communication and Post Initiation procedure are the same as in any other ADD investigation and can be seen in Chapter 6 of this Manual.

 

Investigation

 

In an anti-circumvention investigation, the following steps must be followed:

 

The investigation procedure in case of anti-circumvention investigations is largely the same as in other investigations. Rule 26 makes the provisions of Rule 6 mutatis  mutandis  applicable to anti-circumvention investigations.

 

At the outset, it must be determined by the Authority that there is dumping of the PUI or the PUC, as the case may be, depending on the circumstance of circumvention alleged by the domestic industry. In case there is dumping, the provisions of Rule 10 read with Annexure I to the Rules must be followed.

 

Under circumstances as defined under Rule 25, circumvention of anti- dumping duty must established.

 

The Explanation to sub-rule (3) states that change in trade practice, pattern of trade, or channels of sales shall be established if the following conditions have been met:

 

(i) Absence of a justification, economic or otherwise, other than imposition of ADD.

 

(ii) Evidence that the remedial effects of ADD are undermined in terms of price (price effect) and/or quantity (volume effect) of the like products. These are discussed below.

 

In examining volume effect, the Authority examines whether – since the imposition of the ADD on the PUC – there has been a decrease in the volume of imports of the PUC and a simultaneous increase in the volume of imports of the circumvented product during the POI. This comparison may be made in absolute terms/ relative terms. Examination of volume effect may also be made with regard to whether the domestic industry’s market share of the like article has decreased during the POI.

 

In examining price effect, the Authority examines whether the landed value of the circumvented product is undercutting the selling prices of the like article in India or the landed value is below the NIP determined for the PUC in the original investigation. Any other relevant factors which demonstrate price effect may also be taken into account.

 

In an examination of alleged circumvention under the circumstance defined under sub-rule (1), the Authority must, in addition, determine the value addition3. Explanation I to clause (b) of sub-rule (1) defines ‘value’ to mean the cost of assembled, complete or finished article less value of imported parts or components.

 

Conclusion

 

After detailed examination of anti-circumvention application, the questionnaires and submissions of the interested parties, the Authority can come to one of the following conclusions:

 

That there is insufficient evidence of circumvention and thereby terminate the investigation.

 

That the PUC is being imported into India in an unassembled, incomplete, and unfinished form, and thereafter being assembled, completed and finished in India, with the sole intention of circumventing the ADD on the PUC, and hence recommend that the ADD on the PUC be extended to cover import of PUI which is the unassembled, incomplete or unfinished form of the PUC.

 

That the PUC has been subjected to a process involving alteration of the description, name or composition of an article, such that the ‘article being altered (PUI)’ circumvents the ADD on the PUC and hence recommend that the ADD on the PUC be extended to cover import of PUI.

 

That the producer/exporter notified for the purposes of ADD is exporting through a producer/exporter or country of export/origin other than the producer/ exporter or country notified in the original investigation for the purposes of imposing anti-dumping duty. The Authority may recommend extension of ADD to the PUC being exported by such other producer/exporter or from such other country of origin/export.

 

That the PUC is being imported into another country in an unassembled, incomplete, and unfinished form, thereafter being assembled, completed, and finished in such other country, and then being imported into India with the sole intention of circumventing the ADD on the PUC, and hence recommend that the ADD on the PUC be extended to cover imports of the PUI from such other country.

 

The Central Government issues the customs notification imposing duties which are applicable for the circumventing products, or circumventing producer/ exporter, or country under investigation, in respect of which the anti-circumvention application has been filed.

 

The appeal procedure is the same and lies with the CESTAT.

 

Source: Manual Of Operating Practices For Trade Remedy Investigations