1. LEGAL PROVISIONS

 

Under the Customs Tariff Act 1975, “Export Price” is defined in Section 9A(b) as under:

 

(b) "export price", in relation to an article, means the price of the article exported from the exporting country or territory and in cases where there is no export price or where the export price is unreliable because of association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the imported articles are first resold to an independent buyer or if the article is not resold to an independent buyer, or not resold in the condition as imported, on such reasonable basis as may be determined in accordance with the rules made under sub-section (6);

 

Annexure- I of the Rules, 1995 contains the principles governing the determination of normal value, export price and margin of dumping for each of the co-operating producer exporter, who have exported to India during the POI. The relevant Para 5 and 6 of Annexure- I are as below:

 

5. The designated authority, while arriving at a constructed export price, shall give due allowance for costs including duties and taxes, incurred between importation and resale and for profits.

 

6. (i) While arriving at margin of dumping, the designated authority shall make a fair comparison between the export price and the normal value. The comparison shall be made at the same level of trade, normally  at  the  ex-factory level, and in respect of sales made at as nearly as possible the same time. Due allowance shall be made in each case, on its merits, for differences which affect price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and any other differences which are demonstrated to affect price comparability.

 

(ii) In the cases where export price is a constructed price, the comparison shall be made only after establishing the normal value at equivalent level of trade.

 

(iii) When the comparison under this para requires a conversion of currencies, such conversion should be made by using the rate of exchange on the date of sale, provided that when a sale on foreign currency on forward markets is directly linked to the export sale involved the rate of exchange in the forward sale shall be used. Fluctuations in exchange rates shall be ignored and in an investigation the exporters shall be given at least sixty days to have adjusted their export prices to reflect the sustained movements in exchange rates during the period of investigation.

 

(iv) Subject to the provisions governing comparison   in   this paragraph, the existence of margin of dumping during the investigation phase shall normally be established on the basis of comparison of a weighted average normal value and export prices on a transaction-to-transaction basis. A normal value established on a weighted average basis may be compared to the prices of     the individual export transactions if it is found that the pattern of export prices which differs significantly among different purchasers, regions or time periods and if an explanation is provided as to why such differences cannot be taken into account appropriately by the use of weighted average – to-weighted average or transaction –to- transaction comparison.

 

2. OPERATING PRACTICES

 

The Act and the Rules on Trade Remedy Measures have not defined the term “exporter”. In the context of investigations, it is generally understood to be the producer whose goods have finally been exported to India.

 

“Export Price” is the price at which the subject goods under investigation, are sold or agreed to be sold, for export to India. EP is generally based on the price to the first unaffiliated purchaser in India. As the comparison of EP and NV/CNV has to be done at the same level of trade, there is a requirement to calculate ex- factory net export price (NEP). Therefore, appropriate adjustments are required to be made in export price (CIF/FOB/FOR etc.) for determination of NEP.

 

Pre-Initiation:

 

An application seeking initiation of investigation should be accompanied with complete information in the prescribed formats duly signed and certified. This information forms the basis for computation of NEP for the purpose of initiation of investigation.

 

As per application proforma prescribed for DI and Trade Notice No. 15/2018 dated 22.11.2018, each application seeking initiation of anti-dumping investigations should inter-alia be accompanied with the following information/documents:

 

Documents / Information

Soft Copy of the application

Transaction wise DGCI&S import data along with soft copy

Computation of Ex-Factory Export Price

Evidences for adjustments done in export price

Basis or justification for adjustments in export price

 

The investigation team is required to prima facie confirm the adequacy and accuracy of information in terms of Rule 5 of AD Rules.

 

Post-Initiation

 

After notification of initiation of investigation, the producer exporters are required to submit the Questionnaire response along with the prescribed formats inside T.N. No. 05/2018 dated 28.2.2018 within the stipulated time, including following:

 

Document

Listing of transaction wise exports to India in the prescribed format in appendix-3A, 3B, 3C

Evidence for adjustments done in export price

Details of different channel of exports to India

Evidence that transactions with related party are at arm’s length.

Sample sales invoices for period of investigation

 

The filing of a complete Exporter Questionnaire Response (EQR) makes responding producer exporter to be considered as co-operative and eligible for individual dumping margin leading to individual duty margin.

 

The Producer Exporters, who have not exported to India during the period of investigation, are not to be considered for calculation of individual dumping margins as they are not eligible for individual duty rates, unless they are part of a single group and are related to parties / entities of that group, who have exported to India during the period of investigation.

 

Generally, one Export Price is determined for each co-operative producer exporter for the POI as whole. However, in some cases monthly or quarterly Export Prices may also need to be worked out especially in case of products with highly volatile market prices. Normal Value in such cases should also be determined month wise or quarter wise for working out more accurate dumping margins. The Rules do not prohibit even transaction to transaction workings of Normal Value and NEP resulting in transaction wise dumping margin if the case so warrants. However, for quantification of duties to be recommended as per Rules, the analysis done on transaction wise, weekly, monthly, quarterly or yearly basis should be converted into one weighted average dumping margin.

 

The determination of dumping margin should be made producer wise1. This requires determination of net export price for each of the channels of exports identified and then take a weighted average thereof, as follows:

 

(i) Exports directly to unrelated Indian importers;

(ii) Exports to a related Indian importer who in turn re-sells to unrelated Indian customers;

(iii) Exports through an unrelated exporter (in any country) to unrelated Indian importer;

(iv) Exports through a related exporter (in any country) to unrelated Indian importer;

(v) Any other channel of export during the POI by the respective producer.

 

As already mentioned above, if any entity has more than one channel of exports to India, then after calculation of above mentioned individual NEP, a weighted average NEP is to be worked out for that entity for comparison with the weighted average Normal Value of the respective producer.

 

The present method would cast a duty upon the producers to submit a complete response accounting for whole of the quantity of exports to India. In case the response is not 100% adequate due to any reason, the same has to be specifically explained in detail and the Authority has the discretion to take the final decision regarding accepting or rejecting the response based on the merit of each case.

 

The exports could also be invoiced through another party – related or unrelated. However, it will not alter the fact that the producer, who is in knowledge of the fact of exports of the goods, will continue to be treated as the exporter even if goods have been shipped from any country other than country of origin.

 

In the event of exports taking place through related intermediaries, it would be obligatory for each of these related intermediaries to submit information and cooperate in the investigations in order to get an individual dumping margin for the responding Producer. It should also not matter whether the intermediary is situated in the country of origin or any other third country. The producer exporter may be considered non-cooperative if there is non-cooperation by any of the related entity (Refer to Chapter 19 for Related party provisions) dealing in the subject goods.

 

If the producer exporter is exporting through its unrelated intermediaries, it would still be necessary for each of these intermediaries to cooperate during the investigations and submit the information called for by the Designated Authority. It does not matter whether the intermediary is situated in the country of origin, or any other third country. Whether the intermediary is involved in the physical movement of the goods or in financial transactions / documents, they have to submit information and co-operate in the investigation as explained in the following paragraphs.

 

If there is more than one related producer in a group in the country of origin, which are producing PUC, then one duty rate would be recommended for the entire group even if one or more producers in that group have not actually exported PUC to India during POI but have filed complete response.

 

It is mandatory for the responding producer to file a complete response2 in respect of all its related entities namely producers, exporters, traders, importers who are involved in exports of PUC to India directly or indirectly for being considered co-operative and get an individual dumping margin. In case, exports are through un-related exporter/trader, the response from all unrelated entities is still required (with some relaxation as detailed in subsequent para). In case the information from unrelated entities is not complete, the response is liable to be rejected. However, if the response is accepted by the Authority (to be mentioned specifically in the Disclosure/Final Findings), following methodology is to be adopted for processing the response and working out the producer wise NEP (for exports through unrelated exporters/traders):

 

(i) The NEP with respect to co-operative producer/exporters shall be worked out for each channel of exports separately.

 

(ii) The export price with respect to share of non-cooperating exporter shall be constructed based on available information

 

(iii) Based on the actual net export price and the constructed export price(for the non-co-operative non-related exporter), an overall weighted average export price shall be computed to work out the overall NEP for the responding producer, which will then be used for computation of dumping margin;

 

(iv) In case the share of exports to India of unrelated exporters not participating in the investigation constitutes more than 30% of the total volume of exports to India by the respective Producer, then the responding producer may be considered non-cooperative and the entire response is liable to be rejected.

 

As a matter of general practice, an individual dumping margin is not granted to non-producer intermediaries/trader exporter even when they have filed an independent response.

 

The producer can export the subject good directly or through other exporter(s). In each of the scenarios, the adjustments required to be made in the export price, will be different. The exhaustive list of all possible adjustments is mentioned in the paragraph below and the team has to select items of adjustment based on actuals on case-to-case basis, after due verification.

 

In case the exports are through another exporter, then the team has two options for computation of ex factory export price:

 

Take the final export price of the exporter/trader to unrelated Indian customer and make all applicable adjustments as listed below (as per appendix 3A, 3B, 3C) and additionally also make adjustments on account of indirect SGA expenses and of the exporter/trader (whether the exporter/trader is related or unrelated) based on details given in Appendix 5&9 as well as profit/loss of the exporter/trader based on appendix 5 & 9 of the EQR pertaining to PUC only, for computation of ex-factory export price.

 

Alternatively, if it is established that the producer has exported through an unrelated exporter, then take the sale price of the subject goods from producer to first exporter and adjust for ex-factory expenses to arrive at NEP. In this case it should be verified that the unrelated exporter should have made the exports at profits. In case exporter has posted losses (as verified from appendix 5 & 9) then a reasonable profit has to be deducted for computation of ex-factory export price.

 

In a case where the Producer exports to India through a related trader, who is like an extended arm of the producer, then profit & indirect SGA expenses of the related trader should not be reduced while arriving at the NEP, provided that it can be demonstrated that the related trader is acting as a sales department for the producer i.e. if the producer is selling the product in export market solely through said trader. The logic behind this is that if producer would have set up a separate sales department within its own producing company, then no such adjustment of profit and indirect SGA expenses would have been made.

 

Adjustments for determination of NEP: For arriving at ex works NEP,  the starting price will either be the CIF (cost, insurance, and freight), C&F (cost & freight) or FOB (free on board) price, as the case may be to the first independent customer. The terms on which the subject goods are shipped or the amount which is received by the producer or producer exporter is to be verified. An exhaustive list of various adjustments which are to be made in EP for arriving at NEP (ex- factory net export price) are given below. All the elements may or may not be present in each case. Hence, adjustments will also be made after examining the actual facts pertaining to the subject goods for each of the export transaction:

 

(i) Ocean freight(in case of CIF/CFR);

(ii) Overseas insurance(in case of CIF)

(iii) Handling charges in the country of origin/export

(iv) Inland freight in the country of origin/export

(v) Differential packing cost, if any

(vi) Port expenses in the country of origin/export

(vii) Inland handling charges in the country of origin/export

(viii) Inland insurance in the country of origin/export

(ix) Freight & forwarding charges in the country of origin/export

(x) Port charges

(xi) Credit costs - actual credit period should be considered from the date of invoice to the customer to the actual date of receipt of payment

(xii) Bank charges

(xiii) Commission paid to the agents/distributors/indenting agents for the subject goods

(xiv) Export incentives

(xv) Year-end rebates/ discounts

(xvi) Warranty and guarantee expenses, if any

(xvii) Export taxes, duties or other charges imposed by the exporting country on the exportation of the subject goods provided delivery terms are duty paid.

(xviii) Any selling expenses that the seller pays on behalf of the purchaser.

(xix) Any other selling expenses not identified above.

(xx) SGA Expenses of Trader/ Shipper(for PUC Only)

(xxi) Direct and indirect expenses incurred in the domestic market of the exporting country.

(xxii) Duty Drawback - Duty drawback refund received on inputs used for manufacturing the export products should be added back to arrive at the NEP after verifying from documents and correlating to the Product under consideration.

(xxiiii) Applicable VAT (only Non refundable amount to be deducted)

(xxiv) Profit of Trader/ Shipper (for PUC Only)

(xxv) Any other expense (to be verified specifically)

 

The Net Export Price should be computed PCN wise, wherever PCNs have been prescribed. All direct expenses, wherever directly identified with any PCN, shall be charged to the respective PCN only. All common expenses like ocean freight etc. shall be allocated/apportioned on reasonable basis in all such cases.

 

Certification of Documents All formats prescribed for exporting entities requiring certification must be signed by a practising Chartered/Public Accountant having a certificate of practice in the Exporting Country from a professional body like ICAI in India. A Chartered Accountant/Cost Accountant having certificate of practice in India shall not be competent to sign the documents in foreign country based on statute, accounting standards and regulations etc. as applicable in the exporting country. In case the documents are not properly certified, the same are liable to be rejected.

 

3. RELATED  PRODUCERS/EXPORTERS/  AFFILIATED PARTIES

 

All related producers exporting to India during the POI:

 

In the event both or all the producers have exported the subject goods to India during the period of investigation, the determination can be as follows:

 

(i) Normal Value: To be calculated for each producer and then a single Weighted Average to be computed for all the producers of that group on the basis of volume of domestic sales in the exporting country.

 

(ii) Net Export Price: To be calculated for each producer and then a Weighted Average to be computed for all the producers of that group, on the basis of volume of exports to India

 

(iii) Dumping Margin: To be calculated for that group

 

Only One or more Producer exporting to India during the POI:

 

If one or more of the related producers have exported and other related or group producers have not exported to India during the POI, the determination can be made as follows:

 

(i) Normal Value: To be calculated for each producer exporting to India and then determining one weighted average of all the producers of the group.

 

(ii) Export Price: To be calculated only for the exporting producers to India and then determining one weighted average for the group

 

(iii) Dumping margin: A single dumping margin to be calculated by comparing such weighted average normal value and the weighted average export price. The dumping margin so arrived at shall be applicable to the entire group of all related producers.

 

(iv) Injury margin: A single injury margin to be calculated by taking the weighted average landed value of the producers exporting to India. The injury margin so arrived at shall be applicable to the entire group of related producers.

 

(v) The duty shall be the same for all the producers of the group /related producers.

 

Export Price when Sales are made to a Related   Importer:

 

If the sales are made to a related importer in India, and if the goods are subsequently resold in India by the importer (in the same condition as imported) to an independent buyer, the net export price shall be the selling price of those goods to the independent buyer after making appropriate additional adjustments. Export price will include following cost/price elements incurred on ex-factory basis and hence have to be adjusted:

 

(i) Any customs duty (including CVD/GST, VAT, cess, etc.);

 

(ii) Any costs arising after importation like costs incurred by the importer such as transportation (any entry tax), handling, storage and overheads;

 

(iii) Any warehousing charges incurred by the related importer;

 

(iv) While making adjustments for the costs incurred for the sale of the goods, the Authority may deduct only those expenses / costs which are normally incurred by the importers;

 

(v) The profit, if any, on the sale by the related importer;

 

(vi) Where there is insufficient information to enable an export price to be determined; the Authority may resort to the principles of best information available.

 

4. EXPORT PRICE FOR RESIDUARY CATEGORY OR NON-COOPERATING EXPORTERS:

 

The Anti-Dumping Rules do not mandate any particular methodology for the net export price calculations for the residual category. The practice in the Directorate, separately for each of the subject countries, is as follows:

 

In case there are co-operative exporter, the export price for residual category is determined as the NEP which is the lowest of the co-operative exporters.

 

In case no exporter has been declared co-operative or there is no response, the NEP is determined from DGCI&S data on weighted average basis.

 

5. DISCLOSURE OF NEP:

 

Rule 16 of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 provides that the Designated Authority shall, before giving its final findings, inform all interested parties of the essential facts under consideration which form the basis for its decision. Since the NEP workings are one of the essential facts based on data furnished by the respective producer, the proposed computed NEP should be disclosed to the respective producer exporter along with workings. This provides them an opportunity to submit their comments/views on the adjustments or the facts considered relevant by the Authority in determination of NEP. Detailed procedure for disclosure is explained in Chapter 16 of this manual. A broad format for disclosure of NEP is as under:

 

Particulars	Direct Exports	Through unrelated exporter/Trader	Through related exporter/Trader
	USD per MT	USD per MT	USD per MT
Quantity
Invoice price to Indian Cus- tomer (CIF)
Less: Adjustments
Inland Freight
Handling Charges
Ocean Freight
Credit Expense
Bank Charge
Commission
Any other Direct SGA of Trader (related & unrelated)
Indirect SGA of Unrelated Trader
Profit of Unrelated Trader
Duty Draw Back
Total Adjustments
Ex-factory Export Price
Weighted Avg. NEP

 

Note: Sample Format may be changed as per actual requirement.

 

Source: Manual Of Operating Practices For Trade Remedy Investigations