Injury Analysis

1. LEGAL PROVISIONS

 

The applicable legal provisions are contained in the Article 3 of the ADA and corresponding provisions under the Act are set out below:

 

9B.       No levy under section 9 or section 9A in certain cases  in the absence of injury to industry in India.

 

(b) the Central Government shall not levy any countervailing duty or anti-dumping duty –

 

(i) under section 9 or section 9A by reasons of exemption of such articles from duties or taxes borne by the like article when meant for consumption in the country of origin or exportation or by reasons of refund of such duties or taxes;

 

(ii) under sub-section (2) of each of these sections, on import into India of any article from the specified countries unless in accordance with the rules made under sub-section (2) of this section, a preliminary finding has been made of subsidy or dumping and consequent injury to domestic industry; and a further determination has also been made that a duty is necessary to prevent injury being caused during the investigation:

 

Provided that nothing contained in sub-clauses (ii) and (iii) of clause (b) shall apply if a countervailing duty or an anti-dumping duty has been imposed on any article to prevent injury or threat of an injury  to the domestic industry of a third country exporting the like articles to India;

 

The relevant provisions in the Rules are Rule 11 and Annex II. Sub-rules (1) and (2) of Rule 9 states:

 

11.          Determination of injury:

 

(1) In the case of imports from specified countries, the designated authority shall record a further finding that import of such article into India causes or threatens material injury to any established industry in India or material retards the establishment of any industry in India.

 

(2) The designated authority shall determine the injury to domestic industry, threat of injury to domestic industry, material retardation to establishment of domestic industry and a causal link between dumped imports and injury, taking into account all relevant facts, including the volume of dumped imports, their effect on price in the domestic market for like articles and the consequent effect of such imports on domestic producers of such articles and in accordance with the principles set out in Annexure II to these rules.

 

Specific principles for determination of injury are contained in Annex II which are reproduced below:

 

The designated authority while determining the injury or threat of material injury to domestic industry or material retardation of the establishment of such an industry, hereinafter referred to as “injury” and causal link between dumped imports and such injury, shall inter alia, take following principles under consideration:

 

(i) A determination of injury shall involve an objective examination of both (a) the volume of the dumped imports and the effect of the dumped imports on prices in the domestic market for like article and (b) the consequent impact of these imports on domestic producers of such  products.

 

(ii) While examining the volume of dumped imports, the said authority shall consider whether there has been a significant increase in the dumped imports, either in absolute terms or relative to production or consumption in India. With regard to the affect of the dumped imports on prices as referred to in sub-rule (2) of rule 18 the designated authority shall consider whether there has been a significant price under cutting by the dumped imports as compared with the price of like product in India, or whether    the effect of such imports is otherwise to depress prices to a significant degree or prevent price increase which otherwise would have occurred, to a significant degree.

 

(iii) In cases where imports of a product from more than one country are being simultaneously subjected to anti-dumping investigation, the designated authority will cumulatively assess the effect of such imports, only when      it determines  that  (a)  the  margin  of  dumping  established  in  relation to the imports from each country is more than two per cent expressed       as percentage of export price and the volume of the imports from each country is not less than three per cent of the import of like product in       the importing country or where the export of individual countries less than three per cent, the imports collectively accounts for more than seven per cent of the import of like article and (b) cumulative assessment of the effect of imports is appropriate in light of the conditions of competition between the imported article and the like domestic articles.

 

(iv) The examination of the impact of the dumped imports on the domestic industry concerned, shall include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry, including actual and potential decline in sales, profits, output, market share, productivity, return on investments or utilization of capacity; factors affecting domestic prices; the magnitude of the margin of dumping; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital investments.

It must be demonstrated that the dumped imports are, through the effects of dumping, as set forth in paragraphs (ii) and (iv) above, causing injury to the domestic industry. The demonstration of a causal relationship between the dumped imports and the injury to the domestic industry shall be based on an examination of relevant evidence before the designated authority. The designated authority shall also examine any known factors other than the dumped imports which at the same time are injuring the domestic industry, and the injury caused by these other factors must not be attributed to the dumped imports. Factors which may be relevant in this respect include, inter alia, the volume and prices of imports not sold at dumping prices, contraction in demand or changes in the patterns of consumption, trade restrictive practices of and competition between the foreign and domestic producers, developments in technology and the export performance and the productivity of the domestic industry.

 

(v) The effect of the dumped imports shall be assessed in relation to the domestic production of the like article when available data permit the separate identification of that  production  on  the  basis  of  such  criteria as the production process, producers’ sales and profits. If such separate identification of that production is not possible, the effects of the dumped imports shall be assessed by the examination of the production of the narrowest group or range of products, which includes the like product, for which the necessary information can be provided.

 

(vi) A determination of a threat of material injury shall be based on facts and not merely on allegation,  conjecture  or  remote  possibility.  The  change in circumstances which would create a situation in which the dumping would cause injury must be clearly foreseen and imminent. In making a determination regarding the existence of a threat of material injury, the designated authority shall consider, inter alia, such factors as:

 

(a) a significant rate of increase of dumped imports into India indicating the likelihood of substantially increased importation;

 

(b) sufficient freely disposable, or an imminent, substantial increase in, the capacity of the exporter indicating the likelihood of substantially increased dumped exports to Indian markets, taking into account the availability of other export markets to absorb any additional exports;

 

(c) whether imports are entering at prices that will have a significant depressing or suppressing effect on domestic prices, and would likely increase demand for further imports; and

 

(d) inventories of the article being investigated.

 

2. OPERATING PRACTICES

 

Material Injury to the DI is to be analyzed in terms of the volume effect and the price effect caused by the dumped imports in domestic market for the PUC. For this determination, the analysis is carried out over the POI and the injury period (generally preceding 3 years) and assessment of the impact of dumped imports on the DI is analyzed for the PUC and the like product. Following paragraphs mention the various parameters to be analyzed and also the methodology for examination and verification of information for these parameters.

 

Cumulative Analysis

 

Para (iii) of Annexure II (corresponding to Article 3.3 of the ADA) provides for the cumulative assessment of the effect of imports of a product to India, when more than one country is being simultaneously subjected to an anti-dumping investigation.

 

The cumulative assessment of the effect of imports is appropriate in light of the conditions of competition between the imported article and the like domestic articles. The cumulative assessment can be undertaken only when the following conditions are fulfilled:

 

(i) The margin of dumping from each country is more than two percent determined as percentage of export price; and

 

(ii) The volume of the imports from each country is not less than three percent of the import of the like product; or

 

(iii) Where the export of individual countries is less than 3 percent but the imports collectively account for more than 7 percent of the import of the like article.

 

In order to ascertain whether the above-mentioned conditions are satisfied, the injury tables with reference to import volumes and market share may be examined. It may be ensured that the import from each of the countries is more than de-minimis limits and the margin of dumping from each of the subject countries is more than de-minimis limits1.

 

In order to ascertain whether cumulative assessment of the effect of imports is appropriate in light of the conditions of competition between the imported article and the like domestic articles, the following list of parameters may be examined. There may,however, be more parameters which might be relevant to determine whether cumulative assessment of the effect of imports is appropriate in light of the conditions of competition between the imported article and the like domestic articles.

 

(i) Whether the product supplied by different parties are like articles;

 

(ii) Whether the products supplied by various parties are comparable in properties;

 

(iii) Whether there are arguments on comparability of products supplied by various parties, and if so, how the same has been addressed;

 

(iv) Whether there are parties who are resorting to using of both imported material from various sources and domestic material;

 

(v) Whether the imported and domestic material is being used interchangeably;

 

(vi) Whether there is direct competition between the domestic product & the imported product and the inter-se imported product;

 

(vii) Whether customers are using domestic material and imported material interchangeably;

 

(viii) Whether the exporters from the subject countries and the DI have sold the same product in the same period to the same set of customers;

 

(ix) Whether the channels of distributions employed by different parties shows some absence of competition or whether the sales channels are comparable;

 

(x) What are the parameters for the consumers to decide the source of supply;

 

(xi) Whether the domestic producers and exporters from the subject countries sell the like product to the same category of customers and whether both are competing in the same market; and

 

(xii) Whether import price from various countries has moved in same tandem.

 

Volume Effect

 

Para (ii) of Annexure II (corresponding to Article 3.2 of the ADA) requires that the volume effect is examined in terms of increase in the quantum of imports in absolute terms; or an increase in the quantumof dumped imports relatively compared to the production of the importing member or the consumption in the importing  member2.

 

Volume of imports in absolute terms: this should be preferably based on DGCI&S data. However, the volume of import reported in DGCI&S must be co-related with the volume of imports reported by the responding exporters and secondary source data (if made available by any interested party). In a situation where volume of imports reported by responding exporters or secondary source is higher than DGCI&S, it may be more appropriate to consider the questionnaire responses or secondary source. Typically, the higher of the volumes reported by various parties should be adopted, considering that this in any case is the actual volume of imports in India3.

 

The volume of imports should normally be considered separately for each subject country and then cumulatively for all the subject countries. Further, the volume of import should be separately considered for each of the non-subject countries also.

 

The share  of  imports  from  subject  countries  in  total  imports:  this  should be considered in order to see how the share of dumped imports has changed in relation to total imports in India. This is normally considered on a percentage basis.

 

Share in relation to consumption and production: for the purpose, the market share of various parties is determined in percentage terms. Further, the Indian industry must be considered in the domestic market. As regards other Indian producers, while the Authority requires information with regard to their domestic sales, in a situation where the said information is not readily available, the authority may consider the production volume reported in standing as the best available information.

 

Captive consumption: in a situation where captive consumption of the DI or the other producers is not significant, the captive consumption may not be recognized separately for determining volume and market share. However, in a situation where captive consumption is significant, the demand and market share could be determined by undertaking analysis twice – once including captive, and second excluding captive. The captive consumption should not be excluded from volume analysis.

 

Assessment of Demand: Demand/consumption of the PUCin the domestic market is ascertained by taking the total domestic sales and total imports of the product from all sources. The data is collected over the injury period and POI. Captive consumption by all the Indian companies should also be considered to calculate the total demand. Sales made by 100% EOUs to DTA are also to be taken into account for estimating the total demand. As explained earlier,sales of SEZ for the PUC are not considered for analysis relating to Anti-dumping investigations.

 

The import data should generally be taken from DGCI&S. The secondary source information may also be considered in exceptional cases for the volume and price analysis during injury period, especially in cases where DGCI&S data is incomplete or unreliable either on account of import of the PUC taking place under various HS codes, or the PUC is such that it is difficult to distinguish on the basis of HS codes.

 

Volume and market share of imports: with regard to the volume of the dumped imports, it should be considered whether there has been a significant increase in the dumped imports, either in absolute terms or relative to the production or consumption of the subject goods in India.

 

The volume analysis is also to be done in terms of the market share of dumped imports in relation to total imports of subject goods into the Country. Market share indicates the increasing/ decreasing share of imports with regards to demand/consumption in the domestic market.

 

The analysis should be undertaken with regard to the impact of the volume of dumped imports on the DI. This analysis is done on the basis of import data obtained from DGCI&S. In case of any cooperative producer exporter(s) from a subject country(ies) and after examination of respective producer exporter’s response, it is found that the dumping margin is either zero or negative,the volume of such imports may be considered as “undumped imports” and hence segregated from dumped imports for the purpose of impact analysis4. The transaction wise exports details submitted by cooperative exporters also need to be confirmed with DGS data.

 

Cumulative assessment of  dumped  imports-  where the imports of  the subject goods from more than one country are simultaneously subjected to investigations, the cumulative assessment of the impact of such imports on the DI should be undertaken as detailed above.

 

Price Effect

 

With regard to the effect of the dumped imports on the domestic selling price, the Rules require examination of adverse effect of import prices on the DI. Price effect may be analysed by determination of:(a) price undercutting, (b) price underselling, and (c) price suppression/ depression. However, it is clarified that these may not be the only basis for determining adverse price effect.

 

Price Undercutting is calculated by comparing the landed value of subject imports with the Net Sales Realisation of the DI.

 

The purpose of determining the price undercutting is to assess whether such dumped imports are undercutting the sales price of the DI. The undercutting is a pricing strategy in which a product is set at a low price with the intention to drive the competitors/DI out of the market or to create barriers to entry for potential new competitors.

 

The presence of positive undercutting indicates towards a situation where import prices are below the net sale price of the DI and the DI will be eventually made to sell their products at less than the normal selling price, indicating a direct adverse impact. The negative undercutting indicates that the net sales price of DI is less than the import price. However, this could be due to the market compulsion of DI to hold on to the market share. In such a case, the impact of dumped imports will be seen in the reduction in profits or increase in losses of DI because sale prices have been forced to be kept low.

 

It might be necessary to take into consideration several factors, as mentioned below, in order to ensure proper determination of price undercutting:

 

(i) In case of wide variations in the periodic cost of production due to fluctuation in raw material, it may be appropriate to determine price undercutting by undertaking the monthly or quarterly analysis; and

 

(ii) It is possible that the DI may allege that there are other factors affecting prices of the DI or imports. If any such factor has been brought to the notice of the Authority, the same should be adequately considered/addressed.

 

As far as the price analysis is concerned, typically, the company may not transfer captive consumption at arm's length price, and therefore, the price and the profitability of captive consumption may be distorted. For this reason, the profitability of captive consumption is normally ignored.

 

Price underselling is calculated by comparing the landed value of the subject imports with the Non-Injurious Price (NIP) as determined by the Authority for the DI. The purpose of determining Price underselling is to assess the injury caused to the DI due to the low priced products in the market resulting in the inability of the DI to realize the fair price which is the Non-Injurious Price for the DI.A positive underselling indicates that the imported goods are being sold at a price which is below the fair price (NIP) at which the domestically produced goods should at least be sold. A positive underselling will not allow the DI to grow/develop or sustain in the long run.

 

Price Depression or Superposition Depression refers to a situation when the domestic producer is not able to recover the cost because it is forced to keep prices down in order to compete with the imported goods. Price Depression is determined by comparing the cost of sales of the subject goods of the DI with its selling price. Price Suppression, on the other hand,refers to the situation where the domestic producer is restrained from increasing the selling prices i.e. increase in price which otherwise should have been there in normal circumstances is restrained or even if they do actually increase, the increase is less than it would otherwise have been in normal circumstances. Price suppression is determined by comparing selling prices with costs to assess whether the price increases are commensurate with the increase in costs. This is seen in light of the landed value of the imports of the subject goods. Therefore,the Authority considers whether the effect of dumped imports is to depress prices orto prevent price increases.

 

Another way of analyzing the price suppression or depression could be by determining the trends in operating cost to sales ratio over the injury period. The operating cost to sales ratio takes into account the cost incurred per Rupee of sales. An increasing operating cost to sales ratio implies that the producer had to incur a higher cost per Rupee of sales. In other words, it means that the producer earned less revenue for every Rupee of the cost incurred. Thus, an increase in the operating cost to sales ratio implies that the increase in cost was more than the increase in selling price, implying price suppression. Alternatively, it could mean that the reduction in the selling price was more than that of the cost, indicating price depression. Thus, an increasing operating cost to sales ratio may indicate that the prices of the DI have been either suppressed or depressed.

 

Evaluation of prices: In those situations, where the interested parties have contended steep decline or increase in selling/import prices, the analysis may need to be done on a transaction wise basis. However, if then umber of transactions is large, this analysis can be considered on monthy or quarterly basis. However, this kind of analysis would be viable only if the PUC does not have a large number of different product types having different costs and prices.

 

Evaluation of Economic Parameters

 

The Authority is required to undertake a systematic examination of various injury parameters specified under the Rules6. Each of the fifteen individual factors listed in paragraph (iv) of Annex-II must be evaluated by the investigating authorities and there is no room for a “permissible interpretation” that all individual factors need not be considered7. What is expected in an injury analysis is not merely a faithful mention of each of the criteria and an appropriate notation against each of them, but a sound appreciation of the situation based on each of the factors.

 

The Rules require the Designated Authority to examine both the actual performance and the potential performance. While guidance with regard to potential performance is not available, it can be understood that potential performance implies the likely situation of the DI in the event of continued dumping of the product in the country. Potential performance is more relevant to threat of injury and review cases.

 

The team should analyze the performance of the DI in respect of each and every parameter over the injury period. For this purpose, it is important that data for all the periods are for the same length of time. For example, if the POI is more or less than 12 months, the data must be appropriately annualized and thereafter considered. It must be ensured that there is no time gap between the POI and the injury period, though the overlapping of the period is allowed, which is in compliance with the ADA.

 

The team has access to the actual figures in their record. However, it should be noted that the eventual conclusion is drawn on the basis of overall emerging trends in the performance of the DI over the injury period including the POI and post POI.

 

The analysis of the performance of the DI may also sometimes be required over the injury period to understand the performance of the DI during the injury period or part thereof. This may be necessary where the performance of the DI has suddenly deteriorated due to dumping during the period. This may require quarter by quarter or month by month analysis within the relevant periods. However, if any such analysis has been undertaken, it should be ensured that the analysis is undertaken in a manner which ensures that trends of each of the parameters is micro analyzed for enhanced clarity of the impact of dumping on the DI. This period can be the whole of injury period or a part of such period, which may indicate the initiation of dumping and injury thereof. It is therefore vital that the analysis is done objectively and consistently.

 

For determination of material injury, the specific analyses of factors having a bearing on the state of the industry are to be undertaken by analyzing trends over time i.e., whether its vital performance indicators attributable to the product concerned, collectively show a significant deterioration. Annex II contains specific but a non-exhaustive list of economic factors that must necessarily be considered for assessing the impact of dumped imports on theDI. The parameters are to be examined only for the PUC in an investigation. The mandatory factors of injury having a bearing on the state of industry which have to be analyzed independently are:

 

(i) The natural and potential decline in

 

- sales in quantity;

- profits;

- output and market share;

 -return on investments;

- utilization of capacity; and

- productivity.

 

(ii) The factors affecting domestic prices

(iii) The magnitude of the margin of dumping and

 

(iv) The Actual and potential negative effects on

 

- cash flow;

- inventories;

- employment;

- wages;

- growth;

- ability to raise capital or investments

 

While evaluating the capacity utilization, it may be noted that the actual capacity utilization percentages may vary from industry to industry and from company to company. Therefore, the team must look into the reasons for variations and the likely impact of dumping as a cause for those variations. Further, the team must verify whether there has been a capacity addition during the injury period. This needs to be evaluated in light of the fact that the increase in capacity could also be the reason affecting the DI, if it is not matched by an increase in demand.

 

The Rules require that the Authority consider the effect of the dumped imports of the PUC in relation to the domestic production of the like article under investigation. This is achieved by considering information relating to the PUC only produced by the DI. However, it is possible that the same manufacturing facility is used for the manufacturing of more than one product and not all of them are covered9 in the definition of the PUC. In such cases, the production and capacity utilization should be analyzed on the overall basis both in respect of the PUC as well as the NPUC, as capacity utilisations of individual sub products may vary and be compensated against one another. This requires detailed qualitative and quantitative analysis and an understanding of the business situation. This should also be focused at the time of physical/on the spot verification of the manufacturing facilities.

 

The parameter pertaining to the volume of inventory must be examined with a view to compare the stock of inventory as a proportion of sales volume and industry-specific average inventory norms. The injury may be determined only if there is an increase /decrease in inventory levels relative to sales volume rather than in absolute terms. Captive consumption of PUC may also need to be considered, wherever relevant. In case of an increase in sales volume, the DI may increase its average inventory level to ensure there is no shortfall and increase in inventory may not be necessarily an indicator of injury on account of alleged dumped imports.

 

While evaluating the return on investments, it must be examined whether there has been an increase in the capital employed by the DI in the injury period. If there has been a sudden increase in the capital employed during the injury period, there is bound to be a decline in the returns on the capital employed. This increase in the capital employed should be looked into and reasons thereof should be factored int he evaluation. If there is an increase in the depreciation without corresponding increase in fixed assets, an explanation should be sought from the DI.

 

The profits (PBIT) should be evaluated both as a percentage of capital employed as well as a percentage of sales. The reason for variation during the injury period must be looked into. Interest payments made by domestic producers should also be carefully examined especially the interest payments to the related parties. Further, the reasons for the increase in total capital employed should also be examined as new investments could also be contributing to the reduction in profits or losses, for example, acquisition of new assets/ merger of new units/ amalgamation of new units in the DI.

 

It is important that the evaluation of injury must be based on examination of all factors, as no single factor can be considered as decisive. For example, a mere increase in imports or loss of market share by the DI alone cannot be decisive. Loss of market share should be considered with a range of all other relevant injury indicators before material injury may be established.

 

Performance parameters of DI for the PUC are to be considered from Format H which provides most of the aforesaid details duly audited (and verified during verification) regarding all the above parameters.

 

Particulars	Unit	Year 1	Year 2	Year 3	POI
Installed Capacity
Production Quantity*
Capacity Utilization Percentage
Average   Industry Utilisation, if any Norm for Capacity
Sales Quantity: Domestic Sales- Small Scale Industry** (SSI) Domestic Sales – Other than SSI Export Sales Captive Consumption
Sales Value: Domestic Sales – SSI Domestic Sales – Other than SSI Export Sales Captive Consumption
Sales Realisations per unit: Domestic Sales – SSI Domestic Sales – Other than SSI Export Sales Captive Consumption
No. of Employees
Productivity per Day
Average Industry Norm for Productivity per day, if any
Inventory
Inventory as No. of days of Production
Inventory as No. of days of Sales
Average Industry Norm for Inventory, if any
R&D Expenses
Funds Raised: Equity Loans and Advances Working Capital Other, if any
Cost of Sales per Unit-Domestic Sales (excluding outward freight, outward insurance etc.
Cost of Sales per Unit- Exports
Selling Price per Unit- Domestic Sales (ex- cluding excise duty or GST whichever is applicable, outward freight, outward insur- ance etc.)
PBIT per Unit- Domestic Sales
Total Profit before Interest and Tax – Do- mestic Sales
Interest / Finance Cost – Domestic Sales
Depreciation and Amortisation Expense
Other non-cash expenses
Cash Profits
Average Capital Employed
PBIT as % of Avg. Capital Employed
Average Industry Norm for PBIT as % of Avg. Capital Employed, if any

 

* If the same plant can be used for the production of NPUC also, the total production including NPUC needs to be indicated.

 

**   Small Scale Industries (SSI) means a micro enterprise/small enterprise or a medium enterprise as defined        in The Micro, Small and Medium Enterprises Development Act, 2006

 

It is important to note that the Format H requires the DI to provide average industry norms for relevant performance indicators, like capacity utilization, productivity, inventory and PBIT, as a percentage of average capital employed.

 

The impact of dumped imports is to be examined on domestic sales only,and if there is a fall in export performance of the DI, it should not be attributed to dumped imports. Performance of export sales or costs related to export production may not be relevant for injury analysis. Pricing of captive consumption/transfers may be very relevant in this analysis especially if captive transfers are not at arm’s length price.

 

Threat of Material Injury

 

A threat of material injury in Anti-dumping investigations is a situation where the DI has not suffered an injury over the period considered, but an injury to the DI is clear and imminent if the present circumstances continue. Sub-para (vii) of the Annexure-II (corresponding to Article 3.7 of the ADA) inter-alia provides that the determination of threat of material injury should be based on facts, and not merely on allegation, conjecture or remote possibilities.

 

According to the Para (vii) of Annexure II to the Rules, the following non-exhaustive list of factors should be considered in totality when making a determination of the threat of material injury:

 

(i) Whether there is a significant rate of increase of the dumped imports into the domestic market, indicating the likelihood of substantially increased importation;

 

(ii) Whether there is a sufficiently freely disposable, or an imminent, substantial increase in, the capacity of the exporting producer(s), indicating the likelihood of substantially increased dumped exports to the domestic market, taking into account the availability of other export markets to absorb any additional exports;

 

(iii) Whether imports are entering at prices that will have a significant depressing or suppressing effect on the DI prices, and whether it would likely increase demand for further imports; and

 

(iv) Whether inventories of the product being investigated available with foreign supplier suggests that imports could increase in the future.

 

The presence of one factor alone may not be conclusive evidence of the threat of material injury. For example,even if there is a substantial increase in capacity in exporting country, this does not conclusively mean a threat to Indian industry,as enhanced capacity may be for their own domestic/captive consumption in value-added products, or the exporter may be targeting some other country, where realizations are high.

 

Source of Various Information

 

The information related to various injury parameters is available in Format H along with other relevant Formats. The source of extracting and analyzing in formation on these injury parameters is tabulated below:

 

S N	Parameter	Source  of  information-document/physical verification
1	Production	Cost Audit Report/ SAP/ Audited Financial Records / reporting to banks and other government organizations/ Excise records
2	Installed Capac- ity/ Capacity Utilization	Cost Audit Report/ SAP/Audited Financial Records / reporting to banks, other government agencies like Pollution Control Board/ Excise Records
3	Sales	Cost Audit Report/ SAP/ Audited Financial Records / reporting to banks/ GST records
4	Market Share	Calculated from DI sales vs. total demand
5	Inventories	Cost Audit Report/ SAP/ Audited Financial Records / reporting to banks
6	Profits	Cost Audit Report/ SAP/ Audited Financial Records / reporting to banks
7	Cash Flow	SAP/ Audited Financial Records
8	SAP/ Audited Financial Records	SAP/ Audited Financial Records
9	Factors affecting Domestic Prices	Various submissions available on record by various stakeholders and market intelligence
10	The Magnitude of the Margin of Dumping	Determined as per NEP and NV/CNV
11	Productivity Per Employee	Production quantity/ Number of employees Production quantity/
12	Productivity Per Day	Number of days
13	Growth	Calculation on year to year basis in respect of each of the parameters
14	Ability to Raise Capital Invest- ments	Submissions as verified/ Audited Financial Records

 

Clubbing of parameters  or  separate  analysis  of  each  parameter:  analysis is undertaken separately for each parameter, while sometimes, the analysis may be undertaken by clubbing certain parameters. For example, parameters such as production, capacity utilization, domestic sales, market share, inventories, etc., could be examined either individually for each of these parameters, or in a combined manner for all these parameters. Whatever be the methodology adopted, the analysis should expressly show the application of the mind of the Investigator to each and every parameter. There should be specific commentary/analysis in respect of each of these parameters.

 

Even if the DI has considered some parameter as irrelevant, the same should still be examined. It is however possible to hold that some parameters have been considered irrelevant or indecisive.

 

It is not necessary that each and every parameter or majority of the parameter should show that the performance of the DI has been adversely impacted. It is clearly understood that neither one, nor more, of these parameters may give decisive guidance. One (or more) parameter(s) may sometimes be strong enough to outweigh the performance by the rest of the parameters. For example, in several investigations relating to products such as chemicals, petrochemicals, steel industry, and more particularly where production process is such that the production of the product is continued activity as a compulsion and it is not possible for the DI to regulate the production, it is most often found that the volume parameters such as production, sale, capacity utilization do not show a declining trend despite dumping and the effect of imports is more pronounced on price parameters such as profits, cash flow, return on investment, etc.. What is relevant in this regard is the identification of parameters which show that the performance of the DI is adversely impacted by dumped imports.

 

Material Retardation

 

The material retardation is evaluated for a DI, which is not yet established and which has not yet performed for a reasonable period of time. These DIs are in nascent (just started) or embryonic stages(in process of starting). Therefore, it becomes difficult to assess or evaluate the impact of dumped imports on these industries. Hence, the analysis in such cases focuses on whether the imports are retarding the establishment of the DI, and for this reliance can be placed on project report of the company on the basis of which the plant was commissioned. In other words, in a case of material retardation, it has to be examined whether the newly established industry would be viable but for the alleged dumping. Material retardation of the establishment of the DI is examined in terms of the existence of the material injury or threat thereof. It mainly involves the examination of the following:

 

(i) the ability to produce a marketable product;

 

(ii) the product being qualitatively acceptable to purchasers; and

 

(iii) the ability to sell the product at a price that is competitive with fairly traded imports.

 

The analysis of above mentioned known factors and any other factor (such as the actual or potential production capability of an industry) as claimed by the DI in their application may be regarded while considering whether the establishment of a DI has been materially hindered. The claims of the DI should be supported by positive evidence to the effect that the industry has plans for the establishment at an advanced stage, and financial commitments had been entered into by the prospective producers. Further, Authority may do the monthly or quarterly analysis for evaluating the material retardation.

 

Causation of Injury (Causal Link Between Dumping and Injury)

 

As per the Rules,it needs to be demonstrated that the injury has been caused to the DI producing like goods, and that injury is caused or likely to be caused by the alleged dumped imports. Sub-para (v) of the Annexure II (corresponding to Article 3.5 of the ADA) requires evidence to the effect that a causal link exists between the dumped imports and the material injury to the DI.

 

Therefore,the causal link analysis is not easy mainly due to lack of guidance in the legal provisions. In other words, determination of the causal relationship between the dumped imports and the injury to the DI has been left open-ended under the WTO provisions to a certain extent.

 

The demonstration of a causal relationship between the dumped imports and the injury to the DI should be based on an examination of all the relevant evidence before the Authority. The team should also examine any known factors other than the dumped imports, which at the same time are injuring the DI, and the injury caused by these other factors should not be attributed to the dumped imports. Factors which may be relevant in this respect include, inter alia, the volume and prices of imports not sold at dumped prices, contraction in demand or changes in the patterns of consumption, trade restrictive practices, competition between the foreign and domestic producers, developments in technology, and the export performance and productivity of the DI.

 

In conducting safeguards investigation,the law provides more guidance for the manner in which this analysis is to be conducted. The Panel and Appellate Body in Argentina – Footwear (EC) held that in the context of a causation analysis, there should be a relationship between the movements in the imports and the movements in the injury parameters. In other words, the increase in the imports should coincide with the decline in the relevant injury parameters. Although the nature of the analysis in a safeguards investigation would differ from an anti- dumping investigation,but guidance on the manner in which such an analysis may be undertaken could be from the examination in a safeguards investigation.

In view of above, causation may be examined by using a ‘coincidence’ analysis—where the volume and prices of the dumped imports and the injury factors are examined in order to assess whether a linkage exists between these events. The other factors that cannot be attributed to dumped imports should be examined and their effects should be excluded while determining causation. Information obtained from all stakeholders in the domestic market, e.g. The DI, importers, end-users, etc., is used to evaluate the causal effect of the dumped imports on DI.

 

The significance and weight to be assigned to various causal factors is a matter which is case specific and by the team in consultation with the Designated Authority, having regard to all the available information.

 

This causal link has to be seen in totality over the entire notified period, inclusive of the injury period and the period of investigation.

 

Non-Attribution Analysis

 

Article 3.5 of the ADA requires the establishment of a causal relationship between dumped imports and injury to the DI. This requires the investigating Authority to examine any known factors, other than the dumped imports, which at the same time are injuring the DI, and the injuries caused by these other factors must not be attributed to dumped imports.

 

It is possible that the DI is suffering injury due to several factors, other than the dumped imports, at the same time. The notion of attribution analysis requires the identification of factors, other than the dumped imports,which could be inducing the injury caused to the DI,and examination of these factors. The Authority must isolate and exclude any factors other than the dumped imports which may be contributing to the injury.

 

It may be added that the injury can either be an existing material injury or a threat of material injury to a DI or a material retardation to the establishment of the DI. In order to conclude that the dumped imports have caused material injury to the DI, the investigation Authority must analyze through an objective examination of positive evidence:

 

(i) whether there exists a significant increase in dumped imports in absolute terms or relative to production or consumption in the importing member which by means of their volume, price or both effected in;

 

(ii) a significant price undercutting effected in a significant price depression or a price suppression of significant price increases which otherwise would have occurred in the market of importation for like products;

 

(iii) the impact of the subject imports on unrelated domestic producers of the like products as a whole, or those domestic producers whole collective output constitutes a major proportion of the total domestic production of those products by inter alia evaluating: all relevant economic factors and indices having a bearing on the state of the industry; factors affecting domestic prices; the magnitude of the margin of dumping; actual and potential negative effects on cash flow, inventories, employment, wages, growth and the ability to raise capital and investment.

 

It can be said that undertaking a non-attribution analyses is generally not direct and not very easy. Figures are not to be accepted at their face value and trends need to be interpreted correctly. The following factors could, include, but are not limited to:

 

(i) the volume and prices of imported like articles that are not dumped;

 

(ii) contractions in demand or changes in patterns of consumption;

 

(iii) restrictive trade practices of, and competition between, foreign and Indian producers of like articles;

 

(iv) developments in technology; and

 

(v) the export performance and productivity of the DI.

 

(vi) some other factors that may be relevant for examination include:

 

(a) force majeure (Act of God) events (such as a natural disaster);

 

(b) labour strike or acute shortage of labour;

 

(c) difficulties in the Indian economy and/or financial market in India;

 

(d) shortage of raw materials/inputs in India required for the production of the like article by the DI;

 

(e) Inter-se competition between domestic producers;

 

(f) change in the management leading to focus on other products;

 

(g) a sudden change in economic policies of the government;

 

(h) other operations of the DI that have affected/are affecting/likely to affect the DI, for instance, investment in anew facility;

 

(i) vulnerability to dumped imports may be confined to a specific region and Injury may be occurring in that region. In such cases, it is still possible to take account of such regional injury which is analysed to determine such injury to be material to the industry as a whole; and

 

(j) any adverse impact due to related party transactions that need to be segregated.

 

Information regarding the above factors is usually to be obtained from credible sources such as reliable newspaper articles, annual reports of the domestic producers, published industry intelligence reports/magazines,  etc.

 

Source: Manual Of Operating Practices For Trade Remedy Investigations