I OVERVIEW OF TRADE REMEDIES

Recently designated as the world's sixth largest economy with a population of over 1.3 billion, India has been a member of the General Agreement on Tariffs and Trade since 1948 and is also one of the founding members of the World Trade Organization (WTO) since 1 January 1995.2 Its legal regime is crafted in a way that gives effect to India's rights and obligations under the covered agreements of the WTO. India has been a supporter of multilateralism and liberalised trade, and thus, the country's laws and policies aim to uphold the principles of the covered agreements, while at the same time, allowing the domestic industry to mature. Under the Indian legal system, an international treaty does not take precedence over the domestic laws; however, the established jurisprudence in the form of WTO Panel and Appellate Body Reports are regularly cited in the Indian courts and hold value in interpreting the rights and obligations of the interested parties in the investigations.

The objective of trade remedy legislations in India is to strike a balance between free trade in accordance with India's obligations under the covered agreements of the WTO; and ensuring that free trade does not result in unfair trade practices causing injury to the domestic industry in India. In recent times, India has also strived to achieve efficiency and become a manufacturing hub for the world through programmes such as 'Make in India'.3 Other than protective duties and duties imposable in cases of exercise of emergency powers of the central government, the Indian legal regime provides for four types of trade remedies, including anti-dumping duty, countervailing duty, safeguard duty and quantitative restrictions. The anti-dumping duty investigations (including anti-circumvention investigations), anti-subsidy (countervailing duty) and safeguard duty investigations are regulated under the Customs Tariff Act 1975 (the CT Act); whereas the Foreign Trade (Development and Regulation) Act 1992 (the Foreign Trade Act) regulates the imposition of quantitative restrictions.

India is referred to as a prolific user of trade remedies, with a record of having initiated the maximum number of trade remedial investigations up to 2017. The WTO data enumerates that up to December 2017, India has initiated 888 anti-dumping investigations out of which 214 investigations were initiated against China, 65 against Korea, 65 against the European Union, 62 against Taiwan, 49 against Thailand, 39 against Japan and 40 against the United States.4 In the context of safeguard investigations, India had up to December 2017 initiated 43 cases.5 This is the highest number of safeguard investigations initiated by any Member to date. However, in the context of countervailing duties (CVD) investigations the picture is very different – only four investigations have been initiated by India up to July 2018, concerning China.6 The highest number of CVD investigations have been initiated by the United States, whereby it has initiated 219 CVD investigations up to December 2017.7

II LEGAL FRAMEWORK

The regulation of investigations concerning imposition of anti-dumping duties (AD) and CVD are governed by the CT Act alongside the specific rules issued by the central government to this effect. CVD investigations are specifically regulated under Section 9 of the CT Act read with the Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidised Articles and for Determination of Injury) Rules 1995 (the CVD Rules), whereas AD investigations are regulated under Section 9A of the CT Act read with Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles And For Determination of Injury) Rules 1995 (the AD Rules) alongside various Trade Notices. Trade Notices are issued by the Directorate General of Trade Remedies (DGTR). The DGTR is essentially an investigating authority functioning under the Department of Commerce, Government of India, which is also empowered to recommend the quantum of AD, CVD and safeguard duties, upon the conclusion of investigations. Further, Section 9C of the CT Act provides for a provision of appeal before the Customs Excise and Service Tax Tribunal (CESTAT) in both cases involving imposition and non-recommendation of AD and CVD duties. In case of grievances against the findings of CESTAT, appeals can be made to the Supreme Court of India.

In addition to the above, Section 8B of the CT Act provides for imposition of safeguard duty if the government upon investigation is satisfied that any article is imported into India in such increased quantities and under such conditions so as to cause or threaten to cause serious injury to the domestic industry. Unlike an anti-dumping investigation wherein the trigger point is a price based injury, a safeguard duty investigation is initiated to address situation of 'serious injury' on account of 'sudden, significant and sharp' increase in the imports of a product. Further, a safeguard duty investigation covers within its scope the imports of like products from all countries unlike an anti-dumping investigation, which is restricted to imports from countries specifically identified in the application of the domestic industry. The DGTR is the relevant authority vested with the power to conduct safeguard investigations, alongside its power to conduct AD and CVD investigations. The findings of the DGTR are recommendatory in nature and are given effect by the Department of Revenue, Ministry of Finance by means of a customs notification.8

Lastly, the Indian legal regime also provides for imposition of Quantitative Restriction (QR). Section 9A of the Foreign Trade Act states that the central government is empowered to impose QRs if imports have taken place in such increased quantities and under such conditions as to cause or threaten to cause serious injury to the domestic industry. This section of the Foreign Trade Act is implemented through the Safeguard Measures (Quantitative Restrictions) Rules 2012 (QR Rules) and these functions are also discharged through the DGTR. Under the legal guidance, quantitative restrictions are not to exceed the amount or quantity, which has been found adequate upon investigation to prevent or remedy serious injury and to facilitate adjustment by the domestic industry. It is noteworthy that to date no QR investigation has been initiated in India.

The safeguard duty can be imposed if the government upon investigation is satisfied that any article is imported into India in such increased quantities and under such conditions so as to cause or threaten to cause serious injury to the domestic industry.

i Procedure for domestic industry to initiate a trade remedial investigation
AD and CVD investigations

The initiation of an AD or CVD investigation can take place either via an application filed by the domestic industry requesting initiation of the investigation or via suo moto initiation by the DGTR based on the information received from the Commissioner of Customs or any other source providing sufficient evidence of dumping or subsidisation, injury and causal link. In the first case, when the investigation is initiated via an application filed by the domestic industry, the applicant must meet the requisite threshold of 'domestic industry'. This threshold is clarified in the legal regime as ensuring that the application should be expressly supported by producers constituting at least 25 per cent of the total production of 'like article'. Further, the threshold of being a domestic industry is deemed to be met when domestic producers whose collective output constitutes more than 50 per cent of the total production of the like article expressly support the application. Usually, such applications are filed by trade associations representing the domestic industry on behalf of the industry seeking the imposition of duty. Such an application must also contain information on whether any domestic producer is related to an exporter or importer of the allegedly dumped or subsidised article, or is itself an importer. In such cases, such related producers or importer can be excluded from scope of producers qualifying as the eligible domestic industry.

Additionally, an application for initiation of AD/CVD investigation must also contain evidence of dumping or subsidisation, material injury or threat of material injury and causal link. Usually, to substantiate dumping, evidences in the form of price-related data pertaining to normal value in the exporting country and import prices of the product in India are taken into consideration. In case of application for initiation of a CVD investigation, the evidences of subsidisation undertaken are usually in the form of laws or regulations in the exporting country providing for tax benefits, duty rebates, preferential loans or grants to the producer or exporter. However, in the case of application for initiation of an AD investigation, the domestic industry is required to provide significant amount of costing data relating to the product under consideration such as data on cost of production, raw material consumption, consumption of utilities and allocation of expenditure, etc. The evidences to substantiate the existence of injury are usually in the form of data on capacity, production, sales, selling price, price undercutting, price underselling, profits and losses, capacity utilisation, exports and export sales realisation, etc.

The application may be submitted by the domestic industry in two versions (confidential and non-confidential) to the DGTR. The DGTR is obligated to ensure that the non-confidential version is available to the authorised interested parties upon inspection of public file. There is no time limit prescribed by the CT Act upon which the DGTR is mandated to initiate the AD/CVD investigation. Additionally, the DGTR is empowered to suo moto initiate an investigation as well. The governments of the affected countries are notified about the initiation of AD investigation by the DGTR, while with respect to a CVD investigation the DGTR engages in pre-initiation consultations with the government or governments of the exporting country.

Furthermore, the Indian AD Rules also contain rules on anti-circumvention within their ambit. The burden of proof is on the applicant to demonstrate circumvention of existing AD duties, which can be said to occur in the following three scenarios:

  1. if an unfurnished or unassembled product is imported to be completed or assembled in India or a third country, and the value of the item after assembly is less than 35 per cent of the cost of the finished product;
  2. if an article is imported in an altered form (either in description, name or composition) from the country of export or origin; or
  3. if producers or exporters subject to anti-dumping duties change their patterns or channels of trade without an economic reason, and for the purposes of avoiding the duty.

Additionally, the applicant is also under an obligation to provide evidence demonstrating that the imports that are circumventing the duty are being dumped. There can be a suo moto initiation of an anti-circumvention investigation by the DGTR as well. Similar to an AD investigation, the DGTR informs the government of the exporting country before formally initiating an investigation to determine circumvention.

In AD investigations and anti-circumvention investigations, the DGTR conducts the investigation and recommends the duty to the Ministry of Finance, Government of India, which decides whether or not to impose the recommended duty. The duty may be imposed retrospectively from the date of initiation of investigation. Further, the same product cannot be a subject matter of AD and CVD to compensate for the same situation of dumping or export subsidisation.

Safeguard investigations

A general safeguard duty investigation or a QR investigation can be initiated upon receipt of an application requesting for initiation of the same; or suo moto by the concerned authority. In the first case, if the applicant requests the initiation of an investigation, then the applicant must fulfil the requisite threshold to be qualified as an eligible domestic industry. However, the requisite threshold is not defined in the safeguard duty rules and the QR rules. The requirement mentioned is that the application should be filed by producers whose collective output of the like or directly competitive articles constitutes a 'major share' of the total production of the said article in India. The DGTR's practice in safeguard investigations depicts that they assess whether the applicant producers constitute at least 50 per cent of the total production of the like or directly competitive article. In QR investigations, the practice of the DGTR is yet to be tested.

The burden of proof is on the domestic industry to provide prima facie evidence of increased imports, serious injury or threat of serious injury, and causal link in a general safeguard duty investigation and QR investigation. The applicants are also under a burden to provide detailed import data (quantity and value-based) pertaining to the product under consideration, for at least three years. Additionally, applicants could also provide an analysis of factors attributable to increased imports and share of imports, share of similar domestic products in the total domestic consumption or demand in India over a period of three years. The application must also provide the names and addresses of exporters or producers, importers and any trade associations or user associations related to the product. Additionally, the application must also provide a countrywide breakdown of the imports and their percentage of total imports along with a comprehensive adjustment plan that details out the efforts to be taken by the domestic industry to recuperate from the existing situation, and become competitive with the imported products. In a review investigation of imposed safeguard duties, the imposition was revoked when the domestic industry failed to provide a concrete adjustment plan.9

The data pertaining to reduction in capacity or idling in capacity, sales volume, cost of production and impact of imports thereon, selling price, profits or losses, inventory and employment statistics can be used by the applicants to demonstrate the existence of serious injury, or threat of serious injury. If the applicant domestic industry has requested for imposition of more than one form of trade remedial duty (AD/CVD or safeguard duty) alongside making an application for imposition of QRs, the same is required to be disclosed in the concerned application.

The applications are required to be submitted in two versions- confidential and non-confidential. The DGTR makes the non-confidential version accessible to all interested parties by making it available in the public file. The safeguard duty rules and QR Rules do not provide for a time frame within which the authority is mandated to initiate an investigation. However, the concerned authority may initiate the investigation upon its satisfaction with the accuracy and adequacy of evidence submitted by the applicants.

ii Procedure for other interested parties in a trade remedial investigation
AD and CVD investigations

The exporters, importers and user industries are expressly identified in the application for initiation of AD or CVD investigations, which forms a basis for the DGTR to identify the known interested parties. The DGTR sends a copy of the initiation notification and a copy of the non-confidential version of the application to these known interested parties. Additionally, the DGTR also informs the governments of the exporting countries through their embassies by providing them with a copy of the two documents (i.e., initiation notification and a non-confidential version of the application). Other prospective interested parties are notified of the decision of initiation of the investigation by way of a public notice comprising information about the date of initiation, exporting countries, products involved, basis of allegation of dumping or subsidisation, summary of injury factors and timelines for submission of information. If such interested parties make a request for accessing the application in writing, the DGTR may provide a non-confidential version of the application to the latter. For ease of access to the interested parties, the public notices are also published on the DGTR website.10

Pursuant to a Trade Notice11 issued by the DGTR, any party interested in participating in an AD investigation must notify its intention to participate within 15 days of publication of the notice of initiation. The DGTR sends a separate correspondence to the known exporters and gives them 40 days to file the responses and submit an exporter/importer questionnaire. For all other parties, the time frame for filing their responses to the application and relevant questionnaire is 40 days from the date of initiation notice. The time period of filing responses may be extended upon successful processing of an application for extension to the DGTR.

The submission of responses and questionnaires by the interested parties is usually in two versions – confidential and non-confidential. Claims of confidentiality have to be substantiated with sufficient justifications to the satisfaction of the concerned authority.12 The authority designates a date for public hearing where all interested parties are invited to present their views. However, for the views presented to be taken on record they have to be filed in writing, referred to as written submissions. The post-oral hearing written submissions have to be provided in a non-confidential version as well, in case claims of confidentiality are present in the confidential versions of written submissions. This is to ensure that the other parties have sufficient information to rebut the presented claims, if they desire to do so. The post oral hearing written submissions are submitted by the parties and are followed by a rejoinder submission, where parties rebut each other's claims.

The overall time frame for conclusion of an AD/CVD investigation is prescribed to be 12 months, unless extended by another six months by the central government. The DGTR is also empowered to issue preliminary findings during the course of investigation; however, the same becomes effective only after being approved by the Department of Revenue in the form of a customs notification. There is no specification on the time period within which the Department of Revenue is obligated to issue the relevant customs notification. If approved, the preliminary AD remains valid for a period not exceeding six months; however, it can be extended up to nine months by the central government. Additionally, the duty cannot be imposed before the expiry of 60 days from the date of initiation of the investigation. However, a preliminary CVD can only remain in force for four months, and no extension can be granted.

The final findings are issued by the DGTR after completion of the investigation, which may or may not recommend imposition of duties. After the recommendations are issued, the Department of Revenue has three months from date of the final findings to issue a customs notification, failing which the final findings become infructuous and lapses.

India follows the 'lesser duty' rule, whereby the lower out of (1) the margin of dumping/ subsidy and (2) the injury margin, is considered for imposition as AD/ CVD.

Safeguard investigations

In safeguard investigations, the authority provides the known exporters, importers, users and exporting country governments with a copy of the initiation notification and a non-confidential version of the application. The parties are usually given 30 days to submit their responses and the respective questionnaires, unless an application for extension of the deadline is successfully processed. For the purposes of ease of access of the other interested parties, a public notice is uploaded on the website comprising details about the date of initiation, the exporting countries, product at issue, volume of imports, basis of the allegation of increased imports, summary of injury factors, time limits for submission of information and the address to which parties may direct their representatives. Further, prospective interested parties are given 15 days to express their intention to participate in the ongoing investigation. If they express their intention, they are provided with a non-confidential version of the application for the purposes of submission of their responses and importer/exporter questionnaire. If required, the interested parties can even request for an extension of the time for submission of their responses and importer/exporter questionnaire.

The overall time frame for the conclusion of safeguard investigations is mandated to be eight months from the date of initiation of the investigation, unless extended by the central government. Within this time frame, the authority also conducts a public hearing and gives an opportunity to all the interested parties to voice their concerns. However, oral submissions are not taken on record until they are presented in writing after the conclusion of the oral hearings. These written submissions are submitted by the parties, followed by the rejoinder submissions where parties rebut each other's claims.

In safeguard investigations, requests for imposition of preliminary duties can be made provided the applicant can establish the existence of critical circumstances in their application. If a provisional safeguard duty is recommended, it is subject to an internal evaluation by the Standing Board of Safeguards (BOS), whose deliberations are not open to the public. If the BOS approves provisional duties, they are given effect by the Department of Revenue issuing a customs notification. A provisional safeguard duty can be in existence for a period not exceeding 200 days from the date of its imposition. However, the legal regime does not prescribe for provisions on provisional QRs.

Additionally, in cases where safeguard duty or QR is recommended for more than a year, an obligation to progressively liberalise the same remains on the Government of India. Further, the duty or QR ceases to have effect on the expiry of four years from the date of imposition, unless the central government is of the opinion that the imposition must continue, in which case it may be extended. However, under no circumstances, can the imposition go beyond a period of 10 years from the date of initial imposition.

iii Procedures for appeals and reviews

India's trade remedy legislations prescribe for the provisions of appeal from the final findings of the DGTR, within its scope. The appeal can be directed against an order concerning the existence, degree and effect of any dumping or subsidy. Section 9C of the CT Act provides that an appeal challenging the customs notification imposing AD, CVD or anti-circumvention duty and giving effect to the finding of the DGTR may be made to CESTAT within 90 days of the date of issuance of the relevant notification. However, in the event of safeguard duty imposition, the recourse against the final findings and the customs notification imposing the duty lies in the form of a writ petition before the High Court.

The trade remedial legislations also contain provisions prescribing the scope of mid-term reviews and sunset review investigations; whereby the review investigations assess whether the continued imposition of the duties is warranted. A review investigation, once initiated, must be completed within 12 months of the date of initiation of the investigation in cases of AD and CVD investigations, unless otherwise extended by the central government. However, in the case of a safeguard and QR investigation, a review investigation must be concluded within eight months unless extended further by the central government.

III TREATY FRAMEWORK

India has repeatedly voiced the consistency of its laws and regulations with its rights and obligations under the WTO. This position has also been reiterated by the Supreme Court of India. In Commissioner of Customs, Bangalore v. M/s GM Exports and Others,13 the Supreme Court stated:

49 ... Further, the object and purpose of Section 9A is to impose an anti-dumping duty in consonance with the WTO Agreement, which Section 9A gives full effect to.

Further, the Indian Constitution in Article 51(c) also recognises the importance of fostering respect for international law and treaty obligations. In practice, India continues to ensure efficient implementation of its international obligations.

IV RECENT CHANGES TO THE REGIME

The Government of India amended the Government of India (Allocation of Business) Rules 1961 on 7 May 2018, and substituted the Directorate General of Anti-Dumping and Allied Duties (DGAD) with the DGTR in the Department of Commerce, Government of India. DGAD has been renamed vide Notification No. I-34(7)/2018-O&M dated 17 May 2018, issued by the Department of Commerce.

The DGTR is essentially a single umbrella national authority for all trade remedial defences, including, AD, CVD safeguard measures and QRs, which were previously dealt with by different authorities, including the DGAD, Directorate General of Safeguards and Directorate General of Foreign Trade. The constitution of this body is in consonance with the goal of Minimum Government Maximum Governance Policy of the Prime Minister of India.

V SIGNIFICANT LEGAL AND PRACTICAL DEVELOPMENTS

India ratified the Trade Facilitation Agreement (TFA) on 22 April 2016, which came into force on 22 February 2017 after receiving the relevant number of ratifications by the membership of the WTO. The relevant question that emerges post ratification and implementation of the TFA is of ensuring consistency with the obligations under it. India's rate of implementation of commitments for Category A stands at 72.3 per cent under the TFA and the same for Category B stands at 27.7 per cent, whereby in Category B the time period until February 2022 is available to ensure implementation.14 However, these statistics relate only to notified items of implementation.

In its domestic domain, India initiated an anti-dumping investigation concerning the imports of solar cells and modules; however, it was terminated as the domestic industry took back its application for initiation.15 While the anti-dumping investigation was initiated, the domestic industry also filed for initiation of a safeguard investigation concerning the importation of solar cells and modules. The High Court of Delhi disposed of a petition filed by domestic industry requesting for imposition of a 70 per cent provisional safeguard duty.16 However, the DGTR recently, through final findings dated 16 July 2018, recommended an imposition of safeguard duty for a period of two years regarding imports of solar cells whether or not assembled in modules or panels into India:

  1. first year at 25 per cent ad valorem;
  2. first six months of second year at 20 per cent ad valorem; and
  3. next six months of the second year at 15 per cent ad valorem.

This does not apply for imports from developing nations, as listed in Notification No. 19/2016-custom (NT) dated 5 February 2016; however, the said duty is applicable for imports from China and Malaysia.

VI TRADE DISPUTES

As stated above, India's policy has been inclined towards ensuring consistency of its domestic laws with its obligations under the WTO. This is further reflected in its record of ensuring compliance with WTO decisions. Indian laws have been subject to dispute settlement with the WTO in notable cases, including India-Patents (DS550), India-Autos (DS146) and India-Quantitative Restrictions (DS90). In all these cases, India ensured compliance with the decision of the WTO panel or appellate body by bringing its regime into compliance with the recommendations and rulings of the Dispute Settlement Body. Currently, the United States has challenged the consistency of India's compliance measures in India-Agricultural Products (DS430) with its obligations under the WTO. The parties are presently in arbitration and compliance proceedings.

Additionally, keeping in line with India's export interest, India has filed a request for consultations with the United States concerning imposition of tariffs on the imports of steel and aluminium by the United States.17

VII OUTLOOK

India's outlook towards International Trade has varied across its years of membership in the WTO. Despite being a founding member and a vehement supporter of trade liberalisation in certain aspects, India has taken a step back in negotiations concerning e-commerce and other new issues within the WTO domain.18 Partially, the rationale points to the fact that there is an absence of a national policy on e-commerce and contours of what e-commerce may cover at a multilateral level remain hazy.19 While recent news reports indicate that India is working towards developing its national e-commerce policy, the multilateral dialogue on e-commerce remains entangled in the stalled negotiations concerning core issues like agriculture within the WTO.20

Further, despite the ratification of the TFA, it remains to be seen as to what would be the pace of efficient implementation. However, significant progress can be expected based on India's history of performance and positive outlook towards the WTO, despite impediments such as procedural delays.

In terms of trade flows, the United States used to be India's largest trading partner; however, recently China has emerged as the largest trading partner. With the United States and China being at trade loggerheads in recent times, Indian exports to China are expected to see an upward swing.


Footnotes

1 Saurabh Tiwari is a partner, Ashish Chandra is a partner designate and Stuti Toshi is an associate at L&L Partners.

3 http://www.makeinindia.com/home as accessed on 18 July 2018.

9 Safeguard investigation concerning imports of Flexible Slabstock Polyol (FSP) into India.

10 www.dgtr.gov.in as accessed on 18 July 2018.

11 Trade Notice 01/2012 issued on 9 January 2012.

12 Trade Notice 01/2013 issued on 9 December 2013.

13 2015 (324) ELT 209 (SC).

14 https://www.tfadatabase.org/members/india as accessed on 18 July 2018.

17 WT/DS547/1.