Protecting exports from Anti-Dumping Duty

Ferdaus Ara Begum | Published: December 29, 2018 21:41:48 | Updated: January 04, 2019 21:15:57

Anti-dumping duties, countervailing duties and safeguard measures are some of the trade remedial measures practised by many countries as per World Trade Organisation (WTO) rules. Anti-dumping duties are imposed because of price differences at different markets. Countervailing duties are imposed to counter the negative impacts of import subsidies in order to protect domestic producers. Safeguard measures are like emergency measures taken by affected countries against specific exported products to protect a domestic industry.

Bangladesh does not employ these trade remedial measures. Rather several Bangladeshi export items have been facing anti-dumping duties in some countries. Bangladesh has not done much against these measures though the country is aware that some of the anti-dumping duties are arbitrary and can be fought back legally.

In 2004, Bangladesh had won the Anti-Dumping Duty (AD) case of lead acid battery exported to India. The case had enough merit and the concerned private sector body helped the government with all required information which is one of the important requirements to win any AD case. WTO is a rules-based organisation where each and every step needs to be followed accordingly. The cases need to face legal debates for each and every aspects raised by opponents.

Bangladesh Tariff Commission is now the focal point and over the years, they have managed to strengthen their capacities. As such, the country can now face these cases with more strength. India so far has initiated 400 cases of anti-dumping, and 20 cases of safeguard measures against many developed and developing countries including Japan, USA, and a number of countries from the European Union, South and south East Asian countries.

Anti-dumping agreement (Implementation of Article VI of GATT) is a difficult agreement as each and every article of determination of dumping, determination of injury, definition of domestic industry like products, initiation and subsequent investigation, provisional measures, price undertaking, judicial review, consultation and dispute settlement have specific jurisprudence as per WTO analytical index. It boils down to the capacities and coordinated efforts of legal experts, economic impact analysts and statisticians to win a case.

Experience can be gathered from plenty of instances from the past. In 1992, Bangladesh had faced anti-dumping duty by USA on Bangladeshi cotton shop towels. Investigation for this was held that year. In 1999, after 1st sunset review it continued and after the 2nd sunset review the duty was withdrawn.

Bangladesh also faced AD from Brazil for sacks and jute bags. Investigation into this began in 1992. AD has been continuing following a sunset review every five years.

Lead Acid Battery was an exceptional case for which investigation was initiated in 2002. Bangladesh went to appeal tribunal and after consultation in 2004, the duty was withdrawn.

Bangladesh again faced AD from Brazil on jute yarn which was withdrawn in 2013. Particle Board is another product that faced AD from India in 2009. Safeguard measures were supposed to be taken. But once the investigation was completed, no duty was imposed on this item.

Bangladesh has also faced AD investigation from Turkey for textile & apparel. In terms of safeguard measures, duty was imposed using Turkey's own set of regulations.

In this respect, Bangladesh is lagging behind. Though a number of low priced goods are entering the country causing sufferings for domestic manufacturers, Bangladesh has so far not been able to establish a case against these unethical business practices.

Recent cases were on Hydrogen Peroxide (HP). AD on the chemical was imposed by Pakistan and India in 2015 and 2017 respectively.

India had also imposed AD on jute goods from Bangladesh. In this case, AD investigation was initiated in November 2015 and AD was imposed on different rates on the individual companies depending on their responses during the time of investigation.  Some companies had to stop exporting jute due to heavy margin of AD. They switched to other markets with new products. At the same time Bangladesh is trying to expand the domestic market of jute. The value addition of jute is higher and better than that of readymade garments (RMG). Prior to the AD, 140,000 metric tonnes (MT) of jute goods were being exported to India from Bangladesh. Among those, 110,000 MT were jute yarn. After the imposition of anti-dumping measures, export volume to India has come down to 55,000 MT.

There are 97 jute mills in India. India produces 1.7 million MT of raw jute annually (1.5 million MT are used domestically). Indian Jute Mills Association (IJMA) is the largest buyer of their raw jute and goods (70 per cent).

In order to develop a consensus about the AD imposed on HP and jute sectors, ensure proper preparations and that the cases be handled by maintaining WTO obligations, BUILD in collaboration with the Ministry of Commerce (MOC) organised a number of consultation sessions which saw the participation of concerned stakeholders and some legal experts.

Applying to WTO can be a bit costly. But as a Least Developed Country (LDC), Bangladesh can avail some concessions as per the rules of WTO. WTO follows its own rules instead of domestic rules and does not allow only mathematical calculation to judge any case. It also uses economic, logical and other related evidence along with examples of similar cases and their outcomes in the past to evaluate the cases.

In case of HP under Tariff items 28470000, Hydrogen Peroxide (other than of food grade and electronic grade having concentration of 90 per cent and above), AD was imposed at USD 46.90/tonne, 27.81/tonne, 46.29/tonne and for any other combination, AD at the rate of USD 91.47/ton was introduced. This is a tremendous burden for such a new non-traditional export sector in Bangladesh.

In case of India, they issued a Customs Notification No. 28 (ADD) dated June 14, 2017. The notification stated, "In the matter of import of Hydrogen Peroxide (hereinafter referred to as the subject goods) falling under the tariff item 28470000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as the Customs Tariff Act), originating in, or exported from Bangladesh, Taiwan, Korea RP, Indonesia, Pakistan and Thailand (hereinafter referred to as the subject countries), the designated authority in its final findings vide notification No. 14/3/2015-DGAD, dated the 11th April, 2017 published in the Gazette of India, Extraordinary, Part I, Section 1, dated the 11th April, 2017 came to the conclusion that-

(a) the subject goods have been exported to India from the subject countries (other than Indonesia) below its normal value;

(b) the domestic industry has suffered material injury; and

(c) the injury has been caused by dumped imports from subject countries (other than Indonesia); and has recommended the imposition of definitive anti-dumping duty on imports of the subject goods originating in, or exported, from the subject countries (other than Indonesia)."

The Supreme Court of India said that anti-dumping duty was imposed to save the domestic industry of India and not to make profit. They calculated transportation cost of sending HP to India through land port and sea port. The investigation team added both the sea transport cost and land transport cost to determine the transportation cost. The issue was raised to the Court, but the subject was not accepted.

Pakistan government imposed anti-dumping duty on import of Hydrogen Peroxide from Bangladesh. The Supreme Court of Pakistan depended on secondary information instead of the information provided. One of the HP companies had exported just one consignment of HP to Pakistan as a sample for test run basis. But the Supreme Court of Pakistan imposed AD Duty on those products without providing any logical reasons. The companies of Bangladesh export HP to several countries including Sri Lanka, Pakistan, Indonesia, Malaysia, Nepal, Vietnam, Mauritius, Myanmar etc.

At the consultation, legal experts opined that the investigation process of India is in direct conflict with the Sub Section 7 of WTO Rules as India did not provide any actual and mathematical figure. Also India did not provide any explanations despite queries from the Bangladesh side.

The production process of NPL, a company based in India, had halted for 63 days due to internal issues. Though a Thai company holds 25 per cent share of NPL, India considered it as a domestic company and blamed the loss of the company on Bangladeshi products.

The legal experts at the consultation sessions highlighted the requirement of proper and reasonable explanations for addressing AD measures, giving ample opportunities to the affected party, providing enough time to comment after final notification (which was only five days for Bangladesh), proper legal and factual analysis, the cumulative assessment etc. These factors can be covered while developing a consultation paper. The legal experts also said that procedural lacking from India would need to be investigated, if in case Bangladesh wants to proceed with WTO processes to review the cases. It is necessary for the legal teams to find logical points of argument after reviewing the documents from previous hearing.

The legal experts at the consultations felt that a number of articles were violated as per Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Article 17.3 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement"), Article XXIII:1 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994").

A detailed consultation paper with all legal and logical merits needs to be prepared by a team of experts, following consultation with concerned stakeholders and government officials. The issue is not only a matter of monetary loss but it also has to do with national image at a time when the country is progressing in most sectors.

Ferdaus Ara Begum is Chief Executive Officer of Business Initiative Leading Development (BUILD).

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