The Financial Express

Jute goods export: India\'s allegation of dumping

| Updated: October 22, 2017 11:53:18

Jute goods export: India\'s allegation of dumping

The business community has expressed concern over India's move to impose anti-dumping duty on jute and jute goods exported from Bangladesh. These items now enjoy duty-free access to India under the South Asia Free Trade Area (SAFTA) agreement. 
Jute goods manufacturers of India alleged that Bangladeshi manufacturers got huge subsidies and dumped jute products in the Indian market. Taking the allegation into consideration, the Indian authorities initiated investigation in this regard. 
The Indian Directorate General of Anti-Dumping & Allied Duties (DGDA) has already completed the investigation. As reported in the media, it has recommended imposition of a wide range of specific anti-dumping duties on three types of Bangladeshi jute products - jute yarn, jute sack and jute bag.  For jute yarn, Bangladesh exporters are likely to face anti-dumping duties between $19 and $162 per tonne; for jute hessian $352 per tonne; and for jute bag between $125 and $139 per tonne. 
The Dhaka Chamber of Commerce and Industry (DCCI) fears that anti-dumping duties (ADDs) will widen Bangladesh's trade gap with India. The chamber has urged the government to move seriously and take up the issue with New Delhi. 
Jute Spinners Association is afraid that many jute spinning mills may face closure due to the very high duty. The jute exporters have been lobbying with the government to take effective measures to the stop the Indian move. 
The Tariff Commission has, meanwhile, been given the responsibility to deal with the issue. But, once a country initiates an investigation on dumping with proper due diligence of the rules and guidelines set by the World Trade Organisation (WTO), there is hardly any scope to stop such a move.   
LEGAL SCOPE: The WTO has clear guidelines and rules on the anti-dumping duties in response to unfair trade practices. Generally, two types of 'unfair' trade practices, which distort conditions of competition, are recognised by the WTO. Either the conditions of competition may be unfair if the exported goods benefit from subsidy, or distorted if the exported goods are dumped in foreign country.
The Agreement on Anti-Dumping (AAD) clearly lays down strict criteria for determining whether any export from second country is dumping to the first country. According to the definition, 'a product is to be considered as dumped if the export price is less than the price charged for the like product is sold for consumption in the exporting country.' Again, it is not so straight forward as there are some procedures and tools to determine the dumping. The more important thing is, according to the AAD, that anti-dumping duty may be levied only where it has been established on the basis of investigation that: (a) there has been a significant increase in dumped imports either in absolute terms or relative to production or consumption; and (b) the prices of such imports have undercut those of the like domestic products, have depressed the price from increasing; and (c) as a result, injury is caused to the domestic industry or there is  a threat of injury to the domestic industry of the importing country. 
In fact, a causal link between dumped imports and injury to the domestic industry has to be established. Moreover, there is a long list of procedures to conduct and complete the investigation to draw conclusion whether it is dumping or not. And before making the final determination, the investigation authority has to disclose the facts on which the decision to apply the duty is made to the exporters and producers under investigation, along with their government and respective importers.  
India has already informed Bangladesh about its final decision that, DGDA has specified duties on mill- or -factory basis, not across the board. DGDA sought information from about 250 exporters of Bangladesh. Only 26 responded to the queries.  Of these, 13 jute mills will face different ADDs on their products on mill-basis. Eleven will face similar duties on product-basis. DGDA didn't find any evidence of dumping in the case of two jute mills and thus they will not face any ADD.  Those which didn't respond to Indian queries will also face higher duties. 
ADD is imposed on company or firm and product basis not on sector basis. That's why duty may vary from firm to firm.   
The whole thing is a legal procedure. Bangladesh should carefully examine whether the Indian authorities rightly followed the procedures in the process of investigation and determination. 
It is now the jurisdiction of the Indian finance ministry to accept or reject the recommendations of the DGAD on formally imposing the ADDs, Bangladesh may move for filing appeal against the DGDA recommendations regarding ADDs. According to Indian law, 'an order of determination of existence, degree and effect of dumping is appealable before the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT).' However, only the final findings/order of the Designated Authority/Ministry of Finance can be appealed against before the CEGAT and should be filed within 90 days. 
Once ADD is imposed, the affected party may also go to the court in the country which imposed the duty.
WTO has kept open the scope for an affected party to go to the Dispute Settlement Body (DSB). To deal with ADD, in this case of jute goods and products, there is little need to establish that Bangladeshi exporters are not dumping in India. The key thing is to determine whether Indian procedure to impose ADD complies with WTO rules or not.    
Initially there is a scope for bilateral consultation within 60 days to settle the dispute with the help of a WTO-assigned mediator, if requested by the two parties. If consultation fails to bring any desired result, complaining party may request DSB to proceed and then a panel will be set up to examine the complaint and thus a full-fledged legal procedure will start. 
The Business Guide to the World Trading System (jointly prepared and published by International Trade Centre and Commonwealth Secretariat in 1999) mentions that even though the participants in the entire process of dispute settlement are government representatives, they rely heavily on advice and support on a continuing  basis from the industry and the associations with an interest in the subject-matter under the dispute. 
PREVIOUS EXPERIENCE: In the famous battery case, Rahimafrooz, the Bangladeshi manufacturer and exporter of lead acid battery, provided full support to the government to move with the DSB.  In fact, Rahimafrooz, which faced over 100 per cent ADD in the Indian market, set an example of how to deal with the issue. It was in 2002 when Bangladesh government decided to move DSB seeking redress of ADD imposed by India. Commerce Ministry, Bangladesh Tariff Commission, Bangladesh Geneva Mission and Bangladesh High Commission in New Delhi were very active. It was the first-ever dispute move from a Least Developed Country (LDC) against an advanced developing country. As a LDC, Bangladesh also received crucial support from the Advisory Centre on WTO Law at concessionary terms. 
At the consultation stage, India expressed its willingness to withdraw the ADD and requested Bangladesh not to move on to the next stage - panel formation for hearing. Indian representatives in Geneva were well aware that there were loopholes in their anti-dumping procedure and panel could easily detect those. So, India had little chance of winning in the dispute.
Once India finally withdrew the ADD, Bangladesh also withdrew the complaint by informing the DSB that the dispute was settled at the consultation stage.
The battery case showed that WTO mechanism is quite helpful in dealing with unfair trade practices. The current anti-dumping measures against Bangladeshi jute and jute goods by India, thus, needs to be dealt with jointly by the government and public sector stakeholders.
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