Anti-Dumping law was introduced by Canada in the year 1903. Soon thereafter New Zealand, Australia, United Kingdom and USA came up with legislations which empowered them to take anti- dumping measures. Three of these did countries made some form of injury a prerequisite for imposition of duties as well. The New Zealand Anti-Dumping law did not contain an injury requirement. The American anti- dumping Act of 1921, as originally presented in the House of Representatives did not contain an injury standard. An injury standard was included in a Senate proposal and was eventually adopted by the House of Representatives. Thus, inclusion of the requirement of injury signified that countries recognized the fact that if one sector of the economy was being harmed by dumping there is another sector which might be benefitted by it and preventive action should not be taken unless it was necessary.
The General Agreement on Tariffs and Trade which aims at removing the tariffs and non- tariff barriers between the countries recognizes the right of importing country to protect its domestic country against dumped imports . Thus, GATT does not brand per se as illegal. It is to be condemned only if it causes or threatens material Injury. Therefore –
“ No contracting party shall levy any Anti-Dumping or countervailing duty on the importation of any product of the territory of another contracting party unless it determines that the effect of the dumping or subsidization as the case may be is such as to cause or threatens material injury to an established domestic industry or is such as to retard materially the establishment of a domestic industry.”
Rules for determination of injury have been provided under the 1967 Anti-Dumping Code, 1979 Code and the present Ant-dumping Agreement. It has all through been specified that:
“When in this Code the term ‘injury’ is used, it shall, unless otherwise specified, be interpreted as covering case of material injury to a domestic industry, threat of material injury to a domestic industry or material retardation of the establishment of such an industry.” Thus, Article VI of the GATT provides protection to the domestic industry if :
I. There is injury;
II. Caused by the dumped imports;
III. To the domestic industry.
I. Injury :
Members are given the right to protect their domestic industry only against actual for valid imposition of anti – dumping duties. Injury to domestic industry can be of three types:
i. Present material injury to the domestic industry;
ii. Threat of material injury to the domestic industry:
iii. Material retardation in the establishment of the domestic industry.
It must be clear from the determination that the determination was regarding which of the three types of injury.
Korea- Anti-Dumping Duties on Imports of Polyacetal Resins from the United States :
In this case United States alleged Korea Trade Commission (KTC) injury determination in respect of imports of polyacetal resins from US; as KTC failed to determine that whether its finding was based on present material injury, threat of injury, or material retardation of the establishment of an industry, and this determination was inconsistent with 3.4 and 8.5 of the Agreement. A failure to state the basis for a finding of injury meant that a demonstration of a casual relationship between dumped imports and injury as required under Article 3.4 was not possible. Korea pointed out that though there were different basis for the KTC’s affirmative determination but the reference was made to “material injury”; and its findings was based on all three standards. Held : The panel held that while it could be inferred from the text that the determination had involved a consideration of factors and evidence relevant to all three standards of injury, the section of the determination which examined the existence of a casual relationship between the imports and injury to the domestic industry did not distinguish between the questions of present material injury, threat of material injury and material retardation of establishment of a domestic industry.
The existence of the injury(or threat of injury or material retardation in establishment of the domestic industry) has to be based on:
1. Positive evidence and objective examination;
2. The volume of the dumped imports;
3. Effect of the dumped imports on prices;
4. Consequential impact of the dumped imports on domestic industry.
1. Positive evidence and objective examination:
The requirement for objective examination was explicitly introduced in the 1979 Code only. The 1967 Code only referred to positive evidence.
2. Volume of the dumped imports:
With regard to the volume of dumped imports Para 2 of Article 3 of the 1979 Code and Uruguay Round Ant- dumping Agreement provides, “ the investigating authorities shall consider whether thre has been a significant increase in imports, either in absolute terms or relative to production or consumption in the importing Member.” The 1967 Code did not have any such provision. Volume of the dumped and other imports was however mentioned in Article 6(b) among other factors in evaluation of the effects of the dumped imports on industry.
3. Effect of the Dumped imports on prices:
The 1979 Code and the present Agreement provides: “ With regard to the effect of the dumped imports on prices, the investigating authorities shall consider whether there has been a significant price undercutting by the dumped imports as compared with price of a like product of the importing member, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which otherwise would have occurred to a significant degree. No one or several of these factors can necessarily give decisive guidance .” such a provision was not there in the 1967 Code.
4. Consequential impact of the dumped imports on domestic industry:
Article 3.4 has been slightly changed from the corresponding provision of Article 3(3) of the 1979 Code. It provides that all relevant economic factors having an effect on the domestic industry have to be evaluated. It further gives an inclusive list of factors and indices which may have bearing on the state of the industry. The factors enumerated in the list are “ 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 of cash flow , inventories, employment, wages, growth, ability to raise capital or investments.” The list is preceded by the word “include” in place of the word “such as” which has been used in 1979 Code. The change of the terminology has made evaluation of the factors in the list mandatory.
II. Injury caused by the Dumped Imports:
Rules for the assessment of dumping as cause of injury to the domestic industry has been gradually tightened by under the Three Agreements. The 1967 Code provided vague and wide rules which were made more specific under the 1979 Code. The present Agreement has made it more specific:
a) By providing rules for the cumulative assessment of effects of imports;
b) By enumerating some of the factors which may be the cause of injury not caused by dumped imports.
United States- Imposition of the Anti- dumping duties on Import of Fresh Chilled Salmon from Norway :
With regard to the casual relationship, Norway had based its claim on three main grounds:
1. In making the determination the USITC had failed to ensure the injuries caused by factors other than the imports from Norway were not attributed to these imports.
2. The USITC had failed demonstrate that material injury was caused to the domestic industry in the United States by the imports of Norway “through the effects of dumping”.
3. The USITC had not demonstrated that the imports from Norway under investigation were causing present material injury at the time the affirmative determination was made by the USITC.
Norway argued that any material injury to the domestic Atlantic Salmon industry in the United States was caused by factors other than imports from Norway, mentioning the significant increase in the volume of imports of Atlantic Salmon from third countries, increased supplies of substitute products, and internal problems in the United States to domestic industry. According to United States, the USITC had explicitly considered the alternative factors mentioned by the Norwegian respondents and determined that, while these factors might have had an adverse impact on the industry material injury was caused by the imports from Norway. Held: According to the Panel, the primary focus of the requirement in Article 3.4 of a demonstration of a casual relationship between imports under investigation and material injury to a domestic industry was on the analysis of the factors set forth in Articles 3.2 and 3.3 i.e. the volume and price effects of the imports, and their consequent impact on the domestic industry. The panel concluded that the analysis by the USITC of factors other than the imports from Norway under investigation was not inconsistent with the obligations of the United States under Article 3.4 of the Agreement.
III. Injury caused to the Domestic Industry:
Determination of the injury has to be made with regard to the domestic industry. In this regard all the three Agreements have provided:
“ the effect of the dumped imports shall be assessed in relation to the domestic production of the like products when available data permits 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.” The definition of the domestic industry has been provided in Article 4 of the Agreement.
Mexico – Anti- Dumping Investigation of High Fructose Corn Syrup(HFCS) from the United States :
The United States claimed that SECOFI concluded in the final determination that the relevant domestic for purposes of its threat of injury determination that the relevant domestic industry for purposes of its threat of injury determination consisted of Mexican sugar producers. The United States argued that SECOFI analysis of threat of injury was fundamentally flawed, because SECOFI considered only a portion of the industry’s production , that serving the industrial market for sugar, and never considered the impact of dumped imports on the domestic industry as a whole. The US argued that the Anti-Dumping Agreement requires an assessment of material injury or threat thereof to be based upon the impact of the dumped imports on the entire domestic industry , the US pointed out that the Anti- dumping Agreement provides only for 2 circumstances in which it may be relevant and permissible to examine less that the entire domestic industry: a) exclusion of the related parties, and b) division of the Member’s territory into smaller regions. Mexico argued that SECOFI has considered in its analysis all sugar producers and thus made a determination of threat of injury to the domestic industry as a whole. Mexico acknowledged the SECOFI separately identified the production consumed by the industrial sector from production consumed by the household sector, in view of the specific competition of the former with the HFCS imports. Held: The panel noted that SECOFI defined the domestic industry as “manufactures of cane sugars”. Thus, SECOFI was required , by the explicitly terms of Anti-Dumping Agreement , to consider and determine the question of threat of material with respect to that industry. There is nothing in the Anti-Dumping Agreement which precludes a sectoral analysis of the industry and /or market. The panel noted, that it was undisputed in this case that SECOFI defined the domestic industry as consisting of all sugar producers. What SECOFI failed, to do however, as to assess the question of injury to those producers on the basis of their production of the like product, sugar.
Threat of Material Injury :
“a ‘threat of material injury’ means likelihood of material injury being caused to the domestic industry , if the dumped imports are allowed continue to eneter the importing market unchecked.
Since, the determination of the threat of material injury involves a subjective assessment by the investigating authorities, all the three Anti-Dumping Agreements have specifically provided that ;
“ With respect to cases where injury is threatened by the dumped imports , the application of the anti- dumping measures shall be considered and decided with special care.”
Material Retardation in the Establishment of Industry:
The test of present material injury of threat of material injury is applied in the case of existing industry. In case where industry is yet to be established test of material retardation in the establishment of the industry is applied. There could be two situations where this test may apply :
a) In case of ‘developing industry’ which has not yet begun its commercial production but substantial commitment to commence production has been made;
b) In case ‘nascent industry’ whose commercial production has although begun but the industry has yet to find its place in the market.
While Article 3(a) of the 1967 Code explicitly provided a test for determining the material retardation in the establishment of the industry , it is excluded from the 1979 Code and the present Agreement.
Edwin Vermulst suggests that it should be required in all cases that both the injury and dumping margin must be calculated and the anti- dumping duty must reflect the lower of these two margins .This provision must be coupled with more detailed provisions ensuring transparency with regard to the calculation of injury margins. Since the purpose of anti- dumping duty is protection of the domestic industry ; in situations where there is reduction in domestic sales but the industry is still doing well by way of exports should a conclusion on material injury be reached. Especially in situations where domestic sales have come down from 100% to 72% and the domestic is not selling below cost in the domestic market. Will not positive determination lead to predatory or unfair pricing by the domestic industries abroad which they want to cross-subsidise by keeping the prices up in the domestic market, thus, hurting the domestic consumer and foreign industries. The question becomes more important in cases where domestic industries have been in monopoly situation.
However, another view is that in this way anti- dumping measures are helping the economies in transition by preparing their industries for the market economy.