Antidumping Measures: Policy, Law and Practice in India

Copyright © 2014 by Sheela Rai.

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Contents

Table Of Cases

List Of Abbreviations

Preface

Introduction

Part I Analysis Of Policies And Law Relating To And Affecting Antidumping Measures

Role Of The State In A Liberal Trade Regime

Anti-Dumping Law Of India

Part II Analysis Of The Findings Of The Designated Authority

Response And Normal Value Determination

Compostion Of Domestic Industry And Market Share Of Imports And Domestic Industry

Price And Profitability

Other Parameters

Employment, Wages And Remedy To Doemstic Industry

Sunset Review

Annexure I

Annexure Ii

Bibliographyt

Dedicated to My Parents

Table of Cases

(Decisions of Tribunal, High Courts and the Supreme Court)

Addisseo France S.A.S. vs. Ministry of Finance & the DA MANU/CE/0179/2003

Ahimsa Mines and Minerals Ltd. v. Designated Authority MANU/CE/0149/2002

AIIGMA vs. DA MANU/CE/0177/2000

Alaska Exports v. Commissioner of Customs MANU/CE/0049/1998

Alaska Exports v. Commissioner of Customs MANU/CE/1488/1999

Alembic Ltd. vs. Union of India MANU/GJ/1640/2011

Association of BOPP Manufacturers vs. Designated Authority MANU/CE/0187/2004

Auro Laboratories vs. DA MANU/CE/0714/2000

Automotive Tyre Manufacturers Association vs. DA MANU/CE/0654/2000

Automotive Tyre Manufacturers Association vs. The Designated Authority and Ors. (2011)2 SCC 258.

Caparihans India Ltd. v. Collector of Customs MANU/CE/4046/2001

CCE V. New Tobacco Company 1998 (74) ECR 478 (SC)

Chameli Singh vs. State of Uttar Pradesh (1996)2 SCC 549.

Commissioner of Customs Mumbai vs. M/s Samarth Industries MANU/MH/1786/2011.

Commissioner of Customs v. Chennai Gases Pvt. Ltd. MANU/CC/0110/2006.

Commr. of Customs v. Rajendra Chemicals Corpn MANU/CC/0212/2005

Cyanides and Chemicals Ltd. v. Designated Authority MANU/CE/0431/2000

D.S. Nakara v. Union of India(1983) 1SCC 177

DA (ADD Directorate), Min of Commerce vs. Haldar Topsoe A/S(2000)6 SCC 626

Dalmia Cement (Bharat) Ltd. v. Union of India (1996)10 SCC 104

Deepak Fertilizers and Petrochem vs. The designated authority DG of Lamba 2006(203)ELT370(Del)

Designated Authority, Ministry of Commerce and Industry and Anr.vs. Indian Metals and Ferro Alloys Ltd. (2009)2 SCC 510

Dow Chemical Pacific Ltd. v. Designated Authority MANU/CE/0529/2000

Dye Stuff Manufacturers Association of India and National Organic Chemical Inds. Ltd. v. Govt. of India (Ministry of Finance) and Ors MANU/CE/0339/2003

Essar Steel Ltd. vs. Union of India 2008(222)ELT161

Exide Industries Ltd. v. DA MANU/CE/0118/2003

Forum of Acrylic Fibre Ltd. v. DA/Ministry of Finance and Ors. MANU/CE/0013/2006

Francis Coralie v. Union Territory of Delhi AIR 1981 SC 746.

Gagan Thaper v. Commr. Of Customs MANU/CE/0348/2006

Garware Nylons Ltd. v. CCE MANU/SC/1155/1998

Gemini Traders, Diamond Oil Agency, N.K. Oil Corporation and Victory Traders v. Commissioner of Customs MANU/CC/0364/2006

Hindustan Lever Ltd. and NALCO vs. DA MANU/CE/0009/2006

HSEB vs. Suresh (1999) 3SCC 601

Huawei Tech. Co. Ltd. vs. Designated Authority MANU/CE/0362/2011

Huawei vs. Designated Authority MANU/MH/1496/2011.

Indian Express Newspapers Ltd. vs. Union of India 2003(157)ELT138

Indian Refractory Makers Association v. DA MANU/CE/0175/2000

ISMT Ltd. vs. Union of India MANU/MH/0776/2011

J.G. Impex v. Designated Authority 2003(154)ELT57(Mad)

Jindal Stainless Steel Ltd. v. DA MANU/CE/0578/2006

Jujo Thermal Ltd. v. DA MANU/CE/0701/2000

Kajaria Ceramics Ltd. vs. Designated Authority MANU/CE/0036/2006(Del)

Kalyani Steel Ltd. vs. DA/Ministry of Finance and Ors MANU/CE/0676/2006, 2008(224)ELT47

Kirloskar Brothers ltd. v. Employees’ State Insurance Corpn1996 (2) SCC 682

Korea Kumho Petrochemical Co. Ltd. vs. Designated Authority MANU/CE/0152/2003

Kothari Sugars and Chemicals Ltd. vs. DA MANU/CE/0382/2005(Del)

Liner Technologies India Pvt. Ltd. v. Designated Authority MANU/CE/0404/2005

M/s Spacewood Furnishers vs. Designated Authority and Ors.MANU/MH/0392/2010.

Magnet Users Association v. Designated Authority MANU/CE/0391/2003

Mahavir Mirror Industries v. Designated Authority 2003(155)ELT226

Maneka Gandh v. Union of India (1978)1SCC 248

Meghmani Organics Ltd. vs. Union of India (MANU/GJ/1575/2011

Merck Ltd. v. DA MANU/CE/0215/2006

Multiline Electronics Pvt. Ltd. v. Commissioner of Customs MANU/CM/0075/2006 2006(111)ECC75.

Olga Tellis v. Bombay Municipal Corporation (1985) 3 SCC 545

Oxo Alcohols Industries’ Association vs. DA MANU/CE/4123/2001 Commissioner of Customs MANU/CC/0364/2006

Pig Iron Manufacturers Association v. DA MANU/CE/0014/2000

Puneet Resins v. Designated Authority 2004(170)E.LT 274

Rao Insulating Company Ltd. v. The Commissioner of Customs MANU/CB/0023/2007

Reliance Industries Ltd. v. Designated Authority &Others 2006 (10) SCC 368

Rishiroop Polymers(P) Ltd. v. Designated Authority MANU/SC/1451/2006

S&S Enterprises v. DA (2005)3 SCC 337

Saudi Basic Industries and Ors. vs. Designated Authority MANU/CE/0106/2006

Simalin Chemical Industries vs. DA MANU/CE/0119/2003

Sneh Enterprise vs. Commissioner of Customs (2006) 7 SCC 714.

Sree Karpagambal Mills Ltd.v. Directorate General of Antidumping and Allied Duties (2002)2MLJ525

State of Gujarat Fertilizers and Chemicals Ltd vs. The Additional Secretary and Designated Authority MANU/WB/1031/2012

Sterlite Industries (India) Ltd. vs. Domestic Authority MANU/SC/1105/2003

Universal Chemicals and Indus Ltd. v. DA MANU/CE/0440/2002

Vinati Organics Ltd. v. Designated Authority MANU/CE/0892/2000

Volznsky Pipe Plant v. DA MANU/CE/4063/2001

Woollen Mills Ltd. v. Commr. of Customs MANU/CE/0240/2004

List of Abbreviations

Preface

Writers and economists have continuously emphasized on the conflict between antidumping measures and competition law. To quote the oft repeated statement, one protects competitors and the other protects the process of competition. Very few writers have accepted that there can be collaboration between the two and the two can coexist. India has become a leading user of antidumping measures and has come under criticism for it. Criticisms are not new. It is said that antidumping measures are protecting influential domestic producers at the cost of consumers and downstream industries. In fact initially I had been among this group. But then I started examining the decisions more closely and started comparing them with other countries. I felt then that this is one sided view and the matter needs to be examined more thoroughly. Antidumping measures are trade remedy measures and as such, are part of the general economic conditions and policy of the country. The criticism of misuse of antidumping measures by monopoly producers did not appear to be correct. Some writings came which showed that antidumping measures actually help to increase imports from other sources and the domestic industry does not necessarily benefit much from them. This induced me to think whether antidumping measures and competition law are complimentary rather than in positions of conflict? I decided that conclusions cannot be reached without more intensive research. And hence I decided to undertake a thorough research and applied for the research project.

First chapter of the book discusses general historical, economic and political background of India and role of the state in modern constitutional democracies in the era of liberal trade and globalization. We find that powers of the state are being curtailed in external as well internal sphere but its obligations are growing. It is highlighted that Republic of India has been formed with a certain vision and government’s outlook towards role of private companies kept changing. The second chapter deals with the jurisprudential development in antidumping law in India. Indian law on antidumping is same as the WTO Agreement on Antidumping with slight differences which have been highlighted in cases. The provisions of Indian law have developed through interpretation in various decisions and discussion of the cases help us to understand whether overall regulatory regime of India is protectionist or largely balanced. Second part of the book is analysis of the findings of the designated authority. It is through proper reading and analysis of this data only can one form a proper opinion as to whether antidumping measures are being misused to protect some at the cost of many and resulting in overall national welfare loss. Overall national welfare loss or gain has to be examined in the light of issues raised in the first chapter which discusses role of the state and the Indian political, economic and legal background.

The work started with a minor research project which was sanctioned to me by the University Grants Commission (UGC). Even though I could not complete the project on time and had to return the money, it helped me to continue with the work which otherwise I would have abandoned. The book had been written and completed during a period which was full of turmoil in which I had to change jobs and places because I have been fighting against harassment by the present vice-chancellor of the Hidayatullah National Law University, Raipur. Completion of the work got delayed in the process and must have undoubtedly affected its quality to some extent though with a writer’s bias I may not be able to see it. The work therefore owes a lot to persons who gave support since its inception, especially in difficult times. I foremost thank Prof. B.S. Chimni (Professor Jawaharlal Nehru University) who was then the vice-chancellor of the National University of Juridical Sciences(NUJS), where I was working at the time I took the project. He forwarded the project immediately, without any problem. Moreover, from him only I got the idea of working on trade remedy measures from the perspective of distributive justice. My career as teacher of International Trade Law owes much to him. Next I thank Prof. M.P. Singh who as the vice chancellor of NUJS not only accepted the project, but even though I had left NUJS by that time, he also dissuaded me from surrendering it at a time when I almost felt that I would not be able to complete it. Special thanks are due to my family members my father (Prof. Udai Raj Rai), my brothers (Anil Kr. Rai and Salil Kr. Rai) and my sisters in law whose wholehearted support kept my morale high and gave me the mental tranquility so that I could continue to concentrate on my work. This period strengthened my views that competition in the market is not always fair and one has to depend on the general support of many to survive and get one’s fair share in the market. I thank Amity University Rajasthan (Especially Prof. A.K. Keshot, and Prof. M.S. Raste), and Prof. V. Nagraj (vice chancellor of National Law University Odisha) who pulled me out of my troubles and again gave stability to my career. Much of the work took final shape in these two institutions. I thank all the staff in the training centre in National Law School of India University Bangalore, where in three weeks stay much of the work on data was done. I thank all my other friends and well wishers whose general moral support was very valuable during this time. I thank Prof. A. Jayagovind who has been my teacher in International Trade Law and I have learnt much from him. Last but not the least I thank the University Grants Commission for giving me this project which in a way compelled me to carry on with the work against all odds.

Introduction

Resistance to and revolt against any organized power and authority especially against the state and the governmental power and authority has been the most sung about and romanticized sentiment among human beings. While we need both social and political organization for our existence and growth, at the same time we resent the interference of both in our life and thinking, endeavors and enterprise. Nowhere is the role of state criticized more as it is in economic matters. State is criticized in both ways depending on the economic situation of the country at a particular time. If the state adopts an inquiring and restrictive attitude towards entrepreneurs and enterprises, it is criticized for being too interfering. On the other hand if there is economic slowdown and general poverty, the state is criticized for not doing enough to look after the welfare of its citizens. Liberal economic thinkers in the spirit of liberal political thinkers despise too much state intervention and want to keep it at minimal. Therefore according to them, "Pas trop gouverner" (Govern not too much)¹ should be the motto which every country should follow.² Unleashing of human potential through lifting of excessive governmental regulations, controls and restrictions is the purpose of much of liberal political and economic writings. This approach became epitomized in the phrase of laissez faire coined by Vincent de Gournay which later developed into the motto Laissez faire et laissez passer, le monde va de lui même! ³

There can be little doubt that adherents of laissez faire economy despise the idea of economic planning by the state. Opponents of state planning criticize it for killing individual enterprise and incentive. Hayek, an ardent advocate of spontaneous growth, equates the idea of planning with serfdom. The idea reveals the underlying sentiment and logic behind the liberal market economy principle. Liberal market economy principle is in fact a corollary of liberal political philosophy which aimed to minimize intervention of the state in the affairs of citizens. Right to life, liberty and property were claimed as natural rights of man, interference in which was beyond the justified power of the state. Against the individualists asserting rights of man, collectivists justifying greater role of the state claimed that the state exists to look after the welfare of society as a whole and there is no harm if individual interests are sacrificed at the altar of public good. Nowhere this argument was more effective than in the economic field. Proponents of liberal market economy, therefore, rubbished this claim with the argument that interference of external agency like the state in market distorts natural allocation of resources and results in overall national welfare loss. Instead, if individuals are left to pursue their own rational self interest an invisible hand regulates the market and its distortions automatically. According to this view, less interference of the state in the market and free competition leads to overall national welfare gain. That is why Hayek advocates the idea of spontaneous growth and equates planning with serfdom and Ayn Rand puts forward self-interest as a moral philosophy and equates planning with evil.

In between these two extremes certain observations require consideration. One is that human society is a spontaneous organization and political organization is a tool to hold that society together and in order. Political organization that we call ‘State’ also protects a particular social organization against external aggression and internal disorder. Thanks to liberal political ideologies, long past are days when divine origin can be asserted by the state or those holding political power. The state and those holding political power have to justify their existence to the citizens as well as to the international community in general. In the era of globalization international organization and international community are showing sensitivity towards the plight of fellow human beings who are citizens of other countries. Individual economic, social and political well being is now as much a concern of political superiors as those of concerned individuals, their family and friends. This internal and external accountability of the state requires it to have larger role in the social and economic issues than would be conceded by the proponents of liberal market economy.

Role of the State became especially crucial in countries which gained independence in the second half of the 20th century and were left with exhausted resources and impoverished population lacking in education and with a way of life which did not necessarily match with the ideals of western world that was put forward as dominant and universally acceptable creed. In this scenario state in developing countries had to play an active role to push forward economic development, which led to the growth of ideology of state planning. The ideology of planning originally evolved in socialist countries where state had reached its commanding heights and was directing the pattern of growth to ensure that economic development was matched with equity in distribution of the benefits of development. The idea appealed to less industrialized and less developed countries with large chunk of population living in abject poverty. Little could be expected from spontaneous growth in the economic scenario they were faced with. Therefore state took over the task of leading the country towards economic growth and development.

The basic principle in the ideology of economic planning is that the state shall take an active, indeed the decisive, role in the economy: by its own acts of investment and enterprise, and by its various controls-inducements and restrictions-over the private sector, the state shall initiate, spur, and steer economic development. These public policy measures shall be rationally coordinated, and the coordination be made explicit in an over-all plan for a specified number of years ahead.

The whole complex ideology of planning, in all its ramifications, is thus essentially rationalist in approach and interventionist in conclusions. It is committed to the belief that development can be brought about or accelerated by government intervention. Economic conditions in particular, need not remain as they are or evolve under the influence merely of natural forces. Instead, it is felt that these conditions and their evolution should be under state control so that the economic system can be moved in a desired direction by means of intentionally planned and rationally coordinated state policies. The strategy for these policies would emerge as a set of practical inferences from rational analysis of the facts in a country’s situation and the positing of certain development goals. All those in the South Asian region who urge state economic planning agree, in principle that it should benefit the common people, concentrate on raising the levels of living of the poorest strata in the nation, and express the will of the nation as a whole.⁴

Planning, therefore, even though, emerged in socialist countries it became popular in democratic countries like India that aimed at three goals simultaneously, economic development of the country, greater democracy and growth of equality and equal opportunities to individuals for their overall development. In these countries which had fought against colonial yoke, equality and general social welfare was synonymous with the ideal of democracy and freedom. Therefore they accepted economic planning but not at the cost individual freedom and within the democratic political framework. Hence developed the idea of democratic planning which meant that planning would be controlled not by technocrats but by persons sensitive to popular demands and interests.

Democratic planning—a term that is popular in South Asia-embraces many ideas—. It should be noted first of all that the term is seldom, if ever, used in the restricted sense most natural to westerners; that is to imply merely that public policies and their coordination in a plan should emerge from a democratic political process and be executed by a government whose power lies in a popularly elected parliament. Even in India, which in a fashion satisfies these political conditions, other connotations are emphasized. Sometimes democratic planning implies that planning should create greater social and economic equality. It is then synonymous with socialist planning in its wider and vaguer meaning-in other words, with real democracy. However two other and more specific meanings of the term are prevalent—.

First, democratic planning is held to mean that planning and the policies coordinated in the plans should enlist not only the support of the masses but also their active participation in plan preparation and implementation. Secondly it is generally held to mean that this popular participation and cooperation should emerge voluntarily so that state policies can be carried out without regimentation or coercion.⁵

It is debatable whether combination of liberal political values with socialistic economic ideals was a good idea or not. Many say that India lagged behind the race of economic development because of its democratic set up which reduced the governance power of the State. On the other hand many say that India lagged behind in economic development because of its faulty economic policies which burdened the state with too much to cope with and killed individual endeavors and enterprise.⁶ Anyway, economic crisis and change in world economic and political scenario led government of countries like India to gradually reduce their role in the market and liberalize the economy enough to integrate it with the world economy.

Dilemma that democratic countries like India face now in the globalised economy is to ensure economic development of the country by encouraging individual enterprise but at the same time also taking care of economic and social welfare of each of its citizens. Individualism has come to have a different connotation as well. It not only means that there should be minimal interference in the affairs of individuals but also that each individual should have economic, social, educational and political means to pursue his/her overall welfare and development. A duty is cast on the state as a tool of society to ensure that every individual gets a reward for being member of a politically organized society. This is a political necessity in a democratic country for a government to justify its existence. In addition to internal accountability there is external accountability also with international community analyzing the welfare of citizens of a country in various forums. Negation of the powers of state combined with positive obligations on the state has given a new role to the state that of market regulator. Trade remedy measures, competition policy, labour policy etc. are methods whereby state regulates and directs the functioning of markets and ensures that market functions in a way which fulfills social and political ideals of the society.

The vast majority of States are now in a condition of more or less permanent economic crisis. They cannot afford a prolonged standstill of production, or a rise of prices, profits and wages which paralyses the economic capacity of the nation. Hence the state must intervene, by wage boards, conciliation commissioners compulsory awards, arbitration courts and other means designed to ensure industrial peace, as well as a certain amount of public influence on the formation of prices and wages.⁷

Idea of state enterprises are no longer being encouraged. The state rather encourages private enterprises and tries to protect and strengthen them so that they continue to enhance overall national welfare. Instead of participating in the economy, the state in democratic countries regulates the direction of economy so that its positive obligations are fulfilled through private enterprise and endeavours. Thus planning has taken a new form. State does not participate but regulates, protects and strengthens as the need be, role of various participants. This is not a new approach. It has been happening in all countries with democratic government. Market fulfills not only economic function but also a political one. In the liberal political and economic policy regime, markets become an important tool for politics (viewed as resolving conflicts between competing interests) of the country. Peter Drucker had been candid enough to remark that ‘[e]conomics is too important to American politics to be left to the American economists. Economics has a political role to fulfill that transcends its own subject matter.’⁸

Trade remedy measures like antidumping measures should be examined in this light. India has become one of the leading user of antidumping measures. Often use of antidumping measures are criticized that it is being abused by monopolies and dominant industries to retain their market position at the cost of consumer welfare.⁹ Liberal market economists say that these measures result in overall national welfare loss. By using trade remedy measures like antidumping measures we protect a small group of producers at the cost of consumers at large.¹⁰ The best way is to let the market choose its survivors as it weeds out inefficient players. Writings on the use of antidumping measures in India usually follow this line of thought.¹¹ There are very few exceptions which are actually based on empirical research and finding but unfortunately are not much publicized.¹² Dominant opinion is that India was forced to liberalise its market after the India-Quantitative Restrictions Case¹³, the companies with assistance by the state started using antidumping measures to protect themselves from competition. Present work examines this argument. Usually antidumping measures are considered to be against competition policy and usual statement is that antidumping measures protect competitors while competition policy and law protect the process of competition. This statement which is often repeated by supporters of free market and spontaneous growth is at odds with the consistent statement made by the Indian Antidumping Authority that we need competitors for competition to continue in the market. The Authority further states that antidumping measures do not stop imports they only ensure fair competition and continuation of competition by allowing large number of players to survive in the market thus allowing buyers wide choice.

Hard core liberal market economists would rubbish such statements and so would critics of use of antidumping measures in India. The present work purports to examine this criticism and examines whether antidumping measures can be a tool in protection and promotion of competition and overall national welfare gain. Overall national welfare gain is to be understood not only in terms of mathematical analysis but also in terms of obligations of state, role of state in the modern globalizing economy and relationship of individual and the state. The present work has examined not only the law of antidumping measures but also the application and use of antidumping measures in the market and how far it is being fairly used or abused by the government in discharge of its various functions, as regulator of market on the one hand and as protector of individual rights and welfare on the other.

The present work moves on the premise that there cannot be any hard and fast policy, like and dislike, for antidumping measures. It has to be viewed in the economic, political, legal, social and historical background of a country. The first chapter has to be read in this light and antidumping cases analysed below have to be examined in the background given in the first chapter. In the modern form of planning wherein state works as market regulator antidumping measures help to balance various interests as well as help to maintain competition in the market. Antidumping measures and competition law and policy when properly used are part of the same goal and antidumping measures are easier and readily available tools to continuously check any market distortion. But again it all depends how antidumping measures are being used. Whether they are being properly used or being abused has to be examined in the background stated above. One fact that always needs to be remembered is that we need antidumping measures only when we have a liberal trade regime. That is why India felt the need for an antidumping law only in the second half of 1980s when it slowly started opening up its market. Trajectory of market is fraught with bitter rivalries where the rival is sought to ousted at any cost so that the consumer and the market can be in the control of one or few. In international trade, governments also become participants in the game for one reason or the other. In such a situation it becomes the duty of governments of other countries to continuously monitor the functioning of their market and to check any distortions which may have jeopardizing effect on the economy and welfare of the citizens. Antidumping measures is one way whereby the government may check functioning of the market. However, application of such trade remedy measures also require continuous examination and analysis