Overview of trade remedies
In 1947, the General Agreement on Tariffs and Trade (the GATT 1947) was negotiated as a stopgap measure. Although the GATT 1947 was drafted, the ITO was never created because of inaction on the part of the US Congress. Since inception, the primary objective of GATT 1947 has been to reduce tariffs, enhance international trade and transparency.3 As tariff rates were lowered over time following the GATT 1947 agreement, member countries realised the need to reform the existing framework.4 From 1947 to 1994, the GATT contracting parties engaged in eight rounds of negotiations, the last of which was the Uruguay Round (1986–1994). The Uruguay Round agreements were signed in Marrakesh, Morocco on 15 April 1994 and on the same date the World Trade Organization (WTO) was born when the agreement establishing the WTO (the WTO Agreement) was signed.5
The WTO Agreement, inter alia, included the GATT 1994 as an integral part, which is binding on all members.6 The GATT 1994, in turn, encompassed the provisions of the GATT 1947, as well as the provisions of the legal instruments in force under the GATT 1947.7
One of the cardinal principles of the GATT 1994 and the WTO is the most-favoured-nation (MFN) treatment.8 MFN means that each member nation is required to apply tariffs equally to all trading partners. 'National treatment', which is another core principle of the GATT 1994, prohibits discrimination between imported and domestically produced goods with respect to internal taxation or other government regulation.9 Where, on one hand, the GATT and WTO regimes mandate equal treatment and non-discrimination, on the other, the WTO Agreement provides exceptions by allowing use of trade remedy instruments10, among others, namely:
1. anti-dumping measures targeted against unfair-priced imports;
2. subsidy or countervailing measures targeted to offset subsidy given by exporting governments; and
3. emergency safeguard measures adopted to combat unforeseen surges in imports.
Pursuant to the GATT 1994, detailed guidelines have been prescribed under the specific agreements that have also been incorporated in the national legislation of the member countries of the WTO. Indian laws were amended with effect from 1 January 1995 by introducing a procedural framework for initiation and conduct of trade remedial investigations, the imposition of measure and judicial review.11 The Directorate General of Trade Remedies (DGTR) of the Ministry of Commerce and Industry, chaired by the Designated Authority (DA), conducts all trade remedial investigations in India.12 From 1995 to 2020, India initiated 1,071 anti-dumping investigations, followed by the United States with 817 investigations. From January 2020 to December 2020, WTO member countries initiated 349 anti-dumping investigations, the highest number so far.13 Overall, from 1995 to 2020, China was subjected to 1,069 anti-dumping measures, followed by South Korea with 301 measures.14 In the same period, WTO member countries initiated a total of 632 countervailing duty investigations; the majority of these (290) were initiated by the United States, followed by the European Union (89) and Canada (76).15 India has initiated 28 countervailing duty investigations, most of which have occurred in the past three years and are predominantly against China, Vietnam, Malaysia, Thailand and other Asian countries.16 India has imposed safeguard measures in one investigation concerning imports of solar cells and modules.17
Legal framework
1. Anti-dumping measures
Under international law, anti-dumping measures are regulated by Article VI of the GATT and the Agreement on Implementation of Article VI of the GATT 1994 (the Anti-Dumping Agreement). Anti-dumping laws allow a country to impose temporary duties on goods exported by a foreign producer when the export price of the goods is less than the normal value of 'like articles' sold in the exporter's domestic market and is causing injury to the domestic producers.
In India, anti-dumping actions are governed by Sections 9A, 9AA, 9B and 9C of the Customs Tariff Act 1975 (the Act) and the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules 1995 (the Anti-dumping Rules) as amended from time to time.
The government agency entrusted with the determination of dumping and injury is the DA and the DGTR.18 However, the DA only conducts trade remedial investigations and recommends anti-dumping duties.19 The actual responsibility for imposition and collection of duties lies with the Ministry of Finance.20
India's domestic law envisages that where any article is exported21 from any country or territory to India at less than its normal value,22 upon the importation of the article into India, the Indian government, through the Ministry of Finance, may, by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of dumping23 in relation to the article.24
Since dumping per se is not actionable, there is a further requirement to establish that there exists a causal link between dumped imports and injury caused to the domestic industry.25 The injury margin is arrived at by calculating the difference between the non-injurious price26 and the landed cost of the imported product.27 India follows the WTO's lesser duty rule;28 that is, the Indian government imposes anti-dumping duty to the extent of the margin of dumping or margin of injury, whichever is lower.29 The Indian government (through the Ministry of Finance) has the discretion not to implement the DA's recommendations on levying duty, in which case the findings automatically become infructuous and hold no legal authority.
The DA usually recommends a duty for a maximum period of five years from the date of its imposition unless revoked earlier. However, if the DA, in a review, is of the opinion that the cessation of the duty is likely to lead to continuation or recurrence of dumping and injury, it may from time to time extend the period of imposition for a further five years (known as a 'sunset review').30 During the five-year period, the DA may carry out a 'changed circumstances' review, which is also called a 'midterm review'.31
India also allows 'new-shipper' reviews. In such a review, any exporter who has not exported the product to India during the period of investigation may request a determination of individual dumping duty. However, a new-shipper review is only permissible if the applying exporter is not related to an exporter or producer in the exporting country who is subject to the anti-dumping duties.32 To prevent evasion of anti-dumping duty, the DA also undertakes anti-circumvention investigations with a view to extending the scope of duty levied in a previous investigation.33
The recommendation and imposition of anti-dumping duty is appealable to a specialised tribunal, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), constituted under Section 129 of the Customs Act 1962.34
2. Subsidies and countervailing measures
Article XVI of the GATT 1994 and the Agreement on Subsidies and Countervailing Measures (ASCM) deal with the regulation of subsidies and the use of countervailing measures to offset the injury caused by subsidised imports. Pursuant to the ASCM, a subsidy is deemed to exist if there is a financial contribution by a government or any public body within the territory of a member or there is a form of price support and a benefit is thereby conferred.35
In India, countervailing actions are governed by Sections 9, 9B and 9C of the Act. In 1995, the Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidised Articles and for Determination of Injury) Rules 1995 (the Countervailing Rules) were enacted to determine the manner in which the subsidised articles liable for countervailing duty are to be identified, the manner in which subsidy provided is to be determined and the manner in which the duty is to be collected and assessed under the Act.
As with anti-dumping, the DA conducts countervailing investigations and recommends duties pursuant to the provisions given under the Act and the Countervailing Rules.36 The responsibility for the imposition and collection of duties as recommended by the DA lies with the Ministry of Finance.
Indian law on countervailing measures is similar to the ASCM and provides that where any country or territory pays or bestows (directly or indirectly) any subsidy37 upon the manufacture or production therein or the exportation therefrom of articles of any kind, including any subsidy on transportation of the articles, then, upon the importation of such articles into India, whether imported directly from the country of manufacture, production or otherwise, and whether imported in the same condition as when exported from the country of manufacture or production or changed in condition by manufacture, production or otherwise, the central government may, by notification in the Official Gazette, impose a countervailing duty not exceeding the amount of the subsidy.38
The DA in determining the subsidy shall ascertain whether it:39
1. relates to export performance;
2. relates to the use of domestic goods over imported goods in the export article; or
3. has been conferred on a limited number of persons engaged in manufacturing, producing or exporting the article unless the subsidy is for:
4. research activities conducted by or on behalf of persons engaged in the manufacture, production or export;
5. assistance to disadvantaged regions within the territory of the exporting country; or
6. assistance to promote adaptation of existing facilities to new environmental requirements.
As with anti-dumping practices, the DA is required to assess and accord a finding that the import of a subsidised article into India causes or threatens to cause material injury to the domestic industry. The principles for the determination of injury are set out in Rule 13 read with Annexure I of the Countervailing Rules. Rule 12 read with Annexure IV of the Countervailing Rules provides for the calculation of the amount of countervailable subsidies. However, in a scenario where an article subject to countervailing duty already attracts an anti-dumping duty, a countervailing duty for the amount equivalent to the difference between the quantum of countervailing duty and the anti-dumping duty payable may be imposed by the government.
The countervailing duty ceases to have effect on the expiry of five years from the date of its imposition, unless revoked earlier. However, if the central government, in a review, is of the opinion that the cessation of the duty is likely to lead to continuation or recurrence of subsidisation and injury, it may, from time to time, extend the period of imposition for a further five years.40 An appeal against the order of determination or DA review regarding the existence, degree and effect of subsidy in relation to the import of any article is made to CESTAT.41
3. Safeguard measures
Article XIX of the GATT 1994 read with the Agreement on Safeguards (AOS) provides the ground rules for safeguard actions. According to the AOS, a member may apply safeguard measures to a product if the member has determined that it is being imported into its territory in such increased quantities, absolute or relative to domestic production, as to cause serious injury to the domestic industry that produces identical or similar, or directly competitive products.42 Article 9 of the AOS provides for a special and differential treatment for developing countries.
The national legislation to implement the provisions of the AOS has been enacted under Section 8B of the Act. The Customs Tariff (Identification and Assessment of Safeguard Duty) Rules 1997 (the Safeguard Rules) govern the procedural aspects. Further, Section 8C of the Act and the Customs Tariff (Transitional Products Specific Safeguard Duty) Rules 2002 have been specifically enacted for imposing safeguard duty on any article imported into India from China in such increased quantities and under such conditions as to cause market disruption to the domestic industry. Except in relation to China, the India–Korea Comprehensive Economic Partnership Agreement (Bilateral Safeguard Measures) Rules 201743 and the India–Japan Comprehensive Economic Partnership Agreement (Bilateral Safeguard Measures) Rules 201744 also allow safeguard measures in the form of quantitative restrictions to control surges in imports from Korea causing serious injury to domestic producers of like or directly competitive products in India.
Safeguard duty investigations were previously conducted by the Directorate General (Safeguards) of the Department of Revenue of the Ministry of Finance. Post-2018, safeguard investigations are conducted under the aegis of the DA of the DGTR.
Similarly to the provisions of the AOS, Indian law provides that if the central government, after conducting an enquiry, is satisfied that any article is imported into India in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic industry, then it may, by notification in the Official Gazette, impose a safeguard duty on that article.45 It may be noted that any safeguard duty imposed under the Safeguard Rules shall be on a non-discriminatory basis and applicable to all imports of such an article irrespective of its source.46
The safeguard duty ceases to have effect on the expiry of four years from the date of its imposition unless revoked earlier.47 The DA also conducts a review of the need for continuance of safeguard duty.48 In no case shall the safeguard duty continue to be imposed beyond a period of 10 years from the date on which it was first imposed.49 If the duty so recommended is for more than a year, the DA is to recommend progressive liberalisation adequate to facilitate positive adjustment.50
Treaty framework
Free trade agreements (FTAs) are arrangements between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non-tariff barriers on substantial trade between them.51 Formation of FTAs is one of the permitted exceptions to the MFN principle. Like other countries, India too has entered into FTAs and preferential trade agreements (PTAs).52 India is also involved in other formats of bilateral and pluralistic partnerships such as comprehensive economic cooperation agreements (CECAs), comprehensive economic partnership agreements (CEPAs)53 and regional trade agreements (RTAs).
India views RTAs and PTAs as 'building blocks' towards achieving the overall objective of trade liberalisation. India's initial foray into RTAs was through the Bangkok Agreement (1975), the Global System of Trade Preferences (GSTP, 1988) and the SAARC PTA (SAPTA, 1993). India has built on these initiatives to engage with countries and regional blocs around the globe.54
It is known that FTAs and RTAs through their preferential tariffs accelerate trade among nations. However, to combat surges of imports (including low-price imports) most bilateral treaties preserve the right of members to invoke trade remedy measures. Noted examples are (1) the Association of Southeast Asian Nations (ASEAN) Agreement on Trade in Goods, which permits a member's use of safeguards under the AOS; and (2) the CECA between India and Singapore, which permits the use of subsidy and anti-dumping measures. Some of the bilateral agreements entered into by India also call for strict compliance with the WTO Agreement and incorporate WTO-plus obligations. A memorandum of understanding to this effect was signed between India and Iran in 2018, mandating mutual cooperation in trade remedial measures and sharing of data before initiation of investigations.55
India is also actively involved in negotiating a number of agreements,56 including:
1. the ASEAN–India FTA;
2. the India–Thailand CECA;
3. the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation FTA;
4. the India–Gulf Cooperation Council FTA;
5. the India–South African Customs Union PTA;
6. the Second Review of the India–Singapore CECA;
7. the Expansion of India–Chile PTA;
8. the India–Mercosur PTA;
9. the India–European Union Broad Based Trade and Investment Agreement;
10. the Asia-Pacific Trade Agreement;
11. the India–New Zealand FTA CECA;
12. the India–Canada CEPA;
13. the India–Australia CECA;
14. the India–Indonesia CECA;
15. the Joint Study on the India–Common Market for East and Southern Africa Joint Study Group Report to examine the feasibility of a PTA FTA; and
16. the India–Israel FTA.
In November 2019, the government took a decisive step to withdraw from the Regional Comprehensive Economic Partnership (RCEP). This decision to opt out of the RCEP was based on the understanding that the treaty's structure did not address outstanding issues and key concerns for India.57 On 15 November 2020, 15 member countries, namely the 10 ASEAN member states and Australia, China, Japan, New Zealand and South Korea, signed the RCEP after eight years of negotiations.
Although trade negotiations were marred by the covid-19 pandemic, India and Mauritius signed a comprehensive economic cooperation and partnership agreement (CECPA) on 22 February 2021.58 One of the unique features of the India–Mauritius CECPA is its automatic trigger safeguard mechanism (ATSM), wherein both countries may impose a safeguard duty (once duties are eliminated or reduced) on imports of highly sensitive products after reaching a certain threshold.59 In accordance with the CECPA, the ATSM will be negotiated within two years of the date of the agreement. If negotiations are not concluded within two years, a default ATSM will apply.60
