ABSTRACT

Dumping[1] has been referred to as term used in international law and is a process whereby which, a company or a country exports volumes of products at prices which are lower than the exporter’s domestic market price, and this in turn results in endangering the position of the manufacturer or producer, in terms of financial stability, in the importing nation.

The advantage of dumping is that it has the ability to flood the markets with lower priced products but it is often considered as an unfair practice. Although dumping is considered legal under the World Trade Organization (WTO), the various countries impose tariff duties and quotas for protecting the interests of the domestic producers from monetary harm or losses due to such lower prices of the products. And this only known as anti-dumping.

[2]This type of a duty is only imposed when such import poses potential threat to the local manufacturers, and is a technique used by the domestic government to protect its domestic producers. It is done so by imposition of tariffs; and the tariff depends upon the difference in prices of such products. This research similarly focuses on such type of anti-dumping duty which was imposed on Chinese companies for the export of such lower priced steel, by the US Department of Commerce, in the year 2015.

This paper uses doctrinal form of research on the various secondary data available online, including articles and text books, and throws light on the meaning of dumping and anti-dumping with suitable examples. It then elucidates the various facts of the above mentioned case, where a complaint was filed by the American steel producers against Chinese companies, to the Department of Commerce in America. Later which came under the investigation of the International Trade Commission (ITC). This paper also puts emphasis on the anti-dumping laws connected with the case, to limit the unfair competition/practices, and thereby concludes by mentioning about the reasons for such increase in cases, in recent times.

KEYWORDS: DUMPING, ANTI-DUMPING, INTERNATIONAL LAW, TARIFF, IMPORTS

INTRODUCTION

The tariff which is imposed on foreign manufactured products, imported at prices which is lower than the fair market value of the similar goods in the domestic market, then a type of duty, known as the Anti-dumping duty[3], is imposed to protect the domestic market and businesses from getting exploited or from unfair competition. This duty is normally imposed by the domestic government, but only when it feels that the products are being dumped and it is in some way or other harming the domestic market. Thus, to ensure fair competition in the markets and to promote the interests of the consumers such a duty is imposed. [4]

The difference between the foreign and domestic market price is referred to as the dumping margin, which is calculated by subtracting the export price from the normal value of the product. And this helps us find the amount of products actually dumped by the importing nation. The anti-dumping duty which is imposed on such products might range from anywhere between 0 to 550 percent depending upon the circumstances of each case.

WTO or the World Trade Organization is an international organization which plays one of the most important roles in regulation of anti-dumping measures. It does not have the power to regulate the organizations accused of such dumping but it does have the power to regulate the way any government reacts to such type of dumping activities in their respective territories. It is sometimes seen that many governments impose very high anti-dumping duties on foreign imports, reacting very harshly, this is when the WTO interferes to examine or determine whether the actions are actually genuine or if they go against the founding principle of WTO, i.e. the free market principle or promotion of fair competition.

Although dumping is considered legal under the WTO, it might become illegal on the fulfilment of certain conditions. One of the main factors leading to such illegality is the “material damage” it causes to the domestic market of the imported nation and because this material damage causes harm to the domestic market, it ultimately leads to unfair competition, due to such low prices.

Thus, in case of dumping, if the affected country shows valid proof of such material damage, the amount of material damage and the threat caused to the domestic market, the WTO allows the respective country to take legal action for such activity. Also it is provided that only if the dumping activity is more than 5 percent, then only it can take an action. Dumping below 5

percent is normally not considered illegal.[5]

 

CONCEPTUALIZATION

The research conceptualizes the facts of the case and makes an analysis in comparison with the anti-dumping laws. It throws light on the GATT 1994 principles which provides the guidelines for governing trade between the members of the World Trade Organization. It also mentions that the imported goods shall not be subjected to internal taxes in excess of the costs imposed on domestic goods. [6]According to the WTO, all the imported goods are required to be treated in the same way as other domestic goods, but sometimes when such imports exceed the stipulated rate and threaten to cause injury to the domestic market, in such cases WTO allows the respective government to impose favourable duty on the imports.

There are a number of methods available for determining whether any product has been lightly or heavily dumped and this depends upon the amount of products actually dumped. One such method of calculating the anti-dumping duty is based on the normal price of the product, while other methods include using the price charged in a different country but on the same product and to calculate the duty based on the total cost of the product, expenses and profit margins of the manufacturer.

In recent days anti-dumping cases have increased a lot and most are seen to be initiated by American businesses. The reason for such reliance on anti-dumping laws by local businesses can be attributed directly to the unfair competition from such lower priced imports manufactured abroad. And based on the recommendations made by the U.S. Department of Commerce, the International Trade Commission imposes duties.

Similarly, this research is based on the anti-dumping of steel products which were being imported from Vietnam, originated in China, and were evading the anti-dumping and anti-subsidy orders. Later the US Department of Commerce imposed anti-dumping duties on the imports of cold-rolled steel entering United States. And the case had mainly originated from the petition filed by the U.S. steel producers like Arcelor Mittal USA MT.AS, Nucor Corp NUE.N, AK Steel Holdings Corp AKS.N and United States Steel Corp X.N, who had alleged that the Chinese producers were diverting their steel products to Vietnam after imposition of deities and were in a way harming the US steel producers.

LITERATURE REVIEW

The steel industry is one of the million-dollar industries and the shipments of cold-rolled steel[7] that were imported from Vietnam, into the United States, increased to 215 million dollars annually from 9 million dollars, while corrosion-resistant steel imports rose to 80 million dollars from 2 million dollars.[8]

The fact is beyond doubt that China and United States are the biggest competitors of steel. The steel imported from these countries travel worldwide and are used for multiple purposes but lately China has been accused of dumping steel and related products by the large American companies. And it has been a significant issue since the imported steel, which is estimated to be almost three billion dollars, has resulted in a lot of losses for the American industries and steel producers. It has devalued the markets in America and thus they petitioned to the U.S government to prevent such dumping, while the EU/European Communities also helped in identifying such dumped steel.

Nations like India and Brazil also faced many such negative effects of dumping while China’s imports were increased by around 55 percent. Brazil also had to impose tax on all such Chinese dumped steel, after which the President also gave a speech on creation of a gap between these two nations because of such dumping actions. In 2015 such imports resulted in clear imposition of taxes on such duties due to many complaints coming from the domestic steel manufacturers. The Chinese were seen to out produce the other states by a three is to one ratio.

This research is on a similar case of anti-dumping activity by Chinese companies, of steel products, in the year 2015, which posed a significant impact in the domestic market of U.S. and later many large American steel companies filed a complaint in the US Commerce Department. Since these imports were very low priced, it was causing material harm to the domestic US market, leading to unfair competition.

The investigation later moved to the International Trade Commission, also known as ITC, on the recommendation of US Commerce Department to look and investigate on the amount of injury caused on the domestic market. The ITC later found that such low priced steel had caused significant harm to many American businesses, resulting in a 500 percent import duty on such steel products imported from China.

According to the findings of the case, even India levied anti-dumping duty of around 316 dollars per tonne on the import of such steel products, for protecting the domestic industries or producers from such harm or loss, which the low cost imports were causing. This duty was imposed on three countries, mainly including China. While the duty imposed on Korea was around 180 dollars per tonne, a 309-dollar duty per tonne was imposed specifically on China.[9] This duty was imposed only after the recommendations made by Directorate General to the Ministry of Finance. This duty which has been imposed on certain stainless steel products, have been levied for a period of 5 years.  Certain of these products have also been described as hot-rolled products in the automotive industries.

These products have a number of usages varying from manufacturing of useful equipment’s, railway lines and pipes, while also including its usage in construction and buildings, auto (automotive) parts and in harnessing power.
In this case the DGAD or the Director General of Anti-Dumping Duty had conducted the investigation and also calculated the amount of injury caused by such dumping, thereby determining the principal facts of the case.
This brings our attention to the Jindal Steel Industry, who had filed an investigating  application to the respective authority, about such dumping activity of Stainless steel products by not only Korea and Malaysia but also China. After investigation by the DGAD, it came to the conclusion that the domestic industries of all the imported nations had suffered a lot of losses, with material injury to such domestic industries. The low priced products had resulted in dumping activity of a huge volume of such goods and the main origin of such products was China.

The Ministry of Finance also mentioned the fact that such duty shall be imposed for a duration of 5 years[10] and all the provisions of the multilateral WTO regimes shall be followed.

OBJECTIVES OF THE STUDY

The primary objectives of the study include understanding of the concepts like dumping and anti-dumping, including case analysis of such dumping activity by the Chinese Companies, in the year 2015. It throws light on the factors causing material injury to the domestic market, while focusing on Article 6 of the GATT 1994 agreement with its main motive of limiting unfair competition in the markets.

This paper aims at providing information on the various effects of steel dumping by such Chinese companies on the U.S. markets including an in-detail analysis of the case. It elucidates on factors which cause harm to the markets of the imported nation and while doing so it throws light on Article 4 clause 1 of the GATT 1994 agreement, which talks about the domestic industry. Also it brings to our focus the impact of such dumping on other countries and subsequently the globe at large. Thereby the research concludes by emphasising on the reasons for such increase in dumping cases in recent days.

THEORETICAL FRAMEWORK OF THE STUDY

According to the facts of the case, over the last few years the global production of steel has almost doubled. From eight hundred million it has increased to around 1.6 billion and in the year, 2006, China was announced to be the biggest exporter of steel in the world.  Analysing the need of protecting the domestic industries of a number of nations, around a total number of four hundred trade actions have been taken against China. As a result, many countries have adopted safeguard measures against such dumping. The US Department of Commerce have imposed duties of around two hundred thirty-six percent on steel, in 2015. In the same year two hundred fifty-six percent tariff was levied on corrosion resistant steel products from China.

The international seminar which was held in Brussels jointly by the OECD or Organization for Economic Cooperation and Development and Belgium, was mainly an initiative to reduce the excess volume of steels by nations and ensure more transparency in the transaction. And in a way this was an effort to direct China to reduce its production of steel and such dumping activity.

The study brings to our focus the various provision of the anti–dumping agreement[11] to provide a clearer picture of the infringed laws in the case. The duty which was in this case imposed on the Chinese companies was due to their lower priced steel exports, causing harm to the domestic market of the U.S. This was recognised by the US Department of Commerce since it was causing harm to the domestic American steel producers. Later on this case came under the investigation of the International Trade Commission and to validate the various facts of the case, it explains the meaning of the various provisions mentioned under Article 6 the anti-dumping agreement.

Article 6 of Anti-Dumping-The theoretical framework of the study is based on the Article 6 of Anti-Dumping Agreement which is mentioned under the GATT 1994 principle. This agreement primarily governs the various measures that are applicable under anti-dumping agreement, by the members of the WTO. They are also referred to as certain types of remedies which are available after an investigation, according to the provisions mentioned under the act.

It is mentioned that if an imported product is dumped into the domestic market of the imported nation and such dumped products is causing material injury[12] to the domestic industry, then one has the right to apply the provisions of the agreement, but based on certain requirements which must be fulfilled in order to impose such measures. If one fails to respect either the procedural or substantive requirements, then also the case can be taken to the dispute settlement. Opposite to the Subsidies and Countervailing measures which is based on a certain discipline, the anti-dumping agreement does establish any such discipline, mainly because dumping is considered as pricing practice which is not under any such multilateral disciplines.

Like product is a very important concept on which the anti-dumping agreement is based. Any product which is identical to another product is a like product and although the product might not be exactly same, but has a lot of common characteristic with that of the product in consideration. Thus, products which are dumped are said to cause material injury, since they are imported at a much lessor price resulting in harm or material injury to the domestic industries of the imported nation.

The first provision of the anti-dumping agreement under Article 1 provides the basic principle of not imposing any anti-dumping measure prior to an investigation. And the duty shall be imposed only if the dumped imports causes material injury to the domestic market[13].

The substantive rules for determining the amount of dumping is provided under Article 2 of the act and is calculated according to prevailing normal and export price.in the market. This article contains provisions in detail about ways of calculating the normal and export price along with ways to do such comparison.

While Article 2 provides for the substantive provisions, Article 3 of the agreement provides ways to determine the material injury caused by such dumping. If such dumping does not result in material injury, then the provisions of the act do not apply. There shall be valid evidence of material injury caused.

The rules for determination of material injury is provided under Section 3 of the anti-dumping agreement which defines material injury as a threat to the domestic industry. And formulates that the basic requirement for such injury includes positive evidence of dumped imports, including the volume and price of such products, effecting the domestic industry. It thus contains the various factors which shall be considered while examining the injury caused to the domestic industry by such imports. And the dumping margin shall also be calculated accordingly.[14]

The term ‘industry’ has been defined under Article 4 of the agreement for examining the injury caused to the domestic industry and is also defined with respect to the ‘like product’ where the producers produce almost similar products or products with indistinguishable characteristics, which are being dumped. Also the article makes emphasis on defining the regional domestic industry[15], for determination of duties or injury caused.

METHODOLOGY

The paper uses doctrinal form of research or desk research on the various secondary data available online, in articles, in text books, collected and analysed in respect of different objectives of the proposed study. It also incorporates a narrative analysis based on the available literature of the study.

FINDINGS OF THE STUDY

China being the biggest producer of steel have resorted to unfair trade practices through dumping of steel and imposition of illegal subsidies. They have sold the products below their cost of production resulting in lowering of the level of prices. As a result, the European Commission imposed anti-dumping duties, to protect the domestic steel producers from such harm or material injury, and also for protecting its own imports which was facing severe harm. Such anti-dumping tariffs imposed were mainly for preventing the flow of such cheap priced steel products, from China to other parts of the world.

In 2001 when China entered the WTO, it had agreed to provide concessions to the other WTO members for coming 15 years, contending that others would not be required to use the prices or costs of productions for determining the dumping duties but instead the tariffs were calculated based on the difference in prices with the other member countries. However, this exception was substituted and the later on the European Union adjusted the rules relating to anti-dumping.[16]

In the global scenario, Chinese steel companies fall among the top steel producing companies in the world and principal reason for this being most of the steel enterprises in China are state-owned, which plays a crucial role in uplifting their position.

According to studies conducted by the European Communities, the level of tariff imposed on Chinese companies is anticipated to fall to thirty-five percent from around thirty-nine percent globally. Although, the information provided by Chinese authorities might not be fully true but in the year 2015, it was estimated that China produced 400 million tonnes in surplus and around three-fifty million tonnes in the year 2017.

The various investigations carried on by the EC (European Communities) prove the fact that the enterprises which are owned by the state or controlled by the Chinese government act as price makers, depriving the private players or enterprises who have no option but to accept the unjust prices, acting as price takers. These advantages give the Chinese companies an upper hand in term of making profits and this has been a significant challenge to the entire global steel industry.

CONCLUSION

The study draws our attention to the fact that steel is an ever expanding/ growing industry and is of utmost importance since a number of products are formed from such steel, and a lot of nations are dependent on such imports.[17] It makes emphasis on the dumping activity which is considered legal under the World Trade Organization, unless such dumping activity or products cause harm or ‘material damage’ to domestic industry of the imported nation. Also stating the fact that an action for dumping activity arises only if the material damage caused is more than 5 percent, with valid proof, because dumping of products which amount to less than 5 percent is not considered illegal. The main factor being the material damage, the existence of which gives rise to an action.

The research brings to our notice the importance of steel industry, stating that such dumping will continue to have a major impact on the global trade[18] and this is the reason why most governments of the world are striving to gain a controlling stake in the flow of such raw and processed materials. And although such steel dumping by the Chinese companies has heated up the relations between U.S and China, including BRIC countries like Brazil and India, only time will decide whether it plays a positive or negative impact on the World Trade Organization.

REFERENCES

·        Effects of Chinese Steel Dumping in 2015

by Fedsteel | Feb 11, 2015 | Our Blog

• Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994. Article 6 of GATT agreement
• U.S. slaps heavy duties on Chinese steel shipped from Vietnam

By Reuters Staff

• TRADE DEFENCE | Brussels, 17 February 2022 European Commission imposes anti-dumping measures on fasteners from China
• Anti-dumping duty on steel imports from China, 2 other nations Read more at: https://economictimes.indiatimes.com/news/economy/foreign-trade/anti-dumping-duty-on-steel-imports-from-china-2-other-nations/articleshow/47573058.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
• CHINA IS DUMPING STEEL ON THE GLOBAL MARKET 23. 8. 2018.
• U.S. slaps heavy duties on Chinese steel shipped from Vietnam by Reuters Staff
• Dumping By ADAM BARONE Updated March 24, 2021 Reviewed by MICHAEL J BOYLE Fact checked by KATRINA MUNICHIELLO
• Anti-Dumping Duty By WILL KENTON Updated October 06, 2020 Reviewed by GORDON SCOTT Fact checked by AMANDA BELLUCCO-CHATHAM

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[1] Dumping By ADAM BARONE Updated March 24, 2021 Reviewed by MICHAEL J BOYLE Fact checked by KATRINA MUNICHIELLO

[2] What Is Dumping?

Dumping is a term used in the context of international trade. It’s when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter’s domestic market. Because dumping typically involves substantial export volumes of a product, it often endangers the financial viability of the product’s manufacturer or producer in the importing nation.

[3] What Is an Anti-Dumping Duty?

An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value. Dumping is a process wherein a company exports a product at a price that is significantly lower than the price it normally charges in its home (or its domestic) market.

[4] The anti-dumping duty imposed under this notification shall be effective from the date of issue of this notification in the Official Gazette and shall be payable in Indian currency.

[5] The anti-dumping duty imposed under this notification shall be effective from the date of issue of this notification in the Official Gazette and shall be payable in Indian currency.

[6] Anti-Dumping Duty By WILL KENTON Updated October 06, 2020 Reviewed by GORDON SCOTT Fact checked by AMANDA BELLUCCO-CHATHAM

[7] “Hot Rolled Flat Products of Stainless Steel of ASTM Grade 304 with all its variants”

Footnote- The subject goods include cold-rolled Flat products of stainless steel of width of 600 mm up to 1250 mm of all series not further worked than Cold rolled (cold reduced) with a thickness of up to 4 mm (width tolerance of +30 mm for Mill Edged and +4 mm for Trimmed Edged), excluding the following: (i) the subject goods of width beyond 1250 mm (plus tolerances); (ii) Grades AISI 420 high carbon, 443, 441, EN 1.4835, 1.4547, 1.4539, 1.4438, 1.4318, 1.4833 and EN 1.4509; (iii) product supplied under Indian Patent No. 223848 in respect of goods comprising Low Nickel con taining Chromium-Nickel Manganese-Copper Austenitic Stainless steel and representing Grades YU 1 and YU 4, produced and supplied by M/s Yieh United Steel Corp (Yusco) of Chinese Taipei (Taiwan).

[8] Welcoming the decision, Indian Stainless Steel Development Association said: “Domestic stainless steel industry has started showing signs of being a sick industry, as excessive imports have threatened the huge investments and resulted in underutilisation of capacities.”

[9] A duty of $309 per tonne has been imposed on imports from China, while $316 per tonne duty has been fixed for Malaysia and $180 per tonne for Korea.
https://economictimes.indiatimes.com//news/economy/foreign-trade/anti-dumping-duty-on-steel-imports-from-china-2-other-nations/articleshow/47573058.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[10] The anti-dumping duty imposed under this notification shall be levied for a period of five years (unless revoked, superseded or amended earlier) from the date of publication of this notification in the Official Gazette and shall be payable in Indian currency.

[11] Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994. Article 6 of GATT agreement

[12] Types of injury-The Agreement provides that, in order to impose anti-dumping measures, the investigating authorities of the importing Member must make a determination of injury. The Agreement defines the term “injury” to mean either (i) material injury to a domestic industry, (ii) threat of material injury to a domestic industry, or (iii) material retardation of the establishment of a domestic industry, but is silent on the evaluation of material retardation of the establishment of a domestic industry.

[13] Basic requirements for determination of material injury-The Agreement does not define the notion of “material”. However, it does require that a determination of injury must be based on positive evidence and involve an objective examination of (i) the volume of dumped imports and the effect of the dumped imports on prices in the domestic market for like products, and (ii) the consequent impact of the dumped imports on domestic producers of the like product. Article 3 contains some specific additional factors to be considered in the evaluation of these two basic elements, but does not provide detailed guidance on how these factors are to be evaluated or weighed, or on how the determination of causal link is to be made.

[14] The anti-dumping duty imposed under this notification shall be levied for a period of five years (unless revoked, superseded or amended earlier) from the date of publication of this notification in the Official Gazette and shall be payable in Indian currency.

[15] Domestic industry Definition (Article 4) The Agreement defines the term “domestic industry” to mean “the domestic producers as a whole of the like products or those of them whose collective output of the products constitutes a major proportion of the total domestic production of those products”.

[16] https://www.fedsteel.com/insights/american-steel-industry-2015/

[17] U.S. slaps heavy duties on Chinese steel shipped from Vietnam by Reuters Staff

[18] CHINA IS DUMPING STEEL ON THE GLOBAL MARKET 23. 8. 2018.