Indian as well as WTO anti-dumping rules require sufficient evidence of dumping and injury to domestic industry in the anti-dumping application, before an investigation could be initiated.
But what if the domestic industry says it does not have evidence but still gets the investigation initiated?
Well, that does seem to happen quite often in Indian investigations, especially when it comes to insufficient evidence of dumping and yet Indian authority initiates the investigation.
How so?
Well, before we look at the present practice, let’s dive a little bit into the relevant concepts and provisions.
One of the most important requirements before initiating an AD investigation is the sufficiency of the evidence of dumping, injury and causal link. The provision goes something like this -
Rule 5 - Authority shall initiate an investigation to determine the existence, degree and effect of any alleged dumping only upon receipt of a written application by or on behalf of the domestic industry, and that the application shall be supported by evidence of (a) dumping (b) injury and (c) causal link.
The rules further provide that the Authority shall not initiate an investigation unless, inter-alia, it examines the accuracy and adequacy of the evidence provided in the application and satisfies itself that there is sufficient evidence regarding (a) dumping (b) injury and (c) causal link.
On the face of it, the rules do look compatible with corresponding WTO provisions with the Indian rules toeing Article 5 of WTO Anti-Dumping Agreement. Article 5 also emphasizes the sufficiency of the evidence of (a) dumping (b) injury and (c) causal link.
However, Article 5.2 further reinforces the importance of evidence when it says simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. This reinforcement is absent in Indian provisions and thus gives an opportunity to India in initiating investigations without evidence as well.
So, it is not the content of the complaint/application that matters, it is the sufficient evidence in support of the said content/allegation that counts.
Now, in anti-dumping cases, when we talk of evidence of dumping, it comprises of two components – normal value (home market price of foreign producer) and export price to India [difference between the two being dumping]. While evidence relating to export price is not an issue, but the other component remains a contentious issue as most of the time, the domestic industry does not have any evidence and resorts to ‘constructing’ the normal value based on their own cost of production or conjure up just about any number that ‘may’ resemble normal value as per its understanding.
For example, in recently initiated AD investigation on Electrogalvanized Steel from Korea, Japan, Singapore (Initiation June 28, 2021), the domestic industry admitted that “they do not have information regarding the cost of production and domestic selling price for subject goods in Korea RP, Japan & Singapore and also do not have accurate information regarding the export price of subject goods from subject countries to an appropriate third country for determination of normal value.”
By the way, these are the only three methods under the law to arrive at a normal value for market economy countries. No exceptions (until now!).
In view of the same, the domestic industry constructed normal value as per its own cost and experience, compared the same with an export price to claim dumping, which is accepted by the Authority as 'prima-facie' evidence.
Now the issue here is that the domestic industry claims dumping by foreign producers (i.e., their home market price being lower than export price to India) and yet when it comes to evidence, the best they could do was to present their own cost. Clearly, your own cost cannot be used as prima-facie evidence against your competitor in another country!!
Take another example of AD investigation on Clear Float Glass from Bangladesh and Thailand (Initiation June 30, 2021), where the domestic industry claimed that it could not gather any evidence of domestic selling prices in Bangladesh and Thailand and as a result adopted import prices from all over the world into both the countries as evidence of normal value. Even this has been allowed by the Authority as “sufficient prima-facie evidence”, even though the normal value definition does not allow such a method. Rightly so, as import price cannot be replaced with domestic selling price in that country as many factors like level of trade, inclusion/exclusion of articles not subject to investigation, etc cannot be compared.
Now the existing provisions do not contain phrases like “domestic industry may construct normal value in any manner” and justifiably so as that will make the need for sufficient evidence to initiate an investigation ineffective.
Well, of course, where applications do contain sufficient evidence, then perhaps initiation should not be an issue, even if the quality of said evidence is not up to the level that may be collected during the course of the investigation. But if there is no evidence at all, then it is indeed incorrect to circumvent the law and get the investigations initiated with 'constructed' values.
WTO also had an opportunity to deal with the issue of initiation in DS-156 Guatemala Cement dispute, where the Panel considered that while at the time of initiation of the investigation, the quantity and quality of evidence may be lesser than that gathered during the investigation, however, at the same time, it is necessary that the existing evidence must be such that an unbiased and objective investigating authority could determine that there was sufficient evidence of dumping to warrant initiation. Importantly, the Panel also pointed out another issue while comparing such normal values with export price and opined that different levels of trade play a decisive factor for an unbiased and objective authority before considering such evidence or information provided as being sufficient to justify initiation.
If we look from this angle, then neither the domestic industry’s own cost of production in the first case and import price into the subject countries in the second case can fulfil this test as it will not determine if constructed normal value and export price to India are at the same level of trade.
I am not for once saying that a domestic industry is not entitled to protection under AD law. But if there is a prescribed method and there are no roundabouts, then the letter of law must prevail, or it may lead to gross disregard to international commitments and obviously, the existing domestic provisions as well.
Let’s say if such “tried-my-best-but could-not-get-the-evidence-so-accept-whatever-I-submit” is an acceptable practice, then should not the same apply to foreign producers, who come back and say – hey, I am not dumping, though I do not have evidence, accept whatever I claim? Of course, it will not be the case and the Authority is going to insist on “evidence” before accepting the foreign producer’s claim.
Thus, “evidence” plays an important part in the entire AD investigation process, including the initiation stage. Perhaps this is the reason why WTO Agreement had to categorically add an otherwise purely logical sentence that simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph.
To initiate the investigation without evidence and say the evidence will be collected during the investigation is as good as deeming a person to be guilty, start an enquiry and then ask him to prove that he is not guilty.
Sadly, as things stand now, once the initiation takes place, parties have no option to challenge the same and wait for final outcome. The parties can approach courts challenging the initiation, but in almost all past cases, courts have sent the petitioners back to Authority and asked them to argue during the investigation proceedings. And when the matter is taken up before the Authority, the Authority finally concludes that it was correct in its prima-facie assessment (of course, what else is Authority going to say!!)
So what now?
Not much. Perhaps Governments of subject countries can ask for consultations on this issue and hope for a solution.
Otherwise, one can only hope that someday, someone in the department takes notice addresses the issue.