India continues to oppose a method adopted by the US to determine penalties for exporters engaged in dumping their products, despite it being upheld by a disputes panel of the World Trade Organization (WTO), according to the country’s commerce secretary.
Under the so-called “zeroing” method of calculating anti-dumping duties adopted by the US, the penalty is assessed on the prices charged by exporters from a country who are allegedly dumping their products (or selling it at a lower price than the fair cost), and not as an average of the prices charged by all exporters.
This results in a higher dumping duty being levied on all exporters from that country.
Union commerce secretary G.K. Pillai
The dumping duty is aimed at providing relief to domestic manufacturers and is permitted as an instrument of fair competition by WTO.
On 20 December, a disputes panel of WTO ruled in favour of the US in a case involving the country’s action against stainless steel exports from Mexico. The ruling, according to Susan C. Schwab, the US trade representative, endorsed the US stand on zeoring.
Responding to this, Union commerce secretary G.K. Pillai, in an interview, said he did not think the ruling was a setback to India’s stand on zeoring. “The only significance of the ruling is that the disputes panel has, for the first time, accepted the zeroing method formally. However, I am sure the WTO appellate body will reverse this ruling...,” he said.
Trade disputes between countries are first resolved by a disputes panel of WTO and, on appeal, by the WTO appellate body.
The crucial variable for calculating the anti-dumping duty is the dumping margin, which is the difference between the normal value (or fair value) and the export price of the goods.
Under the zeroing method used by it, the US government disregards, by assigning a zero value, those cases where no evidence of dumping has been detected. As a result, the eventual duty calculation is based solely on the price data where dumping is proven.
“US is the only major country using the zeroing method, while most other countries use the ‘lesser duty rule’. India has been opposing the zeroing method and would redouble its efforts to get a specific prohibition on its use,” said Pillai.
If the dumping margin is 10%, but the domestic industry is being hurt by only 6%, then under the lesser duty rule the importing country will use the 6% figure for calculating anti-dumping duty, Pillai explained.
However, Arun Goyal, director of the Academy of Business Studies, a New Delhi-based think-tank on trade issues, said although it has been a pioneer in opposing zeroing, India itself practices zeroing in many cases.
“According to our recent survey, there are as many as 117 cases where India could be faulted for zeroing. Nobody has questioned us because we don’t pick on the big players like the US and the EU since they are likely to question it,” said Goyal who is opposed to zeroing.
According to another commerce ministry official, who did not wish to be identified, India has consistently opposed the zeroing methodology.
“In 1998, India became the first country to challenge zeroing in a case against the European Community (EC, the former name of the EU), involving the export of cotton bed linen from India. By 2003, both the disputes panel as well as the appellate body had upheld India’s view that the zeroing method was inconsistent with anti-dumping duty rules of WTO. Post this landmark decision, the EC had given up the zeroing method,” the official said.