# Anti-Dumping Duty – Working, Calculations and Examples

10 min read • Published 27 March 2023
Written by Animesh Gupta

The economy is a system in which individuals are involved in the process of production to earn their livelihood. It is a system which surrounds all the activities of production, distribution, business and consumption and therefore builds a nation. However, in the wake of sheer competition, instead of focusing on strengthening their economy, nations attempt to distort other countries’ economies. But how is it done? Usually, it is done by dumping goods in the importing country. To shield the nation’s economy against dumping, a defensive measure called Anti-Dumping Duty (ADD) is imposed by the government on dumped goods.

Before we dive deep into the topic, let’s try to understand the term ‘Dumping’.

## Dumping

Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Thus, the purpose of anti dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade

Suppose, South Korea produces a bicycle and sells it in their local market at Rs 10,000. Now, if they start selling the same bicycle in India at Rs 6,000 while the local manufacturers in India sell the same product at Rs 8,000, then what is expected to happen? The sale of South Korea-made bicycles will increase and the sale of locally manufactured i.e., India-manufactured bicycles will decrease as the consumers would be tempted to buy that product which involves less outflow of money.

In other words, the demand for imported products will increase and local manufacturers’ performance will decrease, thus the Indian economy will suffer. Therefore, if the product is exported to India by other nations in a manner that intends to crumble the Indian wealth and economy extensively, then this operation is referred to as ‘Dumping’.

## What is Anti Dumping Duty

To rectify trade catastrophic effects of dumping, to re-establish fair trade and to protect the domestic economy, many countries impose anti-dumping measures on products they believe are being dumped in their national market. Such a measure involves imposing a protective duty called Anti-Dumping Duty (ADD) which is levied under Section 9A of The Customs Tariff Act, 1975 of our country, India.

## How is Anti-Dumping Duty levied?

This duty is levied only when there is proper evidence that the dumped imports are causing serious injury to the Indian industry that is producing similar articles.

To determine whether the imports cause serious injury or not, a quasi-judicial body called the Directorate General of Trade Remedies (DGTR) [Previously known as Directorate General of Anti-Dumping & Allied Duties (DGAD)] is entrusted with this role. The Designated Authority(DA) in DGTR, is an attached office of the Department of Commerce, Ministry of Commerce & Industry in India.

Process of Investigation

As per the provisions, an investigation by the Designated Authority for the imposition of anti-dumping duty may be initiated in two ways –

a)     Suo-moto by the Directorate or;

b)   upon a written application in the prescribed format by or on behalf of the Indian Domestic Industry [consisting of the local manufacturers producing the article similar to the Product under Consideration (PUC) ]  to DA, DGTR.

However, such an application should be accompanied by the required documents along with evidence of the existence of dumping and material injury to the domestic industry. Further, the following two conditions must be met to constitute a valid application –

1)     Application must be supported by domestic manufacturers accounting for at least 25% of the total production of a similar article in India and

2)     Domestic manufacturers supporting the application must account for more than 50% of the total production of like articles by those opposing the application.

Based on the preliminary findings, ADD may be imposed by the Central Government on a provisional basis for a period of 6 months, extendable up to 9 months under certain circumstances. Such a provisional duty shall not exceed the margin of dumping and is supposed to be levied within 150 days from the date of initiation of the investigation.

Imposition of Anti-Dumping Duty

After the final findings and upon confirmation that the Indian market is being dumped in a way that is causing material injury to the domestic industry

• ADD so levied continued for 5 years and can be further extended up to 5 years, if the circumstances call for it.
• The final findings are generally made within 150 days of the date of the preliminary determination.

The entire investigation process has to be mandatorily concluded within 12 months from the date applying. However, it can be extended to a maximum of up to 18 months in certain situations.

Termination of investigation

However, there can be situations when the Designated Authority may terminate this investigation.

1. When a written request is received from the Domestic Industry which had earlier applied for initiation of investigation;
2.  When there is insufficient evidence of dumping and material injury;
3. When the Margin of Dumping is less than 2% of the Export Price.
4. When the volume of dumped imports from a such country is less than 3% of the total imports of similar products into India or when the volume of dumped imports from all such countries is less than 7% of the total imports into India altogether;
5. When the injury is negligible.

## How is Anti-Dumping Duty Calculated?

Anti- Dumping duty is calculated as the lower of: Margin of Dumping and Injury Margin.

1)     Margin of Dumping (MOD) = Normal Price – Export Price

Normal Price is the domestic selling price of such a product or similar product in the exporting country. Where the domestic sale price cannot be ascertained, then the price at which PUC is exported to another country may be considered. However, if such a price is not available too, then the cost of production is increased by overhead costs and a rational profit margin may be considered as the Normal Price or Normal Value.

Export Price is the price at which the PUC is exported by the exporting country. This is generally the Free on Board (FOB) price of the product. The FOB price does not include freight and insurance costs for the product.

2)     Injury Margin (IM) = Fair Selling Price – Landed cost of the product

Fair Selling Price is the price at which the product would be sold in the open domestic market in normal conditions.

Landed Cost is the total price of the product when it reaches the importing country.  It is the item price as increased by overhead costs, shipping costs, various customs duties and surcharges if any. It is the sum of all expenses associated with shipping goods to their ultimate destinations. It is also called the Cost of import.

For example,

Mr Nick of the USA produces a product ABC in bulk and exports it to Ms Sonika of India in bulk. The Selling Price of ABC per unit in the USA is Rs 120, however, Mr Nick agrees to sell it at Rs 80 per unit to Ms Sonika with the malicious intent to destroy the Indian industry. Now Suppose, after levying Basic Customs Duty, Social welfare surcharge, and Integrated Goods and Services Tax (IGST), the landed value of the product ABC in India is Rs 100 per unit. Contrary, the same product is being produced in India and sold at Rs 130 per unit (including GST) by Indian local manufacturers. Let’s calculate the ADD as follows:

Anti-Dumping Duty (ADD) = Margin of Dumping and Injury Margin, whichever is LOWER

The margin of Dumping = Normal price – Export Price

= Rs 120 – 80

= Rs 40 per unit

Injury Margin     = Fair Selling Price – Landed Cost

= Rs 130 – 100

= Rs 30 per unit

Therefore, ADD     = Rs 30 per unit of Product ABC

This ADD will be added to the Landed cost of the product ABC so that the price becomes equal to the Fair Selling Price.

So now, Mr Nick will have to sell ABC in India for Rs 100 + Rs 30 = Rs 130 per unit.

## Examples of ADD in India

Let’s look at some of the ADD initiated and imposed in India recently:

1)     India imposed ADD for 5 years on imports of all grades and concentrations of phosphoric acid from Korea in the year 2020.

2)     India imposed ADD for 5 years on imports of stainless steel seamless tubes and pipes from China in the year 2022.

3)    The Final Findings have been made in the investigation concerning imports of a detergent grade “ Zeolite 4A” from China. The ADD has been recommended by the Designated Authority.

4)    Based on the final findings, the Authority has recommended the imposition of ADD on imports of Digital Offset Printing Plates from China, Japan, Korea, Taiwan and Vietnam.

The status of any ongoing ADD investigations in India can be viewed at https://www.dgtr.gov.in/anti-dumping-ongoing-investigation

## Conclusion

Although India hasn’t been heavily accused of dumping products in foreign markets , it has been subjected to heavy dumping from other countries. Since the emergence of the World Trade Organisation, which permits the levy of ADD, India has been one of the most largest and recurring users of anti-dumping measures. To date, India has initiated the highest number of anti-dumping investigations as compared to any other country in the world.

While ADD rightly protects the interests of domestic industries, it can be disadvantageous for the nation as it creates a barrier to free trade between the countries. Therefore, it must be imposed extremely diligently by the concerned authorities.

Yes, an appeal against the imposition of ADD can be filed with the Central, Excise and Gold (Control) Appellate Tribunal (CEGAT) ­­within 90 days from the date of order.

### Can ADD be levied on a retrospective basis?

ADD can be levied on a retrospective basis only when there is a history of dumping that caused injury and the injury is caused by massive dumping in a relatively shorter period of time so as to weaken the remedial measures of anti-dumping duty.
However, in no case, such a retrospective application can go beyond 90 days from the date of imposition of the provisional duty.

### Does the levy of ADD on a particular product extend to all imports of that product?

The levy of ADD is both country-specific and product specific. It hence extends to the imports from only those countries in respect of which dumping is apparent and the complaint has been filed by the domestic industry. Therefore, such duty does not apply to imports of similar products from other countries in respect of which domestic industry has not alleged dumping.

Animesh Gupta is a Chartered Accountant by profession and a NISM certified Mutual Fund Expert. He has over 5+ years of experience working in the Financial Services Industry. In his role at Wintwealth, he is part of the Credit and Risk team and evaluates the risk of the bonds available on Wintwealth's platform.

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