Worldwide: Calculation Of Normal Value On The Basis Of Price In A Market Economy Third Country

According to Indian trade remedial law, the normal value for non-market economies like China, in an anti-dumping investigation, may be calculated on the basis of price in a market economy third country. However, such price need not be of the product produced in such market economy third country. In other words, the DGTR may rely on import price of the product into a market economy third country. Interestingly, the laws and practice in other jurisdictions such as EU, Australia, Canada, and the US do not allow for such an approach. Nevertheless, since neither international nor domestic laws preclude the DGTR from adopting the price in a market economy third country which is not a producer of the product, it is an aspect which can be explored in future investigations.

Introduction

According to the Anti-Dumping Agreement ("AD Agreement"), an investigating authority is generally required to consider the domestic sales of the exporting producer while calculating the normal value for the purpose of determining the existence of dumping. However, owing to its status as a 'non-market economy', in case of China, certain special rules under their Protocol of Accession are applicable.² While examining dumping of a product from China, the investigating authority may ignore the domestic selling price of the product in China and use a methodology that is not based on a strict comparison with domestic prices in China. In other words, the investigating authority may devise a methodology to calculate the normal value that would have prevailed had China been a market economy.

The Protocol of Accession neither provides an exhaustive nor an indicative list of the methodologies that may be used by the investigating authorities to determine the normal value for China. Hence, countries have incorporated their own methodologies in their domestic anti-dumping laws. A methodology that is generally relied on by investigating authorities globally around the globe for determination of normal value for China is the price at which the product is sold in the domestic market of the market economy third country. Generally, investigating authorities rely on the price of the product in a market economy third country with significant domestic production thereby ignoring countries with no domestic production despite being an appropriate market economy third country to China. This article seeks to explore whether an investigating authority may choose to rely on import prices of the product in a market economy third country, when such country is not a producer of the product.

Global practice

European Union

The European Commission (EC) generally determines the normal value for China (and other countries not granted market economy treatment) on the basis of the price or constructed value in a market economy third country or price from such third country to other countries, including the EU.³ There is no requirement under law that the market economy third country has to be a producer of the product. However, the EC is required to consider any reliable information received from producers and exporters in the third country while determining the normal value. Hence, a questionnaire seeking relevant information is generally issued to producers identified in such third country. Thus, the EC usually considers third country market economies that are producers of the product.

Canada

The Canada Border Services Agency (CBSA) determines the normal value for non-market economies like China on the basis of the price or cost of production of the product produced in a market economy third country.⁴ Similar to the practice in the EU, the CBSA seeks information from producers in the market economy third country for this purpose. However, unlike the EU, the CBSA is mandatorily required, as per their domestic law, to calculate the normal value on the basis of price or cost of production of the product "produced" in a market economy third country.

Australia

The Anti-Dumping Commission (ADC) of Australia may determine the normal value for non-market economies on the basis of the price of export of the product produced in a market economy third country or the cost of production in such country.⁵ Similar to Canadian law, the Australian law specifically requires the product to be produced in the market economy third country. However, the ADC is of the practice of determining normal value on the basis of cost of production of the product in the market economy third country. The option of price in the third country market economy is not relied on.

United States of America

The United States Department of Commerce (USDOC) determines the normal value for non-market economies, including China, on the basis of cost of production in a market economy third country.⁶ Hence, as a matter of law and practice, the USDOC does not rely on price of the product in the market economy third country as the basis for calculation of normal value for non-market economies.

Possibilities open for DGTR

As per the Indian anti-dumping law,⁷ the first methodology for the calculation of normal value for China is the price in a market economy third country. However, unlike the laws in Canada and Australia, the AD Rules do not expressly require the price to be of the product produced in the market economy third country. Neither international law under the AD Agreement and the Protocol of Accession nor domestic law under the Customs Tariff Act, 1975 and the AD Rules places any limitations on the DGTR in relying on import price into the market economy third country as the basis for determination of normal value for China.

As long as there is demand for a product in a country, regardless of whether the demand is met by domestic production or import, the market would set the price for the product. A potential challenge in the usage of this methodology is to ensure that the import price is not tampered by dumped low-priced imports from certain countries. A practical remedy would be to exclude imports from all those countries which are evidenced to have significant government interference in the production of the product in their domestic jurisdiction. Adoption of this methodology would allow the DGTR to explore a wider range of countries while selecting an appropriate market economy third country.

Footnotes

Disclaimer: The opinion expressed in the article is of the author. It is neither the opinion or view of the firm nor a legal opinion on the issue.

2 Article 15(a), Protocol on the Accession of the People's Republic of China.

3 Article 2(7), Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union.

4 Section 20(1)(c) of Special Import Measures Act, 1985.

5 Section 269TAC (4), Customs Tariff (Anti-Dumping) Act, 1975.

6 Section 773(c)(1) of the Tariff Act, 1930.

7 Paragraph 7, Annexure I, Customs Tariff (Identification, Assessment, and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 ("the AD Rules").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.