- The WTO Agreements do not define the term "product under consideration" or provide guidelines on how the product scope should be defined.
- There is no requirement that the product scope be internally homogenous. Thus, different product types may constitute part of the same product scope.
- Due care must be exercised to ensure that the product scope is not too narrowly defined so as to defeat the intended objective of the levy. However, an unduly broad product scope may lead to undue protection to the domestic industry, or difficulties in constitution of the domestic industry.
- There may be cases where both intermediate product and final product are included within the product scope, irrespective of whether there are imports of the intermediate product.
- Parts and components may be included in product scope, to ensure that the measures imposed are effective.
- Products produced using different technologies or raw materials may form part of the product scope.
- While the Customs classification is not binding during an anti-dumping investigation, it is binding for the purpose of imposition of measures. Imports under a Customs classification, different than that notified, cannot be subjected to the measures.
The first stage and the most crucial aspect of any trade remedial investigation is defining the scope of product under consideration. The product under consideration is the product which shall be subjected to the proposed measures. It, therefore, forms the corner stone of any investigation.
The various WTO Agreements governing the imposition of trade remedial measures do not define the term "product under consideration" or contain any explicit provisions that specify the criteria for identifying the product under consideration. The various decisions of the WTO Dispute Settlement Body also do not shed light on the manner in which the product scope may be defined. In contrast, the term "like article" has been defined, as a product identical or alike, or having closely resembling characteristics to the product under consideration. However, defining the product under consideration accurately is perhaps the most critical step in an application or an investigation.
Considerations while defining the product scope
While defining the product scope, it is essential that the product scope be defined clearly, to ensure that only the products intended to be subject to antidumping duty are included. The WTO Dispute Settlement Body has consistently held that internal homogeneity of the product is not required in defining the product scope. The Panel in EC-Salmon (Norway) (DS337) concluded that the WTO Agreements do not require that the product scope be made of a single product category. Therefore, different types of the product may be covered under the product scope. However, it is necessary to ensure that the inclusions and exclusions are carefully evaluated, from the perspective of the imposition of measures, at the Customs port.
If the product scope is defined too narrowly, any measure imposed may not provide the necessary relief to the domestic industry and may also lead to the circumvention of the measure in place1. For instance, in the case of imposition of anti-dumping duty on imports of High Tenacity Polyester Yarn of 1,000 deniers to 6,000 deniers from China, the narrow product scope resulted in circumvention of duties through imports of yarn of 950-999 deniers. By contrast, a broadly defined product scope may result in undue protection to the domestic industry. Further, post defining the product scope, the investigating authority shall define the like article, and constitute the domestic industry based on such defined like article. An unduly broad product scope may result in a situation where more products form part of the scope than that are offered by the applicants, resulting in the applicants not constituting the domestic industry for such product scope.
Whether intermediate and final downstream product can form part of the same product scope
Another important question in defining product scope is whether an intermediate product and its final product can be included in the same product scope. This is especially relevant in a situation where imposition of duty on the final product may result in significant imports of the intermediate product, not covered by the scope of duties.
For instance, in Chlorinated Polyvinyl Chloride (CPVC) Resin, whether or not further processed into compound, from China and South Korea, the Authority has included both CPVC resin and compound in the scope. The Authority observed that CPVC resin is an intermediate product which would eventually be converted into compound and has no independent uses. The Authority also observed that the conversion from CVPC resin to compound is merely an incremental process without transforming the essential characteristics of the product and just makes the product usable. In view of the same, the Authority found it appropriate to include both the intermediate and the final product in the product scope.
Further, intermediate products have been included, even in absence of imports thereof. For instance, in the case of Phthalocyanine Pigment, the Chinese investigating authority included both crude pigment and the finished product, even though there were no imports of the crude pigment.
Whether parts and components may form part of product scope
Another essential aspect in defining the product scope is the relevance of parts and components. The product scope should be defined in a manner to ensure that any measure imposed is not rendered ineffective, through the imports of parts and components2. If parts and components are excluded in a manner that importers could bring items in different consignments, in an unassembled form, and assemble the same in India, such an exclusion would defeat the levy of the anti-dumping duty. In such a situation, it is imperative that parts and components also form part of product scope, to ensure that the intended objective of the measures is achieved.
Whether products produced using different technologies or raw materials may form part of product scope
Another important aspect is that of production process through which products are produced. Normally, products produced using different production processes can be considered as part of the same product scope. The essential criterion is that the products derived using the different technologies or produced using the different raw materials should be comparable. For instance, in the anti-dumping investigations into imports of Caustic Soda, products produced using Mercury cell process, Diaphragm cell process and Membrane cell process, were all treated as part of product scope, since the final product had the same characteristics. Likewise, in the anti-dumping investigation into imports of Isopropyl Alcohol from China, the product produced using acetone and that produced using propylene was both treated as part of product scope, due to absence of differences in the final product.
However, where the difference in production process leads to a difference in the product itself, the products produced using different technologies are not treated as comparable. For instance, in the anti-dumping investigation into imports of PVC Suspension Resin, only products produced using suspension polymerization process were included, while others were excluded.
Relevance of Customs classification
The Customs classification also plays an important role in defining the product scope. Normally, before the DGTR, the Customs classification is treated as indicative only, and not binding on the product scope. However, once the measures are imposed by the Ministry of Finance, the Customs classification is binding on the product scope. Therefore, any import shall be subject to the measures imposed only if the imported product falls within the product scope, as well as the Customs classification notified by the Ministry of Finance for the purpose of the measures.
It is, thus, evident that the definition of product scope is a critical aspect, and requires careful consideration. An improperly defined product scope can lead to significant challenges in the investigation, and imposition of measures. It is also crucial that the scope of product under consideration be defined having regard to the eventual impact at the stage of imposition of measures, to ensure that the intended objective of the measures is achieved.
Footnotes
1 Manual of Operating Practices, Para 3.12
2 Decision of CESTAT in Huawei Technologies Co. Ltd. vs. Designated Authority [2016 (334) E.L.T. 339 (Tri. - Del.)]
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.
