- In case of material injury, the non-injurious price must allow existing injury to be addressed, and the situation of the domestic industry to be restored to the position prior to dumping. However, in case of material retardation, the noninjurious price must allow the industry to be established.
- Annexure III to the Anti-Dumping Rules does not address the complexities involved in determination of non-injurious price for establishing industries. For instance, the data concerning utilization of raw materials, utilities and capacities over the injury period, is often not available for such industries.
- In case of industries that have commenced production, the Authority has often relied upon comparison of actual utilization of raw materials, utilities and capacities on a quarterly or monthly basis, or in contrast, with the projected utilization.
- In case of industries in trial production, a similar approach has been adopted in the past. A key issue remains depreciation which is not recorded in the books of accounts at trial production stage. The non-injurious price determined without consideration of depreciation would not allow sufficient remedy to the industry.
- Another interesting issue would be determination of the non-injurious price for industries not in production. Since the actual data is not available, alternative information would need to be relied upon in such a situation
Article 9 of the Anti-Dumping Agreement allows investigating authorities to impose anti-dumping duties to a level lower than the level of dumping. However, 9 Article 9 does not state any methodology that can be followed for this purpose. India follows a practice of lesser duty, that is, the duty imposed is lesser of dumping margin or injury margin. While dumping margin is based on the exporter's data, injury margin is based on the difference between the noninjurious price determined for the domestic industry and the landed price of the product under consideration. The non-injurious price is determined in accordance with the provisions of Annexure III to the Anti-Dumping Rules.
One of the key challenges faced in anti-dumping or anti-subsidy investigations is the determination of cost of sales and the resultant calculation of non-injurious price. The non-injurious price, which is supposed to be a fair selling price, is the price at which there would be no injury to the domestic industry. Determination of non-injurious price is a calculation based on certain assumptions, targeted towards determining an allegedly "efficient cost"
A plain reading of Annexure III makes it clear that it is only applicable in case of established industry, which has suffered material injury or threat of material injury. This is because Annexure III requires consideration of best utilisation of raw materials, utilities and production capacities by the domestic industry over the period of investigation and the previous three years. While the data is generally available for an established industry, in case where an industry is in the process of establishment, the data for three years, in most cases, will not be available. Therefore, a simple application of Annexure III will not be possible in cases of material retardation to establishment of the domestic industry.
"Material retardation" in the context of anti-dumping or anti-subsidy investigations refers to a situation where dumped or subsidized imports from a country significantly hinder the development and establishment of a new domestic producer in the importing country. The examination of material retardation is conducted in respect of domestic industries that are newly established or in the early stages of operation, such as nascent or embryonic phases, or have started production of a new independent product, manufacturing of which did not exist in the importing country. Since the industries have not yet operated for a sufficient period, examination of the impact of dumped imports on their performance can be challenging.
In the absence of any specific methodology in the Rules on determination of noninjurious price, there is no guideline or clarity on the methodology for determination of the non-injurious price. The following approach is generally followed:
- The Authority may consider the monthly or quarterly utilization of raw materials, utilities and capacities and compare the same to determine the non-injurious price.
- Alternatively, the Authority may compare the actual utilization or raw materials, utilities and capacities, with that as projected in the project report.
One of the major concerns which arises here is that the cost of production actually incurred and that which would be incurred by the producer cannot be disregarded. For instance, a producer may have projected a higher capacity utilization to be achieved over a period of 3 years. However, it actually achieved a much lower utilization. In such a case, the Authority would determine the non-injurious price considering the actual expenses incurred during the period of investigation, but allocating them over the highest capacity utilization projected. The challenge this creates is that, when the producer has operated at a lower capacity utilization, its cost structures are very different than it would be at the highest utilizations. Therefore, allocating lower expenses to a higher capacity utilization artificially reduces the non-injurious price.
Some other challenges which are often faced by the industry are the treatment of trial run production and its associated costs, comparison with projected levels and lack of availability of data for raw material and utilities for four years. The issue is more critical in cases where the domestic industry has not been in operation for substantial time.
For a newly established plant or a domestic producer that has not declared commercial production by the end of the investigation period, accounting for trial run production and its associated costs in the calculation of non-injurious prices can be challenging. Such an entity would not have capitalized its plant in its books of accounts, and thus, all expenses are not accounted for. Further, since commercial production was not declared, depreciation costs are not recorded in the books of accounts for that period. However, unless such expenses are 11 considered, the non-injurious price would not allow sufficient remedy to the domestic industry, in order for it to be established. Therefore, in determining the non-injurious price, it is imperative to ensure that a major share of the cost does not get ignored.
.Another issue which may arise is calculation of cost of production and the noninjurious price in case of units which are in the process of setting up and have not yet started production. The determination of non-injurious price in such cases poses a higher challenge considering that there is no actual information on cost of production. Without actual production, a producer lacks historical cost records, which would require reliance on alternative information to determine material, labor, and overhead expenses accurately.
Therefore, the determination of non-injurious price for material retardation cases does not have a straight-jacket formula. The Rules also do not envisage the determination of non-injurious price in such cases. However, it is critical that the non-injurious price be determined in a manner that allows the injury to be addressed, to the extent that the domestic industry may get established. The appropriate methodology for determination of non-injurious price in material retardation cases must therefore, be arrived at, having regard to such principle.
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.
