What are Anti-Dumping Laws and How do they relate to International Investment Laws?

Anti-dumping laws prevent unfair trade practices by counteracting the sale of products at unfairly low prices. Governed by the WTO's Anti-Dumping Agreement, these laws ensure fair competition by imposing duties on dumped imports that harm domestic industries.

Harish Khan

Jan 22, 2025 • 15 min read

Introduction

Until the early 1990s, Anti-Dumping (AD) measures were primarily utilized by western and developed countries. However, since 1992, the landscape has changed significantly as developing countries, including India, have become more active in the global trading system. These countries have increasingly faced pressure from domestic industries to take action against allegedly dumped imports. As a result, many developing nations, including India, have begun to adopt AD measures. Since 1995, over half of all known AD investigations have been initiated by developing countries. Although WTO members are not obligated to implement AD actions, they retain the right to do so, provided it aligns with the WTO Agreement on Anti-Dumping. This article delves into the AD measures as outlined in the AD Agreement, comparing AD practices in the US, EU, and India.

The concept of Comparative Cost Advantage, as advised by Adam Smith, emphasizes that it may be more economical to trade than to produce certain goods domestically.[1] This principle has led to international trade, which is now governed by GATT and WTO rules. This article focuses on one key provision in the GATT Treaty Agreement, 1994, Article VI[2], also known as the Agreement on Anti-Dumping. This article plays a crucial role in establishing AD laws and their necessity. The article begins by discussing the importance of understanding the AD laws, particularly in the context of international trade, where countries like India are gaining prominence. The shift in global trade dynamics has led to an increase in AD measures, both initiated by India and against Indian companies by foreign entities.

The structure of this article starts by explaining the concept of dumping and elaborating on the AD measures. It then compares the AD laws between the US, EU, and India. Specific cases are analysed to provide a practical understanding of these laws.

What is Dumping?

Dumping refers to the practice where an exporter sells a product to India at a price lower than the "Normal Value" of similar goods sold in the exporter’s domestic market. Importing goods at lower prices does not automatically indicate dumping. The "Normal Value" represents the fair price at which goods are sold in the exporter’s domestic market under ordinary trade conditions. Dumping is considered an unfair trade practice because it can distort international trade by giving an unfair advantage to exporters over domestic industries. Anti-dumping measures serve as a remedy to counteract the trade distortive effects caused by dumping, aiming to re-establish fair trade.

The purpose of anti-dumping duties is not to protect domestic industries per se, but to ensure fair competition as permitted by the World Trade Organization (WTO). Under Indian law, dumping occurs when an exporter sells a product to India at a price lower than in its domestic market. However, dumping itself is not inherently illegal, as it is recognized that prices may vary between markets due to factors like supply and demand. Price discrimination, predatory pricing, excess capacity, and transitional dumping are common forms of dumping practices.

Reasons for Dumping

Closed Home Market: Exporters may face limited domestic demand and, to utilize excess production capacity, export goods at lower prices.
Anti-Competitive Practices: Some exporters engage in practices that allow them to sell below cost in foreign markets.
Government Subsidization: Subsidies granted to producers in exporting countries can lead to artificially low prices.
Non-Market Conditions: In some countries, economic distortions such as controlled exchange rates can lead to dumping.

Forms of Dumping

1. Price Discrimination: Price discrimination occurs when an exporter charges different prices in two separate markets for an identical product. For price discrimination to happen, two main conditions must be satisfied:

Market Segmentation: The producer must be able to separate the two markets to prevent arbitrage. This is often achieved through geographical segmentation, such as high transport costs or tariff/non-tariff barriers, which restrict imports and lead to dumping allegations.
Market Power: The exporter must have market power to charge different prices. This happens when demand conditions vary in the home and foreign markets, an elastic demand in the foreign market (intense competition) and an inelastic demand in the home market (less competition). The firm will maximize profits by charging a higher price domestically than abroad.

2. Predatory Pricing: Predatory pricing is another form of dumping, where a dominant supplier intentionally sets prices below cost to eliminate competition in a foreign market. Once competitors are driven out, prices are raised above cost, allowing the firm to recuperate losses. Predatory pricing involves pricing below marginal cost. In many cases, this is seen as harmful because it eliminates competition, and consumers end up paying higher prices in the long run. Economists debate the prevalence of predatory dumping in international trade, as the conditions required to implement this strategy are highly restrictive.

3. Excess Capacity: Excess capacity arises in industries where firms face fluctuating demand but large adjustment costs prevent them from quickly matching output to demand. This is common in industries like steel and chemicals, where continuous production involves high setup costs and constant use of capacity. Firms may dump products by selling excess capacity in foreign markets at lower prices.

4. Transitional Dumping: Transitional dumping occurs when an exporter prices below marginal cost to maximize sales and expand market share. This strategy is often seen as an investment in marketing, aimed at gaining long-term profitability. While this may require pricing below marginal cost, it’s not considered predatory pricing. The key argument in this case is that such industries bring long-term benefits to the domestic economy, either by improving production skills or generating external benefits. However, it is necessary to prove that anti-dumping measures are the most effective way to achieve these goals.

Anti-Dumping

Dumping occurs when products are sold abroad at prices lower than in the home market, leading to unfair competition that can harm domestic industries. Anti-dumping measures emerged in the early 20th century to address these practices, initially through special duties on imports sold below fair or domestic values. These measures were first included in the GATT (General Agreement on Tariffs and Trade) in 1947 under Article IV.[3]

Initially, anti-dumping actions were used primarily by developed countries with low tariffs and few non-tariff barriers. Over time, more developing and newly industrialized countries began adopting anti-dumping measures, shifting from broad import restrictions to targeted trade defenses. Critics argue that these actions are protectionist and inefficient, as economists remain divided on whether dumping itself is harmful.

Anti-Dumping under the WTO

The WTO (World Trade Organization) condemns dumping when it results in ‘material injury’ to a domestic industry, under Article VI of the GATT 1994. Anti-dumping measures are permitted as a derogation from GATT’s free trade principles, justified by the need to counter unfair trade practices. Importantly, these measures do not provide the exporting country with the right to retaliation or to concessions of equivalent value. WTO Members conducting anti-dumping proceedings must follow the rights and obligations set out in the WTO Agreement.

The framework for anti-dumping actions within the WTO is detailed in Article VI of the GATT 1994, titled ‘Anti-dumping and Countervailing duties’. This article defines dumping and establishes the general rules governing anti-dumping measures. The WTO’s Anti-Dumping Agreement Supplements Article VI with detailed regulations on the application of anti-dumping measures that WTO Members may implement. It outlines procedural and regulatory guidelines for conducting investigations and the subsequent imposition of duties.

Article 16 of the Anti-Dumping Agreement[4] sets up the Committee on Anti-dumping Practices, which oversees the administration of anti-dumping measures and ensures Members report any preliminary or final anti-dumping actions taken. According to a report from the WTO Secretariat on 27 November 2006, the number of new anti-dumping investigations has continued to decline, while the number of final anti-dumping measures has increased compared to previous years.

The Anti-Dumping Agreement

The Anti-Dumping Agreement sets out precise and detailed rules that govern the conditions under which anti-dumping measures can be imposed. It provides a narrow framework for anti-dumping authorities and is not designed to serve broader import policy objectives. This instrument is typically activated following a request from the domestic industry that competes with foreign imports.

The agreement outlines clear criteria for determining whether dumped imports cause injury to a domestic industry. It also specifies procedures for initiating and conducting anti-dumping investigations, as well as the implementation and duration of anti-dumping measures.

One of the key aspects of the Anti-Dumping Agreement is its focus on ensuring fair comparisons between the export price and the normal value of a product. The agreement provides specific rules to prevent the arbitrary creation or inflation of dumping margins.

The Anti-Dumping Agreement was signed in 1994, following the Uruguay Round of negotiations, and officially came into force in 1995. It replaced the anti-dumping codes from the 1967 Kennedy Round and the 1979 Tokyo Round. Notably, the agreement does not address anti-circumvention, the practice where exporters attempt to bypass anti-dumping duties through various means.

Procedural Requirements in Anti-Dumping

Rules governing the initiation and investigation of anti-dumping proceedings are outlined in Article 5 of the Anti-Dumping Agreement[5]. An investigation into alleged dumping practices can only be initiated through a written application submitted by or on behalf of the domestic industry. This application must provide evidence of dumping, injury, and establish a causal link between the dumped imports and the alleged injury. It must also contain sufficient information about the industry, domestic production, product details, importers, and exporters.

At any stage of the investigation, if the authorities find that there is insufficient evidence to justify proceeding, they are required to immediately reject the application or terminate the investigation. Investigations are also terminated when the margin of dumping is deemed negligible, or when the volume of dumped imports, actual or potential, or the injury caused is minimal. According to Article 5.10 of the AD Agreement[6], investigations must be completed within a year, though this period may be extended to 18 months in certain cases.

Evidence Submission

Article 6 of the Anti-Dumping Agreement[7] specifies rules on the submission of evidence. Investigating authorities are required to notify all interested parties of the information they need. Throughout the investigation, these authorities must ensure the accuracy of the evidence provided by interested parties. They may also conduct investigations in the territory of another WTO Member. The investigating authorities must notify both the exporting WTO Member and the interested parties about their determinations and the factors considered.

Judicial and Administrative Review

Article 13 of the Anti-Dumping Agreement[8] mandates that each Member with anti-dumping legislation must maintain independent judicial, arbitral, or administrative mechanisms for the review of administrative actions and determinations. Interested parties have the right to challenge anti-dumping determinations through these mechanisms.

Substantive Rules in Anti-Dumping

Basic Principle

Article 1 of the Anti-Dumping Agreement[9] states that a Member may impose anti-dumping measures if an investigation confirms that:

The product is dumped;
The dumping causes material injury or threat thereof to a domestic industry; and
There is a causal link between dumped imports and the injury or threat.

Determination of Dumping

According to Article VI of the GATT 1994 and Article 2.1 of the AD Agreement[10], dumping occurs when a product is sold in the domestic market of another country at a price lower than its normal value (the price in the country of origin or export). The comparison between normal value and export price must follow specific criteria set out in Article 2[11]. The agreement provides methods for calculating normal value and export price, including cases where sales do not allow for a proper comparison. For instance:

If sales in the exporting country occur at prices below production costs, those sales can be disregarded.
In cases where domestic sales do not allow for a fair price comparison, authorities may use a 'constructed' normal value, which includes production costs plus reasonable selling, general, and administrative costs (SGA) and profit.

Margin of Dumping

The margin of dumping is calculated based on:

The weighted average normal value compared to the weighted average of comparable export prices, or
A transaction-to-transaction comparison of normal and export prices. The margin is expressed as a percentage of the export price, and authorities must ensure consistency in applying these methods. In cases of significant price differences among different buyers, regions, or time periods, a different comparison method may be used (e.g., 'targeted dumping'). Individual margins are determined for each known exporter or producer, though sampling methods may be used if the number of producers or exporters is too large.

Determination of Injury

Material Injury

Article 3 of the Anti-Dumping Agreement[12] provides rules for determining material injury caused by dumped imports. There are three main types of injury considered:

Material injury itself to a domestic industry,
Threat of material injury, or
Material retardation in the establishment of a domestic industry.

An essential factor in determining injury is the definition of the ‘like product’. The like product is defined in Article 2.6[13] as “a product which is identical, or, in the absence of such a product, another product with characteristics closely resembling those under consideration.”

Objective Examination

‘Material injury’ is not explicitly defined but must be determined through an objective examination based on evidence of volume and price effects of dumped imports and the consequent impact on the domestic industry. Article 3.4 of the Anti-Dumping Agreement[14] governs this examination, requiring authorities to consider all relevant economic factors affecting the industry. The factors listed are not exhaustive.

Dispute Settlement under the WTO

The dispute settlement system of the WTO serves as a critical mechanism to ensure that member countries adhere to the rules established under various agreements, including the Anti-Dumping Agreement (AD Agreement). Its primary objective is to provide security and predictability in the multilateral trading system. When a WTO member believes that another member has not met its obligations, consultations can be requested to resolve the matter. If consultations fail, a formal panel can be established to review the case, with the possibility of appeal to the WTO Appellate Body.

Consultation and Panel Establishment

Request for Consultations: Any WTO member may request consultations if it believes another member has violated AD Agreement obligations. These consultations are conducted according to the WTO Dispute Settlement Understanding (DSU), and failure to reach a resolution can lead to the establishment of a panel.
Panel and Appeal: The panel’s report can be appealed to the WTO Appellate Body. Only issues of law covered in the panel report and legal interpretations may be appealed.

Special Standard of Review – Article 17.6 of the AD Agreement

Article 17.6 of the AD Agreement[15] provides a unique standard of review, giving more discretion to the anti-dumping authorities than the general provisions in Article 11 of the DSU[16]. A panel must determine whether the anti-dumping authorities’ establishment of facts and evaluation were unbiased and objective. If the panel finds that the authorities’ decision was well-founded, even if it differs from the panel’s conclusions, the determination must be upheld.

Guatemala Case[17] – Anti-Dumping Investigation Regarding Portland Cement from Mexico

This landmark case involved procedural and jurisdictional challenges. Mexico alleged that Guatemala had violated Articles 2, 3, 5, and 7.1 of the AD Agreement[18]. The Panel ruled that Guatemala failed to comply with Article 5.3[19] due to insufficient evidence to justify the investigation. Guatemala’s appeal to the Appellate Body argued that Mexico had not properly identified the measure. The Appellate Body clarified that the AD Agreement must be read in conjunction with the DSU, emphasizing the importance of specific measures in disputes.

Anti-Dumping Laws in the United States

The U.S. anti-dumping law is one of the strongest trade protections available to its industries. This law allows the U.S. government to impose duties on products sold at unfairly low prices, particularly those dumped at prices below normal market value or production costs.

Key U.S. Anti-Dumping Laws:

Anti-Dumping Act of 1916: One of the earliest pieces of legislation addressing dumping practices. This law was challenged, and in 2000, a WTO panel ruled it violated GATT and AD Agreement obligations.
Tariff Act of 1930: Formed the basis of U.S. anti-dumping regulation, implemented through the Department of Commerce and International Trade Commission.
Continued Dumping and Subsidy Offset Act, 2000: Also known as the Byrd Amendment, controversial for providing direct payments to U.S. industries harmed by dumping.
Clayton Act (1936): Extends anti-dumping principles to buyers and regulates price discrimination practices.

U.S. Anti-Dumping Measures:

High Dumping Duties: U.S. duties can reach as high as 400%, making imports from certain countries effectively uncompetitive.
Duration: Anti-dumping orders can last up to 10-20 years, creating long-term trade barriers.

Anti-Dumping Laws in the European Union (EU)

The European Union (EU) is the only regional trade bloc that holds WTO membership independently. Although the EU was not formally part of the old GATT, it is now a WTO member and represents all EU Member States in global trade negotiations. Each EU Member State is also individually a member of the WTO.

Hierarchy of EC Anti-Dumping Law:

Article 133 of the EC Treaty[20]: This article establishes the EU's competence for anti-dumping actions, affirming that protection against dumping is a core element of the EU's common commercial policy. As the EU’s competence in commercial policy is exclusive, individual Member States do not have the authority to impose anti-dumping measures.
Secondary Legislation: The Anti-Dumping Regulation (AD Regulation) is the key legal instrument that translates the EU's obligations under WTO law into specific actions.
Legal Acts in Individual Cases: These are legal decisions and measures taken by EU institutions in response to specific anti-dumping investigations, as permitted under the AD Regulation.

Scope of EC Anti-Dumping Law:

The anti-dumping rules apply exclusively to imports from third countries, not to trade between EU Member States, which is governed by the EU’s common market and subject to EU competition law instead.
Anti-dumping measures are applied at the level of the entire EU market due to its status as a customs union with an integrated internal market. Following the elimination of internal customs borders on January 1, 1993, duties at intra-Community frontiers ceased to exist.
Anti-dumping measures on imports from WTO member countries must adhere to both the procedural and substantive requirements outlined in Article VI of GATT and the WTO Anti-Dumping Agreement.

EC Anti-Dumping Regulation:

The Council Regulation 384/96 on protection against dumped imports from countries outside the EU (the AD Regulation) reflects the EU’s obligations under WTO law and incorporates additional provisions, such as rules regarding circumvention of anti-dumping measures and the concept of "Community interest."
This regulation ensures that the EU's anti-dumping measures are aligned with international trade laws and addresses specific issues not covered by WTO rules alone.

Anti-Dumping Laws in India

Legislative Framework

The first Indian anti-dumping legislation came into existence in 1985 with the notification of the Customs Tariff (Identification, Assessment and Collection of Duty or Additional Duty on Dumped Articles and for Determination of Injury) Rules, 1985. Since then, India has established a structured legal framework governing anti-dumping measures, which includes:

Article VI of GATT 1994 (commonly known as the Agreement on Anti-Dumping)
Customs Tariff Act, 1975 – Section 9A and 9B[21] (amended in 1995)
Anti-Dumping Rules (Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995)
Investigations and Recommendations by the Designated Authority, which functions under the Ministry of Commerce
Imposition and Collection by the Ministry of Finance

Authorities for Anti-Dumping

In India, the Directorate General of Anti-Dumping and Allied Duties (DGAD) administers anti-dumping and anti-subsidy measures.

The DGAD functions under the Ministry of Commerce and Industry and is responsible for conducting anti-dumping and countervailing duty investigations.
The “Designated Authority” conducts these investigations and makes recommendations to the Government for imposing anti-dumping duties.
Once the recommendation is made, the Ministry of Finance levies the anti-dumping duties.

Safeguard measures, however, are administered by a different body, the Director General (Safeguard) under the Department of Revenue, Ministry of Finance. The Standing Board of Safeguards, chaired by the Commerce Secretary, considers recommendations from the DG (Safeguard) and recommends the imposition of Safeguard Duties, which are also levied by the Ministry of Finance.

Appeals Process

Indian law provides that the final determinations regarding the existence, degree, and effect of dumping can be appealed to the Customs, Excise, and Gold (Control) Appellate Tribunal (CEGAT).

Only final findings/orders from the Designated Authority or Ministry of Finance can be challenged before CEGAT.
Preliminary findings and provisional duties cannot be appealed.
Appeals must be filed within 90 days from the date of the final determination.

Conclusion

The evolution of Anti-Dumping laws has played a crucial role in shaping international trade under the WTO framework. Through a comparative analysis of these laws in the EU, US, and India, we can see the varying approaches and implementations of trade remedial measures. The Anti-Dumping laws serve as essential tools to protect domestic industries from unfair trade practices, ensuring fair competition and safeguarding the industrial base of a nation.

As highlighted in the apex court judgment Reliance Industries Ltd. V. Designated Authorities & Ors.[22], industrialization is vital for transforming India into a modern, powerful state. The Anti-Dumping Law plays a significant role in this context by preventing the destruction of Indian industries, built with the vision of rapid industrialization for economic growth, employment, and technological advancement. In conclusion, for India to gain respect on the global stage, rapid industrialization is imperative, and the Anti-Dumping Law stands as a key mechanism to support this national goal.

[1] Adam Smith: An Inquiry into the Nature and Causes of the Wealth of Nations, Glasgow Edn. 1976, Book IV Ch. III.

[2] GATT (General Agreement on Tariffs and Trade), 1994, art. VI.

[3] Id. at art. IV.

[4] The Anti-Dumping Agreement, art. 16.

[5] Id. at art. 5.

[6] Id. at art. 5.10.

[7] Id. at art. 6.

[8] Id. at art. 13.

[9] Id. at art. 1.

[10] Id. at art. 2.1.

[11] Id. at art. 2.

[12] Id. at art. 3.