Existence of injury to the domestic industry is an essential pre‐requisite for invoking any trade defense measures. Injury analysis in trade defense mechanism ‐ be it anti dumping, anti subsidy or safeguards measures ‐ can be defined as an evaluation / assessment of effects of the subject imports on the industry concerned.
Three main pillars on which an investigation depends are
a. There must be injury to the domestic industry;
b. The injury (or its threat) must be material/serious; and
c. Imports must be a cause of such injury. It is thus relevant to understand the types and factors of injury.
A. Types of injury
Injury can be defined as either
(i) Material injury to a domestic industry, or
(ii) Threat of material injury to a domestic industry, or
(iii) Material retardation of the establishment of a domestic industry.
A.1. Material Injury‐ Material injury is the first injury examination under dumping subsidy investigation.
The material injury is typically seen for the domestic industry as defined by the authority. Further, the injury to the domestic industry is not be seen in the ideal conditions, but is to be seen for the domestic industry as it exists.
A.2. Serious Injury ‐ Serious Injury is specific to safeguard law. “Serious injury” means a “significant overall impairment” in the position of a domestic industry. The standard of “serious injury” as required for safeguard duty imposition is very high.
All factors relevant to the overall situation of the industry should be included in the authorities’ determination.
A.3 Threat of Material Injury/Serious Injury ‐ A threat of material injury or a threat of serious injury is a situation where the domestic industry has not suffered injury over the period considered, but injury to the domestic industry is imminent if the present circumstances continued. It could therefore be contended that it is a prospective injury analysis. A ‘threat of material injury’ means clear and imminent danger of serious injury. .
A.4 Material Retardation of the establishment of Domestic Industry ‐ Existence of material injury or threat thereof is examined for an established domestic industry. An established industry has a past history of performance. However, for a domestic industry which is not yet established and which has not performed for a reasonable period of time, it would not be possible to appropriately determine whether imports are causing injury. The Authority analyses in such cases whether imports are retarding establishment of the Domestic Industry.
B. Difference between Material Injury and Serious Injury ‐The magnitude of injury, thus, is different in antidumping/ countervailing investigation as compared to safeguard investigation. The Appellate Body in the matter of US Lamb held that word ‘serious’ connotes a much higher standard of injury than the word ‘material’. Thus, it is seen that the standard of injury in safeguard investigation should be higher than that in antidumping/countervailing measure investigation.
Further a basic difference in the language under the two laws is whereas anti dumping (and anti subsidy) law refers to decline in or negative effects on the parameters, safeguard law states about changes in the level of these parameters.
Basic requirements for determination of material injury ‐ The Anti Dumping Agreement states that a determination of injury must be based on positive evidence and involves an objective examination of
(i) the volume of dumped imports
(ii) the effect of the dumped imports on prices in the domestic market for like products, and
(iii) the consequent impact of the dumped imports on domestic producers of the like product.
Material Injury is analyzed in terms of the volume effect and price effect of the dumped imports. As per Agreement on Antidumping following factors are considered under Price and Volume effect:
1. Volume Effect:
a) Increase in Imports ‐ With regard to volume of imports and its effect on the domesticprices, the investigating authority is required to consider whether there has been a significant increase in dumped imports either in absolute terms or in relation to production or consumption.
Whereas under Safeguards investigations, it is determined whether there is absolute increase in imports or in relative terms, i.e., in relation to production and consumption.
b) Cumulative assessment of dumped imports‐ Where imports of a product from more than one country are simultaneously subjected to investigations, the investigating authorities can cumulatively assess the impact of such imports on the domestic industry.
c) Assessment of Demand ‐ Demand/consumption of the product in domestic market is generally ascertained by taking the sales volumes of all the domestic producers and imports of the product from all sources. The data is collected over the injury period, as the injury analysis is carried out based on data for the injury period.
d) Volume and market share of imports‐ With regard to the volume of the dumped/subsidised imports, the investigating authorities shall consider whether there has been a significant increase in imports, either in absolute terms or relative to production or consumption in the domestic market. Some investigating authority also examines the market share of imports in relation to total imports into the Country.
e) Market Share of imports in demand‐ Investigating authority examines the trend of market share of the imports from subject countries. Market share is the share of imports in demand/consumption in the domestic market. .
2. Price Effect:
With regard to the effect of the dumped imports on prices, the rules require the investigating authority to examine whether the import price is having adverse effect on the domestic industry. The investigating authority typically determines (a) price undercutting, (b) price underselling, (c) price suppression/ depression.
f) Price undercutting ‐ The purpose of determining price undercutting is to assess whether such dumped imports are causing injury to the industry. This is done by comparing the landed price of imports with the selling price of the domestic industry.
g) Price Depression or Suppression‐ The investigating authorities consider whether the effect of such imports is to depress prices to a significant degree or prevent price increases, which otherwise would have occurred, to a significant degree.
Price suppression refers to the situation where selling price or value or worth of the product either are prevented or restrained from rising (i.e. they do not increase when they otherwise would or should have) or they do actually increase, but the increase is less than it otherwise would or should have been.
Price depression refers to the situation where prices are pressed down or reduced.
h) Evaluation of all relevant economic factors and indices‐ The evaluation of Injury must be based on an examination of all factors having a bearing on the state of the industry. The parameters listed under the law are
a. State of Industry including actual and potential decline in parameters listed under the law, viz. Sales, profits, output (i.e., production), market share, productivity, return on investments, or utilization of capacity
b. Factors affecting domestic prices;
c. The magnitude of the margin of dumping;
d. Actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments.
D. All parameters need not show Injury ‐ Even though all the listed parameters should be analysed and the determination should show analysis to this extent, it is not mandatory that all listed parameters should demonstrate injury to the domestic industry.
The investigating authority has to determine injury based on the overall evaluation of the domestic industry.
E. Basic requirements for determination of threat of material injury ‐ The WTO Agreement provides the factors to be considered in the evaluation of threat of injury determination. These include the rate of increase of dumped imports, the capacity of the exporters, the likely effects of prices of dumped imports, and inventories. The Agreement specifies that a determination of threat of material injury should be based on facts, and not merely on allegation, conjectures, imagination, or remote possibilities.
D. Trend analysis ‐The injury analysis is done by undertaking trend analysis, barring the parameters such as price undercutting, price underselling, factors affecting domestic prices, and magnitude of dumping margin. Trend analysis is basically a science of studying changes in pattern of a parameters over a specified period of time.
Trend analysis gives the clearer idea of factors which are causing injury and the factors which remain ambiguous are further in‐depth analyzed.
Ms. Divya Nair, Senior Consultant (Legal) &
Ms. Hema Rana, Associate Consultant (Cost)
©Forum For Trade Remedies, 2016