Recent Context
Recently,The Directorate General of Trade Remedies (DGTR) under the Ministry of Commerce and Industry recommended the imposition of an anti-dumping duty on aluminium foils imported from China, after observing that Chinese imports had captured 30 per cent of the Indian market despite sufficient domestic capacity.
What is Anti Dumping Duty?
Anti-dumping investigations are conducted by countries to determine whether domestic industries have been harmed due to a surge in cheap imports. The Ministry of Finance makes the final decision on whether to impose duties.
1.It is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
2.Dumping is a process wherein a company exports a product at a price that is significantly lower than the price it normally charges in its home (or its domestic) market.
3.The duty is priced in an amount that equals the difference between the normal costs of the products in the importing country and the market value of similar goods in the exporting country or other countries that produce similar products.
4.It is imposed to protect local businesses and markets from unfair competition by foreign imports.
5.Hence,the purpose of anti-dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade.
6.The use of anti-dumping measures as an instrument of fair competition is permitted by the World Trade Organization (WTO).
7.The WTO allows the government of the affected country to take legal action against the dumping country as long as there is evidence of genuine material injury to industries in the domestic market.
8.The government must show that dumping took place, the extent of the dumping in terms of costs, and the injury or threat to cause injury to the domestic market.
9.While the intention of anti-dumping duties is to protect local businesses and markets, these tariffs can also lead to higher prices for domestic consumers.
10.In India, the Ministry of Finance makes the final decision on whether to impose anti-dumping duties.
Key Takeaways from recent Action:
— The DGTR stated that imports of “aluminium foil up to 80 microns, excluding aluminium foil below 5.5 microns for non-capacitor applications,” are undercutting the prices of the domestic industry. This price undercutting has forced the domestic industry to reduce its selling price below the cost of production.
— The industry warned that an anti-dumping duty would increase the cost of downstream finished goods, making the Indian downstream industry unviable. Moreover, imports of finished goods from other countries would increase, causing injury to the flexible packaging industry in India.
— Despite several efforts to curb imports from China, goods are increasingly making their way from the neighbouring country. Imports from China have already crossed $60 billion during the first seven months of 2024, which is 10 per cent higher than the $55 billion recorded during the same period last year.