An Anti-Dumping Duty (ADD) is a protectionist tariff that is applied on foreign imports, where the prices of the products are lower than the fair market value. ADD is imposed with an intent to protect the interests of the domestic traders. In India, the ADD is regulated in accordance with the provisions under the Customs Tariff Act, 1975 (the Act) and the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (the Rules).
An ADD is valid for a period of five years, starting from the date on which it is imposed, unless revoked earlier. ADD can be extended for a further period of five years through a Sunset or Expiry Review Investigation. Such a review must be initiated before the ADD is terminated and the investigation must be carried on by the Designated Authority.
The Designated Authority is appointed in accordance with Rule 3 of the Rules, where the Central Government may by notification in the Official Gazette appoint a person not below the rank of Joint Secretary to the Government of India or any other person the Government may think fit.
If the Designated Authority concludes that the ADD upon expiration would most likely lead to continuation or recurrence of injury and dumping, in such a case the duty may be extended for a further period of five years by the Authority.
WHAT IS A SUNSET CLAUSE/ PROVISION IN A STATUTE?
A Provision in a Statute, Regulation or a piece of Legislation that seizes to be effective and expires automatically, is known as a Sunset Clause or Sunset Provision. A Sunset Clause provides for an inherent, automatic repeal of certain Sections, Articles, or Clauses of a Statute or the entirety of the law, upon reaching a specified date. When such Clauses reach the final date, the relevant parts of the concerned Legislation are rendered void, with an immediate effect.
It is apposite to look at the legal framework in Anti-Dumping Agreements where the Sunset clauses are included.
LEGAL FRAMEWORK FOR ANTI-DUMPING
Customs Tariff Act, 1975 – Sections 9A (5) (as amended in 1995):
In India, Anti-dumping Investigations are regulated by the Directorate General of Anti-dumping and Allied Duties, a division within the Ministry of Commerce, presided over by an officer known as the Designated Authority. Over the years, various Anti-dumping Investigations have been initiated and ADD have been levied.
Section 9A (5) of the Customs Tariff Act, 1975 (Customs Tariff Act) pertains to the imposition of the ADD, which shall unless revoked earlier will cease to exist after the expiry of five years from the date of imposition. However, if the Central Government in its review is of the opinion that the expiry of the ADD shall result in the recurrence of dumping, then the ADD may be extended for a further period. If the review initiated has not concluded even after the expiry of five years, then in such case the ADD shall not remain in force beyond one year.
For a Sunset Review, the Designated Authority must scrutinize the likelihood of either the continuation or recurrence of dumping and injury. The method to be adopted for such an examination has not been prescribed either by the WTO or under any Indian Law. The Designated Authority is therefore empowered and has a discretionary power to examine whichever parameters for the analysis, provided that it can justify its determinations and provide rationale as a quasi-judicial body.
Where the Designated Authority examines parameters for which information for the notified period is collected. The due process and essential principles of an Anti-Dumping Investigation must be followed even in a Sunset Review.
- United Kingdom (UK)
In the UK, the Her Majesty’s Revenue and Customs (HMRC) Office regulates the ADD and its implementation upon “dumped” goods and products. Even though anti-subsidies and countervailing measures do apply duties or other actions, such as restriction on imports, there is no mention of any Sunset Review provision which may be implemented by the Designated Authority, which in this case is the HMRC Office.
Since the UK is a party to the ADA of the WTO, it can only be deduced that the UK by default adheres with the Sunset Provision, as provided under Article 11.3. as there is no other provision to the contrary.
- United States of America (USA)
The Uruguay Round Agreements Act,1994 brought a lot of amendments to the anti-dumping and countervailing duty laws in the USA. One of the most significant change required the Department of Commerce and the United States International Trade Commission (USITC) to organize and conduct reviews not later than 5 years after an anti-dumping or countervailing duty order to determine whether revoking the duty order may lead to a possible recurrence of dumping or subsidies and injury. Therefore, in these 5-year reviews, the USITC being a quasi-judicial body determines the consequences of revocation of duty order. These five-year sunset reviews are further stated in Section 751 (c) of the Tariff Act, 1930, 19 U.S.C. 1675 (c).
LEGAL FRAMEWORK FOR ANTI DUMPING AGREEMENTS
- Article VI of the General Agreement on Tariffs and Trade:
The Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, 1994 (“GATT”) is commonly known as the Anti-Dumping Agreement (“ADA”), which includes the elaboration of the basic principles such as the investigation, determination and application of the ADD.
It is pertinent to look at the Sunset Review clause in an ADA. Article 11.3 is also referred as the Sunset Clause of the ADA which is reproduced as under:
“Article 11.3 – Notwithstanding the provisions of paragraphs 1 and 2, any definitive anti-dumping duty shall be terminated on a date not later than five years from its imposition (or from the date of the most recent review under paragraph 2 if that review has covered both dumping and injury, or under this paragraph), unless the authorities determine, in a review initiated before that date on their own initiative or upon a duly substantiated request made by or on behalf of the domestic industry within a reasonable period of time prior to that date, that the expiry of the duty would be likely to lead to continuation or recurrence of dumping and injury. The duty may remain in force pending the outcome of such a review.”
The ADD can be terminated after a period of 5 years from the date of its imposition unless the authorities suo-moto or on the basis of a duly substantiated request received from or on behalf of the domestic businesses determine that the termination of the Anti-dumping duty shall lead to the recurrence of dumping.
A Sunset Review must be initiated before termination of the ADD and to determine whether the expiry of the ADD would likely to lead to continuation or recurrence of dumping and injury. If the Investigating Authority concludes that expiry of the ADD is likely to lead to continuation or recurrence of dumping and injury, it may extend the ADD for a further period of five years.
However, the aforementioned interpretation of Article 11.3 is not followed by several countries like USA. There have been few cases wherein the ADD lasted for more than 20 years.
- International Perspective of Sunset Clause in Anti-Dumping Agreements.
Most international law statutes and treaties are devoid of such a clause or provision however, the ADA contains the Sunset Clause.
The Anti-Dumping Order, as mentioned in the Clause, expires when the five-year tenure elapses and only in certain very exceptional situations can the ADD be continued. However, this very interpretation is not followed by countries like the USA. There have been some cases where the ADD has remained in effect for more than 20 years.
JUDICIAL PRECEDENTS IN INDIA
- Kesoram Rayon & Others v. The Designated Authority & Others [(2018) 359 ELT 475]
In the present case the ADD was levied on the cellophane transparent film from China PR which was soon about to expire. Pursuant to this, an application was filed by the Domestic Industry for a Sunset Review. But, the Designated Authority denied the same as Designated Authority opined that facts of the case did not tend to cause any injury or likelihood of injury to the company. Dis-satisfied by the decision of the Designated Authority, the company filed a Writ Petition in the Delhi High Court praying for the initiation of Sunset Review. The Domestic Industry contended that initiation of Sunset Review is mandatory on the part of the Designated Authority.
The Delhi High Court granted the interim relief to the Domestic Industry by directing the Designated Authority to initiate the Sunset Review. Moreover, directions were also issued that in case of a pending Sunset Review, the ADD also extends for a period of 1 year in accordance to the second proviso to Section 9A (5) of the Customs Tariff Act.
The prominent question presented before the Delhi High Court was whether the Designated Authority must be satisfied about the existence of a prima facie case before initiating the Sunset Review. The Delhi High Court noted that Sunset Review is a two-step process where the first step is to see if the prima facie case is made on the basis of material furnished by the Domestic Industry in its application. The second step is to conduct the Sunset Review.
In furtherance to the aforementioned, the Delhi High Court noted that Designated Authority had sent questionnaires to the several Domestic Industry, considered all the relevant parameters and has arrived at conclusion after a detailed analysis. Henceforth, it was held that Designated Authority had acted in a just way and within its jurisdiction by refusing the Sunset Reviews. Therefore, the Delhi High Court dismissed the writ petition and vacated the interim orders.
- Indian Metal And Ferro Alloys Ltd. v. Designated Authority [2008 (224) ELT 375 Del]
The moot issue in the present case was the interpretation of the Anti-Dumping provisions of the Customs Tariff Act and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (Customs Tariff Rules). The question arising was whether the Designated Authority is obliged to carry the Sunset Review or it can decline to do so.
The Delhi High Court while answering the question in affirmative relied on Reliance Industries v. The Designated Authority [(2006) 10 SCC 368] wherein the Supreme Court observed that the purpose of Section 9A of the Customs Tariff Act is to promote competition and allow healthy competition. The Delhi High court observed that Rule 23 (3) of the Customs Tariff Rules must be respected.
Therefore, the Supreme Court rejected the contentions of the Respondents and took the view that the Sunset Reviews are mandatory. Moreover, such review should be conducted in accordance to Rule 23 of the Customs Tariff Rules.
Quite often, provisions involving Sunset Clauses are approved by a majority of the stakeholders because of the temporary nature of the provisions. In today’s time, the Sunset Clause may be used as a tool to deal with the issues of permanent imposition of law. Sunset Clauses may aid in effectively tackling the legal inertia which is responsible for accumulation of outdated laws/ provisions over several years in many countries.
By having specific dates and time periods for the effect and operation of laws, it allows the lawmakers to push forward new and innovative ideas which can be implemented with restricted downslide. This demonstrates how the modern law-making process is highly experimental in nature and needs validation based on the results and practical findings through experiences. Moreover, having a fixed, stabilized period for review in effect may ascertain the certainty of law.
Like every other policy measure, in the end it is the implementation and execution which is extremely critical and important for its success. The dynamics of review for the Sunset Clause should be specified and properly laid down within the law itself. This would make the review process transparent and efficient.
The purpose of the Sunset Clause is to allow the lawmakers to categorically institute a Provision which enables a quick Authoritative Governmental Action which is reasonably required. A good example would be; the provision for Reservation under the Constitution of India, which was to be a temporary provision for a period of 10 years.
–Team AMLEGALS, assisted by Mr. Aryan Srivastava and Mr. Harsh Mishra (Interns)
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