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									           Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study



      The WTO related issues have been in the forefront of key issues
debated, discussed    and deliberated     upon by     the industry, cost
management profession and the Government over the past decade. The
phase of discussions accelerated after 1st January, 2005, when the
implementation phase has started. The WTO Era, which was in the
background so far, has suddenly loomed large and we find ourselves in
the beginning of a new era.

      Like the famous metaphor of the elephant and the blind men, each
sector has its own views on whether it is a threat or opportunity. While
there are plethora of arguments both for and against, only time will come
out with the actual truth.    It is a well known fact, that it will be an
opportunity for those who understand the nuances and shape their
business strategy to insulate the threats and take advantage of the

      The Institute of Cost and Works Accountants of India have already
come out with series of publications on WTO in the past. The intention of
the Technical Committee of the Diamond Jubilee Celebrations is not to
add one more publication in the list, but add value by providing practical
case studies of how the contentious WTO issues were faced by the
industry. A perusal of the myriad of technical materials (including
websites), shows that plenty are available on the conceptual issues but
very few on the practical or real life aspects. The CASB         and WTO
Committee has been deliberating on bringing out the key practical issues
relating to the WTO matters, and in one of the first meetings, it was
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

decided to bring out a practical publication on textiles and any other
industry, which is facing the anti-dumping or anti-subsidization threat.

        Although Textile Industry has been facing the anti-dumping issues
for a long time, the anti subsidization issue is a topical issue, as EU
imposed countervailing duties on bed-linen on exports from India, in the
first quarter of 2004. It also gave a handle for the Government of India,
to have a re-look at the subsidy policies and practices and make them
WTO Compatible. This also shapes the business strategies, where the
Industry has to stop looking at subsidies as a means of maintaining
profitability and retune their cost structures for survival and growth.

        The anti dumping duty on shrimp industry virtually came as a bolt
from the blue, as the industry does not boast of many large organized
business houses. It is a test case of the ability of the industry to face the
anti dumping levy and survive. There are many similar industries
belonging to this type of products, where unorganized sector play a major
role.    Therefore, the shrimp industry became a natural choice for
publication under ‗any other industry category‘.

        The procedure show cased under the investigation points out to
the need for availability of a structured information base, both at the
macro level and micro level for industries concerned. Often, these
information are not available with the normal authenticated disclosure
formats of the corporate (Eg: Annual Report.) For example, the product
line capacity utilization, profitability, return on investment, cash flow
and investments, required under any investigation under anti dumping/
subsidization authorities, requires a structured and authenticated
format, which will stand the test of investigation. It is said, that
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

unstructured information has been the bane of many anti dumping

      The Institute of Cost and Works Accountants of India have been
harping on the effective use of information base that is readily available
under the Cost Accounting Records Rules and also the Cost Audit Report
Rules for about 47 industries covered under cost audit. A ready source
of information will be available to the users from the Cost Accounting
Records maintained as per the rules as also the Cost Audit Report of
companies in the industry. Even for those industries not covered under
Cost Audit, the same information structure can be useful to provide key
information that is required under the WTO issues. On this matter we
owe our gratitude to Mr.A.K.Kapoor, Advisor Cost, Cost Audit Branch,
Government Of India, who has vast experience in WTO matters, when he
was handling the Anti Dumping issues in the Govt. of India, for providing
vital clarifications on many technical issues.

      Identification of resource persons for the work was the most
critical as the issues have to be retold from a practical angle.
Fortunately, in-house talent was available within the Committee for
textiles. For shrimp industry Sri.S.P.Kamath, Deputy General Manager of
Amalgam Group, Kochi, who has been in thick of the anti dumping
investigation on shrimp industry was the natural choice. We express our
gratitude for having provided the write up on the shrimp industry. The
Research and Journal Directorate and the Professional Development
Directorate of the Institute has been providing invaluable support in the
efforts of the Committee. We are happy to recognize their efforts.

      We also acknowledge the help rendered by S/Sri.A.S.Durgaprasad,
S.Ganapathisubramanian,        A.N.Raman,        V.Arunagiri,    J.S.Anand,
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

K.S.Subramanian and R.Narayanan as part of the Technical Committee,
for providing valuable technical support for the publications.

We are also grateful to Dr.H.R.Subramanya, President, ICWAI, who
germinated the idea of bringing out special publications on topical issues
and which will form the plank on which the future guidance notes and
cost accounting standards will emanate.

Chairman- Technical Committee
Diamond Jubilee Celebrations.
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study



Sl.No                            Topics
1       Introduction
2       Article XV of GATS
3       A Backgrounder- Textiles back in the mainstream
4       A case study on Countervailing Duty -Cotton Bedlinen.
5       Anti-Dumping on Shrimp Exports – A case study
6       The Uruguay Round Agreements and Management
  Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

           Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

                                 PART - I



      Textile Industry in India, have always been on the receiving end of
the measures under WTO for a long time. With the expected dismantling
of the quota regime from Jan 2005, the industry is gearing itself to face
and meet the challenges, build, enhance and sustain the core
competencies. The GOI has also been playing the role of an pro-active
facilitator, in balancing between the need for providing the much needed
relief in the form of lowering/doing away with the duty regimen,
providing interest subsidies to compensate for the differential domestic
interest rates as compared to the requirement under WTO regime.

      In the past the issues were more from the anti-dumping point of
view for exports from India. A robust approach from the industry with
facts and figures enabled it to present a convincing argument, which
resulted in minimal counter-veiling effects in most of the cases. The cost
records maintained by the industry provided an authenticated, verifiable
and transparent cost data, which had to be accepted by the concerned
authorities. A taste of the new front which is opening up has been
experienced during the year 2002-03, when the European Union,
initiated anti-subsidization action against the Indian exporters of cotton-
type bed-linen. The following case study is a pointer to the measures that
have to be faced by the industry, in the process of globalization of the
free trade regime. The procedure applicable is common to any industry,
which enters or already well entrenched in the global market. The
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

dismantling of the quota regime will further increase such measures by
importing countries, as in this case, it was acknowledged that
Community producers suffered material injury in spite of the presence of
quota system.

      The approach followed will be a pointer to the gradual reduction of
subsidies given by the GOI. The start has already been made in lowering
of IT Exemption (Sec. 80 HHC), in a phased manner. GOI has already
given enough indications on the thinking in other forms of subsidies. In
future, the dependence on subsidies to maintain profitability will have to
be reduced and internal cost competencies have to be built in for growth
and sustenance. This is a global phenomenon. The WTO issue being a
double edged sword can also enable industry to come together and
initiate action against unwarranted subsidization by other countries
exporting to India.

      The procedure followed by the initiators as well as responders to
the investigation, will give a bird‘s eye view of the entire process of
investigation. Nothing can be more explicit than going through a real life
case study especially under the complicated provisions of the WTO. In
most of the WTO cases, we find that the stables are secured after the
horses have bolted. Once the damage is done, one has to reach level zero
before climbing back into reckoning. In fact, it will be advisable for
industries, which depend solely on subsidies to survive, to have a re-look
at their business strategy, for survival and growth.

The relevant article under GATS, covering subsidies is given below:

Article XV of GATS

            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

1.          Members recognize that, in certain circumstances, subsidies
may have distortive effects on trade in services. Members shall enter into
negotiations with a view to developing the necessary multilateral
disciplines to avoid such trade-distortive effects. The negotiations shall
also address the appropriateness of countervailing procedures.          Such
negotiations shall recognize the role of subsidies in relation to the
development programmes of developing countries and take into account
the needs of Members, particularly developing country Members, for
flexibility in this area. For the purpose of such negotiations, Members
shall exchange information concerning all subsidies related to trade in
services that they provide to their domestic service suppliers.

2.          Any Member which considers that it is adversely affected by
a subsidy of another Member may request consultations with that
Member on such matters. Such requests shall be accorded sympathetic

It may be also relevant to reproduce below the following backgrounder on

                 “5. Textiles: back in the mainstream

Textiles, like agriculture, is one of the hardest-fought issues in the WTO,
as it was in the former GATT system. It is now going through
fundamental change under a 10-year schedule agreed in the Uruguay
Round. The system of import quotas that has dominated the trade since
the early 1960s is being phased out.

From 1974 until the end of the Uruguay Round, the trade was governed
by the Multifibre Arrangement (MFA). This was a framework for bilateral
agreements or unilateral actions that established quotas limiting imports
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

into countries whose domestic industries were facing serious damage
from rapidly increasing imports.

The quotas were the most visible feature. They conflicted with GATT‘s
general preference for customs tariffs instead of measures that restrict
quantities. They were also exceptions to the GATT principle of treating all
trading partners equally because they specified how much the importing
country was going to accept from individual exporting countries.

Since 1995, the WTO‘s Agreement on Textiles and Clothing (ATC) has
taken over from the Mulltifibre Arrangement. By 1 January 2005, the
sector is to be fully integrated into normal GATT rules. In particular, the
quotas will come to an end, and importing countries will no longer be
able to discriminate between exporters. The Agreement on Textiles and
Clothing will itself no longer exist: it‘s the only WTO agreement that has
self-destruction built in.

Integration: returning products gradually to GATT rules
Textiles and clothing products are being returned to GATT rules over the
10-year period. This is happening gradually, in four steps, to allow time
for both importers and exporters to adjust to the new situation. Some of
these products were previously under quotas. Any quotas that were in
place on 31 December 1994 were carried over into the new agreement.
For products that had quotas, the result of integration into GATT will be
the removal of these quotas.
The agreement states the percentage of products that have to be brought
under GATT rules at each step. If any of these products came under
quotas, then the quotas must be removed at the same time. The
percentages are applied to the importing country‘s textiles and clothing
trade levels in 1990. The agreement also says the quantities of imports
permitted under the quotas should grow annually, and that the rate of
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

expansion should increase at each stage. How fast that expansion should
be is set out in a formula based on the growth rate that existed under the
old Multifibre Arrangement.

Products brought under GATT rules at each of the first three stages must
cover the four main types of textiles and clothing: tops and yarns;
fabrics; made-up textile products; and clothing. Any other restrictions
that did not come under the Multifibre Arrangement and did not conform
with regular WTO agreements by 1996 have to be made to conform or
phased out by 2005.

If further cases of damage to the industry arise during the transition, the
agreement allows additional restrictions to be imposed temporarily under
strict conditions. These ―transitional safeguards‖ are not the same as the
safeguard measures normally allowed under GATT because they can be
applied on imports from specific exporting countries. But the importing
country has to show that its domestic industry is suffering serious
damage or is threatened with serious damage. And it has to show that
the damage is the result of two things: increased imports of the product
in question from all sources, and a sharp and substantial increase from
the specific exporting country. The safeguard restriction can be
implemented either by mutual agreement following consultations, or
unilaterally. It is subject to review by the Textiles Monitoring Body.

Four steps over 10 years
The schedule for freeing textiles and garment products from import
quotas (and returning them to GATT rules), and how fast remaining
quotas should expand. The example is based on the commonly-used 6%
annual expansion rate of the old Multifibre Arrangement. In practice, the
rates used under the MFA varied from product to product.
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

Step Percentage of products How fast remaining to be brought under
GATT quotas should open up, (including removal of any quotas) if
1994 rate was 6%

Step 1: 1 Jan 1995 16% 6.96%
(to 31 Dec 1997) (minimum, taking 1990 per year imports as base)
Step 2: 1 Jan 1998 17% 8.7% (to 31 Dec 2001) per year
Step 3: 1 Jan 2002 18% 11.05% (to 31 Dec 2004) per year
Step 4: 1 Jan 2005 49% No quotas left

Full integration into GATT (maximum) (and final elimination of quotas).
Agreement on Textiles and Clothing terminates.

The actual formula for import growth under quotas is: by 0.1 x pre-1995
growth rate in the first step; 0.25 x Step 1 growth rate in the second
step; and 0.27 x Step 2 growth rate in the third step.

In any system where quotas are set for individual exporting countries,
exporters might try to get around the quotas by shipping products
through third countries or making false declarations about the products‘
country of origin. The agreement includes provisions to cope with these

The agreement envisages special treatment for certain categories of
countries — for example, new market entrants, small suppliers, and
least-developed countries.

A   Textiles   Monitoring    Body    (TMB)   supervises    the   agreement‘s
implementation. It consists of a chairman and 10 members acting in
their personal capacity. It monitors actions taken under the agreement to
ensure that they are consistent, and it reports to the Council on Trade in
Goods which reviews the operation of the agreement before each new
step of the integration process. The Textiles Monitoring Body also deals
with disputes under the Agreement on Textiles and Clothing. If they
           Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

remain unresolved, the disputes can be brought to the WTO‘s regular
Dispute Settlement Body.‖

         Reproduced from Understanding WTO –
           Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

                                PART - II


The following case study relating to imposing a definitive countervailing
duty on imports of cotton-type bed-linen originating in India, by
European Union, is a test case of anti subsidy measures under WTO
regime. The study has been presented under various broad heads
starting from the procedure, product, subsidization, domestic industry,
injury, causation, domestic interest and countervailing measures. The
investigation was initiated for the period (IP) was from 1st Oct 2002 to
30th Sep 2003, and the trends covered the period from 1999 to end of the

      The case study details the procedure followed by the European
Union against the subsidization practices of other countries. The same
defence is available to domestic industry also which faces subsidization.
The procedure detailed below will enable the domestic industry also to
initiate anti subsidy measures to face any material injury to the industry
due to subsidy practices of other countries. The external view will also
enable the industry to suggest subsidy policies of the Government of
India, to be WTO compatible.

            The case study represents the view point of the anti dumping
authority of the EU and should be construed as such.
  Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

                     A. PROCEDURE:
1. Product:
   The product under investigation was bed-linen originating in
   India, made of cotton fibres, pure or mixed with man-made
   fibres or flax, bleached, dyed or printed.

2. Initiation.
   The anti-subsidy proceeding was initiated on 18th Dec 2002,
   following a complaint from ―Eurocotton‖ (A Committee of the
   Cotton and Allied Textile Industries of the European
   Communities), which represent more than 25% of the total
   community production of cotton type bed-linen. The basis of
   the    complaint     contained       prima        facie     evidence   of
   subsidization and the resulting material injury. The due
   process of consultation, with Govt. of India (GOI) and the
   exporting producers and importers were also done. The
   possibility of arriving at a mutually agreeable settlement was
   also explored.

3. Sampling.
   a) Exporters/Producers in India.
   Since there were large number of exporters from India, the
   Commission requested the concerned exporters to make
   themselves known within three weeks of the initiation with
   key information on export and domestic turnover, specified
   subsidy schemes, and the activities and names of related
   companies. In response, about 80 companies representing
   more than 90% of the total exports identified themselves,
   with   the    requisite   details.   Due     to     large    number    of
  Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

  participants to the proceedings, a sample set of producers
  were identified. Final Selection was based on the largest
  representative volume of exports that could be reasonably
  investigated on a time bound basis. This pre-supposes the
  availability of information relevant for investigation. The
  advantage of a robust information system resulted in a
  specific duty, which is normally lower than the peak duty
  levied under the investigation.           Eight exporting producers
  (including     three        related   companies)        were         selected
  (representing 55% of Indian Exports) in consultation with
  TEXPROCIL and GOI. The companies, which were not
  responding, were declared non-cooperating companies and
  had to consequently face a higher countervailing duty.

  b) European Community producers:
  In the same manner five producer companies in three
  member       states     were      selected       covering          the    most
  representative market size. All the producer companies
  supporting the complaint were asked to provide production
  and sales information of the product under reference. Here
  also    companies      which      were    able     to   provide          partial
  information were considered as partially co-operating.

4. Investigation
  The investigation procedure followed was through
         a) Consideration of the views in writing submitted by
           exporting     producers      and      community           producers.
           Where deemed fit, some parties were also heard.
         b) Analysis     of    Questionnaire        replies     from        eight
           exporting      producers        and     from       five     sampled
           complainant community producers. In addition to
  Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

          the      eight   exporting    companies,    three    related
          exporting companies and one unrelated importer
          were also heard.
       c) Verification visits to eight exporting producers and
          five community producers were made.
       d) No provisional anti-subsidy measures were imposed
          given the need to examine further certain aspects of
          subsidy, injury, causality and community interest.


1. Product Concerned.
   The Product CN codes and TARIC codes of bed-linen made of
   cotton fibres, pure or mixed with man-made fibres or flax,
   bleached, dyed or printed were identified. The bed-linen
   included bed-sheets (fitted or flat), duvet covers and pillow
   covers, packaged for either separately or in sets. All similar
   product types with the same essential characteristics were
   considered as one product.

2. Like Product.
   The basic characteristics of products manufactured and sold
   in India and the products manufactured and sold in
   community       were    found   to    be   the    same     physical
   characteristics and considered as like products.
  Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

                        C. SUBSIDISATION
1. Introduction.
The export subsidy schemes identified for consideration were
    (i)        Duty Entitlement passbook (DEPB) Schemes,
    (ii)       Duty-free Replenishment Certificate ( DFRC),
    (iii)      Export Promotion Capital Goods (EPCG) Scheme,
    (iv)        Advance License Scheme (ALS),
    (v)        Export Processing Zones/ Export Oriented Units
               (EPZ/EOU) and
    (vi)       Income Tax Exemption (ITES).

2. All the above schemes were analyzed individually under
            a) legal basis
            b) Eligibility
            c) Practical implementation
            d) Conclusions on the scheme and
            e) Calculation of subsidy under the scheme.
3. The views and presentations of producer exporters, Texprocil
   and GOI were heard.
4. The views of the authority for each of the above schemes are
   given below. These are very vital as they provide the basis on
   which       the   authority   decides   whether   the   subsidy   is
   countervailable or come under legitimate substitution draw
   back schemes. Some of the views are common for all the
Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

     a) Duty Entitlement passbook (DEPB) Schemes,
     1. No obligation for the exporter to actually consume
        the goods imported free of duty, and duty free
        element is not calculated on actual inputs used.
     2. No verification procedure whether duty free inputs
        are consumed in the production process.
     3. Benefits available even without actual imports.
     4. License freely transferable.

     b) Duty Free Replenishment Certificate (DFRC) ,
     1. No verification procedure whether duty free inputs
        are consumed in the production process. (One to one
     2. Certificate freely transferable, therefore becomes an
        actual grant. (No actual user condition).

     c) Export Promotion Capital Goods (EPCG) Scheme.
     1. The capital goods do not constitute ―inputs‖ as they
     do not form part of the final products.

     d) Advance License Scheme.

     1. The scheme is not countervailable and comes within
        the ambit of the basic regulation.

     e) Export Processing Zones(EPZ)/ Export Oriented
        Units (EOUs).
     1. The granting of exemption from sales tax, customs
        duty, excise duty constitute financial contribution of
        GOI and therefore countervailable as subsidies.
  Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

         2. The enterprises can sell part of their production,
            which enjoy the concessions in the domestic market.

         f) Income Tax Exemption (ITES)

         1. The GOI foregoes revenue by providing full or partial
            exemption from income taxes.

(Note: This is only of academic relevance as the exemption is
being phased out).

   The summary of the conclusions arrived by the Commission
on the subsidisation are reproduced in the following table

      SCHEME               DECISION             QUANTUM OF
DEPB Schemes.           Countervailable     1.45% to 8.44%
DFRC                    Countervailable     3.08% to Nil
EPCG                    Countervailable     0.38%, 2.0% and Nil
ALS                     Not                           NIL
EPZ/EOU                 Countervailable     Raw Matls- Nil
                                            Capital    Goods      –
                                            Central   Sales    tax-
**ITES                  Countervailable     0.32% to 3.70%
               TOTAL                        3.09% TO 10.44%
** Income Tax Exemption Scheme.
        Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

   5. Amount of contervailable subsidies
         The range of countervailable subsidies varied between 3.09%
         and 10.44% in total. The same for the sample producers, on
         the basis of the weighted average subsidy margin is 7.67%.
         Since there was a high level of co-operation from the Indian
         producers and exporters (above 90%), the residual subsidy
         margin for all other companies were set at the highest
         individual margin, i.e. 10.44%.
         The table provided below gives the individual margin for the
         companies where subsidy margin were fixed individually.

Coy/Type       of   DEPB/Pos   DFRC    EPCGS   EPZ/EOU     ITES    TOTAL
      n             t Export
Bombay              4.95%              0.38%                       5.33%
Wadia & Sons
Brijmohan           5.93%                                  0.32%   6.25%
Divya               3.47%                                  2.95%   6.42%
Jindal              1.45%                                  1.65%   3.09%
Texcellance         1.88%      3.08%                       3.70%   8.65%
Mahalaxmi           7.02%                                  2.29%   9.31%
Pasupati                                       8.59%               8.59%
Prakash             8.44%              2.00%                       10.44%
Cotton Mills
Vigneshwara         4.46%                                          4.46%
Cooperating                                                        7.67%
companies not
in the sample
All others                                                         10.44%
     Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

                  D. COMMUNITY INDUSTRY
The community industry is composed of 29 community producers
who cooperated with the commission. The five sampled producer
companies were also complainants. Community producers, other
than the above, who were not complainants, did not cooperate. The
commission considered all the above companies as community
producers and they account for 45% of the Community production
for cotton type bed-linen.

                             E. INJURY

The key factors for determination of injury were as follows.
1. Preliminary remarks:
      The   trends   concerning    production,   productivity,   sales,
market share, employment and growth for the entire Community
Industry was collected. In case of sampled (five) Community
Producers the trends concerning prices and profitability, cash flow,
ability to raise capital and investments, stocks, capacity, utilization
of capacity, return on investment and wages were considered.

2. Community Consumption:
      The Community Consumption during the previous period
(1999) and Injury Period (IP) increased by 15%.

3. Imports from the country under investigation:
      (a) Volume and market share:
      Although, the volume and market share decreased from
9.1% from the previous period to 7.2% in the IP, the level of these
imports were substantially above the levels set out in the Article
     Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

10(11) of the basic Regulations. The import volumes increased by
more 11% in the first nine months of 2003 on a year to year basis.

      (b) Prices:
      The average prices dropped in the IP from a high of EUR
5.80 / Kg to EUR 5.50/Kg, i.e. by 5%.

      (C) Price Undercutting:
      The price undercutting was analyzed based on the weighted
average sales price per product type of the Community industry to
unrelated customers, as compared to corresponding weighted
average export prices (CIF) of imports concerned, after deducting
rebates, discounts and appropriate adjustments for customs duties
and post importation costs. The percentage of the above import
price as a percentage of Community industry‘s prices were between
26% and 77%. In more than 75% of the cases, the undercutting
margins amounted to between 60% and 70%.

4. Situation of the Community Industry
      There was no evidence that the Community industry was
suffering from past subsidization or dumping effects. One of the
reasons was the existence of quota system (legal basis provided by
Agreement on Textile and Clothing), during the investigation
period. (Note: This has been removed with effect from 1st Jan,
2005).   It was conclude that the community industry did suffer
material injury in spite of protection by the presence of quotas and
although the Indian exporters were also not able to fully utilize the
allocated quota.
       Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

a) Data relating to the Community Industry as a whole:

    The production volume increased by 5% (Investigation
    Employment was stable and the employee productivity
       increased by 6%.
    Sales volume increased by 4% and turnover decreased by
    Community consumption grew by 15%.
    The Community industry‘s market share decreased by 1.5%.
    Effectively Community industry was not a beneficiary of the

(b) Data relating to the sampled Community Producers

       An analysis was made on the data relating to sampled
companies. The data analyzed were stocks, capacity, capacity
utilization, prices, investments and ability to raise capital,
profitability, return on investment, cash flow and wages.

      Stocks: As the nature of the market is ―Made to Order‖, wide
       fluctuations exist on stock size. Therefore, it could not be
       considered as a relevant indicator of injury.
      Capacity/    Capacity    Utilization:   Due   to   heterogeneous
       combination of machinery it was difficult to come to a
       conclusion on the impact on capacity. In a specific case of
       printed bed-linen, the Capacity Utilization of Printing
       Department decreased from 90% to 82%, during the
       investigation period. Although this may not point to an
    Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

    overall conclusion on the injury due to Capacity, the decline
    in printing capacity utilization was considered as an injury.
    Prices: The average prices (Import) during the investigation
    period increased from 13.30 EUR to 14.20 EUR.                  The
    domestic (community) industry prices went up from 11.30
    EUR    to   11.50   EUR     and    dropped      to   11.10   during
    investigation period. This also might have been due to the
    shift from low value products to high value products.
    Therefore, the absence of injury on the price front was not
   Investments and ability to raise capital: There was a
    significant reduction of 41%, in the investments during the
    investigation period over the prior period.          However, there
    was no indication of inability to raise capital. (Note: An
    analogy can be drawn from the Indian scenario, where some
    time back, textile industry was put on the watch list by
    financial institutions and banks. This can be considered as
    an indication of inability to raise capital).
   Profitability, return on investment and cash flow: There was
    a significant drop in the profitability from a high of 7.70% to
    4.40% during investigation period. The ROI also fell from
    10.50% to 5.90%. The various extraneous factors (other than
    cheaper imports), such as increase in labour costs, were
    considered to analyze whether they may be the main causal
    factor for the decrease in profitability. The ROI and cash flow
    are a corollary to the profitability and therefore, have to be
    treated on the same basis.
   Wages: The analysis of the wage costs did not point to injury.
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

            Magnitude of countervailable subsidies: The significant size
             of subsidized import volume and price indicated that the
             actual margin of subsidy cannot be considered negligible.
            Relevance of Indicators: It was argued that the analysis of
             the abovementioned factors, do not lead to the establishment
             of material injury. The authority rejected the contention on
             the basis that the cumulative effect of numerous factors has
             to be considered, in addition to the above.

      5. Conclusion on injury
             The situation of the Community industry deteriorated, due to
      significant decrease in profitability, decrease in market share
      (decrease by 9.10%, although the community consumption grew by
      15%) and negative indicators on capacity utilization, profitability,
      return on investment, cash flow and investments. Based on these
      and various other factors, the Commission concluded that the
      Community industry suffered material injury.

                                F. CAUSATION
1. General Remarks:
             The first factor to be examined by the Commission was
whether the subsidized imports originating from India, can be considered
as a causal material factor leading to injury to the community industry.
Various factors such as market share of imports, average prices, the
main elements of competition other than price and decrease in market
share of domestic (Community) producers were considered before
arriving at the conclusion.
           Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

2. Effect of subsidized imports:
      Although there was some reduction in import volumes ranging
from 9% to 7.2%, the overall market share was still substantial, during
the investigation period. The average prices also dropped from 5.65 EUR
to 5.50 EUR, representing a reduction by 5%. The products are mostly
made to order, and the market determined the design, colour, quality,
size, etc., and the price was the main basis for order quantity, when
considering the many offers including from the domestic industry. The
commission concluded that pricing was the main factor, which made the
community producers withdraw from the low priced segment and switch
on to high value segments.
      The volume of imports being substantial and made at low and
subsidized prices, undercut the producers belonging to the community
industry. The market share of Indian importers during the investigation
period were also well above de minims levels. The shift to high profit
niche products arising from competition in low end volume products
could not compensate for the loss of market share, investments,
profitability and return on investment of the Community industry.

   This factor established the causal link between the subsidised Indian
imports and the injury suffered by the community industry. It may be
noted that, this was said to be main cause of increase in average prices
of domestic industry.

3. Effect of other factors:
a) Impact of imports originating from Pakistan:
The imports from Pakistan also face the same action, as the market
share, average prices are in a range similar to India. In addition to anti-
subsidy investigation, anti-dumping investigation has also been initiated
against Pakistan, appropriate action is being taken.
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

b) Imports originating from third countries other than India and
The largest exporter among the group of countries other than India and
Pakistan is Turkey. Turkey occupies a special place in the community
due to corporate links between Turkish and Community Companies and
the market integration in the form of inter-company trade between
Turkish exporting producers and Community operators. The remaining
countries‘ market share as well as the average price were not significant
to influence market and affect the causal link.

c) Contraction of demand:
There was no evidence of contraction of EU demand for the product.
Although the community producers have multiple product lines catering
varying market segments, the high margin upper market segments, are
sold in limited quantities. The low priced segments help cover the fixed
costs production, by maximizing capacity utilization.

d) Imports by the Community Industry:
On the matter of imports of bed-linen by community industry itself, it
was established that only one producer imported in value terms about
10% of the turnover.

e) Export performance by the Community Industry:
The exports formed a negligible part (0.5%) of the sales from the
Community Industry and therefore not a relevant factor to be considered
as a causal link.

f) Productivity of the Community Industry:
The productivity increased by around 6% for the community producers.
           Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

4. Conclusion:
It was concluded that the subsidized imports originating from India were
of significant volume with a market share of 7.20% and they have been
imported at lower subsidized prices. The imports caused material injury
to the Community producers in the form of reduced market share, lower
capacity utilization, reduced investments and profitability. The same
situation prevails for imports from Pakistan also. But the substantial
volume and low prices does not break the causal link between the Indian
imports and material injury suffered by the Community Industry.

                        G. COMMUNITY INTEREST
  1. General Remarks:
     The pros and cons of imposing the countervailing measures, was
     tested on the community interest platform. The injury was proved
     material as a result of which, it was difficult for the Community
     industry to compete under fair market conditions. The non
     imposition would have resulted in cessation of established
     producers and correspondingly no investment in new production
     capacity. It was also pointed out that the measures are not to
     prevent the imports into the community in a bid to avoid injurious

  2. Community Industry:
     It was established that the community industry has been proved to
     be a viable industry capable of competing under fair market
     conditions. It faced the injurious situation due to low priced
     subsidized imports. The imposition of countervailing measures is
     expected to restore fair competition to the market and result in
     generation of profitability to justify continued investment in the
     production facilities.
         Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

3. Importers and Users:
  The response from the importers and users were very limited. As
  can be seen else were in the report, the import volume was also
  very negligible. There were arguments that the full demand of the
  community cannot be met from the Community Industry. The
  commission was of the view that the measure is not to restrict the
  imports into the community but to ensure the injurious subsidized
  imports are discouraged. It was also felt that the moderate level of
  countervailing duties will not affect the supply from various

4. Conclusion on Community Interest:
  It was concluded that the grounds of Community Interest cannot
  be    considered    as   a   major   factor     for   non   imposition   of
  countervailing duties.


       1. Injury Elimination level
         Once the decision to adopt countervailing measures were
         taken, the subsidy margins required to eliminate injury
         sustained by the Community industry was taken into
         account. The average level of profitability at 6.5% on
         turnover was taken as an appropriate expected minimum
         that   can   be   obtained    in   the     absence    of   injurious
         subsidization. Based on the above, the increase in price, as
         established for the price undercutting calculations, was
         determined. The       non-injurious price was obtained by
         adjusting the sale price of the Community industry, by the
         actual profit/loss made during the IP and adding the average
         profit margin (6.5%).
           Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

        2. Definitive Measures
           As the injury elimination level was higher the definitive
           measure was based on the countervailing margins. Since the
           level of cooperation from India was high, the residual
           subsidy margin was set at the level for the company with the
           highest individual margin.

           Company                                           Rate of
           Bombay Dyeing and Mfg..                            5.3%
           N.W.Exports Limited
           Nowrosjee Wadia & Sons Limited
           Brijmohan Prushottamdas                            6.2%
           Divya Textiles                                     6.4%
           Texcellance Overseas                               7.8%
           Jindal Worldwide Ltd
           Mahalaxmi Exports                                  9.3%
           Pasupati Fabrics                                   8.5%
           Prakash Cotton Mills                              10.4%
           Vigneshwara Exports                                4.4%
           Cooperating companies not in the sample            7.6%
           All others                                        10.4%

The above case study gives a bird‘s eye view of the entire process of
imposition of countervailing duties under anti-subsidization measures.
In case of anti-dumping, the framework relating to identification, local
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

producers, injury determination, causation etc. remains more less the
same. The factors such as Normal value, Export Price, Costing
Profitability and Specific adjustments in pricing is substituted for
subsidy given in this case. The determination of the average level of
profitability for the industry becomes a key factor in deciding the level of
countervailing duty that has to be imposed to bring the imports at par
with the local industry. This is to provide a level playing ground. It can
be reasonably assumed that transparency, disclosure and logical
presentation of information would have enabled the Commission to arrive
at   reasonable   definitive   measures.   It   only   underscores   the   role
professionals including those belonging to cost management stream can
play under the post WTO era.

(The views expressed in the above article are the personal views of the

     1. Official Journal of European Union – January 2004.
     2. WWW.WTO.ORG
   Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

                        PART - III

Anti-Dumping on Shrimp Exports – A Case Study
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

       Anti-Dumping on Shrimp Exports – A Case Study

Anti-dumping has been one of the most talked about area of WTO in the
recent times. There is extraordinary concern about areas of WTO in the
recent times. This is mainly on two counts. First, India is one of the
highest users of anti-dumping, second only to United States in the year
2001 according to the WTO sources. Second, India is also one of the
main victims of anti-dumping action by foreign authorities. There are
several reasons as to why dumping takes place across nations, but it
needs to be underlined that the act of dumping per se is not the cause of
concern. Only when dumping leads to material injury or threatens to
cause material injury that the WTO Agreement on Anti-dumping allows
imposition of anti-dumping duties. In other words, it must be clearly
understood that anti-dumping duty is not a protection measure but is to
be used only to remedy a particular trade distortion.

Anti-dumping Agreement of the WTO is the basis on which various
national authorities have formulated their own national legislations. The
concepts and definitions, rights and obligations, and to a great extent the
procedures followed by different national authorities remain identical
flowing out of the same agreement. Therefore, this article attempts to
discuss various aspects of anti-dumping with a view to give an insight
into the basic concepts of anti-dumping mechanism.

Before imposition of any anti-dumping measures, three main conditions
are to be necessarily established by the anti-dumping authorities. These

            Existence of Dumping beyond de minimis limits
            Existence of Injury
               Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

              Causal link between dumping and injury

To initiate an anti-dumping action, the domestic industry must be able
to provide sufficient evidence to support the contention of ‘material
injury’. Material injury or thereof cannot be based on mere allegation,
statement or conjecture. Moreover, a ‘causal link’ must exist between the
material injury being suffered by the Indian Industry and dumped
imports. Related to all of the above is what is termed as, the De Minimis
Margin. According to the provisions of the Agreement on Anti-dumping,
any exporter whose margin of dumping is less than 2% of the export
price shall be excluded from the purview of anti-dumping duties even if
the existence of dumping injury as well as the causal link is established.
The Directorate General of Anti-dumping and Allied Duties (DGAD) is the
designated       authority   for   filing   and    monitoring     anti-dumping
investigations in India.      The DGAD applies the Lesser Duty Rule for
making their recommendations regarding the amount of anti-dumping
duty to be imposed. Going purely by the economic rationale behind anti-
dumping, duties levied by most countries, several studies undertaken by
various scholars suggest that antidumping legislation is economically
inefficient and that antidumping practices do not conform to the
economic explanation of protection. On the contrary, these studies seem
to imply that a political economy motivation seems to be driving the
imposition of anti-dumping levies in most countries. It must however be
remembered that ‗anti-dumping is not a tool for protection of the weak.
It is a tool for dealing with a situation where the strong may attack the

As things stand, almost 90% of the total world imports are now entering
countries in which anti-dumping laws are in place. In India also, there
has been a spectacular growth of anti-dumping investigations in recent
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

years. The number of such investigations launched in 1999 was more
than double that of those started in 1995. The national law on anti-
dumping in India has been in place since 1985. The first Anti-dumping
investigation in India was initiated in 1992. During the period from 1992
– 93 to 2003 – 2004, the DGAD received large number of applications for
initiating the Anti-dumping investigations.         After the examination of
these applications, the anti-dumping investigations were initiated in 167

Anti-dumping Duty on Shrimp

On December 31, 2003, the United States Department of Commerce
(DOC) received antidumping duty petitions on imports of certain frozen
and canned warm water shrimps from Brazil, Eucador, India, the
People‘s Republic of China, Thailand, and Vietnam filed in proper form
by the Ad Hoc Shrimp Trade Action Committee (―Petitioner‖) on behalf of
the domestic industry and workers producing frozen and canned warm
water shrimp (―Petition‖)

On January 8, 2004, the Department sent the Petitioner a deficiency
questionnaire requesting clarifications of certain items in the petition. On
January    12,   2004,      the    Petitioner    submitted   their   deficiency
questionnaire response.

On   February    17,   2004,      the   United   States   International   Trade
Commission (ITC) preliminarily determined that there is a reasonable
indication that imports of certain frozen and canned warm water shrimp
from India are materially injuring the United States Industry,

On 20th February 2004, the Department selected Hindustan Lever
Limited (‗HLL‘), Devi Sea Foods Limited (‗Devi‘) and Nekkanti Sea Foods
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

Limited (‗Nekkanti‘), the largest exporters of shrimp to the US during the
Period of Investigation (POI) as mandatory respondents. These companies
submitted extensive information to DOC in their responses to DOC‘s

During the period February to June 2004, various interested parties,
including the petitioners submitted comments on the scope of this and
concurrent investigations of certain frozen and canned warm water
shrimp concerning whether certain other seafood products to be covered
under the scope of the investigation.        The mandatory respondents
submitted their reply to the questionnaire by April 2004. A supplemental
questionnaire was issued and the replies were received by July 2004.

On May 3rd2004, the petitioners alleged that Devi, HLL made third
country sales below the cost of production (COP), and therefore
requested that department initiate a sale-below-cost investigation of
these respondents. On May 28, 2004, the department initiated a sales-
below-cost investigation for Devi and HLL.

On 18th May, 2004, the department determined that the case was extra-
ordinarily complicated and postponed the preliminary determination
until no later than July 28, 2004 .

On June 8, 2004 the petitioners alleged that HLL made below cost sales
to Italy and therefore, requested that the department initiate a sales-
below-cost investigation.   However, because Italy was not selected as
HLL‘s comparison market in this case, the department did not consider
this allegation.

On 15th June 2004, the petitioners objected to Devi‘s use of Canada as
its third country comparison market and they requested that the
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

department to obtain sales data for their company‘s second largest third
country market, Japan. In July 2004, the department determined that it
is appropriate to use the third country market initially reported by Devi.

On July 12, 2004, HLL requested that the department find that one of its
third country sales was made outside the ordinary course of trade. The
department expressed its inability to consider this request for the
preliminary determination however, assured HLL that it would be
considered for the final determination.

In June 2004, pursuant to section 735(a)(2) of the Act, the Seafood
Exporters Association of India (SEAI) and the individual respondents in
this investigation, requested that, in the event of an affirmative
preliminary determination in this investigation, the department postpone
the final determination until not later than 135 days after the date of the
publication of the preliminary determination in the Federal Register and
extend the provisional measures to not more than six months and the
department considered this request favourably.

Statutory Requirements

Section 732(b)(1) of the Tariff Act of 1930, as amended (―the Act‖)
requires that before the Department may initiate an anti-dumping
investigation by petition, the Department must determine whether the
petition was filed on behalf of the domestic industry.

Section 771(4)(A) of the Act defines the ―industry‖ as the producers of a
domestic like product. Thus to determine whether a petition has the
requisite industry support, the Act directs the Department to look to
producers and workers who produce the domestic like product.
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

The International Trade Commission (―the Commission‖), which is
responsible for determining whether ―the domestic industry‖ has been
injured, must also determine what constitutes a domestic like product in
order to define the industry. The Act defines the domestic like product
as a product which is like or in the absence of like, most similar in
characteristics and uses with, the article subject to an investigation
under this title.‖

The scope of the investigation included certain warm water shrimp and
prawns whether frozen or canned or wild caught or farm raised, head on
or head less, shell on or peeled, cooked or raw or otherwise processed in
frozen and canned form. The petitioner in the US ascertained that the
industry‘s injured condition is demonstrated by (1) reduced sales; (2)
reduced prices; (3) declining employment; (4) declining market share; and
(5) Significant financial losses.

It is important to note that these duty margins do not imply that the
Indian exporters are selling their products in the US market below cost.
Rather these margins are the result of certain complex calculations by
which primarily a range of products sold in the US and a pre-selected
third country are matched by product specifications and adjusted selling

There is no Shrimp Aquaculture in the US and US Shrimp resources are
only from the wild. It is known phenomenon that Shrimp catches from
the oceans are declining and it is becoming increasingly more expensive
to catch shrimp from the ocean. Whereas aquaculture has made
tremendous progress in farming technology as well as production yields
and as a result, Asian and Latin American Countries can today produce
shrimp more efficiently at lower costs of production. Therefore, these
countries are able to offer Shrimp at more competitive prices.
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

Consequently, shrimp that was once a luxury item is now available to the
average American consumer at competitive prices.

On July 29, DOC made affirmative preliminary determination and
imposed provisional antidumping duty (‗AD duty‘) as follows :

Exporter                         DOC‘s Prelim Rate
Devi Sea Foods Limited                   3.56%
Nekkanti Seafoods Limited                9.16%
Hindustan Lever Limited                27.49%
All others                             14.20%

DOC made the mandatory ‗disclosure‘ of adjustments made to each
company‘s data in arriving at the margins; and relevant details of
software program they used for margin calculations. It was noticed
during the course of the investigation that DOC made several
adjustments to HLL‘s data, some of which are prima facie not warranted.
This was brought to DOC‘s notice pointing out that the adjustments
made were ‗ministerial errors‘ that could be rectified immediately. The
margin calculations were performed making several adjustments to the
data submitted by the Companies. Most of these adjustments are unique
to the US anti-dumping law and do not conform to normal commercial
methods of determining profit or loss.

                          Period of Investigation

The department fixed the period of Investigation (POI) as 1st October
2002 to September 2003.
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

                         Scope of Investigation

The scope of this investigation includes certain warm water shrimp and
prawns whether frozen or canned, wild caught or farm raised, head on or
head off, cooked or raw form. In accordance with the preamble of the
regulation, the department set side a period of time for parties to raise
issues regarding product coverage and encouraged all parties to submit
comments within 20 calendar days of publication of the Initiation Notice.
Throughout the 20 days and beyond, the department received many
comments and submissions regarding a multitude of scope issues. On
May 21, 2004 the department determined that the scope of this and the
concurrent investigations remains unchanged.

Fair Value Comparisons

To determine whether sales of certain frozen and canned warm water
shrimp from India to the United States were made at Less Than Fair
Value (LTFV), the department compared the export price (EP) to the
normal value (NV) on the weighted average basis for the period of

For the preliminary determination, the Department determined that Devi,
HLL and Nekkanti did not have viable home markets sales during the
POI. Therefore, as the basis for NV, the department used third country
sales to Canada (Devi), Spain (HLL) and Japan (Nekknati) when making
comparison in accordance with the act.
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

                            Product Comparison

In accordance with the Act, the department considered all products
produced and sold by Devi in Canada, HLL in spain and Nekkanti in
Japan, appropriate, during the POI that fit the description in the ―scope
of Investigation‖ for determining appropriate product comparison to
United States sales. Where there were no sales of identical merchandise
in the third country made in the ordinary course of trade to compare to
U.S.Sales to sales of the most similar foreign like product made in the
ordinary course of trade.      Where there were no sales of identical or
similar merchandise made in the ordinary course of trade, we made
product comparisons using constructed value (CV).

In making the product comparisons, the department matched foreign like
products based on the physical characteristics reported by the
respondents in the following order of importance: processed form, cooked
form, head status, count size (on an ―as sold‖ basis), shell status, vein
status, tail status, other shrimp preparation, frozen form, flavouring,
container weight, presentation, species, and preservative.

For determining whether there were sales at less than fair value, DOC
compared the sales made in the US during POI with:

   Sales made in home market during POI
   If there is no home market, then sales made in largest third-country
    market during POI; and
   If there are no comparable sales in largest third-country market, with
    the cost of manufacturing products sold in the US, after adding profit
    derived in line with the U.S. regulations.
              Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

Accordingly, DOC determined that there was no home market for any of
the Indian mandatory respondents. Therefore DOC selected the largest
third country market for them as follows:

   HLL : Spain
   Devi : Canada
   Nekkanti : Japan

For making product comparisons, DOC carried out an exercise called
‗model matching criteria‘ for which comments were obtained from all
interested parties. The SEAI actively participated in this process. DOC
then determined that fifteen product characteristics in a particular order
of priority were important from Industry‘s stand point and hence were
relevant for its analysis. Each attribute within a characteristic was
assigned code numbers. (Example: the status of head of a shrimp is
identified as a characteristic, which can have only one of two attributes:
head-on or headless. Head on is given code 1 and headless is given code
2) When the fifteen characteristics are taken together in respect of any
product, a unique control number is created. All sales in the U.S. and
the third country markets during POI were grouped together based on
these control numbers and then the weighted average selling price,
selling expenses and cost of manufacturing for each product were

Then DOC matched each unique product sold in the US with any of the
unique products sold in the third country market applying a set of
criteria mandated in the regulations governing the US anti-dumping
proceedings (‗regulations‘).
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

   Where there is a match, the net selling price of unique US product is
    compared with net selling price of matching unique product of the
    third country market. In the process, certain adjustments are made to
    ensure that both products are on comparable basis.
                    If the US price is higher than third country price,
        then there is no dumping margin. This excess of US price over
        third country price is ignored for dumping margin calculation
                    If the US price is lower than third country price,
        there is dumping margin to the extent of price difference. This
        dumping margin is multiplied by the unique product‘s sales
        quantity to arrive at the dumping amount for that particular
        unique product.

   Where there is no match, the net selling price of unique US product is
    compared with CV (the unique product‘s cost of manufacture plus an
    element of profit that is calculated as mandated in the regulations).
                    If the US price is higher than CV, then there is no
        dumping margin. This excess of US price over CV price is ignored
        for dumping margin calculation purposes.
                    If the US price is lower than CV, there is dumping
        margin to the extent of difference. This dumping margin is
        multiplied by the unique product‘s sales quantity to arrive at the
        dumping amount for that particular unique product.

The sum of dumping amounts is divided by the total sales to the US to
arrive at the anti-dumping duty rate for each Company.
              Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

The dumping amounts of all three companies are totaled and divided by
the US sales quantities of these three companies to arrive at the weighted
average anti-dumping duty rate for ‗All Others‘.

The process followed and the methods adopted by DOC and ITC in this
investigation so far are consistent with their past practices and in
conformity with their regulations. In respect of Indian determination,
there is no reason to believe that DOC‘s subjective judgement on any
issue is prejudicial. Nevertheless the SEAI felt that certain subjective
decisions of DOC do not reflect the ground realities in the global shrimp
industry     and   decided   to    take   aggressively   at   a   later   stage   of

The following are the rates of duty in the preliminary determination for
the six countries:

 Country and Number          Duty for mandatory           Duty for all others
     of mandatory                  respondents

Thailand (3)                      5.56% to 10.26%                  6.39%
Ecuador(3)                        6.08% to 9.35%                   7.30%
India(3)                          3.56% to 27.49%                 14.20%
Vietnam (4)                   12.11% to 19.60%                    16.01%
China (4)                         0.04% to 98.34%                 49.09%
Brazil (3)                        0.00% to 67.80%                 66.91%

The duty imposed on India is unlikely to create any short term
dislocation in business for two reasons: one, imports from China were
much larger than from India and these would be disrupted immediately;
two, non-tariff countries are not in a position to step up exports to the
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

US for some time to come. However, there may be some impact in longer
term which needs to be carefully assessed.

Change in Rates of Duty – Final Determination

DOC has released amended notice of final determination on 27th January
2005 after correcting ministerial errors. The duty rates for India are as
Company                                Amended Final Margin
                                       As on 27.01.2005

Devi Sea Foods Limited                         4.94%
Nekkanti Seafoods Limited                      9.71%
Hindustan Lever Limited                       15.36%
All others                                    10.71%

These rates will be applicable from the date the amended notice is
published in Federal Register i.e., w.e.f. 31.01.2005.

The rates for other countries have also varied marginally.

Concluding events relating to Investigation
ITC Final Determination Notice in Federal Register:-

ITC informed DOC of its final determination on 21st January 2005, much
ahead of earlier schedule. Therefore, the conclusion of the investigation
was advanced from 7th February 2005 to 28th January 2005.

The notice of final determination of ITC was published in Federal Register
on 31.01.2005 Consequently:
              Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

   The deposit cap ends as on 26th January 2005. Thus if a Company‘s
    duty rate:
             Increases in an Administrative Review (‗AR‘), then the
        difference between: (a) What is paid from 4th August 2004 to 26th
        January 2005; and (b) what is due based on higher rate will not be
             Decreases in an AR, then the difference between: (a) What is
        paid from 4th August 2004 to 26th January 2005; and (b) What is
        due based on higher rate, will be refunded.

   For rest of the first AR period (from 27th January 2005 to 31st
    December 2005), the difference is either collected or refunded as the
    case may be, together with interest.
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

DOC Antidumping Duty Order

DOC has already published the Antidumping Duty Order in Federal
Register. The Order:

   Signifies conclusion of investigation
   Sets the anniversary month for ARs. Since the Order will be published
    in January, the anniversary month for Shrimp ARs will be January of
    each following year. Therefore, first AR will cover the period from 4th
    August 2004 to 31st December 2005; second AR from 1st January
    2006 to 31st December 2006 and so on.
   Requires anti-dumping duty to be paid by cash deposit only. U.S.
    Customs will not accept bond or any other security from this date.

Appeals to CIT

Any appeal arising from any decision of DOC of ITC can be made to the
Court of International Trade (‗CIT‘), New York within 30 days of the Anti-
dumping Duty Order.

The proceedings before CIT normally take 8 months to one year. The CIT
remands the case with its opinion back to DOC for fresh determination.
In case DOC recalculates the duty margin, the revised margin applies
prospectively until completion of AR. DOC may take few months for this.

Refund of Duty

The duty paid from 4th August 2004 will remain as deposit until the first
AR is concluded.
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

First Administrative Review

As mentioned above, the first AR will cover the period from 4th August
2004 to 31st December 2005. DOC will publish Notice of Opportunity in
January 2006. The following are important points relating to ARs:

   An interested exporter may write to DOC seeking AR of his case before
    31st January 2006.
   The AR will be initiated in normal course in February 2006
   An exporter who applied to DOC may withdraw his application within
    3 months of initiation. Then there will be no AR for that exporter.
   The petitioners may also ask for AR of any exporter or exporters. The
    petitioners only can revoke the request for AR in respect of any such
    exporter or exporters within the 3 month period.
   An importer may also ask for any of his exporters.
   There will be a preliminary determination and a final determination in
    AR. The normal time limits are 240 days and 120 days respectively,
    extendable to 360 days and 180 days. Thus an AR may take 12
    months to 18 months.
   DOC will conduct verifications before preliminary determination.
   If there are more applicants for AR than what DOC can handle, then
    DOC selects the requisite number of exporters as mandatory
    respondents for AR based on volume of shrimp exports.
       The review exporters get individual rates
       The exporters who: (a) requested for review; or (b) were referred to
        DOC by petitioners or importers to be reviewed, but were not
        selected by DOC for review, will get the weighted average rate of
        the reviewed exporters.
       For all other exporters, the margin rates at which duties are being
        deposited will apply.
             Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

   At the end of AR, DOC will instruct US Customs to liquidate entries
    from 4th August 2004 to 31st December 2005 at the applicable rates
    as mentioned above.
   From the date of publication of AR final determination in Federal
    Register, the rates determined in AR will be new Cash deposit rates.

Tenure of Anti-dumping Duty Order (‘ADO’)

The ADO will be in force for five years unless it is revoked in a changed
Circumstances Review (CCR) initiated by DOC or ITC. The CCR should
not normally be initiated for atleast two years after ADO is issued unless
sufficient reasons exist for its initiation.

In the fifth year, a ‗sunset review‘ will be initiated by DOC. Then DOC
and ITC will conduct the sunset review mostly like the way investigation
is conducted, to determine whether duties can be withdrawn or should
be continued for another five years.

Changed Circumstances Review (CCR)

In an unprecedented move, ITC decided to invite comments on whether
they should initiate, on their own, a ‗changed circumstances review‘ for
frozen shrimp imports from Thailand and India on account of destruction
caused by tsunami. Once initiated, the CC review and determination will
conclude in 120 days. Contrary to what we heard from media reports,
ITC did not initiate CC review but only decided to call for public
comments to decide whether to initiate such review. It is not yet clear
how ITC propose to collect required information or how they intend to
obtain information from SEAI to facilitate their decision making in this
regard. As mentioned earlier, this is an unprecedented move and there is
no procedure outlined in the ITC manual for this measure.
               Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study


After more than a year of hectic action of arguments and analytical
computations, the dust has finally settled down on the US shrimp
antidumping investigations. Though the final ruling of the US DOC on
the petition of the Country‘s domestic shrimpers has upheld the
‗dumping‘ charges on the shrimp imports from India, the magnitude of
margins as such has steeply fallen below the allegation of the petitioners
and by implication their expectations as well. The numbers tell a tale of
their own. The petitioners had alleged dumping margins ranging from
82.3% to 110.90% for India. We hope that SEAI would be able to
convince ITC the effect of Tsunami which may bring down the duties to
lower level.

(The views expressed in the above article are the personal views of the
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

      The Uruguay Round Agreements and Management

The Cost and Management Accountancy profession has taken on new
dimensions with the WTO's new rules and regulations coming into force
in the global markets. Their role will no more be limited to developing
cost consciousness and advising managers on how to manage and
reduce costs so that the firm can produce goods at lower prices and
maintain/ sharpen the competetive edge in the globalised market place.

Apart from key cost advisory function, the, management accountants
would be increasingly called upon to provide critical information inputs
in the company's growth plans as well as survival strategy.

The three Uruguay Round agreements discussed in the earlier chapters
deal with the measures which governments take to protect industrial
interests in a regime of low tariff levels. The domestic industry will face a
twin challenge when these measures are used.

At one level for protection of domestic market they will have to be aware
and informed about how they can use the measures. At another level
when investigations are started overseas against their exports they will
have to be active and vigilant in protecting their interests.

To understand the accounting implications of the issues involved in
safeguard/ anti-dumping/ countervailing measures we discuss below the
crucial information inputs in each case.

Safeguard Duty: An application for safeguard duty will have to be
supported by hard data to prove
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

      (a) (i) increased imports;
         (ii) serious injury or threat of serious injury to the domestic
         (iii)a causal link between imports and alleged serious injury or
      threat of serious injury, and

      (b) a statement on the efforts being taken, or planned to be taken,
         or both to make a positive adjustment to import competition.

Anti-dumping duty: Agreement on anti-dumping provisions stipulates
that an application shall include evidence of dumping and a causal link
between the dumped imports and the alleged injury. Simple assertion
,unsubstantiated by relevant evidence, cannot be considered sufficient.
The application must contain such information as is reasonably available
to the applicant regarding the following:

                 The identity of the applicant and a description of the
                  volume and value of the domestic production of the like
                  product by the applicant. Where a written application is
                  made on behalf of the domestic industry, the application
                  shall identify the industry on behalf of which the
                  application is made by a list of all known domestic
                  producers of the like product(or associations of domestic
                  producers of the like product)and,to the extent possible, a
                  description of the volume and value of domestic
                  production of the like product.
                 A complete description of the allegedly dumped product,
                  the name(s) of the country or countries of origin or export
                  in question, the identity of each known exporter or foreign
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

                  producer and a list of known persons importing the
                  product in question.
                 Information on prices at which the product in question is
                  sold when destined for consumption in domestic markets
                  of the country or countries of origin or export(or,where
                  appropriate, information on the prices at which the
                  product is sold from the country or countries of origin or
                  export to a third country or countries, or on the
                  constructed value of the prod uct) and information on
                  export prices, or where appropriate, on the prices at
                  which the product is first resold to an independent buyer
                  in the territory of the importing member.
                 Information on the evolution of the volume of the allegedly
                  dumped imports, the effect of these imports on prices of
                  the like product in the domestic market and the
                  consequent Impact of the imports on prices of the like
                  product in the on the domestic industry as demonstrated
                  by relevant factors and indices having a bearing on the
                  state of the domestic industry.

Subsidies and countervailing measures: An application requesting
initiation of an investigation regarding subsidisation should include
sufficient evidence of the existence of (a) a subsidy and, if possible its
amount;(b) material injury or threat of a material injury to a domestic
industry or material retardation of the establishment of such an
industry; and (c) a causal link between the subsidised imports and the
alleged injury.
The application should also incorporate other details regarding the
applicant, domestic production of like product by the applicant, list of
domestic producers and their production ,complete description of the
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

allegedly subsidised product, exporters, country of origin ,existence and
amount of subsidies ,evidence that subsidised imports are causing injury

Accuracy and Adequacy of Evidence: The investigating authorities are
required to examine the accuracy and adequacy of the evidence provided
in the application to determine whether there is sufficient evidence to
justify the initiation of an investigation. This is intended to contain trivial
applications for investigations. Thus, only if the authorities find sufficient
evidence to justify the initiation of an investigation they shall initiate
such an investigation. Further during the course of investigation both
applicants and those opposing the action will have to supply information
to investigating authority to decide for or against the applications and
make recommendations.

Accounting issues: Establishment of increased imports/ dumping /
subsidy injury,(material or serious) and their causal link not only require
a strong data support but also massive objective analysis There are
various areas like the methodology required in determining cost of
production of the product both in the importing as well as in the
exporting country ,impact of financial and non-financial para meters -
capacity utilisation, productivity, profitability, cash flow etc., in specially
multi-product organisations, impact of duties-local customs allocation of
various expenses, establishing appropriate amortization and depreciation
periods, allowances for capital and other development expenditures
quantum of profits considered reasonable on sale, net worth or capital
employed, the basis of comparison-normal value vis-a-vis export price
etc., pose a great challange to the accounting profession. Pricing policy
under excess-capacity and under full-capacity utilisation are likely
to differ. In a variable -technology industry capital intensive firm may
            Monograph on WTO – Antisubsidisation and Anti Dumping- Case Study

have lower average variable costs than more-labour intensive firms.
There is need to analyse such situations, systematically.

Cost-structures in different countries are different due to varying social,
economic and legal factors. These different circumstances have led to the
use of a variety of definitions of the elements of account statement for
example assets, liabilities, equity, incomes and expenses. There are
different basis of measurement of items of costs. In fact, if one looks at
the scope of accounting system in operation in less developed countries
,there may be many areas where it is quite difficult to observe any
consistency, notwithstanding the concept of 'generally accepted
accounting principles' Differences in global practices of business
processes also cause structural differences in the cost structure of
products. A simplistic approach in the evaluation of inputs by looking at
the generally accepted accounting principles will not be able to capture
the true significance of these differences. It is therefore imperative, that a
comprehensive model is evolved for the evaluation of inputs into the
investigation process and thereby provide transparency. Such a
comprehensive model will only evolve after an empirical survey of
safeguard/dumping/subsidy cases across the globe to identify practices
as well as assess how far non-availability of transparent and comparable
information is impairing the fairness of such proceedings.
   1. Glossary of Management Accounting Terms. ICWAI Publication.
   2. Cost Accounting Standards 1 to 4 - ICWAI Publication.
   3. Terminology of Management Accounting – CIMA Publication.
   4. “Official Journal Of the European Union”
   5. Accounting Standards issued by ICAI.
   6. Management Accountant Journal of ICWAI. (Various Issues).

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