TRADE REMEDY MEASURES & THEIR APPLICATIONS by: Mr. Mohamed Shahabar Abdul Kareem Trade Practices Section 11 November 2014 ‘Driving Transformation, Powering Growth’ Driving Transformation, Powering Growth 1
Outline • Anti-dumping; • Countervailing; and • Safeguards • - bilateral safeguard Driving Transformation, Powering Growth 2
LEGAL INSTRUMENTS • WTO Agreement on Implementation of Article VI of GATT 1994 (ADA) Anti-dumping • Countervailing & Anti-Dumping Duties Act 1993 • Countervailing & Anti-Dumping Duties Regulations 1994 • WTO Agreement on Subsidies and Countervailing Measures (ASCM) Countervailing • Countervailing & Anti-Dumping Duties Act 1993 • Countervailing & Anti-Dumping Duties Regulations 1994 • WTO Agreement on Safeguards • Safeguards Act 2006 Safeguard • Safeguards Regulations 2007 • ACFTA Regulation 2013 – Gazetted 2 Sept. 2013 P.U. (A) Driving Transformation, Powering Growth 3
PART 1: ANTI-DUMPING Driving Transformation, Powering Growth 4
LEGAL INSTRUMENTS • To address UNFAIR trade practices. • What is “DUMPING “? : – When the export price is lower than the price in the domestic market (normal value) of the foreign producer; – “Dumping margin” is the difference between domestic market price and export price Driving Transformation, Powering Growth 5
ANTI-DUMPING FUNDAMENTALS OF ANTI-DUMPING INVESTIGATION Standing of the Dumped Imports Domestic Industry IMPORTANT! Magnitude of Causal Link Injury Driving Transformation, Powering Growth 6
ANTI-DUMPING STANDING OF DOMESTIC INDUSTRY • A dumping investigation can normally be initiated upon receipt of a written application BY or ON BEHALF of “DOMESTIC INDUSTRY”. • The application must meet the following conditions: A A & > 25% > 50% A+B+C A +B • Domestic producers: A – Petitioner and Supporter B – Oppose C – Neutral Driving Transformation, Powering Growth 7
ANTI-DUMPING DOMESTIC PRODUCERS • Producers of LIKE articles/products AS A WHOLE or COLLECTIVE output constitutes a MAJOR PROPORTION of domestic production. LIKE ARTICLES/PRODUCTS If not, having Identical - alike closely in all aspects resembling characteristics • Producers who are RELATED to the exporters or importers or are THEMSELVES importers, can’t be part of domestic industry. Driving Transformation, Powering Growth 8
ANTI-DUMPING What is a “ like product ”? • A product which is identical , i.e., alike in all respects, to the product exported ( subject merchandise ) Product sold in Product exported domestic market (subject merchandise) Driving Transformation, Powering Growth 9
ANTI-DUMPING Or … . • A product, although not identical to the subject product, having characteristics closely resembling those of the subject product Product sold in Product exported domestic market (subject merchandise) Red Apple Green Apple Driving Transformation, Powering Growth 10
ANTI-DUMPING How to determine “like product” • Consider, inter alia, – Characteristics of product; – Uses of product; – Raw materials used; – Manufacturing process; – Tariff classification; – Consumer preference; and – Quality. Driving Transformation, Powering Growth 11
ANTI-DUMPING > NORMAL VALUE IN THE EXPORT PRICE EXPORTING MARKET (IN MALAYSIA) (COUNTRY XY) US$100.00 US$80.00 US$20.00 (or 25% margin of dumping) Normal Value is PRICE IN THE EXPORTER’S DOMESTIC MARKET Driving Transformation, Powering Growth 12
ANTI-DUMPING Dumping margin must NOT LESS THAN 2% ( de minimis ) CAUSAL RELATIONSHIP MATERIAL DUMPING INJURY • Other relevant economic factors also analysed to establish CAUSAL LINK . Driving Transformation, Powering Growth 13
ANTI-DUMPING ALL RELEVANT ECONOMIC FACTORS IN EVALUATION OF INJURY Actual or potential Actual or potential decline in: negative effects in: • Sales • Cash flow • Profit • Inventories • Output • Employment • Market share • Wages • Productivity • Growth • Return on Investments • Ability to raise capital/ • Utilisation of Capacity investments The examination of the impact must include an evaluation of all relevant economic factors. Article 3.4 of ADA Driving Transformation, Powering Growth 14
ANTI-DUMPING DEFINITION OF “ INJURY ” • Material injury to a domestic industry (“ present injury ”) • Threat of material injury to a domestic industry (“ future injury ”) • Material retardation of the establishment of a domestic industry ( infant industry ) Driving Transformation, Powering Growth 15
ANTI-DUMPING PRICE EFFECTS Must consider whether there has been : Price undercutting • the price of the imported product is lower than the price of the domestic like product Price depression • the price of the domestic like product has declined (downward trend) over period of time, i.e. one year Price suppression • the price of the domestic like product fails to increase as would have been expected (sell below cost) Driving Transformation, Powering Growth 16
ANTI-DUMPING BASIC REQUIREMENTS Consideration of : • the volume of the dumped imports (dumping); • the effect of the dumped imports on prices in the domestic market for like products (price effects); and • the consequent impact of these imports on domestic producers of like products (economic effects). Driving Transformation, Powering Growth 17
ANTI-DUMPING DUMPING MARGIN Dumping Margin = Normal Value - Export Price Export Price Driving Transformation, Powering Growth 18
ANTI-DUMPING • Export price (FOB/CIF) = US$40 • Normal value (price in the exporter’s domestic market) = US$100 e.g: Dumping Margin = US$ 100 – US$40 US$100 • In this case, the dumping margin is 60%. • Dumping margin must NOT LESS THAN 2% ( de minimis ). Less than 2% dumping margin, the company will not be imposed with any anti-dumping duty. Driving Transformation, Powering Growth 19
ANTI-DUMPING THE APPLICATION • Duties imposed on COMPANY-SPECIFIC BASIS & COUNTRY WIDE . • Producer/Exporter with LESS THAN 2% dumping margin shall be EXCLUDED even if there are dumping, injury and causal link. • Investigation can be terminated if the company opt for PRICE UNDERTAKING prior to preliminary determination . • Imposition of anti-dumping duties or price (ad valorem or specific) undertaking Driving Transformation, Powering Growth 20
PART 2: COUNTERVAILING MEASURE (ANTI – SUBSIDY) Driving Transformation, Powering Growth 21
COUNTERVAILING MEASURE • Countervailing is a measure imposed in the form of duty on imports of product which have been found to be subsidised in the country of origin • Subsidy refers to assistance provided directly or indirectly by the government to the specific c ompanies/industry/region of exporting country (e.g. financial contribution, tax rebate etc.) • Countervailing is a direct challenge on Government’s policy to provide assistance to companies deemed as subsides. Countervailing measures: - Ad valorem or specific duties; and - Imposition period - 5 years Driving Transformation, Powering Growth 22
COUNTERVAILING MEASURE Subsidies which are countervailable : • Prohibited Subsidies (Article 3); and • Actionable Subsidies. What is prohibited subsidies? Two types: • Contingent on export performance; • Contingent on use of domestic over imported goods What is actionable subsidies? • Adverse effects through use of a subsidy; • Serious prejudice; • Injury to a domestic industry; • Nullification or impairment. Driving Transformation, Powering Growth 23
ANTI-DUMPING AND COUNTERVAILING MEASURE TIME FRAME ‒ Petition examined to determine that all OFFICIAL PETITION RECEIVED requirements are fulfilled ‒ Notice of Initiation of Investigation is gazetted ‒ Inform interested parties INITIATE INVESTIGATION to participate 30 DAYS ‒ On site visit to domestic producers and importers ‒ Notice of PD is issued ‒ Provisional duties PRELIMINARY DETERMINATION imposed. 120 (+30) DAYS ‒ On site visit to foreign producers to verify information submitted. ‒ NOEF issued stating the NOTICE OF ESSENTIAL FACTS recommendation for final 120 DAYS determination. ‒ Notice of FD is issued and Custom Order FINAL DETERMINATION gazetted. ‒ Final duties imposed. Driving Transformation, Powering Growth 24
TIME FRAME REVIEW FOR ANTI DUMPING AND COUNTERVAILING Year 1 Year 2 Year 3 Year 4 Year 5 IMPOSITION EXPIRY ADMINISTRATIVE REVIEW ANNUAL EXPIRY REVIEW REVIEW NEW EXPORTER/SHIPPER REVIEW Driving Transformation, Powering Growth 25
TIME FRAME REVIEW FOR ANTI DUMPING AND COUNTERVAILING Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 EXPIRY EXPIRY/SUNSET REVIEW EXTENDED ANTI-DUMPING MEASURES Driving Transformation, Powering Growth 26
PART 3: SAFEGUARD Driving Transformation, Powering Growth 27
SAFEGUARD What is SAFEGUARD ? o Domestic industry is suffering serious injury or facing threat of serious injury caused by surge in imports. o Temporary measure to limit imports and provide time for domestic industry to adjust. o Imposition of duties or quota or both on a global basis. Driving Transformation, Powering Growth 28
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