India’s steel exporters of hot- rolled carbon steel flat products to the United States got a major relief after an appellate body of the World Trade Organization (WTO) asked Washington to amend a law on the basis of which it imposed countervailing duty (CVD) up to 577 per cent on these products.
This would mean the US will have to withdraw CVD on these products as its US Tariff Act and the Code of Federal Regulations have been found inconsistent with the provisions of WTO Subsidy Agreement (ASCM). At most, the US can start fresh investigations after amending the law.
India is now studying cases of other nine products to ask the US Commerce Department to withdraw countervailing duty on them as well. Besides, the WTO appellate body overturned the earlier ruling of a panel which had considered NMDC as a public body.
The case involved US duties imposed because a portion of the iron ore used to produce Indian steel pipe came from NMDC, a public sector company. NMDC supplies raw material to steelmakers such as Tata, Essar and Jindal.
Explaining the ruling, officials said the US used to add injury caused to its industry from dumping of steel, as well subsidies given for exports by various countries, to determine CVD. “This has resulted in CVD of as high as 577 per cent on some hot-rolled steel products,” an official explained.
However, the appellate body said this was inconsistent with ASCM and the US has to amend its law and code under it. The report of appellate body was published late night on Monday.
Particularly, the US Department of Commerce will have to withdraw its code 1677(7)(G)(iii), explained R Parthasarathy, principal partner with law firm Lakshmikumaran & Sridharan.
This was also the order of the WTO panel, which heard the dispute between India and the US. After the panel's order in July this year, both the US and India went to the appellate body on various counts.
The ruling has significant trade impact for India as out of the current 10 products on which the Department of Commerce has imposed CVD, about seven products suffer from the same inconsistency, an official statement of the commerce department said later.
The official quoted above said the WTO Disputes Settlement Body will adopt this report by December 19 and the US will have to give its intent to abide by the ruling in a month. Thereafter, the US will be given 15 months to implement the same. It is at the time of implementation that India will ask the US to withdraw CVD on six other items, most of which are steel products.
Parthasarathy explained the US will not automatically do so, and India will have to approach WTO to make Washington withdraw the CVD on other items.
“India will actively monitor implementation of this ruling by the United States to ensure that the interests of Indian exporters are fully protected,” the statement said.
So far as the pending and the future CVD investigations are concerned, these would be subjected to challenge if cross-cumulation (adding dumping and subsidies to determine injury to US) is applied again, the statement added.
Saloni Roy, senior director, Deloitte in India, said the report concluded the US should bring its measures in line with the WTO regulations to the extent found inconsistent by the Appellate Body.
It was not India which went to appeal to the body against the panel ruling on this count.
However, it approached the body to counter the panel's directive to treat NMDC as a public body. If it is taken as a public body, then iron supplied by it to companies might be treated as a subsidy.
The miner was taken as the public body because 80 per cent of its shares were held by the government and it has overwhelming directors on the board.
However, India challenged it on the grounds that NMDC does not possess government authority and does not discharge governmental functions.
The appellate body held India's position. The implication of this is that the raw material supplied by it will not be taken as subsidised product.
This ruling has implication for other cases also. For instance, Canada is investigating a matter relating to Steel Authority of India Ltd on this count only, the official explained.
The appellate body also upheld India's contention against the US determining subsidy margin by the difference between prices of iron supplied by NMDC and imports from Australia and Brazil together with freight costs and customs duties. India said instead of Australia and Brazil, the US should have taken prices charged by NMDC for its exports to Japan. If this yardstick is adopted, there would not be much difference between what NMDC charges to domestic players and foreign ones, the official explained.
