India’s Anti-Dumping Investigation Against MEG and the Limitations Faced by Minority Producers

In December 2019, Reliance Industry Limited (“RIL“) and India Glycol Limited as per 9A of the Custom Tariff Act of 1975 initiated an anti-dumping investigation against Saudi Arabia, Singapore, Oman, Kuwait and UAE. The allegation made by RIL is that the 5 concerned countries have been selling Mono Ethylene Glycol (“MEG“) in India at a price lower than the price of the product in the market of the exporting country. On February 2020, RIL announced that its complaint against Saudi Arabia will be terminated, allowing the investigation to continue with respect to the other 4 countries. In this sudden announcement, RIL has not provided any reason why the complaint was dropped. During the course of the initial complaint, there was a 15 billion dollar deal struck between RIL and the Saudi Arabian owned company Aramco for a 20 percent stake in the chemical and refinery side of Reliance Industries. Aramco which currently stands as the most profitable company in the world is owned primarily by the Saudi Arabian government, leading to the possibility that RIL’s motivation to drop the complaint against Saudi Arabia may be due to the ongoing deal. 

Issue Arising from Rigid Procedural Specification

RIL’s proportion of domestic production serves as a hindrance against other producers from raising concerns against Saudi Arabia’s price of MEG due to the procedural specifications given under the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (“Custom Tariff Rules“). The proviso to Rule 5 (3) of the Custom Tariff Rules prevents an investigation being conducted if the application is made by a domestic producer accounting for less than 25 percent of total production. 

While the original complaint was made both by RIL and India Glycol Limited, the sheer size of RIL’s production of MEG prevents India Glycol Limited or any another domestic producer of MEG to demand a continuation of the investigation against Saudi Arabia. This is largely due to the fact that India’s total MEG production is 2130 Kilo Tonnes and MEG production from RIL alone is 1500 Kilo Tonnes, constituting more than 70% of the total production from domestic industries. While India Glycol only produces 200-kilo tonnes of MEG, constituting just 9.3% of the domestic production of MEG. 

It seems that these procedural requirements serve as an unnecessary burden to prevent minority domestic producers from raising legitimate concerns. However, there is a possibility for such procedure formalities to be circumvented if one were to look at the Custom Tariff Rules as a whole rather than focusing on only the proviso of Rule 5(3) to determine the relevant factors necessary for initiating an investigation. 

Providing Flexibility for Rigidity Through Interpretation of Legislative Intent

The entire purpose behind the Custom Tariff Rules is to serve as the administrative rules for 9A of the Customs Tariffs Act of 1975 which in turn was intended to prevent the trade distortive effects of dumping. Keeping this in mind, it would be against the legislative intention of 9A of the Custom Tariffs Act if a single producer permitted price distortion for only their benefit. Even Rule 2(b) of the Custom Tariff Rules defines a domestic industry as a producer or producers that have a “major proportion of the total domestic production”. Rule 2(b) provides no specifics with respect to what this major proportion entail, providing scope for the investigative authority to use their discretion to determine what constitutes as a major proportion. Given the purpose behind the legislation, the authorities should provide a liberal understanding of what constitutes a domestic industry for the purpose of initiating an investigation. This would allow all producers to have a say in the matter, rather than having a specific percentage requirement under Rule 5(3) which would render the legislative intention to be irrelevant. 

The Custom Tariff Rules, in many ways, mimic the provisions in the Anti-Dumping Agreement. Particularly with respect to how they define what constitutes as a domestic industry. WTO jurisprudence can thus, aid the domestic investigating authority in terms of expanding the ability of minority producers to file a complaint of dumping. The Appellate Body Report in EC-Fasteners (China), had to consider an important point with respect to the meaning of “a major proportion” in Article 4.1 of the Anti-Dumping Agreement. The Report found that there may be situations where the investigating authority would require flexibility in terms of defining the domestic industry. While the case was specifically in reference to fragmented industries, it is possible to highlight the fact that the Appellate Body is mindful of situations where there might be a necessity to lower the constraints surrounding the meaning of “a major proportion”. Such constraints may be lowered in a case where a single producer’s majority stake in production unnecessarily hampers the interest of the domestic industry as a whole. 

Conclusion

It is important to note that no issue has been raised by India Glycol Limited or any other domestic producer of MEG against the termination of the investigationn against Saudi Arabia. However, the issue here is with respect to their inability to raise their concerns in the domestic investigation against anti-dumping if a grievance were to arise. These minority producers do not have any recourse in terms of challenging RIL’s unilateral decision to benefit their own agenda despite the high likelihood that Saudi Arabia’s measure of dumping can lead to price distortion of MEG. The procedural specificities in both the Anti-Dumping Agreement and the Custom Tariff Rules require revision to allow complaints from even minority producers. While the logic behind the current rule may be to prevent small producers from raising a frivolous complaint, the investigative authority could have dealt with this specific issue by creating a preliminary review process to eliminate such claims. 


Pushkar Reddy is a student at Jindal Global Law School, and is also the Co-Director of the Jindal Forum for International and Economic Laws.

Image: Bloomberg Quint

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