Imposition of Countervailing Duty (CVD) on Stainless Steel Imports

GS Paper III Indian Economy

Context:

The Prime Minister’s Office (PMO) has initiated discussions on the potential imposition of countervailing duty (CVD) on stainless steel.

What is Countervailing Duty?

Countervailing duty (CVD): These are tariffs levied on imported goods to offset subsidies made to producers of these goods in the exporting country.
- CVDs are meant to level the playing field between domestic producers of a product and foreign producers of the same product who can afford to sell it at a lower price because of the subsidy they receive from their government.
Provision in WTO: The World Trade Organization (WTO) permits the imposition of countervailing duty by its member countries.
- Supplementary duty: CVD is imposed as an additional duty besides customs on imported products when such products are given tax concession in the country of their origin.
Recommendation: Countervailing measures in India are administered by the Directorate General of Trade Remedies (DGTR), in the Department of Commerce , Ministry of Commerce and Industry.

Directorate General of Trade Remedies (DGTR):

DGTR is an attached office of the Department of Commerce, Ministry of Commerce & Industry.
The DGTR is a quasi-judicial body that independently undertakes investigations before making its recommendations to the Central Government.
It is the single national authority for administering all trade remedial measures including anti-dumping, countervailing duties and safeguard measures.

Imposition: The department of commerce suggests anti-dumping duties. However, it is the department of revenue in the finance ministry that acts on the suggestion within three months and puts the duties in place.

Additional Information:

Anti-dumping duty:

Against dumping of foreign goods: The government imposes anti-dumping duty on foreign imports when it believes that the goods are being “dumped” through the low pricing in the domestic market.
- It is imposed to protect local businesses and markets from unfair competition by foreign imports.
Exporter-specific and country-specific: The levy of anti-dumping duty is both exporter-specific and country-specific. It extends to the imports from only that country in respect of which dumping has been alleged and the complaint has been filed and duty recommended.

Safeguard Duty

It refers to the steps taken by the government of a nation to shield its domestic industries from unfair competition brought on by a surge in imports.
Sunset clauses: Safeguard duties must typically contain sunset clauses, and are usually imposed by an importing country against all other nations (as opposed to one specific member country).

News Source: Live Mint