US Manufacturers File Petition to Impose Anti-Dumping Duties on Indian Soybean Exports

If countries feel that certain foreign exporters are receiving any unfair advantages due to their domestic subsidies, or that their pricing profile negatively impacts the country’s producers, then they may impose duties such as anti-dumping duties or countervailing duties on such products and countries. The US producers of organic soy products have recently filed a petition asking for such duties to be imposed on Indian exporters.

Several soybean producers of the United States of America such as Organic Soybean Processors of America, American Natural Processors, Lester Feed & Grain, etc. have filed a petition with the U.S International Trade Commission (‘Commission’) for imposing anti-dumping and countervailing duties on organic soybean imported from India.

The petitioners alleged that they had lost significant market to Indian imports because of the unfairly lower priced imports being manufactured in India. They are contending that the subsidies and grants received by the Indian producers are affecting the overall price in the market, which is pushing out American producers. The Commission now has a few months to launch an investigation into the allegations before they provide a final decision.

India-US Trade Relations:

India and the United States have long been considered trading allies, and the commitment to trade has not wavered under the previous or the incumbent American government. In 2019, goods and service trade between India and U.S. totaled nearly USD 146 billion with exports from India nearly USD 59 billion and imports nearly USD 87.4 billion. Since 2019, India is the 9th largest trading goods partner of the United States, and also the third largest goods import supplier behind China.

While the American governments have been committed to trade, there more issues regarding tariff rates during the Trump presidency. India on a general basis has above average tariff rates, especially in the agricultural sector. India has also recently increased the tariff rates in other sectors including cell phones and telecommunication goods, as it tries to gain greater share of the larger scale manufacturing market away from China.

In 2019, the U.S. removed India from their programme of Generalized System of Preferences (GSP) by alleging that India had failed to provide an ‘equitable and reasonable’ access to the Indian market. Under GSP, partners are eligible to nonreciprocal, duty free tariff treatments to targeted products. In the previous years, India had been the largest beneficiary of this programme and the removal has led to reinstated tariff rates for Indian products.

India and the United States have been under negotiations for a bilateral treaty to provide greater market access; however no terms have yet been finalized. Since 2017, India has also terminated almost all bilateral investment treaties with other countries.

What are Anti-dumping and Countervailing Duties?

Dumping refers to a process by which foreign manufacturers try to sell goods in a country for less than fair market value intending to affect the market price and reduce demand amongst the domestic manufacturers. For e.g. if a company was exporting goods from China and were selling it much lesser value in foreign markets like U.S than back in China, then it would be a case of dumping of the goods.

Under the Article VI of the General Agreement on Tariffs and Trade, it is considered dumping if the following factors are satisfied:
  • If the goods being introduced into the foreign country are at a value less than the normal value of the products such that it could materially injure the domestic industries and producers.
  • The price of the product being imported is less than a comparable price for a like good in the country of origin.
To counteract the act of injury to the domestic producer’s countries may levy anti-dumping duty on the product within the margin of difference in price. Similarly, producers that receive various subsidies in their home countries may be receiving significant advantage over the domestic manufacturers in the country of import. To offset any unfair price advantage caused by such domestic subsidies, countries may enforce import duties called countervailing duties.

The countervailing duty is determined to offset any domestic subsidies that might be granted directly or indirectly to the manufacturers for production or export in the country of origin. Hence, such duties cannot be enforced in amounts greater than the subsidies being granted.

Anti-dumping duties are usually imposed by a country to upsell the price of a good up to its fair market value to ensure against injury to the domestic manufacturers in the country of import. Hence, these are usually product or company specific. While countervailing duties are imposed to offset any advantages granted by the country of origin in terms of subsidies or grants, hence these duties are usually country specific. 

Allegations by the United States:

The Organic Soybean Processors of America are an American industry body which consists of several American organic manufacturers, and they have filed this petition against India with the ITC for the following claims:
  • That the government of India is providing unfair subsidies to the organic soybean meal producers in India.
  • That the organic soybean meal production industry in U.S is materially injured or threatened with material injury due to the unfair advantages granted to the Indian producers.
  • That the American industry could be materially retarded due to the Indian producers.
  • That these products from India should face adequate anti-dumping duties or countervailing duties to compensate for the undue advantage.
The commission has launched an investigation into determining the need for anti-dumping and countervailing duties, and will have 45 days to provide a preliminary investigation report. The Commission will then have to transfer their views to the Department of Commerce who can make a decision on whether such duties should be initiated.

Subsidies Availed by the Soybean manufacturers in India:

As the petition details, the primary allegation against the Indian producers of organic Soybean is that they are availing multiple subsidies from the government, which in turn is reducing the overall price of the product when exported to the U.S. This in turn is negatively impacting the American producers as the Indian producers are overtaking the American market share due to their lower prices. The American producers feel that they will not be able to compete at these unfair prices unless duties are imposed to compensate for some of the benefits Indian producers receive.

The petition has detailed some of the subsidies being provided to the Indian producers, and these are detailed as follows:
  • Minimum Support Price Programme: This is a programme that was started by the Government of India which is meant to protect Indian farmers against fluctuating agricultural prices. Under this scheme, prices are set at a price floor beyond which the prices will not follow in a given time period.
  •  Duty Exemption and Remission Scheme: This scheme is run under the Start-up India initiative, and under this scheme, several benefits are provided to producers such as issuing advance licensing to allow duty free import of inputs required for export production, and duty exemptions and duty remissions are also allowed for the duty on the inputs required for production.
  • Merchandise Exports from India Scheme: The scheme was initiated to promote export production by providing rewards such as duty credits scrips to the exporters.  Financial incentives such as free exchange for the realised FOB value exports up to 5%.
  • Several other schemes such as subsidies for export oriented units, Export promotion of Capital Goods Scheme, Pre-Shipment and Post-Shipment Financing, Interest Equalization Scheme on Pre and Post-Shipment Rupee Export Credit, Interest Subvention Scheme for MSMEs, etc.
Conclusion:

India continues to be one of the largest suppliers of organic Soybean Meal or organic soy products to the American markets, and the decision by the ITC could have very severe effects for both Indian and American traders. It is to be seen whether the ITC will recommend establishing dumping and countervailing duties on the Soy products, and if they do the Indian government may respond aggressively to the issue of duties. The crucial decision for the ITC to investigate will be whether the advantages being provided to the Indian producers results in adverse price effects in the American market.