The United States and the European Union have recently placed countervailing duties (CVDs) on four Indian products. These actions came as a response to the Remission of Duties and Taxes on Export Products (RoDTEP) scheme that India introduced for its outbound shipments in January 2021. The US made CVD determinations for items such as paper file folders, common alloy aluminum sheet, and forged steel fluid end blocks. Meanwhile, the European Commission investigated specific graphite electrode systems.
Understanding Countervailing Duty
Countervailing duty represents tariffs imposed on imported goods to counteract subsidies provided to producers of these goods in the exporting country. These tariffs aim at creating a level playing field between domestic and foreign producers of the same product, especially if the latter can sell it at a lower price because of the government subsidy they receive. The World Trade Organization (WTO) allows its member countries to impose a countervailing duty.
The WTO’s Agreement on Subsidies and Countervailing Measures
The WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement) is primarily concerned with two areas: multilateral regulations regarding subsidies and employing countervailing measures against damage from subsidized imports. Multilateral disciplines impose rules on subsidy provisions and are enforced through the WTO dispute settlement mechanism. A member can impose countervailing duties after conducting an investigation and meeting the criteria outlined in the SCM Agreement.
Subsidies Defined and Categorized
In the SCM Agreement, a “subsidy” is identified as a financial contribution by a government conferring a benefit. Whether a subsidy applies to a particular enterprise, industry, or region is determined by its specificity. Prohibited subsidies include export subsidies and local content subsidies, while actionable subsidies are subject to challenge or countervailing measures.
Indian Authorities That Impose Countervailing Measures
The Directorate General of Trade Remedies (DGTR), under India’s Ministry of Commerce & Industry, is the national authority responsible for administering all trade remedial measures, including anti-dumping, countervailing duties, and safeguard measures.
The RoDTEP Scheme Explained
The RoDTEP (Remission of Duties or Taxes on Export Products) Scheme was devised to offset taxes and duties incurred on exported goods that would not be refunded otherwise. This scheme seeks to ensure competitiveness in global markets by providing rebates on hidden Central, State, and Local duties not refunded under other schemes.
An Examination of India’s International Trade
According to the UPSC Civil Services Examination, India’s merchandise exports are currently less than its imports. However, the country’s service exports exceed its service imports. The country faces an overall trade/current account deficit.
