Steel exporters, particularly those in India are afraid that the US and EU will extend their countervailing duty (CVD) to more products than steel. Recently, the US has been aggressive in using CVD on Indian steel, putting a 586.43% CVD on Tata Steel’s exports starting in January 2011. In 2008, an anti-dumping duty (AD) of 21.95% was put on Essar Steel’s products. The US and EU started imposing AD and CVD on steel products from India in 2000.

While CVD is primarily used to counter the impact of subsidies given by exporting countries to their exporters, AD is used by a country to counter the impact of imports on domestic producers of a particular commodity. The WTO permits countries to use these rules to protect their industries and jobs from imports.

The reason governments, including the Union Ministry of Commerce, are so worried is that the US government’s definition of CVD is extremely wide, including all export incentives given by central or state governments, public sector, loans, etc. The government is concerned the CVD might spread to other commodities, which is possible looking at the US’s current definition of CVD. As small or big exporters take some form of advantages for exports, these are all potentially under the US definition of CVD.

“We are currently studying the legality of eligibility of all schemes for CVD and waiting for US action following our representation. Later, we could go for legal redressal. The only issue which has been represented as of now is sourcing of iron ore from NMDC. While imposing CVD, the US had assumed that since NMDC is a government body, its pricing is also controlled by government, amounting to a subsidy, which has been objected to by the Indian government,” according to Business Standard’s article.

As retaliation, the Commerce ministry is evaluating whether they should levy a similar CVD on their imports, while for right now, India uses AD and safeguard duties. Another option is leaning on the WTO for help, as the WTO Appellate Body (WAB) just recently chose to overturn past WTO findings on Chinese exports and the US imposed CVD.

In that case, the “WAB said government control on pricing can only be assumed if the entity is vested with governmental authority in this regard, not merely by being owned or controlled by government. Commerce ministry officials here, for instance, argue that sourcing of iron ore from NMDC by any steel company is done at market prices and the government has no role in fixing this price.

WAB also said that while the WTO agreement allows governments to impose AD and CVD on the same commodity, both could not be calculated using the same elements of alleged subsidy; they are supposed to serve different purposes. Also, both levies together can’t exceed the combined worth of dumping and subsidization found on a particular product.”

In the US review, Tata Steel did not defend itself in the review. Instead, the CVD was calculated using Essar Steel, who had participated in the review and provided all the required details before the CVD was levied.

(Source: Business Standard)