Keep It Simple #2: What is 'Domestic Industry'?
Updated: Mar 29, 2021
Domestic Producers play an important role in an anti-dumping investigation. Domestic Producers become relevant at two stages of the investigation:
1) Pre-Initiation of Investigation (‘Standing of the domestic industry’, i.e., checking if the applicants for an investigation adequately represent the interests of the domestic producers, at large.)
2) Determining if the domestic producers have actually suffered injury because of dumped imports.
The definition of ‘domestic industry’ has no bearing on how the ‘standing of the domestic industry’ is calculated. For the sake of clarity, this post follows the following structure:
Section I: Who can file an application? (Standing of the domestic industry)
Section II: Under ‘domestic industry’ for the purposes of injury determination
Section I: Who can file an application?
Q. Who can file an application for an anti-dumping application?
An application can be made by or on behalf of the domestic industry.
Q. Who can file an application ‘by or on behalf of’ the domestic industry?
Before we get to who may file an application on behalf of the domestic industry, we must understand that there can be four types of domestic producers:
1) Applicant Producers: The domestic producers who are actively applying for an anti-dumping duty to be imposed on dumped imports. These producers lead the investigation process and must provide various information to the investigating authority.
2) Supporter Producers: The domestic producers who would like an anti-dumping duty to be imposed on the dumped imports, but do not want to get actively involved in the process for a multitude of reasons.
3) Opposing Producers: The domestic producers who do not want an anti-dumping duty to be imposed on the dumped imports.
4) Silent Producers: Producers who do not have any opinion on anti-dumping duty being imposed. They have not come to the investigating authority to voice an opinion.
For an application to be filed on behalf of the domestic industry, the investigating authority must check if the domestic production of the Applicant Producers and Supporter Producers is collectively more than 50% of the domestic production of the Applicant Producers, Supporter Producers and Opposing Producers. Silent Producers are not relevant here. To put it mathematically:
Assuming, the product in question is ’leather’, and the break-up of relevant producers is as follows:
In this case, the production of the Applicant Producer and Supporter Producer is 70 MT, which is more than 50% of 130 MT, i.e., 65 MT. Therefore, the application is said to have been filed ‘on behalf’ of the domestic industry.
But wait, there is a step two.
We need to check if the Applicant Producers and Supporter Producers constitute 25% of the total production of the product by the domestic industry. As explained, domestic industry is just all the domestic producers of the said product. Therefore, mathematically speaking:
In this case, the production of the Applicant Producer and Supporter Producer is 70 MT, which is more than 25% of 130 MT, i.e., 32.5 MT.
Therefore, the investigation can be initiated!*
*Well, assuming that all other requirements for initiation are met of course. Head to Article 5 of the Anti-Dumping Agreement.
Q. Once an investigation is initiated, what role does the domestic industry play?
Once the investigation is initiated, the Applicant Producer and the Supporter Producer must supply the required information to the investigating authority. This information is analyzed by the investigating authority to make an ‘injury determination’. In most situations, Supporter Producers will be asked to produce less information than the Applicant Producer.
Section II: Understanding ‘Domestic Industry’
Q. What is domestic industry?
The ‘domestic industry’ is understood to be the domestic producers of the product in the host/importing country.
The ‘domestic industry’ is group of domestic producers who constitute a ‘major proportion’ of the total domestic production of the product in the host/importing country.
Q. What is ‘major proportion’ of the total domestic production of the product?
The injury determination must be made of a ‘major proportion’ of the domestic industry. There is no mathematical standard to determine ‘major proportion’. It should be enough to adequately represent the condition of all the domestic producers at large. Following are some of the key factors taken into account while determining ‘major proportion’:
Is the defined domestic industry ‘significant’ or ‘important’ enough to represent all the other domestic producers?
Is there a possibility that the defined domestic industry only shows one side of the picture?
Have a producer or a group of producers been excluded for a reason which can be rectified or is not very relevant?
Q. What happens when the domestic producers have also been importing the product in question?
An investigating authority may choose to exclude domestic producers who import or are related to importers of the said dumped product. The rationale is simple: how can you complain about dumped imports when you have benefitted from their low prices? Their inclusion in the investigation may not be fair, and it may skew the objectivity of the investigation. The investigating authority may choose to include them if the imports made by concerned domestic producers or their affiliate company are not significant enough (or does not have a bearing on the investigation).
Q. What does the investigating authority do with the data of the domestic industry?
The domestic industry’s data is studied to check for injury and causal link. But that’s a post for another day.
In case you've missed it: What is dumping?