State Policy and regulatory framework in the area
The Azerbaijani anti-dumping, countervailing and safeguard measures Law, that came into force in 2016, sets up specific requirements and the framework for the imposition of provisional or definitive anti-dumping, countervailing or safeguard measures, as well as reviewing any such measures. With the enactment of this Law, the Government of Azerbaijan is determined to protect the interests of its domestic industries from injury caused by unfair trading practices (dumping and subsidization) or by sudden increases of imports. To make effective the Law, the State Service for Antimonopoly Policy and Consumer Rights Protection has been tasked to initiate and conduct investigations. The Cabinet of Ministers is in charge of adopting most of the determinations, including imposition of provisional or definitive anti-dumping, countervailing or safeguard measures, as well as to review any such measures. The Law “On Anti-Dumping, Countervailing and Safeguard Measures” can be accessed here: www.e-qanun.az/framework/33306
What are trade defence instruments?
The trade defence instruments (anti-dumping, anti-subsidy and safeguards) were developed decades ago and have traditionally been used by the largest economies. Since the 90s, however, many developing countries – regardless of their size – have started using them too. In the World, India, the United States and the EU are the largest users. In the CIS area, the Eurasian Economic Union (Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan) and Ukraine are the largest users. Moldova, from time to time, carries out safeguard investigations.
Countries that are not WTO members are free to modify (upwards and downwards) their customs duties. Once Azerbaijan becomes WTO Member, however, it will not be able to increase customs duties beyond bound rates. Trade defence instruments are an exception to this rule.
If for bottled water Azerbaijan had committed to apply customs duties not in excess of 20% and following an antidumping investigation it was found that imports of bottled water from country X were dumped, the duties leviable on imports of bottled water from that country would be the applied customs duty (for instance 20%) plus the calculated dumping margin (for instance 20%). In total, the Azerbaijani importer will thus have to pay a 40% duty on the invoiced CIF price.
Dumping occurs when a product is imported into Azerbaijan at a price which is lower than the price charged for the like product in the domestic market of the exporting country. Therefore, a dumping determination normally requires a comparison of two prices (rather than costs). A dumping determination entails 6 steps, in order to arrive at the margin of dumping:
Determinations and calculations are normally based on information provided by the exporters.
Not all types of subsidies to enterprises may be subject to anti-subsidy measures. For subsidies to be able to be countervailed, they have to meet various requirements:
Typical examples of subsidies include donations, provision of loans, tax reductions or exemptions, customs duty exemptions (in some cases), provision of goods or services at less than adequate remuneration, etc.
- First, the existence of subsidies must be determined. This analysis is to be made programme-by-programme
- Second, the amount of subsidisation must be established. For each programme determined to be a countervailable subsidy, the amount of subsidisation must be calculated. Then, the amount for each programme must be added in order to determine the amount of subsidisation for the investigated product
Unlike antidumping and anti-subsidy instruments, in safeguard investigations there is no need to prove that an unfair trading practice occurs. Safeguards are actions against increased imports. The focus of the investigation is to determine whether there have been recent, sudden, sharp and significant increases in imports. Safeguards may also be applied in cases where there is no absolute increase in imports, provided that there is an increase relative to domestic production. In the example shown in the graph, imports have increased several times over a period of 5 years, and year-on-year increases also took place. The required increase of imports therefore exists.
No measures against dumping, subsidisation or increased imports may be imposed unless the dumped, subsidised or increased imports cause injury to the domestic industry which produces and sells the like product in Azerbaijan. Any injury determination requires conducting separate analyses and determinations:
A causal link must be demonstrated to exist between the dumped, subsidised or increased imports, on the one hand, and the injury determined to exist, on the other. It must also be investigated whether the injury may be caused by factors other than dumped, subsidised or increased imports.
The procedure is divided in three main parts: pre-initiation, provisional and definitive stage. The main determinations to be made are: initiation, preliminary and final.
Investigations are normally initiated following the domestic industry’s submission of a request for initiation (complaint). This complaint must contain a minimum of information, without which the complaint must be rejected, and provide prima facie evidence of the existence of dumping/subsidization/increase of imports and of injury to the domestic industry.
Provided the requirements for initiating an investigation are met, the initial steps are geared towards informing all stakeholders of the initiation and gathering pertinent information from among other exporters, importers, and domestic industry as well as from other Governmental bodies. Verification of the information starts immediately. Based on all the information in the file, the investigating authority will prepare a report with findings and recommendations. The Cabinet of Ministers will decide on the imposition of provisional measures.
The final stage starts with the disclosure of the preliminary determination. Parties have the right to submit comments. Verification of information will be completed. The investigating authority will hear the parties that request so. Once the fact-finding phase is completed, the investigating authority will prepare a report with findings and recommendations. After giving the parties the right to comment this report, the investigating authority will submit the final determination to the Cabinet of Ministers for its consideration and decision on the imposition of definitive measures. Determinations may be challenged before local courts.
Executive authorities and their competences
Responsibilities are split between the investigating authority and the decision-maker. The function of investigating authority has been attributed to the State Service for Antimonopoly Policy and Consumer Rights Protection, through its Department for Control over Antimonopoly and Advertising Law. Importantly, the Service has the competence to initiate investigations. Apart from performing all the main investigative actions, the Service is responsible for preparing the reports based on which the decision-maker will make decisions. The web portal of the investigating authority can be accessed by clicking here.
The Cabinet of Ministers is the decision-making body. It has the competence to decide on among others the imposition provisional or definitive measures, as well as acceptance of undertakings or the extension or termination of measures.
The private sector has a key role in any trade defence system. Seldom investigations are self-initiated by governments. Once initiated, determination must be based on facts submitted, among others, by the domestic industry and importers. Thus, the private sector needs to understand the instruments sufficiently in-depth in order to be able to prepare well-grounded complaints and replies to the questionnaires issued by the Service. Associations as well as consultants should guide domestic producers in collecting and assessing information, and ultimately in deciding whether the case is solid and worth proceeding.
Relevant documents, data and resources
Click in each of the links below to access the document, data or resource:
- Law of the Republic of Azerbaijan “On Anti-Dumping, Countervailing and Safeguard Measures”
- Decree of the President of the Republic of Azerbaijan on application of the Law of the Republic of Azerbaijan “On Anti-Dumping, Countervailing and Safeguard Measures”
- WTO pages dedicated to:
- Trade Remedies - A Tool Kit, developed by the Asian Development Bank
Pages of selected investigating authorities
- European Commission (DG Trade, Trade Defence Page)
- US Department of Commerce (Enforcement and Compliance)
- US International Trade Commission
- Canadian Border Services Agency
- Canada International Trade Tribunal
- Anti-Dumping Commission of Australia
- Eurasian Economic Commission (Department for Internal Market Defence)