Guidance

Determining injury and causation in dumping and subsidy investigations

Updated 12 September 2024

Legal framework

Primary legislation in the Taxation (Cross-border Trade) Act 2018 (the Taxation Act)

Paragraph 5 of Schedule 4 to the Taxation Act defines injury in dumping and subsidy investigations. Paragraphs 8(1)(b) and 8(3)(b) of Schedule 4 to the Taxation Act cover the requirement to demonstrate causation in dumping and subsidy investigations.

Secondary legislation in The Trade Remedies (Dumping and Subsidisation) (EU Exit) Regulations 2019 (the D&S Regs)

Part 4 of the D&S Regs sets out how injury and causation is assessed in dumping and subsidy investigations

World Trade Organization – relevant provisions

The General Agreement on Tariffs and Trade (GATT), particularly Article VI.1, contains a high-level provision on injury and on establishing causation in dumping and subsidy investigations. The following agreements provide further information:

• Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement or ADA), particularly Article 3 and 5.8
• Agreement on Subsidies and Countervailing Measures (SCM Agreement), particularly Article 15

Definition of injury

When we investigate imports of goods which may be dumped or subsidised, we will need to establish whether UK industries producing similar goods are being injured by the imports.

The Taxation Act defines injury to a UK industry that produces particular goods as either material injury or threat of material injury to the industry or material retardation of the establishment of the industry.

Material injury

Material injury is the term used when there is evidence of a UK industry being injured by dumped goods or subsidised imports.

Threat of material injury

Threat of material injury means injury which, although it has not yet occurred, is clearly foreseen and imminent.

Material retardation of establishment

Material retardation is the term used in cases where there is no established UK industry producing goods like those we are investigating. We may find that efforts to establish such an industry have been made much more difficult by the dumped goods or subsidised imports. It may apply in a situation where an emerging manufacturer has produced some goods but not at sufficient levels to allow us to assess material injury or where no goods have been produced.

Determining material injury

We determine injury to UK producers on a case-by-case basis, based on positive evidence. We will not decide based on any single factor.

To determine whether a UK industry is suffering or has suffered material injury from imports of the goods concerned, we will examine:

• the volume of the dumped goods or subsidised imports during the injury period
• the effect of the imports on prices in the UK market for like goods during the injury period
• the consequent impact of the dumped goods or subsidised imports on UK industry during the injury period
• any other factors we consider relevant

We will analyse these factors for the whole of the relevant UK industry if the data is available. If it is not, we may look at data from those producers for whom the data is available.

Assessing the volume of the dumped goods or subsidised imports – the ‘volume effect’

To establish the impact of volumes of the dumped goods or subsidised imports, we may assess the following changes in volume:

• the absolute change in the volume of imports from the country or countries we are investigating
• the relative change in volume of those imports in relation to UK domestic consumption and/or domestic production of this type of goods

Each of these changes can be described as a ‘volume effect’.

Assessing the volume effect in absolute terms

We will assess the volume of imports of the goods concerned in our investigation across the injury period. Evidence of an absolute increase in the volume of these imports could indicate material injury. This may be represented as a percentage of the volume of imports in the first year of the injury period to make comparison easier.

Assessing the volume effect in relative terms

We may look at an increase in imports of the goods concerned in comparison to UK production and/or UK consumption of this type of goods.

When we assess the imports relative to UK consumption, we first need to calculate the overall UK consumption of the relevant goods. We then calculate the market share of the country we are investigating by dividing its total imports of the goods concerned by the total UK consumption figure. If we find that the market share of the exporting country is increasing and the market share of the UK industry is falling, we may consider this an indicator of material injury.

We may also look at the level of imports of the goods concerned compared to UK production levels. For example, if production of the UK-produced goods has reduced, this may indicate injury to the UK industry.

Assessing the effect of the dumped goods or subsidised imports on prices in the UK market – the ‘price effect’

We will establish whether the dumped goods or subsidised imports have affected UK prices of like goods. To do this, we look at whether:

• prices of the dumped goods or subsidised imports are significantly undercutting prices of like goods produced in the UK
• the dumped goods or subsidised imports have significantly depressed or suppressed domestic prices of like goods produced in the UK

Price undercutting

Price undercutting occurs when the dumped goods or subsidised imports are consistently priced lower than the like goods produced and sold in the UK.

To establish whether this is happening, we compare the weighted average price of the dumped goods or subsidised imports with the weighted average price of the UK like goods.

We calculate an undercutting margin to establish the extent to which prices of the imported goods concerned are lower than the domestic sales prices of the like goods. We use the landed price of the goods concerned which is made up of the CIF (Cost, Insurance and Freight) import price, customs duties and relevant post-importation costs. We compare the landed price to the UK industry’s domestic sales price of the like goods at EXW (Ex Works) level.

We will make adjustments where needed so that both prices are at the same level of trade. This means that in some cases, we will assess the price that importers pay and in other cases the price at which importers sell.

Once the prices are correctly adjusted, we will calculate the difference between the exporter’s price and the domestic weighted average price of the goods under each PCN as a monetary amount. This gives us the level of price undercutting per unit. The total undercutting amount is then expressed as a percentage of the adjusted import value of the goods concerned at UK sales prices to give the undercutting percentage.

Price depression

Price depression occurs where there is evidence that the UK industry is forced to reduce its prices to compete against lower priced dumped goods or subsidised imports entering the market.

Price suppression

Price suppression occurs where the low prices of the imported goods prevent domestic sales prices of like goods in the UK from rising to a level they would otherwise achieve.

Assessing the impact of the dumped goods or subsidised imports on UK industry during the injury period

As well as assessing volumes and prices of the goods we are investigating, we must take into account all relevant economic factors that may affect the UK industry along with the indices that will reflect it. These include:

• actual and potential decline in sales, profits, output, market share, productivity, return on investments and utilisation of capacity
• factors affecting domestic prices of the like goods
• actual and potential negative effects on cash flow, inventories, employment, wages, growth and ability to raise capital or investments
• in dumping cases, the magnitude of the dumping margin

These factors may themselves constitute injury.

Assessing actual and potential decline in sales, profits, output and market share; productivity, return on investment and use of capacity

When we are assessing the UK market for goods, we will consider questions such as whether there have been changes in sales in line with changes in consumption and whether the UK industry’s market share is falling. We will also look at current price trends and what is happening to the market share of the country or countries we are investigating.

Assessing factors affecting domestic prices of the like goods

We will look at factors affecting domestic prices from an input or demand perspective. For example, we will consider the impact of changes in labour, raw materials, consumer trends and brand recognition.

When we are assessing domestic production volumes, we will consider questions such as whether domestic production volume has changed over time, whether capacity has increased, decreased or remained stable and what is driving changes in capacity use and inventory practices.

Assessing actual and potential negative effects on cash flow, inventories, employment, wages, growth and ability to raise capital or investments

In looking at employment factors, we will consider aspects such as general employment levels and associated wage costs as well as actual and potential changes in productivity.

We will look at financial indicators, which may help us better understand the other factors we are looking at. We may consider financial indicators relating to the individual businesses for which we have data and also combine the data at industry level.

When we are assessing financial indicators, we will consider among other things:

• profits (gross, operating and net)
• cash flow from operations
• return on investment
• ability to raise capital

We will consider what may be causing any changes to profits and whether there have been any significant changes in areas such as accounting policy, mergers, takeovers, or lawsuits that may have influenced the company’s performance. This is not an exhaustive list and we may assess other factors affecting profits and performance.

Cash flows and cash flow forecasts give us an overview of a business’s capability to invest, maintain operations and generally prosper. We will look into the reasons behind any changes in cash flow.

Return on investment measures business performance and earnings arising from investments, while ability to raise capital is a sign of investor confidence in a business or industry.

Assessing the magnitude of the dumping margin

The dumping margin represents the size of difference between the export price and the normal value of the dumped goods. The size of that margin can be a useful indicator of the extent to which injury may be attributed to dumping (in dumping cases only).

Assessing other relevant injury factors

We may also consider any other relevant factors which may be affecting UK industry. We will consider these factors on a case-by-case basis, using the most appropriate method of analysis for each one.

Our responsibilities in assessing material injury

When we are assessing material injury, we must consider all these factors in our investigation.

We will analyse the factors separately and together. This is so that we can understand how the effects may be interconnected. For example, employment levels falling could be an indicator of material injury in isolation, but if productivity has doubled in the same period, employment numbers may be falling due to a breakthrough in technology or an increase in capital investment rather than because of the dumped goods or subsidised imports. This is called non-attribution analysis and is discussed further below.

Therefore, when one indicator suggests material injury to a UK industry, we may or may not consider this sufficient evidence alone. Similarly, if one indicator does not show material injury, we will not necessarily conclude that there is no injury being caused to UK industry. We will assess all the factors together and make an appropriate determination based on all the facts available.

Causation and non-attribution analysis

Causation

Assessing the four factors detailed above allows us to understand whether the UK industry has suffered or is suffering injury. We will consider timely coincidence of the imports of the goods concerned to help us determine whether a causal link exists.

Non-attribution

We will conduct a further assessment to establish whether there are other known factors that have caused or are causing the injury suffered by the UK industry and whether they break the causal link between the injury we have identified and the dumped goods or subsidised imports we are investigating. This is known as non-attribution analysis. There are different factors to consider and some of these are outlined below.

The volume (and the prices) of imports into the UK that are not dumped or subsidised

We may look at whether imports which are not being dumped or subsidised (from the same country or a third country) are injuring the domestic industry.

Contraction in demand or changes in the pattern of consumption of the like goods in the UK

There may be instances when external factors can result in a significant decline in demand for the like goods. Examples of this type of factor might include a financial crisis or new models of the relevant goods entering the market.

Trade restrictive practices of and competition between the overseas exporters and the UK industry

We may look at whether the UK industry concerned is carrying out any restrictive practices that could result in an increase in imports, such as focusing sales on a particular part of the market.

Developments in technology

We may look at whether the costs of production have been affected by the use of technology.

The export performance and productivity of the UK industry

It is possible that the UK industry’s focus on the export market may have resulted in reduced or lost share of the domestic market.

We would also look at any other relevant factors that are made known to us or that we become aware of. This might include factors such as natural disasters or seasonal issues.

Assessing the threat of material injury

When we determine threat of material injury, we assess whether dumped goods or subsidised imports will cause material injury to the UK industry, that is clearly foreseen and imminent, if no protective action is taken. We may consider, among other things, the following factors:

• whether a significant rate of increase in the volume of dumped goods or subsidised imports entering the UK would suggest that a further substantial increase is likely
• whether excess capacity in the exporting country or the ability of overseas exporters to increase production capacity quickly would suggest that an increase in exports of the goods concerned to the UK is likely. We would also consider whether other export markets might absorb the additional exports
• whether the dumped goods or subsidised imports are entering the UK at prices that will significantly depress or suppress sales prices of the like goods in the UK. We would consider whether these prices are likely to increase demand for further imports of these goods
• whether inventories of the goods concerned in the exporting country would suggest that an increase in exports of the goods concerned to the UK is likely
• in the case of subsidies, whether the type of subsidy is likely to have trade effects that may cause material injury to the UK industry

Our threat of material injury determination must be based on facts and not merely on allegation, conjecture or remote possibility.

Assessing the impact on new and emerging industries (material retardation of establishment)

To determine whether material retardation of establishment of a UK industry exist, we assess whether imports of the goods concerned prevent a new or emerging UK industry in the like goods from (further) developing.

Potential indicators of a new or emerging industry may include the following:

• plans to establish the industry are well advanced
• a factory or plant is being set up
• new machinery or raw materials inventories have been ordered ahead of the start of operations

We will assess whether the new or emerging industry is being injured by the goods concerned and whether the imports of these goods prevent the UK industry from becoming established.

Cumulative assessment of imports

When we are investigating imports of the goods concerned from more than one foreign country or territory at the same time, we may cumulatively assess the effects of these imports on the domestic industry.

We can only consider cumulative assessment if the margin of dumping or the amount of subsidy in each case is more than minimal, and the volume of dumped goods or subsidised imports from each foreign country or territory is more than negligible. A dumping margin is minimal if it is less than 2% of the export price. A subsidy amount is minimal where it is less than 1% (2% for developing countries).

To be more than negligible, the dumped or subsidised goods in each case must account for more than 3% of the goods imported into the UK. This does not apply however where imports from exporting countries individually account for less than 3% of total imports of the like goods to the UK, but collectively account for more than 7% (less than 4% individually but more than 9% collectively for subsidised imports from developing countries).

If we intend to do a cumulative assessment, we must also consider whether this is appropriate in light of the conditions of competition between the goods from the different sources as well as the conditions of competition between the goods concerned and the like goods.

Calculating the injury margin

We must calculate an injury margin in all new dumping and subsidy investigations and in the following types of dumping and subsidy review:

• expiry reviews where the duties are being recalculated
• interim reviews, where relevant and possible
• new exporter reviews, where relevant and possible
• absorption reviews, where relevant and possible
• in transition reviews where the duties are being recalculated

The injury margin reflects the increase rate of import prices of the goods concerned that is considered necessary to prevent injury to UK industry. We calculate the injury margin so that an appropriate level of duty can be applied to remove the injury in future. We will not attempt to compensate for past losses in our calculation. The methodology we use to calculate will depend on the circumstances of each case.

We calculate an injury margin for each overseas exporter who is subject to the investigation. In investigations where we only ask for data from a sample group of exporters, we will calculate injury margins for each of the following exporter types:

• an individual injury margin for each sampled exporter
• one single injury margin for all non-sampled exporters who cooperate with our investigation when required. This will be the weighted average of the individual injury margins provided to all the sampled exporters
• one single injury margin for all other exporters. This will be calculated using any reasonable means and any information available

The data for the injury margin calculation will typically come from responses to questionnaires that we have sent to UK producers and overseas exporters. This will be used to calculate the weighted average landed price for each PCN of the goods under investigation. We will compare this with the weighted average target price for each PCN.

The injury margin is represented as a percentage of the CIF import price per exporter so that we can compare it easily with the dumping margin or subsidy amount.

Target price

This is the price that a UK producer would expect to sell their like goods at, if it were not being affected by the dumped goods or subsidised imports.

It is usually calculated by adding together the UK cost of production for the goods, any administrative, selling and general (AS&G) costs and a normal rate of profit. To calculate the level of profit, we may draw on a range of evidence including:

• profits achieved under normal conditions of competition by UK industry before the dumping or importing of subsidised goods began
• other recent investigations of the goods concerned
• profit figures determined from investigations into closely related goods;
• commercial databases
• profits achieved by producers of the like goods in other countries with similar characteristics to the UK market but which are unaffected by dumping or subsidised imports

We may also use alternative methods to set a target price. For instance, we may use the price of the like goods during a recent period when the market was not affected by the dumped goods or subsidised imports.

We may also use the prices of similar imported goods that have not been dumped/are not subsidised. We can only do this when we are satisfied that the prices of these similar goods have not themselves been affected by the price of the dumped goods or subsidised imports. Also, the import volumes must be of sufficient quantities and distributed through sufficiently similar channels to enable us to make an appropriate comparison.

Landed price

This is the price of the dumped goods or subsidised imports when they arrive at the UK port. It equates to the CIF (Cost, Insurance and Freight) import price plus any customs duties and relevant post-importation costs.

Making adjustments

We may adjust the calculated target price and landed price to ensure that we make a fair comparison. Adjustments may cover, but are not limited to:

• differences between the imported goods and the like goods, such as physical characteristics
• level of trade

De Minimis – the minimum threshold for an injury margin

If our injury margin calculation reveals that the injury margin is less than 2% of the price of the imports, we will recommend a zero duty against the relevant exporter.

The lesser duty rule

When we complete a dumping or subsidy investigation or a review of an existing anti-dumping or countervailing measure which requires us to calculate an injury margin, we will compare it to the dumping margin or subsidy amount we have calculated. We will then use the lower of the two margins as the level of duty that we recommend. This is to reflect the intention of the legislation to set duties which are at a sufficient level to remove the injury to the UK industry. For further information on how we define measures, consult the TRA’s investigation process guidance.