LEGAL FRAMEWORK AGAINST UNFAIR TRADING PRACTICES OF DUMPING AND TRADE IN SUBSIDIZED PRODUCTS IN CAMEROON
By Jacob A. Akuo, Esq., BL, LLM, M2
Co-founding Partner & International Trade Law Expert
When Dayspring Law Firm did a rapid survey on Cameroonian producers and businesses who run domestic industries across diverse sectors regarding dumping and trade in subsidized products, we were in for a big surprise. We noticed that an overwhelming majority of them did not understand what amounts to dumping or trade in subsidized products. They also were not aware of the recourse available to them under both domestic legislation and international law to remedy these unfair trading practices. We noted similarly that one of the industries heavily affected was the agroindustry. In the agroindustry local producers of rice, poultry, fisheries, pork, tomatoes, onions, etc., find it hard to compete with imports due to considerably low prices of such imports either because they are subsidized or are being dumped. When we highlighted local legislation and the rules of international trade that protected them, most of them pointed out to us that they had suffered directly or indirectly the consequences of these unfair trading practices, with the simple thinking that it came with the territory globalization.
Cameroon is one of the founding Members of the World Trade Organization (WTO) having participated in the negotiations during the Uruguay Round that effectively gave birth to the WTO in 1995. In this light, Cameroon is bound by all WTO covered agreements that govern the multilateral trading system, among which are the General Agreement on Tariff and Trade (GATT 1994), the Agreement on Anti-dumping (implementing article VI GATT) as well as the Agreement on Subsidies and Countervailing Duties or SCM Agreement (implementing article XVI GATT).
Obligations under these agreements mandate a Member State to design and structure its economic, legal and judicial system in a manner that is not at odds with her obligations under the multilateral trading system, and to grant market access as much as it has undertaken in the various schedules of concession and commitment, albeit with some notable exceptions.
In 2016, Cameroon passed Law N° 2016/004 of April 18, 2016 Governing External Trade in Cameroon and repealing the 1998 Law on Dumping Practices and Trade in Subsidized Products that hitherto applied. The 2016 Law which applies to dumping practices and trade in subsidized products is implemented by Prime Ministerial Decree N° 2017/6523 of June 07, 2017 (the implementing Decree). Both texts considerably mirror Cameroon’s obligations under the WTO Agreements, ensuring a decent domestic operationalization of these rules of international trade.
This work shall briefly examine what amounts to dumping or trading in subsidized products under the 2016 law and the implementing Decree. It shall underline the conditions for the establishment of injury to similar domestic products or threat thereof alongside the causal link between the unfair trading practices and the injury. It shall likewise highlight the procedural measures put in place by these texts to remedy these unfair trading practices and conclude with an accentuation of our role as the leading law firm in this area of practice in Central Africa and most of Francophone Africa.
What is dumping under these legislations?
Under article 21 of the 2016 law and article 17 of the implementing Decree, a product is dumped where the export price of that product to Cameroon is lower than its normal value or that of a similar product as established in the ordinary course of trade in the country of export or origin.
In this definition, there are certain key words that need to be defined to wit: “export price”, “normal value”, and “similar products”. Though they sound like ordinary phrases, the formulas to reach them can sometimes be incredibly complex.
What amounts to the “export price” in this law varies from one case to another. Generally, the export price refers to the price which is actually paid or is payable for the product under consideration when it is exported for consumption in Cameroon. In cases where there is no actual price paid or payable for the product when it is exported and sold in Cameroon, or where there is not a possibility to rely on the export price because of the existence of an association or compensatory scheme or arrangement between the exporter and the importer or a third party, the export price shall be established either on the basis of the price at which the product is first resold to an independent buyer in Cameroon; or on the basis deemed reasonable where the product in question is not resold to an independent buyer or resold in the condition in which it was imported. Lastly, in circumstances where the normal value (to be defined below) is determined based on the price in the country of origin, the export price shall be the price actually paid or payable for the product under consideration when sold in the country of origin for exportation.
What amounts to “normal value” under this law equally varies from case to case. Nonetheless, its determination reflects the formula laid down in article 2 on the Agreement on Anti-Dumping.
Firstly, account is taken of the comparable market price of the product concerned in the ordinary course of trade for the similar product when destined for consumption in the exporting country. Nonetheless, where the product is only in transit through the country of export or where there is no production of the good or no comparable price in the country of export, normal value would be determined on the basis of the price of similar product destined for consumption in the country of origin.
Secondly, where no sales of the similar product have been made in the ordinary course of trade in the domestic market of the exporting country or where, because of the particular situation of that market or the low volume of sales in that market, such sales cannot serve as a benchmark for the determination of normal value, normal value shall be established on the basis of either the comparable price of the similar product when exported to a third country, provided, however, that export sales to that third country are made in accordance with the same criteria; or the cost of production in the country of origin plus an amount representing administrative and marketing costs, overheads, and a reasonable profit margin.
Lastly, in circumstances where the product is exported from a non-market economy country which happens equally not to be a Member of the WTO, the normal value shall be determined on the basis of the comparable market price in the ordinary course of trade when the similar product is sold for consumption in a third country with a market economy and a comparable economic level; or the comparable price in the ordinary course of trade when the like product is exported from an appropriate market economy country to other countries including Cameroon; or on any other reasonable basis.
“Similar product” has not been defined in the law. But the law states that, it shall have the meaning contained in the Agreement on Anti-Dumping. This Agreement provides that the phrase “similar products” (produits similaires) has an interchangeable meaning with “like products”, which is the phraseology the Agreement extensively uses. Similar products shall be interpreted to mean a product which is identical, i.e. alike in all respects to the product under consideration, or in the absence of such a product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration. This same definition applies when dealing with issues touching on trade in subsidized products.
Another important phrase that is employed time and time again when dealing with dumping practices or trade in subsidized products that needs to be defined is the “domestic industry”. Its definition is very important because remedies to dumping or trade in subsidized products are meant to protect such industry from injury or threat of injury, or material retardation. As per the 2016 Law, domestic industry shall refer to domestic producers of like products whose aggregate production constitutes a major proportion of the total domestic production of those products.
What is trade in subsidized products under these legislations?
Under article 21 of the 2016 Law, a product shall be considered subsidized where it enjoys direct or indirect assistance for production, processing, export, or transportation in the country of export or origin.
In article 32 of the implementing Decree (which mirrors article 1 of the SCM Agreement), a product shall be considered as subsidized where a public authority or any other public body or establishment in the country of origin or export of the product concerned confers a direct or indirect financial contribution on said product or if the exporter or producer of the said product benefits from any form of price or income support with the object or effect of directly or indirectly increasing the export of said product to Cameroon; and such financial contribution or price or income confers an advantage.
In other words, there are three basic elements that a subsidy must fulfil to be considered as such. It must be a financial contribution whether direct or indirect; issued by a government or public body or authority, and which confers a benefit or advantage.
“financial contribution” shall be deemed existent in any of the following circumstances:
- in cases where there is a practice of the public authorities to give direct transfer of funds (in the form of grants, loans, and equity infusions) or potential direct transfers of funds or liabilities (in the form of loan guarantees).
- where the government revenue that is otherwise due is forborne or not collected.
- where the government provides goods or services other than general infrastructure, or purchases goods.
- finally in circumstances where the public authorities make payments to a funding mechanism, or entrust or direct a private body to perform one or more functions of the types listed above, which are normally within their remit, in such a way that the practice followed does not materially differ from the normal practice of the public authorities.
A “benefit” shall be considered conferred on the recipient where the terms of the financial contribution from the public authorities are more favourable than the commercial terms which the recipient could have obtained on the market, or would have had to pay in comparison with the rules of the ordinary law. In other words, where the financial benefit is in the form of a loan that follows the interests rates set in place by the norms and ordinary law governing the banking sector, then they cannot be considered a financial benefit in the definition of a subsidy.
Determining the advantage conferred requires that a difference would have to be drawn between the amount the beneficiary pays under the favourable conditions created by the public authority and that which he would have paid under the normal market conditions.
In addition, in determining the amount of the subsidy in terms of the advantage conferred on the products concerned, the following elements should be deducted from the total amount of the subsidy, the burden of proof and justifications being on the party that claims such deductions to wit:
- the application fee and other costs necessarily incurred to qualify for, or to benefit from, the subsidy; and
- the duties and taxes or other charges levied on the export of the product concerned to Cameroon specifically intended to offset the subsidy.
The ratio of subsidy in percentage terms shall be calculated as the ratio of the amount of subsidy to the value of the sales of the product concerned from the subsidy during the twelve months period immediately prior to the initiation of the investigation.
“Public authority or body” though not defined by this law is defined by the SCM Agreement as the national government, sub-national government, public bodies such as and including state-owned companies, private companies that have been authorized by the government to act at their behest. There are two key domestic laws which lay down the status of public establishments on the one hand and public enterprises on the other hand (Law no 2017/010 of July 12, 2017 on the General Status of Public Establishments and Law no 2017/011 of July 12, 2017 on the General Status of Public Enterprises). These laws are instrumental to define what is a public authority or body.
In reflecting the norms in the SCM Agreement, subsidies that are subject to countervailing measures under this law must be specific subsidies. In accordance with article 35 of the implementing Decree, a subsidy shall be deemed specific in cases where the legislation or public authority in the country of origin or export of the product under consideration expressly limits the granting of such subsidy to an enterprise or industry or group of enterprises or industries either domestically or within a specified geographical region. These subsidies could be enterprise specific, industry specific, regional specific or prohibited. On the other hand, where the subsidies are not prohibited, they are merely actionable and thus countervailable insofar as there is prove that they are causing or threatening to cause injury or prejudice to the domestic industry or material retardation.
Prohibited subsidies are completely frowned at by this law just like the SCM Agreement. They are subsidies that are either de facto or de jure contingent exclusively or as one of several other conditions based on the export performance of the subsidized product; or the use of domestic products over imported products. The reason for their prohibition is pretty evident in that they are meant to directly (negatively) affect trade.
The Condition of Injury or Threat of Injury or Material Retardation: the Causal Link between these and the Dumping Practices or Trade in Subsidized Products
Whether in the case of dumping or trade in subsidized products, the fundamental condition that must be fulfilled for there to be anti-dumping duties or countervailing measures under the 2016 law is that the dumped or subsidized products that have been released for consumption in the Cameroon market must cause or threaten to cause serious injury to similar domestic products or considerably delay the establishment and development of a similar domestic product or industry (material retardation).
In connection to this, there should be an establishment of a causal link between the dumping practice or the trade in the subsidized products with the injury or threat of injury to similar products or domestic industry. In establishing these according to article 40 of the implementing Decree, the investigating authority set up by this Law (Committee on Anti-dumping and Subsidies) shall undertake an objective examination of the volume of imports of the product under consideration during a given period; the effect of such imports on the prices of like domestic products in the domestic market; and the impact of such imports on the domestic industry producing like products. In so doing to establish injury or material retardation of domestic industry, they shall rely on hard facts and not allegations or conjecture of remote possibility.
There are several key factors that must be taken into consideration by the authorities when trying to establish that there have been de facto such unfair trading practices. Some of these include:
- whether there has been an increase in the volume of dumped or subsidized imports, either absolute or relative to domestic production or consumption of like products over a period of twelve months preceding the initiation of the investigation.
- whether there has been a significant price undercutting by the imports of the product under consideration in comparison with the prices of the like domestic product, or whether such imports have the effect of significantly undercutting prices or preventing price increases which would otherwise have occurred. In this case, price undercutting shall be deemed existent where the imported product is sold at a price lower than that of like domestic product.
On the other hand, the examination of the impact of the imports concerned on the domestic industry shall include an evaluation of all relevant economic factors and indices having or bearing on the state of the domestic industry. This information shall be obtained in the course of the investigation from replies to the questionnaires and from accounting records of the domestic producers for a period covering at least the three years immediately preceding the reopening of the investigation for which data are available. This information shall include in particular:
- the actual and potential decline in sales, profits, production, market share, productivity, return on investment, capacity utilization.
- the actual or potential influence on the prices.
- the magnitude of the dumping margin.
- actual or potential adverse effects on cash flow, inventories, employment, wages, growth, financing, and investment capacity.
Once the requirement of injury or threat thereof has been established by showing a causal link between the products concerned and the injury or threat thereof, then anti-dumping or countervailing duties can be imposed.
Investigating Dumping Practices and Trade in Subsidized Products
Once an affected domestic industry or agency can establish the dumping practice or trade in subsidized products including the causal link between such unfair practices and the injury or threat thereof to similar domestic products or industry, the party can make a request for an investigation in the form of a written application to the Ministry in charge of External Trade. The content of the application shall be treated confidential unless the applicant notifies the authority of the contrary. Nevertheless, he must make a summary of facts which are not to be treated as confidential.
The applicant making such a request can only qualify as acting on behalf of the domestic industry where it can be demonstrated that, it represents more than 50% of domestic producers of similar goods that are affected by such unfair trading practices.
Within 30 days of receipt of this application and study of the content, the Ministry in charge of trade shall order an investigation by the Anti-dumping and Subsidies Committee. All interested parties shall be notified of the commencement of such investigation. Any other interested party shall have the right to make themselves known to the Committee within 30 days upon publication of the investigation notice.
Questionnaires for data collection shall be issued out to domestic importers and foreign exporters through various diplomatic channels as the case maybe to elicit information to support the investigation. Upon receipt of the responses of such questionnaires, an initial evaluation shall be drawn up to determine the dumping or trade in subsidized products, a causal link and the injury or threat thereof to domestic industry, and the preliminary determination shall be published in the official journal or newspaper. Such publication must still take into consideration the confidentiality of information provided.
Where such an assessment establishes a preliminary determination existence of dumping or trading in subsidized products, the Minister in charge of External Trade may recommend to the Minister in charge of Finance to institute precautionary measures in the form of provisional anti-dumping duties or countervailing measures (as the case may be) in order to avoid further or irreparable injury to domestic industry. This may take the form of ordering the payment of a deposit in cash or guarantee equal to the dumping margin or subsidy. Such provisional anti-dumping duties or countervailing measures shall be published in the official gazette or newspaper empowered to publish legal notices in Cameroon.
Once the investigation ends, a final assessment shall be made based on all the information collected and verifications made. The final assessment shall be communicated to the parties concerned informing them on whether there is a dumping or trade in subsidized products and the causal link of such activities to the injury or threat thereof to domestic industry or similar products. It shall also form the basis of the decision on whether to definitively apply the anti-dumping or countervailing duty. The parties shall have 30 days upon referral to file their comments and observations. The final report shall equally be published in the official gazette or newspaper charged with publication of such notices in Cameroon. The Minister in charge of Trade shall once more inform the Minister in charge of Finance to impose definitive anti-dumping or countervailing duties.
It is important to highlight that, such an investigation must be completed within a period of twelve months and can be exceptionally extended to a period of eighteen months depending on the circumstances and complexity of the case. Likewise, the anti-dumping or countervailing duty must correspond to the margin of dumping. This is to provide once more a level playing field between the imports and the domestic industry in terms pricing.
The definitive anti-dumping duties or countervailing duties can be reviewed in any of the following circumstances:
- at the expiry of a period of one year after the imposition of the final duty by the authorities suo motu, or upon the request of the parties concerned. Such review shall determine whether to revise, eliminate, or maintain the anti-dumping or countervailing duties.
- Within ninety days prior to the expiry of the period of implementation of the anti-dumping or countervailing duties, suo motu or at the request of the representative of the domestic industry. Such a review shall be to determine whether to extend the period of application of the duties and shall cover both dumping or specific subsidy and injury.
- at any time, at the request of the exporter or producer in the country of the product under consideration who did not exhibit the product in Cameroon during the period of the investigation prior to successful application of the duties and whose exports of the product are subject to said duties. The review will be carried out to determine the individual anti-dumping or countervailing duties for such exporter or producer.
The Role of Dayspring Law Firm
At Dayspring Law Firm, our lawyers make up a handful of practitioners in Cameroon with expertise in trade remedies, who can effectively navigate or pilot clients from all sectors and industries through trade remedies procedures relating to dumping and trade in subsidized products. We assist clients at all levels of the investigation proceedings including but not limited to preparation or review of questionnaires for data collection, due diligence, actual data collection in both local and markets and export markets, determination of the margin of dumping or subsidy, determination of the extent of the injury or threat thereof on the domestic industry in addition to the causal link, filing of applications or defence statements in dumping actions and actions of trade in subsidized products, request for review of definitive dumping or countervailing duties. We have equally established professional networks with all stakeholders and the Ministries concerned, private detectives, bailiffs, members of the security forces, the Anti-dumping and Subsidies Commission, customs officials to efficiently represent our clients and protect their interests during investigations.