Table of Contents
Real Life Example
The U.S. has imposed significant CVD on Indian seafood exports, particularly frozen shrimp, which could indirectly impact cuttlefish exports. The increased duties pose challenges for Indian exporters, potentially affecting their competitiveness in the U.S. market.
Definition
Countervailing Duties (CVDs) are tariffs imposed by a an importing country on goods that enter into its territory with an aim to counterbalance subsidies provided by the exporting country to producers in that country. The main purpose of CVDs is to cushion the domestic industries in the importing country from unfair competition that might arise exporters sell their products at artificially lower prices due to government subsidies.
Investigations Required for Imposing CVDs
The country into which goods are imported must conduct a thorough investigation to confirm that subsidies are truly affecting its domestic industry, before it imposes CVD. This process is governed by the World Trade Organization (WTO) rules, particularly the Agreement on Subsidies and Countervailing Measures.
Once a subsidy is confirmed, the importing country can impose duties equivalent to the subsidy amount. These duties typically remain in effect for five years, after which they may be reviewed and adjusted based on new investigations.
Who imposes CVDs measures in India?
In India, Countervailing Duties (CVDs) are imposed by the Department of Revenue, Ministry of Finance, based on the recommendations of Directorate General of Trade Remedies (DGTR).
- DGTR, Ministry of Commerce conducts investigations into the impact of foreign subsidies on domestic industries
- After investigation, the DGTR makes recommendations on the imposition of CVDs to the Ministry of Finance
- The duties are levied under the provisions of the Customs Tariff Act, 1975, in alignment with the rules of the World Trade Organization (WTO)
- The Indian Customs Department implements the collection of CVDs at the border