Guidance

How we assess injury

Updated 12 April 2024

Based on applications from UK industries, we investigate claims of dumped goods or subsidised imports which may have caused, be causing or threatening to cause injury to UK industry, in order to determine whether a trade remedy measure is justified.

Once we have initiated an investigation, we need to establish if there is dumping or subsidising of particular goods, if there is injury to the UK industry for the same or similar goods, if the dumping or subsidy has caused or is causing or threatening to cause that injury and if a trade remedy measure would be in the UK’s economic interest. If we don’t find both injury and causation, we cannot apply measures to the dumped or subsidised goods.

This guidance explains how we assess material injury or the threat of it to a UK industry in dumping and subsidy investigations and how we evaluate the risk that a new industry may be hindered in becoming established. It covers a number of topics, including:

• relevant UK legislation
• relevant World Trade Organization (WTO) provisions
• definition of injury
• how we determine injury
• assessing injury factors
• calculating an injury margin

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

Injury in dumping and subsidy investigations is referenced under Paragraph 5 of Schedule 4 to the Taxation Act.

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

Injury in dumping and subsidy investigations is referenced under Part 4 (Regulations 27 to 34) of the D&S Regs. These regulations set out further details on provisions under Schedule 4 to the Taxation Act.

World Trade Organization – relevant provisions

The General Agreement on Tariffs and Trade (GATT) contains a high-level provision on injury and 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.
• Agreement on Subsidies and Countervailing Measures (SCM Agreement), particularly Article 15

Defining injury and other terms

When we are asked to 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 also a type of injury and is the term used in cases where there is no existing UK industry producing goods like those we have been asked to investigate, or only a newly emerging industry. 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.

‘Goods concerned’ and Product Control Numbers

We will often refer to the goods which are the subject of our investigation as ‘the goods concerned’ in the case. When we initiate a new case, we will specify the goods that the case covers.

We will use Product Control Numbers (PCNs) to do this. These are identifiers which are used to match the foreign producers’ exported goods with the UK producers’ domestically sold goods. We create PCNs on the basis of the main physical characteristics differentiating the goods, providing that the characteristics have an impact on price.

‘Like goods’ produced in the UK

Our investigation will look at injury caused to a UK industry which produces goods in the UK that are identical to or closely resemble the dumped goods or subsidised imports. These are known as ‘like goods’.

In identifying like goods, we will consider the following non-exhaustive list of criteria:

• physical likeness, such as physical characteristics
• commercial likeness, including competition and distribution channels
• functional likeness, such as end-use or if the goods can be substituted for each other
• similarities in production, such as method and inputs
• other relevant characteristics

When a UK industry applies to us to investigate claims of dumped goods or subsidised imports which are affecting the market for their goods, we will determine whether these goods constitute ‘like goods’ or not for the purposes of our investigation.

Defining the ‘injury period’ and our ‘period of investigation’

The period of investigation will normally be the 12-month period before the date of initiation, while the injury period will cover the period of investigation and normally the 36 months immediately before this (i.e. 48 months in total).

We will collect data from the whole of the injury period.

How we determine 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.

Determining material injury

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

• 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.

How we assess the volume of the dumped goods or subsidised imports – the ‘volume effect’

When we are assessing material injury, 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

We may also assess whether there has been a relative change in the volume of similar goods being imported from other countries which aren’t subject to the investigation, if we think it is relevant. 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 both UK production and UK consumption of this type of goods. In either case, if we find a relative increase in these imports we may consider this to be an indicator of material injury suffered by the UK industry.

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.

How we assess the effect of the dumped goods or subsidised imports on prices in the UK market

We will need to establish whether the imports of dumped or subsidised goods have affected UK prices of like goods and caused injury to the UK industry.

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 is where the dumped goods or subsidised imports are consistently priced lower than those of like goods in the UK.

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

We use the CIF (Cost, Insurance and Freight) price for the imported goods where available. This is the price including all the costs of transporting the item to the agreed delivery point. The weighted average is worked out using the volume of goods, to account for variations.

We will make adjustments where needed so that the 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, which we will then express as a percentage of the domestic price to give the undercutting percentage.

We will then combine the undercutting percentages of all PCNs by weighting them based on total value of sales of each PCN to obtain an overall undercutting margin.

Price depression

This is 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

This is where the low prices of the imported goods prevent 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 and market share, productivity, return on investment and use 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 investment
• in dumping cases, the magnitude of the dumping margin, which is the size of difference between the export price and the normal value of the goods being dumped

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 investment

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.

Assessing financial indicators

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 size of the margin of dumping (dumping cases only) can be a useful indicator of the extent to which injury may be attributed to dumping.

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 a surge in capital investment rather than because of the dumped goods or subsidised imports. This is called non-attribution analysis.

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 won’t 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.

Assessing the threat of material injury

In order to determine whether there is a threat of material injury, UK industries applying to us to carry out an investigation may want to address the following issues in their application:

• does a significant increase in the volume of dumped goods or subsidised imports entering the UK suggest that a further substantial increase is likely?
• does the exporter have significant excess capacity or can they increase capacity quickly? This could indicate that the imports may increase. We would also consider whether other export markets might absorb the additional exports.
• are the dumped goods or subsidised imports entering the UK at prices that could significantly depress or suppress prices of like goods in the UK? We would consider whether these prices are likely to increase demand for further imports of these goods.
• do the overseas exporters have substantial inventories of the goods concerned?
• in the case of subsidies, what kind of subsidy is it and what type of trade effects do we think are likely to arise from it?

We will only conclude that there is the threat of material injury to the UK industry where the facts show injury which, although it has not yet occurred, is clearly foreseen and imminent. Allegations or speculation about possible future injury will not be sufficient.

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

We will first confirm that there is no UK industry in the type of goods or that there is only an emerging industry. Potential indicators of an 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 then assess whether the new industry is being injured or is being prevented from becoming established.

When and how we will cumulatively assess imports

If we are investigating potentially dumped or subsidised imports of the same type of goods from more than one foreign country or territory at the same time, we may cumulatively assess all the effects on the domestic industry.

We can only do this when the amount of dumping or subsidy in each case is neither minimal nor negligible. In summary, to be more than minimal, any dumping margin (the difference between the export price and the normal value of the goods being dumped) must be more than 2% and any subsidy amount must be more than 1%. (A subsidy amount is the difference between an actual or preferential financial contribution received by an exporter from a foreign authority and a comparable equivalent available in the open market.) If the subsidised imports come from a developing foreign country or territory, the subsidy amount will need to be more than 2%.

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. (In the case of a subsidy, when the goods come from a developing country, they must represent more than 4% of the goods imported into the UK. The other exception to this in a subsidy case is where the exporting countries individually account for less than 3%, but collectively account for more than 7% of imports of the goods concerned.)

If we intend to do a cumulative assessment, we must also be satisfied that the conditions of competition across the various types of goods are appropriate. We will look at whether the dumped goods and/or subsidised imports from different sources are all in direct competition with the like goods in the UK.

How we calculate 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
• full interim reviews
• partial interim reviews relating to injury
• new exporter reviews where sampling was not used in the original investigation
• absorption reviews
• in transition reviews where we have decided to revise the level of duties and where it is possible to conduct a meaningful injury margin calculation

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

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

Any individual injury margins we are providing will be calculated before those for non-sampled cooperating exporters and all other exporters.

Making our injury margin calculation

In general, we will calculate the injury margin by comparing a benchmark UK price (generally referred to as the target price) with the import price (known as the landed price) of the goods under investigation. This calculation needs to be done for each Product Control Number (PCN) of the goods concerned and the comparison should always be at the same level of trade.

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 or subsidy margin.

Target price

This is the price that a UK producer would expect to sell its 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 goods concerned 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 relevant import duties and other costs associated with import.

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

The data for the injury margin calculation will typically come from responses to questionnaires that we have sent to UK producers and 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.

De Minimis – the minimum threshold for an injury margin

If our injury 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 one of these measures 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.