The price puzzle: Unpacking the distinct roles of Reference Price and Minimum Import Price in the Indian trade laws

Introduction

India’s trade regulation framework employs various policy instruments to balance liberalization with the protection of domestic industries. Among these, the application of Reference Price in Indian trade remedy investigations and imposition of Minimum Import Price (‘MIP’) under the Foreign Trade (Development and Regulation) Act, 1992 (‘FTDR Act’) on the import of any goods into India are two distinct but often misunderstood tools. While both are tools in the hands of the Indian policy makers to manage import flows of goods and protect domestic industry, they differ significantly in terms of legal basis, operational mechanisms, and objectives. More importantly, in the Indian context, there are significant differences in implications on transactions for stakeholders like importers and exporters, which begs a correct understanding of the two terms on part of the industry. However, the overlap in terminology, international usage of these terms^[1] and similarities in their implementation often cause confusion among stakeholders, including importers, exporters, and policymakers. This article aims to elucidate the distinct features of these two mechanisms, clarify the legal and procedural frameworks governing them, and dispel the common misconceptions.

Part I: Reference Price in Trade Remedy Investigations

Concept and Purpose

A trade remedy investigation can take the form of an Anti-dumping duty (ADD) or Countervailing duty (CVD) investigation to determine the dumping or subsidization of specific goods imported from specified countries causing injury to the domestic industry in India. It can also take the form of a Safeguard duty (SGD) investigation to determine unforeseen circumstances leading to sudden surge in imports of specific goods into India causing serious injury to the domestic industry. These investigations lead to imposition of ADD, CVD or SGD, as the case may be, on imports of specified goods into India. In the context of imposition of these measures, a ‘reference price’ refers to a benchmark price determined by the investigating authority (Directorate General of Trade Remedies – ‘DGTR’) for the imported investigated product. Essentially, the reference price acts as a floor price such that the imports below this floor price attract the measure (i.e. levy and collection of ADD, CVD or SGD). It typically corresponds to the fair selling price determined by the DGTR in Indian market which will remove the dumping or subsidisation of the imported goods found during the investigation or a lower price if that is sufficient to remove the injury caused to the domestic industry. A detailed explanation on calculation and working mechanism of reference price based ADD was provided in our previous article which can be accessed here.

For the present article, it is sufficient to know that this reference price is a floor price to attract the trade remedial measure. More importantly, the imports below this reference price are not prohibited or restricted into India i.e. the exporters can still invoice the subject product to importers in India below this reference price in which case the difference will have to be paid by the importers to the Government of India (Customs department) as ADD or CVD or SGD. For instance, typically in an Indian anti-dumping duty investigation where ADD is imposed based on a reference price, it means:

* If the landed value of the imported goods (CIF price plus non-creditable customs duties) is lower than the fixed reference price, then the ADD is imposed as the difference between the reference price and the landed value.

* If the landed value of the imported goods is equal to or higher than the fixed reference price, then no ADD is levied.

The implication of imposing trade measures in this form is that it brings the import cost for an importer up to the reference price by making the importer pay the import price to the exporter and difference (with the reference price, if any) to the Government in the form of trade remedial measures.

To illustrate, in the recently (2025) concluded ADD investigation on imports of Textured Tempered Coated and Uncoated Glass from China and Vietnam, a reference price between USD 570 to 664 per MT was determined by the DGTR depending upon the exporter and country of export.^[2] To illustrate further, in the ongoing (2025) safeguard duty investigation on imports of Non-Alloy and Alloy Steel Flat Products, the DGTR issued provisional findings pursuant to which the ministry of finance imposed provisional SGD on imports of said steel products at 12% ad-valorem with a reference price condition for different types of steel products ranging from USD 675 to 964 per MT covered in the investigation.^[3] If the CIF price (assessable value) of particular imported steel products is below its reference price, 12% duty becomes payable but if such CIF price (assessable value) is equal to or above its reference price, no SGD is payable. It may be emphasized that it is generally the customs authorities who monitor the compliance with payment of these duties depending upon the trigger (imports above or below the reference prices).

Legal framework

Trade remedial investigations, wherein the reference price-based duty finds its application, derive their legal sanctity from the Customs Tariff Act, 1975 and the rules issued thereunder, namely:

* Anti-Dumping Duties (ADD): Section 9A of the Customs Tariff Act, 1975 read with Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995.

* Countervailing Duties (CVD): Section 9 of the Customs Tariff Act, 1975 and Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995.

* Safeguard Duties (SGD): Sections 8B of the Customs Tariff Act, 1975 read with Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997. 

Operational mechanism

1 Initiation: Generally, a domestic industry files a petition with the DGTR which becomes a trigger for initiation of investigation. If a prima facie case is found to exist, an investigation is initiated and conducted under the rules.

2. Investigation: DGTR undertakes detailed analysis of dumping/subsidy causing injury to the domestic industry or unforeseen circumstances leading to sudden surge in imports causing serious injury to the domestic industry.

3. Recommendation: If the above determination is positive, DGTR recommends imposition of trade remedial measure to the ministry of finance.

4. Reference Price based recommendation: Duties can be recommended in many forms (fixed, ad valorem or based on reference price) i.e., one of the ways in which the duty is recommended by DGTR is a reference price-based mechanism.

5.Enforcement: Customs department monitors compliance. If import price is below the reference price, the trade remedial measure gets triggered. 

Part II: Minimum Import Price (MIP) under the FTDR Act

Concept and Purpose

A Minimum Import Price (‘MIP’) is a policy instrument wherein the government stipulates a minimum threshold price below which imports of specified goods are not allowed to be imported into India. Unlike reference prices in trade investigations, MIPs in the Indian context are policy driven measures adopted generally pursuant to stakeholder or industry discussions. Unlike trade investigation, the law does not mandate a quasi-judicial investigation to be conducted before implementing a MIP. They are more temporary (imposed generally for a few months and subject to extensions) and preventive policy measures to curb imports of low-quality or under-invoiced goods which not only protect consumers, legitimate government revenue, but also support domestic producers in providing a level playing field.

The Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry administers MIPs under the FTDR Act by issuing notification under the import policy regime of India.

Legal framework

MIP is principally governed by Section 3 and Section 5 of the FTDR Act. Section 3 empowers the Central Government to issue orders making provisions for the development and regulation of foreign trade by facilitating imports and increasing exports. It also empowers the Central Government to issue orders make provision for prohibiting, restricting or otherwise regulating inter alia any goods, subject   to exceptions. Section 5 on the other hand empowers the Central Government to formulate and announce the foreign trade policy (FTP) and make amendments to said policy.

 In exercise of above powers, the Government has issued the Foreign Trade Policy (FTP) 2023 and Indian Trade Classification (Harmonised System) 2022 (‘ITC(HS)’). The ITC(HS) is a compilation of codes for all merchandise/goods for export/import classified based on their group or sub-group at 2/4/6/8 digits. It is aligned at 6-digit level with international Harmonized System goods nomenclature (HSN) maintained by the World Customs Organization (WCO).

Schedule 1 of ITC (HS) contains the Import Policy regime of India which mentions the import conditions against each tariff item at 8-digit level. Generally, the import condition mentioned against the tariffs items is ‘free’ which means that goods falling under those tariff items can be freely imported into India without any conditions, unless prohibited or restricted under any other law. Whenever the Government wants to impose MIP on a product, it generally amends the import policy conditions for the goods falling under the relevant tariff items mentioned in Schedule 1 of ITC (HS) from ‘free’ to ‘restricted’ with the condition that import shall remain ‘free’ if the CIF value of that item is above a particular price.

 For instance, the Government has recently amended the import policy condition for import of ‘Synthetic Knitted Fabrics’ covered under specified tariff items codes under Chapter 60 of the ITC (HS), 2022 from ‘free’ to ‘restricted’ with the condition that import shall remain ‘free’ if the CIF value is minimum USD 3.5 per kilogram.^[4]

The term ‘restricted’ implies that a specific import authorization or license will be required by the importer if the condition of MIP is breached. Practically, such licenses are difficult, if not impossible, to obtain because the Government as a matter of policy has considered relevant facts and circumstances before deciding to restrict the imports of that commodity below the MIP.   

The implication of imposing MIP under the FTDR Act is that those goods become prohibited for import into India below the MIP. If the exporter invoices the goods to the importer below the MIP, those goods are liable for confiscation, and re-export out of India with applicable penal liabilities. MIP does not involve WTO-prescribed investigation procedures and is invoked under India’s right to regulate imports as a foreign trade policy measure.

Operational mechanism

1. Policy Formulation: Based on representations from industry or government policy decisions.

2. Notification: The DGFT issues a notification specifying the MIP and the applicable HS codes.

3. Enforcement: Customs denies clearance of imports priced below the MIP.

4. Duration: MIPs are generally temporary and subject to periodic review.

Part III: Key differences Between Reference Price and MIP

Conclusion

Understanding the distinction between Reference Price based duty in trade remedy investigations and Minimum Import Price (MIP) under the FTDR Act is critical for effective policy formulation and compliance. A nuanced understanding of these tools is essential not only for the implementing authority but also for businesses navigating the increasing complexity of international trade. While both involve price benchmarks, their legal foundations, objectives, and operational mechanisms are fundamentally different. The Reference Price serves as a benchmark within a structured legal framework aimed at addressing unfair trade practices and is rooted in WTO-compliant investigations. In contrast, MIP is a unilateral trade policy tool designed to regulate imports, often for short-term stabilization. However, the terminology overlap, and international practices/understanding of MIP creates a lot of confusion in the Indian context. To address the prevailing confusion, policymakers may consider issuing trade notices and stakeholder outreach to clearly differentiate the two measures which can aid in demystifying these two distinct yet similarly worded instruments.

[The authors are Partner and Principal Associate, respectively, in International Trade and WTO practice at Lakshmikumaran & Sridharan Attorneys, New Delhi]

[1] The EU uses the term ‘MIP’ in their trade remedy investigation whereas in Indian context the same is understood as reference price-based duty.

[2] DGTR’s Final Findings vide notification F. No. 6/29/2023-DGTR, dated the 10 February 2025 and Notification No. 11/2025-Customs (ADD) dated 8 May 2025

[3] DGTR’s Preliminary findings vide notification No. 22/01/2024-DGTR dated the 18 March 2025 and Notification No. 01/2025-Customs (SG) dated 21 April 2025

[4] Notification No. 77/2023 dated 16 March 2024 extended/modified by Notification No. 33/2024-25 dated 1 October 2024 further extended/modified by Notification No. 49/2024-25 dated 4 January 2025 and further extended/modified by Notification No. 05/2025-26 dated 23 April 2025