16. Trade remedies: Anti-dumping

Dumping occurs when goods are sold into an importing market at prices below those prevailing in the home market or at prices below their cost of production (including reasonable amounts for administration, marketing costs, and profits). An anti-dumping action is taken by a state as a remedy for dumping

Question: How do calculate an AD duty? (Answ: key beginning point is to calculate a normal value of the product)

The mechanics of anti-dumping

Dumping occurs when the products of one country are introduced into the commerce of another country at less than the normal value of the products

(a) is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or,

(b) in the absence of such domestic price, is less than either

(i) the highest comparable price for the like product for export to any third country in the ordinary course of trade, or

(ii) the cost of production of the product in the country of origin plus a reasonable addition for selling cost and profit.

The usual remedy for dumping is an anti-dumping duty that is applied to incoming shipments of "dumped" goods. Since the purpose of the duty is to offset the effects of dumping, the amount of the duty should be equivalent to the difference between the "dumped" price and the "home market" price. This difference is called the margin of dumping.

Anti-dumping investigations are to end immediately in cases:

• where the authorities determine that the margin of dumping is insignificantly small (defined as less than 2% of the export price of the product).

• if the volume of dumped imports is negligible (i.e. if the volume from one country is less than 3% of total imports from one country of that product and 7% or more of total imports from several countries)

The mechanics of anti-dumping (1)

1.A complaint is initiated on behalf of the industry affected (the complaining business must account for a "major proportion" of total domestic production of like products). If the relevant authorities find the complaint presents a sufficient basis for formal procedures, an investigation is begun.

2.The relevant authority may make a preliminary finding of dumping.

3.The relevant authority may make a preliminary finding of material injury.

4.On the basis of these two preliminary findings, provisional duties may be imposed.

5.If neither preliminary finding is made, the case is terminated.

6.The relevant authorities continue their investigations leading to final determinations with respect to the existence of dumping margins and injury.

7.The investigation may be terminated on the basis of voluntary price undertakings from dumping exporters to increase their prices to eliminate the dumping.

8. If suitable voluntary price undertakings are not agreed to, dumping margins are calculated for each exporter found to be dumping.

9. Final dumping duties, the amounts of which are not to exceed the margins of dumping, may be applied.

10. Dumping duties are to remain in force "only so long as and to the extent necessary to counteract dumping which is causing injury." An injury determination expires after five years. Dumping duties may be extended beyond five years only on the basis of a new investigation that confirms continued threat of injury.

Each member's anti-dumping regime must include provision for independent judicial review of administrative actions relating to final determinations of dumping and injury and of the final determination.

The mechanics of anti-dumping

Under Article VI of GATT 1994, and the Anti-Dumping Agreement, WTO Members can impose anti-dumping measures, if, after investigation in accordance with the Agreement, a determination is made

1. that dumping is occurring,

2. that the domestic industry producing the like product in the importing country is suffering material injury, and

3. that there is a causal link between the two

For an anti-dumping action to be used, two conditions must be met.

• There must be dumping.

• The dumping must have:

  • caused material injury to an established industry in the importing country

  • threatened to cause such industry or

  • if it materially retarded the establishment of a domestic industry.

• Refund or reimbursement

  • Duties have to be collected on a non-discriminatory basis on imports from all sources found to be dumped and causing injury, except with respect to sources from which a price undertaking has been accepted

  • The amount of the duty collected may not exceed the dumping margin, although it may be a lesser amount

• Individual exporter dumping margins

  • The Agreement requires that, when anti-dumping duties are imposed, a dumping margin be calculated for each exporter.

• New shippers

  • The investigating authorities are required to conduct an expedited review to determine a specific margin of dumping attributable to the exports of such a “new shipper”.

  • While that review is in progress, the authorities may request guarantees or withhold appraisement on imports, but may not actually collect anti-dumping duties on those imports.