What is dumping in international trade?
Dumping is, in international trade, a situation where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country.
For example, dumping occurs when a product from country A is sold in domestic market at price X but is exported to country B at price Y (Y < X). According to WTO, this can be considered as an “unfair competition behavior” by foreign producers, foreign exporters towards importing country’s domestic manufacturing industries. Anti-dumping cases and the following anti-dumping measures (if any) are a way to limit this kind of behavior.
What is anti-dumping duty?
Anti-dumping duty is the most widely used anti-dumping measure. It can be imposing on products which is investigated and determined that it being dumped into the importing country and cause material injury to the country’s domestic manufacturing industries.
Basically, this is an import duty, charged in addition to normal customs duty, can be apply on imported products which is the object of the decision of application of anti-dumping duty.
What is an anti-dumping case?
An anti-dumping case is a procedure consists of four steps: Initiate – Investigate – Conclude – Apply Anti-Dumping Duty (if any).
This procedure will be proceeded if there is reason to suspect that a product is being dumped injuriously.
Despite being called a “case”, it is not a judicial procedure, but an administrative procedure is carried out by the importing country’s administrative authorities. The aim of this procedure is to settle the dispute between the domestic manufacturing industry and the foreign producer, foreign exporter. It is not concern the governmental relationship between the two countries.
Because this procedure and other related issues are carried out in a similar way to the conduct of a judicial procedure, it can be seen as a “semi- judicial procedure”. Also, if disagreeing with the final decision of the administrative authorities, the parties can file a lawsuit in court (at this point, the settlement is actually become a judicial procedure).
What are the conditions for imposing anti-dumping measures?
According to WTO regulations, the imposition of anti-dumping measures can only be carry out if the competent authorities of the importing country, after conducting anti-dumping investigation, confirm the simultaneous existence of three following conditions:
– The dumping is occurring (dumping margin >= 2%);
– The domestic industry producing the like product in the importing country is suffering material injury;
– There is a causal link between the two.
How to calculate dumping margin?
Dumpig margin can be calculate by the following formula:
Dumping margin = (Normal Value – Export Price) / Export Price
Normal Value is the price of the like product at issue when destined for consumption in the exporting country market (or the price at which the product is sold to a third country or the “constructed value” of the product, which is calculated on the basis of the cost of production, plus selling, general, and administrative expenses, and profits – WTO regulations contains detailed and specific rules on the conditions for applying each calculating formula).
Export Price is the transaction price which is agreed on in the contract by the exporter and the importer (or the price at which the product is sold to the first independent buyer).