Anti-dumping duties have to be levied on foreign businesses that sell products at a price below the manufacturing price.
They help address the situation thus creating a level playing field in the market for the said products.
This guide helps address all the questions you have on anti-dumping activities:
- What is Anti-Dumping Duty?
- Which Countries Impose Anti-Dumping Duties?
- Who Pays Anti-Dumping Duty?
- What is an Example of Dumping?
- What Parameters are used to Assess Dumping of Goods?
- What are some Anti-Dumping Duty examples?
- What is the difference between Anti-Dumping and Countervailing Duty?
- How do you Determine if your Product is Impacted by Anti-Dumping Duty?
- Who regulates Anti-Dumping Measures?
- How do you Calculate Anti-Dumping duty?
- How do you Determine if your Shipment has been Dumped Lightly or Heavily?
- What are the General Anti-Dumping Duty Rates?
- How do you Pay Anti-Dumping Duties?
- When do you Pay Anti-Dumping Duties?
- Why is Dumping Illegal According to WTO?
- What is the Anti-Dumping Agreement?
- What is Zeroing in Anti-dumping?
- What is the Impact of Zeroing on Anti-Dumping Duty?
- What Types of Dumping are there?
- How can Dumping Affect your Import/Export Business?
- What is Dumping Margin?
- Does Dumping Margin Affect Anti-Dumping Duties?
- How do you Calculate Dumping?
- What is the Significance of Anti-Dumping Duty in International Trade?
- Can you Petition Anti-Dumping Duty on your Imports/Exports?
- How long do Anti-Dumping Duties Apply?
- What is Anti-Dumping Duty Investigation?
- How do you Initiate an Anti-Dumping Duty Investigation?
- What are the Essential Requisites for Initiating an Anti-Dumping Investigation?
- Who conducts an Anti-Dumping Investigation?
- How long does an Anti-Dumping Duty Investigation take?
- What is de Minimis when determining Anti-Dumping Duty?
- Who imposes Anti-Dumping Duties?
- Can you get a Duty Drawback on Anti-Dumping Duties?
- Can a Customs Broker help in Querying if your Imports are Subject to Anti-Dumping Duty?
- What is the Difference Between Anti-Dumping Duty and Normal Customs Duty?
What is Anti-Dumping Duty?
Anti-Dumping duty is a protectionist tariff a nation applies on imports from abroad the government thinks are fixed at a price way below the fair market value.
This duty mainly protects the local industries from the consequences of unfair price reductions by foreign exporters.
It can only be imposed when and if it causes some serious threats to domestic industries.
As such, it has to be imposed with utmost care.
It can be from 0% to 550% of the value of goods as shown in the invoice.
Which Countries Impose Anti-Dumping Duties?
Nations that are member states of the World Trade Organization can impose Anti-dumping duties.
Some of these nations are:
- All nations that are WTO member states.
Who Pays Anti-Dumping Duty?
Anti-Dumping duty is paid by the company importing goods at a lower than the typical/normal value of goods price in the export nation.
Since they are responsible for unfair trade practices, the company has to correct their actions by paying the anti-dumping duty.
What is an Example of Dumping?
An example of dumping is where China is dumping silk and satin into the Indian market.
India is China’s largest market for satin and silk, even though India is also a large manufacturer of silk.
The Indian silk producers are being affected by the dumping of silk and satin in their market.
They claim that they cannot compete with Chinese silk because it is sold at a very low price.
What Parameters are used to Assess Dumping of Goods?
There are two main fundamental parameters used to assess dumping of goods.
You have to ensure that you compare the two parameters at one trade level overall at ex-factory level for dumping examination.
i. Normal Value
This value represents the product price in the typical trade course when it is intended for use in the market of the exporting country.
ii. Export Price
It is the value established for the export services and products the seller/exporter wants to trade in the overseas market.
What are some Anti-Dumping Duty examples?
In America, the ITC (International Trade Commission) is tasked with imposing anti-dumping duties which are often from the Commerce Department’s recommendation.
In 1991, there was a dumping case involving Flat Panel Display Screens manufactured by Japanese Companies.
Due to an established dumping incident, the American government had to impose a 62.5% anti-dumping duty on all FPD screens sourced from Japan.
Investigations were done and the Commerce department established that indeed the foreign companies had dumped FPD screens in the domestic American market.
A further independent investigation by ITC showed that Japanese companies’ dumping actions were causing serious damages to the American companies.
In 2015, big American steel production companies filed another complaint with the American Commerce Department.
They were stating that Chinese companies were unfairly competing with American steel production companies in the US.
They stated that there was unfair competition and this was due to the large imports of steel from China.
China was selling their imports at unfairly low prices.
After investigations by ITC, steel production companies in China were found to have dumped steel products causing serious effects to the American steel companies.
As a result, ITC placed a 500% import duty on some Chinese steel imports mainly to allow the domestic steel industry to operate on a level playing field.
What is the difference between Anti-Dumping and Countervailing Duty?
Both Anti-dumping and countervailing duty are meant to offset the value of dumping.
Thus leveling the playing field for domestic industries affected by unfairly traded imports.
Still, they share some differences.
Countervailing duties are developed when the government of a foreign nation gives subsidies and support to the domestic exporting manufacturers.
That is, like tax break allowing foreign exporter to sell their products at a price below the domestic businesses.
Anti-dumping duty, on the other hand, helps to remedy the effects of dumping.
As such, while countervailing duties are determined at a country-specific level, anti-dumping duties are determined at a company-specific level.
In general, anti-dumping duties are meant to prevent threatening import pricing while countervailing duties are used to counter the effect of foreign subsidies on imports.
How do you Determine if your Product is Impacted by Anti-Dumping Duty?
To determine if your product is impacted by anti-dumping duty, you need to look for its duty rating.
Often, most of the anti-dumping ratings come with caveats.
For instance, there is an anti-dumping duty on a good if it is imported from a particular place.
You need to open up a trade tariff and look up the product codes, VAT rates and duty.
Check the correct place under which your goods are classified and further specify the type of product you’re importing.
You then click your product and import. Click to the country you are importing to and determine if they have any anti-dumping duties.
Who regulates Anti-Dumping Measures?
WTO aids in the regulation of Anti-dumping measures. It regulates how domestic leaders respond to cases of dumping in their territories.
Countries that are members of the WTO have to adhere to the WTO free-market principle.
When some governments respond negatively to international businesses partaking in dumping through bringing in anti-dumping duties on foreign goods meant to punish.
WTO must give a go ahead of whether a nation has violated the free-market principle or their actions are genuine.
Based on the WTO Anti-Dumping Agreement, dumping is legal not unless it negatively affects the importing country’s domestic market.
Once a country establishes that it has a genuine case of dumping, WTO allows its government to apply legal action on the dumping nation.
Among the things that the government has to show are costs of dumping (extent of dumping), establish that dumping took place, and the threat/injury causing the damage on the domestic market.
Note: WTO does not regulate the businesses undertaking dumping.
How do you Calculate Anti-Dumping duty?
When calculating the Anti-Dumping Duty, domestic nations have to act in ways that honors the DATT 1994 principle and is non-discriminative of the trading partners.
According to GATT 1994 principle, we should not levy internal taxes on goods that are imported more than the costs levied on domestic goods.
Secondly, imported goods just like domestic goods have to be treated in the same way under a local nation’s regulations and laws.
GATT also enables governments to apply a duty on foreign imports.
That is in the event that the latter goes beyond the bound rates hence threatening to trigger injury to the local market.
Anti-dumping duties are often calculated at a company-specific level.
In this case, the actual duty amount covers the margin gap between foreign manufacturer fair market value and pricing.
The calculation of the anti-dumping duty takes place through the following ways:
i. Calculation from the product’s normal price
ii. Calculation using a value charged on one product but in a different nation
iii. Calculation of the anti-dumping duty from the total product expenses, profit margins and costs, of the manufacturers.
How do you Determine if your Shipment has been Dumped Lightly or Heavily?
You can determine if your shipment has been dumped lightly or heavily by calculating the normal value of products.
Three methods to calculate the normal value are:
- A calculation is based on the price in the exporter’s domestic market.
- A calculation based on a price charged by the exporter in a foreign country
- A calculation based on a combination of the exporter’s production expenses, costs, normal profit margins and costs.
One can also make an excellent comparison between the normal price and export price.
What are the General Anti-Dumping Duty Rates?
The general Anti-Dumping Duty ranges from 0% – 550% of the value of goods as shown on the invoice.
One often ends up paying a lot as part of the anti-dumping rates.
They cover the amount on their invoice as well as the amount stipulated by the governing body.
How do you Pay Anti-Dumping Duties?
You have to pay anti-dumping duties for any import once it enters a domestic nation.
However, special rules apply in some cases:
i. Duty Suspension Schemes
Free circulation of goods in the domestic market is deferred when a person places the goods under:
- Inward processing
- Customs warehousing
- Other available duty relief procedures that could benefit traders.
If customs officers suspect that some goods should be subject to anti-dumping duty and require further registration, they register the goods before they are released by customs.
Traders can later pay additional duties if there is confirmation that the goods in question were actually dumped.
When do you Pay Anti-Dumping Duties?
You pay anti-dumping duties when an international company sells a product at a lower price than it is produced.
The exporting/foreign company will pay the set amount to the customs to cover for the impact of their unfair trade practices.
Why is Dumping Illegal According to WTO?
According to WTO, dumping is legal unless an exporting company from a foreign nation is causing negative effects on the domestic producers.
At this point, it is considered illegal and should be stopped.
Dumping causes damage in the development of a domestic market industry.
The domestic market suffers serious losses as they are unable to fairly compete with the foreign company products.
What is the Anti-Dumping Agreement?
The Anti-Dumping Agreement is the accord outlining the application of Article VI of the General Agreement on Tariffs and Trade 1994.
This application presents well-outlined rules and regulations.
They show the way and foundation for which WTO member countries can act to address the threatening/injuries dumping of goods from a foreign member nation.
There are rules that enable member countries to act against dumping so as to protect their local industries.
For instance, in America, the U.S. International Trade Commission and the Department of Commerce are tasked with the role of conducting investigations.
In the UK, the EU Commission often conducts investigations after receiving a complaint from the EU industry.
What is Zeroing in Anti-dumping?
It is a methodology utilized by the US to calculate anti-dumping rates.
Zeroing is not applicable where export prices are under the normal value for every transaction.
Look at the below example to understand how zeroing works:
A European Union firm handles three sales on its local market together with 3 export sales to the United States over an investigation.
You then compare the two sales to determine a dumping margin.
EU market, US market and dumping
- $100 $90 $10
- $100 $110 -$10
- $100 $100 $
Looking at the above example and taking into consideration all these three sales, there is no dumping under the rules of the World Trade Organization.
The average home market price is $100 and it is similar to the average export price of $100. EU practice is similar to the rules of the WTO body.
When applying zeroing, America does a comparison of the price of the product on the European Union market versus that of the product in the United States market.
However, it overlooks through staying at zero every transaction the product’s price in the European Union market.
Which is typically smaller than the product’s price in the American market.
Zeroing increase the amount of duty collected and the dumping margin.
What is the Impact of Zeroing on Anti-Dumping Duty?
This methodology often increases significantly the exporters dumping margin hence the total value of anti-dumping duty the exporter is to pay.
America often uses zeroing as its duty collection system.
Once products get to America, the importer is not required to settle the duty immediately.
The customs holds the duty on deposit waiting a duty assessment at another date.
Eventually, an exporter pays more in anti-dumping duty than other nations do.
Other nations have complained about US zeroing system stating that it is unfair.
As such, America commits to the WTO rules and regulations which has fair systems/practices.
What Types of Dumping are there?
There are four main types of dumping:
Figure 3 Types of dumping
Typically, manufacturers practice sporadic dumping to dispose off excess merchandise.
In a bid to prevent a price war in the domestic thus preserving their competitive position, the manufacturer dumps their unsold inventories to other nations.
Through this, the excess supply is destroyed. Similarly, sporadic dumping occurs when a manufacturer dumps excess merchandise into a market where they are normally not sold.
As such, sporadic dumping is to liquidate any excess stocks that may arise once in a while as it os usually temporary.
Also referred to as intermittent dumping. As compared to sporadic dumping, predatory dumping is permanent.
Predatory dumping entails selling goods in overseas market at a home market price below the normal price.
A manufacturer sells at a loss mainly to have access to a new market and further eliminate the competition.
Once they eliminate the competition, the manufacturer enjoys monopoly in this market setting its price.
Zenith in America accused Japanese Television Manufacturers of using predatory dumping. American manufacturers filed reports secret rebates and false billing by Japanese manufacturers to set low predatory prices of TV sets in America.
Apparently, Zenith wanted to drive manufacturers out of the market so they can gain monopoly.
Another case is where Hitachi was accused of dumping EPROM chips.
It occurs in the foreign market where the demand is less elastic. These foreign markets often tolerate higher prices.
Hence, dumping is done in the manufacturer’s domestic market by selling locally at a lower price.
This is a long-time dumping. It is an indefinite price discrimination that occurs across international borders.
Often firms that export products benefit from this type of dumping as there is a demand for the products in an international market.
However, this demand could be more elastic than the demand in a company’s domestic market.
They consistently sell at a lower price in a single market than in the rest of the markets.
It is typically based on the fact that markets differ in terms of demand characteristics and overhead costs.
A firm can use marginal costs pricing in international market while also using full cost pricing in domestic markets.
An example is where Japan sold consumer electronics at a higher price in the national due to lack of competition.
However, it sold lower prices in the American market due to high competition mainly to maintain a market share.
How can Dumping Affect your Import/Export Business?
Dumping can place an import/export business at a serious risk if the dumping offense was severe or it is not the business’ first offense.
They could even be forced out of business completely. When a local company cannot lower the price of their products way below the one of the foreign companies, they are potentially left without a market to sell their products.
Dumping also affects the importers bottom line.
What is Dumping Margin?
Dumping margin is the export price less the normal value of the product under complaint. Usually, it is shown as a portion of the export price.
Note: You can check the Section 9A of the Customs Tariff Act, 1975 for a definition.
Does Dumping Margin Affect Anti-Dumping Duties?
Of course, yes.
The dumping margin is calculated based on the comparison between the average weights of the prices of every export transaction and the weighted average normal value.
If the margin of dumping is low, then the anti-dumping duties will be lower because the threat/injury is not very significant. And, the vice-versa is true.
How do you Calculate Dumping?
When calculating dumping, you have to examine the normal value, and export price.
You then conduct a good comparison of the normal value and export price.
Following this, you calculate the dumping margin and complete a duty assessment.
What is the Significance of Anti-Dumping Duty in International Trade?
Some foreign companies use dumping as a way of entering new markets and monopolize them. With monopoly in the market, a foreign company has undue advantage over its competitors.
Anti-dumping duty helps importing countries to avoid the practice of dumping that negatively impacts the domestic manufacturers.
In imposing an anti-dumping duty, the product being imported becomes expensive in the local market.
As a result, consumers could avoid buying it and instead go for cheap locally manufactured products.
Domestic producers will, therefore, remain comfortable knowing that they are being protected by the government against foreign exporters malpractices.
Anti-dumping duty is very important for nations that are still in the developing phase and do not have crucial industrial development and infrastructural facilities.
Can you Petition Anti-Dumping Duty on your Imports/Exports?
Companies or manufacturers can file petitions to the U.S. Department of Commerce or the U.S. International Trade Commission.
That is if they find a foreign government subsidizing manufacturer or an international manufacturer selling below fair market value.
A petition has to include the following:
- Description of the importers, exporters and imported goods
- General information
- Subsidy and price information
- Injury information
- Critical circumstances information
How long do Anti-Dumping Duties Apply?
Typically, Anti-dumping duties can be applied for:
Definitively (for a time of 5 years) or Provisionally (for up to 9 months)
If a preliminary investigation is done by the EU commission, a provisional duty can be applied.
This duty shows that:
Subsidies have been introduced or dumping has occurred
In such cases, the EU will begin a full investigation.
If the full investigation confirms that dumping has taken place or that subsidies have been introduced the charges are introduced/applied definitively.
What is Anti-Dumping Duty Investigation?
Anti-dumping duty investigation involves the right agency/body determining the goods being imported into a nation and sold at lower prices than that of the producing country.
In the UK, the EU commission launches an investigation once it has a complaint from an EU industry.
This is after giving adequate information that exporting manufacturers from one or several countries are dumping goods into the European Union market.
Thereby, promoting injury to the European Union.
The EU Commission then launches an investigation within a period of 45 days.
It publishes an initiation notice in the EUs Official Journal.
Where it specifies the nations to be investigated, product under investigation, the obligations and rights of those interested to the proceeding as well as deadlines which will apply.
A typical investigation looks to whether:
- Dumping is taking place from the nations concerned
- Material injury has been suffered by the specified EU industry
- The specific dumping is indeed causing the material injury
- It would be against the EU economic interests to impose measures
Questionnaires are completed by the interested parties to conduct a comparison of the export price of the international producer to the normal value.
They may find that the foreign producers export price is lower than the normal value.
It may imply that there is a casual link between the alleged dumping in the domestic country and injury suffered.
It ends when the body establishes that a foreign producer is dumping its products. Dumping cases should end within a year but more than 18 months.
Note: When the investigating body finds that the dumping margin is insignificantly low by 2% of the export price of the good or is de minimis, then the investigation has to end.
The investigation has to end if dumped products’ volume is very small.
That is, the volume from a country is below 3% of total product imports).
How do you Initiate an Anti-Dumping Duty Investigation?
You can initiate an anti-dumping duty investigation by presenting a written complaint to the Commission by the European industry involved or the person on behalf.
The complaint is then lodged with the competent body in the member state.
The said authority examines the correctness of the complaint and starts the investigation as the processing of the case continues.
What are the Essential Requisites for Initiating an Anti-Dumping Investigation?
Below are the essentials for initiating an anti-dumping investigation:
- The domestic producers must be fully supporting the anti-dumping
- There has to be adequate evidence to the fact that there is indeed dumping and material retardation to the domestic industry.
Further, there is a link of an injury caused by dumping meaning that the dumped imports have caused the alleged injury.
Who conducts an Anti-Dumping Investigation?
Anti-dumping investigations are done by a government and this is based on a local industry’s written application.
There are some special cases when a local government can begin an investigation on behalf of the industry.
The written application should give evidence of dumping, injury, and a causal link between these.
How long does an Anti-Dumping Duty Investigation take?
An anti-dumping investigation can take 1 year or around 18 months at most.
According to Article 5.10 an anti-dumping duty investigation takes 18 months.
Anti-dumping duty is then issued following preliminary determinations that take around 190 days of initiation of the antidumping investigations.
What is de Minimis when determining Anti-Dumping Duty?
When determining anti-dumping duty, de Minimis is 2% less the margin of dumping. It is often shown as a percentage of the export price.
Who imposes Anti-Dumping Duties?
In the United States, the International Trade Commission (ITC) imposes the anti-dumping duties.
However, ITCs actions are from the recommendations by the Department of Commerce as well as the investigations by the Department of Commerce or/and the ITC.
Can you get a Duty Drawback on Anti-Dumping Duties?
Of course, yes.
You can get a duty drawback on anti-dumping duties by filling for a refund. You can qualify for the drawback if you are eligible:
- Indirectly/directly involved in importing goods that are then exported in the same condition they were imported
- You further use imported or manufacture goods in a limited manner to give other goods for export
A claim can be done up to 4 years after goods were imported.
A claimant has to submit a drawback claim with supporting documentation.
Can a Customs Broker help in Querying if your Imports are Subject to Anti-Dumping Duty?
A customs broker can help in querying if your imports are subject to anti-dumping duty.
Customs brokers make the shipping process easier.
The customs broker functions to make the export and import of goods run smoothly by encouraging the clearance of goods via customs processes.
The customs broker has all the knowledge and rules/regulations involving the products that are subject to anti-dumping duty.
What is the Difference Between Anti-Dumping Duty and Normal Customs Duty?
Customs duty vs anti-dumping duty
Normal customs duty and anti-dumping duty are both applied and taken by the Customs Office.
However, anti-dumping duty differs from normal customs duty in operation and purpose.
Anti-dumping duty is linked to the notion of fair trade. It guides against those situations arising from unfair trade practices.
Custom duties on the other hand are a way of collecting revenue and general economic development.
Anti-dumping duty is a trade remedial measure while custom duty is a trade and fiscal policy of the government.
Custom duties have implications for the development of economy and government revenue.
While anti-dumping duty help with offsetting the injurious effect of international price discrimination.
Anti-dumping duties are never offered in duties/taxes.
Even so, the government is allowed to discontinue this duty in a situation where the exporter gives a price undertaking.
Anti-dumping duties are levied against country/exporter even though they are exporter and country-specific.
Custom duties, on the other hand, are universally and generally applied to every import regardless of the exporter.
Further, anti-dumping is applied beyond the typical customs duty that can be charged on the import goods.
I know at times, knowing whether your imports from China are subjected to anti-dumping duty can be a challenges process.
That’s where BanSar comes in – contact us now for all your inquiries and questions on anti-dumping duties.