When governments impose anti-dumping or countervailing duties on imports, the importer's costs go up and profits are wiped out overnight.
In this blog entry, customs and global trade advisor Arne Mielken shares his knowledge of what anti-dumping duty and counter-veiling duty are and what happens when these extra duties are imposed. Read on to understand what your options are.
What is dumping?
A company is 'dumping' if it exports a product to the market at a price lower than the normal value of the product. The normal value is either the product's price as sold on the home market of the non-domestic company or a price based on the cost of production and profit.
The national authorities investigate whether trade remedy measures are needed to counteract unfair import practices because of a dumping claim: Authorities can open an investigation after receiving a complaint from local producers of the product concerned. Authorities can also do so on their initiative.
The three most types of investigation
There are usually three trade policy tools to counter imports that are causing or threatening injury to the domestic industry. They usually are:
Anti-dumping remedies address imported goods being sold in a country at prices that are below the normal value in the country they are being exported from.
Countervailing remedies address imported goods that are being subsidised by foreign governments. Safeguard remedies protect domestic industries against an unforeseen surge of imports.
Dumping (ADD) & subsidy (CVD) or safeguard investigations
Consequently, dumping investigations assess whether dumping is causing material injury to a domestic industry. Safeguard investigations assess whether an unforeseen surge of imports is causing or threatening serious injury to local producers. Investigations may normally run from 8 to 13 months, depending on the investigation.
What process is being followed?
If the authorities are satisfied that the complaint contains enough evidence, they can open an anti-dumping proceeding (investigation).
The investigation usually checks if:
there is dumping by the producers in the country/countries concerned
the local/national industry concerned suffers 'material injury'
there is a causal link between dumping and injury
putting measures in place is not against the national interest
Often, it is when all four conditions are met that the authorities would put anti-dumping measures in place.
Making imports more extensive
Anti-dumping and other measures can be put on imports of specific products if the investigation justifies it. These measures are usually in the form of an "ad Valorem" duty. Other measures that can be applied to include a fixed or specific amount of duty or, in some cases, a minimum import price.
Price undertakings may also be accepted instead of anti-dumping duties. This is where the exporter agrees not to sell products in a given market at prices below a minimum amount.
If the lawmaker agrees to an undertaking, then the anti-dumping duties will not be collected on those imports. The lawmaker is not obliged to accept an offer of an undertaking.
To find out more about how ADD works, zoom in on CVD in our dedicated expert blog category dedicated to ADD and extra-duty payment. Find out what to do if you are affected by ADD and if your profit has sunk to zero overnight, or if you suspect that products that you sell are being dumped on the market at lower prices than is possible in your market.
How Customs Manager Ltd help
Affected by dumping or an investigation? Wish to make a complaint? We support companies with ADD and similar investigations or help you submit a request for investigation.