Anti-dumping duty is a tariff that the United States government imposes on imported goods. These imported goods have a lower price than the fair market value of the same or similar goods in the domestic market. The government imposes anti-dumping duties when there is reason to believe that the goods are being dumped into the domestic market due to their low pricing. Anti-dumping duty is a way of protecting businesses and markets within the United States from unfair competition by imports.
Why is it important?
Anti-dumping duties are typically levied when a foreign company sells an item at a significantly lower price than the price at which it has been produced. The primary intention of anti-dumping duties is to save domestic jobs. Anti-dumping duties can also lead to higher prices for domestic consumers and reduce international competition of domestic companies producing similar goods. Anti-dumping duties are a way for local enterprises to deal with unfair competition from imports manufactured abroad that have below-market value.
How it works
The International Trade Commission (ITC) is responsible for controlling dumping in the US and enforcing anti dumping law. In most cases, duties of more than 100% of the product’s value are imposed on the erring party.
When an importer sells a product in the US at a price substantially lower than its country of origin (home market), that product is subject to anti-dumping duties. Anti-dumping duties help save domestic jobs and mitigate the level of competition of local companies selling related or comparable products.
Companies enforce anti-dumping laws and duties to protect local markets/businesses from foreign companies flooding the market with cheap goods. There has been a significant increase in the number of anti-dumping cases initiated by American businesses in recent years.
Anti-dumping duties are important for protecting the US economy and ensuring fair competition in the marketplace.
Types of Dumping
There are four main types of product dumping in international trade: sporadic, predatory, persistent, and reverse.
- Sporadic dumping occurs when companies dump excess inventories to avoid price wars in the home market and protect their competitive position. This can be done by destroying extra supplies or exporting them to a foreign market where the products are not currently sold. It is generally a temporary strategy.
- Predatory dumping is a permanent strategy whereby a company regularly sells a product in the foreign market at a lower price than what is charged in the domestic market. The goal is to gain entry and destroy the local industry. Once some monopoly is gained in the foreign market, prices are slowly increased.
- Persistent dumping happens when a country regularly sells products at a lower price in the foreign market than the domestic prices. This is generally due to a constant demand for the product in the foreign market.
- Reverse dumping occurs when the price changes do not impact demand. In this case, the company can charge a higher price in the foreign market and a lower price in the local market.
Examples of Anti-Dumping Duty
The ITC imposes anti-dumping duties based on the recommendations of the US Department of Commerce. Anti-dumping duty is a tariff that is imposed on an imported product when it is sold at a price below its fair market value. This type of duty is intended to level the playing field between domestic and foreign businesses.
Some examples of anti-dumping duties include the following:
1. In 1991, the ITC imposed a 62.5% anti-dumping duty on flat panel display (FPD) screens imported from Japan after finding that Japanese companies were dumping these products in the US market.
2. In 2015, the ITC imposed a 500% import duty on select steel imports from China after finding that Chinese companies were dumping steel products in the US market.
A complete list of anti-dumping duties that have been imposed in the past is available on the government website.
Role of WTO in Anti-Dumping
The World Trade Organization (WTO) is responsible for regulating anti-dumping measures. Anti-dumping occurs when a company exports goods to another country at a price that is lower than the price of those same goods in the company’s home market. This can cause material injury to the importing country’s domestic market.
The WTO does not regulate brands blamed for dumping activities. However, it has the power to regulate how governments handle dumping activities in their countries. There have been instances of some governments reacting aggressively to the dumping of goods in their territories by foreign companies by applying punitive anti-dumping duties on those products. In such cases, the WTO may step in to check if such actions are justified or whether they go against the WTO free-market principle.
According to the WTO anti-dumping agreement, dumping is legal unless it causes material injury in the importing country’s domestic market. The WTO also bans dumping when the activity results in material retardation in the domestic market. In such cases, the WTO allows the affected country’s government to take legal actions against the dumping country.
However, there must be sufficient proof of genuine material injury to trade in that country’s domestic market. Under this circumstance, the affected government must prove the following:
- The fact that the dumping took place
- The extent of the dumping expenses
- The injury or threat to the domestic market
If the WTO finds that a government has applied anti-dumping measures without justification, it may order the government to remove those measures. The WTO can also rule that the measures are justified and allow them to remain in place.
WTO Anti-Dumping Agreement
The WTO Anti-Dumping Agreement is a trade measure that allows governments to intervene when they believe that a product is being “dumped” in their market. Dumping occurs when a product is sold for less in another country than it is sold for in its home market, or when it is sold for less than the cost of production. Anti-dumping measures, such as imposing duties on the product, can help to level the playing field for domestic industries that compete with dumped products.
However, anti-dumping measures can also distort the market and go against WTO free-trade principles. In a free market, governments typically cannot determine what constitutes a fair market price for goods or services. As such, anti-dumping duties may not always be the most effective way to deal with dumped products.
How Is Anti-Dumping Duty Calculated?
When it comes to Anti-Dumping Duty, there are three main methods of calculation.
- The first method calculates the anti-dumping duty based on the normal price of the product.
- The second technique uses the price charged on the identical product but in a different country.
- The third method calculates the duty based on the total product costs, expenses, and the manufacturer’s profit margins.
Now let’s take a more in-depth look at each of these methods:
- The first method of Anti-Dumping Duty calculation is based on the normal price of the product. In other words, this method looks at the average price that the product is sold for on the open market. This is then compared to the price of the same product being sold by the country in question, and if the difference is found to be significant, Anti-Dumping Duties will be applied.
- The second method used to calculate Anti-Dumping Duty is based on the price of an identical product being sold in a different country. This is useful for situations where the country in question is selling the product at a significantly lower price than what is being charged in other countries. By looking at the price of an identical product being sold elsewhere, it provides a more accurate picture of what the fair market value for the product should be.
- The third and final method for Anti-Dumping Duty calculation is based on the total product costs, expenses, and the manufacturer’s profit margins. This method takes a closer look at the overall cost of producing the product, as well as any additional expenses that go into selling it. By taking all of these factors into account, this method provides a more comprehensive picture of the true cost of the product.
Anti-Dumping Duties are an important tool for protecting domestic markets from being unfairly undercut by foreign competition. By understanding how these duties are calculated, you can be sure that your business is in compliance with international trade law.
How to Know if a Product Is Subject to Anti-Dumping Duty?
If you’re wondering whether a product is subject to anti-dumping duty, there’s only one way to find out for sure: requesting a scope ruling from the ITA. A scope ruling clarifies the scope of an ADD/CVD order and can help you determine if your product falls under that order.
When preparing your scope ruling request, be sure to include:
- A detailed description of the product, including its technical characteristics and uses
- The current US tariff classification number for the product
- A statement of your position on whether the product is within the scope of an order, along with reasons and supporting factual information
You’ll also need to serve a copy of the scope ruling request to all parties on the Comprehensive Scope Service List. The request must include a Company Certification of Accuracy, Representative Certification of Accuracy, and Certificate of Service.
Once you’ve prepared your scope ruling request, submit it electronically through the Anti-dumping and Countervailing Duty Centralized Electronic Service System (ACCESS). If a scope inquiry is initiated, notice will be sent to all parties on the Comprehensive Scope Service List and comments will be solicited. The ITA typically issues a final ruling within 120 days of initiating the inquiry.
ADD/CVD orders reference the US Harmonized Tariff Schedule (HTS) classification of the goods subject to the orders. So another way to determine if your product is subject to anti-dumping duty is to check the HTS classification. If it’s the same as the HTS classification in the ADD/CVD order, then your product is likely subject to the order.
Anti-dumping measures are trade restrictions that a government imposes on imported goods that it believes are being sold at below fair market value. The goal of these measures is to protect domestic businesses from unfair competition and level the playing field.
There are benefits and drawbacks to imposing anti-dumping duties. The main benefit is that it protects domestic businesses from unfair competition. However, the downside is that it creates a barrier to free trade and can act against the interests of domestic consumers.
If you are considering whether or not to impose anti-dumping duties in your country, it is important to weigh the pros and cons carefully. Ultimately, the decision will come down to what is best for your domestic economy.