Dumping

Presenters

Vinay Yadav Deepali Raut Vijetha Shetty

7858 78 78

Dumping
Does Dumping Mean Cheap Or Low Priced Imports

In Business and Economics: In economics, "dumping" can refer to any kind of predatory pricing (selling at an unfairly low price).

Predatory Pricing

Domestic Firm selling at lower price in home market

Dumping
In Context of International Trade Law:

Dumping means export of goods by one country / territory to the market of another country / territory at a price lower than the normal value

Dumping

Foreign firm selling at lower price in other country.

Comparable domestic price, Export price to a third country, or Cost of production plus a reasonable addition for selling cost and profit.

Parameters used to assess dumping

Export Price

Normal Value

Dumping margin

Dumping Margin

Normal Value of the like article

minus

Export price of product under consideration

Export price Rs. 100

Domestic price Rs. 150

Dumping Margin = 150-100 = Rs.50. Dumping Margin = 33%

Types of dumping

Sporadic dumping Intermittent dumping Long period dumping

Domestic Industry

The domestic industry is all domestic producers of the product concerned, or those whose collective output constitutes a major proportion of total domestic production of those products.

Reasons for Dumping

Predatory Price (Predatory Dumping) The practice of cutting prices in an attempt to drive a rival out of business or create barriers to entry for potential new competitors. Price Discrimination/Strategic Dumping If a firm has a monopoly in its home market but faces strong competition in a foreign market, it will charge a higher price in the home market

Reasons for Dumping

Cyclical Dumping Selling at low price because of over capacity due to downturn in demand. Market Expansion Dumping Selling at lower price for export than domestically in order to gain market share. State Trading Dumping Selling at lower price in order to gain hard currency.

Reasons for Dumping: Summary

The nations dump products to;

Eliminate Competition Secure Monopolies Increase Share of International Export

Dumping: Factors

Subsidies; Subsidies (in the exporting country) can lead to aggressive dumping, since goods can be sold profitably at a price that is cheaper than the cost of manufacture.
Banned Products; History also sheds light on the numerous manufacturers that have used dumping to sell off products that were banned in their domestic market.

Implications of Dumping
Dumping results in the following:

Hurts a countrys domestic industry and producers. Impacts the sales volume. Hurts the market shares. Triggers decline in profitability. Leads to job losses. Cause material injury.

Moral Implications of Dumping: Examples

Dumping can take many forms. Shaw cites the recall of pajamas containing the chemical Tris, which, according to study, caused kidney cancer in children (Shaw, 33, 34). In this instance, a number of small companies who manufactured clothing treated with the now-banned chemical faced mounting inventories and severe financial losses. In order to absorb the losses, some companies sold the pajamas to exporters who marketed the goods overseas where Tris-treated garments were not banned. The manufacturers suffered less severe losses than if they had not sold to the exporters, the exporters made a profit on the deal, and children overseas were exposed to the carcinogen Tris.

Antidumping Agreement
Article VI of GATT 1994, commonly known as Anti-Dumping Agreement.

Antidumping Measures Antidumping measures are unilateral remedies applied by a member after; Investigation of Dumping

Determination of injury to the domestic industry caused by

dumped imports

Antidumping
Due to the above narrated and other reasons, countries have incorporated strict anti-dumping measures. The very purpose of antidumping measures is to prop up domestic producers. Advantages of anti-dumping Re-establishes fair trade and fair competition. Provides protection to the domestic producers and the industry. Rectifies unfair trade practices pertaining to dumping.

History of Anti-Dumping

Anti-dumping regimes have been regulated throughout the history of the GATT system. They first appeared long before that system eventuated. Canada adopted the first anti-dumping law in 1904. Australia (1906), New Zealand (1905), South Africa and Great Britain (1921) followed shortly thereafter. The US adopted its first antidumping law in 1916

Need for Anti-Dumping Measures

Trade is increasingly being seen as a means of achieving economic development.

Trade liberalization also implies distortion and exploitation, which is unfair. To reduce such distortion protectionary measures are available to counter act these unfair practices.

Protectionary Measures for Free Trade

Tariffs: Simplest form of protection is a tax levied on goods when they are imported. These taxes are either specific or advalorem. Tariffs result in higher prices for consumers along with higher tax revenues for the government. Safe guard Measures: Safe guard measures are temporary restrictions on the imports of certain products. Purpose is to protect the domestic industry from an increase in imports of any product which is causing threat to domestic industry. Anti Dumping Duty: Anti dumping duties are charge against the exporting country for selling their price lower than the normal price in the another country

Antidumping Measures
Anti Dumping measures are of two kinds.

Antidumping duty: This is imposed at the time of imports, in addition to other customs duties. The purpose of antidumping duty is to raise the price of the commodity when introduced in the market of the importing country.
Price undertaking: If the exporter himself undertakes to raise the price of the product then the importing country can consider it and accept it instead of imposing antidumping duty.

Antidumping Measures: Preferred Option

Anti dumping duties have been gaining more importance in recent times simply because, It has been observed to be the best form of protection. Unlike Quotas or Safeguard measures, anti dumping duties are not retaliatory. They are industry, time and product specific and hence lesser distorting effects as compared to other form of protection. Anti-dumping measures can only be applied if the dumping is hurting the industry in the importing country. Therefore, a detailed investigation has to be conducted according to specified rules first.

Anti-Dumping Duty

Amount of duty should not exceed dumping margins

Members should collect duties on a non discriminatory basis

Anti-Dumping Duty

Mechanism to ensure reasonable duty

Calculates specific amount of anti dumping duties Collection of estimated anti dumping duty and then adjusting afterwards

Anti-Dumping Agreement
A Summary of Article VI of GATT 1994 & Its sub articles.

Basic Principles
WTO members can impose Anti-Dumping if

Dumping is occurring
Domestic industry producing the like product in importing country is suffering material injury There is a causal link between the two.

Members and Committee

Developing Country Members The possibility of constructive remedies should be explored with developing countries before applying AD duties. Committee on Anti-Dumping Practices A Committee on AD Practices is established, composed of representatives from each WTO Member.

Antidumping Agreement
The committee Meeting twice a year under Article 16 Review of National Legislation Review of Anti-Dumping actions taken by members Ad Hoc Group focuses on technical issues of implementation Dispute settlement body of WTO Dispute Settlement Understanding (DSU) under Article 17 Members may challenge imposition of Anti-Dumping measures Panel formation if challenge occurs

WTO and Anti-Dumping Provision

Anti-dumping (AD) provisions of the WTO allow governments to impose AD duties on foreign products if ;
They are imported at prices less than their fair values (often, the foreign market prices of imported products) And such dumping activities cause material injuries to relevant domestic industries. Under the general guidance of these provisions, many countries have developed distinct AD rules and practices of their own.

Antidumping Agreement Narrates.

Detailed procedures are set out on how? anti-dumping cases are to be initiated, how the investigations are to be conducted, and the conditions for ensuring that all interested parties are given an opportunity to present evidence. Anti-dumping measures must expire five years after the date of imposition, unless an investigation shows that ending the measure would lead to injury.

Procedure for Anti-Dumping Action

In order to do that the government has to be able to show that dumping is taking place;
calculate the extent of dumping (how much lower the export price is compared to the exporters home market price), and show that the dumping is causing injury or threatening to do so.

Procedure for Anti-Dumping Action

GATT (Article 6) allows countries to take action against dumping. The Anti-Dumping Agreement clarifies and expands Article 6, and the two operate together. They allow countries to act in a way that would normally break the GATT principles of binding a tariff and not discriminating between trading partners. Typically anti-dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the normal value or to remove the injury to domestic industry in the importing country.

Procedures to Calculate Dumping

There are many different ways of calculating whether a particular product is being dumped heavily or only lightly. The agreement provides three methods to calculate a products normal value. 1. Compare w/price in domestic market 2. Compare w/price in other export markets 3. Do calculation of costs and normal profit margins

Determination of Injury

An injury determination must examine Volume of dumped imports and effect of those import on prices in the domestic (importing) market; imports can be cumulated if several countries are involved in the same investigation. The consequent impact of these imports on the domestic industry must include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry.

Determination of Injury

What is Material Injury? It takes place if the dumped imports cause adverse effects on domestic industry. They may include inter alia.

Decline in sales, profits, outputs, market share, productivity Negative effect on cash flow, inventories, employment, wages, ability to raise capital

Initiation and Subsequent Investigation

Investigations should be initiated

On the basis of a written application by or on behalf of the domestic industry By the authority in question if they have sufficient evidence of dumping, injury and causal link.

Initiation and Subsequent Investigation

Requirements for Application An application should include evidence of dumping, injury and causal link. It should particularly contain ; a) information on the applicant b) description of the product and identification of exporters & importers c) information on export prices and normal value d) information on the evolution of imports and their effect on the importing market. An application is made on behalf of an industry if it is expressly supported by a minimum 25% of total production of the domestic industry (and if it is not opposed by more than 50% of those expressing an opinion).

Antidumping Investigation Ends.

Anti-dumping investigations are to end immediately in cases where the authorities determine that; 1. Dumping margin is insignificantly small i.e. less than 2 % of the export price of the product. 2. Volume of the dumped imports is negligible i.e. less than 3 % of total import of that specific product.

Investigations shall normally be concluded within one year after initiation and in no case more than 18 months.

Evidances
Exporters must be given at least 30 days to reply to questionnaires. Non-confidential summaries of information regarding evidences must be provided. All interested parties must have a full opportunity to defend their interest throughout the investigation. Satisfaction of authorities and on site investigation in exporting country should be made. If inappropriate information available, authorities can use facts available to make determination. As a rule, individual margins of dumping should be calculated for each known exporter or producer concerned.

Provisional Measures
Provisional measures (in the form of a duty or, preferably a security by cash deposit or bond) can be applied no sooner than 60 days after initiation of the investigation. Provisional measures can be applied for; A maximum of 4 months, Extendable to 6 months. These deadlines are 6 and 9 months respectively when an authority applies a duty lower than the dumping margin where that is sufficient to remove the injury (i.e. lesser duty rule).

Price Undertaking

Proceedings can be terminated with voluntary price undertakings. Undertakings offered by exporters need not be accepted by the authority concerned nor shall exporters be required to enter into such undertakings.