Dumping is a trade term applied when a business or a country exports its product at prices on the market for imports that is less than the cost of the local markets of the seller. Dumping typically involves an item's massive exports, and it can be detrimental to the financial viability of the import country's producers or manufacturers for the item.
The Indian government has introduced anti-dumping duties against exporters that cause significant or serious injury to a local manufacturing industry within India to ensure that dumping actions don't affect the local market. The anti-dumping law in India refers to the Customs Tariff Act, revised in 1995.
In India, anti-dumping laws protect India's steel and iron industry. However, due to an increase in imports coming from countries such as China, the USA, UAE, Malaysia, etc., there is a rise in dumping cases that have caused severe harm to the various industry sectors of India.
After understanding the anti-dumping duty meaning, we're ready to dive into more details.
Did You Know?
For five years, India imposed an anti-dumping duty on five Chinese products, such as aluminium products and certain chemicals, to protect local manufacturers from competing against cheap imports.
Also Read: Overview of Custom Duty in India
What is Anti-dumping Duty?
Now, let's know about the proper anti-dumping duty meaning. The United States is one of the nations with the highest reputation that appears to be fighting the dumping schemes head-on. In the United States, the International Trade Commission (ITC) is the designated body that enforces anti-dumping duties based on analyses, examinations and investigations conducted by the Department of Commerce. The Department of Commerce is the most reliable source for imports, exports, goods production, and trade issues. According to their suggestions, the ITC can decide whether to impose anti-dumping duty on any nation or product.
Most of the time, the duties imposed on dumped products are more than 100% over the product's value, making exporters increase the price of their products on the market.
The ITC generally imposes such charges when the price at which a foreign company sells its item within the U.S. is considerably lower than what the item was initially offered for sale both in the United States and the foreign sources' home country.
Consider, for example, that the price of a can of bike lubricants contains a ₹4,000 price tag. Then a foreign firm decides to export to the market in the country at the cost of ₹1,500 per can. In contrast, the product is priced at as much as ₹2,500 per can in the country where it is produced.
Anti-dumping Duty in India
Directorate General of Anti-dumping and Allied Duties (DGAD) manages countervailing actions in India under the Department of Commerce, Ministry of Commerce and Industry. The department makes recommendations for anti-dumping duties, whether definitive or not. However, the Department of Revenue in the Ministry of Finance acts upon the recommendation within 3 months and imposes these obligations.
How to Calculate Anti-dumping Duties?
We've learned that applying the anti-dumping duty is the price difference of a product when you sell it versus the price of growth in the market of the exporter's country (i.e. the fair cost of such an item). Thus, the normal export value equals the anti-dumping value.
Now, let's understand what normal value and export value refers to.
The normal value refers to the fair market value for these or similar products in the export country. When you can't access the normal value without the presence of domestic sales from the exporter in the country of his destination, there are two different ways in which we can determine the normal value. The price at which a product or you sell any similar product to another country could be accessible. If this price is not accessible, then the production cost is raised by overhead costs and a reasonable profit margin. You can consider it to be a normal value.
The name suggests that it's the amount at which a product can be exported, and it refers to the product's FOB (free on board) price. Dumping's value can be determined when the product's normal value in the exporter's country is measured to the FOB price for the item (and not the CIF price since it includes costs including insurance and freight).
The World Trade Organisation
The World Trade Organization (WTO) is to supervise and enforces various international trade laws. This organisation was founded quite some time ago and is responsible for all issues related to international trade. One of the primary responsibilities of this body is to regulate and oversee anti-dumping measures and strategies. The preceding sentence suggests that the WTO focuses on anti-dumping rather than dumping.
This aids in eliminating any bias in international trade. The WTO does not label any product as a dumping scheme. Instead, it concentrates on how national governments respond to suspected dumping schemes and then uses that information to decide the potential consequences and the things that should not be implemented. In the context of the World Trade Organisation mandate, the organisation assists governments in taking action against dumping schemes by assisting them in enforcing anti-dumping laws when a genuine investigation is conducted and the company exporting the goods is found to violate the law.
In some instances, the WTO helps companies fight the attempts of governments who intend to impose tariffs on protectionists on goods where sufficient materials or evidence is not established to prove the existence of the dumping. Since prices in the market are relative, they cannot determine what constitutes an appropriate market price and what isn't within international trading. This is the error certain government agencies make when creating anti-dumping duties.
They generally determine the fair market price according to the product's price in their country. They don't analyse the cost of an imported product from an international perspective from a global perspective. Anti-dumping laws cause havoc in the marketplace. The WTO intervention in these duties is a re-enactment of their free-market principles, which they strongly defend.
Anti-dumping Examples and Measures
A variety of households and steel companies in the United States filed a complaint against China in 2017. The companies included: United States Steel Corp., Steel Dynamics Inc., Nucor Corp., ArcelorMittal USA, California Steel Industries and A.K. Steel Corp. all submitted a complaint to the Department of Commerce and International Trade Commission (ITC) about the continuous import of steel into the market by China and how it affected the prices in the U.S. of their goods.
They also cited other countries that had committed similar acts. However, the focus was primarily on China, and they were among the most significant exporters of imports into the country. According to a conducted investigation in the year following, the United States decided to place a tariff of 500% on designated steel imports to come to the U.S. via China. The decision was taken following numerous discussions and arguments made by appropriate authorities.
In 2018, China decided to file an appeal with the World Trade Organisation (WTO) to protest the tariffs or duties that president Donald Trump imposed. But Trump's White House replied in 2019 that it would continue to take on China's unfair trade practices and its other trading partners through the WTO.
According to the Anti-dumping Agreement, it's upon the authorities of the importer destination country to choose whether or not it is appropriate to establish anti-dumping duties.
The agreement provides an option not to impose duties if you complete all requirements for imposing these obligations. However, there are not many authorities that allow this alternative. The amount of duty imposed by the government can't override the margin for dumping. However, the agreement allows the duty to be reduced if sufficient to minimise the damage to the local industry.
Anti-dumping duty aims to safeguard industries in the country from the effects of price reductions unfairly made by foreign exporters. Therefore, it is enforced with the utmost caution and only when it poses any threat to the local industries.
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