Learn to navigate the complicated waters of international shipping better with our introduction to Antidumping duties to help you understand it better.

An Introduction to Antidumping Duties

Antidumping duties are tariffs that a domestic government imposes on foreign imports that it believes are priced below fair market value of similar goods in the domestic market. The purpose of antidumping duties is to protect local businesses and markets from unfair competition by foreign imports.

What is Dumping?

Dumping is a process wherein a company exports a product at a price that is significantly lower than the price it normally charges in its home (or its domestic) market. It can have various motives, such as gaining market share, driving out competitors, or disposing of excess inventory. However, dumping can also have negative effects on the importing country, such as harming domestic producers, reducing profits and employment, and distorting prices and trade flows.

The World Trade Organization

The World Trade Organization (WTO) is an international organization that deals with the rules of trade between nations. The WTO also operates a set of international trade rules, including the international regulation of antidumping measures. However, the organization does not intervene in the activities of companies engaged in dumping, but it regulates how governments react to dumping in their territories.

According to the WTO Anti-Dumping Agreement, dumping is legal unless it threatens to cause material injury in the importing country domestic market. Also, the WTO prohibits dumping when the action causes material retardation in the domestic market. Where dumping occurs, the WTO allows the government of the affected country to take legal action against the dumping country as long as there is evidence of genuine material injury to industries in the domestic market. The government must show that dumping took place, the extent of the dumping in terms of costs, and the injury or threat to cause injury to the domestic market.

The WTO Anti-Dumping Agreement also allows governments to act in a way that does not discriminate between trading partners and honors the GATT 1994 principle when calculating the duty. The GATT 1994 principle provides a number of guidelines to govern trade between members of the WTO. It requires that imported goods not to be subjected to internal taxes in excess of the costs imposed on domestic goods. Also, it requires that imported goods be treated the same way as domestic goods under domestic laws and regulations.

How are Antidumping Duties Calculated?

The anti-dumping duty is calculated as the difference between the normal value of the product in the exporting country and the export price of the product in the importing country. The normal value is usually based on the price of the product in the domestic market of the exporting country, or the cost of production plus a reasonable profit margin. The export price is usually based on the price paid by the importer, or the price at which the product is first resold in the importing country. The anti-dumping duty can be anywhere from 0% up to 550% of the invoice value of the goods.

The anti-dumping duty is imposed by the domestic government of the importing country after conducting an investigation and making a preliminary or final determination. The investigation is usually initiated by a petition from the domestic industry that claims to be injured by the dumped imports and involves collecting and verifying information from the exporters, importers, and other interested parties, as well as conducting on-site verification visits. It can take up to 18 months, or longer in exceptional cases.

What are Some Examples of Antidumping Duties?

Antidumping duties are applied to a wide range of products and countries. Some examples are:

• In 2023, the U.S. imposed antidumping duties on certain cold-rolled flat steel products from China, Brazil, India, Japan, Korea, Russia, and the United Kingdom, ranging from 3.15% to 265.79%¹.
• In 2023, the European Union imposed antidumping duties on solar panels and cells from China, ranging from 17.2% to 42.1%².
• In 2023, China imposed antidumping duties on wine from the European Union, ranging from 6.3% to 27.0%³.
• In 2023, India imposed antidumping duties on ceramic tiles from China, ranging from 1.87% to 35.89%⁴.

What are the Advantages and Disadvantages of Antidumping Duties?

Antidumping duties have both advantages and disadvantages for the importing and exporting countries, as well as for the consumers and producers. Some of the advantages are:

• Antidumping duties can protect domestic industries from unfair competition and predatory pricing by foreign exporters.
• Antidumping duties can prevent dumping from causing material injury or retardation to the domestic market and its development.
• Antidumping duties can encourage fair trade practices and compliance with the WTO rules by foreign exporters.
• Antidumping duties can increase government revenue from the tariffs collected.

Some of the disadvantages are:

• Antidumping duties can increase the prices of imported goods for the consumers and reduce their choices and welfare.
• Antidumping duties can reduce the efficiency and competitiveness of the domestic industries by shielding them from market forces and foreign competition.
• Antidumping duties can distort the allocation of resources and create trade barriers and frictions between countries.
• Antidumping duties can trigger trade wars and retaliation measures by the affected countries.

Conclusion

Antidumping duties are tariffs that a domestic government imposes on foreign imports that it believes are priced below fair market value of similar goods in the domestic market. The purpose of antidumping duties is to protect local businesses and markets from unfair competition by foreign imports. They are calculated and imposed according to the WTO Anti-Dumping Agreement and the GATT 1994 principle. With both advantages and disadvantages for the importing and exporting countries, as well as for the consumers and producers, antidumping duties are applied to a wide range of products and countries, and they can have significant impacts on the global trade and economy.