Anti-dumping
An anti-dumping measure is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value. Governments use anti-dumping duties to level the playing field for domestic producers. The purpose of the anti-dumping tariff is to raise the cost of imported goods to the same level as domestic goods.
An anti-dumping action usually begins with a complaint filed by domestic producers. The complaint must include evidence that dumping is occurring. Evidence includes specific sales data and an analysis of production costs, profit margins, and prices. The domestic producers must also demonstrate that they have been injured or have a reasonable expectation of injury as a result of the dumping.
If the complaint is successful, domestic producers will be granted a period of protection from imports of the alleged product. During this period, an investigation by an independent body is initiated to determine whether or not dumping has occurred and whether or not any action is required. If the investigation finds that dumping is occurring, a provisional anti-dumping duty can be imposed on the imported product. The provisional anti-dumping duty is usually equal to the difference between the export price of the goods and their normal value. The normal value could be the average cost of production, the cost of what the same goods would sell for in the exporters domestic market, or a combination of both.
Once the provisional anti-dumping duty has been imposed, the investigation is continued and a final determination is made. If the investigation finds that dumping occurred, the duty becomes a definitive anti-dumping duty. The definitive anti-dumping duty is usually equal to the difference between the export price and the fair market value. The fair market value is based on what the goods would sell for in the exporters domestic market.
Anti-dumping measures are often controversial because they are seen as protectionism. Critics of anti-dumping measures argue that they are used as a way to protect domestic producers from foreign competition. They also point out that anti-dumping measures can result in higher prices for consumers, and that they can lead to retaliation by exporting countries.
The World Trade Organization (WTO) regulates anti-dumping measures and discourages their use. In order to be found compliant with WTO rules, domestic producers must be able to demonstrate that there has been injury caused by dumping, and that the anti-dumping measures imposed are necessary and proportional to the injury suffered.
