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What Are Anti-Dumping Duties?

By Mary Iannuzzi on January 28, 2019

 

Dumping is defined as exporting a product to a foreign market at a price below its free market value. Anti-dumping duties are taxes placed on these products by the importing government. Their purpose is create a fair market and stop foreign producers from undercutting domestic options.

 

How are they created?

In America, companies who believe they are being affected by foreign dumping can petition the US government to create an anti-dumping duty. The agency holding final responsibility for the creation of these duties is the International Trade Commission (ITC). They are aided in petition and investigation by the Department of Commerce. The extent of the duty can be up to 550% of the invoiced value of goods. The rate is set in order to bring the price of the dumped good to a cost comparable to market and domestic options.

 

How are they regulated?

For the most part, anti-dumping duties are left to the discretion of individual governments. The supervising party for these taxes is the World Trade Organization(WTO). The WTO does not regulate the industries or firms which are accused of dumping, but rather ensures that actions taken by governments to tax these industries are fair. Rates must be set in a way that does not discriminate against trading partners and remains within the constraints of the General Agreement on Tariffs and Trade (GATT). The GATT requires that imported goods are not subject to internal taxes higher than the cost imposed on domestic products. In other words, anti-dumping duties are to be used to level the playing field, not give domestic manufacturers a clear advantage.

Dumping is not inherently illegal. The WTO allows dumping to some extent so long as it does not violate the concept of free trade, or cause material injury to another country. The government affected by dumping may take legal action against the dumping country if they believe they are causing or likely to cause material harm. Material harm usually happens in the form of material delay and waste.

 

What are the negative consequences?

Two main problems can arise from anti-dumping regulation. First is that costs will increase for consumers. Second is that international competition is stifled for domestic companies. This can lead to a decrease in innovation as well as further cost increase for consumers.

 

Examples of Dumping Duties in the USA

The most well-known example is the recent steel tariffs. In 2015 various steel companies petitioned the Department of Commerce that China and others were dumping low-cost steel on the American market. The ITC investigated the claims and found China guilty of dumping. They reacted by imposing a 500% duty on steel imports from China. There are also various addition steel duties imposed on imports from other countries, such as steel tubing from India.

Anti-Dumping duties can also be levied on specific products as well. One example of this is Japanese TV screens. In 1991, the US government found that Japan was dumping flat panel display screens on the US market and imposed an anti-dumping duty of 62.5%.

 

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