Dumping generally refers to instances of international price discrimination in which a product’s price in the market of the importing country is lower than its price in the market of the exporting country. Thus, the simplest way to detect dumping is to compare the prices in two markets. However, the situation is rarely that straightforward. Most times, it is necessary to carry out many difficult analytical steps to be able to conduct an appropriate comparison. The proper price in the market of the exporting country (normal value) and the proper price in the market of the importing country (export price) have to be determined.
The Anti-Dumping Agreement and Article VI of GATT
The “most favored nation” principle is one of the fundamental ideas included in the GATT of 1994 that are applicable to trade between WTO members. Additionally, imported items must not be subject to additional internal taxes or other adjustments from those imposed on native products. Under domestic rules and regulations, imported goods must receive treatment no less favorable than domestic goods. The creation of schedules with bound tariff rates was also approved by WTO members. Contrarily, Article VI of GATT 1994 permits the establishment of a particular anti-dumping charge on imports in situations where dumping harms or threatens to harm a domestic industry.
Notifications
All WTO Members must update their anti-dumping laws to comply with the Anti-Dumping Agreement and notify the Committee on Anti-Dumping Practices of these changes. Legislation from Members is discussed in the Committee with questions from Members, although the Committee does not “approve” or “disapprove” any legislation. It is also discussed whether a specific Member has consistently incorporated the Agreement’s requirements into national law. Additionally, Members must inform the Committee twice a year of all anti-dumping inquiries, actions, and procedures.
Establishing the normal value
The price of the product in question during regular business hours when it is headed for consumption on the exporting country market is typically considered to be the normal value. It might not be possible to establish normal value on this basis in some situations, for as when there are no sales on the domestic market. In such circumstances, alternate procedures for determining normal value are provided under the Agreement. If sales in the exporting national market are not a suitable basis, two alternatives are offered for determining normal value. These are: (i) the price at which the product is sold to a third country; and (ii) the product’s constructed value, which is determined by adding the production cost to sales, general, and administrative costs as well as profits.
Establishing the export price
The transaction price at which the foreign producer sells the good to an importer in the importing nation will typically serve as the basis for the export price. But just like with normal value, the Agreement acknowledges that this transaction price may not be suitable for comparisons.
Exceptions
For a certain product, there might not be an export price if, for example, the export transaction is an internal transfer or the product is traded in a barter transaction. Additionally, if the exporter and the importer or a third party have a relationship or a compensation arrangement, the transaction price at which the exporter sells the goods to the importing nation may not be reliable. In this situation, it’s possible that the transaction price was altered, perhaps for tax reasons, and wasn’t an arms-length market price. The Agreement acknowledges that in these situations, a different approach to figuring out an appropriate export price for comparison is required.
Exchange of currencies
The Agreement stipulates particular guidelines for currency conversion if the comparison of normal value and export price calls for it. Consequently, the conversion rate used should be the one in effect on the date of sale (date of the contract, invoice, purchase order, or order confirmation, whichever establishes material terms of sale). The exchange rate from the forward currency sale must be applied if an export sale is directly related to it. Furthermore, the Agreement stipulates that currency rate variations must be disregarded and that exporters must have at least 60 days to modify their export pricing in response to significant changes in the exchange rate.
Reimbursement
The Agreement requires Members to collect tariffs on imports from all sources that are determined to be dumping and causing injury without discrimination, except sources for which a price undertaking has been accepted. Additionally, even though it can be less, the amount of the duty collected cannot be greater than the dumping margin. Two measures are outlined in the Agreement to prevent the collection of excessive duties. The method chosen will depend on how the duties are collected. The Agreement specifies that the final decision of the amount must take place as quickly as practicable, upon request for a final assessment. This applies even if a Member permits imports, collects an anticipated anti-dumping tax, and only afterward determines the precise amount of anti-dumping duty to be paid.
Injury
According to the Agreement, the investigative authorities of the importing Member must determine harm before imposing anti-dumping measures. According to the Agreement, injury is defined as (i) significant harm to a domestic industry, (ii) a significant threat to a domestic industry, or (iii) a significant delay in the development of a domestic sector.
