In the intricate surroundings of international trade, there are several practices and rules aimed at saving domestic industries. Thus, to ensure fair business dealings between nations. One of these measures is anti-dumping, which is a significant tool in the niche of customs logistics.
This post discusses all that you need to know about anti-dumping duty, its objective and calculation methods.
What is Anti-dumping Duty?
Dumping takes place when a country exports products to another country at a cost lesser than its normal price. This is an illegal trade practice that can leave a deforming impact on international trade. Thus, anti-dumping is a measure to remediate the conditions coming up from the dumping of items and its distortive trade effect. Thus, the purpose of anti-dumping duty is to rectify the trade declining dumping effect and re-build lawful trade. The WTO permits the use of anti-dumping measures as a tool of fair business competition. It gives relief to the domestic industry, as opposed to the injury caused by dumping.
How Does Anti-Dumping Duty Work?
While anti-dumping duty may sound complicated, knowing its mechanics is essential for grasping the implications of international trade. It starts with an inspection. This can be started in two different ways:
1. Suo-moto by the Directorate
The DGTER or Directorate General of Trade Remedies can begin an inspection on its own pact if it comes to know that dumping is taking place.
2. Written Consent by Domestic Industry
On the other hand, the inspection can be activated by formal written consent from the domestic industry that thinks dumped imports negatively impact it. For consent to be regarded as valid, it must fulfil particular criteria.
First, domestic manufacturers must support it, accounting for approximately 25% of the overall manufacturing of similar products in the country.
Second, those supporting the consent must show over 50% of the overall manufacturing of similar products by those contending the consent. Lacking the ability to fulfil these conditions can result in the consent being dismissed.
Why are Anti-dumping Measures Essential?
Anti-dumping measures are essential for saving domestic businesses from the impacts of artificially low-cost imports. These duties assist local industries in competing fairly by:
1. Stopping foreign industries from underpricing local businesses.
2. Protecting industries from unsuitable pricing practices that can lead to job losses or closures.
Without these measures, unethical competition can affect vital industries, resulting in wider financial consequences.
Objectives of Anti-dumping
Anti-dumping has various basic objectives, like protecting the uniformity of competition in global trade and securing the interests of domestic industry. Here, we will explain the objectives in detail.
1. Safeguarding Domestic Industry
One of the key objectives of anti-dumping is to safeguard the domestic industry from severe injury because of dumping rules. By charging tariffs or counteracting duties on unreasonably low-cost imports, the target is to level up the playing arena and stop domestic processes from being uprooted or facing certain financial problems.
2. Endorsing Fair Competition
Anti-dumping seeks to make sure that organisations contend on a level playing area. By stopping foreign goods from getting into the market at artificially low costs, fair competition between foreign and local manufacturers is supported. This adds to keeping up the viability and diversity of supply in the market, benefiting customers and arousing innovation.
3. Protecting Economic Stability
Anti-dumping plays a significant role in saving a country’s financial stability. By safeguarding domestic industry and keeping the viability of local organisations, job losses and the destabilisation of key segments of the economy are ignored. This adds to sustainable financial development and the safety of society’s general welfare. (1)
What are the Different Anti-dumping Duty Calculation Methods?
These calculation methods include two important metrics:
1. Margin of Dumping or MOD
The margin of dumping or MOD is calculated with the help of the difference between the normal price and the export price.
2. Injury Margin or IM
Injury margin or IM is the difference between the fair selling price and the landed cost. The fair selling price is at which the item will be traded in the domestic market in normal situations. Meanwhile, the landed cost is the overall cost of the item when it lands in the importing country, including customs and shipping charges.
The anti-dumping duty is then fixed as the lower of the MOD and IM. To emphasise, suppose the MOD is Rs 40 per unit, and the IM is Rs 30 per unit; then the duty will be Rs 30 per unit.
Can the Anti-dumping Duty be Imposed On a Reflective Basis?
Anti-dumping duty can be imposed on a reflective basis if it is found that –
1. There is a record of dumping that caused injury or that the importer was, or should have been, attentive to the fact that the exporter follows the dumping procedure and that such dumping will be responsible for the injury.
2. The injury is done by the huge dumping of goods imported in a somewhat short time. In view of the timing and the quantity of the imported goods dumped and various circumstances, it is possible to seriously threaten the remedial impact of the duty accountable to be levied.
Moreover, this duty cannot be imposed reflectively further than ninety days from the issue date of the notification levying a duty. (4)
Final Words
Anti-dumping duty is an important tool created to offer equal chances to local trades, assuring that domestic industries can compete well next to foreign counterparts. It is significant to remember that anti-dumping duty is a double-edged sword, since it protects local jobs and industries, it also challenges the concept of free trade. Thus prospectively directing trade wars and burdened global relations. We hope that now you have a good knowledge of how duties like anti-dumping can shape your business on an international level.
So, if you are new to starting an export and import business, use e-commerce export platforms like Amazon Global Selling. This platform can help you with customs clearance, freight forwarding, and global shipping without any hassle.
