The anti-dumping law is a trade defense measure, within the scope of customs procedures, which is carried out when a foreign supplier charges prices lower than those applied in their own country. This practice is known as dumping.
In order to protect their respective economy, many countries impose duties on products they believe are being dumped in their national market because these products have the potential to undercut local businesses and the local economy.
Today we will talk about what the anti-dumping law is and how the margin of dumping of a product is calculated.
What is anti-dumping?
The Anti-Dumping Agreement defines dumping as the sale of a product for export at a price lower than its “normal value”. This definition involves a comparison between two prices, the export price, and the “normal value”, to determine whether the product is dumped.
It is important to note that dumping is not the sale of a product for export at a price lower than that charged by producers in the importing country. This is price undercutting. Prices charged by producers in the importing country are not relevant in determining whether an imported product is dumped. However, the issue of price undercutting is among the factors to be taken into account when determining whether dumped imports are causing injury to the domestic industry.
How to impose a measure of this type?
In order to impose an anti-dumping measure, the Member in question must determine the existence of dumping, material injury to the domestic industry, and a causal relationship between dumping and injury.
These three elements must be determined in the course of an investigation carried out by the authorities of the importing Member country in accordance with the procedural rules established in the Agreement.
How is the margin of dumping calculated?
The margin of dumping is the difference between the export price and the normal value. The Anti-Dumping Agreement establishes rules for calculating the export price (the price of the allegedly dumped product in the importing country) and the normal value (usually the price of the allegedly dumped product in the exporting country).
One of the requirements is that the comparison of the two prices is “fair” and some of the elements of a fair comparison are specified in the Anti-Dumping Agreement: the two prices must be set at the same level of trade, usually the “ex-factory” level., and on the basis of sales made as soon as possible.
The preferred methodologies for calculating the margin of dumping are to compare the weighted average normal value with the weighted average export price or to calculate the margins of dumping on a transaction-by-transaction basis. In cases where the product under investigation covers more than one by-product or “model”, its full value must be attributed to any negative margin of dumping corresponding to a given model by calculating the overall weighted average margin of dumping for all the models together.
That is, negative margins cannot be considered “zero” dumping. The margin of dumping is generally expressed as a percentage of the export price. For example, if the normal value is 100 and the export price is 80, the difference will be 20 and it will normally be said that the margin of dumping is 25 percent (that is (20 ÷ 80) * 100).