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Dumping(2)

Dumping(2)

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Published by Kamal Syal

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Published by: Kamal Syal on Aug 27, 2012
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08/27/2012

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Anti Dumping

Kamal Syal Khyati Seth Kunal Moitra Mayank Jeloka

Overview
      


What is dumping? Like Products Normal Value Relationship Injury Impact Remedial Action Case Studies Implications

What is Dumping?
A product is said to be dumped when its export price is less than its normal value of a like product in the domestic market in the exporting country.

What is Dumping?

Normal Value in the Exporting Market

Export Price

If a product is exported at a price (Export Price) lower than the price (Normal Value) it normally charges on its own home market, it constitutes “dumping”

Like products
 A product is identical alike in all respects OR  A product that has closely resembling characteristics

Normal Value
The Normal Value is  The price in the exporter’s domestic market, or  The price charged by the exporter in another country, or  Production costs plus expenses and normal margins. other profit

ANTI-DUMPING FLAWS
Price discrimination is an unfair trade practice

It disciplines unfair trade practices

Objectives of dumping

To enter into a foreign market

To dispose of occasional surplus at a lower

price in foreign markets

To develop a market in foreign countries by selling at a lower price

Benefits of Dumping
o

It finds market for its surplus production Exporting more, which strengthens its balance of Payments

o

o

Consumers benefit as they have to pay lower prices

Transitional Dumping

Sporadic Dumping

When the producer intends to dispose off his casual overstock.

Sales in the specified period may not be as

good as expected

The producer finds himself with surplus stock.

Antidumping Laws

In existence since 1980’s AntiDumping Petition Monopoly Firm’s POV Predatory Dumping Misuse of Antidumping

Relationship

Dumping

Injury

Injury

Dumping must cause material injury in the importing market

Types of Injury
 Material injury to a domestic industry,  Threat of material injury to a domestic industry,  Economic retardation of the establishment of a domestic industry

The Impact
The Impact on the industries of importing country
       Loss of Sales Reduced Profits Loss of market share Reduced returns on investments Decline in Productivity Decline in output Under utilization of capacity        Cash flow Inventories Employment Wages Growth New Investment Ability to raise capital

Adverse Effect On

Allowances
Import Products
 Not subjected to internal taxes  No less favourable than domestic goods  No quantitative restrictions, fees and formalities

Remedial Action

Restrict Dumping

OR

Enter into a Price Undertaking

Measures for Remedial Action

 Imposition of anti dumping duties

 Countervailing duties

 Safeguard measures

Concept of Zeroing

Zeroing is a concept whereby non-dumped sales are not permitted to offset dumped sales, essentially by setting the value of a negative dumping margin to zero

It is a significant cause of the systemic overestimation of dumping margins and subsequent application of inflated antidumping duties

Impact of Zeroing

If every comparison generates a positive dumping margin, then the prohibition of zeroing will have no impact.

If there are many comparisons generating negative margins, then prohibition of zeroing can have a very substantial impact on the amount of anti-dumping duties ultimately applied

The EC Bed Linen Case:

In September 1996 the European Communities (“EC”) initiated an antidumping case against imports from India cotton-type bed linen.
EU WAS SPLIT ABOUT THE CASEREASON:

Protecting the EU‟s fabric weaving sector from low-priced import competition Opposing the anti-dumping action: job less companies that consumed the imports which faced redundancies as a result of the protective remedy

Measures Taken By EU
 

Constructed value as a substitute for Normal Value EC identified five types of cotton bed linen exported to it and also sold in representative quantities in India. EC established export price for cotton-type bed linen in the EC market and compared constructed value with export price Calculated dumping margins for different models (for example- pillowcases and sheets)

The Appellate Body of the World Trade Organization found EU to be volatile of the WTO‟s Anti-Dumping (AD) agreement, and ruled in favour of India. The Appellate Body found fault with the EU Commission‟s AD investigations and measures such as: o the practice of „zeroing‟; i.e. investigating the existence of margins of dumping. o calculating the administrative, selling and general (SG&A) costs and profits . o calculating the amount of profits by excluding sales by other exporters or producers not made in the ordinary course of trade o using all types of bed-linen products - bed sheets, duvet covers and pillow cases etc.

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