Dumping : Dumping Presenters : Presenters Omer Azhar MBA-E-13
Kashif Javed MBA-E-23
M. Rizwan Riaz MBA-E-24
Adnan Shahzad MBA-E-40 Dumping : Dumping In Business and Economics:
In economics, "dumping" can refer to any kind of predatory pricing (selling at an unfairly low price). Predatory Pricing Domestic Firm selling at lower price in home market Dumping : Dumping In Context of International Trade Law:
The act of a manufacturer/firm in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production.
A standard technical definition of dumping is the act of charging a lower price for a good in a foreign market than one charges for the same good in a domestic market. Dumping Foreign firm selling at lower price in other country. Dumping : Dumping When; Export Price Comparable Domestic Price
Export Price to a Third Country
Cost of Production Plus a reasonable addition for selling cost and profit Normal Value Comparable domestic price,
· Export price to a third country, or
· Cost of production plus a reasonable addition for selling cost and profit. Dumping Margin : Dumping Margin minus Normal Value of the like article Export price of product under consideration Domestic price
Rs. 150 Export price
Rs. 100 Dumping Margin = 150-100 = Rs.50.
Dumping Margin = 33% Domestic Industry : Domestic Industry The domestic industry is all domestic producers of the product concerned, or those whose collective output constitutes a major proportion of total domestic production of those products. Reasons for Dumping : Reasons for Dumping Predatory Price (Predatory Dumping)
The practice of cutting prices in an attempt to drive a rival out of business or create barriers to entry for potential new competitors.
Price Discrimination/Strategic Dumping
If a firm has a monopoly in its home market but faces strong competition in a foreign market, it will charge a higher price in the home market Reasons for Dumping : Reasons for Dumping Cyclical Dumping
Selling at low price because of over capacity due to downturn in demand.
Market Expansion Dumping
Selling at lower price for export than domestically in order to gain market share.
State Trading Dumping
Selling at lower price in order to gain hard currency. Reasons for Dumping: Summary : Reasons for Dumping: Summary The nations dump products to; Eliminate Competition Secure Monopolies Increase Share of International Export Dumping: Factors : Dumping: Factors Subsidies;
Subsidies (in the exporting country) can lead to aggressive dumping, since goods can be sold profitably at a price that is cheaper than the cost of manufacture.
History also sheds light on the numerous manufacturers that have used dumping to sell off products that were banned in their domestic market. Implications of Dumping : Implications of Dumping Dumping results in the following:
Hurts a country’s domestic industry and producers.
Impacts the sales volume.
Hurts the market shares.
Triggers decline in profitability.
Leads to job losses.
Cause material injury. Moral Implications of Dumping: Examples : Moral Implications of Dumping: Examples Excerpt from the paper
"Dumping" is the practice of American firms exporting goods which have been declared dangerous or which have been banned altogether from domestic markets (Shaw, 34). The practice is typically undertaken by companies which have invested a considerable amount of their resources into the product, and who are trying to recover part of that investment. This research is concerned with the moral questions which arise from dumping, and considers whether dumping can be morally justified. Moral Implications of Dumping: Examples : Moral Implications of Dumping: Examples Dumping can take many forms. Shaw cites the recall of pajamas containing the chemical Tris, which, according to study, caused kidney cancer in children (Shaw, 33, 34). In this instance, a number of small companies who manufactured clothing treated with the now-banned chemical faced mounting inventories and severe financial losses. In order to absorb the losses, some companies sold the pajamas to exporters who marketed the goods overseas where Tris-treated garments were not banned. The manufacturers suffered less severe losses than if they had not sold to the exporters, the exporters made a profit on the deal, and children overseas were exposed to the carcinogen Tris. Moral Implications of Dumping: Examples : Moral Implications of Dumping: Examples Dumping can assume more sinister forms, as well. Wheat and barley in Iraq were treated with a US-banned fungicide in 1972. As a result, 400 died and 5,000 became ill.
Baby pacifiers (Teether) which have been implicated in choking deaths have been shipped overseas, and the American government sponsored Moral Implications of Dumping: Examples : Moral Implications of Dumping: Examples The moral question becomes more acute when considering the use of the Dalkon Shield. This contraceptive device is known to cause pelvic inflammation, blood poisoning, spontaneous abortions, tubal pregnancies and uterine perforations (Shaw, 34). Some deaths are considered the direct result of the contraceptive's use.
Despite its known risks, the device is used in a number of American-sponsored population control programs. The Dalkon Shield puts women at these countries at increased risk of illness and death. Yet a number of American and overseas officials support the contraceptive's use. These officials argue that withdrawing the contraceptive will result in more pregnancies in societies which can ill afford significant increases in population. Antidumping Agreement : Antidumping Agreement Article VI of GATT 1994, commonly known as Anti-Dumping Agreement.
Antidumping measures are unilateral remedies applied by a member after;
Investigation of Dumping
Determination of injury to the domestic industry caused by dumped imports Antidumping : Antidumping Due to the above narrated and other reasons, countries have incorporated strict anti-dumping measures.
The very purpose of antidumping measures is to prop up domestic producers.
Advantages of anti-dumping
Re-establishes fair trade and fair competition.
Provides protection to the domestic producers and the industry.
Rectifies unfair trade practices pertaining to dumping. History of Anti-Dumping : History of Anti-Dumping Anti-dumping regimes have been regulated throughout the history of the GATT system. They first appeared long before that system eventuated.
Canada adopted the first anti-dumping law in 1904.
New Zealand (1905),
South Africa and Great Britain (1921) followed shortly thereafter.
The US adopted its first antidumping law in 1916 Need for Anti-Dumping Measures : Need for Anti-Dumping Measures Trade is increasingly being seen as a means of achieving economic development.
Trade liberalization also implies distortion and exploitation, which is unfair.
To reduce such distortion protectionary measures are available to counter act these unfair practices. Protectionary Measures for Free Trade : Protectionary Measures for Free Trade Tariffs:
Simplest form of protection is a tax levied on goods when they are imported. These taxes are either specific or advalorem. Tariffs result in higher prices for consumers along with higher tax revenues for the government.
Safe guard Measures:
Safe guard measures are temporary restrictions on the imports of certain products. Purpose is to protect the domestic industry from an increase in imports of any product which is causing threat to domestic industry.
Anti Dumping Duty:
Anti dumping duties are charge against the exporting country for selling their price lower than the normal price in the another country Antidumping Measures : Antidumping Measures Anti Dumping measures are of two kinds.
This is imposed at the time of imports, in addition to other customs duties. The purpose of antidumping duty is to raise the price of the commodity when introduced in the market of the importing country.
Price undertaking: If the exporter himself undertakes to raise the price of the product then the importing country can consider it and accept it instead of imposing antidumping duty. Antidumping Measures: Preferred Option : Antidumping Measures: Preferred Option Anti dumping duties have been gaining more importance in recent times simply because,
It has been observed to be the best form of protection.
Unlike Quotas or Safeguard measures, anti dumping duties are not retaliatory.
They are industry, time and product specific and hence lesser distorting effects as compared to other form of protection.
Anti-dumping measures can only be applied if the dumping is hurting the industry in the importing country. Therefore, a detailed investigation has to be conducted according to specified rules first. Anti-Dumping Duty : Anti-Dumping Duty Amount of duty should not exceed dumping margins
Members should collect duties on a non discriminatory basis Anti-Dumping Duty : Anti-Dumping Duty Mechanism to ensure reasonable duty
Calculates specific amount of anti dumping duties
Collection of estimated anti dumping duty and then adjusting afterwards Anti-Dumping AgreementA Summary of Article VI of GATT 1994& Its sub articles. : Anti-Dumping AgreementA Summary of Article VI of GATT 1994& Its sub articles. Basic Principles : Basic Principles WTO members can impose Anti-Dumping if
Dumping is occurring
Domestic industry producing the like product in importing country is suffering material injury
There is a causal link between the two. Members and Committee : Members and Committee Developing Country Members
The possibility of constructive remedies should be explored with developing countries before applying AD duties.
Committee on Anti-Dumping Practices
A Committee on AD Practices is established, composed of representatives from each WTO Member. Antidumping Agreement : Antidumping Agreement The committee
Meeting twice a year under Article 16
Review of National Legislation
Review of Anti-Dumping actions taken by members
Ad Hoc Group focuses on technical issues of implementation
Dispute settlement body of WTO
Dispute Settlement Understanding (DSU) under Article 17
Members may challenge imposition of Anti-Dumping measures
Panel formation if challenge occurs WTO and Anti-Dumping Provision : WTO and Anti-Dumping Provision Anti-dumping (AD) provisions of the WTO allow governments to impose AD duties on foreign products if ;
They are imported at prices less than their fair values (often, the foreign market prices of imported products)
And such dumping activities cause material injuries to relevant domestic industries.
Under the general guidance of these provisions, many countries have developed distinct AD rules and practices of their own. Antidumping Agreement Narrates…. : Antidumping Agreement Narrates…. Detailed procedures are set out on how?
anti-dumping cases are to be initiated,
how the investigations are to be conducted,
and the conditions for ensuring that all interested parties are given an opportunity to present evidence.
Anti-dumping measures must expire five years after the date of imposition, unless an investigation shows that ending the measure would lead to injury. Procedure for Anti-Dumping Action : Procedure for Anti-Dumping Action In order to do that the government has to be able to show that dumping is taking place;
calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price),
and show that the dumping is causing injury or threatening to do so. Procedure for Anti-Dumping Action : Procedure for Anti-Dumping Action GATT (Article 6) allows countries to take action against dumping. The Anti-Dumping Agreement clarifies and expands Article 6, and the two operate together.
They allow countries to act in a way that would normally break the GATT principles of binding a tariff and not discriminating between trading partners.
Typically anti-dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the “normal value” or to remove the injury to domestic industry in the importing country. Procedures to Calculate Dumping : Procedures to Calculate Dumping There are many different ways of calculating whether a particular product is being dumped heavily or only lightly. The agreement provides three methods to calculate a product’s “normal value”.
Compare w/price in domestic market
Compare w/price in other export markets
Do calculation of costs and normal profit margins Determination of Injury : Determination of Injury An injury determination must examine
Volume of dumped imports and effect of those import on prices in the domestic (importing) market; imports can be cumulated if several countries are involved in the same investigation.
The consequent impact of these imports on the domestic industry – must include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry. Determination of Injury : Determination of Injury What is Material Injury?
It takes place if the dumped imports cause adverse effects on domestic industry. They may include inter alia.
Decline in sales, profits, outputs, market share, productivity
Negative effect on cash flow, inventories, employment, wages, ability to raise capital Initiation and Subsequent Investigation : Initiation and Subsequent Investigation Investigations should be initiated
On the basis of a written application by or on behalf of the domestic industry
By the authority in question if they have sufficient evidence of dumping, injury and causal link. Initiation and Subsequent Investigation : Initiation and Subsequent Investigation Requirements for Application
An application should include evidence of dumping, injury and causal link. It should particularly contain ;
a) information on the applicant
b) description of the product and identification of exporters & importers
c) information on export prices and normal value
d) information on the evolution of imports and their effect on the importing market.
An application is made on behalf of an industry if it is expressly supported by a minimum 25% of total production of the domestic industry (and if it is not opposed by more than 50% of those expressing an opinion). Antidumping Investigation Ends…. : Antidumping Investigation Ends…. Anti-dumping investigations are to end immediately in cases where the authorities determine that;
Dumping margin is insignificantly small i.e. less than 2 % of the export price of the product.
Volume of the dumped imports is negligible i.e. less than
3 % of total import of that specific product.
Investigations shall normally be concluded within one year after initiation and in no case more than 18 months. Evidances : Evidances Exporters must be given at least 30 days to reply to questionnaires.
Non-confidential summaries of information regarding evidences must be provided.
All interested parties must have a full opportunity to defend their interest throughout the investigation.
Satisfaction of authorities and on site investigation in exporting country should be made.
If inappropriate information available, authorities can use facts available to make determination.
As a rule, individual margins of dumping should be calculated for each known exporter or producer concerned. Provisional Measures : Provisional Measures Provisional measures (in the form of a duty or, preferably a security by cash deposit or bond) can be applied no sooner than 60 days after initiation of the investigation.
Provisional measures can be applied for;
A maximum of 4 months,
Extendable to 6 months.
These deadlines are 6 and 9 months respectively when an authority applies a duty lower than the dumping margin where that is sufficient to remove the injury (i.e. lesser duty rule). Price Undertaking : Price Undertaking Proceedings can be terminated with voluntary price undertakings. Undertakings offered by exporters need not be accepted by the authority concerned nor shall exporters be required to enter into such undertakings. Imposition and Collection of Antidumping Duty : Imposition and Collection of Antidumping Duty Whether a duty should be imposed, or the amount of such a duty, are decisions to be made by the authority concerned. It is desirable the duty be less than the dumping margin if sufficient to remove the injury to the domestic industry. The amount of dumping duty must not exceed the margin of dumping.
An accelerated review should be provided for new exporters that
a) are not related to existing exporters
b) did not export during the period of investigation. Retroactivity (Period before enactment) : Retroactivity (Period before enactment) Measures and duties should only apply to products imported after the measure is adopted.
Provisional duties can be retained if there is a final determination of injury.
Definitive duties can be levied retroactively for up to 90 days prior to provisional measures in certain circumstances. Duration and Review : Duration and Review AD duties should only last for five years, unless an expiry review determines that the duty should be continued.
Duties should also be reviewed where interested parties show the need for a review (provided at least one year has passed). Public Notice and Explanation of Determination : Public Notice and Explanation of Determination Authorities must provide public notice of ;
a) AD investigations initiated
b) preliminary or final determinations.
Sufficient detail must be provided on findings and conclusions reached and all issues of fact and law considered material by the investigating authorities. Judicial Review : Judicial Review A body, independent from the authorities responsible for the determination, must be maintained to review decisions relating to final determinations and reviews. Anti-Dumping Action on Behalf of a Third country : Anti-Dumping Action on Behalf of a Third country Applications for AD action can be made by the authorities of a third country, where they can show that dumped imports are causing injury to the domestic industry in the third country. Consultation and Dispute Settlement : Consultation and Dispute Settlement The WTO Dispute Settlement Understanding is applicable to consultations and the settlement of disputes under the WTO anti-dumping agreement.
Members can request consultations with other Members if any benefit under the agreement is nullified or impaired.
If a mutually agreed solution is not reach, the matter can be referred to the DSB (Dispute Settlement Body). The DSB shall establish a panel to examine the matter.
Each Member must take necessary steps to ensure the conformity of its laws and regulations. ANNEX-I : ANNEX-I PROCEDURES FOR ON-THE-SPOT INVESTIGATIONS
The authorities and the firms known to be concerned in the exporting country must be informed of the intention to carry out on-the-spot investigations.
Non-governmental experts can be included in the investigation team but must be subject to effective sanctions if they breach confidentiality.
Sufficient advance notice of the verification should be provided. ANNEX-II : ANNEX-II BEST INFORMATION AVAILABLE
Authorities should specify in detail information required from any interested party.
If information is not supplied within a reasonable time, authorities are free to make determinations on the basis of facts available, including those in the application / complaint.
Authorities can request information in a particular format but should take into account the ability of the interested party to respond in the preferred medium. ANNEX-II : ANNEX-II BEST INFORMATION AVAILABLE
All information which is verifiable and supplied in a timely fashion should be taken into account when determinations are made.
Information that is not ideal in all respects should not be disregarded if the interested party has acted to the best of its ability.
Where information is rejected, reasons should be given.
Where authorities must base their findings on information from a secondary source, they must do so with special circumspection. Anti Dumping in Pakistani Perspective : Anti Dumping in Pakistani Perspective Pakistan is one of a founder member of GATT ( in 1947)
and the WTO ( in 1995)