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Dumping

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Presenters

Omer Azhar MBA-E-13 Kashif Javed MBA-E-23 M. Rizwan Riaz MBA-E-24 Adnan Shahzad MBA-E-40

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Dumping

In Business and Economics:In economics, " dumping " can refer to any kind of predatorypricing (selling at an unfairly low price).

Predatory Pricing Domestic Firm selling at lowerprice in home market

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Dumping

In Context of International Trade Law:

The act of a manufacturer/firm in one country exporting aproduct 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 forthe same good in a domestic market.

Dumping Foreign firm selling at lower

price in other country.

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Dumping

When;

Export Price

1. Comparable DomesticPrice2. Export Price to a Third

Country3. Cost of Production Plus a

reasonable addition forselling 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.

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Dumping Margin

minusNormal Value of the like article

Export price of product under

consideration

Domestic priceRs. 150

Export priceRs. 100

Dumping Margin = 150-100 = Rs.50.Dumping Margin = 33%

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Domestic Industry

The domestic industry is all domestic producers of the product

concerned, or those whose collective output constitutes a majorproportion of total domestic production of those products.

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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 newcompetitors.

Price Discrimination/Strategic DumpingIf a firm has a monopoly in its home market but faces strongcompetition in a foreign market, it will charge a higher price in

the home market

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Reasons for Dumping

Cyclical DumpingSelling at low price because of over capacity due to downturn indemand.

Market Expansion DumpingSelling at lower price for export than domestically in order togain market share.

State Trading DumpingSelling at lower price in order to gain hard currency.

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Reasons for Dumping: Summary

The nations dump products to;

Eliminate Competition

Secure Monopolies

Increase Share of International Export

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Dumping: Factors

Subsidies;Subsidies (in the exporting country) can lead to aggressive

dumping, since goods can be sold profitably at a price that ischeaper than the cost of manufacture.

Banned Products;

History also sheds light on the numerous manufacturers that haveused dumping to sell off products that were banned in theirdomestic market.

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Implications of Dumping

Dumping results in the following:

Hurts a countrys domestic industry and producers. Impacts the sales volume. Hurts the market shares. Triggers decline in profitability. Leads to job losses. Cause material injury.

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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 istypically undertaken by companies which have invested aconsiderable amount of their resources into the product, and whoare 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.

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Moral Implications of Dumping: Examples

Dumping can take many forms. Shaw cites the recall of pajamas containing the chemical Tris , which, according to study, causedkidney cancer in children (Shaw, 33, 34). In this instance, anumber of small companies who manufactured clothing treatedwith the now-banned chemical faced mounting inventories andsevere financial losses. In order to absorb the losses, somecompanies sold the pajamas to exporters who marketed the goodsoverseas where Tris-treated garments were not banned. The

manufacturers suffered less severe losses than if they had notsold to the exporters, the exporters made a profit on the deal, andchildren overseas were exposed to the carcinogen Tris .

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Moral Implications of Dumping: Examples

Dumping can assume more sinister forms, as well. Wheat andbarley 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 chokingdeaths have been shipped overseas, and the American

government sponsored

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Moral Implications of Dumping: Examples

The moral question becomes more acute when considering theuse of the Dalkon Shield . This contraceptive device is known tocause pelvic inflammation, blood poisoning, spontaneousabortions, tubal pregnancies and uterine perforations (Shaw, 34).Some deaths are considered the direct result of thecontraceptive's use.Despite its known risks, the device is used in a number of American-sponsored population control programs. The DalkonShield puts women at these countries at increased risk of illness

and death. Yet a number of American and overseas officialssupport the contraceptive's use. These officials argue thatwithdrawing the contraceptive will result in more pregnancies insocieties which can ill afford significant increases in population.

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Antidumping Agreement

Article VI of GATT 1994, commonly known as Anti-DumpingAgreement.

Antidumping Measures

Antidumping measures are unilateral remedies applied by amember after;

Investigation of Dumping Determination of injury to the domestic industry caused by

dumped imports

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Antidumping

Due to the above narrated and other reasons, countries haveincorporated strict anti-dumping measures.

The very purpose of antidumping measures is to prop updomestic 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.

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History of Anti-Dumping

Anti-dumping regimes have been regulated throughout the historyof the GATT system. They first appeared long before that systemeventuated.

Canada adopted the first anti-dumping law in 1904. Australia (1906), New Zealand (1905), South Africa and Great Britain (1921) followed shortly

thereafter. The US adopted its first antidumping law in 1916

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Need for Anti-Dumping Measures

Trade is increasingly being seen as a means of achievingeconomic development.

Trade liberalization also implies distortion and exploitation,which is unfair.

To reduce such distortion protectionary measures are available tocounter act these unfair practices.

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Protectionary Measures for Free Trade

Tariffs:Simplest form of protection is a tax levied on goods when theyare imported. These taxes are either specific or advalorem. Tariffsresult in higher prices for consumers along with higher taxrevenues 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 froman increase in imports of any product which is causing threat todomestic industry.Anti Dumping Duty:

Anti dumping duties are charge against the exporting country forselling their price lower than the normal price in the anothercountry

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Antidumping Measures

Anti Dumping measures are of two kinds.

Antidumping duty:This is imposed at the time of imports, in addition to othercustoms duties. The purpose of antidumping duty is to raise theprice of the commodity when introduced in the market of theimporting country.

Price undertaking:

If the exporter himself undertakes to raise the price of theproduct then the importing country can consider it and accept itinstead of imposing antidumping duty.

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Antidumping Measures: Preferred Option

Anti dumping duties have been gaining more importance inrecent 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 ishurting the industry in the importing country. Therefore, adetailed investigation has to be conducted according to specifiedrules first.

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Anti-Dumping Duty

Amount of duty should not exceed dumping margins

Members should collect duties on a non discriminatory basis

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Anti-Dumping Duty

Mechanism to ensure reasonable duty

Calculates specific amount of anti dumping duties

Collection of estimated anti dumping duty and then adjustingafterwards

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Anti-Dumping Agreement

A Summary of Article VI of GATT 1994&Its sub articles.

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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.

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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.

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Antidumping Agreement

The committeeMeeting 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 WTODispute Settlement Understanding (DSU) under Article 17 Members may challenge imposition of Anti-Dumping

measures Panel formation if challenge occurs

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WTO and Anti-Dumping Provision

Anti-dumping (AD) provisions of the WTO allow governmentsto 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 countrieshave developed distinct AD rules and practices of their own.

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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 measurewould lead to injury.

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Procedure for Anti-Dumping Action

GATT (Article 6) allows countries to take action againstdumping. The Anti-Dumping Agreement clarifies and expandsArticle 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 discriminatingbetween trading partners.

Typically anti-dumping action means charging extra import dutyon the particular product from the particular exporting country inorder to bring its price closer to the normal value or to removethe injury to domestic industry in the importing country.

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Procedures to Calculate Dumping

There are many different ways of calculating whether a particularproduct is being dumped heavily or only lightly. The agreement

provides three methods to calculate a products normal value.

1. Compare w/price in domestic market2. Compare w/price in other export markets3. Do calculation of costs and normal profit margins

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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 becumulated if several countries are involved in the sameinvestigation.

The consequent impact of these imports on the domesticindustry must include an evaluation of all relevant economicfactors and indices having a bearing on the state of theindustry.

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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

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Initiation and Subsequent Investigation

Investigations should be initiated

On the basis of a written application by or on behalf of thedomestic industry

By the authority in question if they have sufficient evidence

of dumping, injury and causal link.

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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 domesticindustry (and if it is not opposed by more than 50% of thoseexpressing an opinion).

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Antidumping Investigation Ends.

Anti-dumping investigations are to end immediately in caseswhere the authorities determine that;

1. Dumping margin is insignificantly small i.e. less than 2 %of the export price of the product.2. 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 afterinitiation and in no case more than 18 months.

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Evidances

Exporters must be given at least 30 days to reply toquestionnaires.

Non-confidential summaries of information regarding evidencesmust be provided.

All interested parties must have a full opportunity to defend theirinterest throughout the investigation.

Satisfaction of authorities and on site investigation in exportingcountry should be made.

If inappropriate information available, authorities can use factsavailable to make determination.

As a rule, individual margins of dumping should be calculatedfor each known exporter or producer concerned.

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Provisional Measures

Provisional measures (in the form of a duty or, preferably asecurity by cash deposit or bond) can be applied no sooner than60 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 anauthority applies a duty lower than the dumping marginwhere that is sufficient to remove the injury (i.e. lesserduty rule).

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Price Undertaking

Proceedings can be terminated with voluntary price undertakings.Undertakings offered by exporters need not be accepted by theauthority concerned nor shall exporters be required to enter intosuch undertakings.

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Retroactivity (Period before enactment)

Measures and duties should only apply to products imported afterthe measure is adopted.

Provisional duties can be retained if there is a final determinationof injury.

Definitive duties can be levied retroactively for up to 90 days

prior to provisional measures in certain circumstances.

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Duration and Review

AD duties should only last for five years, unless an expiry reviewdetermines that the duty should be continued.

Duties should also be reviewed where interested parties show theneed for a review (provided at least one year has passed).

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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 conclusionsreached and all issues of fact and law considered material by the

investigating authorities.

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Judicial Review

A body, independent from the authorities responsible for the

determination, must be maintained to review decisions relating tofinal determinations and reviews.

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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 arecausing injury to the domestic industry in the third country.

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Consultation and Dispute Settlement

The WTO Dispute Settlement Understanding is applicable toconsultations and the settlement of disputes under the WTO anti-dumping agreement.

Members can request consultations with other Members if anybenefit under the agreement is nullified or impaired.

If a mutually agreed solution is not reach, the matter can bereferred to the DSB (Dispute Settlement Body). The DSB shallestablish a panel to examine the matter.

Final Provisions Each Member must take necessary steps to ensure the conformity

of its laws and regulations.

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ANNEX-I

PROCEDURES FOR ON-THE-SPOT INVESTIGATIONS

The authorities and the firms known to be concerned in theexporting country must be informed of the intention to carry outon-the-spot investigations.

Non-governmental experts can be included in the investigationteam but must be subject to effective sanctions if they breachconfidentiality.

Sufficient advance notice of the verification should be provided.

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ANNEX-II

BEST INFORMATION AVAILABLE

Authorities should specify in detail information required fromany interested party.

If information is not supplied within a reasonable time,authorities are free to make determinations on the basis of factsavailable, including those in the application / complaint.

Authorities can request information in a particular format butshould take into account the ability of the interested party torespond in the preferred medium.

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ANNEX-II

BEST INFORMATION AVAILABLE

All information which is verifiable and supplied in a timelyfashion should be taken into account when determinations aremade.

Information that is not ideal in all respects should not bedisregarded if the interested party has acted to the best of itsability.

Where information is rejected, reasons should be given.

Where authorities must base their findings on information from asecondary source, they must do so with special circumspection.

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Anti Dumping in Pakistani Perspective

Pakistan is one of a founder member of GATT ( in 1947)and the WTO ( in 1995)

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