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 What Is Dumping

‡ In economics, "dumping" can refer to any kind of predatory

pricing

‡ In the context of international trade law, where dumping is

defined as the act of a manufacturer 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 cost of
production

‡ As per Article VI Of GATT 1994

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

Export Price Normal Value

ãComparable domestic
price

ãExport Price to third

country

ãCost of production plus

reasonable addition for
selling cost and profit
 Dumping Margin

‡ The dumping margin is the amount by which the normal

value exceeds the export price.

‡ The comparison is made between sales at the same

commercial stage and on dates which are as close to each
other as possible.

‡ The necessary adjustments are made to take account of

differences in sales conditions, taxation and other
differences which affect price comparability.
 Dumping Margin

Export price of
Normal Value of Minus product under
the like article
consideration

Domestic price Export price

Rs. 150 Rs. 100

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 Reasons for Dumping
‡ Predatory Price
The practice of cutting price in an attempt to drive a rival out
of business or create barriers for entry for potentially new
competitors.

‡ Price Discrimination
If a firm has a monopoly in its home market but faces strong
competition in the international market, the home market is
charged a higher price.
 Reasons for Dumping

‡ Cyclical Dumping
Overcapacity due to downturn causes selling at lower price

‡ Market Expansion Dumping

In order to gain market share causes selling at a lower price
for export than selling domestically

‡ State Trading Dumping

To gain hard currency causes selling at lower price
 The nations dumps products to

‡ Eliminate Competition

‡ Secure Monopoly

‡ Increase share of International Export

 Dumping Factors

‡ Subsidies:
It leads to aggressive dumping, since goods can be sold
profitably at a price that is cheaper than the cost of
manufacture.

‡ Banned Products:
There are numerous incidents when manufacturers have
used dumping to sell off products that were banned in
their domestic market.
 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.
 Anti dumping History
‡ In the 19th century European Sugar Industries appealed to their
respective government for protection against sugar being
dumped at unfairly low prices.
‡ In 1902, there was a formal agreement on anti dumping.
Canada adopted the first anti-dumping law in 1904 followed
by European countries and then US in 1916.
‡ Formed the basis for the original GATT article (Article VI of
GATT) on anti-dumping in 1947.
‡ Subsequently, codes on anti dumping were developed during
the Kennedy Round (1962-67) and Tokyo Round (1973-79).
‡ However, these were not binding on all GATT members; they
were open to signature by those countries that wished to do so.
‡ But the Uruguay Round, (1984-94) anti-dumping agreement is
an agreement binding on all GATT or WTO members.
 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.
 Antidumping Measures
Anti Dumping measures are of two kinds.

‡ Antidumping duty:
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.
Differences & Similarities
between anti dumping &
safeguards
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ãAnti dumping is against ³unfair
pricing´ by Foreign Producers ±
charging higher price in home market
and exporting at lower price
  
ãSafeguards is against cheap imports,
which has shown a sudden surge in imports
due to some unforeseen circumstances.

ãAnti dumping is company and country ãThere are two safeguard laws in India ±
specific General & Transitional
ãDuty varies from company to company ãGeneral safeguard is against all countries
ãTransitional safeguards is against China
ãUniform duty on all imports

ãForm of injury is ³material injury´ Form of injury is

ãSerious injury in general safeguards
ãMarket disruption in case of China
specific safeguards

ãNo interim duty can be imposed before ãInterim duty can be imposed on initiation
expiry of 60 days. However, duty can be of enquiry without notice
imposed on retrospective basis on past
90 days imports
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ãIndia has wide and rich experience on ãNot many cases done globally
anti dumping

ãAnti dumping is not a protection ãSafeguard duty means protection.

Affected country is entitled to protection.

ãInvestigations are conducted by ãInvestigations are conducted by Director

Designated Authority on Anti Dumping in General (Safeguards) in Ministry of
Ministry of Commerce Finance

ãDesignated Authority makes a ãDirector General (Safeguards) makes

recommendation, which is required to be recommendations
implemented by Ministry of Finance ãCommittee on Safeguards accepts the
recommendations
ãMinistry of Finance imposes the duty

ãFinal Order can be challenged before ãNo appeal provision. Only a writ can be
CESTAT. Writ can be filed before High filed before High Court or Supreme Court.
Court or Supreme Court.
 Basic Principles
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‡ Dumping is occurring

‡ Domestic industry producing the like product in importing

country is suffering material injury

‡ There is a causal link between the two.

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.
 Case Study - Paracetamol
Anti-dumping investigations concerning import of Paracetamol
originating in or exported from China and Taiwan
j
Petitioners Product Involved Countries
Involved
M/s Triton Laboratories Ltd., Paracetamol China and
Hyderabad Taiwan
M/s Vamsi Labs Ltd., Solapur

M/s Srinivasa Agro Industries &

Drugs Ltd., Vijaywada
M/s Sri Krishna Pharmaceuticals
Ltd., Hyderabad
‡ Domestic Industry Standing: The petitioners account for 70% of the
total domestic production
‡ Normal Value: The petitioners have claimed normal value in
Taiwan on the basis of constructed cost of production of
Paracetamol.
‡ Export price: The petitioners have claimed export price based on
the data published by DGCIS and secondary sources. Comparing
the normal value and export prices the dumping margins are
significantly higher than the de-minimize limit for which they have
provided the evidences for the same.
‡ Like Goods: The petitioner has claimed that goods produced by it
are like articles to the goods originating in or exported from China
and Taiwan
‡ Injury and Causal Link: The various economic indicators relating to
domestic industry such as production, sales, profit/loss etc.
collectively and cumulatively, indicates that the domestic industry
has suffered injury.
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‡ Period of Investigation: 1st April, 1999 to 30th September, 2000 (18 months).
‡ Submission of Information: Designated Authority, Ministry of Commerce, Directorate
General of Anti- Dumping, Udyog Bhavan, New-Delhi ±110011.
‡ Inspection of Public File: In terms of Rule 6(7), any interested party may inspect the public
file containing non-confidential version of the evidence submitted by other interested
parties.
 
  
‡ The Authority notified the Embassies of the subject countries about the receipt of dumping
allegation
‡ The Authority issued a Public Notice dated 30th January 2001,published in the Gazette of
India Extraordinary initiating anti-dumping investigations
‡ The Authority forwarded a copy of the Public Notice to the known exporters and importers
‡ Request was made to the Central Board of Excise and Customs (CBEC) to arrange details of
imports of Paracetamol.
‡ The Authority provided copies of the non-confidential Petition to the known exporters in
accordance with Rule 6(3) supra.
‡ The Authority sent a questionnaire, to elicit relevant information to various known
exporters in China and Taiwan and importers/users of Paracetamol in accordance with Rule
6(4); However none of them responded within a given time period.
 !"
‡ Paracetamol is an odorless white crystalline powder (C8H9NO2)
‡ Dumping has intensified extremely and the export price is continuously declining.
‡ 40-45 producers of Paracetamol in India. The collective output of the foue
petitioners represent a major proportion of the production of Paracetamol in India
and hence constitute domestic industry.
‡ Comparable in terms of physical and chemical characteristics, manufacturing
process and technology, functions and uses, product specifications, pricing,
distribution and marketing and tariff classification of the goods.

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‡ Paracetamol produced by the domestic industry has been treated as Like to the
product exported from China and Taiwan within the meaning of Rule 2(d).

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‡ The Authority considers the normal value and the export prices provided by the
petitioners.

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‡ Considering the constructed normal value and export prices, the dumping margin
determined by the Authority comes to 47.3% and 50.3% of export price for China
and Taiwan respectively.
* 

‡ the quantum of imports from the subject countries have increased in

absolute terms and in relation to production and consumption in India

‡ the market share of the petitioner has gone down while that of imports
has increased

‡ the petitioners have been forced to sell at prices below their fair selling
price resulting in losses

‡ imports have undercut the prices of the domestic industry.

+ 

‡ The Authority decided if the landed value is lesser than the reference
value provided ie. Rs.162470 per 1000kg, the landed price will be
equal to the reference price.