Anti-dumping duties

What is dumping?

Dumping is the practice of selling a product in a foreign market at an unfairly low price (a price that is lower than the cost in the home market, or which is lower than the cost of production) in order to gain a competitive advantage over other suppliers.
Dumping is done to gain access to the foreign market and eliminate competition. It creates a monopoly in the market.
Dumping enables consumers in the importing country to obtain access to goods at an affordable price. However, it can also destroy the local market of the importing country, which can result in layoffs and the closure of businesses.

Anti-dumping duty

An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports when it believes that the goods are being “dumped” – through the low pricing – in the domestic market.
Anti-dumping duty is imposed to protect local businesses and markets from unfair competition by foreign imports.

Ill effects of such duties

While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
In the long-term, anti-dumping duties can reduce the international competition of domestic companies producing similar goods.

Dumping and WTO

The World Trade Organization (WTO) plays a critical role in the regulation of anti-dumping measures.
The WTO Anti-Dumping Agreement allows the government of the affected country to take legal action against the dumping country as long as there is evidence of genuine material injury to industries in the domestic market.
The government must show that dumping took place, the extent of the dumping in terms of costs, and the injury or threat to cause injury to the domestic market.
In other cases, the WTO intervenes to prevent anti-dumping measures.

Why in News?

Over one-third of anti-dumping duties imposed by the Finance Ministry in the last three financial years covered goods manufactured by either a sole domestic producer or just two producers, mostly from the chemical industry.
Of the 46 anti-dumping duties levied in the latest three fiscals, 60 per cent targeted goods originating only in China and 26 per cent targeted goods originating in China and at least one other country.
Dumping is an unfair trade practice that occurs when goods are exported from one country to another at a price lower than their normal value.
Directorate General of Trade Remedies (DGTR), India’s trade watchdog under the Ministry of Commerce, investigates cases of anti-dumping brought forward by industry players and recommends an anti-dumping duty (ADD) and the margin of duty in case of a consequential serious injury to domestic industry.
The Central Board of Indirect Taxes and Customs (CBIC) under the Finance Ministry has to accept or refuse DGTR’s ADD recommendation within three months from the date of the final hearing.
The imposition of anti-dumping duties is a legitimate trade remedial measure under the World Trade Organization (WTO) rules.

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