Dumping & Anti-Dumping Measures

The article 'Dumping & Anti-Dumping Measures' highlights how dumping can disrupt fair competition by undercutting prices and potentially leading to market distortions. The detrimental effects on domestic industries and employment are also examined. To address the challenges posed by dumping, the article delves into the different anti-dumping measures commonly employed by countries. 

Dumping is understood as ‘injuring pricing’ which elaborates how the incessantly low pricing of the goods that are imported to other countries injures the fair competition ideology. This further hampers the local market by causing extensive losses to the local and domestic producers. International trade has often experienced this practice by many countries due to either overproduction or their attempt to clear out faulty and damaged products. A legal framework has been established to minimise this practice by the countries. In this article, we shall be discussing the same in the context of the Indian scenario.

Meaning of Dumping

Dumping in its most simple forms can be understood to be a sort of price manipulation where the price of the product sold in the country which has imported that good is less than the price of that product in the exporting country. To identify if dumping is taking place, prices of the products in two countries can be compared. However, the factors involved are more complex to finally certify whether a country is practising dumping or not.

A comprehensive analysis takes place to determine the ‘appropriate price’ of a good and then the prices as set in the importing countries are then compared with this price. This practice is often considered malicious on the part of the exporting countries because the artificially low prices carry a reason behind them. Some of the reasons for the same include overproduction by that country, or faulty and damaged goods being sold. Moreover, the impact that this has on the local and domestic markets of the importing countries is also massive. The local producers often face unfair competition circumstances that cause them huge losses as customers prefer foreign goods over their goods due to the low prices and expectations of high quality.

Types of Dumping

Dumping can be categorised into the following four types:

1. Sporadic Dumping

This is done when companies of the exporting country dump all their unsold goods. This is done to avoid any price wars in their country and to further keep maintaining their competitive position. In such a situation they have two choices, they can either destroy the unsold goods but they instead choose to send them to the countries where they can sell them for fewer prices to compensate for their production costs.

2. Persistent Dumping

This is a practice where an exporting country is involved in the process of dumping as a regular practice. In such situations, majorly it is because there is a demand in the importing country for the goods that are dumped. Therefore, the exporting country continuously transports its goods for dumping in the importing country.

3. Predatory Dumping

This practice is different from sporadic in the sense that it is permanent unlike sporadic where dumping is only done in certain circumstances. Here, the country is constantly engrossed in producing goods for dumping itself. This is also different from persistent dumping because the objective behind is to eliminate competition in the importing country and to make a place for itself in the foreign market.

4. Reverse Dumping

In this form of dumping, it is important to note that there is less demand elasticity for the product in the foreign market. Meaning to say, the exporting country can charge more prices for its products in the foreign market and less in the local market. This won’t affect the demand for those goods.

Objectives of Dumping

Objectives of dumping have been discussed below:

1. Expansion of Market Share

Since the prices for the products are extremely low, the market share of the products increases incessantly as the same can now be accessed by a wider audience and that means a wider market. The low price thereby, works for the benefit in such cases.

2. Depletion of the Goods

Post meeting the domestic needs of a product, if the country feels that it still has a large quantity of those goods available with it, then it resorts to the practice of dumping. To not lose any money, the country in such circumstances adheres to dumping to make money even though it is less, since that is better than losing all the money altogether.

3. Outperforming the Competitors

If the prices are kept so low, this would help the company of the exporting country to make an advantageous position for itself over its competitors. Thus, this is often chosen as a viable option by them for creating a competitive position for themselves.

Anti-Dumping Measures

Some of the anti-dumping measures that can be undertaken to prevent it are discussed in brief as follows:

1. VER (Voluntary Export Restraint)

Countries often decide amongst themselves to set up a bilateral agreement whereby they agree to not practice dumping. This sort of imposes a restraint on them that they have voluntarily taken up to refrain from practising or indulging in any potential dumping practices.

2. Imposing Tariffs

The domestic company has the authority to impose tariffs on the goods that are imported or dumped and thus they can by this way, make the goods a little more costly than what they ate priced at initially to lure the customers. It is important to note that this is beneficial if the tariffs that are imposed on such goods are equal to the difference in their price and domestic goods’ price since then it would make both of them equal.

3. Quota for imports

If the countries set a fixed limit for the imports that are to be made, then this would help in preventing excessive imports ultimately leading to dumping. This if clubbed with the tariff imposition, and then would lead to a very steady flow of imports. Some countries also often impose embargoes to ban all imports from the countries that practice dumping.

Growth of Anti-Dumping Legislation

Early in this century, anti-dumping laws were first adopted by Canada in 1904, New Zealand in 1905, Australia in 1906, and the United States in 1916. These laws were later subject to numerous changes. The first anti-dumping laws in the UK were passed in 1921 as well. Despite these advancements, anti-dumping remained a relatively uncommon tool until a significant amount of time following the GATT's establishment, even though Article VI of the 1947 GATT provided the fundamental guidelines for the implementation of anti-dumping measures. Only three nations used anti-dumping as a significant trade tool in the immediate post-war period: South Africa, Canada, and Australia.

To achieve a more uniform approach to anti-dumping, discussions on Article VI of the GATT were first held during the Kennedy Round of trade negotiations. The "Agreement on Implementation of Article VI of the GATT" was the result, and it served as the foundation for the first European Community anti-dumping law, which was implemented in 1968. The standards and processes that WTO members are supposed to follow in enforcing their anti-dumping laws have been addressed in more detail in subsequent trade rounds, albeit the WTO members are still given some latitude in how they conduct themselves.

WTO Agreement and Legal Framework in India for Anti-dumping Investigations

The General Agreement on Tariffs and Trade of 1994 (abbreviated as "GATT") has been ratified by World Trade Organisation members. Member states of the WTO may enact anti-dumping measures under certain restrictions by Article VI of the GATT of 1994 read with the Anti-Dumping Agreement.

With effect from January 1, 1995, Indian laws were changed to conform to Article VI of the GATT and special agreements between the member countries.

The Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 ("ADD Rules") and Sections 9A, 9B, and 9C of the Customs Tariff Act, 1975 ("Tariff Act"), as amended in 1995, serve as the legal foundation for anti-dumping investigations and the imposition of anti-dumping duties.

Currently, given the slowdown faced by the domestic industry due to the COVID pandemic and the ensuing decrease in cross-border trade, there has been an upward trend in imposing ADD on several items of import. In 2021 itself, the Ministry of Finance until March 11 has issued more than 10 notifications imposing ADD on several items of import (primarily from China PR).

Anti-Dumping Duties in India

In India, the Ministry of Finance imposes the Anti-dumping Duty, on the Department of Commerce's recommendation. On the other side, the Ministry of Finance's Department of Revenue's Director General (Safeguard) is in charge of overseeing the safeguard measures. Among all WTO members, India has the distinction of starting the most anti-dumping cases. Anti-dumping actions are often implemented by WTO laws to safeguard the domestic sector. Critics counter that India has largely used its interpretation and application of the law to safeguard special interests and suppress competition. And that the nation is damaging its downstream businesses and competitiveness by bringing a growing number of anti-dumping actions.

Conclusion

Every nation in the world today is either directly or indirectly dependent on every other one. To provide equal opportunities and conditions for all nations to flourish, free and fair commerce is crucial. One such practice that hurts this possibility is dumping. Even though India has laws in this area, they are far from perfect. Implementation issues combined with the government's lax approach frequently result in rampant dumping in a few sectors of the economy. If this trend is not stopped as soon as possible, the phrase "emerging superpower" will forever be associated with India.

References

[1] Prachi Darji, “Laws on Anti-Dumping in India”, Available Here

[2] Rajkumar Dubey, “Anti-dumping Laws in India”, Available Here

[3] Anti-Dumping Duty in India- A Primer, Available Here

[4] Mrinalini Baskaramoorthy, Anti-Dumping Law and Practice in India- A Critical Study, Available Here

[5] Mukul Shashtri, Anti-Dumping Laws and Practice in India, Available Here

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