Dumping: What is it and how it affects countries?
When an exporter sells his/her products to a country at prices lower than domestic prices in his country it is called dumping. Per se there is nothing illegal about dumping. However when it affects the domestic industry, the government steps in through its designated authority.
Dumping occurs when the export price of goods imported into a country is less than the Normal Value of ‘like articles’ sold in the domestic market of the exporter.
The price at which like articles are sold in the domestic market of the exporter is referred to as the “Normal Value” of those articles. The normal value is the comparable price at which the goods under complaint are sold, in the domestic market of the exporting country or territory. If the normal value cannot be determined by means of domestic sales, it can be arrived at by providing for the following two alternative methods:
- Comparable representative export price to an appropriate third country
- Cost of production in the country of origin with reasonable addition for administrative, selling and general costs and for profits.
The export price of goods imported into India is the price paid or payable for the goods by the first independent buyer. If there is no export price or the export price is not reliable because of association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the imported articles are first resold to an independent buyer.
Margin of dumping refers to the difference between the Normal Value of the like article and the Export Price of the product under consideration. Margin of dumping is normally established on the basis of:-
- a comparison of weighted average Normal Value with a weighted average of prices of comparable export transactions; or
- comparison of normal values and export prices on a transaction to transaction basis.
A Normal Value established on a weighted average basis may be compared to prices of individual export transactions if the Designated Authority finds a pattern of export prices that differ significantly among different purchasers, regions, time period, etc. The margin of dumping is generally expressed as a percentage of the export price.
It is not sufficient that a country claims dumping. They need to prove it. Injury analysis can broadly be divided in two major areas:
This content is for paid members only.
Join our membership for lifelong unlimited access to all our data science learning content and resources.