This article is written by Shreya Patil, pursuing Diploma in International Business Law from LawSikho. The article has been edited by Zigishu Singh (Associate, LawSikho) and Ruchika Mohapatra (Associate, LawSikho).
Table of Contents
Introduction
In the contemporary era, international trade, industries and corporations have encountered tremendous foreign competition. This competition is often assisted by foreign governments. While such competition may be difficult to tackle, it is extremely important to maintain a balance between the domestic markets and the international markets in order to protect the economy of any country. Dumping is one such obstacle that despite being illegal, is critical to tackling, concerning the confrontation of the businesses. This article briefly discusses the anti-dumping laws of the U.S and their governing strategies and statutes for anti-dumping.
Anti-dumping and related duties
Anti-dumping generally means the import of goods that are manufactured in foreign countries and are priced below fair market value e in the domestic market. Such products are taxed by the government, this is known as “anti-dumping duty” with the perspective of the goods being dumped in the country through low pricing. This is executed in order to protect the local businesses and markets from unfair competition by foreign imports. Such duty is calculated by equalizing the difference between the average costs of the products in the importing country and the market value of the goods in the exporting country ranging anywhere from 0% up to 555% of the invoice value of the goods.
Regulation of anti-dumping measures by the World Trade Organisation
As an international organisation, the role of the world trade organisation is extremely critical. Since it cannot regulate the companies allegedly involved in dumping activities, it possesses the powers to regulate the reactions of the governments to dumping activities in their territory. Some governments take the dumping activities very seriously resulting in harsh reactions of declaring punitive anti-dumping duties on the foreign companies. Hence, world trade organisations may determine the gravity of imposition of such duty and if they are really genuine or against the principle of capitalism and free markets.
In accordance with the principles of the world trade organisation, dumping is considered legal unless it comes as a threat of material injury in the domestic markets of the importing country. Despite determining dumping as legal, the world trade organisation allows the affected governments to impose legal actions against the dumping country provided there should be enough evidence of the material injury to the domestic markets with the terms of costs and the potential threat to cause injury to the domestic markets.
Calculation of anti-dumping duty
The WTO Anti-Dumping Agreement allows the governments to proceed in a way that does not discriminate between the trading partners and honours the GATT 1994 principle when calculating the duty. The GATT 1994 governs the trade between the members of the WTO that requires the imported goods not to be subjected to internal taxes in excess of the costs imposed on the domestic goods. It also thereby provides to treat the imported goods in the same way as of the domestic goods in accordance with the domestic laws and regulations provided they do not exceed the bound rates and threaten to cause injury in the domestic markets resulting in the imposition of the duty. There are various ways of interrogating whether an imported product has been dumped lightly or heavily, and the amount of duty that shall be applied. The anti-dumping duty is calculated either by the normal price of the product or by the price charged on the same product in a different country. It may also be calculated through total product costs, expenses and the manufacturer’s profit margins.
Anti-dumping import laws in the USA
Under the Tariff Act of 1930, a United States based industry may petition the government for relief from the imports that are sold in the United States at less than the fair value or which benefit from the subsidies provided through foreign government programs. While The United States Department of Commerce (“USDC”) determines the existence and the margins of the dumping or the amount of the subsidy, the United States International Trade Commission (“USITC”) determines the existence of material injury or threat of material injury to the domestic industry due to the dumped or subsidized imports. The USITC can also determine whether unestablished industries are facing hindrances in growth due to dumping or subsidized imports. Nonetheless, the relief available for such dumping of the products is the imposition of the duties to equalize the market and as well as acting as a revenue source for the Government of the United States. Such interrogation and investigations pertaining to antidumping and duty investigations are conducted under title VII of the Tariff Act. However, the investigations pertaining to material injury are conducted in preliminary and final phases.
Enforcement of anti-dumping regulations
In the United States, anti-dumping regulations are enforced as mentioned below:
- Plaintiffs representing a particular industry have to file a petition with the (“USDC”) and the (“USITC”).
- Such plaintiffs must satisfy the elements to obtain anti-dumping relief:
- The price of the imports must be unfairly low, meaning it must be below “normal value” which is defined (in order of priority) by domestic market prices; foreign market prices; or based on constructed value.
- There must be an existence of material injury or threat of material injury to the plaintiff’s industry by virtue of importing the dumped goods.
- If there is an establishment of dumping which has resulted into the injury to the domestic injury, then a dumping duty order is issued.
- The dumping duty order is the primary form of relief for the plaintiffs that enables the prices of the domestic producers and the foreign imports to compete with each other.
Penalties under us civil law for import anti-dumping
Circumvention of the dumping duties ultimately results into the penalties imposed from the United States Customs & Border Protection (“CBP”) and even criminal liability under certain circumstances as mentioned below:
- Under 19 U.S.C. §1592, CPB shall impose penalties for the acts of fraud, gross negligence and ordinary negligence.
- If an importer makes false statements to avoid dumping duties and fails to pay amounts that are legitimately owed, CPB can impose penalties that equals the commercial value of the merchandise itself, in addition to collection of the underpaid and the paid duties.
- Importers are also liable for civil/or criminal penalties for “conspiracy to commit offense or to defraud the United States” and for making false statements or entries. These penalties are the most significant that CPB may impose and add up to amounts that exceed the value of the imported goods.
To hereby summarize, there are three ways by which an importer violates customs regulations in relation to antidumping:
- Inaccurate country of origin making,
- Misclassification of goods,
- Failure to pay antidumping duties.
The doctrine of “Respondeat Superior” applies in the cases of anti-dumping violations. Under this principle, the employer or principal is also held liable for acts of agents or employees even if not specifically directed to engage in the acts which are prohibited by the employers. Hence a company’s set of internal policies and procedures put into place in order to comply with laws, rules, and regulations or to uphold the business’s reputation, often regarded as compliance, are crucial to ensure the potential civil and criminal liability that the employees and agents aren’t exposed to.
Penalties under us criminal laws for import anti-dumping
US Laws do not consist of any criminal statutes specifically for antidumping laws. Criminal liability associated with antidumping is asserted due to the violation of other existing criminal statutes, such as 18 U.S.C. Section 1519, concerning the “Destruction, Alteration, or Falsification of Records in Federal Investigations and Bankruptcy.” Fraud, negligence, and gross negligence elements in antidumping criminal cases are standard.
In accordance with Section 592 of the Tariff Act of 1930, as amended 19 U.S.C. 1592, any person who, by fraud or negligence, enters merchandise into the United States by means of false data, statement, document, act or omission, is subject to a penalty and criminal liability. If the duties are not paid, the CPB, who is thereby in charge to ensure the payment of duties and seizing merchandise, may then be forfeited in lieu of payment.
There are various statutes that cover customs fraud & imports as below:
- Title 18, United States Code, section 542 (Federal Criminal Statute): Provides sanctions who present false information to custom officers and thereby imposes a maximum of two years imprisonment, a fine, or both, for each violation involving an importation or attempted importation.
- Money Laundering Control Act: This Act includes importation fraud violations that specify unlawful activities or predicate offenses within the act which imposes imprisonment of up to 20 years for each offense.
Usually, only civil penalties are applied in the cases of antidumping violations, however, in the event of egregious conduct which involves fraud, gross negligence and in cases of intentional conduct, criminal charges may be filed.
Importing from an economically advantageous country
If an importer determines the advantageous position, economically, in order to avoid anti-dumping duties, the UDSC could use the data of the alternate country data to determine the market value which is fair in the different countries.
Examples of the dumping cases in the United States
Recently, there has been a continuous increase in the number of anti-dumping cases. The local businesses solely rely on the anti-dumping laws in order to limit the unfair competition below the market-value imports which are manufactured abroad. Some of the cases are as mentioned below:
- Flat Panel Display Screens Dumping by the Japanese Companies in 1991
As a result of consideration of the complaints by the American businesses on the dumping of flat panel display (FPD) screens by the Japanese, the Commerce Department held that they were liable for the dumping of the FDP screens in the U.S market and thereby initiated an investigation. This investigation concluded that the dumped FDP screens were causing material damage to the American businesses and recommended a 62.5% anti-dumping duty on FDP screens imported from Japan.
- Dumping of Steel by Chinese Companies in 2015
The Chinese companies dumped a large number of steel in the American markets. This led the American businesses to complain that the large imports of steel resulted in the unfair competition since the imports were unfairly at a lower price. After the investigations of the International Trade Commission (ITC), the commerce department found out that there was an injury or threat to injury on domestic markets and found the Chinese companies guilty of dumping and thereby imposing a 500% import duty on steel imports from China in order to protect the domestic steel industry.
Conclusion
Regardless of the increased global competition, the competition laws always have an upper hand. In the case of U.S. dumping laws, the anti-dumping laws have majorly impacted resulting in maintenance of the fair value for the domestic markets as well as for the international imports with applicable duty. Regardless, the world is constantly evolving and so should the laws, considering the increase in competition, globally. It is also pertinent to note that, investigations under such circumstances shouldn’t be biased or on the sole basis of complaints made by the American businesses and must have a wider perspective while conducting such interrogations. Nonetheless, the U.S has been successfully maintaining the balance through adequate measures.
References
- https://corporatefinanceinstitute.com/resources/knowledge/other/anti-dumping-duty/
- https://www.stimmel-law.com/en/articles/anti-dumping-import-laws-basics
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