Trade Risk Guaranty defines antidumping and countervailing in a new educational video on their YouTube channel.
The topic of antidumping and countervailing can be very scary for any business or entity that imports goods into the United States.
For more information on the topic of antidumping and countervailing, check out our many blog posts on the topic.
What are Antidumping and Countervailing duties?
Watch the video below to learn what antidumping and countervailing duties are and why they are enforced within the United States.
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How to Prevent the Dumping of Goods into the U.S. Market
First let’s quickly define what is considered ‘Dumping’. Dumping occurs when a foreign manufacturer sells goods in the United States at less than fair market value, causing injury to the U.S. industry manufacturing those goods. This Dumping can be because the foreign manufacturer is selling the goods in the United States at a price lower than they would sell it in their home country or the goods are being sold in the U.S. at a price that is lower than it cost to produce it.
In the typical market conditions, there is a balance in the United States economy between goods produced or manufactured on U.S. soil and commodities imported from foreign suppliers. This scenario results in U.S. suppliers staying in business with a healthy amount of importing to support the demand of consumers.
However, if a foreign country is able to dump an increased amount of a certain commodity into the U.S. economy, it can cause injury to the U.S. industry manufacturing those same goods and potentially cause U.S. manufacturers to close when they cannot compete. This upsets the balance of the overall U.S. economy and makes U.S. consumers more reliant on foreign suppliers.
In order to prevent “dumping” from occurring the US government has established certain preventative measures known as “antidumping”. Anti-dumping duties are imposed on certain goods in order to bridge the gap back to fair market value.
Countervailing is very similar to anti-dumping with one significant difference: they are established when a foreign government provides assistance and subsidies to local exporting manufacturers, such as tax breaks. The benefits enable a foreign supplier to sell the goods cheaper than domestic manufacturers. Once again, the increased amount of importing can potentially cause U.S. manufacturers to close when they cannot compete. And without the domestic competition, the foreign market would then be able to raise the price of the commodity at will.
Therefore, Countervailing duties are imposed in order to bridge the gap back to fair market value.
Ultimately, Anti-dumping and Countervailing duties are imposed in an attempt to bring the commodity’s end cost to the importer to be about the same as it would have been if it was purchased from a supplier within the United States. This ensures American suppliers can afford to continue producing while the American market retains a healthy balance of imported and domestic goods.
