How Is an Anti Dumping Duty Calculated and Imposed?

An anti-dumping duty is a protectionist tariff a government imposes on foreign imports priced below fair market value. Its purpose is to shield domestic industries from unfair competition. By leveling the playing field, these duties aim to prevent harm to local businesses, such as lost sales and declining profitability.

Establishing the Dumping Margin

The foundation of an anti-dumping case is calculating the “dumping margin.” This margin is the difference between a product’s price in the exporter’s home market (the “Normal Value”) and its price when sold for import into the United States (the “Export Price”). The calculation involves subtracting the Export Price from the Normal Value. If the Export Price is lower, the difference is expressed as a percentage of the Export Price to determine the dumping margin.

For instance, if a foreign company sells a product for $100 in its own country and sells the same product to a U.S. importer for $70, the initial difference is $30. This $30 difference is then divided by the $70 Export Price, resulting in a dumping margin of approximately 42.8%. This percentage often becomes the rate of the anti-dumping duty that importers must pay.

When determining the Normal Value based on home market sales is not feasible, authorities can use alternative methods. One option is to use the price at which the exporter sells the product to a third country. Another method is to calculate a “Constructed Value,” which involves summing the exporter’s costs of production, selling, general, and administrative expenses, and adding an amount for profit.

The Anti-Dumping Investigation Process

The process of imposing anti-dumping duties is managed by two U.S. government agencies: the Department of Commerce (DOC) and the International Trade Commission (ITC). The DOC is responsible for determining if foreign merchandise is being sold at less than fair value and calculating the dumping margin. The ITC’s role is to determine whether a U.S. industry is materially injured or threatened with material injury by the dumped imports.

An investigation begins when a domestic industry files a petition with both the DOC and the ITC containing evidence of dumping and injury. The ITC then conducts a preliminary injury investigation within 45 days. This assesses if there is a reasonable indication that the domestic industry is being harmed.

An investigation can be terminated early if the dumping margin is de minimis, meaning less than 2% of the export price. A case may also end if the import volume from a country is negligible, which is less than 3% of all imports of that product. An exception applies if multiple countries, each under the 3% threshold, collectively account for more than 7% of total imports.

If the ITC’s preliminary finding is affirmative, the DOC makes its own preliminary determination on dumping. If the DOC’s finding is also affirmative, it instructs U.S. Customs and Border Protection (CBP) to suspend liquidation of entries. Importers will then be required to post cash deposits for the estimated duties on all future imports.

The DOC then conducts a more thorough investigation, including on-site verifications of data from foreign producers, before making its final determination on the dumping margin. Following the DOC’s final decision, the ITC makes its final injury determination, which is due within 45 days. For an anti-dumping duty order to be issued, both agencies must make final affirmative determinations. The DOC then issues an official order that remains in effect for five years.

Information Required for a Petition

A petition to initiate an anti-dumping investigation must provide specific information to meet statutory requirements. A primary component is a detailed description of the imported merchandise, including its physical characteristics, uses, and tariff classification. The petition must also define the “domestic like product,” which is the U.S. product most similar to the imported good.

The petition must also demonstrate it is filed on behalf of the domestic industry. This requires showing the petitioners account for at least 25% of total domestic production. Additionally, over 50% of the production by the part of the industry that expresses an opinion must support the petition.

Substantial evidence of dumping is required, including data on the exporter’s home market prices or production costs. The petition must present a calculation of the estimated dumping margin for the merchandise.

Finally, the petition must contain information showing the domestic industry is experiencing material injury from the dumped imports. This evidence includes data showing a decline in the domestic industry’s sales, market share, profits, production, and employment.

Post-Order Administration and Reviews

An “administrative review” allows the DOC to recalculate the duty rate for specific exporters. This can be requested annually by interested parties, such as foreign exporters, U.S. importers, or domestic petitioners. The review examines an exporter’s sales data for a specific period to set a new cash deposit rate for future entries and a final duty rate for past entries.

A “scope ruling” determines if a particular product is covered by an existing anti-dumping duty order. An interested party can request a ruling from the DOC when there is uncertainty. The DOC analyzes the product against the order’s scope language to make a formal determination.

Every anti-dumping order undergoes a “sunset review” every five years. This mandatory review by the DOC and ITC determines if revoking the order would likely lead to a recurrence of dumping and injury. If both agencies make affirmative determinations, the order continues for another five years; otherwise, it is terminated.