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Finding a great price on a product overseas can feel like a great unexpected surprise. As a wholesaler or retailer, you might already be seeing a big profit margin for yourself. However, it’s both practical and necessary to make sure these goods don’t run afoul of U.S. law and, in turn, know how to avoid anti dumping duty.
The most reliable way to avoid anti-dumping duty is to consult with a Licensed Customs Broker prior to making an international purchase. A licensed broker can review the tariff classification of your goods and identify whether they’re currently subject to anti-dumping duties.
It’s also good to be familiar with the U.S. organizations that regulate such activity and how to be in compliance. Continue reading to find out more about anti dumping duty and how to avoid it.
In order to avoid an anti dumping duty (ADD), you must first know what is considered dumping. This is when a foreign entity, either an exporter or producer, attempts to sell goods in the U.S. with a price that is considered to be under the normal value of the product.
This can happen for a variety of reasons. A foreign enterprise could have produced too much of a product and is simply looking to unload their current inventory, cutting the price in order to do so.
But it can be more serious than that. For instance, if the merchandise in question is being sold in America for less than it’s sold for in its domestic market, or at a price that is less than its actual production cost, this can be viewed unfavorably as dumping.
This mechanism is used to increase market share and eventually drive out all other competition, who can no longer compete on price. When dumping is at its most effective, the entity that engaged in the dumping is the last one left standing with no other competitors. They can then dictate the supply, quality and price of the product, which is viewed as not ideal for consumers.
Dumping (or subsidizing) is also considered a way in which a country would lose the jobs of domestic producers if it allowed this practice to go on unchecked. This is the purported reasoning behind combatting dumping; the flip side of this can be the unintended consequences of higher costs for customers.
But, as it will be explained later in the article, dumping has to be proven in order for something to be done about it. It’s not enough to just think dumping is ongoing and throwing around accusations.
Don't tackle anti-dumping duties on your own
An anti dumping duty is a tariff imposed by a domestic government in order to effectively enforce fair competition in a free market economy. While the United States is decidedly a capitalist country that is intended to let the market dictate the prices it is willing to pay for goods, it sometimes still needs the government to help regulate the influx of imported products to make sure that its own market is not being manipulated by outside factors.
If the market is getting flooded with artificially inexpensive goods that are intentionally being sold for less than they cost to produce, less than they would sell for in their own market, or is suspected to be receiving large financial backing from the exporting country’s government to lower prices, these are all possible dumping examples and would trigger an anti dumping duty.
These duties exist so that businesses in the U.S. are not undercut in what’s perceived to be an unfair manner. These duties are enacted to
We’ve covered the positive effects of enacted anti dumping duties above but every regulation is a two-sided coin and there are two things that sometimes happen as unintended consequences of a country trying to protect its own best interests.
The first thing that can occur from this duty is U.S. consumers can end up paying higher prices in the long run. This happens because competition or market saturation is reduced, leaving customers with less options than before. When there are fewer options, generally the price of a product won’t vary as widely either.
The second thing is that some companies might be legitimately producing their goods at a low cost and be able to sell cheaply. This is because assessing anti dumping duties is not an exact science, instead being often based on the belief that dumping is going on in some cases.
So while some companies or producers of goods might be operating fairly, they might decide it’s too much trouble to deal with possible dumping accusations and the associated financial penalties. At that point, those businesses will exit the market in question on their own accord.
The penalties for dumping, at least as it relates to foreign products entering the U.S. market, are purely financial — although in some cases, it can also have the effect of straining relations between countries.
Companies wouldn’t be prosecuted legally for this practice, but could see extremely high tariffs on their products. In extreme cases, the country that is the target of dumping practices might ban the offending company from selling its product in the United States. While a financial penalty might not sound that daunting, it makes a huge difference if you were expecting to pay a tariff of 10 percent for your products and instead were found guilty of dumping, paying 200 percent of the value of the imported goods instead.
There are several organizations that have a role in reviewing possible dumping in America and, in turn, proposing or levying that such action be taken. The first three are U.S. government agencies that each have crucial roles throughout the process, from the initial investigation of claims to collecting the financial tax once the rate is agreed upon.
The fourth government agency is an international one that is meant to settle disputes between two countries, but actually doesn’t make an ethical judgment that dumping should be illegal.
Don't tackle anti-dumping duties on your own
This organization is the one in which U.S. companies log formal complaints to and that makes the actual decision on whether or not it constitutes dumping.
The International Trade Commission (ITC) has the power to do this because of the Tariff Act of 1930. This act established laws about anti dumping and countervailing, and that U.S. industries were then allowed to file a petition with the U.S. government both when foreign governments subsidized their industries or when imports came into the American market at less than fair value.
The ITC uses the best information presented at the time of the claim to assess the threat of material injury and then render a decision, which will be passed onto the Department of Commerce (DOC) for further clarification. If the DOC’s findings are affirmative that dumping has taken place, it then goes back to the ITC for the final conclusion on what steps are appropriate if dumping is found.
Under the direction of the ITC, the Department of Commerce’s (DOC) Enforcement and Compliance unit is the government agency that calculates the duty rate. This is accomplished by comparing the projected export price to the U.S. against what the home country market price is for the alleged country suspected of engaging in dumping.
To avoid confusion, it’s helpful to note that the DOC is actually a part of the ITC. So sometimes it’s said that the DOC makes a determination about dumping, but the ITC is always the one that carries out the initial investigation. This is true even in times where simultaneous complaints are made to both organizations. From there, the DOC continues the investigation and then takes the ITC’s preliminary determination and either accepts it, or continues its fact-gathering mission.
An easy example of how anti dumping duty is enforced once it is claimed and proven would be if the normal U.S. value of an item is determined to be $5. If the price a company is trying to sell it for is $4, there is a $1 (or 20 percent) difference between the two values. This is considered the margin of dumping.
The DOC would enforce this in the form of an anti dumping duty of $1 to match the average rate of the dumping that occurs.
It’s important to note that the DOC itself cannot repeal or change these anti dumping duties at its own discretion. They are only calculating the rate and suggesting it based on the findings by the ITC. Only a valid anti dumping order being revoked — either at the U.S. domestic industry’s direct request or a 5-year sunset review, where the domestic industry in question is no longer considered to be affected by dumping — can change that.
The 5-year sunset review is a result of the Uruguay Round Agreements Act, which was introduced in 1994. This act was intended to amend the laws surrounding anti dumping and countervailing, primarily to add the sunset review and make sure once anti dumping duty is levied, that it is not in perpetuity if it’s no longer a threat to one of the U.S. domestic industry.
This organization, also known by the CBP, is used to actually enforce anti dumping duty at the point of entry once the determination has been made. The CBP is under the instruction of both the U.S. DOC and ITC and will be guided by those two bodies on which goods from which countries to collect these tariffs on.
These duties will be expected before the goods are legally allowed to enter the country, so running afoul of the CBP is not an option. In fact, it will be a surefire way to get your products held at a port or border crossing and tied up in legal tape.
This is just one of the many responsibilities of the CBP but something that is crucial to making sure that imports are entering the country in good standing.
You would think this one would be listed higher, considering its laws and statutes are used by many countries in the world during international trade disputes. But the WTO’s stance on dumping is a bit murky — in that it has made a determination that dumping is legal in most cases.
In contrast, most of the member countries governed by the WTO in international trade believe that dumping should be illegal and treat it as such in their own business relations.
However, if a country can prove beyond a reasonable doubt that a domestic industry is being unfairly impacted in a negative way, the WTO won’t stand in the way of that country imposing anti dumping duties against the product in question.
In lieu of such a scenario, though, the WTO will not intervene unless a formal complaint has been logged and sufficient evidence presented that the country logging the charge is actually found to have jeopardized jobs or an entire industry.
Regardless of who you employ to help you process customs clearance or the importing process, any violation involving dumping will incur an anti dumping duty. There are two ways to help yourself avoid anti dumping duty or, if that’s not possible, at least know when the correct time is to pay it if you feel like it’s unavoidable.
It’s recommended that a company engaging in importing would have its own internal document — known as an import compliance manual — that would cover anti-dumping and how the company itself is going to put steps in place to take appropriate measures.
This would include information such as:
Generally, someone within the organization — or you, if you’re the sole proprietor — is given the responsibility that the appropriate ADD is declared in all applicable cases. This person can access the database to make sure a shipment is in compliance and can also compile a list on any goods that will be subject to an anti dumping duty.
Another part of policing yourself to avoid this duty is to do your own market research. This is something that should already happen during the earlier stages of determining how to set prices for the goods you’ll be selling.
As a businessperson, it should be obvious when looking for price comparisons if it seems that you’re able to set prices much lower than the going rate and still see a profit. While that’s every entrepreneur’s dream, it should raise enough of a concern to encourage you to dive deeper and make sure you’re not unintentionally involved in dumping.
While it’s really important to continue to monitor your own operations to have a handle on whether or not you could be found guilty of dumping, sometimes help is what you really need. In that regard, you can turn to a licensed customs broker to help guide you on this topic. This can be invaluable in keeping you from being blindsided by much larger-than-expected anti dumping duties when you might be prepared for something much smaller.
A licensed customs broker should be up to date on the most recent laws dealing with anti dumping and be able to give you trusted advice at any juncture to make the whole ordeal go much smoother. In fact, a customs broker can be an asset to any customs issue or question you might have, making them an amenity that shouldn’t be overlooked.
Don't tackle anti-dumping duties on your own
Once you’re equipped with the knowledge of how to avoid anti dumping duty, get a big boost for your importing needs by having USA Customs Clearance help handle every aspect of your imports. We can help you avoid unintentionally engaging in dumping and make sure you’re in full compliance in every sense of the word.
Before or during your importing, USA Customs Clearance has fully licensed customs brokers who can consult with you over the phone via 30-minute sessions so that you can learn the ins and outs of the process and ask any questions you might have about anything.
This can even be in the form of help with filling out your Importer Security Filing (ISF), which is a mandatory component of imports that travel by ocean vessel.
With the high likelihood that you’ll need a customs bond, that’s something else USA Customs Clearance can help you procure. Whether you think you will need a continuous or single-use bond, your imports will be covered and in line with the CBP’s requirements.
So now that you’re well-versed on how to avoid anti dumping duty, give the import experts at USA Customs Clearance a call at (855) 912-0406 to find out exactly how we can bring your business to the next level.
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We are contemplating either manufacturing TriChlor Chlorine Pool tablets in the USA or manufacturing overseas (probably China). In either case, the raw material is Trichloro-s-triazinetrione. My question is what the duty (possibly anti-dumping duty) is bringing in the finished product in tablet form or alternatively, what the duty is if I brought in the raw material to manufacture in the US. I also heard that you if you have the required EPA certificate for the tablet and a US citizen manufacture overseas they are not subject to anti-dumping duties. Please feel to email me or call me at 415-246-4545 to discuss further.
Thank you for your time.