Loading the player...

What is an 'Anti-Dumping Duty'

An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value. Dumping is a process where a company exports a product at a price lower than the price it normally charges on its own home market. To protect local businesses and markets, many countries impose stiff duties on products they believe are being dumped in their national market.

BREAKING DOWN 'Anti-Dumping Duty'

In the United States, the International Trade Commission (ITC) imposes anti-dumping duties based upon investigations and recommendations from the Department of Commerce. The ITC is an independent government agency. Duties often exceed 100% of the value of the goods. They come into play when a foreign company is selling an item significantly below the price at which it is being produced. Part of the logic behind anti-dumping duties is to save domestic jobs, but they can also lead to higher prices for domestic consumers and reduce the international competition of domestic companies producing similar goods.

The World Trade Organization

The World Trade Organization (WTO) operates a set of international trade rules. Part of the organization's mandate is the international regulation of anti-dumping measures. The WTO does not regulate the actions of companies engaged in dumping. Instead, it focuses on how governments can or cannot react to dumping. In general, the WTO agreement allows governments to "act against dumping where there is genuine (material) injury to the competing domestic industry." In other cases, the WTO intervenes to prevent anti-dumping measures.

This intervention is justified to uphold the WTO's free market principles. Anti-dumping duties distort the market. Governments cannot normally determine what constitutes a fair market price for any good or service; fair market value is whatever price the market will bear as determined by supply and demand.

Practical Examples of Anti-Dumping Measures

In June 2015, American steel companies United States Steel Corp., Nucor Corp., Steel Dynamics Inc., ArcelorMittal USA, AK Steel Corp. and California Steel Industries filed a complaint with the Department of Commerce and the ITC alleging that China (and other countries) were dumping steel on the U.S. market and keeping prices unfairly low.

A year later, the United States, after a review and much public debate, announced that it would be imposing a 500% import duty on certain steel imported from China. China may bring the debate before the WTO by China if it feels the tariffs are unfair.

RELATED TERMS
  1. Dumping

    In international trade, the export by a country or company of ...
  2. Import Duty

    A tax collected on imports and some exports by the customs authorities ...
  3. World Trade Organization - WTO

    An international organization dealing with the global rules of ...
  4. Steel Industry ETF

    A sector exchange-traded fund that invests only in companies ...
  5. Countervailing Duties

    Tariffs levied on imported goods to offset subsidies made to ...
  6. Duty Free

    Goods that international travelers can purchase without paying ...
Related Articles
  1. Investing

    What is an Anti-Dumping Duty?

    An anti-dumping duty is a large tariff a government imposes on importers who price their goods below fair market value.
  2. Insights

    U.S. Raises China Steel Import Duty Sixfold (SLX)

    The U.S. said Tuesday it would raise import duties on Chinese cold-rolled steel by 522%.
  3. Insights

    The Dark Side Of The WTO

    The World Trade Organization has its share of detractors. Find out why this international entity has such harsh critics.
  4. Investing

    How China Impacts the Global Steel Industry

    The Chinese economy is having a significant impact on the performance and profitability of steel and mining stocks.
  5. Insights

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  6. Insights

    Do Cheap Imported Goods Cost Americans Jobs?

    Flooding the market with cheap products can mean job losses and even market collapse - but dumping isn't as threatening as it seems.
  7. Insights

    3 Times the WTO Got It Right This Century

    Learn how the World Trade Organization (WTO) is facilitating landmark trade agreements that benefit both corporations and consumers.
  8. Investing

    Global Steel Industry Faces “Severe Winter”

    The global steel industry is in deep crisis due to overcapacity, falling prices and rising competition that has threatened the survival of many companies.
  9. Investing

    Tariffs

    Tariffs, or customs duties, are taxes imposed on foreign goods and services. In addition to providing a country with additional revenue, tariffs offer protection to domestic producers. Imported ...
  10. Investing

    What is Dumping?

    Dumping refers to exporting a good at a lower price than the price charged for the good at home.
RELATED FAQS
  1. Out of which international body did the World Trade Organization emerge?

    On January 1, 1995, the World Trade Organization (WTO) came into being. The WTO was an outgrowth of the General Agreement ... Read Answer >>
  2. What are common reasons for governments to implement tariffs?

    Gain a basic understanding of a government-sanctioned import tariff, what it is meant to accomplish and common reasons for ... Read Answer >>
  3. How do tariffs protect domestic industries?

    Understand the four ways tariffs are used by domestic government to protect its domestic industries. Learn how tariffs are ... Read Answer >>
  4. How can tariffs cause inefficiencies in domestic industries?

    Understand what a tariff is and why a government would want to impose a tariff. Learn how tariffs can contribute to domestic ... Read Answer >>
  5. What was the first company with a $1 billion market cap?

    United States Steel Corportation (NYSE:X) was the world's first company to surpass the market capitalization mark of $1 billion ... Read Answer >>
  6. What are the most famous monopolies?

    Learn about famous monopolies from Carnegie Steel to Comcast that challenge free-market competition and encourage government ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center