What are anti-dumping and countervailing duties?

What are anti-dumping and countervailing duties?

The European Union (EU) protects its industries against unfair trading practices through anti-dumping and countervailing duties. Anti-dumping duties are imposed to counter products sold below their normal market value, a practice which can harm local businesses by distorting competition. Countervailing duties are designed to neutralize the advantages induced by foreign government subsidies, thus ensuring fair competition. Together, these measures support the integrity and fairness of the European market.

In simple terms, anti-dumping and countervailing duties can be seen as the opposite of preferential agreements: while the latter aim to facilitate trade by reducing barriers, anti-dumping duties seek to protect the market against practices deemed unfair.

Understanding anti-dumping duties

Definition and purpose of anti-dumping duties

Dumping occurs when products are exported and sold for less than they are worth on the exporting country's domestic market. This practice can undermine the competitiveness of local industries by flooding the market with low-priced products, making it difficult for local producers to remain competitive.

Anti-dumping duties are tariff measures imposed to counter such practices. The main objective is to re-establish a level playing field by adjusting the price of imported products to reflect a fair assessment of their cost of production and market value.

To calculate the dumping margin, we compare the normal value of a product (its price on the domestic market of the exporting country) with the price at which this product is exported to the EU. If the export price is lower than the normal value, the difference represents the dumping margin. This margin is then used to determine the rate of anti-dumping duties. These duties are then applied to the imports concerned to raise their price to a level considered fair, thus protecting European industries against the distorting effects of dumping.

Anti-dumping investigation process

The anti-dumping investigation process begins with the filing of a complaint. European companies that believe they are being injured by products sold at dumped prices can lodge a complaint with the European Commission. This complaint must be supported by sufficient evidence that dumping is taking place and that it is causing or threatening to cause injury to European industry.

Once a complaint has been received, the Commission examines the evidence provided. If it deems the information sufficient to warrant an investigation, it then launches a formal investigation process. There are several key stages in this process:

  1. Publication of the opening of the inquiry: The announcement is made in the Official Journal of the European Union, inviting all interested parties to participate.
  2. Information gathering: The Commission collects data from exporters, importers, and relevant industry associations. These parties are encouraged to provide additional comments and evidence.
  3. Verification visits: Commission inspectors may visit producers' facilities both in the EU and abroad to check the accuracy of the information provided.
  4. Analysis and calculation: The Commission analyzes the data to determine whether dumping has occurred and, if so, calculates the dumping margin and assesses the injury caused to the EU industry.

If, in the course of the investigation, the initial evidence is confirmed, the Commission may decide toadopt provisional anti-dumping duties. These duties are applied to prevent further injury while the investigation continues. These provisional measures are generally in place for a period of up to six months, but can be extended up to nine months under certain conditions.

This procedure ensures that all parties have the opportunity to present their cases, and that any measures taken are based on a rigorous and fair assessment of the facts.

Understanding countervailing duties

Definition and purpose of countervailing duties

Countervailing duties are tariff measures imposed to neutralize the distorting effects of subsidies granted by governments to their exporters. These subsidies can take various forms, such as direct financial aid, tax breaks or loans on preferential terms, enabling companies to sell their products abroad at prices below their real production costs.

The main aim of countervailing duties is to protect EU industries from the unfair competitive advantages that these subsidies can give to foreign companies. By neutralizing the impact of subsidies, these duties help to maintain fair competition on the European market.

The method for calculating countervailing duties begins with the identification and quantification of subsidies granted by foreign governments. This involves examining the amounts of subsidy provided directly or indirectly to exporting companies. Once these subsidies have been identified and quantified, they are compared with the value of the imports concerned to determine a subsidy rate.

The subsidy rate calculated in this way is used to establish the amount of countervailing duties that will be applied to the imported products. This amount is generally expressed as a percentage of the FOB (free on board) price of the imports, meaning that the duties increase in proportion to the value of the import. This approach aims to re-establish the price conditions that would have prevailed in the absence of subsidies, thus ensuring that European companies can compete on a fairer basis.

Anti-subsidy investigation process

The anti-subsidy investigation process is designed to determine whether subsidies provided by foreign governments confer an unfair advantage on products exported to the European Union, and whether these subsidies cause injury to European industry. The key stages of this process are as follows:

Filing a complaint

EU producers who are suffering or are likely to suffer injury as a result of subsidized products can lodge a complaint with the European Commission. This complaint must contain clear evidence of the existence of subsidies and demonstrate how they adversely affect EU industry. The Commission examines the evidence provided to decide whether it justifies the opening of an investigation.

Investigation launched

If the Commission finds sufficient evidence, it announces theopening of the investigation in the Official Journal of the EU. The announcement details the products concerned and invites all interested parties (exporters, importers, suppliers and governments) to participate in the process.

Procedures during the survey

In the course of the investigation, the Commission collects and analyzes additional information provided by all parties. This includes detailed questionnaires, audits and on-site visits to verify the accuracy of the data provided by the companies and governments involved. This phase is crucial in establishing whether subsidies exist and whether they are causing injury to EU industry.

Adoption of provisional duties

If preliminary evidence clearly indicates that subsidies are causing injury, the Commission may decide to impose provisional countervailing duties. These duties are applied temporarily to prevent further injury to EU industry while the investigation continues. The decision to apply provisional duties is generally taken between 60 and 90 days after the initiation of the investigation.

This process ensures that decisions are taken on a solid basis of factual evidence and after thorough consultation with all parties concerned, thus ensuring that the measures taken are fair and balanced.

Legal and regulatory procedures

Legal framework for anti-dumping and countervailing duties

The legal framework governing anti-dumping and countervailing duties within the European Union is mainly established by two basic regulations, which ensure that the measures taken are both fair and in line with international standards.

Regulation (EU) 2016/1036: This regulation defines the legal framework for the defense against dumped imports from non-EU countries. It establishes the criteria for determining the existence of dumping, the injury caused to EU industry, and the causal link between the two. This regulation ensures that anti-dumping duties are only applied when these three conditions are clearly met, thus protecting European industries while respecting international trade rules.

Regulation (EU) 2016/1037: Similarly, this regulation concerns the defense against subsidized imports from non-member countries. It describes how subsidies are to be identified and assessed, as well as the conditions under which countervailing duties can be imposed. This legislative text ensures that the measures taken are proportional to the advantage gained by the subsidy, with the aim of restoring the competitive balance within the single market.

Implementing regulations and terms of application

In addition to the basic regulations, various implementing regulations have been published to specify how these measures are to be applied. These documents detail the administrative procedures to be followed for the assessment of complaints, the conduct of investigations, and the imposition of measures. They include guidelines on how to calculate dumping margins or subsidy amounts, and provide frameworks for gathering evidence and protecting the rights of the parties concerned.

These implementing regulations are essential to ensure that all actions taken under the basic regulations are conducted in a transparent and fair manner. They also help EU companies and trading partners to understand their rights and obligations under these procedures, facilitating their participation in and compliance with ongoing investigations.

Together, these regulations form a robust framework that supports the EU's trade policy, protecting its industries from unfair trading practices while respecting the Union's international commitments.

Review and expiry process

The European Union's regulatory framework provides specific mechanisms for reviewing anti-dumping and countervailing duties, to ensure that these measures remain appropriate and proportionate over time.

Intermediate review

The interim review is initiated either at the request of interested parties, or on the initiative of the European Commission. This process can be requested by exporters, importers or EU producers, provided that at least one year has elapsed since the imposition of definitive measures. The request for a review must present evidence that the conditions which justified the imposition of the measures have changed significantly. This may be the case, for example, if the dumping margin or the amount of subsidy has decreased, or if the injury suffered by the EU industry has changed.

Expiry review

Anti-dumping and countervailing duties are generally only imposed for a limited period, often five years. Before this period expires, an expiry review may be initiated to determine whether the measures should be maintained, abolished or adjusted. This review is triggered by a request from EU producers representing a significant proportion of the European production concerned. The request must demonstrate that the termination of the measures would be likely to lead to a continuation or recurrence of dumping or injury.

Procedures and conditions for reviewing existing rights

In a review, the European Commission carries out a full assessment, similar to that carried out in the original investigation. This includes gathering new information, carrying out audits and, potentially, imposing provisional duties if the evidence gathered clearly indicates that the continued imposition of measures is justified. The review may also result in the modification of existing duty rates if market conditions or trade practices have changed significantly.

These review procedures are crucial to ensuring that the anti-dumping and countervailing duties applied by the EU remain fair, targeted and effective, avoiding unnecessary market distortions while protecting European industries from unfair trading practices.

Additional measures and anti-circumvention investigations

Anti-circumvention surveys

Anti-circumvention investigations are a crucial tool in the European Union's trade defense toolbox, used to ensure that anti-dumping and countervailing measures are not rendered ineffective by changes in trade patterns. These investigations aim to identify and counter strategies employed by certain exporters to avoid the duties in force.

Definition and explanation

An anti-circumvention investigation is launched when there is evidence that products originally subject to anti-dumping or countervailing duties are being exported to the EU via a third country in order to avoid these duties. This process may involve minimal changes to the product or its packaging, or a slight transformation in a third country, which does not substantially alter the product but is sufficient to classify it under a different tariff code, thus evading the measures applied.

Example of extended measures

An illustrative example of anti-circumvention investigations could be the case where bicycles manufactured in China, and subject to anti-dumping duties, are partially disassembled and shipped to an ASEAN country where they are reassembled, reconditioned and then exported to the EU. If an anti-circumvention investigation is carried out and proves that the processing in the third country is merely a front to avoid the duties, anti-dumping measures can be extended to these imports, even if they are shipped from a country other than China.

These investigations are vital to maintaining the integrity and effectiveness of the EU's trade defense measures, ensuring that anti-dumping and countervailing duties fulfill their purpose of protecting European industry from unfair trade practices.

Safeguarding the competitiveness of European companies

Anti-dumping and countervailing duties play a crucial role in protecting European Union companies against unfair trading practices that can distort the market and harm the European economy. These measures ensure that dumped or subsidized imports do not undermine the viability of European businesses. By neutralizing these undeserved advantages, the EU enables its industries to compete on a level playing field, preserving jobs and promoting a healthy, competitive economy.

It is imperative that EU companies and industry associations actively participate in the procedures put in place by the European Commission. Their involvement in the complaints process, participation in investigations, and use of review and refund mechanisms are essential to ensure that the rights applied remain relevant and effective. By staying informed and involved, companies can not only protect their interests but also contribute to the implementation of fair and balanced trade policies.

Anti-dumping and countervailing duties are therefore essential tools for maintaining fair trade. The proactive involvement of European economic players in these procedures strengthens the Union's ability to defend its commercial interests, while supporting fair competition within the Single Market.

FAQ

  1. What is an anti-dumping duty?
    ‍An
    anti-dumping duty is a tariff measure imposed on imported products that are sold for export at a price below their normal value in the exporting country. These duties are intended to protect European Union industries from unfair trade practices and to maintain fair competition.
  2. How are anti-dumping duties calculated?
    ‍Anti-dumping
    duties are calculated by comparing the export price of a product with its normal value on the domestic market of the exporting country. The difference, known as the dumping margin, determines the rate of anti-dumping duty that will be applied.
  3. What is a countervailing duty?
    ‍A
    countervailing duty is a tax imposed on imported products that benefit from government subsidies in the country of origin. These duties are intended to neutralize the distorting effects of subsidies on the European market and to support fair competition.
  4. When is an anti-dumping investigation initiated?
    ‍An
    anti-dumping investigation is initiated following the filing of a complaint by a European company or industry association that provides sufficient evidence of dumping and injury to EU industry.
  5. What are the stages of an anti-dumping or anti-subsidy investigation?
    ‍The
    stages include the filing of a complaint, initial examination, formal initiation of the investigation, data collection, verification visits, analysis of evidence, and potentially the adoption of provisional measures followed by definitive duties.
  6. How can a company apply for a refund of anti-dumping or countervailing duties?
    ‍A
    company must submit a refund application to the national customs authorities, accompanied by evidence that the duties have been overpaid or applied in error. Applications must be filed within six months of the re-evaluation of the dumping margin or subsidy amount.
  7. What is an anti-circumvention investigation?
    ‍An
    anti-circumvention investigation is launched when it is suspected that anti-dumping or countervailing measures are being circumvented, for example, when products undergo slight modifications or are transhipped via a third country to avoid the duties in force.

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