(customs) The sale of a commodity in a foreign market at less than fair value, usually considered to be a price lower than that at which it is sold within the exporting country or to third countries.
“Fair value” can also be the constructed value of the merchandise, which includes cost of production plus a mandatory 8 percent profit margin.
Dumping is generally recognized as an unfair trade practice because it can disrupt markets and injure producers of competitive products in an importing country.
(a) With price-price dumping, the foreign producer can use its sales in the high-priced market (usually the home market) to subsidize its sales in the low-priced export market. The price difference is often due to protection in the high-priced market.
(b) Price-cost dumping indicates that the foreign supplier has a special advantage. Sustained sales below cost are normally possible only if the sales are somehow subsidized.
(c) Diversionary dumping is the sale of foreign products to a third country at less than fair value where the product is further processed and shipped to another country.
(d) Downstream dumping is the sale of products below cost to a secondary producer in the original producer’s domestic market who then further processes the product and ships it to a foreign country.
(U.S.) The U.S. Antidumping Law of 1921, as amended, considered dumping as constituting “sales at less than fair value,” combined with injury, the likelihood of injury, or the prevention of the establishment of a competitive industry in the United States. The Trade Act of 1974 added a “cost of production” provision, which required that dumping determinations ignore sales in the home market of the exporting country or in third country markets at prices that are too low to “permit recovery of all costs within a reasonable period of time in the normal course of trade.” The Trade Agreements Act of 1979 repealed the 1921 act, but reenacted most of its substance in Title VII of the Tariff Act of 1930.
See countervailing duties; antidumping duties; constructed value; dumping margin; fair value.