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-reverse dumping
. In order to have such a
case, the overseas demand must be less elastic, and the market will tolerate a
higher price. Any dumping will thus be done in the manufacturer's home market
by selling locally at a lower price.
Legal Aspect of Dumping
Whether dumping is illegal or not depends on whether the practice is tolerated in
a particular country. Switzerland has no specific antidumping laws. Most
countries, however, have dumping laws that set a minimum price or a floor on
prices that can be charged in the market.
Illegal dumping occurs when the price charged drops below a specified level.
What are the unfair or illegal price level, and what kind of evidence is needed to
substantiate a charge of dumping? The case of Melex golf carts from Poland
illustrates the difficulty in determining a fair price. The success of Melex in the
United States led to an accusation of dumping.
The Treasury Department was unable to ascertain whether Melex's U.S. price
was lower than prices at home in Poland because Poland has no golf courses and
no demand for such a product. The cost of production was unsuitable for
determining its fair price. Poland, as a socialist economy, does not let market
forces fully dictate the costs of factors of production. For this reason, the 1974
Trade Act does not allow production costs in a communist/socialist country to
be used for comparison purpose.
To determine fair costs, the Treasury began to use a small Canadian
manufacturer's costs as reference prices, only to see the Canadian firm stop
making golf carts. Also, Poland protested that the Canadian firm's production
costs were too high and unsuitable for comparison. The Treasury's next step was
to rely on reference prices of a comparable product from free-market countries.
Mexico and Spain were chosen because they were considered to be similar to
Poland in terms of their level of economic development. Even though Mexico
and Spain do not produce golf carts, they were used anyway to determine what
their production costs would be if they produced such a product. After much
review and discussion, the ruling was that the "constructed" value did not differ
appreciably from Melex's actual price.
The 1980 ruling did not end the matter. The American producers still wanted
Melex to pay the dumping charges for the years 1979 to 1980, and the
Commerce Department's 1992 review imposed a duty of $599,053.51 plus
interest. Melex has continued to fight the case, which has outlasted five U.S.
administrations, Poland's martial law, and the Soviet Union empire.
One item of evidence of dumping occurs when a product is sold at less than fair
value. The Commerce Department, for example, made a final determination that
imports of certain small-business telephone systems and subassemblies from
Japan and Taiwan were being sold in America at less than fair value.
Subsequently, the U.S. International Trade Commission made final
determinations and found injury to industries in the United States from such
imports. The Commission's injury finding led to antidumping duties being
placed on imported products to offset their price advantage.
Another example of dumping evidence is a product sold at a price below its
borne-market price or production cost. The United States relies on the official
U.S. trigger price, which is designed to curb dumping by giving an early signal
of an unacceptable import price. In the case of steel, the trigger price sets a
minimum price on imported steel that is pegged to the cost of producing steel in
Japan. According to the General Accounting Office, some 40 percent of all
imports at one time were priced below the trigger price.
To provide relief, the Antidumping Act requires the Department of Commerce
to impose duties equal to the dumping margin. The antidumping duty is based
on the amount by which the foreign market value or constructed value exceeds
the purchase price or an exporter's sale price.
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