How Anti-Dumping and Countervailing Impact Foreign and Domestic Trade

When it comes to promoting and protecting free trade within the country, there are many steps that the United States takes to prevent the distortion or interruption of the flow of free trade. Two of these steps to ensure free, fair trade include anti-dumping tariffs and countervailing duties.

What is Anti-Dumping?

Dumping is when a foreign producer sells a product within the United States at a price that is below the foreign producer’s sales price in their home market, or at a price that is lower than the cost of production. By doing this, producers flood the U.S. markets with unfair product prices. Dumping is considered a type of price discrimination.

The World Trade Organization (WTO) doesn’t take an explicit stance on whether or not dumping is an unfair trade practice, and dumping is legal under WTO rules unless the foreign country can reliably prove the negative impact that the exporting firm has had on its domestic producers. That said, most nations are not in favor of dumping, and the vast majority of trade agreements include restrictions on dumping. Many nations also employ tariffs as a way of combating dumping and other types of predatory pricing.

To prevent price discrimination through dumping, the U.S. has an anti-dumping duty. This is a protectionist tariff, imposed on foreign imports that the U.S. believes are priced below the fair market value. When a foreign country is selling a product at a price that is significantly below the price at which is it produced, anti-dumping duties are levied. The impact of these anti-dumping tariffs include:

  • Protection of domestic jobs
  • Higher prices for domestic consumers
  • Reduced international competition for domestic companies

What is Countervailing?

Countervailing duties are also a type of tariff. Commonly referred to as CVDs, countervailing duties are tariffs imposed on imported products to offset subsidies made to the producers of these products in the exporting country. Since foreign producers of a good may be able to afford to sell it a lower price, due to subsidies received from their government, CVDs work to level the playing field for domestic producers of the same good.

Export subsidies are considered an unfair trade practice under the WTO. The WTO has procedures in place to establish when a situation calls for countervailing duties to be imposed by an importing nation, and to regulate the measures that nations take to offer the consequences of subsidies.

By promoting fair trading practices, CVDs work to:

  • Protect domestic industry
  • Prevent factory closures
  • Protect domestic jobs

Anti-dumping tariffs and CVDs work to protect and promote fair trade and it is necessary for importers and exporters to understand how they may impact both international and domestic trade. To learn more about both anti-dumping and CVDs, what products they may affect, and what steps need to be taken when dealing with them, please see this resources page from U.S. Customs and Border Protection.

This content is intended for informational purposes. Due to the generality of this content, the provided information may not be applicable in all situations. We encourage the reader to review the most up-date-regulations directly with the U.S. government’s sources on anti-dumping and countervailing, which can be found here.

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