Companies engaging in international trade need to research and be aware of laws and barriers to entry that are set up in different countries.
Antidumping (AD) and countervailing (CV) duties are imposed by the United States Department of Commerce (DoC) to protect local manufacturers in the US.
These fair trade laws were set by policy makers as replacement for the previous free trade environment in the US.
This is because local businesses felt that foreign manufacturers and governments were using unfair trade practices and sold goods at lower than fair value in the US markets.
Antidumping duties in the USA explained
Dumping is explained by the International Trade Administration as an event where a foreign business sells products that are priced lower than in the US compared to their origin country. If a producer sells products that are below the cost of production, this is also considered dumping.
It is important to take note that a foreign manufacturer selling products cheaper than a US company is not automatically considered dumping. To be fined an anti-dumping duty, the alleged dumping must have caused harm to a company or industry in the US.
Who pays anti-dumping duties?
The dumping margin is the difference between prices in the US and prices in the manufacturer’s home market. The AD duty is charged to offset the dumping margin and damage caused to other local companies in the industry.
The importer of record is the person that submits the document to the US customs and is responsible for clearing AD duties. They are responsible for compliance with import laws and assume ownership of products.
What are countervailing duties?
Countervailing (CV) duties are taxes imposed on subsidized businesses that export to the US. These tariffs are meant to offset the subsidies that companies receive from home countries that allow them to sell their items at a cheaper price.
Countervailing duties are charged if there is proof that a subsidized business has caused harm to the domestic industry.
Subsidies from an importer’s government could be in the form of cash inflow, tax exemptions or loans with low-interest rates. To be considered countervailable, it needs to be a government subsidy that benefits a specific industry and is dependent on export or the use of domestic goods.
Who pays the countervailing duty?
Countervailing duties are meant to neutralize any effect of the subsidy on local producers who don’t have subsidies. Countervailing duties are charged only after a thorough investigation is conducted and the damages incurred have been calculated. CV duties are charged to the company that is the importer of record.
Why are these duties imposed?
International trade laws such as the AD and CV duties are made with the intention to protect local manufacturers from foreign competition. American policymakers have switched out free trade laws in favor of fair trade laws to level the playing field for American manufacturers.
Over the years, foreign markets have taken note of the profitability of the US market. Foreign governments offer subsidies and incentives for companies to export home countries’ products to the US to boost sales margins.
Foreign companies who receive subsidies from their governments are able to sell products at lower than fair value prices.
Local companies who don’t receive subsidies or help are at risk of shut down when facing unfair competition. These duties help level the competition especially for products that are sensitive to import.
What is the difference between these duties?
Products that are sold for lower than fair value in the US are considered to be dumped. Countervailing duties are charged when a business receives subsidies that allows them to charge goods at a lower price. Both anti-dumping and countervailing duties can be charged on the same product.
The US International Trade Commissions run investigations and decide if companies are guilty of these charges. AD duties are charged to balance out the dumping margins while CV duties are charged based on the subsidies a company has received.
Dumping and countervailing investigation
AD and CV duties are only charged to a company after a thorough investigation to ensure that all parties have a chance to make their case. A petition can be filed by a domestic party about an imported good if they have sufficient evidence to prove injury and dumping or subsidization.
International Trade Commissions and The US Department of Commerce run investigations on claims made against importers. During this time, the US customs holds on to all the products that are under investigation.
Once a decision is made and the estimated duties are decided, customs charges the importer of record.
According to the International Trade Admissions, preliminary determinations are done within 190 days for antidumping investigations and 130 days for countervailing. Importers will have to set aside the estimated amount which would be collected at the end of the investigation. Investigations take about 12 to 18 months to complete from initiation.
Parties can also come to a suspension agreement where the foreign exporter changes their damaging actions. These agreements allow the AD or CV investigation to be suspended as long as the unfair pricing and damage from subsidies is eliminated.
Manufacturers are free from assessment and duties as long as the terms of the agreement are kept.
The Role of the World Trade Organization
Governments tend to react aggressively to foreign companies who are involved in dumping by levying anti-dumping duties on their products. The World Trade Organization (WTO) states that dumping is legal unless it harms the domestic market.
WTO regulates investigations and requires the country to prove the extent of the cost of damages before allowing them to charge AD duties. The WTO also has an agreement on countervailing measures to regulate the use of subsidiaries without harming the country of import.
The problem with antidumping laws and countervailing duties investigations
While these investigations are deemed to be fair, The Heritage Foundation and the United Nations Conference on Trade and Development find that there are quite a few problems that occur when charging foreign manufacturers with these trade duties.
Antidumping laws are often used on products that aren’t comparable because they don’t have the same exact quality. Often, products may have the same purpose but should be valued differently because they are marketed as having different qualities.
These investigations also don’t account for the fact that sometimes prices in the home country could be more expensive because of sales-associated costs that are different. The prices of products in their home country may seem to be inflated and thus look like they’re dumping products in the US.
The implementation of these laws are also left to local authorities and have loopholes that may be subject to abuse. There are also a large number of unjustified cases that never lead to a concluded outcome because of low thresholds.
Antidumping cases by country
The list of products that face antidumping and countervailing duties vary between countries. In the USA, there are many products that could go through AD/CV investigations and it’s best to check out the extensive list on the official International Trade Administration website.
List of anti dumping items from China 2020
China was the biggest trading partner in the United States in 2020 with a total trade worth $659.5 billion. They have an excellent trade relationship but there are also many AD/CV investigations on China import items. However, the scenario changed after the US-China Trade war.
Among the list of items that have AD/CV cases on them from China are as below.
- Ammonium sulfate
- Barium carbonate
- Calcium hypochlorite
- Potassium permanganate
- Steel racks
- Wooden cabinets
- Polyester staple fiber
Role of MultiB2B in Anti-Dumping and Countervailing Duties checks in the USA for manufacturers
When it comes to exporting to the US, it is imperative for the Asian manufacturers to consider the options they have to expand in the overseas market; Direct exporting vs dropshipping supplier: which one’s better for you as a manufacturer/brand? It could be useful for manufacturers to also read the article how do manufacturers expand their businesses in the US through dropshipping? if they are not familiar with this concept before deciding.
Getting the right partner will help you to avoid paying heavy duties by being informed earlier if such possibility exist. Thus, the most obvious advantage of partnering with MultiB2B for the manufacturers’ exports is we would do a thorough market research to find out if there are any duties imposed before manufacturers arrange for products to be sent to the US. Other advantages are highlighted in the article why do you need to outsource fulfillment services when shipping to the USA.
It is important to get your documentations right and classify products correctly so as not to get tangled in an antidumping or countervailing dispute.
Charges for these duties can be significantly higher than the value of the products and importers can be charged fines for having the wrong documentation.
It is best to work with brokers, logistic managers or end to end fulfillment partners who are familiar with the processes and may be able to do the legal work for you. It is also good to know your rights and the legal actions that you can take if you believe that your AD or CV charges are misclassified.