Dumping is a term that is used in financial markets as well as in international trade. In the context of buying and selling securities, dumping refers to the practice of selling large blocks of securities. More specifically, when dumping securities the seller is primarily interested in getting rid of the securities at any price. One simply dumps, or unloads, on the market with no regard to the selling price of the securities.

Dumping is also used in a commercial sense in the context of international trade. It refers to the practice of one country selling commodities or finished products in another country below cost or fair market value. Predatory dumping occurs when one nation exports goods to another nation below cost or fair market value in order to obtain market share at the expense of domestic competitors. In many cases, predatory dumping drives out domestic competition. Then, having established a dominant marketing position in the industry, the predatory dumpers raise their prices well above previous levels.

Many nations, including the United States, have enacted antidumping laws that provide for the imposition of antidumping penalties or tariffs when a case of dumping can be proven. Following the Uruguay Round of Multilateral Trade Negotiations in 1993, the General Agreement on Tariffs and Trade (GATT) contained provisions to standardize antidumping measures by different nations. Antidumping measures affect not only the practice of dumping goods into the U.S. market, they also affect the ability of U.S. companies to export goods to other countries at competitive prices.

The enforcement of antidumping measures in the United States and elsewhere has not only caused friction among trading partners, it has also proven to be exceedingly complex at times. In foreign markets the use of antidumping laws has rapidly increased in the 1990s. In the past, U.S. firms have been subject to dumping decisions where it was not clear by what criteria the cases were decided.

In the United States dumping cases are investigated by the U.S. International Trade Commission (ITC) and the International Trade Administration on the basis of industry complaints. Under GATT there must be more expressed support among domestic producers than expressed opposition to the initiation of an investigation. In addition, investigations are not to be initiated when imports from any one country constitute less than 3 percent of U.S. imports of the product in question, or if imports from all countries subject to a complaint are less than 7 percent of total U.S. imports of the product.

Although a single firm may be guilty of dumping, antidumping complaints are brought against all of the firms in the foreign country's industry. That means that the decision to impose punitive tariffs and duties affects a country's entire industry, not just a single company.

Among the questions that are material to a dumping investigation are the pricing policies and profit margins of the exporter in its home market and in other export markets. The ITC must determine what constitutes unfair pricing. How does the ITC or an investigative body in another country determine that a product or commodity is being sold below cost or fair market value? How much above cost can an exporter sell its goods in the United States and still be accused of dumping? Using fairly complex rules and guidelines, the ITC compares the price of the goods in the U.S. market with those in the exporters' domestic market as well as its sales to other countries. Such price comparisons may be complicated by the fact that home-market sales may be too small to make valid comparisons, the exporter may make occasional sales below cost in its home market, and other factors.

The object of the ITC investigation is to determine if an exporter's practices have injured or might pose the threat of an injury to an existing U.S. industry. If an industry complaint passes the ITC's preliminary investigation, it must then be confirmed by the U.S. Secretary of Commerce. The ITC then conducts a final investigation. Once the ITC determines that dumping has occurred, it is up to the nations involved to come to a corrective agreement, or else the president of the United States may impose antidumping measures in the form of higher tariffs and duties on the imported product or commodity.

From 1980 to 1997, 837 antidumping petitions were filed with the International Trade Administration, which approved 804 of them for investigation by the ITC. Under the Uruguay Round Agreements Act, all antidumping duties, tariffs, and suspension orders would be automatically canceled after five years, unless it was determined that their revocation would lead to a recurrence of dumping and would cause injury to domestic industry. Of the 320 cases up for "sunset" review, more than one-third of them involved the steel industry, which has used antidumping complaints as a tool to curb imports.

The minivan controversy between the United States and Japan in the early 1990s provides one example of how antidumping complaints are handled. The major U.S. automakers accused Japanese automakers of selling minivans in the United States at less than fair market value. In its preliminary investigation the ITC agreed with the U.S. automakers. The U.S. Department of Commerce then issued a ruling that Toyota and Mazda were in fact dumping minivans in the U.S. marketplace. When the ITC conducted its final investigation, however, it determined that the Big Three automakers—Ford, Chrysler Corp., and General Motors Corp.—had not been hurt by Japanese pricing practices in the U.S. minivan market. The Big Three appealed, but a judge in the U.S. Court of International Trade upheld the ITC decision, and Toyota and Mazda were cleared of dumping charges.

[ David P. Bianco ]


Buck, Manfred W. "Dumping: Tool of World Trade." American Metal Market, 19 August 1997, 13.

Dumler, Christopher M. "Stifling Competition in the Supercomputer Industry." USA Today Magazine, May 1998, 26-28. Kelly, Nancy E. "Rule Changes May Revoke Some Anti-Dumping Cases." American Metal Market, 6 May 1998, 7.

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