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CHAPTER VIII

ANTI-DUMPING LEGISLATION

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What dumping is not - Competition with cheap foreign goods Undervaluation Specific vs. ad valorem duties - Countervailing duties - Types of dumping - Sporadic selling abroad below price at home- Dumping as a permanent policyDumping as predatory price cutting-Effect of dumping on American industries Post-war possibilities Canadian dumping law-Australian method of handling unfair competition American dumping legislation of 1916 - Proposed revisions.

A tariff that equalizes the normal permanent differences in competitive conditions between this country and foreign countries should be supplemented by legislation that will prevent foreign interests from defeating the intent of Congress in enacting the tariff law. Failure to recognize this fact tends to encourage the agitation for a prohibitive tariff. In addition to a tariff law that will place our industries on an equality with their foreign competitors, we need trade defenses that will keep them there.

"Dumping" is a term which is heard frequently and which is used very loosely by business men. The great majority of cases described as dumping are merely cases of severe competition of cheap foreign goods. Foreign manufacturers may not be guilty of dumping even though they are selling their products in the United States at prices that make it impossible for American competitors to remain in business. Their costs may be so low that they can continue to undersell the American manufacturer and make a profit. We get nowhere by

calling this condition "dumping." It may require a remedy, but the remedy is a higher tariff, not antidumping legislation. The persistent selling in the American market of those foreign goods which it is desired to protect at a price below the cost of American manufacture is precisely the sort of condition that a tariff law should be devised to correct.

There is another objectionable trade practice which is not dumping, although it is often confused with it. This practice is undervaluation. In the American tariff law ad valorem duties are assessed on the foreign value of the goods. The lower the value, the less duty need be paid; the higher the value, the more protection the American manufacturer gets. Disputes are not infrequent between Government appraisers and importers. In spite of the machinery devised for determining foreign values, undervaluing of goods is not uncommon. It may be unintentional, or it may be carried out by an elaborate system of false invoices and entries. Here again a remedy is necessary, but not anti-dumping legislation.

The tendency in modern tariff making is to abandon, wherever possible, ad valorem duties and adopt specific duties, that is, duties on units of quantity, so much per pound, so much per gallon, and so forth. Many rates in the American tariff, now ad valorem, should be specific. Not only do ad valorem rates make undervaluation possible, but they afford American producers the least protection when they most need it. When the price of a particular commodity, for example, steel, rises abroad, the effective amount of protection given by ad valorem duties is relatively higher, but it is then that it is least needed by the American industries affected. On the other hand, when prices of particular com

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modities fall abroad, and it is profitable for importers to buy them for sale in the United States, a percentage duty on low foreign values affords relatively less protection. In other words, ad valorem duties vary in amount inversely with the needs. Specific duties need no change if relative conditions do not change. Ad valorem duties need change when anything changes. Specific duties, however, require very careful, and in some cases, detailed classification of goods in the tariff Prohibitive duties may be concealed in specific duties, as they were in the old so-called compensatory duties in the Payne-Aldrich woolen tariff. Ad valorem duties may be resorted to because of a lack of knowledge in tariff making, for they automatically adjust themselves to variations in price. If a tariff law does not have a scientific classification of articles, ad valorem duties had better be used. But the aim of tariff making should be a scientific classification of all products and the use of specific duties wherever possible. Specific duties are easy and inexpensive of collection and are desirable on this account also. The weighing or measuring of products is much simpler than determining their value.

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Specific duties are not always possible. and chinaware tariff, for example, does not seem to be adapted to specific duties. Values vary so widely that a duty on the weight or size would result in injustice. But in this line of goods undervaluation has been particularly flagrant. The way out of this and similar dilemmas seems to be the adoption of what is known as a system of fixed valuations. Such a system consists of a list of established values on every class and grade of goods which are used for a stated period as the basis for assessing ad valorem rates regardless of the foreign

market price. It is ad valorem in form but specific in effect. The successful working of such a system requires a frequent revision of the values in the list. For a number of years the Treasury Department followed such a plan in administering the pottery schedule of the tariff, but it was finally overruled.

Even were specific duties and fixed valuations adopted generally, some cases would remain that could only be reached by ad valorem duties. For example, the socalled "catch-all" or "blanket" clauses of the tariff act will necessarily contain ad valorem rates. The laws of the United States now provide that duties shall be levied on the value of goods in the principal foreign market.1 This method, supported by effective machinery for detecting undervaluation, is probably the most satisfactory way of handling a tariff based on values.

Still another practice, objectionable and requiring a remedy, should be distinguished from the practice known as dumping, although as a matter of fact it is a form of dumping. In some countries export bounties or similar aids in the nature of subsidies are granted to exporters. The result is to nullify the tariff of this country pro tanto. Countervailing duties is the name usually given to the duties this country has employed to defend itself against such an effort to evade its laws. The American Tariff Act of October 3, 1913, provides that when "any country, dependency, colony, province, or other political subdivision of government" shall grant any bounty on the exportation of any article and that article is imported into the United States, it shall be subjected to an additional duty equal to the net amount of the bounty. A general clause providing for counter

1 Act of October 3, 1913, Section III, paragraphs K, L, and R.

vailing duties is now an accepted part of our tariff laws. Some important questions, however, are still unsettled with reference to them. Our present law provides only for countervailing duties in case the bounty or grant is made by a governmental organization. The most insidious and undesirable preferential treatment accorded to exporters is sometimes established by organizations that are either controlled solely by commercial interests or are used as a cloak for Government activities. These private concerns, private in form or in fact, at times grant bounties and subsidies to their members in exporting to foreign countries, or preferential railroad or steamship rates are given. So far as the effect is concerned, it makes no difference to this country whether bounties or other forms of preferential treatment are granted by a foreign Government or private organization. Countervailing duties should be extended to include bounties granted by private cartels or associations, preferential railroad and steamship rates, and any other form of grant that tends to nullify the object Congress had in mind when it enacted our tariff duties.

Three aspects of dumping must be distinguished before this practice can be understood and before adequate anti-dumping legislation can be devised. Dumping may be:

(1) A temporary and sporadic selling abroad below the domestic price of a surplus that cannot be disposed of at a profitable price at home. It is the principle of the "bargain counter" applied to international trade.

(2) A constant deliberate selling abroad below the domestic price of a portion of a factory's output, since by operating full time foreign producers

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