Published in Supply Chain Digest, April, 2012, ghost written for Anthony Hardenburgh
The terms “countervailing” and “anti-dumping duties” are often used together without necessarily distinguishing the two — in fact they are often abbreviated as ADD/CVD. What are these duties, and why are they important to supply chain managers?
Countervailing duties address the consequences of subsidies granted by governments for the production of certain goods. Subsidies effectively make goods less expensive, and when subsidized goods enter other countries, they may undercut or injure local producers. If there is a determination that Country A’s producers have been injured by Country B’s subsidies, then Country A may impose countervailing duties on the goods to close the price gap. Countervailing duties neutralize the negative effects of subsidies.
Dumping refers to actions taken by companies, not governments. If a company exports a product at a price lower than the price it normally charges within its own home market, it is said to be “dumping” the product. Therefore, when a government imposes anti-dumping duties, it is attempting to bring an imported product’s price closer to a “normal value.” The net objective is to protect domestic businesses from unfair pricing practices.