Anti-Dumping 101: A Trade Protection Measure

Imagine the following scenario. You run a Malaysian-based manufacturing company. For many years you have been conducting your business, and the business has grown. Your sales in the domestic market are increasing rapidly and the fundamentals of market growth for your products are solid. Things are going great. It seems like everything is hunky-dory, and you begin to think about buying the Bentley Flying Spur that you have long coveted.
Then, as time passes, you begin to realise that despite the booming market, your sales are dwindling and a worrying amount of unsold product is building-up. You do some digging. You find out that your other competitors in Malaysia are experiencing the same problem. You all then begin to wonder – where did all the customers go?
You do some more digging, then you find that imports of the manufactured goods your company is selling has increased tremendously. Ominously, you see that these imported goods are being sold at a lower price than your products. In fact, these goods are being sold in Malaysia cheaper than they are in their home country. There is no way that your company or your competitors in Malaysia can match the prices.
What do you do? Do you have any recourse in such a situation? Or should you just close up shop and retire?
But there may be hope. Many, many years ago, Malaysia became a signatory to the General Agreement on Tariffs and Trade (“GATT”). The main purpose of the GATT was to promote international trade between member states by reducing trade barriers. Then when the World Trade Organization (“WTO”) was founded in 1995 as a successor to the GATT, Malaysia became a founding member.
You are probably thinking, “All that sounds great but what does that have to do with my business?”
As part of Malaysia’s obligation as a WTO member, Malaysia had enacted a certain law to deal with the exact issue your business is facing. This law exists to address situations where international unfair trade practices occur. The law is called the Countervailing and Anti-Dumping Duties Act 1993 (the “Act”).
The Act provides for various trade remedies, including what is called an anti-dumping measure.
What is an anti-dumping measure?
An anti-dumping measure can be imposed by the Government under the Act in a situation where dumping of goods occurs.
So, what is dumping?
Dumping occurs in a situation where goods are imported into Malaysia at prices below the sales price of the goods in their home country. In other words, foreign manufacturers are selling goods in Malaysia below the price the foreign manufacturers are selling those goods in their own country.
Dumping can occur due to many reasons. Examples of why goods are dumped into the overseas market include plans to drive competitors out of business to gain market share in a particular country, or to clear excess capacity due to over-production in the country of origin or a reduction in demand for a product.
The existence of dumping alone will not justify the imposition of an anti-dumping measure. It must also be shown that the dumping of the products had caused material injury to the domestic industry as a whole. It is pertinent to note that it is not sufficient to show injury to just your company; what needs to be established is that injury was suffered by the entire domestic industry producing the products.
You must be now thinking, “Is there anything I can do if I think my business has suffered from the effects of dumping?”
The answer is, yes. You may apply to the Government to initiate an anti-dumping investigation. However, such an application cannot be made by a company on its own (unless the company has sufficient market share), but it needs to be made on behalf of the domestic industry.
In order to initiate an anti-dumping investigation on behalf of the domestic industry, you will first need to establish that the application is supported by producers whose collective output comprises: 

  • more than 25% of the total Malaysian production of the products; and 

  • more than 50% of the total production of the like products by the Malaysian producers who have expressed either support for, or opposition to, the application. 
Once you have gotten over that hurdle, you will need to show that dumping has indeed occurred. The reason for the dumping is immaterial, and this is a purely mathematical exercise.
If you have managed to establish dumping, then you and the other domestic producers will need to show that the domestic industry has suffered injury as a result of the dumping.
There are many factors that can be considered to establish what causes material injury. These include decline in sales, fall in profit and drop in production – to name a few. As part of the process, in Malaysia, public interest is also something that is considered.
What does an anti-dumping measure entail?
If the Government is satisfied that dumping has occurred, it will impose anti-dumping duties on imports of the products from the particular countries that are the culprits to the dumping. The percentage of the duties will be the difference between the sales price of the products in their home market against the amount of the sales prices of the products in the Malaysian domestic market, in line with the aim to equalise and neutralise the injury caused by the cheap import prices.
Within three to four months from the time the investigation is initiated, the Government may make an affirmative preliminary determination and impose provisional anti-dumping duties on imports of the products from the countries that appear to be dumping their products in Malaysia. These duties are usually collected in the form of a security such as a bank guarantee.
Thereafter, within six to seven months from the time the investigation is initiated, the Government may make an affirmative final determination and impose definitive anti-dumping duties. These duties will be collected in the same manner as customs duties.
In Malaysia, the Ministry of International Trade and Industry (“MITI”) is tasked with overseeing the investigations and determination of anti-dumping duties under the Act.
Therefore, any application for anti-dumping measures is to be made to MITI.
Once such an application is made, MITI will have one month to evaluate the data provided and to decide whether to launch a full investigation. In situations where MITI has determined that there is prima facie evidence of dumping and material injury caused by the dumping, MITI would usually initiate such an investigation.
Once the investigation is initiated, all interested parties may submit their views to MITI as part of the investigation process. These interested parties include importers of the products, foreign producers of the products, local domestic producers and trade/ business associations.
From the time of initiation, an anti-dumping investigation may last from around three months to slightly less than one year.
In the event MITI imposes anti-dumping duties, MITI will usually impose individual dumping margins on foreign producers that stepped forward and cooperated as interested parties during the investigation, as well as separate general anti-dumping duties for the non-cooperative or non-participating parties for each country affected.
Anti-dumping duties have a life of five years, and may be extended upon expiry of that period for a further five years if there is evidence that dumping will re-occur should the duties lapse.
Now that you are aware of what anti-dumping is, its requirements and the procedure, you now have a chance to seek remedies to fight against those unfair competing  products which have been imported from foreign countries at dumped prices.
It is interesting to note that anti-dumping measures are seldom used in Malaysia in comparison to other jurisdictions such as India, China, South Africa, Turkey and the United States. However, with a little awareness, this could be a boon to Malaysia’s domestic manufacturing businesses to combat unfair trade practices as our economy expands and the manufacturing sector further develops.
Perhaps the gleaming Bentley Flying Spur could still find the pride of place in your garage.
Article by Lim Koon Huan (Partner) and Manshan Singh (Senior Associate) of the Trade Remedies Practice of Skrine.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact