Help! Foreigners Are Killing My Business!
30 June 2014
Lim Koon Huan and Jason Teoh discuss the anti-dumping safeguards in Malaysia.
Is your business suffering because foreign exporters are flooding the domestic market with their products priced below their cost price? Are your fellow Malaysian manufacturers suffering the same fate as well? Do you fear for the future of the domestic market? If you are experiencing any of the above, you may be the victim of dumping activities. Fear not, for help is just around the corner!
Dumping occurs when a foreign producer sells a product in the importing country at a price (“export price”) that is below that producer's sales price in the country of origin (“normal value”) and as a result of the dumping, the local manufacturers of the said product in the importing country (“domestic industry”) suffer injury. The difference between export price and normal value is called the “dumping margin”.
In the short run, dumping appears to be beneficial to end users as it has the effect of driving down market prices temporarily. However, in the long run, dumping (which is a form of unfair trade practice) stifles the growth and development of local industries and may lead to more severe economic repercussions.
HOW TO COMBAT DUMPING
If dumping is said to have taken place, the government of the importing country is permitted under the World Trade Organisation (“WTO”) to take remedial action, typically in the form of charging extra import duty on the particular product from the exporting country in order to bring the export price closer to the normal value or to remove the injury to the domestic industry.
THE GUARDIAN OF FAIR TRADE IN MALAYSIA
In Malaysia, the Trade Practices Section of the Ministry of International Trade and Industries (“MITI”) is the authority that has been tasked to investigate and deal with unfair trade practices, including dumping, on behalf of the Government of Malaysia under the Countervailing and Anti-Dumping Duties Act 1993.
SUMMONING THE GUARDIAN
An aggrieved domestic manufacturer may petition to MITI on behalf of the relevant industry, seeking investigation on the foreign exporter(s) in relation to a particular product which, in its view, has been dumped in Malaysia.
The domestic manufacturer must provide statistical evidence to support the claim of dumping. Generally, the following information is required by MITI for its preliminary assessment:
- the identity of the domestic industry producers, manufacturers and distributors, including any affected upstream and downstream stakeholders and regional producers, if any;
- the petitioner must show that the petition is supported by domestic producers who account for a sufficiently large percentage of the domestic production of the like product. In this regard, MITI will assess:
(a) whether the identified domestic producers expressing either support or opposition to the petition account for more than 50 per cent of the total production of the like product produced by that portion of the domestic industry; and
(b) whether the domestic producers who support the petition account for at least 25 per cent of the total production of the like product by the domestic industry;
- a detailed description of the merchandise that defines the requested scope of the investigation, including technical characteristics and uses of such merchandise and its current Malaysian tariff classification;
- the country in which the merchandise is produced, and if such merchandise is imported from a country other than that in which it is produced, the name of the intermediate country;
- the identity of each party the petitioner believes is producing the merchandise for export or is exporting to Malaysia and is selling the merchandise at prices below the normal value;
- any factual information, particularly documentary evidence, relevant to the alleged dumping, including:
- information relevant to the calculation of the normal value and export price of the merchandise; and
- the volume and value of the merchandise imported into Malaysia during the most recent two-year period or during any other recent period that the petitioner believes to be more representative, or if the merchandise was not imported into Malaysia during the two-year period, information as to the likelihood of its sale for importation into Malaysia;
- the identity of each party whom the petitioner believes is importing, or if there is no importation, is likely to import the merchandise; and
- evidence of injury to the domestic industry caused by the merchandise and the causal link between the imports of the merchandise and the alleged injury.
THE INVESTIGATION PROCESS
On receipt of an anti-dumping petition from the domestic industry or local producers, MITI will notify the government(s) of the exporting countries concerned that such a petition has been filed.
Meanwhile, MITI will conduct a preliminary investigation to determine the accuracy of the evidence presented, the level of support or opposition of the petition by the domestic industry, as well as the public interest involved. If an investigation is warranted, MITI will:
- notify all interested parties (e.g. the foreign government/manufacturers concerned and local importers) of the decision to initiate the relevant investigation;
- publish a notice of initiation of investigation and gazette the same;
- seek the required information (including but not limited to, information on prices and injury factors) through questionnaires issued to the relevant stakeholders; and
- at an appropriate juncture, conduct verification visits on the respondents to the questionnaires to verify the information received.
THE ANTICIPATED RELIEF
At the end of the investigation process, if MITI makes a finding that:
- the product under investigation was dumped by the exporting foreign producers;
- injury has been suffered by the domestic industry concerned;
- there is a causal link between the dumping and injury found; and
- the imposition of anti-dumping duties is not against public interest,
extra import duty in the form of anti-dumping duties will be imposed on the product under investigation from the particular exporting country in order to bring the export price closer to the normal value or to remove the injury to the domestic industry.
As a general rule, any anti-dumping duties imposed will be for a maximum duration of five years from the date of publication of the affirmative finding in the Gazette. No later than five years after anti-dumping duties have been imposed, MITI will conduct a sunset review to determine whether revoking the said duties would be likely to lead to continuation or recurrence of dumping. In this regard, MITI will seek written views from the relevant stakeholders before making its decision.
No less than one year after the anti-dumping duties have been imposed, affected foreign exporters may request MITI to conduct an administrative review of the said duties where the dumping margin has changed substantially or where the duties imposed are no longer necessary or maintainable.
Upon receiving such a request, MITI will review the facts and circumstances involved to determine if the said request is meritorious.
THE MALAYSIAN TREND
Whilst Malaysia has not been known to be an active user of trade remedies, there has been a surge in anti-dumping investigations initiated by MITI since mid-2012. Among the products investigated within the last 24 months were (i) s
Consistent with the global trend, the most frequently investigated products were from the iron and steel sector. As four out of the eight recent investigations by MITI involved construction related products, there were speculations that trade remedy measures, in particular anti-dumping actions, have been used to protect the construction-related industry in Malaysia.
WHERE DO WE GO FROM HERE?
Newton’s Third Law states that for every action there is a reaction. It is crucial that in determining anti-dumping measures, the investigation must be transparent and be up to the standards prescribed by the WTO. If any duty is to be imposed, it must be proportionate to the injury caused to the importing market and not for any other reason.
Although no formal connection has been made, eyebrows were raised when Vietnam decided to impose anti-dumping duties against cold-rolled stainless steel coils originating from Malaysia shortly after Malaysia had imposed anti-dumping duties on biaxially oriented polypropylene films from Vietnam. As a developing nation, a full blown trade war would not be in Malaysia’s interest. Indeed, all eyes are on MITI’s role as the Malaysian Free Trade Guardian.