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Matched Legal Cases: ['art. 2', 'art. 2', 'Art. 3', 'Art. 5', 'art. 3', 'art. 2', 'art. 2', 'Art. 10', 'Art. 1']

Customs Valuation Chap 15 Fig 4 | Dumping (Pricing Policy) | Subsidy
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All Quiet on the Antidumping Front? Take a Closer Look, Cato Free Trade Bulletin No. 23
UNDP EE AHDR Energy Subsidies 2012 Final
Notice: Antidumping: Hot-rolled flat-rolled carbon-quality steel products from&#8212; Japan
Customs Valuation : The value of goods traded that is taken into account by customs authorities is of major importance to exporters
and importers. If the value is more than what it should be, it will result in higher duties at the importers expenses, consequently making the product less competitive. In the past, GATT registered numerous complaints to the effect that customs applied arbitrarily and unduly high customs values. Traders also complained that they could not estimate in advance the duty that would be applied to products. The Agreement on Customs Valuation (ACV), which was adopted during the Uruguay Round, intends to address these problems, and indicates how goods are to be valued by customs authorities. The revised GATT article VII on Valuation for Customs Purposes reduces the possibility of arbitrary valuation and binds all WTO member countries (WTO 1999, p. 110). The Agreement lists various alternatives methods of valuing goods. The first method the priority method bases the customs value on the transaction value of the goods when they are exported under normal conditions. When such a method may not be used, five other methods are suggested. Broadly speaking, these methods are based on the price of similar products, in reference to other sales prices or to production costs or on the basis of a combination of both prices and production costs. In most instances, the customs value should be the invoice value plus various items when applicable such as royalties, licensing fees and export packing. Perhaps as importantly, the Agreement spells out which valuation practices are unacceptable. These include valuations based on comparisons with prices of competing products, export market prices, or choice of the higher price when two methods are used. Customs authorities always retain the right to question the documents that are presented to them as evidence of the transaction prices that are claimed by traders. They may reject prices but they must give an opportunity to importers to justify their claims. These measures are likely to discourage invoicing firms from lowering prices with a view of saving on customs duties, in agreement with the importing party. They will also provide much greater clarity and predictability than under the old GATT regime as the rules followed by customs authorities should be more transparent than in the past. They also recognize that prices paid by an importer may as some of his or her suppliers may be more price-competitive than others. Pre-Shipment Inspection: Many governments, in particular developing countries, request that goods be inspected before shipment. Independent firms provide inspection services, and certify the quality and quantity of products exported. One of the objectives of governments that request such a service is to make sure that the price billed to importers represents the true value of the goods. It therefore reduces the risk of under- or over-invoicing. There is, however, a risk that exporters may be exposed to unfair practices by the inspection companies acting on behalf of governments. The Agreement on Pre-
shipment Inspection (PSI) provides guidelines designed to cope with such dysfunctionalities. According to PSI, physical inspection should be carried out in the exporting country, and when it is not possible in the country of manufacture. Quality and quantity inspections should be conducted according to terms agreed between buyers and sellers. In order to determine whether the export price reflects the correct value of the goods, inspection companies should compare the price with prices of identical goods offered for export from the same country (PSI art. 2). 16 Inspections should be carried out in a non-discriminatory manner. Both the MFN clause and national treatment principle should be respected (PSI art. 2:1 and 2:2). Inspection companies facilitate exports by speeding-up the exporting process. They, therefore, offer a valuable service for the trading community. The PSI Agreement provides stricter discipline in their determination of the value of goods exported. It also provides a new institutional mechanism for handling complaints regarding alleged arbitrary decisions by inspection companies. It may also reduce the level of customs-related corruption (ITC/CS, 1999 p. 81). Dumping and Antidumping Measures: Firms may want to set the export price at a lower level than the normal price with a view of gaining market share or access to a new market. It is a rather common practice in exporting (Cavusgil, 1988, Stttinger 2001). WTO does not condemn dumping per se. Dumping is not allowed only if it causes or threatens to cause material injury to an industry or if it delays the establishment of a domestic industry in a member country. The Agreement on Anti-Dumping Practices (ADP) states that if dumping is demonstrated, and if it results in an injury or threat of injury (ADP Art. 3), the importing country may impose an anti-dumping duty (See for instance WTO 2001, Guatemala - Definitive Anti-dumping Measure regarding Grey Portland Cement from Mexico, complaint by Mexico, WT/DS156). The anti-dumping duty is to be set at a level that offsets the margin of dumping. Anti-dumping duties shall not be applied when the margin of dumping is de minimis (less than 2% of the export price) or when the injury is negligible (ADP, Art. 5:8). Provisional measures may be applied if the preliminary investigation leads to the conclusion that an injury has indeed been caused by dumping. Exporters may avoid anti-dumping duties by undertaking to increase their export prices. Such so-called price undertakings are allowed only after the investigating authorities have issued a preliminary determination of injury as a result of dumping. Anti-dumping duties may not be imposed for more than five years, and should be terminated earlier if they are no longer warranted. Complaints are to be handled by the Dispute Settlement Body (DSB) of WTO.
Anti-dumping has attracted considerable attention from lawyers, policy makers and academics. Strictly from a business viewpoint, one may argue that it may have attracted too much attention. One might feel that other issues perhaps more mundane such as TBTs might actually be more important to the trading community as a whole. Although disputes over dumping issues are frequent, and attract considerable political and media attention, cases are limited compared to the vast number of international transactions conducted worldwide (See WTO, 2001). Yet some fear that complaints of dumping may be on the increase as industries in developing countries that used to be heavily protected have difficulties to adjust to ever increasing trade liberalization (ITC/CS 1999, p. 154). When addressing the antidumping issue, traders should keep in mind a few basic facts. First, an action may be taken against them only if it causes or threatens to cause an injury to an industry or to a large share of that industry. For instance, one of the criteria listed in the Agreement is that producers in the importing country supporting the action should account for at least 25 % of the industrys total production. As a result, a small or middle-sized firm is 17 unlikely to be exposed to anti-dumping action unless it holds a major share of an export market. Secondly, anti-dumping action is more likely to take place in oligopolistic rather than in monopolistic industries (Sabry 2000). One reason is that an agreement within the industry regarding the legitimacy of an action may be easier to reach in a sector composed of a few firms rather than in an industry with many firms and diverging interests. It may be observed that most antidumping actions have taken place in the past in highly concentrated industries such as the cement or lumber industries. Thirdly, a firm charged with dumping may always stop the antidumping process by offering a voluntary price undertaking. Actually, many anti-dumping investigations do end up this way (see WT 2001). A firm deciding to fight an anti-dumping action should be prepared to cope with the usual legal hazards: heavy legal fees, alien scrutiny over its accounting, pricing and managerial practices, considerable time and human resources devoted to the defense of the case, and the additional discomfort of loosing the case. Exporters should be very cautious, and watch closely the situation in the importing countries. They should pay attention to how local competition is behaving not only in terms of pricing strategies but also with regard to their marketing performance and profitability. When domestic competitors face difficulties, the temptation to lodge antidumping actions increases. In these circumstances, exporters might judiciously consider increasing their prices before being investigated. Lastly, exporters should take seriously any request for information by the investigating authorities. Failure to do so is likely to have costly consequences.
On a more theoretical note, one should be aware that anti-dumping is a sore point in the WTO system. Although considerable efforts have been made during the Uruguay Round to improve its legitimacy and effectiveness, it still perceived by some trade policy analysts as a device that may too often be used by members to limit the contestability of their markets rather than to protect the legitimate interests of exporting firms (Hoekman and Kostecki 1995). Subsidies : Governments that do not subsidize one way or another some sector of their economy are very few indeed. Since subsidies may have serious trade distorting effects, GATT has attempted in the past and during the Uruguay Round to limit their use and ill effects. WTO treatment of subsidies depends on whether the goods exported are industrial or agricultural products. Subsidies and Industrial Goods. The Agreement on Subsidies and Countervailing Measures (SMC) covers industrial goods, and basically pursues the same two objectives of the Anti-Dumping Agreement. It seeks to protect industries in importing countries from unfair practices by exporting countries (see WTO 2001, United States Imposition of Countervailing Duties on Certain Hot-rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, complaint by the European Communities WT/DS138/1), and to limit the opportunity to turn countervailing measures into obstacles to fair trade. Two types of subsidies are prohibited (so-called red subsidies): export subsidies that are contingent one way or another on export performance and import substitution subsidies that are contingent to the use of domestic products (Agreement on SCM art. 3). (See also WTO 2001 United States - Tax Treatment for "Foreign Sales Corporations" WT/DS108/1). The Agreement covers also subsidies that are neither condemned nor exempt from challenge should they have adverse effects on other members trade interests (socalled amber 18 subsidies). Under the new GATT regime, there will be a presumption of prejudice in a number of specific instances such as when a subsidy amounts to more than 5 % of the value of a product. The presumption shifts the burden of proof from the importer to the exporter (Agreement on SCM art. 2, 5). Subsidies that are non-actionable (green subsidies) are non-specific subsidies that do not favor any firm over other firms. Basic assistance to research, regional assistance and assistance for the adaptation to new environmental regulations are examples of green subsidies. They are however subject to specific conditions (Agreement on SCM art. 2,8).
One may wonder why many countries still offer to firms export promotion services such as subsidized trade missions to foreign markets or subsidized marketing information services, and whether firms benefiting from these services may be exposed to countervailing actions. They might indeed be exposed to such actions. Government export promotion services should therefore be charged to firms at full market cost equivalent. A number of developed countries have indeed taken the habit of doing so. In case of successful export performance as a result of such support, some governments demand a repayment for the cost of the services that have been granted to firms prior to entering foreign markets or negotiating international contracts. They cannot be accused of providing subsidized support to exporting firms. The use of export subsidies for industrial products is now forbidden to developed as well as to developing countries (except countries with per capita GNPs lower than US$ 1,000). They have, however, a transitional period extending to 1 January 2003 (ITC/CS 1999, p. 133). The Agreement contributes to reduce considerably the tradedistorting effects of subsidies on manufactured products. Subsidies and Agricultural Products. The Agreement on Agriculture negotiated in the Uruguay Round was perceived by many as a potential breakthrough in a sector that been traditionally branded as a protectionist stronghold. The Agreement aimed at developing a more equitable market-oriented agricultural sector. Members were required in particular to adopt new disciplines governing export and other types of government subsidies. As to export subsidies, countries are required to make commitments to reduce their use. They may use certain export subsidies (e. g. subsidized international transport charges on export shipments) provided they agree to undertake commitments to reduce the amount of subsidies and the quantities of subsidized exports (Agreement on Agriculture, Art. 10). (See WTO 2001, Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/DS103/1). In addition, the Agreement requires countries to make commitments to reduce trade distorting domestic subsidies. Domestic subsidies are divided in three categories: green, blue and amber subsidies (Agreement on Agriculture, Art. 1 and 6). Subsidies that have no or minimal distorting effects on trade or production are green subsidies, and are not subject to reduction commitments. Direct payments under production limiting programs are blue subsidies and under certain conditions are also exempt of reduction commitments. Amber subsidies are domestic support subsidies that are trade distorting. The Agreement sets a ceiling on total support that may be provided to producers, and that must be progressively reduced by agreed percentages. The Agreement should have profound consequences on trade in agricultural products providing countries respect their commitments. Further negotiations on
agriculture were supposed to start in 1999. The first phase of these negotiations actually ended up in March 19
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