Anti-dumping and countervailing measures in Malaysia

IN RECENT months, there have been numerous articles on the dumping of various products in Malaysia and the public and government's actions in response. "Dumping" is an anti-competitive practice of international price discrimination. This occurs when the product being sold is priced significantly lower in the importing country ("export price") compared to its market price in the exporting country ("normal value").
In many cases, "dumping" is a result of excess supply in the exporter's country, especially during an economic slowdown. The manufacturer resorts to the most cost-effective solution: flooding a foreign market with the product at a lower price.
For the consumer, "dumping" could be seen as a positive, which increases competition in the industry and reduces market prices. For example, if construction material prices are kept low due to "dumping", property development costs should decrease and, following that, housing inflation rates are slowed down. On the other hand, overproduced imports have been alleged to be of low quality with unreliable documentation, causing difficulties in bringing claims for defects.
This article touches on the concept of "dumping", and its importance as a trade remedial measure in Malaysia.
'Dumping' and the Investigation Process
The Malaysian Ministry of International Trade and Industry (Miti) is empowered by the Countervailing and Anti-Dumping Duties Act 1993 to take action against "dumping" by foreign exporters, chiefly by imposing anti-dumping duties. An aggrieved domestic manufacturer may file a written petition to Miti on behalf of the relevant industry, seeking investigation on the foreign exporter(s). The investigation committee assigned by Miti will first determine the "normal value" and the "export price" of the product.
Generally, the "normal value" is the domestic price of a product in ordinary trade in the exporting country. The World Trade Organisation has also set out alternative methods of determining the "normal value": by considering the price in a third country, or its "constructed value" based on expenses incurred and profits made by the exporter.
The "export price" is the transaction price the exporter has set for the product in, say, Malaysia, save in the event of a barter transaction or an internal transfer, or where the "export price" is adjusted due to an association or compensatory arrangement.
Miti will compare the two prices based on sales made during the same period at the same level of trade, with allowance made for import duty and taxes. The committee will next consider if the "dumping" is materially injurious to the Malaysian domestic market for that product (or like products). The injury is determined by undertaking an objective examination on the quantity of "dumped" imports and their impact on the domestic market and Malaysia's domestic producers, such effects including domestic price depression.
Anti-Dumping as a Protective Measure
Unlike Custom duties, anti-dumping duties and tariffs are trade remedial measures to counteract international price discrimination caused by dumping and its consequential injury. The object of anti-dumping duties is to prevent unfair trade practices, and seek redress while helping develop a healthy domestic market for local manufacturers.
Imposing such duties arbitrarily can have drawbacks. As recent as January, Vietnam unilaterally imposed anti-dumping tariffs against a Malaysian steel manufacturer for exporting into Vietnam cold-rolled stainless steel coils. It is unclear whether this was in response to Posco VST, a wholly-owned Vietnamese subsidiary of South Korean steel giant Posco, having alleged that competition from foreign exports caused it losses of US$66 million (RM215 million). The Vietnamese tariffs, imposed at a duty rate of 14.38%, have been criticised for causing a potential knock-on effect in trading of stainless steel coil in the Asean region.

Recent Developments in Malaysia
A new Customs (Anti-Dumping) Order has been gazetted in March where, for five years effective March 30, 2014, anti-dumping duties of up to 31.14% will be imposed on two Thai manufacturers for cellulose fibre reinforced cement flat sheets imported into Malaysia. 2013 also saw Miti imposing anti-dumping duties on four industrial raw materials; electrolytic tinplates, biaxially-oriented polypropylene (BOPP), steel wire rods, and polyethylene terephthalate (PET).
The move has been criticised by importers and foreign manufacturers to be the Malaysian government's attempt to monopolise the industrial raw material industry by Malaysian companies. Deputy Finance Minister Datuk Ahmad Maslan defended the action, stating that it would create "a balanced competitive environment at a global level between local and foreign companies".

Conclusion
Although anti-dumping measures aim to protect the domestic market, they are protective only, seeking to redress injuries already caused or threatened, and cannot prevent anti-competitive trade practices. In addition, such moves often lack transparency and may create international political and economic tensions, especially where market access of exporters are restricted. Local manufacturers may be seen as being allowed to monopolise the domestic market, increasing the value of such products at the expense of the domestic consumer.
It is crucial that in determining anti-dumping measures, the investigation must be thorough in considering all angles. And if any duty is to be imposed, it must be reasonable to the injury caused to the importing market.

Contributed by Danny Foo of Christopher & Lee Ong (www.christopherleeong.com).