Domestic Economy

Iran Takes on Dumping

Iran Takes on Dumping Iran Takes on Dumping

The Ministry of Industries, Mining and Trade has outlined procedures for countering dumping.

The new directive elaborates on a Cabinet ratification from 2004, which is aimed at protecting domestic producers from the dumping of foreign products.

Dumping, in international trade, is the export by a country or company of a product at a price lower in the foreign market than the price charged in the domestic market or below its cost of production.

As dumping usually involves substantial export volumes, it often has the effect of endangering the financial viability of manufacturers or producers of the product in the importing nation.

Iran has faced the dumping of commodities ranging from foodstuff to consumer goods from various countries, but mainly from the Far East, especially China and India.

Most Iranian industries have been heavily regulated, which reduced productivity and in turn made them uncompetitive.

Under the circumstances, even fair competition with foreign firms becomes a tall order. The Iranian textile industry is one of the early victims of this trend, failing to hold market share against cheaper products from China and neighboring Turkey.

Competitiveness is rarely, if ever, helped by protectionist policies. And economies thrive on competition. However, dumping is an entirely different ball game. If left unchecked, dumping may have a negative impact on the local economy by driving domestic producers out of business, which would result in job losses and a higher rate of unemployment.

Iran is facing these issues, which have not entirely resulted from dumping.

In order to counter dumping, most nations use tariffs and quotas to protect their domestic industry from the negative effects of predatory pricing. Iran is doing the same.

Based on the Industries Ministry's directive, companies claiming that an importer is dumping a foreign-made product can submit their evidence to the Trade Promotion Organization of Iran for review.

The TPOI reviews the case for 20 days and either dismisses the case or launches a formal investigation. During the investigation, importers or foreign manufacturers have 30 days to respond to TPO's questions. The period can be extended to 60 days.

If preliminary findings support the dumping claim, the TPOI can impose temporary tariffs or demand the price difference as a fine, for up to three months.

Tariffs or fines can be imposed for up to five years by Cabinet members, if the investigation formally concludes that the product was being dumped. The fines will last until damages to the domestic producer are repatriated. The ruling will be subject to renewed investigation after five years.

Dumping is legal under World Trade Organization rules unless the foreign country can reliably show its negative effects on domestic producers.

Thus, in the simplest of cases, one identifies dumping simply by comparing prices in two markets. However, the situation is rarely, if ever, that simple.

In most cases, it is necessary to undertake a series of complex analytical steps to determine the appropriate price in the market of the exporting country (known as the “normal value”) and the appropriate price in the market of the importing country (known as the “export price”) to undertake an appropriate comparison.