What is dumping?

The word dumping is an English word, derived from "dump" and means "to unload".

It refers to a practice used by large corporations to introduce into the European market products from the domestic market at a price much lower than the market value.

The price reduction can result from the overproduction of a product originating from foreign companies.

Therefore, products are sold at a price that does not reflect the cost of production, and as a result, companies that do not adjust their prices, in the worst case scenario, no longer sell and are forced to close.

In fact, the enterprise that sells at very low prices in a particular foreign market harms local producers but does not cause harm to consumers who only receive benefits.

This type of practice is introduced with the goal of rapidly achieving very high market shares and undercutting competitors, even if it's an unfair strategy.

Types of Dumping

Depending on the market objectives that the company wants to achieve, dumping is classified into different types, namely:

• Sporadic Dumping: when selling in a foreign market at a price lower than that of the domestic market is used to dispose of surplus stock of goods that remain unsold in the national market. This type is practiced by companies that operate in foreign markets only occasionally and find themselves with products in stock exceeding what they can dispose of through normal sales channels;

Persistent Dumping: when the price applied to a product and introduced into the market is lower than that applied in other countries. This type of dumping is practiced by companies of great significance that have an almost monopolistic position in the domestic market;

Predatory Dumping: when a company sets very low prices in order to drive its competitors out of the market. This kind of dumping is carried out by companies that decide to sell at rock-bottom prices to force a new competitor to give up, thus recovering losses.

In short, dumping turns out to be a very unfair marketing methodology for competitors, so anti-dumping measures have been implemented.

Anti-dumping Measures

The possibility of undertaking dumping actions has meant that companies grew in the foreign markets.

When it was understood that selling products from abroad at a discounted price was harming the local industry, anti-dumping measures were implemented.

This involves a comparison between the price introduced at the time of export and a "normal value" based on the price practiced by the exporting company in its home market.

This value can be determined based on the average prices practiced, at the time of export, in other destination markets.

In practice, the costs of production, insurance and transport, utility and administrative and financial expenses are evaluated.

Once a fair value is determined and it is ensured that the price is fair, one can export and sell the product in foreign countries.