Counter Veiling Duty(CVD)

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Aranya Dey

Aranya Dey (Querist)
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13 October 2008 What is Counter Veiling Duty?

CMA Jitendra Singh

CMA Jitendra Singh (Expert)
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13 October 2008 Countervailing duties (CVDs) are a means to restrict international trade. They are imposed when a foreign country subsidizes its exports, hurting domestic producers. According to World Trade Organization rules, a country can launch its own investigation and decide to charge extra duties, provided such additional duties are in accordance with the WTO's Dispute Settlement Mechanism (DSM). Since countries can rule domestically whether domestic industries are in danger and whether foreign countries subsidize the products, the institutional process surrounding the investigation and determinations has significant impacts beyond the countervailing duties.

Ramasubbu K

Ramasubbu K (Expert)
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17 November 2008 Sir can you elaborate your explanation to understand better please.

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Asha Kanta Sharma

Asha Kanta Sharma

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20 July 2024 Counter Veiling Duty (CVD), also known as Countervailing Duty, is a tariff or duty imposed by a government on imported goods to offset subsidies provided to producers or exporters in the exporting country. The purpose of CVD is to ensure fair competition between domestically produced goods and imported goods, especially when the imported goods are benefiting from subsidies or other forms of government support in their country of origin.

Key points about Counter Veiling Duty:

1. **Purpose**: CVD is imposed to neutralize the advantage that subsidized imports might have over domestically produced goods. Subsidies can distort international trade by artificially lowering the cost of production and hence the price of exported goods.

2. **Types of Subsidies**: CVD primarily targets subsidies that are specific to particular industries, companies, or products, rather than general subsidies that benefit all industries equally.

3. **Calculation**: The amount of CVD imposed is usually calculated based on the amount of subsidy benefit that the imported goods receive. It aims to approximate the amount of subsidy received by the exporter and then imposes an equivalent duty on the imported goods.

4. **Legal Basis**: CVD is typically imposed in accordance with international trade agreements, such as those under the World Trade Organization (WTO). WTO agreements provide guidelines on when and how member countries can impose countervailing duties.

5. **Impact**: CVD affects the cost competitiveness of imported goods, making them more expensive compared to domestically produced goods. This can influence consumer choices and protect domestic industries from unfair competition.

6. **Application**: Governments typically investigate and determine the need for CVD through a formal process. Importers and exporters may participate in hearings or provide evidence during these investigations.

In summary, Counter Veiling Duty is a trade remedy mechanism used by governments to counteract the unfair advantage that subsidized imports may have in the domestic market, thereby promoting fair competition and protecting domestic industries from subsidized foreign competition.