Meaning
Voluntary price agreement allows an exporter to commit to selling goods at a specific level to avoid the imposition of anti-dumping duties. Regulatory agencies accept a price undertaking when it effectively removes the injurious effect of dumped imports on the domestic market. This arrangement allows the exporter to retain the additional revenue that would otherwise go to the government as a tax.
It requires regular reporting and monitoring to ensure compliance with the agreed terms.
Legal Obligation
Failure to adhere to the terms of a price undertaking leads to the immediate application of provisional or final duties. The agreement functions as a legal contract between the foreign producer and the importing country’s trade authority. It often specifies the currency of the transaction and the frequency of price reviews.
Importers must be aware of these limits to avoid entering into contracts that violate the undertaking.
Market Stability
Use of this instrument provides a degree of certainty for both the exporter and the domestic industry. By setting a floor, the price undertaking prevents the downward spirals that characterize aggressive price wars. It also allows the exporter to maintain market share without the stigma of formal duties.
However, the requirement for transparency can expose sensitive pricing data to government auditors.
Compliance Audit
Invoice verification ensures price compliance. Authorities check invoices to verify adherence to the price undertaking.
