Countervailing Duty is a tax imposed on imported goods to offset subsidies provided by foreign governments to their exporters, ensuring fair competition for domestic industries.
How It Works:
- A foreign government provides subsidies to its exporters.
- Imported goods enter the domestic market at lower prices.
- Authorities investigate the subsidy impact.
- A countervailing duty is imposed to neutralize the advantage.
- The duty raises the import price to a fair level.
Benefits:
- Protects domestic industries from unfair subsidies
- Promotes fair trade practices
- Prevents market distortion
- Supports local businesses and employment
Example:
If a foreign government subsidizes steel exports, India may impose a countervailing duty to protect domestic steel manufacturers.