A price undertaking agreement is a formal contract between a company and a regulatory body that establishes a minimum price for a specific product or service. This agreement is commonly used in industries where there is a concern about dumping, which is the practice of exporting goods at a lower price than they are sold domestically.
In a price undertaking agreement, the company agrees to maintain a minimum price for their product or service in the importing country. The regulatory body, in turn, agrees to suspend or terminate any anti-dumping duties or investigations related to the product.
The purpose of a price undertaking agreement is to ensure fair competition and prevent the market from being flooded with cheap imports that could harm local businesses. It is also a tool for companies to maintain their profitability and protect their market share.
To establish a price undertaking agreement, the company must provide evidence that their product is not being sold at an unfairly low price in the importing country. This evidence is typically in the form of documentation that shows the production costs, sales prices, and profit margins of the product.
Once the agreement is in place, the company must report regularly to the regulatory body on their sales prices and volumes. If they fail to maintain the agreed minimum price, the regulatory body can impose anti-dumping duties again.
Price undertaking agreements can be beneficial for both the company and the importing country. The company can continue to export their product without facing anti-dumping duties, while the importing country can maintain fair competition in their market.
In conclusion, a price undertaking agreement is a formal contract that establishes a minimum price for a product or service in an importing country. It is an effective measure to prevent dumping and maintain fair competition in the market. Companies must provide evidence and report regularly to the regulatory body to maintain the agreement.