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Customs Legislation (World Trade Organization Amendments) Bill 1994
House: House of Representatives
Portfolio: Industry, Science and Technology
Commencement: Sections 1,2 and 3 (Short Title, Commencement and Application) commence on the date of Assent. Parts 2 (Amendments of The Customs Act 1901) and 3 (Amendments of the Anti-Dumping Authority Act 1988), commence on the day on which the World Trade Organization Agreement enters into force for Australia. That agreement is taken to come into force on the day declared by the Governor-General, by Proclamation under the Copyright (World Trade Organization Amendments) Act 1994.
The amendments proposed by the Bill will give effect to the agreements reached at the General Agreement on Tariffs and Trade ( GATT) talks, in relation to anti-dumping and countervailing measures. The major amendments provide for:
A. a requirement that an anti-dumping or countervailing subsidy application must be supported by a sufficient part of the domestic industry;
B. more detailed definitions of dumping and subsidisation and a method for determining the margin of dumping or value of the subsidy;
C. the termination of an investigation into dumping or subsidisation where the value or quantities of dumping or subsidisation are negligible;
D. sampling where the number of exporters or types of products are too large to calculate individual dumping margins;
E. accelerated review of dumping and countervailing duty notices for exporters in certain circumstances;
F. undertakings to be accepted from an exporter that it will conduct future trade with Australia in a non-injurious manner and the deferral of an application on the receipt of such a satisfactory undertaking.
This bill is one of a number of bills which change Australian law to give effect to Australia's commitment to the GATT.
The proposed amendments to the Customs Act and Anti-Dumping Authority Act arose out of the eighth round of the GATT. The GATT is a treaty between 118 governments which seeks to provide a:
"secure and predictable international trading environment for the business community and a continuing process of trade liberalisation in which investment, job creation and trade can thrive" 1.
A GATT "Round" is a cycle of multilateral (i.e. between more than 2 countries) trade negotiation which result in trade agreements among the participating countries to reduce tariffs and non-tariff barriers to trade.
The first round of GATT talks took place in 1947 between 23 participating countries.
The eighth round (also known as the "Uruguay Round" commenced on 20 September 1986 and finished on 15 December 1993. The round brought about agreement to:
1. further reduce tariffs and convert non-tariff barriers into tariffs so that these barriers become transparent and can be systematically reduced;
2. subject agricultural and textile products to the GATT rules;
3. cover trade in a number of services;
4. cover trade in related investment measures;
5. cover intellectual property rights; and
6. establish a World Trade Organisation to replace GATT.
World Trade Organisation
The GATT was founded with the express intention that it would provide rules and regulations for the International Trade Organisation ( ITO) to enforce at a later date. However, the ITO was never to be 2. The US Congress viewed some of the elements of the ITO draft Treaty as an intrusion into US economic government. President Eisenhower failed to secure the concessions Congress demanded and the ITO never eventuated.
However, the Uruguay Round agreed to establish a World Trade Organisation ( WTO) which will be the administrative organisation responsible for matters related to enforcement and supervision of GATT rules. The WTO will operate as a forum for multilateral negotiations between member states and is to be established by July 1995.
The WTO will be headed by a Ministerial Conference, made up of all members of the WTO, which will meet at least every 2 years. A General Council, once again composed of all member, will sit beneath the Ministerial Council and will act as the head of the WTO between ministerial meetings. The General Council will discharge the function of the Dispute Settlement body and the Trade Policy Review body. Subsidiary councils set up by the GATT 1994 will sit under the guidance of the General Council.
Will Australia Benefit from the Uruguay Round ?
It is said that Australia will benefit substantially from the Uruguay Round because cuts to border protection and export subsidies will improve the nation's access to world markets. A significant aspect of the GATT is a change from non-tariff to tariff only protection 3.
In particular, world agricultural trade has been severely affected by the support and protection policies of the world's major industrialised countries. In 1992, the OECD estimated that OECD subsidies were worth $US160 billion 4.
It is estimated by the GATT Secretariat that by 2005 there will be an increase in world exports of at least $US755 billion and an increase in global income of $US235 billion flowing from decreases in tariffs on industrial goods, changes in the textile trade and the liberalisation of agriculture 5.
It is estimated that Australia and New Zealand stand to gain an annual $2.5 billion as a result of the Uruguay Round:
These estimates do not take into account intangible benefits from strengthening rules restricting arbitrary use of anti-dumping duties, regulating intellectual property rights and reforming trade dispute settlement procedures. They also do not cover social costs arising from structural adjustments of economies in the wake of trade liberalisation 6.
As an efficient agricultural producer, Australia is likely to benefit from the liberalisation of agricultural trade; as a middle rank trading power it will benefit from a tightening of rules and new dispute resolution procedures; and as a developed country with a large services sector and significant capacity for invention 7. The abolition of tariffs on goods such as beer, pharmaceutical and medical equipment is also said to benefit Australia 7.
Anti-Dumping and Countervailing
"Dumping" occurs when goods are exported at prices lower than those charged in the domestic markets. This often occurs where there is an oversupply in the producing country. The goods are said to be "dumped" at cheap prices on other countries. The importing country can, in defined circumstances, defend itself by imposing special duties on the "dumped" products. The operation of anti-dumping laws and regulations has been the source of many recent trade disputes in GATT.
A positive finding in a dumping action requires 8:
I. a recognition of a "below normal" price being charged;
II. a domestic firm being injured; and
III. the former causing the latter.
Where a country provides a prohibited subsidy (as defined in Article III of the agreement) to its exporters and that subsidy causes material injury in the importing country (in the same way as dumping causes injury), the importing country may have the right to impose a countervailing duty on the import.
The amendments introduced by the new Agreement focus on providing a greater amount of prescriptive detail in the application of the principles of anti-dumping and countervailing. Legislating these amendments will require amendment to three Acts:
(a) The Customs Act 1901;
(b) The Anti-Dumping Authority Act 1988;and
(c) The Customs Tariff (Anti-Dumping) Act 1975.
This bill amends the first two of Acts. A separate bill, the Customs Tariff (Anti-Dumping) (World Trade Organization Amendments) Act 1994, amends the Customs Tariff (Anti-Dumping) Act 1975.
Under clause 3 the Act will apply in relation to the specified applications made under the Customs Act 1901 and the Anti-Dumping Authority Act 1988that are made on or after the day on which the Agreement Establishing the World Trade Organisation enters into force for Australia.
Clause 5 amends section 42 of the Customs Act 1901 allowing Customs to take security for interim duty that may become payable where an undertaking is accepted. The provision also allows security to be taken pending the completion of a review of an application.
Sub-clause 7(a) amends the definition of "Interested Party" to include anyone who is likely to be concerned with the production of the goods, a trade organisation (where a majority of the members are likely to be concerned with the production or importation of the goods or like goods) and the government of a country of export or origin of the goods.
Sub-clause 7(b) inserts some new definitions. Some notable additions are:
Allowable exemption or remissions - where exported goods are exempt from domestic duties or taxes which would ordinarily apply if the goods were consumed domestically - that exemption is an allowable exemption or remission and is not regarded as a subsidy.
Countervailable subsidy - this definition is considered below.
Country of Origin is the place of manufacture of the goods as opposed to the Country of Export.
New exporter - means an exporter who did not export goods to Australia at any time during the inquiry or investigation period.
Residual exporter as opposed to a Selected exporter - as is discussed below, where there are too many exporters to investigate individually, a representative sample may be selected an investigated. A selected exporter is one who was investigated - a residual exporter was not.
Subsidy - is
1. a financial contribution, made by a government or by another body at the direction of the government, that is in connection with the production manufacture or export of the goods. The financial contribution need not be a direct transfer - it can involve, amongst other things, acceptance of a liability, non-collection of revenue or provision of goods or services.
2. any form of income or price support referred to in Article 16 of the GATT.
The financial contribution, income or price support must confer a benefit (see heading number 4 below).
Clause 8 allows the Minister to certify that a country is a member country of the WTO, a developing country or a special developing country. This is important to the operation of some subsequent clauses.
Clause 8 defines countervailable subsidy. In general terms, this is a subsidy which is specific to particular enterprises or is contingent on export performance or the use of domestically produced goods in preference to imported ones. However even if a subsidy satisfies one of these criteria, it may not be a countervailable subsidy if access to the subsidy is established by objective criteria which do not favour particular enterprises over others. The subsidy must also not be an excluded subsidy, which are subsidies for such things as research, and adaptation to environmental requirements.
Clause 10 makes some relatively minor prescriptive amendments to the method of determining the normal value of goods. The normal value is generally the price paid, in the ordinary course of trade, for the goods in the country of export. However, where the volume of sales of the goods is low (less than 5% of the volume of goods which are the subject of the application) in the country of export or it is not appropriate to use that price as the normal value the Minister may:
(1) determine the cost of production and include an amount for administrative and selling costs and profit; or
(2) use the price paid for the goods in an export transaction to an appropriate third country.
3. Whether Dumping has Occurred and the Level of Dumping
Clause 11 provides that a comparison is made between the normal value and the export price. This may involve the use of the weighted average of export and normal prices over the investigation period.
If the export price (or weighted average of export prices) is less than the corresponding normal value (or weighted average) then the goods are taken to have been dumped. The dumping margin is the difference between the export price and normal value (or the respective weighted averages).
It is preferable that the existence of dumping and the dumping margin are calculated for individual exporters however where this is not practicable (because of the large number of exporters) a statistically valid sample of exporters or the exporters responsible for the largest volume of exports will be investigated. If information is submitted by an exporter not initially selected for investigation, the investigation must extend to it unless that would prevent timely completion of the investigation.
4. Whether Benefits have been conferred (i.e. Subsidisation) and the Amount of the Benefit
Clause 11 provides a mechanism for determining whether a financial contribution or income or price support (as referred to in the definition of subsidy) confers a benefit and if so the amount of the subsidy.
A benefit is taken to be conferred when there is a direct financial payment from the government or another body at the direction of the government or where the Minister so determines having regard to a number of guidelines.
The amount of the subsidy is:
a. where the benefit is conferred by way of a direct financial payment - the amount the payment;
b. where the benefit is conferred by the making of a loan - the difference between the amount required to be repaid under the loan and the amount that would be required to be repaid on a comparable commercial loan; or
c. where the benefit is conferred by the guarantee of a loan - the difference between the amount required to be repaid on the guaranteed loan and the amount that would be required to be repaid if the loan were not guaranteed;
d. where the benefit is conferred by another financial contribution or income or price support - the amount determined by the Minister.
As in the case where dumping is alleged, if the number of exporters from a country is so large that it is not practicable to investigate each individually, a sample of exporters or the exporters responsible for the largest volume of exports will be investigated.
5. Material Injury to Industry
Existing section 269TAE sets out the factors which the Minister may consider in determining whether material injury has or may be caused to an Australian industry. Clause 12 adds to those factors by allowing the Minister to consider the size of the dumping margin or the countervailable subsidy.
Clause 12 also provides that in determining whether material injury has or may be caused to an Australian Industry:
(a) a number of factors not related to the exportation of the goods must not be attributed to the exportation. Such factors include changes in technology, contractions in demand and changes in the pattern of consumption; and
(b) only changes in circumstances as would make the injury foreseeable and imminent should be taken into account; and
(c) a consideration of the effect of the exportation of like goods by different exporters, from the same or different countries, may only be made where it is appropriate in light of the conditions of competition between the imported goods and the conditions of competition between the imported goods and the like domestic goods.
6. Currency Conversion
Clause 13 provides that where a comparison of export prices and normal values requires a conversion of currency, the exchange rate on the date of the transaction that best establishes the material terms of the sale should be used. However, the Minister has the power to do any of the following:
1. use a forward rate of exchange;
2. disregard short-term exchange rate fluctuations; and
3. where the rate of exchange has undergone a sustained movement - use the rate in force on a day declared for the period of 60 days from that day.
7. Anti-Dumping Proceedings
Clause 15 provides that where an application for an anti-dumping or countervailing duty notice is made, notification must be given to the government of the exporter country. In the case of an application for a countervailing duty notice, the notification must contain an invitation to consult with the Comptroller with the aim of arriving at an agreed solution.
A significant amendment contained in clause 15 is the requirement that an application be supported by a sufficient part of the domestic industry. Although in practice this would have been required in the past, it is now proposed as a formal requirement of the legislation.
An application is taken to be supported by a sufficient part of the domestic industry where:
(a) it is supported by domestic producers whose collective output is more than 50% of the total production of those that have commented on the application; and
(b) supporters of the application account for at least 25% of the total production.
Clause 16 amends the provisions relating to consideration of an application by requiring that, where a decision is made not to reject an application, the public notice of that decision must now additionally include:
(a) the basis on which dumping or countervailable subsidisation is alleged in the application; and
(b) a summary of the factors on which the allegation of injury is based.
That clause also provides for a copy of the application (or as much of it as is not confidential) to be provided to the exporters and the government of the exporter country.
Negligible Dumping Margins or Subsidisation
Clause 18 deals with the termination of an investigation on the basis that:
a. the dumping margin; or
b. the volume of dumping; or
c. the countervailable subsidisation; or
d. the volume of countervailable subsidisation; or
e. the injury caused by the dumping or subsidisation
Exactly what constitutes a negligible amount is defined.
In relation to negligible volumes of dumping and countervailable subsidisation, there is provision for aggregating volumes of like goods from different countries where the individual volumes would otherwise be negligible.
Clause 20 and 22 allow the Minister, while considering whether to publish a dumping or countervailing duty notice, to give the exporter the option of giving an undertaking that it will so conduct future trade to Australia in like goods as to avoid causing material injury to an Australian industry or hinder the establishment of an Australian industry. If the offer of giving an undertaking is accepted, the Minister may defer the decision to publish or not publish a notice.
In respect of undertakings given in response to dumping investigations, price increases under the undertaking must not be higher than necessary to eliminate the margin of dumping and remove the injury to the domestic industry.
The Minister cannot accept an undertaking given in response to a countervailing duty investigation unless the government of the exporter country consents.
If the undertaking is breached the Minister may resume the investigation. The exporter has the right to request the Minister to continue the investigation and determine whether the Minister would have published a notice had the undertaking not been accepted. If the Minister determines that a notice would notice have been published, the undertaking automatically lapses.
Third Country Dumping and Countervailing Duties
Clauses 21 and 24 provide that where a country alleges that an exporter to Australia is dumping goods or providing countervailable subsidisation, it is the industry in that other country which is to be considered when assessing the effects of the dumping or subsidisation, not individual producers or manufacturers.
Accelerated Review and Procedural Matters
Clause 28 allows a residual exporter to apply for accelerated review of a dumping duty or countervailing duty notice.
Clause 28 also inserts a new division - Procedural and evidentiary matters - in general terms, these provisions prescribe the details to be included in public notices and notices to be given to interested parties. There is a requirement that a person giving information that is claimed to be confidential should provide a non-confidential summary of the information to allow a reasonable understanding of the substance of the information.
8. Amendments of the Anti-Dumping Authority Act 1988
Clause 32 adds as one of the functions of the authority the role of reviewing any decision by the Comptroller to terminate an investigation of an exporter or of a country of export.
Clause 34 (proposed section 7A) allows for a review of the decision to terminate an investigation on the basis of negligible dumping margins or subsidisation. In making that decision the authority may only have regard to the information that was available to the Comptroller at the time the Comptroller made the investigation.
Clause 34 also provides (proposed section 7B) that if an application for a notice is made and that application becomes the subject of an investigation by the Authority, the Authority must terminate the investigation if dumping, subsidisation or potential injury are negligible.
The clause further provides (proposed section 7C) that the authority must consider the terms of any undertaking which an exporter or exporter country proposes to give and must indicate whether it would be prepared to recommend the Minister accept the undertaking.
Clause 35 deals with the Authority making recommendations on the continuation of dumping or countervailing measure when they are nearing expiration. The Authority may only recommend the continuation of the measure where the expiration of it would be likely to lead to a continuation of material injury.
Clause 37 requires the authority to maintain public records of its inquiries. There is also a requirement that a person giving information that is claimed to be confidential should provide a non-confidential summary of the information to allow a reasonable understanding of the substance of the information.
1. Australia. Department of Foreign Affairs and Trade, Briefing. Australia and the Uruguay Round, 1993.
2. Evans, P Walsh, J The EIU Guide to the New GATT, The Economist Intelligence Unit, London, April 1994
3. Australia. Department of Foreign Affairs and Trade, Briefing. Australia and the Uruguay Round, 1993.
4. Warby, M When the talking had to stop: the end of the Uruguay round, Current Issues Briefs (Foreign Affairs, Defence and Trade Group), 4/1993, 17 December 1993.
5. Grobmann, H; Koopmann, G Michaelowa, A The new World Trade Organization: Pacemaker for world trade? Intereconomics, 29(3), May/June 1994
6. Evans, P Walsh, J The EIU Guide to the New GATT, The Economist Intelligence Unit, London, April 1994
7. Ibid, p11.
8. Evans P. and Walsh J. The EIU Guide to the New GATT, p50
Lee Jones (06 277 2430)
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Commonwealth of Australia 1994.
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.
Published by the Department of the Parliamentary Library, 1994.