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Customs (Anti-Dumping Amendments) Bill 1999
Bills Digest No. 122 1998-99
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal st atus. Other sources should be consulted to determine the subsequent official status of the Bill.
Customs (Anti-dumping Amendments) Bill 1998
Commencement: The amendments relating to the method for determining normal value commence on a date to be fixed by proclamation, or failing that, six months after the Bill receives Royal Assent. The amendments relating to interim dumping and countervailing duties are taken to have commenced on 1 January 1993.
- provide a new method for determining normal value in respect of goods exported from countries whose economies are in transition from command to market economies and
- ensure interim dumping and countervailing duties can be imposed prior to a final assessment of duties payable.
The major amendments proposed by the Bill were introduced into Parliament in June 1997 as the Customs Legislation (Anti-Dumping) Amendment Bill 1997. That Bill lapsed with the proroguing of Parliament on 31 August 1998.
Dumping occurs when products from one country are exported to another country at prices less than their normal value.
Australian anti-dumping law is the product of Australia's obligations under t he General Agreement on Tariffs and Trade, the Agreement on Implementation of Article VI (the Anti-Dumping Code) and the Agreement on Interpretation and Application of Articles VI, XVI and XXIII (the Code on Subsidies and Countervailing Duties). The Customs Act 1901 and the Customs Tariff (Anti-Dumping) Act 1975 are the principal legislative instruments relating to anti-dumping.
Where an application claiming dumping has been lodged, Customs must determine whether there are sufficient grounds to initiate an investigation. Within the statutory period allowed for consideration of a claim, Customs considers matters including whether the goods meet the produced in Australia requirements, injury factors, the adequacy and accuracy of price evidence produced and whether a causal link exists between the alleged dumping and injury to an Australian industry.
Countervailing duties are duties imposed on imports to offset government subsidies to producers or exporters in the exporting country.
Where a positive preliminary finding of dumping occurs, action is usually taken against future imports by the imposition of provisional duties, that is, interim dumping duties. The rate of duty is based on the dumping margin found duri ng the preliminary finding inquiry, that is, the difference between the normal value (non-injurious price) and the export price of the goods.
Interim and final dumping duty are imposed by section 8 of the Customs Tariff (Anti-Dumping) Act 1975 on goods subject to a notice under section 269TG of the Customs Act 1901 . Basically, subsections 269TG(1) & (2) of the Customs Act 1901 provide that final and interim dumping notices apply to goods or like goods when the amount of the export price is less than the amount of the normal value of the goods. As noted in the Explanatory Memorandum to the Bill, in the case of interim dumping duties the export price and normal value have not been calculated because their collection is 'intended to be pending final assessment of the interim dumping duty payable'. As such, it is arguable that it is not possible to impose interim dumping duty until the actual amounts of export price and normal value are calculated. The Government has accepted this argument and the amendments proposed by items 5 and 6 of Schedule 1 of the Bill seek to resolve the perceived problem.
Section 269TAC of the Customs Act 1901 sets out the criteria that must be followed when determining the normal value of goods exported to Australia. Determination of normal value of goods is central to a determination of whether goods are being dumped because dumping occurs when the products of one country are exported to another country at prices less than their normal value. Basically, the method used to determine normal value is to use the price paid in the country of export. Other methods used for determining normal value include constructing a value from the cost of production, administrative, selling and general costs, and where appropriate an amount for profit, or applying the price paid for like goods sold to an appropriate third country. Where insufficient information has been supplied, or is not available, to determine normal value under any of the latter methods, the normal value is determined by the Minister having regard to all available information.
Subsection 269TAC(4) of the Customs Act 1901 sets out methods to be used to determine normal value where the government of the country of export has a monopoly, or substantial monopoly, of the trade of the country and determines, or substantially influences, the domestic price of all goods in that country. These circumstances describe the situation in a so called 'command economy'. Where the Minister determines that a command economy situation exists and other methods for calculating normal value are not appropriate, the calculation methods specified in paragraphs 269TAC(4)(c)-(f) must be used. These methods include:
- a value equal to the price of like goods produced or manufactured in a country determined by the Minister or sold for home consumption in the ordinary course of trade in that country, being sales that are arms length transactions (paragraph 269TAC(4)(c)) and
- a value equal to the price payable for like goods produced or manufactured in Australia and sold for home consumption in the ordinary course of trade in Australia, being sales that are arms length transactions (paragraph 269TAC(4)(f)).
The major amendments proposed by the Bill provide a new method for determining normal value in respect of goods exported from countries whose economies a re in transition from command to market economies.
Until recently the methods for determining normal value in subsection 269TAC(4) were used to determine normal value for goods exported from command economies by reference to information obtained in a third country.
However, as stated in the Second Reading Speech to the Bill:
In November of last year legal advice was obtained as to the scope of subsection 269TAC(4). That advice confirmed that the section was severely limited in its application. Its stringent tests require that the Government of the country of export has as least a substantial monopoly of all of the trade of the country - not just in terms of the goods under investigation, AND must also substantially influence the domestic price of all goods in that country.
Although the governments of economies which are in a state of transition from a command economy to a market economy may still maintain controls over the domestic selling prices of a significant number of sensitive products, it cannot be said that the extent of the control falls within the ambit of subsection 269TAC(4).
As subsection 269TAC(4) can have no further application to economies which are considered to be in transition from a command economy to a market economy, the determination of the normal values for exports from such economies, as a matter of law, must be made in accordance with the remaining provisions of section 269TAC. These provisions do not distinguish between "market economies" and those which are considered to be "in transition". … That is, there is presently no flexibility available for investigating authorities to treat exports from economies which are in transition differently from exports from other countries.
On 4 September 1997 the Se nate Selection of Bills Committee referred the Customs Legislation (Anti-Dumping) Amendment Bill and Customs Tariff (Anti-Dumping) Amendment Bill 1997 to the Senate Economics Legislation Committee for consideration. The Senate Selection of Bills Committee, when recommending the inquiry requested the Committee determine whether the legislation would allow goods and materials from economies in transition to be dumped in Australia and hinder Australia from undertaking legitimate anti-dumping action.
While the majority report of the Committee, which reported in October 1997, recommended that the Bills be passed, it expressed the following beliefs:
- That China is an economy in transition. [The Committee accepted Department of Foreign Affairs and Trade evidence which was based on World Bank and other studies in preference to submissions made by industry groups.]
- That as part of the discretion to be exercised by Customs, consideration should be given to the cost of raw material inputs where investigators conclude that it exceeds 10% of the production process. Where such a finding is made, Customs should take into account information from surrogate countries when determining normal values by referring to a surrogate country to ascertain the normal value of the raw materials inputs.
It should be noted that the Australian Labor Party and Australian Democrats issued minority reports.
The Australian Labor Party, while agreeing that legislative changes are necessary to preserve the integrity of Australia's anti-dumping sys tem, believed:
that the Bill does not achieve this goal, particularly in the way it ignores the impact of inputs to the production process, precludes the use of a sectoral approach and takes a position which is well in advance of our trading partners in the way it treats dumping complaints against products sourced from China.(1)
The Australian Labor Party recommended that the legislation be amended along the lines of the proposal put forward by the Industry Taskforce on Anti-Dumping, that is, regulations pr escribe the circumstances which are deemed to constitute price control, eg:
- Majority ownership or control by a foreign government (at whatever level) in the enterprise manufacturing the exported goods
- Any Government restriction on selling on the domestic m arket
- Major domestic customers for the goods sold are government owned/controlled enterprises
- Any Government price control on the domestic market
- Any Government restriction or direction as to the quantity of goods to be manufactured.(2)
The Australian Demo crats whilst acknowledging the need to pass appropriate legislation to deal with economies in transition, recommended that the proposed legislation be amended to ensure that if price controlled inputs constitute a significant proportion of production costs, then a surrogate market should be utilised for determining normal values.(3)
The purpose of item 1 of Schedule 1 , which inserts new subsections 269TAC(5D)-(5G) , is to provide for a new method of determining normal value for goods exported to Australia from countries whose economies are in transition from command to market.
Under proposed subsection 269TAC(5D) where the Minister is satisfied that:
- goods are exported to Australia from a country which in the past the government had a monopoly, or a substantial monopoly, of the trade of that country, or substantially influenced domestic prices of goods in that country and
- the above circumstances no longer apply and
- a price control situation exists in relation to like goods to those exported;
the normal value of the exported goods is an amount determined by the Minister having reg ard to all relevant information.
A definition of 'price control situation' is contained in proposed subsection 269TAC(5E) . A price control situation will exist in relation to like goods to those exported if:
- the exporter sells like goods in the country of export and the domestic selling price of those goods is controlled, or substantially controlled, by a government of that country or
- the exporter does not sell the goods in the country of export but there are other sellers in that country of like goods and the domestic selling price of those goods is controlled, or substantially controlled.
The effect of items 4 , 6 , 8 , 10 , 12 , 14 , 16 and 18 of Schedule 1 is to ensure that interim dumping and countervailing duties can be imposed in respect of goods and like goods exported to Australia prior to a final assessment of duties payable on those goods. The amendments are taken to have commenced on 1 January 1993. The reason for that date is to ensure that duties collected since the commencement of the provisions, which was 1 January 1993, are not subject to legal challenge.
It is arguable, based on evidence presented to the Senate Economics Legislation Committee reference on the Customs Legislation (Anti-Dumping) Amendment Bill 1997 and Customs Ta riff (Anti-Dumping) Amendment Bill 1997, that the amendments proposed by the Bill also represent a response to industry disquiet regarding the dumping of materials or products from China.
The principal focus of the discussion of anti-dumping action in relation to economies in transition from command to market in the Committee's report was in relation to China. While industry and government accepted that the existing law does not adequately address dumping in Australia from countries with economies in transition such as China, there was a difference of opinion as to how to address the problem.
The Committee reported that industry lacks confidence that a price control situation would be recognised by Customs when foreign government owned operations continue to be the major supplier in a market or where government owned companies continue to supply major raw materials to downstream operation when the downstream operations are privately owned. (4)
Objectively however, it cannot be said that industry provided any realistic alternative to the Government's proposal. Industry submitted that they would like to have assurance that Customs would identify companies with significant foreign government influence in a company exporting the goods to Australia.(5) The mechanism suggested by industry for identifying companies with significant foreign government influence was:
that in the initial stage if an investigation into a foreign company that is wishing to export products to Australia, that officials seek information from the exporter on firstly the possible presence of government ownership in the company and secondly identify the supplier of the raw material and whether any influence is present by the government that may lead to the reduction of the prices of the raw materials. Once that simple identification has been done, and if possible government contamination has occurred the officials could then revert back to the old rules of surrogacy.(6)
- Australian Senate - Economics Legislation Committee, Customs Legisl ation (Anti-Dumping) Amendment Bill 1997 - Customs Tariff (Anti-Dumping) Amendment Bill 1997, October 1997, p. 9.
- Ibid., at p. 10.
- Ibid., at p. 20.
- Ibid., at p. 4.
- Ibid., at p. 5.
2 March 1999
Bills Digest Service
Infor mation and Research Services
This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document. IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.