Bills Digest No. 156, 2012–13

24 June 2013

Customs Amendment (Anti-dumping Measures) Bill 2013 [and] Customs Tariff (Anti-Dumping) Amendment Bill 2013

Leah Ferris
Law and Bills Digest Section 

Date introduced: 29 May 2013

House: House of Representatives

Portfolio: Home Affairs

Commencement: The Customs Amendment (Anti-dumping Measures) Bill 2013 will commence on 1 January 2014. Sections 1-3 of the of the Customs Tariff (Anti-Dumping) Amendment Bill 2013 will commence on Royal Assent; Schedule 1 will commence on the same day as the Customs Amendment (Anti-dumping Measures) Bill 2013.

Links: The links to the Bills, the Explanatory Memoranda and second reading speeches can be found on the Bills’ home page for the Customs Amendment (Anti-dumping Measures) Bill 2013 and the Customs Tariff (Anti-Dumping) Amendment Bill 2013, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

The Bills were introduced together and will be dealt with by the Parliament together.

Purpose of the Bills

The purpose of the Customs Amendment (Anti-dumping Measures) Bill 2013 (the Customs Bill) is to amend the Customs Act 1901 (the Customs Act)[1] to implement further changes to Australia’s anti-dumping system.

The Customs Bill will:

·         remove the requirement for the Minister to consider the lesser duty rule in certain cases

·         amend the retrospective duties provisions and

·         introduce a new type of circumvention activity.

The Bill will also make other minor amendments to Australia’s anti-dumping regime.

The purpose of the Customs Tariff (Anti-Dumping) Amendment Bill 2013 (the Tariff Bill) is to amend the Customs Tariff (Anti-Dumping) Act 1975 (the Dumping Duty Act)[2] to reflect the changes to the lesser duty rule proposed under the Customs Bill.

Structure of the Bills

The Customs Bill is divided into three areas of reform:

1.       removal of the lesser duty rule

2.       changes to the retrospective duties provisions and

3.       introduction of a new type of circumvention activity, as well as a new termination provision that will apply to all types of anti-circumvention inquiries.

The Tariff Bill has seven items which amend the current provisions relating to dumping and countervailing duties to allow for the changes to the lesser duty rule.

Background

What is dumping?

Dumping is said to occur when an overseas supplier sells a product at a price lower than the price charged in the supplier’s home country or at a price that is lower than the average cost to produce the product.[3]

Dumping can be predatory or episodic in nature

Predatory dumping is said to occur when an overseas supplier’s main aim is to obtain market power by driving the local suppliers out of the market and subsequently raising the price. This type of dumping is not common in Australia.

The Productivity Commission Inquiry into anti-dumping stated:

There is no evidence that in recent years dumping has been motivated by the sort of predatory intent that would, in a domestic market context, risk breaching the Trade Practices Act (TPA).[4]

The other form of dumping is more episodic in nature and is said to occur when an overseas supplier sells surplus stock at heavily reduced prices. This may put pressure on local suppliers to reduce prices or reduce production. It is this sort of ‘dumping’ that Australian businesses are sometimes faced with.

Dumping or price discrimination

Whilst the engagement of predatory dumping is seen by almost all to be an undesirable business practice as it can lead to misuse of market power, the same cannot be said for other pricing strategies often referred to as ‘dumping’ but which may be more akin to price discrimination.

In effect, price discrimination in international trade means that suppliers can charge different prices for a good in the domestic market than they do in the international market.[5]

Such a pricing strategy is not uncommon. Governments around the world, including Australia’s, advise their exporters to price differentiate. In 2006 Austrade issued the following advice to domestic exporters:

Marginal (or ‘differential’) costing is a technique commonly employed in export and produces a more competitive price to assist market entry … It is particularly useful where a company has excess production capacity and needs to reduce its export prices to be competitive.[6]

Is dumping illegal?

John Brumby, in his Review into Australia’s Anti-dumping Arrangements, discussed the legality of dumping:

There is nothing illegal about the practices of dumping or subsidisation per se. Dumping is a form of price differentiation that can, in some circumstances, be beneficial to both the exporting and importing countries. The provision of government subsidies is also not uncommon, and such subsidies can provide a benefit to a producer or exporter of the goods.[7]

He further noted that:

There is global recognition that these practices can constitute unfair trade practices and that nations are entitled to take action to counter such practices where they cause material injury to a domestic industry in that country.[8]

WTO and dumping

The World Trade Organisation (WTO) is responsible for determining and administering internationally agreed principles and rules for managing dumping issues, as well as for providing a dispute settlement mechanism.

Under the WTO rules, an importing country may apply an anti-dumping duty when an overseas supplier is ‘dumping’ goods that cause or threaten to cause, ‘material injury’ to local suppliers.

Two WTO agreements provide the basis for Australia’s anti-dumping system:

·         the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Anti-Dumping Agreement) prescribes rules for the conduct of anti-dumping investigations and the application of measures to address dumping, including how member countries may: initiate cases, calculate dumping margins, determine injury, enforce remedial measures and review past determinations[9] and

·         the Agreement on Subsidies and Countervailing Measures (the Countervailing Measures Agreement) regulates measures designed to remedy material injury caused by subsidised imports, along similar lines to the Anti-Dumping Agreement.[10]

The Customs Act and the Dumping Duty Act are the principal statutes relating to anti-dumping.[11]

Timeline of reforms

The key milestones associated with the development and implementation of the reforms to Australia’s anti-dumping and countervailing system are outlined below.

·         July 2008: In its 22nd meeting, the Council of Australian Governments (COAG) identified Australia’s anti-dumping system as one of a number of priority areas for competition reform[12]

·         March 2009: The Government asked the Productivity Commission to conduct an inquiry into the effectiveness and impact of Australia’s anti-dumping system. This came about after renewed calls for industry protection amidst the backdrop of the global economic crisis

·         December 2009: The Productivity Commission released its report. It made 20 recommendations, 15 of which were accepted by the Government[13]

·         March 2011: Independent Senator Nick Xenophon introduced a Private Member’s Bill, the Customs Amendment (Anti-Dumping) Bill 2011[14] proposing a number of amendments to the anti-dumping regime

·         June 2011: The Senate Economics Legislation Committee rejected the majority of the proposals made in Senator Xenophon’s Bill.[15] However, the Bill’s proposed amendment to the definition of ‘interested party’ to include trade unions was accepted by the Committee and has been incorporated into the Government’s Customs Amendment (Anti-dumping Improvements) Act 2011[16]

·         June 2011: The Government responded to the Productivity Commission’s report and other stakeholder recommendations by releasing its policy paper Streamlining Australia’s Anti-dumping System,[17] which contains the background to the proposed legislative changes.[18]

The aim of these changes is to:

–        improve access to the anti-dumping system by funding the establishment of an International Trade Remedies Adviser to help businesses prepare applications and submissions to anti-dumping cases

–        improve timeliness by increasing Customs staff numbers and requiring the Minister to make a decision within 30 days of receiving a relevant report or recommendation

–        improve the decision making process by increasing funding for the use of experts, including forensic accountants

–        provide consistency with other countries by amending the subsidies provisions to align them with those set out by the WTO and expanding the definition of ‘interested party’ to include trade unions and downstream industry

–        enhance compliance by introducing a framework to make it easier for Customs to identify circumvention activities and

–        improve implementation by establishing the International Trade Remedies Forum to advise on the implementation of the proposed changes.[19]

·         July 2011-June 2012: The Government introduced its reforms through a number of tranches of legislation:

–        Customs Amendment (Anti-dumping Improvements) Act 2011[20]

–        Customs Amendment (Anti-dumping Improvements) Act (No. 1) 2012[21]

–        Customs Amendment (Anti-dumping Improvements) Act (No. 2) 2012[22] and

–        Customs Amendment (Anti-dumping Improvements) Act (No. 3) 2012 (which implements the International Trade Remedies Forum’s recommendations).[23]

Notwithstanding these changes to the anti-dumping system, the Government indicated that there might be further amendments beyond those that came out of the Productivity Commission inquiry.

In June 2012 the Minister for Home Affairs, Jason Clare, stated:

[M]ore can be done to ensure that the system can respond to new and emerging trends. For example, there may be more that we can do to address sales at a loss, aimed at avoiding the effect of our anti-dumping system. I am looking at this and other areas where future reform may be required, and will bring forward further legislation for the parliament's consideration if it is needed.[24]

Further changes to Australia’s anti-dumping system

On 4 July 2012, the Government responded to industry concerns and asked the former Premier of Victoria, John Brumby to:

·         examine the effectiveness of the current arrangements when assessing and investigating anti-dumping matters and

·         assess the viability in setting up a dedicated anti-dumping authority.[25]

In November 2012 the Government announced the release of the Brumby Review, which contained 13 recommendations.[26]

On 4 December 2012, the Prime Minister, Julia Gillard, announced that in response to the Brumby Review the Government would be introducing further amendments aimed at improving Australia’s anti-dumping regime.[27]

The Government identified the following key reforms:

·         establishment of a new Anti-Dumping Commission

·         the allocation of additional funding to Customs ($24.4 million over four years)

·         changes to make the anti-dumping system easier for small and medium-sized businesses and

·         the introduction of stricter remedies against overseas producers who deliberately circumvent Australia's anti-dumping rules.[28]

The Government stated that:

These reforms will ensure competition is on a level playing field, supporting jobs in manufacturing and other industries.

They implement recommendations of the former Victorian Premier John Brumby's report on the administration of the anti-dumping system and include additional initiatives to strengthen the system.[29]

Regulation Impact Statement

On 14 December 2012, the Department of Industry, Innovation, Science, Research and Tertiary Education published the regulation impact statement (the RIS) examining the effect of the proposed regulatory changes.[30]

The RIS identified the various stakeholders as falling within two groups:

·         Group 1: Union and industry stakeholders who are ‘adversely impacted by dumped or subsidised exports’.[31] The RIS noted that the recommendations made by these stakeholders to more recent reviews were aimed at issues not addressed to their satisfaction in the Government’s response to the Productivity Commission inquiry[32] and

·         Group 2: Australian agents of overseas exporters or Australian businesses ‘that have benefited from the lower prices offered by dumped or subsidised exports’.[33] These recommendations were made to more recent reviews and took the opposite approach to the recommendations proposed by Group 1.[34]

These stakeholder comments have clearly shaped the further changes announced by the Government:

The Ministers for Industry and Innovation and for Home Affairs intend to put to the Government for its consideration a suite of proposals aimed at addressing the factors identified as hindering Australia’s system from achieving outcomes similar to those in other jurisdictions, identified by the majority of stakeholders contributing to recent inquiry and review processes…[35]

Application of the lesser duty rule

One of the main amendments proposed in this Bill affects the operation of the lesser duty rule. A detailed explanation as to how this concept operates is set out in the RIS:

Where dumped or subsidised imports are found to cause or threaten material injury to industry producing like goods, WTO rules permit duties to be imposed up to the full dumping margin (the difference between the normal value and the export price) or to cover the full value of a subsidy. However, Australia follows the WTO principle known as the lesser duty rule. Under the lesser duty rule, consideration is given to the desirability of imposing duties at less than the full margin if that would be adequate to remove injury.[36]

In considering whether the current provisions relating to the lesser duty rule should be altered, the RIS considered four possible options of reform.[37] In examining each option, the RIS considered the various stakeholders comments, the impact each option would have on Australia’s economy and what changes would be required to give effect to each option. In particular, the RIS noted that while imposing the maximum duty would benefit injured industries by way of compensation and deterrence, the increased prices would affect downstream industry groups who relied on cheap imports.[38] The RIS ultimately recommended that routine application of the lesser duty rule should be maintained except in highly complex cases. This would continue to recognise the WTO’s preferred application of the lesser duty rule, while allowing Customs to focus on these complex investigations.[39] The RIS further stated that Option 4 addressed the majority of stakeholder comments, while not manifestly hurting downstream producers who rely on cheaper imports.[40]

The RIS also identified three examples of highly complex circumstances, where the lesser duty rule should not apply and provided justification as to why they should be considered to be particularly complex:

·         particular market situation identified in an application[41]

·         the application involves a country that has not adequately complied with its WTO subsidiary obligations[42] and

·         the application involves an Australian industry comprising a number of small-medium enterprises (SMEs).[43]

Policy position of non-government parties

Coalition

In her second reading speech, Dr Sharman Stone confirmed the Coalition’s support for the measures and emphasised the Coalition’s focus on a system that is strong, flexible and administratively easier.[44]

Dr Stone stated:

The country suffered for a long time when it was evident from the information that there was an antidumping action that should have been brought. However, because of the costs of bringing about a review of the situation and because of the time it took, too often the damage was done to the domestic industry and so people gave up a long time ago. Timeliness, effectiveness and the significant costs-all of those sorts of problems- are now in the process of being addressed.[45]

The Shadow Minister for Innovation, Industry and Science, Sophie Mirabella, commented that ‘anti-dumping is but a small and critical part in addressing some of the issues faced by many manufacturers’.[46]

The Australian Greens

The Australian Greens have been supportive of the Government’s anti-dumping reforms, with Deputy Leader Adam Bandt stating that the changes proposed in this Bill are ‘long overdue’.[47] The Greens have stressed the need for the Government to bring in stronger local content rules on investment, particularly in the mining and resources sector.[48]

During the debate on the current Bills, Mr Bandt moved an amendment that would require the Australian Bureau of Statistics to publish all import data collected.[49] Import data is defined in the amendment to mean particular information about individual shipments of goods exported to Australia.[50] While information of this kind is already supplied to Customs, it is not made publically available.[51]

Mr Bandt argued aggrieved persons wanting to bring complaints or proceedings need to have access to import data. [52]

This amendment was not supported by the Government, having received advice that the amendment might alter the independence of the ABS and the confidentiality of the information provided to the ABS.[53]

Position of major interest groups

International Trade Remedies Forum

As part of the Government’s response to the Productivity Commission’s report it announced it would establish the International Trade Remedies Forum (ITRF), which would allow stakeholders to provide feedback on changes to the anti-dumping regime.[54]

A description of the ITRF is provided by Customs:

The Forum comprises representatives from Australian manufacturers and producers, importers, unions, and relevant Government agencies. The Forum has been established to provide strategic advice and feedback to the Government on the implementation and monitoring of the Streamlining reforms, and play an ongoing advisory role, including reporting to Government on options for further improvement.[55]

The Minister has stated that ‘the Forum has played a substantial role in providing advice to the Government on the operation of Australia’s anti-dumping system’ and that much of the Forum’s input ‘has found its way into these tranches of legislation’.[56]

Financial implications

According to the Explanatory Memorandum, these amendments will be funded from administrative funds within Customs as well as specific funding previously announced by the Prime Minister.[57] As part of the 2013–14 Budget, the Government confirmed that it would be providing $27.7 million over four years to further improve Australia’s anti-dumping system.[58] While the majority of the funding appears to be aimed at setting up the new anti-dumping commission and in improving the rate in which Customs currently handles investigations, it will also allow for ‘several improvements to anti-dumping legislation’.[59] The Government has stated previously that ‘these reforms will ensure competition is on a level playing field, supporting jobs in manufacturing and other industries’.[60]

Statement of Compatibility with Human Rights

The Statement of Compatibility with Human Rights noted that:[61]

The Bill is compatible with human rights because it observes or advances the protection of human rights relating to presumption of innocence, privacy and reputation, and fair trial and hearing. While certain amendments contained in the bill may engage human rights relating to freedom of assembly and association, right to an effective remedy, right to equality and non-discrimination, and the presumption of innocence, those limitations are reasonable, necessary and proportionate.[62]

The Parliamentary Joint Committee on Human Rights noted in its report that neither Bill gives rise to human rights concerns.[63]

Main Issues

The need for a stronger anti-dumping system

Throughout the various debates that have occurred with regards to the Government’s previous tranches of anti-dumping legislation, it has been the position of both major parties that dumping is ‘cheating’[64] and that more should be done to prevent dumping from occurring in Australia.[65] While some Members of Parliament have warned about the potential adverse effects strong anti-dumping measures may have on Australia’s own trade interests,[66] there has been little acknowledgment of the role the Australian Government plays in assisting its own exporters.

This issue has been canvassed by Andrew Percival of law firm Corrs Chambers Westgarth:

Governments around the world (perhaps unwittingly) assist their producers to ‘dump’ in export markets through subsidies and other incentives. Exporters that are subsidised in their home markets can sell their exports at a lower price than if they received no government financial support. This happens in many markets around the world, including in Australia.

As an example car manufacturers in Australia receive subsidies from the Federal Government under the $5.4 billion New Car Plan. One of the recipients is Holden which last year received a reported $275 million in subsidies. Recently Holden announced it was exporting its new Holden VF Commodore to the USA under the Chevrolet badge. More importantly, while the export model would have a larger engine than the model sold in Australia, Holden confirmed it would be sold in the USA for approximately $10,000 less than the model sold in Australia.[67]

Although Holden receives subsidies from the Australian Government and is selling its Commodores in the US for a price less than it sells them in Australia, this does not mean Holden is engaging in dumping.[68] As long as the goods are not causing material injury to the domestic US industry, then the exporter’s action don’t constitute dumping and therefore don’t breach WTO rules.

Mr Percival also criticised the reliance placed by industry on the need for stronger anti-dumping measures:

Australia’s manufacturing industry has considerable problems, not the least of which is the high Australian dollar and tough international competition. The easy response has been to blame cheap imports from Asia, in particular, China, and try to impose tougher anti-dumping and countervailing measures.[69]

Changes to the lesser duty rule

While the WTO encourages the application of the lesser duty rule, it is not required under the various WTO agreements. The WTO has left it up to its members to decide when to implement this rule.[70]

As noted in the RIS:

Other jurisdictions that routinely apply the lesser duty rule include the European Union, New Zealand and India. Some jurisdictions only apply the lesser duty rule in certain circumstances (for example, Canada), and others routinely impose duties to the maximum allowed (for example, the United States).[71]

Australia will now operate similarly to Canada with respect to the lesser duty rule, though ‘under the Canadian regime, a lesser duty cannot be imposed separately from any public interest test assessment’.[72] However, there remains a divergence of views between industry groups and importers; with industry groups arguing that Australia should be more like the United States and provide better protection to industry, while importers do not wish to be deprived of cheap imports.[73]

The Government has chosen to keep the requirement that the Minister consider the lesser duty rule, except in certain ‘complex cases’ set out in the legislation.[74] It is questionable whether ‘complex cases’ are analogous with ‘hard to prove’, but as Customs is still required to complete investigations with regards to these situations dumping will still need to be proved (though some parties may be unduly burdened by the new retrospective provisions). While it has been argued that these changes may act as a deterrent for countries wishing to dump their goods in Australia[75], it is unclear how effective this amendment will be in deterring dumping.

Key provisions

Removal of the lesser duty rule in certain circumstances

Customs Act

Under subsection 269TG(5) of the Customs Act, the Minister is currently required to consider the lesser duty rule when setting dumping duties (a similar provision exists with respect to countervailing duties under subsection 269TJ(3B)). Instead of removing this requirement, the Government has chosen to maintain the current routine application of the lesser duty rule, except in a few select circumstances.

The Customs Bill provides for three situations, where the Minister will no longer have to apply the lesser duty rule:

1.       where a particular market situation is defined in an application

2.       where the application involves a country that has not adequately complied with its WTO subsidiary notification obligations or

3.       where the application involves an Australian industry containing at least two small-medium enterprises (SMEs).[76]

Items 7-8 of the Customs Bill provide for these amendments. In particular, item 7 inserts new subsection 269TG(5A) which provides that the Minister is not required to consider the lesser duty rule when setting dumping duties where:

·         the market situation of the country of export is not suitable for determining the normal value of the goods the subject of the investigation or

·         where the Australian industry that produces such goods contains at least two SMEs (it does not matter whether the industry also consists of other enterprises).

Item 8 inserts new subsection 269TJ(3BA), which provides for similar measures with respect to countervailing measures. Specifically, proposed subsection 269TJ(3BA) provides that the Minister, when applying countervailing measures, is not required to consider the lesser duty rule where:

·         the country of export has not complied with Article 25 of the Agreement on Subsidies and Countervailing Measures for the compliance period (which requires countries to report to the WTO on the various subsidies that they have in place) or

·         where the Australian industry that produces such goods contains at least two SMEs (it does not matter whether the industry also consists of other enterprises).

Item 3 of the Customs Bill inserts definitions of ‘compliance period’ and ‘small-medium enterprise’ into the Customs Act.

Dumping Duty Act

Under the Dumping Duty Act, Customs can impose dumping and countervailing duties.[77] Items 1-6 of the Tariff Bill remove the requirement for the Minister to consider the lesser duty rule when setting dumping or countervailing duties where any of the three circumstances specified above apply.[78]

Item 7 of the Tariff Bill sets out the application provisions with respect to these changes. The Explanatory Memorandum clarifies that ‘the requirement relating to the Minister’s consideration of the lesser duty rule will be consistent with the requirement that applied when the measures were imposed or last continued’.[79]

Amendments to the retrospective duties provisions

Current operation of the retrospective duties provisions

Currently, section 269TN of the Customs Act sets out the circumstances where retrospective duties may be applied. While subsection 269TN(1) generally prevents the application of duties to goods that have been entered for home consumption, except where Customs has taken security to ensure compliance with the legislation, subsections 269TN(3)-(8) set out the circumstances where subsection 269TN(1) does not apply.

In particular, subsections 269TN(3)-(4) and (6) provide for the various situations where retrospective dumping duties can be imposed, while subsections 269TN(5) and (7)-(8) set out the relevant circumstances where retrospective countervailing duties can be imposed.

The need for reform

The Government considers that ‘the current provisions in the Customs Act 1901 are consistent with the WTO rules, but are poorly constructed, making them difficult to understand and apply’.[80] It is not impossible to comprehend why, based on the technicality and complexity of these provisions, retrospective duties have never actually been applied.[81]

Proposed amendments

Items 9-18 of the Customs Bill amend the retrospective duties provisions.

Promoting clarity

Items 10 and 15 insert headings into section 269TN of the Customs Act, in order to distinguish between the provisions that relate to dumping duties and the provisions which relate to countervailing duties. Item 14 moves the provisions listed under subsection 269TN(6) so that they now fall under new subsection 269TN(4B), so that all the provisions that relate to dumping duties are kept together. Items 11 and 13 clarify that it is the Minister who is the relevant decision maker in deciding whether dumping or countervailing duties should be imposed.

While these provisions improve the structure of section 269TN, the section itself remains highly technical and complex. It is not likely that this simple restructuring will improve the accessibility of these provisions.

Better alignment with WTO agreements

Items 12, 14, 16 and 17 of the Bill amend various sections of the Act for the purpose of better aligning them with the two WTO Agreements.[82]

Item 12 amends subsection 269TN(3), which sets out when the Minister can apply retrospective dumping duties. Specifically, item 12 changes the wording in paragraph 269TN(3)(b) to reflect the intent in the wording of Article 10.6 (seriously undermine the remedial effect of the definitive anti-dumping duty to be applied) which allows for harm that has been suffered by industry before duties have been applied to be considered by the Minister.[83]

Item 14 also includes proposed subsection 269TN(4C), which implements Article 10.8 of the Anti-Dumping Agreement and provides that an investigation into dumping must have been initiated before the relevant goods were entered for home consumption, before retrospective duties can be imposed.

Items 16 and 17 amend paragraph 269TN(5)(b), which sets out when the Minister can apply retrospective countervailing duties. The purpose of this amendment is to better align this provision with Article 20.6 of the Countervailing Measures Agreement, which allows for countervailing duties to be applied retrospectively where ‘authorities find that injury which is difficult to repair is caused by massive imports in a relatively short period’.[84]

Other amendments

Item 18 repeals current subsection 269TN(6) (which has now been incorporated in new subsection 269TN(4B)) and inserts new subsection 269TN(6), which provides that before the Minister publishes a countervailing duty notice, he/she must inform the importer of the goods of his/her decision to impose retrospective countervailing duties. Subsection 269TN(4A) currently imposes this obligation on the Minister with respect to dumping duties, with the purpose of allowing the importer of the goods reasonable time to comment on the Minister’s decision to impose duties. Item 9 makes a minor amendment to paragraph 269TLA(4)(b) to ensure that the Minister, when making a decision with regards to new subsection 269TN(6), is not required to comply with the time limits set out under subsection 269TLA(2).[85]

Changes to Australia’s anti-circumvention framework

The use of anti-circumvention measures

The WTO defines circumvention to mean:

Getting around commitments in the WTO such as commitments to limit agricultural export subsidies. Includes: avoiding quotas and other restrictions by altering the country of origin of a product; measures taken by exporters to evade anti-dumping or countervailing duties.[86]

In order to combat the use of circumvention activities by overseas producers, governments will introduce anti-circumvention measures in order to protect local industry. There are currently no WTO rules prohibiting anti-circumvention measures, and Australia is not alone in having implemented such measures.[87]

As part of the Government’s fifth tranche of anti-dumping legislation, Division 5A was inserted into Part XVB of the Customs Act.[88] This new Division addressed the circumvention of trade measures by allowing for the CEO of Customs and Border Security to commence an anti-circumvention inquiry in certain circumstances.[89] Where an original notice is published imposing dumping duties on the importation of particular goods[90] and a person representing Australian industry believes that circumvention activity is occurring, they may apply to the CEO to conduct such an inquiry. The Minister also has the power to request the CEO to conduct an anti-circumvention inquiry.

Section 269ZDBB of the Customs Act currently sets out the five circumstances where circumvention activity occurs:

·         assembly of parts in Australia-where an importer of the goods subject to dumping duty imports those goods in parts and then assembles them in Australia

·         assembly of parts in a third country-where goods are manufactured in a foreign country that is the subject of a dumping notice, and then exported to a third country to be assembled, and then exported to Australia

·         export of goods though one or more third countries- where an importer of goods subject to dumping duty imports those goods via a third country, in order to have them considered as imports from that third country and avoid the dumping duty imposed

·         arrangements between exporters-where an exporter of goods subject to dumping duty makes an arrangement to export its goods though a second importer, who is not subject to dumping duty, in order to avoid the dumping duty imposed and

·         circumstances prescribed under the regulations.[91]

In considering the new anti-circumvention arrangements, the Minister has stated that ‘the reforms in this bill will take that framework one-step further by addressing situations where antidumping measures have been ineffective’.[92] This Bill provides for the establishment of a new type of circumvention activity, as well as a new termination provision that will apply to all types of anti-circumvention inquiries.

Introduction of a new anti-circumvention activity

The Explanatory Memorandum provides:

The new circumvention activity, called ‘avoidance of intended effect of duty’, describes the situation where dumping or countervailing duty has been imposed and is being paid by the importer; however, the imposition of the duty has little or no effect as, over a ‘reasonable period’, the price at which the goods are sold by the importer has not increased in line with the duty payable. A reasonable period may be different for different goods depending on the characteristics of the goods, the conditions of the market for the goods, and other relevant factors.[93]

Examples of where the intended effect of the duty has been avoided include where ‘the exporter has lowered the export price, where a party in the transaction is making sales at a loss, or where the importer is absorbing the duties’.[94]

The Explanatory Memorandum also notes that:

In determining if circumvention activity has occurred, investigators will give due consideration to the characteristics of the goods concerned, the market conditions, the nature of the relationship between the importer and exporter, and reasonable levels of profit. After having such consideration, the Commissioner may consider that it is appropriate to recommend to the Minister that the notice not be altered, even when the circumvention activity may be occurring to a limited extent.[95]

This is consistent with paragraph 269ZDBE(2)(b) of the Customs Act, which provides that the CEO must determine whether an application complies with the relevant formalities and whether there appear to be reasonable grounds for asserting that one or more circumvention activities in relation to the original notice have occurred.

Items 19-24 and 26-34 of the Bill amend the Customs Act to provide for a new anti-circumvention activity.

In particular, Item 19 inserts new subsection 269ZDBB(5A) which provides that the ‘avoidance of intended effect of duty’ is considered a circumvention activity under the Customs Act. This will occur when ‘the importer of the circumvention goods, whether directly or through an associate or associates, sells those goods in Australia without increasing the price commensurate with the total amount of duty payable on the circumvention goods under the Dumping Duty Act’.[96] Item 22 provides that Customs must provide a report to the Minister within 100 days of the Commissioner publishing an inquiry notice under section 269ZDBE, unless the Minister allows for a longer period under section 269ZHI.[97]

Items 20-21, 23-24, 26-30 and 34 make a number of procedural amendments to various provisions under Division 5A.[98] These amendments provide that the inquiries under proposed subsection 269ZDBB(5A) will be conducted differently to other anti-circumvention activities, as the CEO will not be required to publish a statement of essential facts, and there will therefore be no submissions in response to such a statement.

Termination of anti-circumvention inquiries

Item 25 inserts new section 269ZDBEA, which allows the Minister to terminate an anti-circumvention inquiry when he/she is satisfied that no circumvention activity in relation to the original notice has occurred.

Proposed subsection 269ZDBEA(1) provides that ‘for circumvention activities contained in subsections 269ZDBB(2) to (5) the termination may occur at any time before the Commissioner would otherwise be required to place the statement of essential facts on the public record’.[99] Under proposed subsection 269ZDBEA(2), the Commissioner may terminate proposed subsection 269ZDBB(5A) inquiries at any time before reporting to the Minister.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

© Commonwealth of Australia

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.

Feedback is welcome and may be provided to: web.library@aph.gov.au. Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.

ISSN 1328-8091

[1].              Customs Act 1901 accessed 14 June 2013.

[2].              Customs Tariff (Anti-Dumping) Act 1975, accessed 14 June 2013.

[3].              Background material included in this digest has been prepared by Eugenia Karanikolas (Parliamentary Library, Economics Section). For further background: L Ferris and E Karanikolas, Customs Amendment (Anti-Dumping Commission) Bill 2013, Bills Digest, 82, 2012–13, Parliamentary Library, Canberra, 2013, accessed 12 June 2013.

[4].              Productivity Commission (PC), Australia’s anti-dumping and countervailing system, Inquiry report no. 48, PC, 18 December 2009, p. 40, accessed 6 June 2013.

[5].              Price discrimination also happens within a country’s borders by domestic suppliers. This practice is not prohibited under the Competition and Consumer Act 2010. The argument is that non-predatory price discrimination may positively impact competition.

[6].              Productivity Commission, Australia’s anti-dumping and countervailing system, op. cit., p. 40.

[7].              J Brumby, Review into anti-dumping arrangements, Report, Commonwealth of Australia, November 2012, p. 15, accessed 6 June 2013. In July 2012, the Government asked Mr Brumby to conduct a review into Australia’s anti-dumping system.

[8].              Ibid., p. 16.

[9].              World Trade Organization (WTO), Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, WTO website, accessed 6 June 2013.

[10].              World Trade Organization (WTO), Agreement on Subsidies and Countervailing Measures, accessed 6 June 2013.

[11].              Productivity Commission, Australia’s anti-dumping and countervailing system, op. cit., p. 8.

[12].              More information can be found in L Nielson, Customs Amendment (Anti-dumping Improvements) Bill (No. 2) 2012 [and] Customs Tariff (Anti-Dumping) Amendment Bill (No. 1) 2012, Bills Digest, 145, 2011–12, Parliamentary Library, Canberra, 2012, accessed 6 June 2013.

[13].              Productivity Commission, Australia’s anti-dumping and countervailing system, op. cit., pp. xxviii-xxxv.

[14].              Customs Amendment (Anti-Dumping) Bill 2011, accessed 6 June 2013.

[15].              Senate Economics Legislation Committee, Customs Amendment (Anti-Dumping) Bill 2011, Report, The Senate, Canberra, 22 June 2011, accessed 6 June 2013.

[16].              The Customs Amendment (Anti-dumping Improvements) Bill 2011 was enacted and received Royal Assent on 17 October 2011, accessed 6 June 2013. The Act can be viewed on the Comlaw website: Customs Amendment (Anti-dumping Improvements) Act 2011, accessed 21 June 2013.

[17].              Australian Customs and Border Protection Service (ACBPS), Streamlining Australia’s anti-dumping system: an effective anti-dumping and countervailing system for Australia, Canberra, June 2011, accessed 6 June 2013.

[18].              B O’Connor (then Minister for Home Affairs and Justice) and Dr C Emerson (Minister for Trade), Government combats dumping and helps support local jobs, joint media release, Canberra, 22 June 2011, accessed 6 June 2013.

[19].              Minter Ellison Lawyers, Changes to Australia’s anti-dumping/countervailing regime: overview of key amendments, 29 November 2011, accessed 6 June 2013.

[20].              Customs Amendment (Anti-dumping Improvements) Act 2011, accessed 6 June 2013. Further information about this tranche of legislation is set out in the relevant Bills Digest: M Priestly, Customs Amendment (Anti-dumping Improvements) Bill 2011, Bills Digest, 47, 2011–12, Parliamentary Library, Canberra, 2011, accessed 6 June 2013.

[21].              Customs Amendment (Anti-dumping Improvements) Act (No. 1) 2012, accessed 6 June 2013. Further information about this tranche of legislation is set out in the relevant Bills Digest: L Ferris, Customs Amendment (Anti-dumping Improvements) Bill (No. 2) 2011, Bills Digest, 149, 2011–12, Parliamentary Library, Canberra, 2012, accessed 6 June 2013.

[22].              Customs Amendment (Anti-dumping Improvements) Act (No. 2) 2012, accessed 6 June 2013. Further information about this tranche of legislation is set out in the relevant Bills Digest: L Nielson, Customs Amendment (Anti-dumping Improvements) Bill (No. 2) 2012 [and] Customs Tariff (Anti-Dumping) Amendment Bill (No. 1) 2012, op. cit.

[23].              Customs Amendment (Anti-dumping Improvements) Act (No. 3) 2012, accessed 6 June 2013. Further information about this tranche of legislation is set out in the relevant Bills Digest: L Ferris and E Karanikolas, Customs Amendment (Anti-dumping Improvements) Bill (No. 3) 2012, Bills Digest, 19, 2012–13, Parliamentary Library, Canberra, 2012, accessed 6 June 2013.

[24].              J Clare (Minister for Home Affairs), ‘Second reading speech: Customs Amendment (Anti-dumping Improvements) Bill (No. 3) 2012’, House of Representatives, Debates, 27 June 2012, pp. 8149–8150, accessed 6 June 2012.

[25].              J Clare (Minister for Home Affairs and Justice), John Brumby to report on a Commonwealth Anti-Dumping agency, media release, 4 July 2012, accessed 6 June 2013.

[26].              J Clare (Minister for Home Affairs), Brumby Anti-Dumping Review, media release, Canberra, 27 November 2012, accessed 6 June 2013.

[27].              J Gillard (Prime Minister), G Combet (Minister for Industry and Innovation), J Clare (Minister for Home Affairs), Anti-dumping reforms to support Australian industry, media release, Melbourne, 4 December 2012, accessed 6 June 2013.

[28].              Ibid.

[29].              Ibid.

[30].              Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE), Australia’s trade remedies system, Regulation Impact Statement, 14 December 2012, accessed 14 June 2013. The RIS was assessed as adequate by the Office of Best Practice Regulation: Department of Finance and Deregulation, ‘Update: changes to the anti-dumping regime – Regulation Impact Statement – Department of Industry, Innovation, Science, Research and Tertiary’, Office of Best Practice Regulation website, 14 December 2012, accessed 14 June 2013.

[31].              DIISRTE, Australia’s trade remedies system, op. cit., p. 5.

[32].              Ibid.

[33].              Ibid.

[34].              Ibid.

[35].              Ibid., p. 20.

[36].              Ibid., p. 17.

[37].              Ibid., p. 23.

[38].              Ibid., p. 17.

[39].              Ibid., p. 31.

[40].              Ibid., p. 32.

[41].              Ibid., p. 24.

[42].              Ibid.

[43].              Ibid.

[44].              Dr S Stone, ‘Second reading speech: Customs Amendment (Anti-dumping Measures) Bill 2013; Customs Tariff

(Anti-Dumping) Amendment Bill 2013', House of Representatives, Debates, 6 June 2013, p. 125, accessed 14 June 2013.

[45].              Ibid.

[46].              S Mirabella, ‘Second reading speech: Customs Amendment (Anti-dumping Measures) Bill 2013; Customs Tariff

              (Anti-Dumping) Amendment Bill 2013', House of Representatives, Debates, 17 June 2013, p. 147, accessed 18 June 2013.

[47].              A Bandt, Anti-Dumping good start, but government must act on local content, media release, 31 May 2013, accessed 14 June 2013.

[48].              Ibid.

[49].              A Bandt, ‘Second reading speech: Customs Amendment (Anti-dumping Measures) Bill 2013', House of Representatives, Debates, 17 June 2013, p. 149, accessed 18 June 2013.

[50].              The amendment provides that ‘import data’ includes information about the country of origin, the type of goods, the volume and value of the goods and any other details specified by the Minister via a legislative instrument.

[51].              Imports data is collected under the Customs Act with importers having a legal obligation to provide documentation to Customs. The Customs Administration Act 1985 allows Customs to pass this data to the ABS for statistical purposes: Australian Bureau of Statistics (ABS), International merchandise imports, Australia, May 2013, cat. no. 5439.0, ABS, Canberra, 2013, accessed 18 June 2013.

[52].              A Bandt, ‘Second reading speech: Customs Amendment (Anti-dumping Measures) Bill 2013', op. cit.

[53].              S Neumann, ‘Second reading speech: Customs Amendment (Anti-dumping Measures) Bill 2013', House of Representatives, Debates, 17 June 2013, p. 149, accessed 18 June 2013.

[54].              Australian Customs and Border Protection Service (ACBPS), Streamlining Australia’s anti-dumping system: an effective anti-dumping and countervailing system for Australia, op. cit., p. 29.

[55].              Australian Customs and Border Protection Service (ACBPS), ‘International Trade Remedies Forum’, ACBPS website, 9 May 2013, accessed 14 June 2013. The ACBPS’s website also provides a list of the current members of the ITRF, though Rio Tinto, BlueScope Steel, Steel House Framing Australia Pty Ltd (Stoddart) and the Food and Beverage Importers Association only joined the forum on 14 June 2013: J Clare (Minister for Home Affairs), Members of International Trade Remedies Forum announced, media release, 14 June 2013, accessed 16 June 2013.

[56].              J Clare (Minister for Home Affairs), ‘Second reading speech: Customs Amendment (Anti-dumping Measures) Bill 2013', House of Representatives, Debates, 29 May 2013, p. 19, accessed 14 June 2012.

[57].              Replacement Explanatory Memorandum, Customs Amendment (Anti-dumping Measures) Bill 2013, p. 2, accessed 14 June 2013.

[58].              Australian Government, ‘Part 2: Expense measures', Budget measures: budget paper no. 2: 2013–14’, accessed 14 June 2013.

[59].              Ibid.

[60].              J Gillard (Prime Minister), G Combet (Minister for Industry and Innovation), J Clare (Minister for Home Affairs), Anti-dumping reforms to support Australian industry, op. cit.

[61].              Replacement Explanatory Memorandum, Customs Amendment (Anti-dumping Measures) Bill 2013, op. cit., pp. 4–7. As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.

[62].              Ibid., p. 7.

[63].              Parliamentary Joint Committee on Human Rights, Eighth Report of 2013, Joint Committee, Canberra, June 2013, p. 69, accessed 21 June 2013.

[64].              J Clare, ‘Second reading speech: Customs Amendment (Anti-Dumping Commission) Bill 2013’, House of Representatives, Debates, 6 February 2013, p. 142, accessed 14 June 2013.

[65].              S Mirabella, ‘Second reading speech: Customs Amendment (Anti-Dumping Commission) Bill 2013’, House of Representatives, Debates, 13 February 2013, p. 1222, accessed 14 June 2013.

[66].              C Kelly, ‘Second reading speech: Customs Amendment (Anti-Dumping Commission) Bill 2013’, House of Representatives, Debates, 13 February 2013, p. 83, accessed 14 June 2013.

[67].              A Percival, ‘Anti-dumping reforms are barking up the wrong tree’, Corrs Chambers Westgarth website, 12 March 2013, accessed 14 June 2013.

[68].              Ibid.

[69].              Ibid.

[70].              Productivity Commission, Australia’s anti-dumping and countervailing system, op. cit., p. 65.

[71].              Department of Industry, Innovation, Science, Research and Tertiary Education, Australia’s trade remedies system, Regulation Impact Statement, op. cit., p. 17.

[72].              The Government has chosen not to apply a public interest test: Australian Customs and Border Protection Service (ACBPS), Streamlining Australia’s anti-dumping system: an effective anti-dumping and countervailing system for Australia, op. cit., p. 26.

[73].              Ibid., p. 17.

[74].              Replacement Explanatory Memorandum, Customs Amendment (Anti-dumping Measures) Bill 2013, op. cit., p. 12.

[75].              A Jarbin, ‘Two new developments in the Australian anti-dumping framework’, King & Wood Mallesons website, 30 May 2013, accessed 14 June 2013.

[76].              Department of Industry, Innovation, Science, Research and Tertiary Education, Australia’s trade remedies system, Regulation Impact Statement, op. cit., p. 24.

[77].              Section 7 of the Dumping Duty Act.

[78].              The Explanatory Memorandum sets out the various situations where the Minister will no longer be required to give consideration to the lesser duty rule when imposing duties: Replacement Explanatory Memorandum, Customs Amendment (Anti-dumping Measures) Bill 2013, op. cit., pp. 23–24.

[79].              Ibid., p. 24.

[80].              Department of Industry, Innovation, Science, Research and Tertiary Education, Australia’s trade remedies system, Regulation Impact Statement, op. cit., p. 21.

[81].              J Clare (Minister for Home Affairs), ‘Second reading speech: Customs Amendment (Anti-dumping Measures) Bill 2013', op. cit., p. 19.

[82].              The Explanatory Memorandum states that the current provisions are consistent with WTO rules: ibid., p. 13.

[83].              Article 10.6 of the Anti-Dumping Agreement sets out the circumstances when retroactive duties can be applied by the relevant authorities: World Trade Organization (WTO), Agreement on Implementation of Article VI of the General Tariffs and Trade 1994, op. cit.

[84].              Countervailing Measures Agreement, accessed 14 June 2013.

[85].              This exception already applies to decisions made in relation to subsection 269TN(4A).

[86].              World Trade Organization (WTO), ‘Glossary’, WTO website, accessed 14 June 2013.

[87].              The only WTO authority with regards to anti-circumvention measures is a Ministerial Decision made at the Uruguay Round Agreement. ‘The Ministerial Decision on Anti-Circumvention, which is not part of the AD Agreement, noted that the negotiators had been unable to agree on a specific text dealing with the problem of anti-circumvention, recognized the desirability of applying uniform rules in this area as soon as possible, and referred the matter to the Committee for resolution’: World Trade Organization (WTO), ‘Decision on anti-circumvention’, WTO website, accessed 14 June 2013.

[88].              See the relevant Bills Digest for further information regarding these amendments: L Ferris and E Karanikolas, Customs Amendment (Anti-dumping Improvements) Bill (No. 3) 2012, Bills Digest, op. cit., pp. 14–16.

[89].              Trade measures may be circumvented by exporters or importers of goods (which are subject to measures) to avoid the full payment of dumping or countervailing duty. Examples of some of the various forms of circumvention activities which seek to exploit different aspects of the anti-dumping and countervailing system are found in the Minister’s second reading speech on the Customs Amendment (Anti-dumping Improvements) Bill (No. 3) 2012: J Clare (Minister for Home Affairs), ‘Second reading speech: Customs Amendment (Anti-dumping Improvements) Bill (No. 3) 2012’, op. cit., pp. 8148–8149.

[90].              A notice may be published in respect of goods under subsections 269TG(2) or 269TJ(2) of the Customs Act.

[91].              See the relevant Bills Digest for further information regarding these amendments: L Ferris and E Karanikolas, Customs Amendment (Anti-dumping Improvements) Bill (No. 3) 2012, Bills Digest, op. cit., pp. 14-16.

[92].              J Clare (Minister for Home Affairs), ‘Second reading speech: Customs Amendment (Anti-dumping Measures) Bill 2013', op. cit., p. 19.

[93].              Replacement Explanatory Memorandum, Customs Amendment (Anti-dumping Measures) Bill 2013, op. cit., p. 15.

[94].              Ibid.

[95].              Ibid.

[96].              Proposed paragraph 269ZDBB(5A)(d).

[97].              Items 32 and 33 of the Bill amend section 269ZHI to allow for the Minister to extend the 100 day time limit with regards to inquiries conducted under subsection 269ZDBB(5A).

[98].              Further information regarding these amendments is set out in the Explanatory Memorandum: Replacement Explanatory Memorandum, Customs Amendment (Anti-dumping Measures) Bill 2013, op. cit., pp. 14–18.

[99].              Ibid., p. 17.