BILLS DIGEST NO. 42, 2017–18              17 October 2017

Customs Amendment (Anti-Dumping Measures) Bill 2017

Paul Davidson
Economics Section 

Date introduced: 13 September 2017

House: House of Representatives

Portfolio:  Industry, Innovation and Science

Commencement: The day the Act receives Royal Assent

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at October 2017.

Purpose of the Bill

The purpose of the Customs Amendment (Anti-Dumping Measures) Bill 2017 (the Bill) is to amend the Customs Act 1901 (the Customs Act) so as to provide additional certainty to exporters to Australia of the ascertainment of export prices in reviews of anti-dumping measures.

Structure of the Bill

The Bill contains one Schedule which amends the Customs Act.

Background

‘Dumping’ is a term used in international trade law to refer to a situation where an entity in one country exports a product to another country, at a price which is either below the price it normally charges in its home market, or is below its costs of production.[1] Anti-dumping therefore refers to the process and potential imposition of a duty (a dumping duty) so to have the effect of removing the extent of the dumping.

The principal Australian laws dealing with anti-dumping measures are contained in the Customs Act,[2] which sets out the general inquiry process, and the Customs Tariff (Anti-Dumping) Act 1975 which provides for the imposition of anti-dumping and countervailing (anti-subsidy) duties.

Anti-dumping measures can be imposed after an investigation is conducted by the Anti-Dumping Commissioner which recommends to the relevant Minister that dumping duties be imposed, where there is evidence of dumping. If the relevant Minister agrees with the recommendation then dumping duties can be imposed.

Once dumping duties are imposed, interested parties (generally either the exporter subject to measures or an Australian producer of like goods) can request a review of the duties imposed. Generally, the purpose of the review is to establish whether the extent of the duties imposed remains fit for purpose, that is, that they remedy the extent of any dumping. The review therefore needs relevant information, particularly about the relevant prices of the goods. The Bill creates an additional method for ascertaining the export price for the purposes of conducting an anti-dumping review in order to prevent gaming of the system under the existing method.

Australia’s anti-dumping has attracted substantial controversy and evolving legislative action over several decades, including the Gruen Review in 1986, the Willett Review in 1996, a Productivity Commission inquiry in 2009, and the Brumby Review in 2012 which led to the establishment of the present Anti-Dumping Commission.[3]

Committee consideration

Selection of Bills Committee

At the time of writing, the Selection of Bills Committee had deferred consideration of the Bill until its next meeting.[4]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Scrutiny of Bills Committee had not considered the Bill.[5]

Policy position of non-government parties/independents

At the time of writing, the position of non-government parties is not known.

Position of major interest groups

At the time of writing, the position of specific interest groups is not known, although the Explanatory Memorandum to the Bill did note:

The Australian industry stakeholders who have expressed concerns allege that the way the system treats exporters who have not exported in a review period or have exported small quantities (as described above) is encouraging exporters to adopt this behaviour to allow them to resume dumping in the period following the review.[6]

Financial implications

The Government stated that the ‘revenue impact of the Bill is unquantifiable due to the variable frequency and nature of anti-dumping reviews. However, the revenue impact is likely to be small given the low volumes of exports affected’.[7]

Statement of Compatibility with Human Rights

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. The Government considers that the Bill is compatible.[8]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Joint Committee on Human Rights had not considered the Bill.[9]

Key issues and provisions

The Bill amends section 269TAB of the Customs Act, which deals with ascertaining the export price of exported goods to Australia. Item 1 repeals subsection 269TAB(1A)—which deals with permissible deductions (reimbursements) that the Minister may apply in ascertaining the export price of the goods. Item 3 effectively reinstitutes it as proposed subsection 269TAB(6), as a consequence of the main amendment proposed by item 2.

Item 2 proposes to insert a new methodology for the calculation of the export price of goods which specifically applies when there is a review of anti-dumping measures conducted under the Customs Act. Currently, the export price is determined in three different ways (Box 1).

Under subsections 269TAB(3)–(4), the Minister has discretion to determine the export price in the absence of sufficient information, and the discretion to disregard any information that is considered (by the Minister) to be unreliable.

Box 1: current approaches to ascertaining the export price of goods exported to Australia

Subsection 269TAB(1) of the Customs Act provides for three ways in which the export price is ascertained. In summary, those ways are:

1.       Where the goods have been exported to Australia otherwise than by the importer and have been purchased by the importer from the exporter, and the purchase by the importer was an arms-length transaction—then the export price is the price so paid, other than any part which represents a transportation charge or any other matter arising after exportation.

2.       Where the goods have been exported to Australia otherwise than by the importer and have been purchased by the importer from the exporter, and the purchase by the importer was not an arms-length transaction, and the goods are subsequently sold by the importer to a third party—then the export price is the price at which the goods were sold by the importer, less any prescribed deductions.

3.       In any other case—the export price is the price determined by the Minister.

Source: Customs Act 1901, subsection 269TAB(1).

The central problem that the Bill aims to remedy is the ascertainment of the export price in accordance with subsection 269TAB(1), in relation to reviews of anti-dumping measures. This is because where the export price of the goods is less than the normal value of those goods[10] dumping has occurred.[11] For the purposes of reviewing anti-dumping measures which are in place, the default rules of ascertaining the export price currently apply (Box 1).

The general purpose of anti-dumping reviews are to ensure that measures remain fit for purpose in that they are targeting dumped goods and only provide the minimum necessary remedy. Once measures are in place, an exporter will be subject to anti-dumping duties as determined. However, as noted in the Explanatory Memorandum:

An unintended consequence of the current legislation allows Exporters to receive a less effective anti-dumping duty by not exporting, or exporting small volumes at a higher price, for a period of time, before applying for the duty to be reviewed.[12]

In effect, under the current provisions, it is possible for exporters to game the system by selectively constraining exports and/or charging a high price for them once dumping duties are imposed. Generally, reviews of anti-dumping measures can only be conducted annually,[13] so it is possible for exporters to depress volumes and/or increase prices during that 12 month period to ensure that the export price of the goods is closer to (or above) the normal value of those goods. If that were the case, then either a nominal duty (or no duty) would be imposed as the level of detriment to the Australian industry producing like goods would be negligible. With the Minister having then set a nominal duty (on acceptance of a recommendation by the Anti-Dumping Commission), the exporters increase their volume and/or decrease the price of their exports, thus injuring Australian producers of like goods.

Those Australian producers generally have to wait a period of 12 months before a review can be conducted, during which time dumping is occurring. If dumping is found by the Anti-Dumping Commission in a subsequent review and a recommendation made to the Minister to impose dumping duties is accepted, then dumping duties are imposed. A repeating cycle can then begin whereby the exporters selectively constrain their exports during the next period prior to calling for a review of the anti-dumping measures. Item 2 proposes to avoid that occurrence by permitting the Minister a different method of ascertaining the export price when conducting anti-dumping reviews.

The amendments proposed by item 2 would create a discretion by which the Minister may determine that an appropriate export price be ascertained by reference to the current provisions in subsection 269TAB(1) in relation to the relevant export price for a review of anti-dumping measures.

Item 2 inserts proposed subsection 269TAB(2A) which provides that the Minister may determine the export price in accordance with proposed subsection 269TAB(2B) if:

•       the price is being ascertained in relation to an exporter of goods subject to an anti-dumping review and

•       the Minister determines that there is insufficient or unreliable information to ascertain the price due to an absence or low volume of exports of those goods to Australia.

The Ministerial determination about an absence or low volume of goods is determined having regards to: the previous volumes of exports by that exporter; the pattern of trade for like goods; and factors affecting the pattern of trade for like goods which are outside the control of the exporter.

Proposed subsection 269TAB(2B) provides that the export price is that which is determined by the Minister having regard to any of the following:

•       the export price that is established in accordance with subsection 269TAB(1) (see Box 1 above) for any of the decisions outlined in proposed subsection 269TAB(2D)[14]

•       the price paid for like goods by the exporter in arms-length transactions of a Ministerially-determined appropriate third country[15]

•       the export price for like goods exported to Australia from the country of export by another exporter for any of the decisions outlined in proposed subsection 269TAB(2D).

Proposed subsection 269TAB(2C) permits the Minister to deem that such exports have occurred in the absence of exports of those goods.

Proposed subsection 269TAB(2G) provides that in ascertaining the export price, adjustments may be made to the price ascertained under proposed subsection 269TAB(2B) by the Minister where the Minister determines that such adjustments are necessary to reflect what the export price would have been had there not been an absence or low volume of exports.

Item 4 provides that the amendments will apply to:

•       review applications lodged, or requests made, on or after the commencement of Schedule 1

•       reviews currently on foot but for which a declaration has not yet been made

•       review applications lodged, or requests made, before the commencement of Schedule 1, but for which a notice of a review had not been made at commencement.

In practice this means that reviews which are currently on foot may be subject to the new methodology provided for by item 2, which would amount to a retrospective change in relation to those reviews. As noted in the Explanatory Memorandum:

This will avoid applying a disproportionately low duty to reviews already underway. Failing to do so, could allow Exporters to subvert the intent of the anti-dumping system and produce an unfair outcome for Australian industry.[16]

However, the Government does not explain why it is necessary to retrospectively apply the new methodology to reviews currently on foot. Those reviews, once concluded, could be re-reviewed in a further 12 months’ time. There is no estimate of much of an ‘unfair’ outcome would be generated by not prospectively applying the amendments in the Bill, but given that the total amount of duty impact is small,[17] it is not likely to be significant.

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[1].              Marrakesh Agreement establishing the World Trade Organization (WTO Agreement), done in Marrakesh 15 April 1994, [1995] ATS 8, (entered into force for Australia and generally 1 January 1995), Appendix: General Agreement on Tariffs and Trade (GATT, 1947) Article VI.

[2].              Particularly Parts XVB and XVC, Customs Act 1901.

[3].              For a summary of these reviews and reform of Australia’s anti-dumping system, see Senate Economics Legislation Committee, Customs Amendment (Anti-dumping Measures) Bill (No. 1) 2015 and Customs Tariff (Anti-dumping Measures) Amendment Bill 2015, The Senate, May 2015, pp. 3–6.

[4].              Senate Selection of Bills Committee, Report, 11, 2017, The Senate, 14 September 2017.

[5].              Senate Standing Committee for the Scrutiny of Bills, Index of Bills considered by the Committee, The Senate, 16 September 2017.

[6].              Explanatory Memorandum, Customs Amendment (Anti-Dumping Measures) Bill 2017, p. 12.

[7].              Ibid., p. 4.

[8].              The Statement of Compatibility with Human Rights can be found at page 28 of the Explanatory Memorandum to the Bill.

[9].              Parliamentary Joint Committee on Human Rights, Index of Bills and legislative instruments, Parliament of Australia, 12 September 2017.

[10].              As ascertained in accordance with Customs Act, section 269TAC.

[11].              Additional requirements relate to material injury to an Australian industry producing like goods: Customs Act, paragraphs 269TG(1)(a)–(b). The imposition of dumping duties is in accordance with the Customs Tariff (Anti-Dumping) Act 1975, section 8.

[12].              Explanatory Memorandum, Customs Amendment (Anti-Dumping Measures) Bill 2017, p. 2.

[13].              Customs Act, subsection 269ZDBC(1A).

[14].              Proposed subsection 269TAB(2D) provides for decisions relating to dumping duties, countervailing duties, reviews of anti-dumping measures, anti-circumvention inquires, accelerated review, and continuation of anti-dumping measures.

[15].              Proposed subsection 269TAB(2F) provides that without limiting the matters in determining whether a third country is appropriate, regard may be had to whether the volume of trade with the third country is similar to the volume of trade with Australia, and whether the nature of the trade with the third country is similar to the nature of the trade with Australia.

[16].              Explanatory Memorandum, Customs Amendment (Anti-Dumping Measures) Bill 2017, p. 3.

[17].              Ibid., p. 4.