Bills Digest no. 124 2005–06
Export Market Development Grants Legislation Amendment
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 status. Other sources should be
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Development Grants Legislation Amendment Bill
Date introduced: 30 March 2006
House: House of
Commencement: On Royal Assent, with the exception of item 34 in
Schedule 1. Item 34 is retrospective, correcting a minor drafting
The purpose of the Bill is to
amend the Export Market Development Grants Act 1997 in
order to continue the Export Market Development Grants (EMDG)
scheme and to implement changes that enhance the effectiveness of
the scheme. The Bill also repeals the Export Expansion Grants
The EMDG scheme, administered by the Australian Trade Commission
(Austrade), assists Australian companies to commence or sustain
export activity by partially reimbursing eligible export promotion
expenses. In 2004-05, the EMDG scheme delivered 3,277 grants valued
at $123.9 million to Australian businesses.(1)
In its 32 year history, the EMDG scheme, in its various forms,
has become an integral component in the export strategy of
Australian firms seeking to commence or sustain export activity.
This is particularly true for small to medium-sized enterprises
(SMEs), for whom the costs of commencing or sustaining export
activity present a substantial hurdle.
The Austrade Board estimates that the EMDG scheme accounts for
more than one-third of the export income for SMEs participating in
the scheme. Without access to the scheme, such firms would likely
reduce or cease export activity. In 2004-05, approximately 77 per
cent of EMDG payments went to small businesses with an annual
income of $5 million or less.(2)
The final grant year for the current EMDG scheme will be
2005-06, for which applications will be received in 2006-07. In
June 2004, the Minister for Trade requested that Austrade undertake
a review of the EMDG scheme and make recommendations on the
continuation of the scheme, as required under section 106A of the
Export Development Grants Act 1997.
Austrade review considered 394 public submissions, feedback
from 70 consultation meetings and the results of independent
research carried out by the Centre for International Economics
(CIE). The review found the EMDG scheme to be an effective tool to
assist SMEs to commence or sustain export activity. It also found
that the scheme enjoys the strong support from the Australian
business community across a wide range of industry sectors.
Accordingly, the review recommended that the EMDG scheme be
The review also identified options to improve the effectiveness
of the scheme based around four broad categories:
- Increasing the incentive for SMEs to internationalise by
visiting overseas markets;
- Updating the scheme to support new and emerging export
industries and practices;
- Reducing risk management and administration costs; and
- Improving the certainty of payment (see discussion below).
On 24 January 2006, the Trade Minister announced the Government
s intention to extend the EMDG for a further five years, until the
end of 2010-11 and to implement certain changes recommended in the
Austrade review, subject to the passage of the current
The key changes to the scheme included in the Bill are:
increase in the overseas visit allowance from $200 to $300 per
Provision of greater flexibility in the handling of applications
that do not technically meet requirements under the current
Modification of the current Australian origin rules.
eligible an applicant s expenses incurred to increase the return on
the disposal of intellectual property and know-how through related
Separation of the overseas representatives and marketing
consultants expense categories and capping of overseas
representatives expenses at $200,000 per annum and marketing
consultants expenses at $50,000 per annum.
of rules covering changes in business ownership.
in the period for which Austrade can grant special approval status,
including approved body status, from three years to five years.
Clarification of Austrade s power to disregard unsubstantiated,
unreasonable, uncommercial or non-bona fide expense claims and the
limitation of eligibility for cash payments to $10,000 per
of the export performance test.
The Bill in its current form has only a limited ability to
address what has become the key concern of industry and exporter
associations certainty of payment.
In 1997, the Australian Government capped funding of the scheme
at $A150 million a year until 2005-06. Grants larger than an
initial payment ceiling , currently set at $50 000, are paid in two
instalments. The first instalment is payable immediately after
assessment by Austrade. The second instalment is multiplied by a
payout factor determined by the amount of funds remaining in the
pool. Consequently, if demand for grants exceeds the scheme budget,
payments to applicants eligible for a grant above the initial
payment ceiling are reduced.
This creates uncertainty in the amount of the final payment as
noted by the Australian Chamber of Commerce and Industry:
In the 2002/03 round of payments, there were
insufficient funds to pay the total amount of claims, and 900
Australian businesses had their grants reduced and will receive
approximately 75 per cent of their entitlement.(4)
This makes it impossible to factor in with any certainty the
reimbursement of eligible export promotion expenses prior to
undertaking activity, effectively removing the incentive factor.
The ACCI goes on to note:
This continuing shortfall is of great concern to
the Australian Chamber movement, and to rank-and-file member firms
who look to the Scheme to contribute to their export performance,
many of whom formulate their export plans on the basis of an Export
Market Development Grants Scheme of diminishing
While the majority of submissions to the Austrade review
recognise that funding of the scheme should be addressed in the
context of the budget, many also support changes to the legislation
that would contribute to payment certainty in the scheme. This
funding of the scheme to the central price index (CPI) to preserve
its real value.
payments such as the overseas visit allowance to the CPI. Changes
in the current Bill raising the overseas visit daily allowance from
$200 to $300 is the first time it will have been raised since
− Allowing funds
not spent in years of low demand to be carried forward over the
lifetime of the program.
Schedule 1 amends the Export Development
Grants Act 1997 to continue the Export Market Development
Grants (EMDG) scheme and to implement changes to enhance the
effectiveness of the scheme.
Item 6 of Schedule 1 removes references to
defining and measuring the amount of an applicant s export
Item 10 of Schedule 1 modifies eligibility
rules regarding the Australian content of goods to be exported. The
item replaces Australian content rules with the requirements that
goods are made in Australia . Rules for defining made in Australia
are to be set out in Ministerial guidelines. It also provides that
goods not made in Australia will be eligible if Austrade is
satisfied that Australia will derive a significant net benefit from
their sale outside Australia, in accordance with Ministerial
Item 13 of Schedule 1 separates the overseas
representative and marketing consultant expense categories and caps
claims for overseas representatives at $200,000 per annum and
claims for marketing consultants at $50,000 per annum.
Item 16 of Schedule 1 increases the claimable
overseas visit allowance from $200 to $300 per day.
Item 17 of Schedule 1 enables Austrade to
determine whether an applicant s claims are reasonable and to
disregard unsubstantiated, unreasonable, uncommercial or non-bona
fide expense claims. It requires Austrade to notify the applicant
that certain expenses are not considered reasonable and to invite
the applicant to respond. See also item 38.
Item 20 of Schedule 1 increases the flexibility
of Austrade to consider applications that do not technically meet
principal status requirements under the scheme.
Item 28 of Schedule 1 allows applicants to
claim reasonable expenses incurred promoting the return on the
disposal of intellectual property and know-how through related
Item 29 of Schedule 1 limits eligibility for
cash payments to $10,000 per claim.
Item 35 of Schedule 1 increases the period for
which Austrade can grant special approval status from three years
to five years. It also increases the period for which Austrade can
grant special approval status renewals of five years.
Item 38 of Schedule 1 revises the rules
covering changes in business ownership. It also deals with Austrade
s power to disregard expenses (see also item 17).
Item 42 of Schedule 1 provides for Ministerial
guidelines to be complied with by Austrade to determine whether
goods are made in Australia and whether Australia will derive a
significant net benefit from the sale of goods outside of
Australia, as referred to in item 10 of Schedule 1.
Item 43 of Schedule 1 provides for Ministerial
guidelines to be complied with by Austrade to determine if changes
in business ownership comply with revised section 94 of the Act, as
referred to in item 38 of Schedule 1.
Item 47 of Schedule 1 requires that an
independent review of the scheme commence no later than 1 January
2010 and to report by 30 June 2010. It requires that submissions
from the public must be sought and public hearings may be
Item 52 of Schedule 1 extends the scheme for a
further five years, until the 2010-11 grant year, for which grants
will be paid in the 2011-12 financial year.
Schedule 2 provides for the repeal of the
Export Expansion Grants Act 1978. Part 1
repeals the Export Expansion Grants Act 1978, under which
the Exports Expansion Grants scheme was administered and
Part 2 removes references to the Export
Expansion Grants Act 1978 in the Australian Trade
Commission Act 1985.
The Bill provides the exporting community with greater certainty
on the continuation of the scheme and provides changes that will
enhance the effectiveness and management of the scheme. However,
given that a primary concern of the exporter community certainty of
payment lies outside the current amendments, the ultimate
effectiveness of the EMDG scheme in encouraging creation,
development and expansion of foreign markets for Australian goods,
services, intellectual property, also lies outside the current
- Austrade, Review of the Export Market Development Grants Scheme
, Commonwealth of Australia, 2005.
- Mark Vaile, Added certainty for exporters as grants scheme
extended for five years , Press Release, 24 January
- ACCI, Stopping the rot: adequately resourcing the EMDG scheme ,
Submission to the Austrade review of the EMDG scheme, August
Foreign Affairs, Defence and Trade Section
9 May 2006
Bills Digest Service
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© Commonwealth of Australia 2006
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