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This Digest was prepared for debate. It reflects the legislation as
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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details
Customs
(Anti-dumping Amendments) Bill 1998
Date Introduced: 3 December 1998
House: House of Representatives
Portfolio: Attorney-General
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.
Purpose
The major
amendments proposed by the Bill:
-
- 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.
Background
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.
Anti-Dumping
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 the 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
Countervailing duties are duties imposed on
imports to offset government subsidies to producers or exporters in
the exporting country.
Interim dumping duties
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 during 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.
Normal value of goods
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
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)).
Rationale for proposed
amendments
The major amendments proposed by the Bill
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.
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.
Report of Senate Economics Legislation
Committee
On 4 September 1997 the Senate 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 system, 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
prescribe 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 market
- 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 Democrats 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)
Main Provisions
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 regard 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.
Concluding Comments
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 Tariff
(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)
Endnotes
-
- Australian Senate - Economics Legislation Committee,
Customs Legislation (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.
- Ibid., at p. 5.
Ian Ireland
2 March 1999
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