BILLS DIGEST NO. 47, 2011–12, 12 September 2011

Customs Amendment (Anti-dumping Improvements) Bill 2011

Michael Priestley
Economics Section

Date introduced:  6 July 2011

House:  House of Representatives

Portfolio:  Home Affairs

Commencement:  Sections 1 to 3 commence on Royal Assent; Schedule 1 commences on a single day to be fixed by Proclamation, or six months after Royal Assent, whichever occurs first.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. 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/.

Purpose

The Bill amends Division 5 of Part XVB of the Customs Act 1901 (the Act) to partially implement the Government’s response to the Productivity Commission’s Report into Australia’s Anti-dumping and Countervailing System and to respond to the report of the Senate Economics Legislation Committee into the Customs Amendment (Anti-Dumping) Bill 2011. The Bill amends the Act to:

•           provide a 30-day time limit for ministerial decisions on anti-dumping cases or a longer period in special circumstances

•           expand consideration of the economic factors in assessing the extent and cause of ‘material’ injury to include any impact on jobs and any impact on investment

•           include the full list of actionable subsidies provided by the World Trade Organization (WTO) Subsidies and Countervailing Measures Agreement, and

•           expand the definition of ‘interested party’ to include trade unions and downstream users who may wish to participate in anti-dumping and/or countervailing investigations.

The proposed amendments are part of the recent close attention to Australia’s anti-dumping system and the wider debate concerning manufacturing in Australia.

Background

The 22nd meeting of the Council of Australian Governments (COAG) on 3 July 2008 ended with a commitment by all Australian governments to continue national competition reform and, as part of the economy-wide reform agenda, to refer the effectiveness of Australia’s anti-dumping system to the Productivity Commission for review. The policy imperative for competition reform can be found in the communiqué by COAG which estimated the net community gains from the reduced costs of regulation between $1.5 billion to $4.5 billion annually. The communiqué identified Australia’s anti-dumping system as one of a number of priority areas for competition reform.[1]

The review by the Productivity Commission was finalised at the end of 2009 and released publicly in May 2010.[2] A major recommendation of the review was the adoption of a ‘bounded’ public interest test, drawing on similar tests overseas. This could oblige the Minister for Home Affairs to refrain from applying anti-dumping measures when dumping is proven and a business is being harmed.[3] However, the review was conducted at a time of renewed calls for protection. The pressure was intensified following the Global Financial Crisis (GFC) and the winding-back of GFC stimulus spending. Trade negotiations between Australia and China to secure a comprehensive free trade agreement further intensified the pressure for an effective anti-dumping system.

Recent events, such as the decision by Kimberly-Clark to close some of its paper product operations and the public anti-dumping campaign by the Australian Workers’ Union also focussed attention on the anti-dumping system.[4] The issues the Bill seeks to address reflect the concerns of industry and trade unions about the current arrangements.

Reviews of Australia’s anti-dumping system

Australia’s anti-dumping and countervailing system has been the subject of numerous reviews and reports since 1986. It has been previously reviewed by Professor Gruen in 1986 as part of a review of the Customs Tariff (Anti-dumping) Act 1975 and later by the Senate Standing Committee on Industry, Science and Technology in its 1991 report, Inquiry into Australia’s Anti-Dumping and Countervailing Legislation. This was followed by the Willett Review in 1996[5], the Anti-Dumping Joint Study in 2006[6], and, more recently, the review by the Productivity Commission.

Over the same period from 1986 to 2010 there has been a marked decline in the number of anti‑dumping complaints by Australian industry. Prior to the Gruen Review the number peaked at 86 complaints in 1983 then fell steadily to 21 complaints in 1989.[7] The number of complaints rose in 1992 to 88 following the 1991–92 recession and has declined since 1998.[8] In 2010 there were 13 complaints and 8 complaints in the previous year.[9]

The current legislative framework and policy settings for Australia’s system were introduced in 1998 following the Willett review.[10] The 1998 amendments abolished the Anti-Dumping Authority (ADA), ending the two-stage investigation process by Customs and the ADA. Customs became responsible for both preliminary and final investigations, while the Trade Measures Review Officer (TMRO) was established to review but not vary decisions. The period for a complete anti-dumping investigation was reduced from 215 to 155 days and interim dumping duties could be imposed after 60 days.

The streamlining of the investigation process and reduced timeframes returned a level of certainty to the application process and was supported by Australian industry. However, by this time, further restructuring of manufacturing had occurred and the number of applicant companies seeking anti-dumping protection continued to decline. By the time of the Joint Study in 2006, the anti-dumping system was available to those manufacturing industries that survived restructuring brought on by reductions in tariffs.

The Joint Study did not undertake a review of the underlying anti-dumping legislation and focussed on administration of the system. The study led to administrative changes to the process which were incorporated into the Dumping & Subsidy Manual.[11] These changes included more direct assistance by Customs to the complainant industry in mounting an anti-dumping action and publication of the guidelines used to assess an anti-dumping application.[12]

A full review of the anti-dumping system by the Productivity Commission was first proposed by the government in 1996 in its response to the Willett review.[13] The review was foreshadowed as part of the government’s legislative review commitments under the Competition Principles Agreement.[14] However, the review was postponed to allow full implementation of the new scheme. The review timeframe was later extended to June 2002 but the scheduled review did not take place. The COAG meeting in July 2008 gave renewed focus to the anti-dumping system and a review was undertaken by the Productivity Commission in 2009. The government’s response to the review was announced on 22 June 2011.[15] The administrative changes to the process announced by the government are framed within the GOAG competition reform priorities and followed consultations with state and territory governments.

Australia’s WTO commitments

At the conclusion of the Uruguay Round in Marrakesh on 15 April 1994, the members of the Trade Negotiations Committee signed two international treaties, the Final Act Embodying the Results of the Uruguay Round Multilateral Trade Negotiations (the Final Act) and the Agreement Establishing the World Trade Organization (Agreement on the WTO).

The Final Act provides that the members of the WTO shall have their competent authorities approve the Agreement on the WTO and its annexes as well as the various Ministerial declarations and decisions. Article XVI of the Final Act provides that:

Each Member shall ensure the conformity of its laws, regulations and administrative processes with its obligations as provided in the annexed Agreements.

Amongst the Agreements annexed to the Final Act is the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Anti-Dumping Agreement or ADA).

Article 1 of the ADA binds signatories to the Principles governing the application of the provisions of the ADA: 

Members hereby agree as follows:

PART I

Article 1

Principles

An anti-dumping measure shall be applied only under the circumstances provided for in Article VI of GATT 1994 and pursuant to investigations initiated and conducted in accordance with the provisions of this Agreement. The following provisions govern the application of Article VI of GATT 1994 in so far as action is taken under anti-dumping legislation or regulations.

Article 18.1 of the ADA obliges member countries from taking any specific action against dumping except in accordance with the provisions of the ADA:

No specific action against dumping of exports from another Member can be taken except in accordance with the provisions of GATT 1994, as interpreted by this Agreement.

As a signatory to the Final Act and the Agreement on the WTO, Australia automatically acceded to the ADA and changes to the anti-dumping legislation were enacted in 1995 to bring the legislation into conformity with the ADA.[16] But as the Minister advised the House, Australia’s implementation
of the ADA did not alter the anti-dumping legislation in any fundamental sense.[17]

To emphasise conformity with the ADA, the 1998 amendments inserted a new provision requiring the Minister to have regard to Australia’s international obligations under the WTO.[18]

Review by the Productivity Commission

The Productivity Commission reported on 18 December 2009. It recommended retaining the current anti-dumping system but making changes which would limit the duration of anti-dumping measures and provide for greater consideration of a national public interest before measures were imposed or continued. Under such a public interest test, anti-dumping measures would not be imposed where one or more of the following circumstances applied:

•           the imposition of measures would unduly restrict competition in the Australian market for the like goods

•           measures raising the price of the dumped or subsidised goods to offset the dumping would still not be high enough to make the local industry competitive because of the high costs of production

•           un-dumped or non-subsidised goods are readily available in Australia at a price comparable to the dumped or subsidised imports

•           where the market share of the local industry is low and would remain so, even if measures were imposed, or

•           the bulk of the exporter’s output is destined for export and the goods are sold in Australia
at a price that covers the exporter’s ‘fully distributed costs and a reasonable profit margin’.

The Productivity Commission found that such tests, as applied in the EU and Canada, are ‘bounded’ in that there is a presumption in favour of measures if dumping and material injury are found. The recommendations to limit the duration of anti-dumping measures to a maximum eight years and to introduce a ‘bounded’ public interest test reflect the Competition Principles Agreement.[19] Among other changes, the Productivity Commission recommended that:

•           Australia’s list of actionable subsidies be aligned with the lists in the latest relevant WTO agreements, and

•           decisions by the Minister in anti-dumping cases should be subject to a 30-day time limit.

Report by the Senate Economics Legislation Committee

On 2 March 2011, Senator Xenophon introduced a Private Members’ Bill, the Customs Amendment (Anti-Dumping) Bill 2011. The Bill proposes both minor and substantial amendments to the Act that will impact the way anti-dumping investigations are conducted. The Bill seeks to achieve timely and effective outcomes for manufacturers facing competition from dumped or subsidised imports.

In his second reading speech, Senator Xenophon gave expression to the public statements of local manufacturers and trade unions for the need to revisit the WTO anti-dumping disciplines:

... while there are international rules around dumping, under the World Trade Organization’s Anti-Dumping Agreement (Agreement on Implementation of Article VI (Anti-dumping)) which was finalised during the Uruguay Round in 1994 and sets up a framework for how countries can implement anti-dumping duties, the appropriateness and application of these rules needs to be seriously re-considered.

Indeed, it should not be a case of - ‘They’re the rules, no questions asked’, rather as circumstances change and situations emerge the system needs to adapt in the interest of local industry and the Australian Parliament needs to act in the interest of Australian industry and Australian jobs.[20]

The Bill was referred to the Senate Standing Committees on Economics for inquiry and report. In its report, the Senate Economics Legislation Committee broadly supported the current arrangements. At paragraph 10.2 of the report, the Committee stated:

The committee recommends that the Senate reject the majority of the amendments proposed in the Bill. Of primary concern is that, if enacted, many of the proposals:

·         could result in an unfair burden being imposed on various parties which they would be unlikely to meet;

·         are likely not to meet their stated objectives in practice;

·         would be practically difficult for Customs to administer; or

·         are likely to be non-compliant with Australia’s WTO obligations.[21]

However, subject to those comments, the Committee supported items 1, 2 and 32 in Schedule 1 of the Bill.[22] The items proposed to amend the definitions of ‘affected party’ and ‘interested party’ to include trade unions.

Additional comments by Coalition Senators did not concur with the Committee’s rejection of the majority of the amendments and commended further consideration of aspects of the Bill.

A minority report by Senator Cameron and Senator Pratt addressed the ‘bounded’ public interest test recommended by the Productivity Commission and recommended the government consider ways of facilitating access to the anti-dumping system by small manufacturers.

In a dissenting report, Senator Xenophon advocated adoption of the reversal of the onus of proof
of dumping and swifter anti-dumping penalties, balanced by a non-judicial appeal mechanism for
all decisions.

Committee consideration

The Bill was not referred to committees.[23]

Financial implications

The Bill has no financial impact.

Key provisions

Schedule 1–Amendments

Item 1 amends subsection 269T(1) Definitions by repealing the definition of ‘Agreement on Agriculture’ to remove any reference to the WTO Agriculture Agreement (AA) in Part XVB of the Act. The AA set out rules on government support, including export subsidies, for agricultural products. It included a ‘peace clause’ whereby WTO Members agreed they would show due restraint in initiating countervailing action in respect of certain agricultural support. Further, ‘green box’ support was a non-actionable subsidy. Green box support (as defined in Annex 2 of the AA) was that which had no, or at most minimal, trade-distorting effects or effects. The ‘peace clause’ expired on 1 January 2004 and there are no longer any WTO restrictions on countervailing action as set out in the peace clause. However, the Productivity Commission observed that aligning Australia’s list of actionable subsidies with the wider WTO lists:

would most likely have only a minor impact on the scope for Australian industries to bring countervailing actions, it would have a more general benefit by addressing a perceived unfairness in the current system.[24]

Item 2 amends subsection 269T(1) paragraph (b) by amending the definition of ‘interested party’
to include a body representing, or representing a portion of, the industry producing, or likely to be established to produce, like goods. The proposed amendment recognises industry associations as having certain rights to participate in anti-dumping and/or countervailing investigations.

Item 3 amends subsection 269T(1) by inserting new paragraphs (g) and (h) into the definition of ‘interested party’. The purpose of new paragraph (g) clarifies that the definition includes a trade union. New paragraph (h) clarifies that the definition also includes downstream users of the like goods.

Items 4 repeals subsection 269TAAC(1) and substitutes a reference to a subsidy as an actionable subsidy if it is specific. A subsidy that is ‘specific’ is called an ‘actionable subsidy’. The ‘actionability’ of subsidies means that a WTO Member can take bilateral action through the use of countervailing measures or it can take a multilateral remedy through dispute settlement action. Under Article 8.1 of the WTO Subsidies and Countervailing Measures Agreement (SCM), subsidies were defined as ‘nonactionable’ if they were not ‘specific’ or if they fell within one of three provisions relating to (a) research activities, (b) assistance to disadvantaged regions or (c) adaptation to new environmental requirements. Article 8 lapsed in 1999, meaning the only subsidies that are not actionable now are those that are not ‘specific’ as defined in Article 2 of the SCM Agreement.

Item 5 repeals subsection 269TACC(6). This section was not updated to reflect the fact that Article 13 of the AA (the ‘peace clause’) and Article 8 of the SCM Agreement had lapsed. The subsection as it stands defines an ‘excluded’ subsidy (i.e. one under the Act that is not countervailable) as one that is (i) a ‘domestic support measure’ that falls under Annex 2 of the AA (i.e. a ‘green box’ measure) or (ii) ‘described’ under Article 8, thereby excluding certain forms of support for agricultural products from countervailing action.

Item 6 replaces the words ‘the effect’ with ‘any affect’ in paragraphs 269TAE(1)g and 2(g). Section 269TAE(1) sets out a list of ten considerations the Minister may have regard to when determining under section 269TG whether material injury to the Australian industry has been or is being caused, or is threatened, by dumped goods. One of those factors involves reference to:

the effect that the exportation of goods of that kind to Australia from the country of export in those circumstances has had or is likely to have on the relevant economic factors in relation to the Australian industry.

The proposed amendment provides the Minister further scope to consider any effect the dumping may have on the relevant economic factors listed in subsection 269TAE(3).

Item 7 inserts new paragraph (ha) into the list of relevant economic factors the Minister considers when determining material injury. Almost all of the relevant economic factors are concerned with the overall condition of the affected industry. Paragraph (ha) adds an additional factor relating to employment conditions in the industry.

Item 8 inserts new section 269TLA and provides that the Minister must, unless there are special circumstances that prevent the decision being made within that period, make a decision whether
or not to publish a dumping notice and/or a countervailing duty notice within 30 days of receiving a recommendation on an investigation from the Chief Executive Officer (CEO) of Customs and Border Protection. In special circumstances the Minister may extend this period but must give public notice of the decision to extend the period and indicate what the extended period is. Currently, there are no time limits requiring the Minister to decide whether to impose a dumping and/or countervailing duty after receiving a recommendation from the CEO of Customs and Border Protection.

Item 9 to 14 require the Minister to make a decision within 30 days of receiving a report from the CEO of Customs and Border Protection on a continuation inquiry, a review of existing anti-dumping and/or countervailing measures before their expiry, or a report following a review of a decision by the TMRO. The amendments would also require the Minister to publish a notice where the 30-day period is extended.

Concluding comments

In many ways the key issue in this Bill is the effectiveness of the anti-dumping system. The proposed amendments address two areas of improvement to the current arrangements. These include the 30-day time limit for ministerial decision-making and clarification of the rights of trade unions and other interested parties. However, one commentator noted that the changes to the process only stand as a reiteration of existing practices.[25]

While the Senate Economics Committee report concluded that the object of Senator Xenophon’s Bill in reversing the onus of proof of dumping and introducing a rebuttable presumption of injury caused by dumping where dumping is found to have occurred ran counter to the WTO ADA, a number of the amendments are technical in nature and there is nothing inherent in them which would conflict with the provisions of the ADA. Other suggested amendments are based on the ADA, the most important of these is the amendment that would allow appeal from a decision of the Minister, CEO of Customs and Border Protection or TMRO to the Administrative Appeals Tribunal.[26] In the view of one expert practitioner, the amendment would “result in a review architecture which would be more compliant with Australia’s WTO obligations than the current one.”[27]

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2465.

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ISSN 1328-8091

[1].               Council of Australian Governments’ Meeting, Communiqué, p. 2, 3 July 2008, viewed 30 August 2011, http://www.coag.gov.au/coag_meeting_outcomes/2008-07-03/docs/communique20080703.pdf

[2].               Productivity Commission 2009, Australia’s anti-dumping and countervailing system, Inquiry report no. 48, Commonwealth of Australia, Canberra, 19 December 2009, viewed 31 August 2011, http://www.pc.gov.au/__data/assets/pdf_file/0006/93750/anti-dumping.pdf

[3].               B O’Connor, Minister for Justice and Home Affairs and C Emerson, Minister for Trade, Improvements to anti-dumping system benefit Australian manufacturers, joint media release, 24 November 2006, viewed 30 August 2011, http://www.customs.gov.au/site/content8151.asp

[4].               ‘Don’t Dump on Australia – an AWU campaign defending good jobs’, Australian Workers’ Union, 10 February 2011, viewed 31 August 2011, http://www.awu.net.au/628783_5.html

[5].               L Willett, Review of Australia’s anti-dumping and countervailing administration, Canberra, 1996.

[6].               Joint Study of the administration of Australia’s anti-dumping system, Canberra, August 2006, viewed 31 August 2011, http://www.customs.gov.au/webdata/resources/files/JointStudyReport.pdf

[7].               Industry Commission, Annual report 1985–86, Table A4.1, Canberra, 1986 and Annual report 1992–93, Table R1, Canberra 1993.

[8].               Productivity Commission, Trade & Assistance Review 2006–07, Figure B.1 and Table B.2, Canberra, 2008.

[9].               Productivity Commission, Trade & Assistance Review 2009–10, Table B.2, Canberra, 2011.

[10].               Customs Legislation (Anti-dumping Amendments) Act 1998. See Customs Legislation (Anti-dumping Amendments) Bill 1998, Bills Digest, no. 233, 1997-98, viewed 31 August 2011, http://www.aph.gov.au/library/pubs/bd/1997-98/98bd233.htm

[11].               Australian Customs Service, Dumping & Subsidy Manual, August 2007, viewed 31 August 2011, http://www.customs.gov.au/webdata/resources/files/customsmanual_volume22.pdf

[12].               C Ellison, Minister for Justice and Customs and I MacFarlane, Minister for Industry, Tourism and Resoursces, Improvements to anti-dumping system benefit Australian manufacturers, joint media release, 24 November 2006, viewed 30 August 2011, http://www.customs.gov.au/site/content8151.asp

[13].               G Prosser, Minister for Small Business and Consumer Affairs and Customs, Minister releases review of anti-dumping system, media release, 13 December 1996, viewed 30 August 2011, http://www.customs.gov.au/site/content3521.asp.

[14].               National Competition Council, Compendium of National Competition Policy Agreements, 1995. Under the legislation review element of the National Competition Policy Agreement, the anti-dumping system was scheduled for review by the year 2000.

[15].               Hon B O’Connor, Minister for Home Affairs and Justice and Hon Dr C Emerson, Minister for Trade, Government combats dumping and helps support local jobs, joint media release, 22 June 2011, viewed 30 August 2011, http://www.ag.gov.au/www/ministers/oconnor.nsf/Page/MediaReleases_2011_SecondQuarter_22June2011-Governmentcombatsdumpingandhelpssupportlocaljobs

[16].               Customs Legislation (World Trade Organization Amendments) Act 1994. See Customs Legislation (World Trade Organization Amendments) Bill 1994, Bills Digest, no. 172, 1994, viewed 5 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2FB6Z10%22

[17].               G Bilney, ‘Second reading speech: Copyright (World Trade Organization Amendments Bill) 1994 and cognate Bills’, House of Representatives, Debates, p. 2191, 18 October 1994.

[18].               Section 269TAG(5) of the Customs Act 1901.

[19].               Australian Government, Australia’s anti-dumping and countervailing system Regulation Impact Statement, p. 27, viewed 2 September 2011, http://ris.finance.gov.au/files/2011/07/Anti-Dumping-20110713.pdf

[20].               N Xenophon, ‘Second reading speech: Customs Amendment (Anti-Dumping) Bill 2011’, Senate, Debates, p. 972,
1 March 2011, viewed 31 August 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query%3DBillId_Phrase%3A%22s821%22%20Dataset%3Ahansardr,hansards%20Title%3A%22second%20reading%22;rec%3D0

[21].               Senate Economics Legislation Committee, ‘Customs Amendment (Anti-Dumping) Bill 2011’, Canberra, 30 August 2011, p. 103, viewed 31 August 2011, http://www.aph.gov.au/senate/committee/economics_ctte/customs_amendment_2011/report/report.pdf

[22].               Senate Economics Legislation Committee, ‘Customs Amendment (Anti-Dumping) Bill 2011’, op. cit., pp. 109-10,
Table 10.1: Summary of the committee’s view on the compliance of the items in Schedule 1 of the Bill with Australia’s WTO obligations.

[23].               Selection of Bills Committee, Report no. 10 of 2011, 18 August 2011.

[24].               Productivity Commission, Review of Australia’s anti-dumping and countervailing system, op. cit., p. 127.

[25].               A Hudson, ‘Gillard Government announces proposed reforms to Australia’s anti-dumping and countervailing regime’, Customs Trade and Transport Update, Hunt & Hunt Lawyers, 24 June 2011, p. 3, viewed 2 September 2011, http://www.hunthunt.com.au/download/publications/customs-trade-and-transport/CTT_update_Jun11.pdf

[26].               Item 47 of Schedule 1 of the Customs Amendment (Anti-Dumping) Bill 2011.

[27].               Moulis Legal, Submission to the Senate Economics Legislation Committee, Customs Amendment (Anti-Dumping) Bill 2011, June 2011, Submission no. 12, 31 March 2011, p. 11.