House of Representatives

Explanatory Memorandum

Circulated by authority of the Minister for Home Affairs, the Honourable Jason Clare MP

Schedule 1-Amendments

Part 1 - Amendments

Customs Act 1901

Items 1 and 2 - Section 45

6. Pursuant to subsection 269TD(4) of the Customs Act, where the Commissioner has made a Preliminary Affirmative Determination during the course of an investigation, the Commissioner may require and take securities under section 42 of the Customs Act if the Commissioner is satisfied that it is necessary to do so to prevent material injury to an Australian industry occurring while the investigation continues.

7. Section 45 of the Customs Act provides for the cancellation of securities and, in effect, places a time limit for such securities to be taken and in force.

8. Current subsection 45(2) provides that where a security is taken in respect of an interim duty that may become payable on goods under section 8, 9, 10 or 11 of the Dumping Duty Act, the security will be cancelled after a prescribed period. A prescribed period is defined in subsection 45(3).

9. Paragraph 45(3)(a) concerns the cancellation of securities taken in respect of dumping duties payable under sections 8 or 9 of the Dumping Duty Act. The relevant period for the cancellation of securities is defined to be 6 months (or 9 months in certain circumstances). Item 1 repeals paragraph 45(3)(a) and substitutes a new paragraph, the effect of which (when read with new paragraph 45(3A)(a) - see Item 2 below) reduces these periods to 4 months (or 6 months in certain circumstances) respectively.

10. Item 2 also inserts new paragraph 45(3A)(b) which extends the time period for the cancellation of securities where the non-injurious price of the goods has been ascertained at a level lower than the normal value (which is relevant to the Minister's consideration of the level of duty to be applied). In this situation, the relevant periods for the cancellation of securities are extended from 4 months to 6 months (or from 6 months to 9 months in certain circumstances).

11. The purpose of the amendments made by items 1 and 2 is to better align the expiration of securities with Article 7.4 of the Anti-Dumping Agreement.

12. The amendments ensure greater consistency with Article 7.4 of the Anti-Dumping Agreement by allowing, where the security is taken in respect of any interim dumping duty, the security to be cancelled after the extended period of 6 months, or 9 months where requested by the exporter, in the case where a lesser duty was considered during the course of the investigation.

Items 3 and 4 - Section 269T

13. Item 3 inserts a definition of compliance period which is a period prescribed in, or worked out in accordance with, an instrument by the Minister under new subsection 269T(1A). A compliance period is relevant, in particular circumstances, to the Minister's examination of certain factors relevant to either (i) the price at which an undertaking is notified and accepted (see Item 8 paragraph 269TJ(3BA)(a)) or, (ii) the level of countervailing duty applied (see paragraph 10(3DA)(a) of the Dumping Duty Act) in subsidy investigations.

14. Item 3 also inserts a definition of small-medium enterprise which will be an enterprise of a kind prescribed in an instrument by the Minister under new subsection 269T(1B). The existence of small-medium enterprises is relevant, in particular circumstances, to the Minister's examination of certain factors relevant to either (i) the price at which an undertaking is notified and accepted or, (ii) the level of dumping or countervailing duty that is applied following an investigation.

15. Item 4 inserts the instrument making powers relevant to defining compliance period and small-medium enterprise for the purpose of Items 2 and 3.

Item 5 - After subparagraph 269T(4E)(b)(i)

16. Subsection 269T(4E) prescribes the variable factors relevant to a review of anti-dumping measures under Division 5 and to an anti-circumvention inquiry under Division 5A.

17. Paragraph 269T(4E)(a) provides that the variable factors in relation to a dumping duty notice are the normal value, export price and non-injurious price of goods of that kind as ascertained, or last ascertained, by the Minister for the purposes of the notice. Paragraph 269T(4E)(b) provides that the variable factors in relation to a countervailing duty notice are the amount of countervailable subsidy received in respect of the goods and the non-injurious price; however, this paragraph does not include a reference to the export price.

18. The item adds export price as a variable factor in relation to a countervailing duty notice. This allows the Minister to examine, and where necessary re-ascertain, the export price in reviews of countervailing measures or in anti-circumvention inquiries concerning subsidies where it is relevant to do so. An examination of the export price is relevant to some anti-circumvention inquiries concerning countervailing duty notices, for example, where a new exporter is added to the notice and new variable factors need to be specified under section 269ZDBH. An examination of export price for countervailing measures may be relevant in a review of a countervailing duty notice if an ad valorem form of measure is imposed; or when examining revocation and it must be determined whether or not the subsidy is negligible.

Item 6 - Paragraph 269TAA(1)(b)

19. Subsection 269TAA(1)(c), operating with sub-section 269TAA(2), allows 'sales at a loss' to not be treated as arms-length transactions during an investigation or a review.

20. Subsection 269TAA(1)(b) specifies that where 'the price is influenced' by a relationship between the buyer and seller, it shall not be treated as an arms-length transaction. This section can be used to address a range of circumstances where a relationship between the parties affects the price paid or payable for goods.

21. Article 2.3 of the Anti-Dumping Agreement sets out procedures for establishing an export price where there is no export price or the export price appears unreliable to the authorities concerned. Specifically Article 2.3 provides that "where it appears" an export price is unreliable because of an association or compensatory arrangement between the parties, an export price may be established by specified alternative means.

22. By including the phrase 'the price appears to be' in paragraph 269TAA(1)(b) the Customs Act is better aligned with the Anti-Dumping Agreement, and recognises that the evidence that authorities may have available in an investigative process may not be entirely conclusive as to the effect of a relationship on a price, and instead allows a reasoned and objective approach to such an issue based on what the available information suggests.

Items 7 and 8 - Section 269TG and Section 269TJ

23. Subsection 269TG(5) requires the Minister to consider, in giving a notice to an exporter that an undertaking would be satisfactory, and in considering the terms of any proposed undertaking, the desirability that any price increase to which the undertaking relates is limited to an amount such that the total price of the goods is not more than the non-injurious price of the goods. That is, the Minister is required to consider a lesser duty in giving a notice of, or in accepting, an undertaking in relation to dumping measures.

24. Subsection 269TJ(3B) contains a provision in the same terms with respect to countervailing measures.

25. Item 7 inserts new subsection 269TG(5A) which provides that the Minister is not required to have regard to subsection 269TG(5) when satisfied either or both of the following apply in relation to the goods:

-

the normal value of goods was not ascertained under subsection 269TAC(1) because of the operation of subparagraph 269TAC(2)(a)(ii);

-

there is an Australian industry in respect of like goods that consists of at least 2 small-medium enterprises, whether or not that industry consists of other enterprises.

26. The first limb in subsection 269TG(5A) relates to the finding that there is a situation in the market of the country of export such that sales in that market are not suitable for determining a normal value of the goods. This is a finding of fact by the Minister, based on an examination of the conditions in the market of export, which results in the normal value being established using an alternative methodology.

27. The second limb in subsection 269TG(5A) relates to a finding by the Minister that the Australian industry producing like goods comprises at least 2 small-medium enterprises. The definition of small-medium enterprise will be established by legislative instrument by the Minister (see Item 3).

28. Item 8 inserts new subsection 269TJ(3BA) which provides that the Minister is not required to have regard to 269TJ(3B) when satisfied either or both of the following apply in relation to the goods:

-

the country of export has not complied with Article 25 of the Agreement on Subsidies and Countervailing Measures for the compliance period;

-

there is an Australian industry in respect of like goods that consists of at least 2 small-medium enterprises, whether or not that industry consists of other enterprises.

29. Article 25 of the Agreement on Subsidies and Countervailing Measures requires World Trade Organization Members to provide notification of subsidies. The Minister will set, in a legislative instrument, the applicable time period which must be examined in deciding whether a country of export has complied with the obligations established under Article 25.

30. Countries which are not subject to the Agreement on Subsidies and Countervailing Measures (that is, countries that are not Members of the World Trade Organization) will not be affected by new paragraph 269TJ(3BA)(a).

31. The three circumstances described in the amendments are circumstances which can introduce complexity into a dumping or subsidy investigation. In such complex cases, delays can occur in the course of the investigation which impacts on the ability of the injured industry to recover as injury can continue to be sustained until the imposition of measures. The purpose of the amendments is to give the Minister discretion to consider the desirability of fixing a lesser duty in these circumstances which could be characterised as complex. By allowing discretion for the Minister to consider imposing the maximum permitted duties in these complex cases, it is intended that a better environment for the recovery of the injured industry will be provided.

32. The effect of the amendments in Items 7 and 8 is to remove, in the circumstances specified, the Minister's mandatory consideration of the lesser duty rule in respect of consideration of the terms of any proposed undertaking under subsections 269TG(5) and 269TJ(3B).

33. Importantly, the removal of the mandatory consideration of a lesser duty in the identified circumstances does not prevent the Minister from considering and applying the lesser duty rule where those specified circumstances exist and where the Minister considers it would be appropriate to do so.

Items 9 to 18 - Section 269TN

34. Subsection 269TN(1) of the Customs Act prevents the Minister from publishing a dumping duty or countervailing duty notice in respect of goods which have already been entered for home consumption except in circumstances outlined in section 269TN. That is, the Minister must not impose dumping duty or countervailing duty retrospectively except in the circumstances listed in section 269TN.

35. The circumstances contained in section 269TN reflect the provisions allowing the imposition of retrospective duty contained in the Anti-Dumping Agreement (Article 10) and the Agreement on Subsidies and Countervailing Measures (Article 20).

36. The amendments contained in these items clarify the operation of the provisions concerning retrospective duties and better align these provisions with the Anti-Dumping Agreement and the Agreement on Subsidies and Countervailing Measures.

37. Item 9 makes a minor consequential amendment to refer to new subsection 269TN(6), so that the time limit for the Minister to make certain decisions as described in subsection 269TLA(2) does not apply where subsection 269TN(4A) or subsection 269TN(6) applies in relation to the decision.

38. Item 10 is a technical amendment which inserts a subheading to improve the readability of the section and to delineate those provisions applying to anti-dumping duties from those that apply to countervailing duties.

39. Item 11 inserts the Minister as the relevant decision maker for a finding that the circumstances in paragraph 269TN(3)(b) have occurred.

40. Item 12 amends paragraph 269TN(3)(b) to remove the words 'recurrence of the injury' and adds 'serious undermining of the remedial effect of the dumping duty that will become payable upon publication of the notice' to the end of paragraph 269TN(3)(b). This wording addresses the fact that certain conduct that occurs before duties can ordinarily be applied (that is from the date securities might be taken in accordance with a preliminary affirmative determination under subsection 269TD(4)) has the capacity to undermine the prospective application of duties, thereby lessening the effectiveness of remedies for the Australian industry. This better aligns the circumstances in which the Minister can impose retrospective duty with Article 10.6 of the Anti-Dumping Agreement.

41. Item 13 inserts the Minister as the relevant decision maker for a finding that the circumstances in paragraph 269TN(4)(a) have occurred.

42. Item 14 inserts new subsection 269TN(4B) which moves the previous subsection 269TN(6) to keep the subsections of section 269TN that relate to dumping duties together.

43. Item 14 also inserts new subsection 269TN(4C) which provides that retrospective dumping duties cannot be imposed on goods that enter home consumption prior to an investigation into alleged dumping being initiated. This reflects Article 10.8 of the Anti-Dumping Agreement.

44. Item 15 is a technical amendment which inserts a subheading to improve the readability of the section and to delineate those provisions applying to countervailing duties from those that apply to dumping duties.

45. Items 16 and 17 amend paragraph 269TN(5)(b) to remove the words 'material injury' and substitute 'the Minister considers that material injury, which is difficult to repair', and add ', and the Minister considers that the publication of the notice is necessary to prevent the recurrence of the injury' to the end of paragraph 269TN(5)(b). The amended wording in paragraph 269TN(5)(b) recognises that material injury caused by the export of large quantities of subsidised goods in a short period of time can be difficult to remedy and that such circumstances may provide a basis for the Minister to apply duties retrospectively to effectively prevent further injury. This better aligns the circumstances in which the Minister can impose retrospective countervailing duty with Article 20.6 of the Agreement on Subsidies and Countervailing Measures.

46. Retrospective duties available under subsection 269TN(3) and 269TN(5) are reserved for use in particular circumstances including: particular features in the timing and volume of imports and other circumstances (such as a rapid build-up of inventories of the imported product); where the remedial effect of the measures is likely to be undermined or where such injury can be difficult to repair; and therefore the imposition of retrospective duties is necessary to prevent further, or the recurrence of, the injury to an Australian industry.

47. Item 18 repeals and substitutes subsection 269TN(6) to mirror current subsection 269TN(4A) in relation to retrospective countervailing duties.

48. Subsection 269TN(4A) requires the Minister, in deciding to publish a dumping notice imposing duty retrospectively on goods already entered for home consumption, to inform the importer of the proposed decision, allow the importer reasonable opportunity for the importer of the goods to comment on the proposed decision and give consideration to the importer's comments.

49. New subsection 269TN(6) places the same obligations on the Minister, in the circumstances referred to in subsection 269TN(5), in relation to a decision to publish a countervailing notice imposing duty retrospectively.

Items 19 to 24 - After subsection 269ZDBB(5)

50. These items insert a new circumvention activity for the purposes of an anti-circumvention inquiry under Division 5A. Item 19 inserts new subsection 269ZDBB(5A) which prescribes the new circumvention activity.

51. 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. The reasons for the effect of the duty being avoided may be because there has been a reduction in profit taken on the sale, or where the export price has been decreased post the imposition of measures.

52. An inquiry into the new circumvention activity is aimed at investigating the reasons why the price of the goods has not increased to a price that is commensurate with the total amount of duties payable. In particular, the inquiry seeks to address situations where the circumstances are occurring because 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.

53. If external factors, for example such as currency fluctuation, have caused the circumstance where the selling price of the importer has not increased in accordance with the duties, the circumvention activity will not be determined to have occurred. Further, recognising that profit reduction of itself is a legitimate business practice, an importer who is independent of the exporter, and who may be absorbing part of the duty but not making sales at a loss, will generally be considered as not engaging in the circumvention activity - unless the inquiry found, for example, evidence that the exporter was compensating in some form the reduction in profit allowing no, or limited, movement in the price of the goods.

54. 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.

55. In cases where external factors have not caused the circumstance, but instead the inquiry concludes that the circumvention activity has occurred because of the lowering of the export price, sales at a loss, profit reduction, reimbursement or compensation from the exporter, or other activity of a similar nature, the Commissioner may choose to recommend to the Minister that the notice be altered. Alteration of the notice may specify a new export price at a value ascertained in accordance with the relevant provisions in the Customs Act (for example, relating to arms-length transactions in section 269TAA) to account for the circumvention activity.

56. An inquiry in relation to this new circumvention activity will be conducted in a shorter period than the existing circumvention inquiries and there will be no requirement for the Commissioner to publish a statement of essential facts.

57. Item 20 inserts new subsection 269ZDBC(1A) which will have the effect of preventing a person from lodging more than one application alleging a circumvention activity under new subsection 269ZDBB(5A) in respect of a notice within a 12 month period.

58. The purpose of this provision is to prevent multiple applications made by the same Australian industry member (that is the same business entity) making substantially the same allegation after only a short period of time has elapsed. Such a limitation is consistent with other processes in the Customs Act (see for example subsection 269ZA(2) which applies to reviews of anti-dumping measures). This limitation recognises the uncertainty that can be introduced when such applications are made repeatedly in a short duration. If, following an unsuccessful application, the Australian industry member has new grounds to make a subsequent application within the 12 month period, it may petition the Minister to exercise his or her power to request the Commissioner undertake an anti-circumvention inquiry.

59. Section 269ZDBD prescribes the content and lodgement of anti-circumvention inquiry applications. Item 21 inserts new subsection 269ZDBD(2A) which provides that applications in relation to circumvention activities under new subsection 269ZDBB(5A) must not describe any other kind of circumvention activity.

60. Anti-circumvention inquiries which allege the new circumvention activity are conducted in a shorter timeframe and have different procedural requirements from inquiries in relation to other circumvention activities. To maintain this differentiation, an inquiry into the new circumvention activity will be conducted separately to other anti-circumvention inquiries. This also recognises the differences between the types of circumvention activities set out in the Customs Act, that is, those dealing with the avoidance of the payment of duties (subsections 269ZDBB(2) to (5)) and those addressing the avoidance of the effect of the duty (subsection 269ZDBB(5A)).

61. Item 22 requires the Commissioner, in publishing an inquiry notice under section 269ZDBE indicating that an inquiry is to be conducted in relation to a circumvention activity under new subsection 269ZDBB(5A), to indicate a report will be made to the Minister within 100 days after the day the inquiry notice is published or such longer period as the Minister allows under section 269ZHI.

62. This section has the effect of requiring the Commissioner to provide a report to the Minister within 100 days of publishing the notice for an inquiry in relation to the new circumvention activity, and differentiates this process from the other circumvention activities where reports are made within 155 days of publication of the inquiry notice.

Items 23 and 24

63. These items make consequential amendments to subsection 269ZDBE(6) related to item 22 , and make it clear in the inquiry notice that inquiries relating to a circumvention activity under subsection 269ZDBB(5A) do not involve the publication of a statement of essential facts.

Item 25 - Section 269ZDBEA

64. Item 25 inserts new section 269ZDBEA regarding termination of anti-circumvention inquiries.

65. New section 269ZDBEA allows the Commissioner to terminate a circumvention inquiry in relation to any circumvention activity where the Commissioner becomes satisfied that no circumvention activity in relation to the original notice has occurred. 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. For a circumvention activity contained in new subsection 269ZDBB(5A), the Minister may terminate the inquiry at any time before reporting to the Minister.

66. Where the Commissioner terminates an anti-circumvention activity, new subsection 269ZDBEA(3) requires the Commissioner to publish a public notice of the decision to terminate, notify the applicant for the anti-circumvention inquiry of the decision, and inform the applicant of their rights to have the decision to terminate the inquiry reviewed by the Review Panel under Division 9.

Item 26 - Subsection 269ZDBF(1)

67. Item 26 makes a minor consequential amendment to reflect that a circumvention inquiry in relation to the new circumvention activity described in subsection 269ZDBB(5A) (see item 19) does not require a statement of essential facts to be published.

Item 27 - Subsection 269ZDBG(1)

68. Section 269ZDBG requires the Commissioner to provide a report to the Minister on an anti-circumvention inquiry within certain timeframes and containing certain recommendations.

69. This item amends subsection 269ZDBG(1) to take into account the shorter timeframe within which the new kind of circumvention inquiry will be conducted. New subsection 269ZDBG(1), in relation to an anti-circumvention inquiry in respect of the new circumvention activity, requires the Commissioner to provide the Minister a report specifying certain matters within 100 days of publishing a notice of the circumvention inquiry under subsection 269ZDBE(4) or (5). The Minister has a power under section 269ZHI to extend the period of the inquiry, upon application by the Commissioner.

70. The requirements under this section in relation to the other circumvention activities contained in subsection 269ZDBB(2) to (5) are unchanged.

Items 28 to 30

71. These items make consequential amendments related to the new circumvention activity and the different reporting requirements. More specifically, these amendments make it clear that in relation to the new circumvention activity under subsection 269ZDBB(5A) there is no statement of essential facts, or submissions following the statement of essential facts, relevant to the Commissioner's report to the Minister.

Item 31 - After subsection 269ZDBG(3)

72. This item inserts new subsection 269ZDBG(3A) which provides that for the purpose of an anti-circumvention inquiry into a new circumvention activity under subsection 269ZDBB(5A) the Commissioner is not required to have regard to a submission concerning the inquiry received after 40 days following the publication of the inquiry notice if to do so would, in the Commissioner's opinion, prevent the timely preparation of the report to the Minister.

Items 32 and 33 - Subsection 269ZHI(1)

73. These items make consequential amendments to section 269ZHI to allow the Minister, upon application by the Commissioner, to extend the 100 day time period within which a circumvention inquiry in relation to the new circumvention activity must be conducted.

Item 34 - Subsection 269ZZK(6)

74. Subsection 269ZZK(6) provides the definition of relevant information for the purpose of a review by the Review Panel of certain Ministerial decisions.

75. Item 34 makes a consequential amendment to the definition of relevant information under paragraph 269ZZK(6)(ca) by including reference to submissions made to an anti-circumvention inquiry in relation to the new circumvention activity described in subsection 269ZDBB(5A).

Item 35 - section 269ZZN

76. Section 269ZZN contains a list of the decisions under Part XVB which are reviewable under Subdivision C.

77. This item inserts a reference to the Commissioner's decision to terminate an anti-circumvention inquiry under new subsection 269ZDBEA(1) or (2).

Item 36 - Section 269ZZO

78. Section 269ZZO contains a table setting out who may make an application for a review in relation to each of the reviewable decisions under Subdivision C of Part XVB.

79. This item inserts a new table item providing the applicant under subsection 269ZDBC(1) may apply for a review of the termination of an anti-circumvention inquiry.

Item 37 - Section 269ZZT

80. This item repeals subsection 269ZZT(2) and substitutes a subsection to provide that where a termination decision under subsection 269ZDBEA(1) is revoked by the Review Panel, as soon as practicable after the revocation, the Commissioner must publish a statement of essential facts under section 269ZDBF in relation to the anti-circumvention inquiry concerned, and after that the anti-circumvention inquiry concerned resumes.

81. This item also repeals subsection 269ZZT(3) and substitutes a subsection to provide that where a termination decision under subsection 269ZDBEA(2) is revoked by the Review Panel, it resumes from the time when it was terminated.

Item 38 - Application provisions

82. This item contains an application provision in relation to the amendments contained in the Bill.

83. Amendments made by items 1 and 2 in relation to the period for expiration of securities, apply in relation to a security taken on or after commencement of those items.

84. Amendments made by items 7 and 8 , which provides that the Minister is not required to have regard to subsection 269TG(5) and subsection 269TJ(3B) in certain circumstances, apply where:

(a)

the dumping duty or countervailing duty notice is given on or after the commencement of the amendment and the application for the notice is made on or after the commencement of the amendment; or

(b)

the dumping duty or countervailing duty notice is given on or after the commencement of the amendment and the Minister initiates an investigation under subsection 269TAG(1) of the Customs Act on or after commencement of the amendment.

The amendments made by items 7 and 8 will also apply where the dumping duty or countervailing duty notice is given before the commencement of the amendment and on or after the commencement of the amendment, the Minister publishes a notice under subsection 269ZHG(1) of the Customs Act declaring the continuation of the anti-dumping measures concerned.

85. Amendments made by items 9 to 18 which relate to retrospective notices as referred to in section 269TN, apply in relation to a notice of a kind referred to in subsection 269TN(1) that is published on or after the commencement of those items.

86. Division 5A of Part XVB, so far as it relates to the amendment made by item 19 which inserts a new circumvention activity, applies to conduct constituting circumvention activity occurring wholly after the commencement of the item, wholly before the commencement of the item and partly before and partly after the commencement of the item.

87. Amendments made by items 20 and 21 which relate to an application alleging a circumvention activity apply to an application under subsection 269ZDBC(1) made on or after the commencement of those items.

88. Amendments made by items 22 to 24 and 26 to 33 apply in relation to a notice indicating that an anti-circumvention inquiry is to be conducted that is published on or after the commencement of those items.

89. Amendments made by item 25 which relate to the termination of anti-circumvention inquiries, apply in relation to a notice indicating that an anti-circumvention inquiry is to be conducted that is published on or after the commencement of the item, whether the application for the conduct of an anti-circumvention inquiry was made before, on or after that commencement.

90. Amendments made by item 37 which relate to a decision of the Review Panel to revoke a termination decision applies in relation to a revocation made on or after the commencement of that item.