Australian Anti-dumping and Countervailing Measures

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1 Lex Mundi Asian Pacific Conference Saturday, May Australian Anti-dumping and Countervailing Measures by John Carroll The first contact you may have with Australia's anti-dumping system is when your client tells you that the Australian Customs Service is coming to visit. This paper will explore some recent trends in Australia's approach to anti-dumping law and administration and provide some comments on how exporters to Australia may reduce their exposure to the legal risks associated with Australian industry taking anti-dumping action. Unless otherwise specified, this paper will refer to anti-dumping and countervailing matters together as "anti -dumping", unless otherwise specified. Anti-dumping in Australia, as elsewhere, inherently involves a struggle between the competing interests of exporters to Australia and Australian industry. The debate will no doubt continue as to whether the proper economic analysis of dumping is that it represents anti-competitive practices by exporters or back door protectionism for local industry. Australian producers and manufacturers no doubt feel they are very open to prevailing global trading conditions given Australia's relatively low tariff rates. Australia is a small market by world standards and is geographically isolated. It may not come as a surprise that Australia's industries respond promptly to perceived dumping or countervailing issues and press Australian Governments to provide a mechanism that affords the maximum protection. The Customs Act 1901 and the Customs Tariff (Anti-Dumping) Act 1975 are the principal legislative instruments relating to anti-dumping. Australian domestic legislation 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 task of administering anti-dumping and countervailing measures in Australia now falls to the Australian Customs Service (Customs). Applications claiming dumping are lodged with Customs who screen the application, investigate screened applications and make preliminary determinations on provisional measures. If a positive determination is reached, Customs will then prepare a Statement of Essential Facts, consider any submissions in response and prepare a report and recommendation on final measures for the Minister. The Minister for Justice and Customs is empowered under the Australian legislation to impose duties. 1. Snapshot - The Australian Position The statistics of the WTO Secretariat, Rules Division, for the period reveal that Australia is: a very high user of anti-dumping measures; conducts inquiries faster than anyone else; imposes provisional measures often; and imposes final measures in around 30% of cases. SYD6\260\

2 Notably, there is also a fairly low level of litigation around dumping in Australia with an average four cases per year brought before the Federal Court of Australia. In the period Australian authorities conducted 383 dumping investigations (17% of the world total) which is second only behind the USA with 391 investigations. If the number of dumping investigations is considered in view of a country's share of global imports (for Australia only 2%) Australia becomes the highest user of anti-dumping measures in the world. Australia conducts investigations in a shorter timeframe than any other nation. The average duration of an anti-dumping investigation in Australia between 1995 and 1997 was five months. During the same period the average for all countries was around eleven months. Some countries have much longer timeframes, for example, the European community with an average of around fifteen months. Article 7.3 of the WTO Anti-dumping Agreement requires at least a sixty day investigation before provisional measures are imposed. The current position in Australia is that provisional measures can be imposed after the period of sixty days has elapsed. Australia imposes provisional measures in just over 50% of the cases investigated. However, exporters to Australia have a very good prospect of avoiding the imposition of final measures. Overall definitive measures are only imposed in under 30% of the cases investigated by the Australian authorities. The statistics indicate that whilst Australia is a heavy user of anti-dumping measures exporters to Australia the subject of an investigation are likely to avoid the imposition of final measures in around two out of three cases. This represents a better outcome than in the case of any of the other major users of anti-dumping measures around the world. The major industry sectors involved in anti-dumping cases in Australia are plastics, chemicals, glass and ceramics, machinery and electrical, paper and foodstuffs. 2. Continuing Review and Legislative Change Australia's legislation and administration continues to undergo repeated review and adjustment. In the last fifteen years there have been five major reviews undertaken by the Government. Most reviews have been followed by significant legislative change. Those reviews were: March 1986 June 1991 December 1993 January 1995 September 1996 Review of the Customs Tariff (Anti-Dumping) Act 1975 Report by Professor Fred Gruen Senate Standing Committee Inquiry into Australia's Anti-Dumping and Countervailing Legislation Review of the Australian Customs Service 'The Turning Point' Legislative revisions to effect Australia's new obligations arising from the Uruguay Round Review of Australia's Anti-Dumping and Countervailing Administration by Mr Lawrie Willett Whilst each review has brought about changes to the law and administration the changes have not substantially altered the fundamentals of the system but have focussed on the continuous refinement and adjustment of the legislation and administration. These changes have been made within the context of the increasingly prominent requirements of the World Trade Organisation (WTO) and demands of Australian industry. SYD6\260\

3 3. The Most Recent Review On 25 June 1996 the Minister for Small Business and Consumer Affairs appointed the consultant, Mr Lawrie Willett to undertake a review of Australia's Anti-dumping and Countervailing administration. The Terms of Reference made it clear that Australia was mindful of its international obligations under the WTO but, within those confines, the review was to consider how to best deliver the Government's policy objectives of improved procedures for Australian industry and shorter timeframes for dumping inquiries. The Report was delivered on 6 September 1996 and legislation was introduced in However, due to the 1998 election the legislation was not passed until early The major pieces of legislation encapsulating the Government's response to the Willett Report were the Customs Legislation (Anti-dumping Amendments) Bill 1998 and the Customs Legislation (Anti-dumping) Amendment Bill The legislative changes are stated by the Government to be consistent with Australia's obligations imposed by the WTO and in particular the obligation that "throughout an investigation all interested parties must have a full opportunity for the defence of their interests" including the opportunity to see all relevant information, to acquaint themselves with the opposing views and to offer rebuttal arguments. The most significant changes are: the abolition of the Anti-dumping Authority. The Australian Customs Service now have sole responsibility for conducting anti-dumping inquiries. This removes the two stage, two agency, investigation process and replaces it with a two stage, one agency, process. shortening and reworking the timeframes for the investigation by Customs. Following a 20 day prima facie investigation the complaint is investigated and a report given to the Minister within 155 days. The creation of a new review body called the Trade Measures Review Officer provides merits review of certain dumping decisions before a matter is taken to the Australian Courts. The Government has offered various rationale for the changes. The previous two stage system was criticised by Australian industry because it took too long before provisional measures could be put in place, and during this time, long term damage could be caused to Australian industry. The two agency structure was said to cause duplication, inconsistency, uncertainty and additional cost to parties. This was essentially because if a positive finding was referred to the Anti-dumping Authority it commenced a de novo investigation, collected new information and then reconsidered the issues previously determined by Customs. The Government recognised that anti-dumping and countervailing investigations are disruptive for all parties. Those investigations give rise to trade chilling effects which are a detriment to exporters to Australia, importers and consumers alike. Australian industry regards these investigations as creating uncertainty in the marketplace which may delay investment and economic development. 4. Who Protects the Interests of Exporters? The Willett Review received few detailed submissions from exporters to Australia and, not surprisingly, relied heavily on submissions from Australian manufacturers, producers and trade unions. The interests of exporters to Australia, therefore, were primarily protected through Australia's recognition that its legislation and administration must be consistent with WTO obligations. 5. Abolition of the Anti-dumping Authority Under the previous scheme where there was a positive preliminary finding of dumping causing material injury, Customs could impose securities but was then required to refer the matter for further investigation to the Anti-dumping Authority. The Anti-dumping Authority then called for additional submissions, gathered further information and reached its own conclusion within 120 days. Under the new system overseas exporters deal solely with the Australian Customs Service. SYD6\260\

4 The Anti-dumping Authority, Australia's second agency, was created in 1988 and abolished in The Anti-dumping Authority Act 1988 commenced operation on 1 September 1988 and the Customs Legislation (Anti-dumping Amendments) Act 1998 repealed the Anti-dumping Authority Act 1988 with effect from 22 December It is perhaps not surprising that the rationale for the introduction of the Anti-dumping Authority in 1988 was to solve some of the problems which its abolition is also said to address. Those issues relate to the need for short timeframes, expert bodies to investigate anti-dumping matters and the need for balance in the system. The Government said that the abolition of the Anti-dumping Authority would remove duplication, reduce the cost of administration and reduce the uncertainty for all involved. Customs was said to be best placed to administer the system because it has ready access to information about imports into Australia and its staff are trained in conducting dumping inquiries, including normal values inquiries outside Australia. In its ten years of operation the Anti-dumping Authority acquired considerable expertise in anti-dumping law and administration. It conducted a significant number of cases in the Federal Court of Australia defending its decisions and the decisions of Ministers against challenges from both overseas exporters and Australian industry. The hard learnt lessons from litigation were successfully applied to modify the Anti-dumping Authority's administrative arrangements and the Authority's success rate in litigation improved markedly over the period. However, the abolition of the Anti-dumping Authority has not meant that that expertise has been lost because Customs was also involved in the litigation. The challenge for Customs is to now continue to administer the legislation in a way that balances the parties rights and interests and produces decisions able to withstand legal challenge from both importers and Australian industry. 6. Shorter Timeframes for Investigations The Australian Government has shortened the timeframe for investigations to the shortest in the world. Once an investigation is initiated it only takes 155 days for the investigation phase and report to the Minister. To get a complete picture of the timeframe we need to add the 20 days for the initial screening of the application and an unspecified period for the Minister to make a decision on whether to impose duties. The changed timeframes can be summarised below. Pre 1999 Current Screening 25 Preliminary Finding 100 Final Finding 120 Screening 20 Preliminary Finding * 60 Final Finding 95 * Can be extended by the Minister (s.269zhi of the Customs Act 1901) The following diagram indicates the new timeframes in Australia: 245 days 155 days SYD6\260\

5 0 Screening (max 20 days) Investigation initiated * Submissions due Preliminary affirmative determination Statement of essential facts Commence administrative review Comments on statement due Report and recommendation to Minister S e c u r i t i e s Final Measures On positive final determination retrospective duties may be imposed from day 0 SYD6\260 \ * May be extended by the Minister 5

6 7. Other Recent Changes We will briefly mention two other recent changes to the Australian legislation. 7.1 China - Transition Economies The Customs (Anti-dumping Amendments) Bill 1998 introduced changes to provide a special approach for determining normal values of allegedly dumped goods for countries in the process of a transition to a market economy from a centrally controlled economy. Australia's legislation provides for normal values to be assessed through a hierarchy of methodologies with Customs working progressively through each until a point is reached where the normal value can be determined. Where goods are exported from a command economy normal values were previously determined by reference to information obtained in a "surrogate" country because the Government's control of prices meant that a proper normal value could not be determined within the command economy. Australia now has greater flexibility when determining normal values for exports from economies in transition from command economies to market economies. If it is identified that the domestic selling price of the goods under consideration is subject to a price control situation the normal value of the goods exported to Australia is now able to be determined having regard to not only information obtained from a surrogate country but also information obtained in the transition economy. Where there is no price control situation Customs may now proceed to examine the cost of production of the goods exported to Australia. 7.2 Retaliatory Countervailing Action Australia has also amended its legislation to ensure that a previous inconsistency with its obligations to the World Trade Organisation has been removed. The Customs Tariff (Anti-dumping) Amendment Bill 1998 amends the Taxing Act, the Customs Tariff Anti-dumping Act 1975, to repeal certain provisions which previously permitted Australia to take retaliatory countervailing action against another country in certain circumstances. 8. How exporters to Australia can manage their exposure Managing your exposure to the risks of anti-dumping measures being imposed by Australia is probably very similar to managing those risks in relation to other countries. The obvious approach is to ensure that your clients are not dumping goods on the Australian market and that they have the information to prove that fact. As we know, it is not always easy to show that you are not dumping. The steps that an exporter to Australia may choose to take will, of course, be dictated by the nature and extent of the exposure to the risk of anti-dumping measures. As with any business risk, it is important to identify the risk and apply resources commensurate with the risk. If your client exports goods to Australia with a significant value and participates in an industry where a dumping complaint from the Australian industry is a real prospect then it may be worthwhile taking significant steps to reduce your client's exposure. To manage your client's exposure we suggest: you watch the Australian legislation and administrative systems and alter your position as appropriate to prepare to respond to an allegation of dumping. For example, you identify the Australian information requirements and, where possible, be in a position to meet Australia's information requirements; once a complaint has been lodged you should respond promptly and fully to Customs' investigation. A full and early response may avoid the much higher costs associated with an unfavourable decision later, including the high cost of litigation. An open and constructive SYD6\260\

7 dialogue with Customs, in particular the inquiry officers, should be established and maintained. You shall treat requests for information seriously and attempt to fully comply having identified the matters to be established; once an adverse finding has been made you deal with the matter on both the legal and business levels. On the business level you can consider restructuring arrangements to remove future dumping and seek revocation of the measures. On the legal level you can consider a challenge in the Federal Court of Australia. The statistics mentioned earlier support an approach of working with Customs to achieve a successful outcome for the importer to Australia. Only around 30% of investigations result in duties being imposed. Understanding the Australian system and applying resources early will improve your chances of success. 9. Federal Court Litigation In Australia anti-dumping matters are litigated in the Federal Court of Australia. The Federal Court is a relatively speedy jurisdiction by Australian standards and anti-dumping matters attract some of Australia's most senior and best qualified counsel. The Australian industry has been represented for the last decade primarily by one firm of solicitors based in Sydney and that firm has relied on a small and capable group of counsel. Importers, on the other hand, have been represented by many of Australia's major first tier law firms but they too have chosen from a fairly small group of counsel with experience in anti-dumping matters. There is a relatively small number of cases which constitute the body of interpretation by Australia's Courts of Australia's anti-dumping legislation and those cases often only deal with small elements of the legislation or its application to particular circumstances. As a result, there is still ample room for the Courts to interpret the Australian legislation. It is clear that anti-dumping law is a specialist area. To succeed exporters to Australia need to ensure that they obtain the best available expertise and assistance from Australian Counsel with a knowledge of antidumping matters. SYD6\260\