House of Representatives

Explanatory Memorandum

Minister for Home Affairs, the Honourable Jason Clare MP

A. Schedule 1-Subsidies

Item 1 - Subsection 269T(1) (definition of subsidy)

23. This item amends repeals and replaces the definition of subsidy in subsection 269T(1). The new definition clarifies that a subsidy encompasses a financial contribution and any form of income or price support, whether received directly or indirectly in relation to goods exported to Australia that confers a benefit.

24. The new definition closely follows the language of, and is in accordance with Article 1 of the ASCM which in defining subsidy does not differentiate between direct and indirectly received subsidies. Further Footnote 36 to Article 10 of the ASCM defines countervailing duty as "a special duty levied for the purpose of offsetting any subsidy bestowed directly or indirectly upon the manufacture, production or export of any merchandise, as provided for in paragraph 3 of Article VI of GATT 1994".

25. This amendment clarifies that subsidies conferring a benefit indirectly may be included in any benefit calculation under section 269TACC.

Items 2 - Subsections 269T(2AA), (2AB) and (2AC)

26. This item repeals current subsections 269T(2AA), (2AB) and (2AC) and substitutes a single new subsection 269T(2AA).

27. Current subsections 269T(2AA), (2AB) and (2AC) are redundant due to the new definition of subsidy and other amendments proposed in the Bill.

28. The new subsection 269T(2AA) provides the circumstances in which a benefit may be conferred and is intended to emphasise that a benefit may be conferred indirectly in relation to goods exported to Australia.

Items 3 - Subsection 269TAAC(3)

29. This item repeals and replaces subsection 269TAAC(3) to ensure that it more closely follows the requirements and language of Article 2.1(b) and Footnote 2 of the ASCM.

30. Subsection 269TAAC(1) relevantly provides that a subsidy is a countervailable subsidy "if it is specific ...". Subsection 269TAAC(2) sets out circumstances in which a subsidy is specific. The new subsection 269TAAC(3) sets out circumstances where a subsidy is not specific, and therefore cannot be regarded as a countervailable subsidy.

Items 4 - Subsection 269TAAC(4)

31. This item amends subsection 269TAAC(4) by deleting the words "Despite the fact that access to a subsidy is established by objective criteria, the" and substitutes the words "The".

32. Article 2.1(c) enables a determination that a subsidy is specific by reference to other factors, despite the appearance of non-specificity from the application of the principles laid down in the earlier subparagraphs of Article 2.1. Those principles include, but are not limited to, "objective criteria".

33. The new subsection 269TAAC(4) provides that the Minister may, having regard to the matters set out in paragraphs (a) to (d) of this subsection, determine that a subsidy is specific. This amendment ensures that subsection 269TAAC(4) more accurately reflects the ASCM.

Item 5 - Section 269TACC

34. This item repeals and replaces section 269TACC, and inserts a new section 269TACD.

35. New section 269TACC is simpler and clearer than the current section 269TACC, and is limited to determining whether a benefit has been conferred by a financial contribution or income or price support. This section is intended to reflect Article 14 of the ASCM which provides guidance in determining whether a benefit is conferred.

36. New subsection 269TACC(1) provides that, subject to subsections 269TACC(2) and (3), the question of whether a financial contribution or income or price support confers a benefit is a matter to be determined by the Minister having regard to all relevant information.

37. New subsection 269TACC(2) provides that a benefit is conferred where a direct financial payment is received from any of the following:

37.1.

a government of a country;

37.2.

a public body of a country;

37.3.

a public body of which a government of a country is a member;

37.4.

a private body entrusted or directed by a government of a country or by such a public body to carry out a governmental function.

38. This provision mirrors the effect of the current subsection 269TACC(2) that prescribes that a benefit is taken to be conferred if a financial contribution in respect of goods is a direct financial payment.

Guidelines for financial contributions

39. New subsection 269TACC(3) sets out guidelines to which the Minister must have regard when determining whether a financial contribution confers a benefit. These guidelines:

39.1.

reflect Article 14(a) of the ASCM in determining whether provision of equity capital by a government or body confers a benefit (paragraph 269TACC(3)(a));

39.2.

reflect Article 14(b) in determining when a loan by a government or body confers a benefit (paragraph 269TACC(3)(b));

39.3.

reflect Article 14(c) in determining when a guarantee of a loan by a government or body confers a benefit (paragraph 269TACC(3)(c)); and

39.4.

reflect Article 14(d) in determining when the provision of goods or services for less than adequate remuneration, or the purchase of goods or services for more than adequate remuneration, by a government or body confers a benefit (paragraphs 269TACC(3)(d) and (e)).

40. New subsection 269TACC(4) provides that the Minister, for the purposes of paragraphs 269TACC(3)(d) and (e), is to have regard to the prevailing market conditions for like goods or services in the country where those goods or services are provided or purchased when determining the adequacy of remuneration in relation to those goods or services. The provision reflects the last sentence of Article 14(d) of the ASCM.

Section 269TACD Amount of countervailable subsidy

41. New section 269TACD deals with the amount of countervailable subsidy. Subsection 269TACD(1) provides that where the Minister is satisfied that a countervailable subsidy has been received in respect of goods, the amount of the countervailable subsidy is an amount determined by the Minister in writing. This reflects the broad approach taken in Footnote 36 of Article 10 of the ASCM as quoted in paragraph 24 of this Explanatory Memorandum.

42. Subsection 269TACD(2) provides that where the amount of countervailable subsidy received in respect of goods has not been quantified by reference to units of those goods the Minister must do so. The amount of countervailable subsidy per unit of goods is used in determining the duty payable under a countervailing duty notice, if the Minister decides to impose measures.

Item 6 - Subsections 269TAE(1) and (2)

43. This item makes a minor consequential amendment to subsections 269TAE(1) and (2) which is necessary due to Item 7.

Item 7 - After subsection 269TAE(2A)

44. This item inserts a new subsection 269TAE(2AA) requiring that when making a material injury determination under subsections 269TAE(1) or (2) that the determination must be based on facts and not merely on allegations, conjecture or remote possibilities. This reflects the wording of Article 15.7 of the ASCM.

Item 8 - After paragraph 269TAE(2C)(d)

45. This item inserts a new paragraph 269TAE(2C)(da) into section 269TAE to ensure that section 269TAE more closely reflects Article 15.3 of the ASCM regarding when the cumulative effects of exportations from different countries may be considered.

Item 9 - At the end of section 269TC

46. This item inserts a new subsection 269TC(10) that ensures that the CEO is able to include any new subsidies discovered during the course of an investigation, particularly where this subsidy was not identified in the original application. This is in accordance with the Article 10 and footnote 36 of the ASCM.

47. Article 10 of the ASCM provides that:

"Members shall take all necessary steps to ensure that the imposition of a countervailing duty on any product of the territory of any Member imported into the territory of another Member is in accordance with the provisions of Article VI of GATT 1994 and the terms of the Agreement".

48. The term 'countervailing duty' in Article 10 is defined in Footnote 36 of the ASCM as "a special duty levied for the purpose of offsetting any subsidy bestowed directly or indirectly upon the manufacture, production or export of any merchandise, as provided for in paragraph 3 of Article VI of GATT 1994".

49. It is generally understood that Footnote 36 to Article 10 of the ASCM allows the investigating authority to include any subsidy discovered in the course of an investigation into the scope of the investigation regardless of whether that subsidy was specified in the application for countervailing duty.

Item 10 - Subparagraph 269TDA(2)(b)(ii)

50. This item amends subparagraph 269TDA(2)(b)(ii) by omitting the words "after the start of" and substituting "during". This corrects a drafting error in the current provision. Under the amended provision the CEO would have to terminate an investigation if the amount of countervailable subsidy never exceeds the negligible level of countervailable subsidy (as defined in subsection 269TDA(6)) during the investigation period, rather than the open-ended period from the start of the investigation period.

51. As the investigation period is required to be published in the initiation notice as required by paragraph 269TC(4)(bf) the period which has to considered is transparent and fair to all parties.

Item 11 & 12 - Subsection 269TDA(14) (heading) & Paragraph 269TDA(14)(b)

52. This item amends subsection 269TDA(14) to clarify that the CEO must terminate an investigation if the CEO is satisfied that the injury if any, to an Australian industry that has been, or may be, caused by the export of goods is negligible, without having to find that a countervailable subsidy has been received.

53. On one literal interpretation of the current subsection 269TDA(14), there must be a determination that a countervailable subsidy has been received before the CEO may terminate an investigation because injury to Australian industry is negligible.

54. The amendment reflects Article 11.9 of the ASCM which requires immediate termination of an investigation where the authorities determine that injury is negligible. That requirement is not dependent on a determination that a countervailable subsidy has been received.

Item 13 - Application provisions

55. This item applies the amendments made by items 1 to 8 (eg the amendments to the definition of subsidies, the calculating benefit and the determination of material injury), to investigations that are initiated, or to reviews or inquiries that begin, on or after the commencement of those items.

56. This item applies the amendments made by item 9, to allow for subsidies found during investigations to be examined in said investigation, applies in relation to investigations that:

56.1.

are initiated on or after the commencement of that item; and

56.2.

were initiated before that commencement but that were not completed immediately before that commencement.

57. The amendments made by items 10 to 12 to the termination provisions in section 269TAE apply in relation to investigations that are initiated on or after the commencement of those items.