House of Representatives

Explanatory Memorandum

Minister for Home Affairs, the Honourable Jason Clare MP

B. Schedule 2-Circumvention Activity

Item 1 - After subsection 269SM(5)

58. This item inserts new subsection 269SM(5A) which provides an overview of the new Division 5A, anti-circumvention inquiries. Subsection 269SM(5A) deals specifically with the rights of persons to ask the CEO to conduct an anti-circumvention inquiry to address the potential evasion of certain dumping duty notices or countervailing duty notices.

Item 2 - Subsection 269T(1)

59. This item defines circumvention activity as having the same meaning as that given in the new section 269ZDBB, as inserted by item 6.

Item 3 - Subsection 269T(1) - (after paragraph (b) of the definition of interested party)

60. In conjunction with item 1, Schedule 4, this item amends the definition of interested party so that it applies to new Division 5A in a similar way to other existing parts of the Customs Act, for example, Division 5 of the Customs Act ("Review of anti-dumping measures").

Item 4 - Subsection 269T(4E)

61. This item amends subsection 269T(4E), which defines references to variable factors relevant to a review under existing Division 5 of the Customs Act ("Review of anti-dumping measures"). The amendment ensures that the definition in this subsection will also apply to anti-circumvention inquiries under new Division 5A.

Item 5 - Subsection 269TE(1) (paragraph (a) of the definition of recommendation)

62. This item amends subsection 269TE(1) ("CEO to have regard to same considerations as Minister"), which provides that the CEO is to have regard to the same considerations as the Minister when making certain recommendations or decisions. The amendment includes a reference to new subsection 269ZDBG, as inserted by item 6, and ensures that the subsection applies to recommendations in a report made under new Division 5A.

Item 6 - After Division 5 of Part XVB

63. This item inserts the new Division 5A ("Anti-circumvention Inquiries"), consisting of sections 269ZDBA to 269ZDBE, which will provide for anti-circumvention inquiries.

Section 269ZDBA - What this Division is about

64. New section 269ZDBA provides an overview of new Division 5A including prerequisites for lodging a valid application and the roles and powers of the Minister and the CEO. It is a merely explanatory section, and is not a substantive provision.

65. New section 269ZDBA provides an overview of new Division 5A including prerequisites for lodging a valid application and the roles and powers of the Minister and the CEO of Customs and Border Protection.

66. The new Division will allow persons representing, or representing a portion of, the Australian industry producing like goods to apply for an anti-circumvention inquiry in relation to a dumping duty notice published under subsection 269TG(2) or countervailing duty notice published under subsection 269TJ(2). Additionally, the Minister can initiate an anti-circumvention inquiry. Under the new Division, the CEO will provide a report, including recommendations, to the Minister following an accepted application or request from the Minister. The CEO's report will recommend that the Minister alter the relevant notice or not. The Minister, after considering the CEO's report, is empowered to amend the notice or to leave the relevant notice unaltered.

Section 269ZDBB - Circumvention activities

67. New section 269ZDBB outlines four activities which will each be considered to be circumvention activities for the purposes of new Division 5A:

67.1.

assembly of exported parts in Australia;

67.2.

assembly of exported parts in a third country;

67.3.

export of goods through one or more third countries; and

67.4.

certain arrangements between exporters.

68. Additionally, new subsection 269ZDBB(6) allows for additional circumvention activities to be prescribed by regulations.

Assembly of exported parts in Australia

69. New subsection 269ZDBB(2) provides that circumvention activity occurs:

69.1.

when goods are exported to Australia in individual parts and assembled in Australia;

69.2.

the goods are manufactured in a foreign country that is the subject of a dumping duty and they are then bought in parts to Australia;

69.3.

these parts are then assembled in Australia, with or without other parts, to create the goods that are the subject of the notice;

69.4.

the total value of the parts manufactured in the foreign country is a significant proportion of the final assembled goods; and

69.5.

section 8 or 10 of the Customs Tariff (Ant-Dumping) Act 1975 (Dumping Duty Act) which applies to like goods that are exported to Australia being subject to measures, does not apply to the export of circumvention goods to Australia.

Assembly of parts in a third country

70. New subsection 269ZDBB(3) provides that circumvention activity occurs:

70.1.

when goods are manufactured as individual parts in a foreign country that is the subject of the dumping notice;

70.2.

these parts are then assembled in a foreign country that is not the subject of the dumping notice, with or without other parts being added to create the goods;

70.3.

the parts that are assembled in the foreign country not subject to measures, then form the goods that are subject to the dumping notice;

70.4.

these goods are then exported to Australia;

70.5.

the total value of the parts manufactured in the country subject to measures must be a significant proportion of the customs value of the circumvention goods (customs value is defined in section 159 of the Customs Act); and

70.6.

section 8 or 10 of the Dumping Duty Act which applies to like goods that are exported to Australia being subject to measures, does not apply to the export of circumvention goods to Australia.

Export of goods through one or more third countries

71. New subsection 269ZDBB(4) provides that circumvention activity occurs:

71.1.

when goods that are subject to the anti-dumping measures are exported to Australia from a foreign country that isn't the subject of the notice;

71.2.

before that export, there were one or more other exports of the same goods from a foreign country to another foreign country;

71.3.

the first exporter of those exporters from which the goods were exported was the country that was subject to the measures; and

71.4.

section 8 or 10 of the Dumping Duty Act which applies to like goods that are exported to Australia being subject to measures, does not apply to the export of circumvention goods to Australia.

Arrangements between exporters

72. New subsection 269ZDBB(5) provides that circumvention activity occurs if the goods that are the subject of the anti-dumping measure are exported to Australia from the original exporter through another exporter who is subject to a lesser rate of duty or is exempt from duty.

Section 269ZDBC - Applications and requests for conduct of an anti-circumvention inquiry

Applications for anti-circumvention inquiries

73. New section 269ZDBC provides that an anti-circumvention inquiry can be initiated in one of two ways: by application by a person representing Australian industry or by request by the Minister. The section also outlines the prerequisites for an application or request from the Minister.

74. In relation to an applicant:

74.1.

an original notice imposing measures must have been published;

74.2.

the person must represent, or represent a portion of, the Australian industry producing like goods;

74.3.

the person must consider that one or more circumvention activities in relation to the notice have occurred; and

74.4.

the person must also consider that it would be appropriate to alter the notice because of the circumvention activities.

75. Similarly, in relation to requests from the Minister:

75.1.

an original notice imposing measures must have been published;

75.2.

the Minister must consider that one or more circumvention activities in relation to the notice have occurred; and

75.3.

the Minister must also consider that it would be appropriate to alter the notice because of the circumvention activities.

Section 269ZDBD - Content and lodgement of applications for conduct of an anti-circumvention inquiry

Content of application

76. New section 269ZDBD outlines the matters which should be included in an application to initiate an anti-circumvention inquiry and the ways in which the application should be submitted. Applications should:

76.1.

be in writing;

76.2.

be in an approved form;

76.3.

contain such information as the form requires; and

76.4.

be signed in the manner indicated by the form.

77. The application form should include:

77.1.

a description of the kinds of goods that are the subject to the original notice;

77.2.

a description of the original notice subject of the application;

77.3.

a description of the circumvention activities that the applicant considers has occurred; and

77.4.

a description of the alterations to the original dumping notice that the applicant considers necessary.

Lodgement of application

78. New subsection 269ZDBD(3) outlines the way in which applications should be submitted:

78.1.

leaving it at Customs House, Canberra; or

78.2.

posting it to the postal address specified in the approved form; or

78.3.

sending it via electronic facsimile.

Section 269ZDBE - Consideration of applications and requests for conduct of an anti-circumvention inquiry

Application

79. New section 269ZDBE outlines the way in which the CEO will address applications. The CEO must consider the application within 20 days of receiving it and either reject the application in writing, or publish a notice indicating that an anti-circumvention inquiry will be conducted.

80. New subsection 269ZDBE(2) requires that, when considering the application, the CEO should consider whether, among other things, there appear to be reasonable grounds for asserting that one or more circumvention activities have occurred.

Requests

81. Similarly, new subsection 269ZDBE(5) requires that when the Minister requests the CEO to conduct an anti-circumvention inquiry, the CEO must publish a notice indicating that an anti-circumvention inquiry will be conducted.

Content of notice

82. New subsection 269ZDBE(6) outlines the content of the inquiry notice and provides that the notice must:

82.1.

describe the types of goods to which the anti-circumvention inquiry relates;

82.2.

describe the original notice;

82.3.

state that the inquiry will examine whether circumvention activities have occurred;

82.4.

indicate that a report will be made to the Minister within 155 days after the publication of the inquiry notice (or within a longer period that the Minister allows under section 269ZHI);

82.5.

invite interested parties to lodge submissions within 40 days;

82.6.

state that within 110 days of the publication of the inquiry notice (or a longer period if the Minister allows), the CEO will place on the public record a statement of the essential facts ; and

82.7.

invite interested parties to lodge submissions in response to the statement of essential facts within 20 days.

Section 269ZDBF - Statement of essential facts in relation to conduct of an anti-circumvention inquiry

83. New section 269ZDBF provides that the CEO must place on the public record a statement of essential facts on which the CEO proposes to base a recommendation to the Minister about the original notice, within 110 days of publishing the inquiry notice (or a longer period if allowed by the Minister). The CEO must have regard to the anti-circumvention inquiry application or request, and any submissions that are received within 40 days. The CEO may also take into account any other matters that the CEO considers relevant.

Late Submissions

84. New subsection 269ZDBF(3) provides that the CEO is not obliged to have regard to submissions received after the end of the 40 day period if this will prevent the timely publication of the statement of essential facts.

Section 269ZDBG - Report on anti-circumvention inquiry

CEO Recommendations

85. New section 269ZDBG provides that the CEO must provide a report to the Minister within 155 days after the publication of the inquiry notice (or such longer period that the Minister approves). This report must recommend that:

85.1.

the original notice remain unaltered; or

85.2.

the original notice be altered, and the alterations to be made.

86. In deciding on the recommendation or recommendations, the CEO must have regard to:

86.1.

the application or request for the anti-circumvention inquiry;

86.2.

any submissions which the CEO has relied on to formulate the statement of essential facts;

86.3.

the statement of essential facts;

86.4.

any submissions about the statement of essential facts received within 20 days of the statement being published; and

86.5.

any other matters the CEO considers relevant to the anti-circumvention inquiry.

Late submissions

87. The CEO is not obliged to have regard to submissions received after the end of the 20 day period if they would prevent the timely preparation of the report to the Minister.

Reasons for CEO recommendation

88. The report to the Minister must include a statement of the CEO's reasons for any recommendation in the report which:

88.1. sets out the material findings of fact on which that recommendation is based; and

88.2. provides particulars of the evidence relied on to support those findings.

Section 269ZDBH - Minister's powers in relation to anti-circumvention inquiry

Minister's decision

89. New subsection 269ZDBH(1) provides that the Minister will consider the CEO's report, and any other information the Minister considers relevant, and publish a declaration stating whether the original notice is to be altered or remain unaltered, and specify the date from which any alteration takes effect.

90. New subsection 269ZDBH(2) outlines the kinds of alterations that may be made to the original notice including:

90.1.

different goods that are to be the subject of the original notice;

90.2.

different foreign countries that are to be the subject of the original notice;

90.3.

different exporters that are to be the subject of the original notice;

90.4.

in relation to existing exporters that are the subject of the original notice-the specification of different variable factors in respect of one or more of those exporters; and

90.5.

in relation to exporters that are to be the subject of the original notice-the specification of variable factors in respect of those exporters.

Timing of decision

91. The Minister must publish the declaration within 30 days of receiving the CEO's report. Alternatively, the Minister make take a longer period to publish the declaration if the Minister considers that there are special circumstances, in which case the Minister must give public notice of the longer period.

Notification of declaration

92. The Minister must inform an effected exporter, or exporters, of the outcome of the declaration as soon as practicable.

When declaration takes effect

93. Subsection 269ZDBH(8) provides that the day which the Minister specifies under subsection 269ZDBH(1) as being the day from which the declaration takes effect, must not be earlier than the day of publication of the notice under subsections 269ZDBE(4) or (5). Therefore the Minister will be empowered to extend the measures with some limited retrospective effect, up to the day when the anti-circumvention inquiry was notified, but not any earlier. The Minister could specify any day after that day as being when the declaration takes effect, including a day in the future, in which case the declaration would not have any retrospective effect.

Item 7 - After paragraph 269ZHI(1)(e)

94. This item amends existing section 269ZHI to allow the CEO of Customs and Border Protection to request extensions in respect of:

94.1.

the 110-day period in which the CEO must publish the statement of essential facts in regard to anti-circumvention inquiries; and

94.2.

the 155-day period for providing the Minister with the CEO's report on the anti-circumvention inquiry.

Item 8, 9 & 10 - Subsection 269ZJ(1), paragraph 269ZJ(5)(a) & paragraph 269ZJ(6)(a)

95. These items amend existing section 269ZJ ("CEO to maintain public record for certain purposes") which requires the CEO to maintain and deal appropriately with public records. It ensures that the provisions apply similarly to applications or requests for an anti-circumvention inquiry as they do under other parts of the Customs Act, for example, existing Division 5 ("Review of anti-dumping measures"). In particular, paragraphs 269ZJ(5)(a) and 269ZJ(6)(a) provide that the CEO is able to disregard certain information in cases where there is a dispute as to the confidential nature of information provided.

Item 11 - Section 269ZX (after paragraph (aa) of the definition of interested party)

96. This item expands the definition of interested party in existing section 269ZX, Division 9 ("Review by Review Officer"). The expanded definition ensures that person who applied for an anti-circumvention inquiry is included in the definition of interested party for the purposes of Division 9.

Item 12 - After paragraph 269ZZA(1)(c)

97. This item amends existing section 269ZZA ("Reviewable decisions") to include the Minister's decision to publish a declaration, under new section 269ZDBH, as a decision reviewable by the 'Review Panel'. The Review Panel will be introduced by Customs Amendment (Anti-dumping Improvements) Act (No. 1) 2012 (Currently called the Customs Amendment (Anti-dumping Improvements) Bill (No. 2) 2011). Currently, the Customs Act provides that review functions are to be undertaken by a "Review Officer".

Item 13 - After paragraph 269ZZD(b)

98. This item amends section 269ZZD ("When must an application be made?") to provide that an application for a review of an anti-circumvention inquiry must be made within 30 days after the relevant declaration is published under new subsection 269ZDBH(1). This item amends section 269ZZD as outlined in Customs Amendment (Anti-dumping Improvements) Act (No. 1) 2012 .

Item 14 - Subsection 269ZZK(6) (after paragraph (c) of the definition of relevant information)

99. This item amends section 269ZZK ("The review"). It provides that, where a reviewable decision was made because of an anti-circumvention inquiry, then the relevant information to be used in the review was the information which the CEO had regard to under new subsection 269ZDBG(2) when making the findings set out in the report. This item amends section 269ZZK as outlined in Customs Amendment (Anti-dumping Improvements) Act (No. 1) 2012 .

Item 15 - Application provisions

100. This item determines the original notices to which the anti-circumvention provisions in this Bill apply, and the period which can be investigated under an anti-circumvention inquiry.

101. In effect, this item provides that the Minister may make a declaration, under new section 269ZDBH, as a result of an anti-circumvention inquiry, affecting an original notice whether that notice was published before, on or after the date on which the anti-circumvention provisions in this Bill come into effect.

102. Additionally, the effect of this item is that an anti-circumvention inquiry can take into account circumvention activity which has occurred before, on or after the date on which the anti-circumvention provisions in this Bill come into effect.