Demystifying Dumping Duty
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Demystifying Dumping Duty
Transcript of Demystifying Dumping Duty
Demystifying Dumping Duty
Topics
1. What is dumping?
2. When can dumping duties be imposed?
3. Australian wine investigation
4. Responding to an investigation
5. Risk management
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Who are we
Customs and trade specialists
• 90 year old national law firm
• Dedicated customs and trade practice for over 15 years
• Represented exporters, importers, retailers in many dumping
investigations
• Sit on the International Trade Remedies Forum
• Current chair of the Law Council of Australia Customs and
International Transactions Committee
• Established relationships with Chinese dumping duty specialists
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Dumping Duty Basics
Why is this important?
• Dumping investigations are politically popular
• Dumping is acceptable protectionism
• Dumping investigations are likely to increase
• Dumping duty can end supply chains
• Mistakes can cause financial ruin
• Dumping duty rates are very high
What is dumping?
Domestic selling price is higher than the
export price
Australian sale price $20 Export price $10 = Dumping 100%
Dumping – Quick facts
• Dumping is not illegal or wrong
• Exporters do not have to be selling at a loss to be found to have
dumped products
• FTAs do not reduce dumping duty
• Australia is one of the most prolific users of the Anti-Dumping
system
• Dumping duties are imposed on the importer of the goods
• Generally in place for 5 years
• Once in place, there are procedures for reviews of the rates
When is dumping duty imposed?
• Dumping occurs when exported goods are priced lower than their
"normal value“
• What is the normal value:
• the comparable price that the exporter sells the goods in its domestic
market;
• comparable prices of exports to a third country; or
• a constructed value based on the cost of production plus selling,
general and administrative expenses and profit.
• Anti-dumping duties may be imposed when dumping causes, or
threatens to cause, material injury to a domestic industry.
• Dumping duty will only be on products where there is a domestic
industry
Are dumping duties legal?
• Dumping duties are permitted under WTO rules
• WTO rules and domestic legislation need to be followed
• If an importer/exporter/producer disagrees it can appeal via the
domestic review process (internal review, Courts)
• If a country disagrees, they can apply to the WTO for a ruling
• Indonesia successfully appealed Australian dumping duties on A4
copy paper
• WTO panel system is currently broken
• A WTO review takes many years
Australia loves using dumping duties
A4 copy paper
Aluminium extrusions
Ammonium nitrate
Clear float glass
Power transformers
Pineapple Railway wheels
Silicon metal
Wind towers Steel
products Pallet
racking Wire rope
Dumping Investigations
Investigation process – quick points
• Investigations conducted by the Ministry of Foreign Trade and
Economic Cooperation
• In most cases, dumping duty is imposed after an application is
made by the domestic industry or a representative body
• A lengthy investigation is carried out – China 12 months – but can
be extended to 18 months
• Review period set – usually goods exported in a set 12 months
• Injury assessment period – usually 3-5 years
Application steps
Submission of application
Initiation Registration Issuing
questionnaires
Filing Questionnaires
Preliminary determination
Provisional dumping measures
Verification
Price undertaking
Injury hearing Fact disclosure Final
determination
60 days 20 days 10 days 37 days
8 months from initiation
12 – 18 months from initiation
Case could be
terminated
Could be supplementary
questionnaires
Investigation – Key Steps
Application by domestic Industry – Defines the goods under consideration
Sample approach
Exporter questionnaires – 37 days – extensions (7 days)
Submissions
Price undertakings
Final determination and levying of duties
Internal appeal options
Key issues – Normal value and export price
• Export price:
• who is the exporter?
• related party transactions
• time of export
• Normal value
• comparable product
• market situation
• sales in the ordinary course of trade – excludes unprofitable sales
• can be difficult if substitute costs are used
• adjustments (level of trade, credit terms, packaging, transport)
• constructed value – costs of production
• sales to a third country
Outcomes
Investigation terminated
• exempt exporters
• individual exporter rates
• residual exporters
• non-cooperative / all other exporters
Duties imposed:
• combination of fixed and variable duty method;
• fixed duty method;
• floor price duty method;
• ad valorem duty method;
Method of duty
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China wine investigation
High level
• Investigation period – 1 January – 31 December 2019
• Injury assessment period – 2015 - 2019
• Product – wine in containers holding 2 litres or less
• Not limited to a type of wine
• Dumping alleged – 202%
• Alleged market situation
Motivation
1. Investigation is within WTO rules
2. Motivation may be political – but doesn’t change anything
3. May be retaliation to Australia’s dumping measures against
China:
1. 5 investigation against China commenced this year alone
2. Recent submission by China to the ADC:
China … has not initiated a single trade remedy investigation against any country this
year. However, we regret to see that Australian investigating authority has maintained
trade cases on Chinese products and has initiated five trade remedy investigations on
three kinds of Chinese products. The number of case and amount of case value have
increased significantly compared with the same period last year. We… hope that the
investigation authorities, including Australia, can use trade remedy measures with restraint
and caution to avoid it becoming a tool of trade protection.
Australia’s history of anti-dumping measures
Further detail – Dumping margin
• Allegation of dumping – based on an average export price of
US$6.40 per litre
• Normal value – based on price of Australian wine imported from
China – US$20.03 per litre
• Why was a Chinese export price used for normal value:
• an alleged market situation in Australia
• Government intervention in the Australia wine industry
• same allegations made in barley case – but not relied upon in final
decision
Market situation
Impact of market situation – domestic sales cannot be used as the comparison
What is used – the costs of production plus reasonable expenses and profits
If there is a market situation there is almost always dumping
Market situation – Basis of claim
(1) Wine balance tax preferential items
(2) Export and regional wine package support plan
(3) Regional plan
(4) Wine tourism and wine cellar ticket funding project
(5) Manage farm risk projects
(6) National Land Conservation Project
(7) Accelerating commercialization projects
(8) Innovative connection project
(9) Export market development subsidy projects
(10) Research and development tax incentive projects
(11) Business growth funding projects
(12) Australian doctoral research internship project
(13) Sustainable rural water and infrastructure projects
(14) Federal Agricultural Efficient Irrigation Promotion Project
(15) Three-year tax deduction project for water supply facilities
of primary producers
(16) Drought preferential loan program
(17) Agriculture promotion and assistance project
(18) Interest rate subsidies under special circumstances
(19) Farm Finance Concession Loan Program
(20) Victorian Agricultural Energy Investment Plan
(21) Victorian Regional Employment Fund Project
(22) Victorian Food Resources Funding Project
(23) Victorian regional buyer attraction project
(24) Capital Territory Commercial Energy and Water Project
(25) TechVouchers project in New South Wales
(26) Tasmania's advanced manufacturing innovation and
growth coupon system
(27) Western Australia State Innovation Coupon Project
(28) South Australia State Export Acceleration Funding Project
(29) South Australia Resource Productivity Assessment Project
(30) South Australia Regional Food Incentive Project
(31) Key regional brand support projects in South Australia
(32) Tasmania vineyard and orchard expansion project
(33) Sustainable Development Fund Project in the River Valley
Region of South Australia
(34) Murray River Sustainable Development Plan in South
Australia
Constructed value
Exported good
Profit (10%) $1.80
Grapes $10
Overheads $4.20
Selling costs $4
Export Price $20
Based on profits on domestic
sales
Actual Au sale price $20
Constructed normal value
Profit (10%) $2.8
Grapes $14
Overheads $8
Selling costs $6
Constructed Price $30.8
Based on “reasonable” prices
Dumping is 54%
Will China accept Australian information?
Insufficient information
In the barley case China found that insufficient information was
provided
It calculated normal value based on the export price of Australian
barley to Egypt
Market situation
Barley investigation made market situations allegations against
Australia
The issue was investigated, but no decision made on it
In an investigation against US N-propanol in July 2020 – China
made a market situation finding, but it did not affect the outcome
Injury
Injury claims based on limited information/assumptions such as:
• information about 4 manufactures;
• pricing of two categories of dry red wine
• assumes that Chinese produced wine and Australian wine is
interchangeable
More detailed information should be obtained in the investigation
Generally the information provided shows:
1. reduced market share
2. reduced profits
3. reduced revenue
Causation
Alleges direct price competition between Chinese and Australian
wines as:
• basic physical characteristics are the same
• sold via the same sales channels
• the same merchants buy and sell domestic and imported wine
• e-commerce has increased the impact of price differences
Causation
• Do Chinese domestic and imported wines
compete on price?
• It is up to Australian exporters and their
clients to put forward evidence of other
causes of the injury
• general decline in Chinese wine market in 2019
• customs duties on AU wine fell from 14% to 0%
under ChAFTA
• pricing of French / Chile / US / Italian wine
• market shift to better quality wines
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Responding to an investigation
General
If you have the opportunity – get involved
Failure to be involved or cooperate – all other exporter
rate – this is always the highest possible rate
• generally an average of the sampled exporter rates
• could be a fraction of the all other exporter rate
Small exporters – may not obtain an individual rate but
will get the residual rate:
• They will know the local industry
• What do they believe has caused the loss
• Will they participate as an importer
Alert your importing clients
China wine investigation
• Complete the Registration form by 6 September
• Basic contact details
• Export volumes
• Noting related parties
• Even small exporters should do this
• Contact your Chinese customers and obtain their views
• Identify and prepare your team – legal, accounting/finance, sales
• Identify Australian sales, Chinese exports and third country
exports of bottled wine during the review period
• Identify assistance received from Federal and State Governments
• Next steps depend on if you are included in the sample
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Risk management
Risk management
Complete the Registration form – for most exporters
this is all that will be required
Exports that arrive prior to securities
being imposed
Securities – If imposed, how long
are they in force
Contracts with customers – who will pay the duty if
imposed
Related party suppliers –
document arm’s length
arrangements
Can costs of production and SGA
be allocated per product line
How can we help
• Help with understanding the dumping system
• Lodgment of exporter registration form
• Coordination of response:
• internal coordination and review of legal / finance / selling response
• manage the relationship with Chinese lawyers
• assistance with completion of exporter questionnaire
• submissions on market situation / normal value / causation
• Work with Beijing DHH Law Firm – specialist in Chinese
investigations
