INSIGHT: Australia Dumping Duties—How to Manage an Unexpected Demand

While the trade war between the U.S. and China deservedly attracts the news headlines, it would be wrong to think that it is the only instance of increasing duties on imported goods. From an Australian perspective, duty increases are coming in the form of dumping duties. These increases are arriving in three forms:

• an increased range of products being affected;
• higher rates of duties on those goods affected; and
• an extremely aggressive compliance approach by the Australian Border Force.

As an example, in the 2019 the Australian government has imposed dumping duties of over 100% on aluminum extrusions and steel pallet racking exported from China.

When faced with an unexpected dumping duty assessment, importers have a number of options, such as:

• arguing that their particular imports are not the goods described in the dumping duty notice;
• arguing that the relevant goods fall to a tariff classification that is not subject to dumping duties;
• applying for a dumping duty assessment, which may result in a lower rate of dumping duty.

It is this last option which will be discussed.

Dumping Duty Assessment

The important difference between a dumping duty assessment and other methods of contesting the duty is that it does not involve arguing that the goods are not covered by the dumping duty notice, but rather is a claim that the rate is too high. It is unlikely to result in a 0% dumping duty rate, but it could see a rate near 100% significantly reduced. Further, it can provide a more ongoing solution, meaning the importer does not need to alter their entire supply chain.

Isn’t the Dumping Duty Rate Set in Stone?

Dumping duty rates are set following a dumping duty investigation. However, these rates are based on historic information and only apply to the exporters that participated in the investigation. Under World Trade Organization (WTO) rules, Australia is only permitted to impose dumping duties to the extent that the relevant export was dumped. The dumping duty rate determined in the original investigation may not be accurate for subsequent exports and is especially unlikely to be accurate for an exporter that did not participate in the original investigation.

So that it accords with its WTO obligation, Australia has a system of imposing dumping duty based on the investigation outcome at the time of import; however, it allows importers to apply for an assessment of the actual dumping duty that applied to their imports. This involves the Anti-Dumping Commission (ADC) reviewing the dumping margin for all imports by the importer during a relevant period and determining the actual dumping margin. If the rate is lower, the importer will receive a refund of the difference. If the rate is higher, no additional duty is payable.

To carry out the assessment the ADC needs information about the exporter’s domestic sales and costs of production—an intrusive and costly process. Realistically, an importer can only successfully go through the assessment process with the full assistance of the overseas supplier. This is most likely to occur with related parties. However, third party suppliers may be willing to assist where the commercial relationship is strong and/or where they have been through an assessment process previously.

With the help of dumping duty consultants, the parties should be able to undertake a high level review of the data and determine the likely duty refund of going through an assessment process. This high level review can avoid the time and cost of a full assessment where the costs do not justify the likely benefits.

Time to Make an Application for Assessment

Unfortunately, the right to apply for a dumping duty assessment is time barred. A dumping duty assessment must be made within six months of the end of the relevant “importation period.”

Each six-month period following the imposition of dumping duties is an “importation period.” For example, if dumping duties were first imposed on January 1, the first importation period would be January 1–June 30. An application for a duty assessment for imports during that importation period would have to be lodged by December 31.

A constant headache for Australian importers has been the approach of the ADC to what it deems to be incomplete duty assessment applications. The position of the ADC is that any deficiencies in the application for a dumping duty assessment cannot be cured after the last date for the lodgement of the application. This is a very harsh outcome as these deficiencies may not be known until after the ADC has reviewed the application. Further, once known, the deficiencies may be easy to cure.

In a perfect world, the application for a dumping duty assessment would be lodged a few months before the due date, allowing time to deal with any issues raised by the ADC. However, it is often the case that a dumping duty assessment comes as a surprise and the importer may be suddenly faced with a looming dumping duty assessment due date.

ADC Position Considered by Court

The strict position of the ADC was considered by the Australian Federal Court in Downer Utilities Australia Pty Ltd v Commissioner of the Anti-Dumping Commission [2019] FCA 1190. This case concerned an application for a duty assessment required to be lodged by January 2, 2018 and which was lodged on December 29, 2017. The lodgement was incomplete as not all required imports were listed and some listed figures were not totaled. The missing import was of an immaterial amount and was known to the ADC.

The failure to total the relevant figures was due to a problem with the ADC electronic form. The representative for Downer tried calling the ADC regarding the problems with the ADC form; however, due to the Christmas and New Year holiday period, the ADC did not respond to the query.

The legislation gives the ADC 20 days to review an application and form a view as to whether or not it is deficient. The issue in this case was, if a deficiency was identified in that 20-day period, did the ADC have an obligation to inform the applicant and allow them to correct the deficiency?

The ADC argued that the 20-day period was merely for it to screen the application and that it did not have an obligation to inform applicants of deficiencies, and even if it did, applicants could not cure those deficiencies after the due date.

The Court held that:

• deficiencies could be cured in the 20-day screening period; and
• the ADC had an obligation to inform Downer of the deficiencies (which were minor) and allow them the opportunity to correct these in that 20-day period.

The ADC’s rejection of the application in the circumstances meant that Downer was denied procedural fairness and Downer was able to have the decision set aside.

Will the ADC Change its Approach?

The decision is important, as previously the ADC has been very strict in its view that deficiencies could not be cured after the initial due date. Applicants who have had applications rejected due to deficient applications may have been denied procedural fairness. The government has not appealed the decision.

Hopefully the ADC will take on board the findings of the Federal Court and adopt a fairer approach to processing dumping duty assessment applications. It is reasonable to argue that the six-month time frame on applications is unfair given that retrospective demands for duty can go back four years. This means that where an audit results in a surprise dumping duty bill, only the most recent imports can be subject to an assessment.

Given this disparity, the ADC should not be unfairly administering the six-month time frame. Specifically, the ADC should not be opportunistically using minor deficiencies to reject applications and then hiding behind the six-month time limit. The Federal Court has made clear that the ADC must notify the applicant of the errors and allow them the opportunity to correct those errors.

Planning Points

Importers facing a high dumping duty bill should consider the following:

• Are there any credible arguments that the dumping duty does not apply based on the identity of the exporter, the nature of the goods or the tariff classification? Such issues can be considered in parallel with a dumping duty assessment.
• If it is likely that the goods are correctly subject to dumping duty, assess the amount of that dumping duty.
• Determine the due date for a dumping duty assessment application. This information can be found on the ADC website.
• Speak to the exporter about whether they will cooperate with a dumping duty assessment.
• If the exporter is willing to assist, the importer and exporter should work together to determine a likely outcome of a dumping duty assessment application. The previous investigation report and associated documents will provide a good guide to the ADC’s methodology to calculating the dumping margin. The size of a likely refund can inform whether there is any merit in proceeding with a dumping duty assessment.
• If the importer plans to proceed with an assessment, the importer should obtain a list of imports during the importation period. Not listing all imports can be a reason for the ADC to reject the application.
• If possible, lodge the assessment application well before the due date. Importers have six months in which to lodge an application. Lodging early will allow the ADC time to notify the applicant of errors prior to the due date enabling a compliant form to be lodged.

A dumping duty assessment is not the answer for all importers. However, it should be one of the options that is considered. As it is time sensitive, this option should be considered as early as possible.

Russell Wiese is a Partner/Principal with Hunt & Hunt Lawyers, specializing in customs and global trade.

The author may be contacted at: rwiese@huntvic.com.au

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.