Safeguard Measures – New Powers for the Anti-Dumping Commission

The Australian Government has announced that the responsibility for carrying out safeguard investigation will be transferred from the Productivity Commission to the Anti-Dumping Commission (ADC), This is a significant move that increases the likelihood of wide ranging protectionist tariffs with potential consequences for businesses that rely on imported goods.

What are safeguard measures?

Under WTO rules there are broadly 3 types of legal trade remedy measures that can be imposed.

• Anti-dumping duties – imposed when imports are sold at unfairly low (dumped) prices.

• Countervailing (anti-subsidy) duties – imposed where foreign subsidies give exporters an unfair advantage.

• Safeguard measures – temporary measures to protect local industry against a sudden, unforeseen surge in imports.

 

Safeguards are intended to be a temporary import measure imposed to address an unforeseen surge in imports of a product that is causing or threatening to cause serious injury to a domestic industry. Safeguards do not attempt to address unfair trade practices, but rather address the consequences of an unforeseen surge in imports. This means that there is not an inquiry into whether goods are being dumped.

 

Where imposed, safeguard measures generally apply to all goods, regardless of the country of origin. There can be exceptions for low volume exports from developing countries. There are also exemptions under some free trade agreements. For instance, Australia will not impose safeguard measures against goods of either New Zealand or Singaporean origin, and can exclude goods of either US or Thai origin if they are not the source of the injury.

 

Safeguard measures will initially be in place for 4 years and can be extended for a further 4 years.

 

How are safeguard measures different from dumping duties?

There are 4 major differences between dumping duties and safeguard measures.

1. Dumping duties are based on the price of the goods and there is a need to prove goods are sold at an unfair (dumped) price. By contrast, safeguard measures are based on the volume of goods and the suddenness of the increase.

2. Dumping duties must be targeted at specific countries. Often for Australia this is China. Safeguard measures generally apply to all countries.

3. There is a system for the granting of exemptions from dumping duties, especially where there is no local manufacturer of a particular good. There are no legislated exemptions for safeguard measures.

4. Because the measures are not based on proving dumping of a particular good, safeguard measures tend to have broad descriptions. For example, while a dumping measure may apply to a narrowly defined steel tube, a safeguard measures may apply generally to all steel tubes. Practically, this means that safeguard measures can be imposed over categories of goods that would not be suitable for a dumping duties investigation.

 

Why does the shift to the ADC matter?

The ADC is a trade remedies body whereas the Productivity Commission had a much wider scope. In past safeguard investigations, the Productivity Commission took a wide view on the causes of injury to the Australian industry and did not make finding that injury was caused by a surge in imports. Further, as a general premise, the Productivity Commission must take into account the benefits / costs of a measure on the entire Australian economy.

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The whole of economy approach of the Productivity Commission has meant that there have been very few Australian safeguard inquiries.

 

By contrast, the ADC is a specialist trade remedies body focused on protecting Australian manufacturers. It has a long record of recommending high tariffs in anti-dumping matters, particularly on steel and aluminium imports. Importantly, the ADC does not weigh up the wider economic impacts or ask whether a measure is in the national interest.

 

The shift of safeguard powers to the ADC will no doubt make the effort of applying for a safeguard inquiry much more appealing.

What’s next?

It is likely that legislation will need to be passed enabling the ADC to carry out safeguard inquiries. Australia should also notify the WTO of the new system.  If the ADC subsequently commences a safeguard inquiry, there will be an opportunity for interested parties to make submissions. For importers, early involvement will be critical to influencing the outcome. Key issues to address may include:

• Whether factors other than imports caused the injury to the local industry;

• Whether the proposed product scope is too wide;

• Whether there has been a sudden and unexpected surge in importations of the good;

• If safeguard measures are to be made, what particular measures are appropriate (quota, floor price, tariff).

 

Too often interested parties only take action once a decision has been made and duties imposed. By this time, it likely be too late to influence the outcome.

Key Takeaways

• Safeguard powers are moving from the Productivity Commission to the ADC, a more protectionist body.

• Safeguards are broader than dumping duties, often applying across all countries and wide product categories.

• Importers face increased risk of sector-wide tariffs or quotas in future safeguard inquiries.

• Early engagement is essential – businesses should act as soon as an investigation is announced.

 

Please contact us to better understand safeguard measures and how they may affect your business.