Originally published by Lloyds List Newspaper
As the numbers and size of dumping and countervailing measures have increased here and overseas so has the importance of the expertise to identify and manage the risks associated with those measures. That expertise needs to be held by exporters, importers and their service providers such as freight forwarders and licensed custom brokers as each of them face significant liabilities from transacting with goods subject to the measures. Unfortunately, at the same time that as those liabilities and risks increase, so does the pressure to avoid those measures. There is ample evidence both here and overseas of successful prosecutions of parties who have taken deliberate fraudulent steps to avoid measures.
It needs to be kept in mind that the liabilities can be extreme, including significant financial penalties as well as possible jail time. It also needs to be kept in mind that parties willingly engaging in this manner of fraud in the export of goods from Australia to the US (for example) could face prosecution for a variety of offences both here and in the US. Which is not a particularly attractive proposition.
The issue truly has global significance. It has recently been reported that the United States has proposed that WTO members discuss in greater detail the problem of dumping duty evasion. According to the United States submission, the United States has witnessed a dramatic increase in actions designed to help importers and/or exporters avoid dumping duties, even where those involved in such evasion activities could face substantial civil and criminal penalties from customs authorities around the world.
In our jurisdiction, the issues of dumping and countervailing measures, the increased complexity of the regime, the introduction of anti-circumvention provisions and the incidents of alleged fraudulent action have pushed to the fore. As many would be aware, there have been a number of recent media releases from the Australian Customs and Border protection Services ("Customs") referring to actions taken to address concerns on supply chain integrity. Many of those concerns refer to companies which may be seeking an unfair advantage by avoiding payments of duties and taxes on certain imported goods. The recent focus seems to be on companies alleged to be seeking to obtain a financial advantage by deception through the alleged falsification of origin on imported goods to avoid the imposition of dumping and countervailing measures. Those under suspicion include importers, freight forwarders and their officers.
So, what are the factors contributing to these problems?
- One factor is that the measures are often imposed after exporters and/or importers have made a decision to start trading in Australia and after the parties have already entered into agreements for the purchase and subsequent sale of goods subject to the measures. The sudden imposition of dumping or countervailing measures after agreements have been entered into will add significant additional costs to the undertaking of business regarding those goods. Indeed, it may make the purchase or supply of those goods to be totally uneconomic. Faced with that situation, many exporters and/or importers may resort to means to avoid an imposition of those measures.
- It’s a very complicated area in which the law and practice changes rapidly. Affected parties often do not have the expertise or means to address proposed measures when, ideally, overseas exporters and local importers should become engaged in any investigation and take steps to defend the imposition of measures altogether or to minimise their impact. Further, the failure to respond to an investigation could lead to the allegation that an exporter is a" non-cooperating exporter" with the likely imposition of higher levels of dumping or countervailing measures.
- Determining which goods are subject to dumping and countervailing measures can be a difficult task. The Dumping Commodities Register established by the Anti-Dumping Commission ("ADC") gives some details of goods subject to such measures and the ADC's website also refers to current investigations which may lead to the imposition of such measures in the future. It is also worth paying attention to the types of measures applied to goods overseas as those measures may well then be sought in Australia. However, there still remains the issue of clarifying goods to determine if they are subject to measures.
- The introduction of a circumvention measures makes the task of identifying goods subject to measures more difficult. Anti-circumvention is different to conduct involving fraud or reckless misstatements to avoid measures. It works by imposing additional duty on goods in certain circumstances even if the measures do not otherwise apply to those goods. The application of a circumvention measure depends upon the possible application of one of the prescribed "circumvention" circumstances under the legislation. This could arise from a change to a supply chain to "hide" the origin of goods, to movement of part of goods to a third country or assembly to "hide" origin to circumstances where exporters and their Australian importers fail to pass on the measures by way of an increase in the local prices for the goods subject to the measures. The last circumstance was found to have occurred in recent investigation into alleged circumvention of measures for aluminium extrusions although the decision of the ADC is now subject of appeal to the Anti-Dumping Review Panel.
- The regulatory regime is subject to significant legislative and practice changes. Not only does this create uncertainty regarding the regime it may also create liability to measures where none had previously existed. For example, the Government recently passed a regulation creating a new type of "circumvention" event where additional measures can be imposed. That arises if the goods had only been "slightly modified" to avoid the imposition of such duties when the goods serve the same purpose and effect as the goods actually subject to such dumping and countervailing measures. This could have the impact of applying such dumping and circumvention measures to goods even though they are not within the category of goods described as subject to the measures. The exporters, importers and service providers then need to "guess" as to whether the goods have been "slightly modified" in a way that attracts the measures.
- The risks for service providers handling such goods are significant. In recent times, freight forwarders and licensed customs brokers have received search warrants from Customs regarding their involvement with such goods. Fraud-based proceedings in relation to evasion of dumping duties have been commenced against a freight forwarder. However, liability goes significantly beyond that point. Even putting to one side criminal liability under the Commonwealth Criminal Code or section 234 of the Customs Act 1901 ("Act"), there is still the potential for liability under section 243T of the Customs Act 1901 ("Act"). The latter section could impose penalties on corporate importers or their licensed customs brokers on a strict liability basis if they incorrectly declare that goods are not subject to dumping or countervailing measures even if their errors were inadvertent. Where Customs believes that an offence has been committed under section 243T of the Act, then Customs could issue an infringement notice against those corporations with a penalty of 75% of the dumping or countervailing duty which had been underpaid. Given that the quantum of duties recoverable for dumping and countervailing is significant, that could lead to a massive penalty associated with an infringement notice to an exporter, importer or licensed customs broker which could be hard to defend given the limited remedies available in response to an infringement notice. Individuals could face a penalty of 25% of the duty underpaid under section 243T. Plus the duty is still payable! Even then, payment of the penalty in the Infringement Notice is not the end of the matter. The involvement with action could cause action to be taken against the licence of a licensed custom broker.
All things considered, service providers need to exercise extreme caution. Service providers need to be aware of the goods which are subject to measures and how those measures change over time including changed or new circumvention measures. Terms and conditions of trade should include indemnities from liability caused by exporter or importer clients. Service providers should not be associated with business intended to avoid or evade dumping or countervailing measures. Further, if clients suddenly change the alleged origin of goods or description of goods being imported that should be questioned if it means that measures are suddenly claimed not to be payable. It is also in everyone's interest to ensure that exporters and importers affected by new investigations which could lead to the imposition of measures should seek advice and take all appropriate steps to protect against or minimise the effect of such measures during the investigation.
In the event of doubt, exporters, importers and their service providers need to excise extreme caution with goods which could be subject to dumping or countervailing measures to ensure correct declarations are made and correct duties are paid. Seek advice from Customs and the ADC if there is doubt. Use the mechanisms to seek exemptions from measures or to seek final and specific levels of measures if they are appropriate to reduce or eliminate measures. The penalties and adverse consequences for errors, (whether inadvertent or reckless) or for fraud significantly outweigh any perceived short term benefits. After all – who wants to spend more time with us lawyers than you have to!