Three issues in setting Customs tariffs

1
Three issues in setting Customs tariffs

• Classification
• defining categories of objects
• Valuation
• calculating value of object
• Rate
• maxima bound under GATT Art II

2
Classification

• Many possible levels of specificity
• Unless there is uniformity of classification,
  GATT obligations are easily subverted
• World Customs Organisation
• Harmonised Commodity Description and Coding
  System 1983 (the Harmonised System)

3
Classification in Australia

• Customs Tariff Act 1995 (Cth)
• The Big Book of Everything
• Rules of Interpretation in Schedule 2 are from
  the Harmonised System
• How to deal with unfinished products,
  combinations, sets, etc
• Essential character

4
Valuation

• GATT obligations are easily subverted by
  protectionist systems of valuation
• American Selling Price the market value of
  domestically-produced goods of the same kind
• GATT Valuation Code in WTOA
• Positive or notional
• Positive uses invoice price as starting point
• Notional calculates hypothetical market value

5
Valuation

• GATT Valuation Code allows use of either FOB or
  CIF price
• Australia uses FOB value
• Calculation of transaction price
• Possible for parties to manipulate FOB price to
  reduce duty, especially if sale is CIF

6
Dumping

• Art 2.1 of Agreement on Implementation of Article
  VI of the GATT 1994
• A product is to be considered as being
  dumped, ie introduced into the commerce of
  another country at less than its normal value, if
  the export price of the product exported from one
  country to another is less than the comparable
  price, in the ordinary course of trade, for the
  like product when destined for consumption in the
  exporting country.

7
Reasons for dumping

• Predatory dumping to drive producers in the
  target country out of the market
• Economic dumping to take advantages of
  economies of scale in the market in the
  producers own country

8
GATT does not outlaw dumping per se

• Art VI.1 GATT
• The contracting parties recognise that
  dumpingis to be condemned if it causes or
  threatens material injury to an established
  industry in the territory of a contracting party
  or materially retards the establishment of a
  domestic industry.

9
Response to dumping

• GATT permits imposition of an anti-dumping duty
  equal to the dumping margin - Art VI.2
• Agreement on Implementation of Article VI of the
  GATT 1994
• In Australia, Customs (until recently,
  Anti-Dumping Authority), operating under the
  Customs Tariff (Anti-Dumping) Act 1975 (Cth)

10
Key provisions of the implementation agreement

• Art 2.4 fair comparison at the same level of
  trade, normally at the ex-factory level, and in
  respect of sales made as nearly as possible at
  the same time

11
Key provisions of the implementation agreement

• Art 3 how injury to domestic industry is
  determined
• positive evidence
• objective examination of (a) volume of dumped
  imports, and (b) impact on domestic producers

12
Key provisions of the implementation agreement

• Art 4 definition of domestic industry
• domestic producers as a whole, or a majority of
  them
• excluding domestic producers related to the
  dumping producer

13
Key provisions of the implementation agreement

• Annex II, para 1 provision of information
• if not provided by interested party,
  investigating authority will be free to make
  determinations on the basis of the facts
  available including those contained in the
  application for the initiation of the
  investigation by the domestic industry
• ie, commercially-sensitive information, so
  confidentiality an issue

14
Countervailing duties

• Protectionist retaliation against impermissible
  export subsidies under Art VI
• Agreement on Subsidies and Countervailing
  Measures
• Annex 1 Illustrative List of Export Subsidies