9 October 2019

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On 24 September 2019 the Australian Minister for Industry revoked anti-subsidy duties applying to a Chinese exporter of aluminium extrusions.[1] The outcome is a reminder that the rule of law holds sway over the policies of protection that are presently impacting heavily on regulators the world over. Its reasoning demonstrates the upward-trending importance of competition principles in deciding “trade rules” matters – the disciplines of anti-dumping, countervailing and safeguards.

Moulis Legal’s Charles Zhan and Macky Markar represented the Australian importer in the appeal procedure that led to the revocation of the anti-subsidy duties, known as “countervailing measures”. In this Trade Law Bulletin, they recount their experience of the case and the key messages arising therefrom.

Post-GFC wall of protection against imported aluminum

Aluminium extrusions are a key building material, used in commercial and residential construction in windows, doors and wall frames. Australia has 25% of the world’s reserves of bauxite, the main raw material for aluminium smelting. China produces about 50% of the world’s aluminium, and consequently supplies a large part of world demand for extrusions. The Australian extrusions market alone has a value estimated at over 1 billion AUD. Australia first introduced anti-dumping and countervailing duties on aluminium extrusions from China in late 2010. Since then there has been a flood of anti-dumping and countervailing procedures against the importation of these products into Australia, including the extension of the measures to exporters from countries like Malaysia, Thailand, Taiwan and Vietnam.

Two of the affected parties were Guangdong Zhongya Aluminium Company Ltd (“Zhongya”) and its Australian customer, Darley Aluminium Trading Pty Ltd (“Darley”). In the original 2010 investigation, Zhongya was found not to have underpriced the goods it exported to Australia in a comparative sense (compared to its home market price). But it was found to have benefited from a subsidy from the Chinese government, in the form of the benefit of purchasing aluminium ingots from State-invested enterprises (“SIEs”) at “less than adequate remuneration”. Zhongya’s exports were thereby exempted from dumping duty, but were subjected to a countervailing duty of 7.6%.

In reaction to the imposition of the duty, Zhongya stopped buying from SIEs. Instead, it began sourcing all its aluminium ingots from private entities in China. Over the period since 2010, through a series of reviews of Zhongya’s procurement of aluminum ingots and its costs, its countervailing duty rate dropped well below the negligible “de minimis” level. For exports from a developing country, the level is under 2%. Indeed, by mid-2018, the countervailing duty rate applicable to Zhongya’s exports was only 0.1%.

Despite that, the measures continued to be applied against Zhongya’s exports, with Darley always paying the duty on importation.

Australian industry again alleges underpricing against Zhongya

In early 2018 the then Australian Minister for Science, Jobs and Innovation asked the Anti-Dumping Commission (“the ADC”) to conduct a review of the duty rates (“Review 482”) for all Chinese exporters.[2] Significantly, the initiation of Review 482 coincided with the conclusion of a second anti-dumping investigation requested by the Australian industry, targeting all exports from Thailand and those exports from Chinese companies who were not subject to anti-dumping duties. The ADC terminated that investigation on 24 July 2018, finding that Zhongya’s exports were not exported to Australia at a price that was any lower than its price in China.[3]

Determined to bring an end to the cost and disruption of nine years of anti-dumping and countervailing “red tape”, and urged-on by its customer Darley, Zhongya returned “fire with fire”. It asked the ADC to consider revoking the countervailing duty as against Zhongya’s exports altogether, on the basis that Zhongya had stopped sourcing aluminium ingots from SIEs long ago, and therefore did not receive the 7.5% benefit that had caused the countervailing duties to be imposed in the first place.

On 9 May 2019, the ADC refused to revoke the duties, and instead determined a new countervailing duty rate for Zhongya, which had nothing to do with benefits received from SIEs, of 0.2%. The ADC argued that he measures should not be revoked because the subsidy margin had increased, from 0.1% to 0.2%; because Zhongya could go back to purchase from SIEs again; and because Zhongya’s goods were sold by Darley in Australia at prices that undercut the Australian industry’s prices by up to 7%.

De minimis rule not a bar to continuation of duties

Darley appealed the decision to the Anti-Dumping Review Panel (“ADRP”), on two grounds.[4] The first was that it was technically incorrect for the ADC to be satisfied that a 0.2% subsidy could cause a recurrence or continuation of the injury that the measure was intended to prevent. Darley argued that injury caused by a 0.2% subsidy benefit cannot be injury that the measure was intended to prevent, because 0.2% is well under the 2% statutory threshold and therefore it would not have been possible to impose a countervailing duty with respect to that small degree of benefit in the first place. The second ground was that there was insufficient evidence to support the finding that revocation of the duty could cause a recurrence or continuation of the injury, because the subsidy impact, as evidenced by the duty being only 0.2%, was so low.

The ADRP did not support Darley’s first ground argument. That said, it did not take kindly to the ADC’s assertion that Zhongya may recommence purchasing from SIEs again, finding that this was not supported by past and contemporary evidence which demonstrated a long period of procurement from private entities. The ADRP agreed that there was no commercial incentive for Zhongya to change its procurement arrangement, as this would trigger a bigger subsidy duty, making its products less competitive on the Australian market.

Nonetheless, the ADRP ruled that the legislation did not require a finding that subsidisation or dumping that is likely to continue or recur must be at or above the “actionable” threshold of 2% that applies in an original investigation. In the ADRP’s view, there is no necessary connection between the rule for imposing measures in an original investigation and the rule for continuing them in a revocation review.[5]

A 0.2% molehill meets a 7% mountain

But Darley did succeed on its second ground. Here the ADRP found that the effect of a subsidy (or of dumping, as the case may be) is still the most relevant question to consider in determining whether the imported goods would cause the injury to continue or recur, and that the effect must be material. Important in this consideration was the requirement, amongst others, not to attribute any injury effects caused by “restrictive trade practices of, and competition between, foreign and Australian producers of like goods” to the subsidised (or dumped) imports.[6] That competition included, in Zhongya/Darley’s case, a 7% price advantage in the Australian market which had nothing to do with dumping and of which only 0.2% could be said to arise from foreign government subsidies.

The ADRP expressed its views, including its reliance on World Trade Organization authority, as follows:[7]

101. Recalling the Commissioner’s material injury findings…, Capral had returned to profitability in the last two years of the investigation period, but it had not been able to increase its prices to “a desired price”. A likely reason for such inability was Zhongya’s dominant position with the Australian market as “a price setter”, one able to undercut Capral’s selling prices “by approximately 7% or higher”, such prices being less than both Capral’s USP and its NIP. Notwithstanding this level of undercutting, Zhongya’s exports were not dumped and were found to have benefited from a subsidisation rate of 0.2%.

102. The Commissioner’s analysis correctly identified the injurious effects of the subsidised imports, as it is the effect of the subsidised imports and not the subsidy or its quantum which is more often than not determinative. However, I recall that in US – Carbon Steel the Appellate Body recognised that it would be ‘unlikely’ that very low levels of subsidisation could be shown to cause ‘material’ injury. The Appellant Body’s view reflects the importance of the exclusion of other factors impacting upon the domestic industry from the injury and causation analysis and suggests that where very low levels of subsidisation exist additional focus will fall upon the non-attribution analysis.

103. The Commissioner was confronted with Zhongya’s selling prices in the market which undercut those of Capral. This difference exceeded what the Appellate Body referred to as “very low levels of subsidisation”. In such circumstances the impact of the subsidised imports was no longer determinative and other factors impacting upon the competition between Zhongya’ and Capral’s goods in the market became relevant considerations in the material injury analysis. The Commissioner did consider the conditions of competition existing between Zhongya and Capral when referencing the relativity between the prices at which Zhongya’s exports were sold to customers in Australia and Capral’s USP and NIP. However, the Commissioner did not go on to analyse the implications arising from this price relationship, notwithstanding that REP 482 had found “that overall measures have been effective in remedying injury from dumping and subsidisation, noting that for the majority of the injury period Capral has been profitable.”

In summary, the ADRP’s view is that where the alleged injury is merely an effect of fair competition, and does not come about as a result of the degree and effect of subsidies or of dumping, then the duty measure cannot be justified.

The ADRP therefore recommended to the Minister that the countervailing measure as against exports from Zhongya be revoked, a recommendation with which the Minister duly agreed.

Anti-dumping and anti-subsidy laws not isolated from competition principles

The ADRP’s finding sends a strong message at a time when the nerve endings of international trade are in a lot of pain. Comparative advantage – whether of countries or of private entrepeneurs – and open competition are fundamentally important concepts. Tenuous, unevidenced assumptions and vague possibilities cannot form the basis for adverse regulatory action against market participants. It is not the fact of subsidisation or underpricing that is determinative, rather it is their effect and materiality that counts.

The notion that the anti-dumping system is not an instrument of protection would not survive two seconds of debate in the Australian Parliament. However, law instructs that market regulation is about rules, and not sentiments.

As Nicholas J observed, in the Federal Court proceedings relating to the original investigation concerning aluminium extrusions, the purpose of the anti-dumping regime is not to blindly favour an Australian industry ahead of other Australian industries, or Australian consumers, or our trading partners:[8]

I do not agree with [the Australian industry] that the purpose of [the anti-dumping provisions] of the Act is “to protect Australian industry”. The purpose of Part XVB is far more complicated. It is apparent from the scheme of Part XVB that the legislature has sought to strike a balance, as the relevant international agreements no doubt seek to do, between various interests including not only those of Australian industries but also other WTO members and their own domestic industries, Australian consumers (in the broadest sense of that word) who may have an interest in acquiring imported goods at the lowest available prices and Australian exporters that supply their goods to other countries that are also members of the WTO.

The ADRP’s finding in the Darley review is a timely reminder of this important principle.

For more information, please contact Charles Zhan (+61 2 6163 1000 or 

Moulis Legal’s trade regulatory team handles WTO-related matters, export and import compliance, trade sanctions, and cross-border commercial arrangements. For more information please contact Daniel Moulis on +61 2 6163 1000 (

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.

© Moulis Legal 2019






[6]           Section 269TAE(2A), Customs Act 1901

[7]           ADRP Report No 104

[8]           Panasia Aluminium (China) Limited v Attorney-General of the Commonwealth [2013] FCA 870, at para 148