The Minister for Trade & Customs desires my opinion on the points raised in the following memorandum:

By direction of the Minister I am submitting for advice the question of whether dumping duty has been legally imposed and correctly collected on maize imported from South Africa.

Papers relative to the matter, including reports by the Tariff Board, are forwarded herewith as per schedule attached.

Maize originated in or exported from South Africa was ‘gazetted’ under section 4 of the Customs Tariff (Industries Preservation) Act 1921–22 on the 5th July 1923, operating on and after 21st June 1923.

Dumping duty at the rate of 7d. per cental has been charged and collected on all maize from South Africa which has arrived at a Commonwealth port since the 21st June 1923 inclusive.

Before ‘gazetting’ South African maize the Minister was satisfied, after inquiry and report by the Tariff Board, that maize was being sold in South Africa to importers in Australia at an export price which was less than the fair market value of the goods at the time of shipment, and that detriment was thereby resulting or would result to an Australian industry.

The Tariff Board’s first report to the Minister on this matter was dated 10th November 1922 and read as follows:

Many complaints have been made by Australian producers of Maize in regard to the competition of maize imported from South Africa which is underselling the Australian product. Information has been obtained from the South African Customs authorities which shows that the export price of South African maize is 7d. per cental lower than the domestic price in South Africa.

The Board therefore recommends that maize of South African origin to be gazetted under section 4 of the Industries Preservation Act.

Although the Minister approved the above recommendation of the Tariff Board it was not put into effect, as before action was taken to gazette same it was decided to defer the imposition of the duty. The Tariff Board on 1st December 1922 reported as follows:

In view of the serious position disclosed since this question was decided, and the special representations in regard to drought in New South Wales and Queensland, the Tariff Board recommends that the dumping duty on imported maize be not imposed.

On 4th April 1923 the Tariff Board again reported on this matter as several deputations had waited on the Minister and many representations had been made to the Department urging that the dumping duty be imposed. The Tariff Board concluded the report as follows:

After closely reviewing all the facts it does not appear advisable to further raise the already high price of maize, viz: 7/- per bushel, but it is suggested that the matter might be left for the Tariff Board to keep in touch with prices and report further should it be found that owing to heavy importations from South Africa the price of maize should be brought down below a reasonable amount.

This recommendation was approved by Cabinet.

The Tariff Board kept in touch with the market and on 19th June 1923 reported that the export price of maize in South Africa had fallen to ‘3/6 to 3/8’ per bushel, f.o.b. and at such a price it could be landed and duty paid in Australia for about 5/- per bushel, or possibly just under 5/- per bushel, and in view of these prices and the fact that bountiful rains had fallen over a large grazing area, thus restricting handfeeding of stock, the Tariff Board recommended the imposition of the dumping duty.

From the above it will be seen that when South African maize could be landed and duty paid for about 5/- per bushel, the Tariff Board recommended that Australian growers be protected under the Industries Preservation Act.

The actual price at which detriment results to an Australian industry may be hard to determine, but the Act places the decision with the Minister after inquiry and report by the Tariff Board and provides that ‘if the Minister is satisfied that detriment may result to an Australian industry’ the goods may be gazetted.

Particulars regarding a reasonable price of maize in Australia had been obtained. Nine leading growers of maize in New South Wales submitted to the Prime Minister that in their opinion a price of 6/6 to 7/- per bushel was necessary, and information furnished of the cost of production showed that on a crop of 70 bushels to the acre the maize produced cost 5/4 per bushel.

Information has been supplied by the Council of Agriculture, Brisbane, to the effect that there are thousands of tons of maize available in Queensland and this furnishes good reason to believe that the sale of South African maize at a lower price than the market price for Australian maize would be detrimental to the industry.

As to the rate of dumping duty—this was fixed by the Department at 7d. per cental—section 4 of the Customs Tariff (Industries Preservation) Act provides that the dumping duty in each case shall be the sum which represents the difference between the fair market value of the goods at the time of shipment and the export price.

On the 26th September 1922 the following cable was sent to the Comptroller of Customs, Capetown:

Please telegraph domestic wholesale price also export price maize at first July, August, September.

to which a reply was received from the Customs, Pretoria, on 4th October, 1922, reading:

Maize per bag 203 lbs. gross export f.o.b. Durban 1st July 11/10 August 12/1 September 12/7 domestic price including delivery charges 13/- 13/3 13/9.

It will be seen that the difference is 1/2 per bag (or 7d. per cental) in each instance.

The reason for the export price being lower than the home consumption price in South Africa is given in a cable dated 1st December 1922, from the Prime Minister, South Africa, to the Prime Minister, Melbourne, which reads inter alia as follows:

Difference is entirely due to lower railway rates for export which are credited to overseas buyer. For example domestic price of No. 2 grade maize in Johannesburg which is largest consuming market in Union of South Africa was 11/9 per bag on 1st September and in Durban 13/9 per bag. Railway rates from Transvaal to Durban on maize for local consumption is £1/7/8 per ton of 2,000 lbs. and 10/- per ton of 2,000 lbs. when for export. Difference between railway rates at Durban is therefore just over 1/9 per bag, which more than accounts for difference between domestic and export price in Durban.

It was clear that owing to the low railway freights in South Africa for maize for export the export price at port of shipment was consistently less than the home consumption price at the port concerned, and it was also clear that the difference in the export and home consumption prices did not represent the actual difference in the amount of railway freights, but that the exporters of maize were ‘striking an average’ or by some other means fixing an export price which was regularly 7d. per cental less than the home consumption price.

It was accordingly decided to make 7d. per cental the amount of dumping duty to be imposed in every case.

Since then the invoices from South Africa have shown varying amounts as the difference between the export and consumption values, but the invoices have not been regarded as satisfactory evidence of home consumption values especially in the matter of the amount of inland freight included in the declared values, and the Department has on the information received from the Prime Minister of South Africa and from the South African Customs Department, demanded a dumping duty at the rate of 7d. per cental in all cases.

Several applications for refunds of dumping duty have been lodged by importers of South African maize, legal advice has been taken by at least some of the importers, and they are threatening to take proceedings.

From the above memorandum it appears that the appropriate procedure, precedent to the imposition of dumping duty under sub-section (2) of section four of the Customs Tariff (Industries Preservation) Act 1921, was followed.

The ground upon which the Minister formed the opinion which is the basis of action under sub-section (1) of section four is, therefore, not open to question.
The amount of the dumping duty is specified in sub-section (3) as being in each case the sum which represents the difference between the fair market value of the goods at the time of shipment and the export price.

It is necessary, therefore, to ascertain the fair market value and export price in relation to each shipment or parcel of maize imported into Australia, in order to ascertain the correct amount of dumping duty to be imposed thereon.

‘The export price’ of goods exported to Australia is defined as meaning the price at which the goods are sold by the exporter to the importer in Australia (including the free on board charges in the country of export).

‘The Fair Market Value’ of goods is defined as meaning the fair market value of the goods or of goods of the same class or kind, sold in the country of export, in relation to which the expression is used, for home consumption in the usual and ordinary course of trade plus free on board charges in that country, but not including any excise duties payable in that country.

With regard to the calculation of ‘Fair Market Value’, it appears that a difficulty has arisen owing to differentiation in railage charges on maize for export and maize for home consumption. The fact that the export price of the maize is less than the fair market value at the time of shipment is due solely to the fact that railage charges on maize for export are less than on maize for home consumption.

If the fair market value is the same throughout the Union then the Fair Market Value for the purposes of the Act is the home consumption selling price plus charges, from the place of sale to the place of export, incidental to placing the particular goods on board ship, and, in that case, those charges, so far as railage is concerned, are those applicable to goods for export.

If the selling price for home consumption varies throughout the Union, then that price is taken, for the purposes of the Act, which is the selling price where the contract is made and, if that place is the port of export, the only additional charges to be added, in order to ascertain the Fair Market Value, will be those for putting the goods on board but the price will have included railage at rates applicable to maize for home consumption.

I think it better to advise on the legal interpretation of the sections involved leaving it to the Department, after ascertaining the facts of each case, to apply the principles contained in the advice.

[Vol. 20, p. 274]