EXPORT MARKET DEVELOPMENT GRANTS BILL 1997 Explanatory Memorandum

Commonwealth of Australia Explanatory Memoranda

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EXPORT MARKET DEVELOPMENT GRANTS BILL 1997

1997

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

EXPORT MARKET DEVELOPMENT GRANTS BILL 1997

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Trade, The Hon Tim Fischer)

80627 CAt. No. 96 5918 8 ISBN 0644 497009

EXPORT MARKET DEVELOPMENT GRANTS BILL 1997

PURPOSE AND OUTLINE OF THE BILL

The purpose of this bill is to create a revised Export Market Development Grants Act which simplifies the structure and improves on the readability of the current Export Market Development Grants Act 1974, increases focus on assistance to small to medium enterprise, and places an upper limit on the cost of the scheme.

The bill is structured to group like matters and to reduce the need to cross reference within the bill. The core provisions of the bill are covered by parts three to seven. The bill in total comprises 10 parts.

Part 1 - Preliminary

This part establishes the title and object of the bill and the commencement date of provisions in the bill. The Act created will be known as the Export Market Development Grants Act 1997, commencing on 1 July 1997. The provisions of the bill apply from 1 July 1996. The object of this bill is to increase benefit to Australia through expanded exports by way of the limited reimbursement of some promotional expenses.

Part 2 - Entitlement to grant

Part 2 very broadly outlines the path to be followed through the bill to achieve entitlement to a grant. The applicant must: be an eligible 'person', refer part 3; have incurred eligible expenses broadly covered by part 5; and, have applied for a grant in the manner set down under part 7. Grant entitlement is then calculated under the provisions of part 6, which takes account of the various thresholds imposed by the bill, for example, the 50% rule, the $15,000 floor, the export performance test, and the $200,000 annual grant limit.

Part 3 - Persons eligible for a grant

Part 3 is in five divisions as follows; a general description of who may apply for a grant and the rules governing their eligibility, what comprises eligible export earnings for various types of claimant, insolvency and who is affected, convictions and who is affected, and registration and grants entry testing for first time claimants. An eligible applicant is a solvent Australian individual, company, partnership or co-operative, or a body especially approved by Austrade. They must have a reasonable chance of export success. Certain convictions under the Crimes Act 1914 relating to fraud and dishonesty and where a person directly, or by aiding or abetting another person, causes any commonwealth or territory law to be broken, preclude eligibility. Income for the relevant grant year must not exceed $50 million and export earnings must not exceed $25 million. First time applicants are required to pass a grants entry test and the general grant limit is eight per applicant. There is provision for additional grants with respect to "new markets".

Part 4 - Eligible products

This part defines what is an eligible product. Eligible product will fall under one of four broad categories; goods, services, intellectual property, or know-how. Australian content rules are defined - nominally 50% Australian content with provision for goods made outside of Australia where they include Australian components. Eligible internal services and eligible tourism services are prescribed in regulations. Broadly, all services provided outside Australia are eligible provided that they are a legal activity.

Part 5 - Eligible expenses

This part is in three divisions. Division 1 sets down a number of matters fundamental to the eligibility of expenses: they must be incurred by the applicant in the grant year, eligible expenditure must exceed $20,000 in the grant year; persons who have not previously received a grant may add the previous years 'eligible' expenses to those of the grant year; eligible expenses of approved joint venture are limited to those of the approved project.

Division 2 describes the types of promotional activities and expenses claimable under the scheme. There are six general areas of eligible expenditure: overseas representation, overseas marketing visits, communications, free samples, trade fairs and advertising, and short term consultancy. Expenses in relation to overseas representatives is limited to $200,000 in any one year. Airfares may be claimed in respect of only the first two grants, the exception being expenses of overseas representatives. Accommodation, entertainment and sustenance expenses are not directly claimable. Two hundred dollars per day to a maximum of 21 working days per overseas trip may be added to eligible expenses. All expenses are subject to considerations of reasonableness. There are 17 areas of expenses excluded from eligibility. These relate to; capital expenses, expenses incurred when not an Australian resident, direct trade with New Zealand, trade with sanctioned countries, other Austrade schemes of financial assistance, payments received for services, expenses disclosed subsequent to lodgement of application, taxes, sales related expenses, the general eight grant limit and "new markets", payments to approved trading houses, non arms length expenses of approved trading house, limits on certain expenditure in respect of approved joint venture, trustees of trust estates, intellectual property and non arms length companies, illegal activities, and "X"-rated films.

Division 3 defines the incurrence of expenses. For EMDG purposes an expense is not incurred until it is acquitted by the applicant. Acquitted includes actually paid or set off against monies owing to the applicant. Expenses in relation to goods and services not provided to the applicant by the conclusion of a grant year are taken not to have been incurred.

Part 6 - Amount of grant

Part 6 comprises four divisions and sets out how a grant is calculated. There is an annual cap on funds available for grant payments. Partly because of this there are several stages of calculation involved in the determination of the amount of grant actually payable to an applicant. Division 2 provides the method for the calculation of a "provisional grant amount". For applicants who have received less than two grants under the EMDG scheme, their "provisional grant amount" is assessed eligible expenses less $15,000 divided by two (a 50% grant rate). Where these applicants did not claim any amount for communications expenses, the calculated grant is increased by 3%. For the third or subsequent grant, the grant is subject to possible limitation by an export performance test. These provisional grants may not exceed a percentage of export earnings achieved in the grant year. For the third grant the limit is 40% of export earnings. The percentage declines to 5% of export earnings for the seventh and subsequent grants. The provisional grant amount for all applicants other than approved trading houses is $200,000. The approved trading house limit is $500,000. Company groups are limited to a maximum combined annual grant payment of $250,000.

Division 3 provides the method of calculation necessary to keep total grant payments within the annual funding cap. The method incorporated in this bill allows for smaller grants to be paid immediately upon assessment, and for larger grants to be paid in two stages, one immediately upon assessment and a final payment when the balance of funds remaining is known.

Division 4 provides for the determination of the amount of the initial payment ("initial payment ceiling amount"), the point in time each year when the calculation of remaining funds takes place ("balance distribution date"), and the factor to be applied to all outstanding grant entitlements ("payout factor").

Part 7 - Application for, and payment of, grant

This part comprises three divisions. Division 1 covers the requirements for the lodgement of applications. Austrade provides pro-forma application documents but applicants may use their own forms provided they are approved by Austrade. Applications must be received by Austrade within five months of the end of a grant year. Austrade has the power to seek further information from applicants, "associate persons", and "export market development grants consultants", and to request a search of criminal records.

Division 2 prevents the processing of an application where its preparation is assisted by an "export market development grants consultant" or persons under the direction of such a consultant, where these persons have been convicted of certain offences related to fraud or dishonesty. The applicant has the right to lodge a fresh application.

Division 3 provides for the payment of a grant. Except where a request for additional information has been refused or a check of criminal records has been refused, Austrade must assess all applications and determine the amount of grant payable. Grant or part grant payments up to the level of the "initial payment ceiling amount" must be paid as soon as is practicable. Payment of a grant will not be made to an applicant who is not at the time immediately prior to payment a resident of Australia, or where, between the time of assessment and the time of payment, the applicant incurs an outstanding "disqualifying conviction" or falls under insolvency administration.

Part 8 - Miscellaneous

Part 8 comprises nine divisions covering; special approvals by Austrade, rearrangement of business circumstance, appeal rights of applicants, accreditation of export market development grants consultants, guidelines under the bill, conduct by directors, employees and agents of applicants, repayment of grants, and the funding of the administration of the scheme and the power to make regulations.

Division 1 provides Austrade with the power to approve (give applicant status to) 'persons' who would not otherwise be eligible to apply for a grant. There are three 'approved persons' - approved body, approved joint venture and approved trading house. An approved body is generally an organisation established with group assistance/ public purpose in mind and who does not own an eligible product. Approved joint venture is a group of 'persons' who have come together for a specified project or purpose. Grants paid to approved joint venture do not affect the individual members ability to apply for a grant in their own right. A 'person' may be a member of no more than three approved joint venture at any one time. Approved trading house status is usually afforded to larger experienced export organisations for the purpose of assisting the export of Australian product where the original owner lacks the ability to promote overseas and export.

A change in the circumstance of a 'business' may allow circumvention of a number of the provisions of this bill. For example, a transfer of a business activity to another entity who is a first time EMDG applicant would disregard any EMDG payments to the previous owner, and allow the grant 'count' to start again. Division 2 prevents this and other abuses of the scheme.

Division 3 provides for the adjustment of an applicant's eligible expenses and export earnings where the applicant has been party to an arrangement or transaction which is likely to result in the payment of a larger grant than would otherwise have been paid.

Division 4 allows applicants, where dissatisfied with a decision of Austrade to ask for a review and if still dissatisfied, appeal to the Administrative Appeals Tribunal.

Division 5 provides Austrade with the power to establish a scheme of accreditation for export market development grants consultants.

Guidelines are required for the operation of a number of provisions under the scheme. Division 6 specifies where the minister must and may establish guidelines.

Specified offences under the Crimes Act 1914 by certain persons related to an application prevent assessment of an application and/or the payment of a grant. Division 7 describes the circumstances relating to the establishment of the "state of mind" of applicants and persons related to applicants for the purposes of prosecution.

Division 8 provides Austrade with the power to recover grants in circumstances where similar offences have been made.

Division 9 provides for two matters: the deduction of the administrative costs of the EMDG scheme from the single line of funding for the purposes of the bill; and the power to create regulations necessary for the operation of the bill.

Part 9 - Interpretation

Part 9 provides the definitions of all terms and a number of concepts used in this bill.

FINANCIAL IMPACT

Expenditure in respect of the provisions of this bill is limited to a maximum of $150 million per annum including up to 5% of the cap for administration. The saving created by this bill are estimated to be $99.8 million 1997/98, $121.1 million 1998/99 and $145.2 million 1999/2000.

ABBREVIATIONS

The following abbreviations are used in this explanatory memorandum:

EMDG Act 1974; Export Market Development Grants Act 1974.
EMDG scheme; any scheme of financial assistance instituted under the Export Market Development Grants Act 1974, or devolved legislation.
Austrade; Australian Trade Commission.

NOTES ON CLAUSES

PART 1 - PRELIMINARY

Clause 1 The Act may be cited as the Export Market Development Grants Act 1997.

Clause 2 The Act Commences 1 July 1997. Note that the Act has application for the 1996/97, 1997/98 and 1998/99 grant years. This is established by the definition of "grant year" under Part 9 - Interpretation.

Clause 3 The object of the EMDG scheme is to provide limited assistance to small to medium size Australian export enterprise who are committed to and capable of export success.

PART 2 - ENTITLEMENT TO GRANT

Clause 4 Part 2 sets down in broad terms the path through this bill which must be followed to achieve an entitlement to grant. The applicant must:
• comply with part 3 which covers the types of 'persons' who are eligible;
• have incurred eligible expenses broadly covered by part 5; and,
• have applied for a grant in the manner set down under part 7.
Grant entitlement is then calculated under the provisions of part 6 which takes account of the various thresholds imposed by the bill, for example, the 50% rule, the $15,000 floor, the export performance test, the $200,000 annual grant limit, and the $50 million earnings cap.

PART 3 - PERSONS ELIGIBLE FOR A GRANT

Division 1 - General

Clause 5 Describes the broad underlying principles guiding eligibility to receive a grant. Applicants should be small to medium size Australian business who are developing or wish to develop an export market and who have a reasonable chance of success.

Clause 6 Sets down specifically the categories of persons who may receive a grant. The applicant must be an Australian resident (see clause 114) who meets requirements under the general rules set out under clause 7. Eligible applicants include individuals, corporations, partnerships and co-operatives, plus those applicants especially approved by Austrade - approved body, approved joint venture, and approved trading house.

Clause 7 Describes the general rules for eligibility to receive a grant for each type of applicant ie. - individual, company, and an organisation especially approved as an eligible applicant under this bill. Conditions which must generally be present are:
• the need to be a solvent resident of Australia genuinely carrying on business in Australia;
• not be a convicted 'person' within the meaning of clause 17 of this bill;
• have in the grant year income not greater than $50 million;
• have export earnings in the grant year of not greater than $25 million (includes the export earnings of any "related companies" which claim in the grant year);
• have received not more than eight previous general grants (an additional three grants may be received in respect of "new markets");
• if not in receipt of a previous grant under the EMDG scheme, have registered in the grant year an intention to lodge an application for that grant year, and subsequently pass the grants entry test .

Approved joint venture and approved trading house are afforded the right to apply for a grant only subsequent to their meeting criteria set down in ministerial guidelines under this bill. Because these organisations are approved for specific purposes, a number of the foregoing conditions variously do not apply or are incorporated within the guidelines. Approved joint venture are limited to a maximum of five grants and are not subject to the $50 million income test. However, the expenditure contribution to the approved joint venture by members whose income is above $50 million is excluded. Apart from the insolvency and convictions provisions, approved trading house are not subject to any of the afore mentioned provisions. The grants entry test is not applicable to approved joint venture or approved trading house. The term approved joint venture is taken to include an arrangement which might otherwise be referred to as a consortium.

Clause 8 Describes the circumstances where grants previously received by an applicant may be disregarded for the purposes of this Act.

Prior to 20 May 1985 there was no minimum expenditure threshold. A grant was payable on and from the first eligible dollar of expenditure. Subsequent to 20 May 1985, a minimum eligible expenditure threshold of $5,000 was applied and the grant rate was 70%. A minimum grant of $3,500 was, therefore, payable. It is considered that these grants should not count for the purposes of this bill, for example, the $25 million under paragraph 7(1)(e) or the export performance test under subclause 63(3).

Prior to 20 May 1985 bodies specified in schedule 7 to regulations under the EMDG Act 1974 were able to claim a grant in respect of any eligible activity under that Act. Subsequent to 20 May 1985 these bodies activities were limited to specified educational services. They would be disadvantaged should these grants be subsequently counted. Similarly providers of eligible tourism services from 1 July 1990 would be disadvantaged should the bill count grants paid in respect of tourism services under rules applicable to tourism during the period 1978 to 1985.

Grants paid in respect of "new market" as described under clause 113 of the bill are not counted for the purposes of the eight grant general limit. "Claim period" means the grant year to which the claim relates and not the period allowed for the lodgement of an application for grant following the end of a grant year.

Division 2 - Export earnings

Clause 9 This division explains which sales constitute eligible export earnings for the purposes of the EMDG scheme.

Clause 10 Clause 10, by means of a table, cross matches eligible product against the type of export earnings which are eligible in respect of that product. For goods this is earnings received or receivable; for services, intellectual property rights and know-how, it is earnings actually received in that grant year only. Where a tourism operator provides their service to an Australian inbound tour operator for on supply to an overseas visitor, 20% of the earnings received by the original operator may be claimed as eligible export earnings. To minimise double counting, the inbound tour operator's export earnings are limited to 80% of receipts from the overseas purchaser.

For EMDG purposes, the date of export of goods may be earlier than the date of export indicated on a bill of lading or air waybill. Where a 'wharf receipt' or its airline equivalent is issued for goods held awaiting export, the date of receipt is acceptable.

Direct trade with New Zealand is ineligible (see paragraph 10(3)(a)) and clause 43). Trade with countries subject to trade sanctions is ineligible (see paragraph 10(3)(b)) Where a person is a member of an AJV, any earnings related to the activities of the AJV, as prior approved by Austrade, are not counted as earnings in respect of any claim by that person on their own behalf. Trustees of trust estates may not claim any earnings in respect of their trusteeships.

Clause 11 Prescribes that the export earnings of approved joint venture are limited to the Austrade approved activity, project or purpose of the joint venture. Not included are earnings which may be derived by members of the joint venture in their own right or in respect of another joint venture of which they may be a member. The export earnings of a member of a joint venture whose income in the grant year is greater than $50 million is disregarded for all purposes under this bill.

Clause 12 Austrade may adjust the export earnings of an applicant where the applicant has been a party to an act or thing which may result in the applicant receiving a grant greater than would have otherwise have been payable (refer to clause 96).

Division 3 - Insolvency administration

Clause 13 Individuals, body corporates, and partnerships, whether under direct insolvency administration or by relationship with an "associate" under insolvency administration, are ineligible to receive a grant. "Associate" is defined under clause 107 of this bill. Broadly the definition covers a company director, a member of a partnership or a director of a company member of a partnership, a member of a joint venture, a partner of a partnership member of a joint venture or a director of a company member of a joint venture, and members of governing bodies of applicant organisations.

Clause 14 Prescribes the circumstances where an individual claimant is considered to be under insolvency administration. Provisions relate directly to section 50 and division 2 of part X of the Bankruptcy Act 1960 where an official receiver has been appointed or where a trustee or solicitor has been authorised to take over control of property and or call a meeting of creditors. The provision extends to comparable bankruptcy situations under the law of external territories and foreign countries.

Clause 15 Prescribes when a body corporate is under insolvency administration: being wound up; receiver, receiver manager or other controller appointed; under administration or official management; unterminated deed of company arrangement; or unconcluded compromise or arrangement. Allows for circumstances where the person administering the body corporate states that the body is able to pay all its debts as and when they become payable, thereby avoiding the application of clause 13 of this bill. This facility is not available to partnerships and individuals.

Division 4 - Outstanding disqualifying convictions

Clause 16 Prescribes the circumstances where a conviction which would prevent the payment of a grant (a "disqualifying conviction") by defining a "relevant offence" to be an offence under subsection 229(3) of the corporations law, an offence against section 5, 6, 7, 7A, 29A, 29B, 29C, 29D or subsection 86(1) of the Crimes Act 1914, or an offence against section 39 of the EMDG Act 1974. The corporations law and crimes act offences are essentially those related to fraud and dishonesty, and where a person directly, or by aiding or abetting another person, causes any commonwealth or territory law to be broken. Section 39 of the EMDG Act 1974 relates to offences under that Act where false or misleading statements were made or documents presented to obtain or attempt to obtain a grant.
Clause 17 Sets down the period for which a "disqualifying conviction" remains in force - five years from conviction or release from prison.

Division 5 - Registration and grants entry test

Clause 18 Describes the persons to whom registration and the grants entry test applies - applicants who have not previously received a grant under the EMDG scheme other than approved joint venture, approved trading house or approved body. These organisations are exempted because their circumstances are established by Austrade against ministerially approved guidelines prior to their being allowed to claim for a grant. Any person whose application for grant has not been determined by the conclusion of the following grant year is not required to re-apply for registration for the following grant year (this waives the general requirements under clause 19). Should the applicant subsequently fail the grants entry test, then a fresh application for registration will be required in respect of any later grant years.

Clause 19 A person defined in clause 18 intending to lodge a claim for a particular grant year must, in that grant year, make application to Austrade to be registered as a potential grants applicant. Upon receipt of the application Austrade must register the applicant and advise them in writing of their registration.

Clause 20 Any 'registered' person who has lodged or intends to lodge a claim in respect of the 'registered' grant year, must take a grants entry test. The purpose of the test is to ascertain the level of export preparedness of the applicant. Austrade will decide whether the applicant has passed the test. The test will require a level of written reply, and may involve some direct personal participation by the applicant, but it does not take the form of an examination as is to be found in the environment of an educational institution.

Clause 21 Provides that Austrade may determine the contents of the grants entry test, a copy of which is to be publicly available. The test must be placed before parliament and may be disallowed. In coming to a decision, Austrade may sight existing or especially requested and prepared documents.

Clause 22 Allows Austrade to seek additional information from the applicant giving a minimum period of 28 days to comply. Austrade may cease the processing of any application and not pay a grant where a request is not complied with (see clause 73).

PART 4 - ELIGIBLE PRODUCTS

Clause 23 Part 4 sets out the conditions applicable to 'product' eligible for consideration under the bill. Essentially, 'product' is eligible only if it is substantially of Australian origin. 'Product' includes goods, services, intellectual property, and know-how.

Clause 24 Eligible goods are those where Australian content is at least 50% of the free on board value of the goods. Australian content includes the cost of materials and labour, factory overheads, and margin for profit. Goods made outside Australia will meet the Australian content rule if 75% of the value of the components used in the making of the goods is attributable to goods that meet the 50% Australian content rule. Eligibility of goods is further subject to consideration by Austrade that the export of the goods will derive a significant net benefit to Australia. Austrade may determine in writing that goods meeting the 50% or 75% requirements are not eligible for grants consideration, or alternatively, that goods which do not meet the 50% or 75% requirements are eligible for grants consideration.

Clause 25 There are three categories of eligible services - internal services, tourism services, and external services. Services must be supplied to persons who are not residents of Australia. Note that eligible internal services and eligible tourism services are prescribed by regulation. All external services are broadly eligible. Where Austrade determines in writing that the Australian input to a service is not sufficient to ensure that Australia will derive a significant net benefit from the supply of that service, that service is ineligible for grants consideration.

Clause 26 To be eligible, intellectual property must have a satisfactory level of Australian input. In the case of trade marks a satisfactory level of input can be established by first use in Australia or by an increase in significance or value through use in Australia. In the case of things other than trade marks, eligibility will be established by reference to the extent of creative research or work done in Australia.

Clause 27 To be eligible, know-how must to a substantial extent have resulted from research or work done in Australia. Note that know-how may include the physical demonstration of things covered by the know-how. However, the provision of any service in these circumstances will be considered as part of the delivery of know-how and will have no standing as a separate service for any purpose under the bill.

PART 5 - ELIGIBLE EXPENSES

Division 1 - General

Clause 28 Part 5 defines eligible expenses. They must be expenses incurred by the applicant in the grant year for the overseas promotion of the applicant's eligible product. Only those promotional activities specified in part 5 of the bill are eligible for grants consideration.

Clause 29 Eligible expenses are those which meet the requirements of clause 33 of part 5 of this bill, and amount to a minimum of $20,000 in respect of the particular grant year. Eligible expenses of an approved trading house or approved joint venture are limited to the Austrade approved activity, project or purpose. A grants applicant who has not previously received a grant under the EMDG Act 1974 or under the provisions of this bill, may include eligible expenses incurred in the year immediately preceding the grant year. - that is, two years expenses may be claimed.

Clause 30 Similar to the provisions covering the adjustment of export earnings under clause 12, Austrade may adjust the expenses of an applicant where the applicant has been a party to an act or thing which may result in the applicant receiving a grant greater than would have otherwise have been payable (refer to clause 96).

Division 2 - Claimable expenses in respect of eligible promotional activities

Subdivision 1 - General

Clause 31 Division 2 describes the types of promotional activities which may be undertaken and the expenses which may be claimed in respect of those activities.

Clause 32 Expenses of a permanent overseas representative of an applicant, to the extent to which they are incurred for an approved promotional purpose, are taken not to be the expenses of agent of an applicant for grant. This prevents the possible transfer of overseas representational costs to other expenditure items. This is necessary given the $200,000 annual expenditure limit for overseas representatives.

Subdivision 2 - Eligible promotional activity and claimable expenses defined

Clause 33 Clause 33 sets out in tabular form the six general areas of promotional activity allowed under the bill, and the extent of expenses allowed in relation to each of those activities. The six activities are:
• overseas representatives;
• overseas marketing visits;
• communications;
• free samples;
• trade fairs and advertising; and,
• short term consultancy.
Expenses in relation to overseas representatives are limited to a maximum of $200,000 in any grant year. An overseas representative may be a person previously employed in Australia by the applicant, or may be a director of a company applicant, or may be a partner in a partnership applicant. Expenses in respect of overseas marketing visits are limited by the provisions of clause 34 immediately following. Expenses in respect of overseas marketing visits, communications, and trade fairs and advertising must be payments to persons not "closely related" to the applicant ("closely related" is to be determined under ministerial guidelines - see clause 101). Consultants must be persons not closely related to the applicant. Free samples must be provided to a person who is not a resident of Australia.

Clause 34 Expenses of air fares associated with overseas marketing visits are eligible for grants consideration in respect of the first two grants only. Note that an unsuccessful claim for grant, ie. an application for which zero grant is paid, does not count for the purposes of the two year limit. Note also that the two year limit on air fares does not apply to expenses by overseas representatives. Fares other than airfares are not subject to the two year limit. Eligible expenses in respect of first class airfares is limited to 65%. Two hundred dollars per day is added to eligible expenses for each day that was primarily devoted to the promotion of the claimant's eligible product - this is limited to 21 working days per overseas visit. In circumstances where relatives travelling overseas on marketing visits meet, expenses are limited to one traveller only. This limitation is waived for each affected travelling relative where the relative has been an agent of the applicant for at least the immediately preceding five years.

Clause 35 Austrade will determine the reasonableness of expenses claimed by applicants. Where expenses are considered unreasonable, Austrade must notify the applicant in writing giving reasons and request the applicant to justify the reasonableness of its claim. Where Austrade subsequently considers the expenses to be unreasonable, Austrade must determine the amount of eligible expenses.

Subdivision 3 - Approved promotional purposes

Clause 36 The object of subdivision 3 is to explain what are "approved promotional purposes".

Clause 37 This clause links eligible promotional activity to eligible product to define "approved promotional purpose". An "approved promotional purpose" exists where eligible promotional activity is linked to:
• eligible goods owned by the applicant, and for sale by the applicant or by another person;
• goods made outside Australia where the Australian content of which is made up wholly or principally from components supplied by the applicant;
• eligible services supplied by the applicant;
• eligible intellectual property or eligible know-how owned by the applicant.
There are exceptions:
• approved trading houses have an approved promotional purpose in respect of eligible goods as owner only, but in respect of eligible intellectual property and eligible know-how, the 'purpose' exists both when activity is on behalf of other Australian persons as well as on behalf of themselves;
• approved trading houses are not eligible to promote services in any circumstances.
• approved bodies have approved promotional purpose in respect of eligible services, intellectual property and know-how only where activity is on behalf of eligible product owned by other Australian persons. However, in the case of eligible goods, activity may be on their own behalf or on behalf of other Australians.

Clause 38 Approved promotional purpose exists where the eligible promotional activity of an applicant is for the purpose of increasing the return on the disposal of eligible intellectual property or eligible know-how sold by the applicant (in the case of an approved body the increase in return relates to other Australian person(s) return(s)). For example, an applicant who previously sold eligible intellectual property or eligible know-how to an overseas party, and where an increase in return is the intention, may promote the sale of product manufactured and owned by the overseas party regardless of whether or not that product meets Australian content rules. The return must be by way of royalty or licence fee.

Subdivision 4 - Excluded expenses

Clause 39 Subdivision 4 sets out the specific expenses to be excluded from those broadly listed as eligible under column 3 of the table at clause 33.

Clause 40 Provides in tabular form the 17 areas of excluded expenses which are subsequently detailed in the following clauses 41 to 57.

Clause 41 All expenses of a capital nature are excluded. The cost of leasing or hiring capital equipment for an eligible promotional purpose is prima facie eligible expenditure.

Clause 42 The term "resident of Australia" is defined at clause 114. An expenses incurred by an applicant for grant at a time when the applicant was not a resident of Australia is excluded from grants consideration (see clause 53 with respect to the application of this rule to approved joint venture).

Clause 43 New Zealand is not an eligible market. This is because of the similarity of the New Zealand and Australian markets and arrangements between the two countries devolving from 'Closer Economic Relations'.

Clause 44 Expenses are ineligible where they relate to promotional activity in respect of a country subject to trade sanctions. Only those countries declared by the minister under paragraph 10(3)(b) of this bill will be ineligible for the purposes of clause 44.

Clause 45 Expenses related to any activity or project the subject of assistance under any scheme of financial assistance administered by Austrade, other than the EMDG scheme, are ineligible for consideration under the EMDG scheme.

Clause 46 Any payment outstanding or received for work carried out while undertaking promotional activity will be deducted from eligible expenditure. The amount of deduction will not be affected by any action by the grants applicant to subsequently reduce or eliminate the amount of payment.

Clause 47 A period of time often passes between lodgement and determination of a claim for grant. Where, in that period, an applicant seeks to include additional expenses, the additional expenses allowed for the purposes of the grant calculation cannot exceed 10% of the eligible expenses originally included in the grant application.

Clause 48 With the exception of Australian departure tax, any tax, levy or other payment required by or under Australian law is not an eligible expense for the purposes of this scheme.

Clause 49 The EMDG scheme focuses on pre-contractual expenditure. Sales related costs are not eligible for grants consideration.

Clause 50 Apart from approved body, approved joint venture, and approved trading house, there is a general limit of eight grants per applicant. However, applicants covered by the eight grant limit may apply for up to three additional grants in respect of each "new market". "New market" is described under clause 113 of this bill.

Clause 51 Applicants may not claim expenses paid to an approved trading house in circumstances where that trading house is a claimant in respect of the same eligible promotional activity.

Clause 52 An approved trading house may not promote product currently owned by itself or any closely related person. An approved trading house is afforded status under the EMDG scheme for the purpose of undertaking the overseas promotion of eligible product initially owned by Australian organisations not able to promote on their own behalf. Conditions formulated in accordance with ministerially approved guidelines are applied to approved trading houses. Expenses of an approved trading house are excluded to the extent that the trading house has breached these conditions.

Clause 53 Technically, the expenses of an approved joint venture are incurred by the individual members of the joint venture. The concept of an approved joint venture as a single applicant for grant is notional. Under paragraph 7(1)(d) any applicant, other than an approved trading house or approved joint venture, whose income (same meaning as Income Tax Assessment Act 1936) exceeds $50 million in the grant year is precluded from receiving a grant for that grant year. To maintain the integrity of this provision, the expenditure of a member of an approved joint venture where that member's income exceeds $50 million in the grant year, is excluded. Conditions formulated in accordance with ministerially approved guidelines are applied to approved joint venture. Expenses of an approved joint venture are excluded to the extent that the joint venture has breached those conditions. The expenses of a member of an approved joint venture are excluded where that member is not a resident of Australia.

Clause 54 Expenditure incurred in respect of a trust estate by the trustee of that trust estate is ineligible for grants consideration. This does not prevent the trustee from claiming a grant in respect of activities outside of the function of trustee.

Clause 55 Under clause 38 applicants may claim a grant in respect of the promotion of product which has resulted from the use of intellectual property or know-how sold by the applicant to another party. That is, where the product is not owned by the applicant. Clause 55 prevents the provisions of clause 38 from operating where the other party is a foreign corporation the control of which may be influenced by the applicant.

Clause 56 Expenditure in relation to any activity which is illegal in Australia or in a country the object of the activity, is excluded from the scheme.

Clause 57 Expenses in respect of an "X"-rated film are excluded. Classification is that given under an Australian censorship law. This exclusion extends to the situation where Austrade has reason to believe that a film will be refused classification or will receive an "X" classification.

Division 3 - When are expenses incurred ?

Clause 58 This clause provides some fundamental rules covering the incurrence of expenses. These rules are:
• that expenditure must be acquitted - expenditure may not be accrued;
• acquitted means actually paid, or formally set off against the debts of the creditor;
• cheques and payment orders are not eligible expenses until actually debited to the applicant's account;
• shares do not constitute eligible expenses.

Clause 59 Austrade has a discretion to disallow as eligible expenses, that portion of expenses which relate to goods and services paid for but not received within the grant year. The applicant has the right to include these disallowed expenses in a claim for the subsequent grant year.

PART 6 - AMOUNT OF GRANT

Division 1 - General

Clause 60 Part 6 sets out how a grant is calculated.

Clause 61 This clause provides an outline to the three substantive divisions (2, 3 and 4) of part 6.

Division 2 - How to work out an applicant's provisional grant amount

Clause 62 Division 2 comprises three substantive clauses (63, 64 and 65). An applicant's provisional grant amount is worked out under clause 63 subject to modification as applicable by clauses 64 (inflated grants) and 65 (related company groups).

Clause 63 The initial step in calculating a provisional grant amount is to calculate half of assessed eligible expenses in excess of $15,000. Where the applicant did not claim for communications costs, the grant calculated is increased by 3%. No substantiation of communications costs is required in these circumstances. The provisional grant amount is limited by an export performance test based on a sliding scale against export earnings. This test applies to all applicants without exception commencing with the applicant's third grant. The provisional grant amount for a third grant is the lesser of the grant calculated as above and 40% of eligible export earnings achieved in the grant year. This tapers down through 20%, 10%, 7.5% and 5% for the fourth to seventh grants. All provisional grant amounts subsequent to the seventh grant, including those in respect of "new markets", are subject to a maximum of 5% of eligible export earnings. The provisional grant amount for all applicants other than approved trading house is limited to a maximum of $200,000. In support of the approved trading house role of facilitating the promotion of the product of less export capable Australian suppliers, their maximum grant has the higher limit of $500,000.

Clause 64 An applicant's provisional grant amount may be adjusted where an act or thing may result in the payment of a greater grant than would have otherwise have been payable (refer to clause 95).

Clause 65 The general annual grant limit, set under clause 63, is $200,000. However, where an applicant is a member of a related company group, the totality of all grants paid to members of that group is limited to $250,000 in any grant year. "Related company" means a body corporate related within the meaning of section 50 of the Corporations Law. An individual member's provisional grant amount is its proportion of the totality of all grants calculated in respect of the group, and that proportion applied to $250,000. Where the total group grant amount is equal to or less than $250,000, the originally calculated grant will be the member's provisional grant amount.

Division 3 - How to work out amount of grant

Clause 66 Division 3 establishes the mechanism for working out the actual grant payable to an applicant.

Clause 67 The level of funding for payments under the EMDG scheme is finite. As it is likely that grants sought by applicants will exceed the level of funding, the scheme requires a mechanism which will ensure that each applicant receives an equitable share of the available funds, and that the annual funding limit is not exceeded. The mechanism employed necessarily requires that some applicants will receive payment of their grant in two parts separated by an interval of time.

The clause establishes the concepts of "initial payment ceiling amount" and "payout factor". The "initial payment ceiling amount" is the amount set by the minister as the maximum which can be paid to an applicant immediately following assessment of the claim by Austrade (see clause 68). All provisional grants at the level of the initial payment ceiling amount or below will be paid immediately. Where provisional grants are in excess of the initial payment ceiling amount, a payment at the level of the initial payment ceiling amount will be made immediately.

Any unpaid balance of the provisional grant amount is then subject to the payout factor (see clause 69). The payout factor is the factor which ensures that the funding cap for that grant year is not exceeded. Unless outstanding provisional grants equal or fall below the annual funding cap, the payout factor will be a multiplier of less than 1. That is, outstanding provisional grant amounts will all be reduced proportionately.

Division 4 - Initial payment ceiling amount, balance distribution date and payout factor

Clause 68 Provides the ministerial power to determine the "initial payment ceiling amount", and the "balance distribution date". To allow the payment of 1996/97 grants to commence immediately following assessment, the "initial payment ceiling amount" will be set towards the end of the 1996/97 grant year or very soon after 1 July 1997. This determination will apply to subsequent years unless amended. The balance distribution date is the point in time where the totality of applications received for the grant year are assessed for the purposes of establishing the payout factor. This will be close to the end of processing period for the relevant grant year - ie during June of year following the grant year. The ministerial determination (the 'date') must be placed before parliament and may be disallowed.

Clause 69 The method of calculating the payout factor is to be set down in regulations under this bill. The payout factor is to be a written determination, and is to be made available as soon as practicable after the balance distribution date.

PART 7 - APPLICATION FOR, AND PAYMENT OF, GRANT

Division 1 - Applying for a grant

Clause 70 An application for grant must be in a form and manner approved by Austrade. Austrade provides pro-forma application documents upon request. However, an applicant may create their own document provided that prior to application for grant it has been approved by Austrade. Applications must be lodged with Austrade within five months of the end of a grant year - by 30 November. Applications by approved joint venture may be lodged only by the "nominated contact member". The "nominated contact member" is specified at the time of Austrade's approval of the joint venture. The member is 'nominated' in the joint venture's application for approved status. Austrade usually accepts the nominated member. Austrade has no power to accept late lodged claims. This provision is necessary to prevent a known potential for involved and costly litigation concerning the definition of 'lodged'. Five months is considered to be a generous period in which to prepare and lodge an application. The need for a balanced allocation of Austrade's resources throughout the year and the new administrative requirements imposed by the scheme's annual funding cap are considered here also.

Clause 71 Austrade must actually receive an application for grant by close of business on the final day of the lodgement period (30 November). Applications in the mail, or those not formally delivered to the advertised Austrade reception areas by close of business on 30 November, are taken not to have been made

Clause 72 To ensure compliance with the provisions of the bill, Austrade must have full knowledge of matters relevant to an application. Austrade has the power to write to an applicant seeking the provision of relevant records and documents, and to seek permission for a search of criminal records - see requirements under division 4 of part 3 and clause 86. This may extend to each member of a company group in the case of records and documents, and "closely related persons" in the case of a criminal records search. Austrade must provide to applicants documentation explaining the effect of these requirements and non compliance with them.

Clause 73 Empowers Austrade to refuse to proceed with assessment of application where an applicant has failed to comply with clause 72 or subclause 70(2). Subclause 70(2) requires that application for grant must be in the form and manner prescribed by Austrade, and within five months of the conclusion of the grant year. Clause 73 also allows Austrade not to proceed with the assessment of an application where an export market development grants consultant, or an individual under the direction of an export market development grants consultant, who worked on the application, fails to provide consent for a search of criminal records. The following division 2 of this part describes the rules concerning export market development grants consultants and certain other individuals.

Division 2 - Disqualified individual not to help in preparing application

Clause 74 In certain circumstances some people are prevented from assisting in the preparation of applications for grant. This division defines the persons affected and sets out those circumstances. The division is focussed on two types of 'person'. An "export market development grants consultant" who prepares a claim for grant on behalf of an applicant, and a person who assists in the preparation of an application for grant at the direction of an export market development grants consultant. An export market development grants consultant means a person who asks for or receives a fee for any work relating to the preparation of an application for grant. This clause introduces the term "prescribed capacity" which combines the foregoing persons with work undertaken by them which involves the forming of an opinion about the operation of the law.

Clause 75 Any application involving a person described in clause 74 is deemed not to have been made. This applies to all applications where any part of the disqualification period, as set down at subclause 78(2), falls in the period commencing when Austrade receives the application to the time immediately before Austrade determines entitlement to grant. Determination of grant is taken to have taken place when a formal notice of determination of grant is despatched to the applicant.

Clause 76 Where an application for grant is rejected under clause 75, Austrade must notify the applicant of the rejection and advise of the options open to the applicant.

Clause 77 Where an application is rejected under clause 75, the applicant may make a fresh application for grant. The period for lodgement of a fresh application is 90 days from receipt of notification from Austrade that the first application has been rejected, regardless of the general 30 November close off date for the receipt of applications. This facility is not available in circumstances where the applicant new or had reasonable grounds to suspect that the individual was a disqualified person.

Clause 78 This clause sets out the circumstances where a person is a disqualified individual for the purposes of division 2 (ie. disqualified from assisting in the preparation of an application for grant). Offences which will disqualify a person are essentially those related to fraud and dishonesty, whether under Australian or overseas law, and where a person directly, or by aiding or abetting another person, causes any commonwealth or territory law to be broken. The clause specifically mentions section 5, 6, 7 ,7A, 29A, 29B, 29C, 29D, and subsection 86(1) of the Crimes Act 1914. Also included is an offence against section 39 of the EMDG Act 1974, described under clause 16 of this explanatory memorandum.

Clause 79 The operation of this division relies upon access to information covering the offences described under clause 78. It is necessary, therefore, that Austrade has the power to request permission to seek a search of criminal records of a person described at clause 74. Where permission is not granted, the application is rejected and the applicant may make a fresh application under clause 77.

Division 3 - Determining entitlement to, and making payment of, grant

Subdivision 1 - Duties of Austrade

Clause 80 Entitlement to grant does not exist without Austrade making a determination to that effect. Austrade is required to consider each application lodged, and determine the amount of grant payable. Only those applications where a request for additional information has been refused, or an applicant or an individual who has assisted preparation of an application in a prescribed capacity has refused a check of criminal records, are not covered by this provision.

Subdivision 2 - When grant payable

Clause 81 Where an applicant's provisional grant amount, when determined before the balance distribution date does not exceed the initial payment ceiling amount set for that grant year, the grant is payable as soon as practicable following assessment of the application by Austrade. Where the provisional grant amount exceeds the initial payment ceiling amount, an amount equal to the initial payment ceiling amount will be paid as soon as practicable following assessment.

Clause 82 Where Austrade's determination to entitlement is made after the balance distribution date and before the next occurring 1 July - that is, the first day of the second year following the grant year - the grant becomes payable on 1 July. Where Austrade's determination is on or after 1 July, the grant becomes payable on the day of determination.

Clause 83 Where a company is a member of a related company group, the totality of grants payable to the group is limited to $250,000 in any grant year (see clause 65). Clause 83 provides that a grant is not payable to a company group member until all avenues of appeal against grant determinations in respect of all of the members of the group have been exhausted.

Clause 84 In the case of an approved joint venture, grants may be paid only to the nominated contact member (see comments clause 70).

Subdivision 3 - Circumstances in which grant not payable

Clause 85 Regardless of circumstances existing prior to the issuance by Austrade of the notice of determination, a grant is not payable to an applicant who is not a resident of Australia at the time immediately prior to the issuance of the notice of determination. No grant recovery action will be taken should a grant recipient subsequently become a non resident.

Clause 86 Division 4 of part 3 defines "disqualifying conviction". Where, between the time when Austrade establishes an entitlement to grant and Austrade issues a notice of determination, there is an outstanding disqualifying conviction against an applicant, the grant is not payable. No grant recovery action will be taken should a grant recipient subsequently incur a disqualifying conviction.

Clause 87 Division 3 of part 3 defines the circumstances surrounding "insolvency administration". Where, between the time when Austrade establishes an entitlement to grant and Austrade issues a notice of determination, the applicant or an associate falls under insolvency administration, the grant is not payable. No grant recovery action will be taken should a grant recipient or an associate subsequently fall under insolvency administration.

PART 8 - MISCELLANEOUS

Division 1 - Approved bodies, approved trading houses and approved joint
ventures

Clause 88 Division 1 allows certain 'persons' who would not otherwise be eligible to receive a grant to be approved by Austrade. The three categories of 'person' are; approved body, approved joint venture, and approved trading house. Any person seeking special status must do so in writing to Austrade.

Fundamental to the general provisions of this bill is the concept that an applicant for grant be the owner of the product being promoted by the applicant. There are, however, many organisations which expend funds promoting other persons product. Most obvious amongst these are the specific industry associations which charge their membership an annual fee from which, amongst other things, overseas promotional programs are financed. A co-operative association operates in a similar fashion, as do some government initiated public purpose organisations. These are the types of organisations which may be considered for "approved body status". Fundamentally they are a body which promotes the interests of a group of people, usually, but not necessarily, based up a factor of common interest.

"Approved joint venture" status affords certain facilities to a joint venture group. Where a group of persons form (say) a company to undertake their joint activity, that company is, prima facie, eligible to claim as a single identity in its own right. But, that eligibility is subject to several tests by Austrade (for example, see clause 94) to ensure that the integrity of intention of the legislation has not been compromised. However, where a group of persons is afforded approved joint venture status, the approved joint venture becomes eligible to claim grants as an individual, and the members remain eligible to claim grants separately for their eligible activities outside of the joint venture. Joint venture are approved only for specified projects and purposes.

Approved trading house is a very specialised facility afforded only to those organisations which can demonstrate significant and ongoing experience in international marketing and demonstrate extensive overseas contacts amongst importers and distributors in overseas countries.

Clause 89 Austrade is required to advise an applicant in writing of its decision concerning an application for special status, and where approved, specify the conditions to which to approval is subject. In the case of approved joint venture and approved trading house, the notification will specify the approved activity, project or purpose and name the nominated contact member of the approved joint venture. A nominated contact member must be a resident of Australia. The rules establishing approved body, approved joint venture and approved trading house will be described in regulations under this bill. Ministerial guidelines control the approval, variation and cancellation process (see paragraph 101(1)(c)).

Clause 90 Austrade may specify the day on which its approval takes effect, and where specified this will be included in the approval notification. The notified day of effect can be prior to the day of approval. In practical terms this is limited by the provisions of subclause 70(2)(b) which does not allow Austrade to accept a late lodged application for grant. However, these applicants may take advantage of the provisions of subparagraph 29(c)(i) allowing for two years expenses to be included in the application. If not specified, the day of effect is the day the approval is given. Approvals, if not varied or cancelled earlier, have a life of three years.

Clause 91 Where Austrade is considering the cancellation of an approval, Austrade must give the approved organisation written reasons for its opinion. The organisation must be given the opportunity to provide a written response to Austrade, and Austrade must give consideration to that response.

Clause 92 The EMDG scheme assists small to medium size enterprise. In general smaller business could not reasonably be involved in more than a limited number of joint venture and maintain focus. Maximisation of limited funding to as many applicants as possible is a further consideration. This clause allows the minister to limit approved joint venture membership. The limit is established by determination which may be varied from time to time if appropriate. A maximum membership of three approved joint venture at any one time is currently considered appropriate. The determination must be placed before parliament and may be disallowed.

Division 2 - Effect of change in ownership of business etc. on allocation of eligible
expenses etc.

Clause 93 To prevent circumvention of a number of principles fundamental to this bill, it is necessary to have the power to negate the effect of certain actions by applicants. Two of the principles at risk are the eight grant per applicant limit and the rate of application of the export performance test. The EMDG scheme is based on 'individual legal identity'. That is , for example, the scheme does not recognise as an applicant, a division or branch within a company. On the other hand, the ownership of a company has no bearing on that company's status as an eligible applicant for grant - if it is registered in Australia (has an Australian company number) it is prima facie an eligible 'person'. It follows that a partnership registered in Australia is an eligible 'person'. It follows also that a second partnership with only one member different from the first partnership, is a separate legal identity, and may claim grants in its own right.

The creation of a 'new' identity' of itself does not circumvent the principles of the bill. The focus is on the business carried on by another person, whether or not that other person is a 'new' person or an existing person. Should a person take over a business activity or part of a business activity previously carried on by another person, the new 'owner' gains the benefit of grants paid to the previous owner. In addition, as a separate legal identity with (say) no previous EMDG history, and without regard to the number of grants paid to the previous owner, the new owner has the right to receive eight general grants and additional "new market" grants - that is, the business gets all the benefits of a first time applicant. This situation could be repeated indefinitely. To prevent this occurrence this clause assumes that a continuing business environment exists until investigation by Austrade indicates otherwise. Where an exemption is not given, the grants history of the previous owner in respect of the particular business activity is assigned to the new owner.

Clause 94 Specifies the circumstances where the change of ownership of business provision applies. Specifies that a sale or transfer of a business, a change in membership of a partnership, or any other business arrangement whereby a business previously carried on by one 'person' is now carried on by another 'person', is covered by the concept described in clause 93. The clause specifies that any aspect of the business as carried on by the previous owner must be attributed to the new owner.

Division 3 - Applicant party to transaction resulting in applicant obtaining grant etc.

Clause 95 Austrade may, where it thinks appropriate, limit the grant payable to an applicant. Circumstances where the applicant is party to an act or thing which may or has increased the amount of grant payable, may be caught by this provision. The main purpose of the provision is to control actions of the type which might occur between close relatives. Whilst possible, it is unlikely that dealings between arms length parties would incur any penalty under this provision.

Clause 96 Allows Austrade to adjust either or both expenses and export earnings to arrive at an applicant's provisional grant amount.

Division 4 - Review of decisions

Clause 97 This clause lists those decisions of Austrade which are reviewable decisions. A reviewable decision is one which may be reviewed by the Administrative Appeals Tribunal. In certain circumstances Austrade decisions may also be referred to the Federal Court and the High Court. The reviewable decisions relate to:
• failure to pass the grants entry test,
• a decision directly related to the eligibility or otherwise of goods, services, intellectual property, or know-how,
• any decision relating to an application for grant,
• refusal of approved body status, approved joint venture status or approved trading house status, and decisions to vary or cancel approvals,
• conditions specific to approval as an approved body, approved joint venture or approved trading house,
• refusal to accredit an export market development grants consultant, and decisions to vary or cancel accreditation.

Clause 98 Clauses 98 and 99 describe the process to be followed by an applicant dissatisfied with a decision of Austrade. Austrade will notify a person of any decision in writing. The notification will include a statement covering the person's review rights. Within 30 days of receipt of advice of a decision by Austrade, the affected person may request Austrade to review its decision. This request must state the reasons for dissatisfaction with the Austrade decision. Following receipt of a request for review, Austrade must reconsider its decision and may vary its decision.

Clause 99 Regardless of the outcome of Austrade's review of its decision, the affected person may make an application to the Administrative Appeals Tribunal for a review of Austrade's decision. Note that an application to the Administrative Appeals Tribunal may not be made until the affected person is in receipt of Austrade's review decision.

Division 5 - Accreditation of export market development grants consultants

Clause 100 An "export market development grants consultant" is a person who asks for, or receives, any fee for any work relating to the preparation of an application for a grant. Should Austrade consider it necessary, Austrade may determine a scheme for the accreditation, variation of accreditation and cancellation of accreditation of these consultants. Any scheme so devised must be placed before parliament and may be disallowed.

Division 6 - Guidelines

Clause 101 Clause 101 specifies the circumstances where the minister must, and where the minister may, determine guidelines for the purposes of this bill. The minister must determine guidelines in relation to the following matters;
• whether a person is genuinely carrying on business in Australia,
• whether a person is, or is not, closely related to an applicant,
• approval of approved body, approved joint venture, and approved trading house,
• exemption from the continuing business provision which attaches a previous owner's grants history to the new owner,

The minister may determine guidelines in relation to any of Austrade's powers under this bill.

All of the foregoing guidelines must be place before parliament and may be disallowed.

Division 7 - Conduct by directors, employees and agents

Clause 102 Paragraph 7(1)(g) prevents grants from being paid where a person or closely related person has an outstanding "disqualifying conviction" (see clauses 16 and 17). Further, an individual may be prevented from preparing, or assisting with the preparation of, an application for grant. where that individual, amongst other things, is convicted of a specified offence under the Crimes Act 1914 (see clause 74). This clause describes the circumstances necessary to establish the 'state of mind' of a body corporate or an individual for the purposes of a prosecution in the foregoing circumstances. With respect to a body corporate, it is enough to show that a director, employee or agent undertook a particular conduct which was within the scope of their authority. Where the state of mind relates directly to the action of an individual, it is enough to show that a particular conduct was within the scope of the individuals authority. Where a particular conduct was undertaken within the scope of their authority by a (first) person, on behalf of a second person, the conduct may be taken to have been engaged in by both the first and second person. The second person may avoid involvement where they can show that they took reasonable precautions and exercised due diligence to avoid the conduct. Had the conviction of an individual not occurred but for the particular rules of this clause, the individual is not liable to imprisonment.

Division 8 - Repayment of grant etc.

Clause 103 Clauses 29A, 29B, 29C and 29D of the Crimes Act 1914 are essentially offences of fraud and dishonesty. Where a grant or an advance on account of a grant has been paid in relation to an application where the applicant or an associate is convicted under one or more of the above clauses, that amount is repayable to Austrade. The amount may be deducted from any subsequent grant entitlement of the applicant, or may be recovered by court action.

Clause 104 The making of a statement, or the use of a record, book or document, that was false or misleading will require the repayment to Austrade of any grant or advance on account or grant. The amount may be recovered from any subsequent grant entitlement of the applicant, or may be recovered by court action.

Division 9 - General

Clause 105 Costs incurred in the administration of the EMDG scheme are to be meet from a single appropriation for the purposes of meeting all commitments under the bill. That is, administrative funding is not separate from funding for the payment of grants. The administrative costs of the scheme may not exceed five percent of the total appropriation for any year.

Clause 106 The bill in some clauses specifies the need for regulations. The power to make those regulations, and a general power to make other regulations subsequently deemed necessary for the functioning of the bill, is provided by this clause.

PART 9 - INTERPRETATION

Clause 107 Part 9 explains the meaning of terms used in this bill. Clause 107 provides the definition for phrases and terms used in this bill.

Clause 108 Certain convictions are specified in this bill with respect to the non assessment of applications and the non payment of grants. These convictions are not tied to the date of commencement of, or date of application of any provision in, this bill. The conviction may have been recorded during the tenure of the EMDG Act 1974. Any disqualification period applicable in relation to a conviction under the EMDG Act 1974 will run its full course.

Clause 109 A principle fundamental to the bill is that an Australian resident intends to sell and subsequently does sell to a non resident of Australia. This clause relates to eligible goods. After the receipt of two grants an applicant must achieve a level of export sales to be entitled to a grant. An eligible export sale is, amongst other things, only that where the sale is between the applicant and a non resident of Australia.

Clause 110 Where an Australian resident sells eligible goods to a non resident buyer, but the goods are exported from Australia by the non resident, the sale (exports earning) is attributed to the Australian resident for the purposes of this scheme. Clause 109 ensures that a sale to another Australian resident does not have eligibility for the purposes of this scheme.

Clause 111 Same principle as clause 109 as it relates to eligible intellectual property or eligible know-how.

Clause 112 The EMDG scheme recognises a partnership as a 'person' eligible to apply for a grant in its own right. Also, Austrade may provide applicant status to a group of persons under the approved joint venture provisions of this bill. However, a joint venture not approved by Austrade has no right to apply for grant. It is important, therefore, that, as a group of 'persons', a partnership be clearly defined. For the purposes of this bill, a partnership exists only if it is allowed by or under the law in the place where the partnership agreement was made.

Clause 113 Clause 50 allows that eligible expenses may be incurred beyond the general eight grant limit where they relate to "new markets". A market is a foreign country. A "new market" is a foreign country in respect of which an applicant has received in the three years immediately preceding the grant year, not more than $300,000 from the sale of any 'product' eligible under the EMDG scheme. Grants may be claimed in respect of a new market for a maximum of three years, regardless of the eligible product promoted.

Clause 114 A correct functioning of the EMDG scheme relies on a clear distinction between residents and non residents. This distinction is necessary not just to assist with the definition of who is eligible to receive a grant, but also to restrict the operation of the scheme to only those activities relating to promotion to non residents of Australia.

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