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1998-99-2000
THE PARLIAMENT OF THE
COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
CUSTOMS TARIFF AMENDMENT BILL (NO. 3)
2000
EXPLANATORY
MEMORANDUM
(Circulated
by the Authority of the
Minister for Justice and Customs, Senator
the
Honourable Amanda Vanstone)
CUSTOMS TARIFF AMENDMENT BILL (NO. 3)
2000
The purpose of this Bill, which includes three schedules, is to enact a
range of amendments to the Customs Tariff Act 1995 (the Customs
Tariff).
Schedule 1 implements the Government’s decision to remove
the customs duty from 268 so called ‘nuisance tariffs’.
‘Nuisance tariffs’ have a duty rate of 5% or less, each attracted
less than $100,000 revenue in financial year 1996-97 and cover goods where there
are few or no local producers.
The Schedule also inserts an additional
note in Chapter 57 of Schedule 3 to the Customs Tariff to direct that all tufted
carpets be classified to heading 5703.
Schedule 2 imposes an excise
equivalent duty on imported toluene and similar chemicals which may be used in
fuel substitution activities.
Schedule 3 inserts a 1 January 2005 phasing
rate of duty for automatic voltage regulators of subheading 9032.89.11. This
amendment corrects an oversight in the application of the post 2000 passenger
motor vehicle tariff arrangements which were legislated in Act No. 141 of 1999
(Customs Tariff Amendment (ACIS Implementation) Act
1999).
Background
In July 1998, the then Industry Minister,
the Honourable John Moore MP, identified lower business input costs as a key
area for future reform. In this context, the then Department of Industry,
Science and Tourism was directed to undertake a review of nuisance tariffs. For
the purposes of the review, nuisance tariffs were defined as tariff items that
attract a duty of 5 per cent or less; raise less than $100,000 in revenue a year
(in 1996-97); and apply to items where there are few or no local producers. The
purpose of the review was to identify and remove the tariff on items that offer
little or no protective benefit to industry. A preliminary list of 1058
nuisance tariff items was compiled in consultation with the Australian Customs
Service (Customs) and released in August 1998 for consultation with industry and
the Industrial Supplies Office Network (ISONET). Following industry
consultation which identified local producers for a number of these items, a
final list of 268 items was announced on 8 December
1999.
1. Problem
Higher business input costs resulting
from nuisance tariffs
A tariff is a duty paid on an imported item.
It is designed to protect local manufacturers by making their products more
competitive against similar imported products. However, where there is no
domestic producer to protect, the tariff is solely a cost to those local
manufacturers who use the imported item as a business input and/or
consumers.
Government action is needed to instigate legislative changes
to the Customs Tariff to remove the duties on those nuisance tariff items.
Removing those tariffs will aid business by reducing their input costs and by
reducing the compliance costs associated with the various existing tariff
concession schemes.
No action will require business to continue to pay
inflated prices for their imported inputs, even where there are no local
producers to protect. This cost is ultimately passed on to consumers in the
form of higher sales prices.
2. Objectives
Primary
objective: improve the competitiveness of local industry by lowering business
input costs.
Subsidiary objective: provide consumers with better
priced products.
The Government has identified lower business input
costs as a key area for future reform in improving the competitiveness of local
industry. In this context, the former Minister for Industry, Science and
Tourism announced a review of nuisance tariffs in July 1998. The review
excluded tariffs covered by other Government announcements, including those
tariffs relating to the passenger motor vehicle and textiles, clothing and
footwear industries.
The purpose of the review was to identify and remove
nuisance tariffs on items that offer little or no protective benefit to
industry.
3. Options
Removing the duty on those items
identified in the nuisance tariff review requires amendments to the Customs
Tariff. This is the only option to achieve the objectives of the
Government’s nuisance tariff review.
4. Impact
Analysis
A tariff exists to protect domestic producers. Where there
is no domestic producer to protect, the cost of the tariff is passed on to local
manufacturers who use the imported item as a business input. Ultimately, this
cost is then passed on to domestic consumers in the form of higher sales prices.
Alternatively, where an imported item is placed directly on the market,
consumers are also required to cover the cost of the tariff in the final sales
price.
In addition, compliance costs are incurred by businesses that wish
to use the various tariff concession schemes. This adds to business costs,
which again, are ultimately passed on to consumers.
Government is the
only party to benefit from a nuisance tariff, namely from the revenue it
collects on the imported items (estimated to be $7.2 million for the 268 tariff
lines on 1998-99 figures). In the short-term, while the removal of the tariff
on the 268 items will result in $7.2 million of Government revenue forgone,
local industry is likely to benefit in the long-term through improved
competitiveness.
Removing the duty on those items identified in the
nuisance tariff review will benefit industry in the form of lower input costs
and reduce compliance costs associated with current tariff concession schemes.
It will also benefit consumers in the form of lower sales prices.
There
will be no additional costs to business and consumers. The only cost will be
borne by the Government in the form of an estimated $7.2 million annual revenue
forgone (based on 1998-99 figures) from the removal of the tariff on the 268
items identified in the review.
There will be no significant change in
administrative costs for Customs as a result of the proposed amendments to the
Customs Tariff, as it costs much the same to administer a zero rate of tariff as
it does a positive one. While some administrative savings may result from a
reduction in claims by business for tariff concessions, these savings are
expected to be minimal.
5. Consultation
A preliminary list
of nuisance tariffs was released in August 1998 for consultation with
industry.
The consultation process involved:
• the then Industry
Minister writing to peak industry groups requesting that they identify which
items on the preliminary list of nuisance tariffs should be
retained;
• the Industry Department sending a similar letter and the
tariff list to second tier industry associations;
• placing press
advertisements in major newspapers;
• including details of the review
on the Department’s website; and
• the Department providing
information about the review to interested parties.
Following the
completion of consultations with industry, the Government received a total of 89
responses, a number of which were consolidated responses from industry
associations. This process identified a number of items from the original list
for retention.
In November 1998, the Department of Industry, Science and
Resources consulted ISONET to check the validity and comprehensiveness of the
responses to the review.
A second round of industry consultation
identified further items for retention on the basis of local production. This
left a final list of 268 tariff items for removal. Customs duty was removed
from these tariff subheadings by the tabling of Customs Tariff Proposal No. 7
(1999) in the House of Representatives on 8 December 1999. The reductions in
the rates of duty took effect on 15 December 1999.
6. Conclusions and
recommended option
Removing the duty on those items identified by
business in the nuisance tariff review is the preferred option to achieve the
objectives of the Government’s review. This option will require
amendments to the Customs Tariff to remove the duty on those items identified in
the review.
7. Implementation and review
The incorporation
of the amendments contained in Customs Tariff Proposal No. 7 (1999) in the
Customs Tariff is required within 12 months of the tabling of the Proposal - ie
by 8 December 2000.
The Productivity Commission (PC) is currently
conducting a review of Australia’s General Tariff Arrangements. The terms
of reference for the review require the Commission to inquire and report by 20
July 2000 on the scope for a post-2000 reduction in the general tariff (covering
all rates of 5 per cent or less, and excluding the Passenger Motor Vehicle and
Textiles, Clothing and Footwear Sectors). The PC has been asked to consider the
community-wide costs and benefits of options for future general tariff
arrangements. A draft report was released for public comment on 25 May 2000.
The Government will take into account the Commission’s findings and the
recommendations of its final report when considering future general tariff
reforms.
Schedule 1
It is estimated that $7.2 million of revenue
will be forgone annually by the removal of nuisance tariffs.
Schedule 2
The aim of imposing excise equivalent rates of
duty on toluene, benzene, xylenes and mixed alkylbenzenes is to reduce the
financial incentive to misuse these chemicals for illicit blending with excise
paid petroleum products. As arrangements are in place to remit and refund the
duty for legitimate uses of these products, the net revenue effect is zero.
Schedule 3
Any financial impact from these change was
costed into the amendments legislated in the Customs Tariff Amendment (ACIS
Implementation) Act 1999 – Act 141 of 1999.
CUSTOMS TARIFF
AMENDMENT BILL (NO. 3) 2000
A Bill for an Act to amend the Customs Tariff Act 1995, and for
related purposes.
Clause 1 - Short Title - Customs Tariff Amendment Act
(No. 3) 2000.
Clause 2 - Commencement
Subclause 1 - Clauses 1,
2 and 3 commence on the day on which this
Act receives the Royal
Assent.
Subclause 2 - Schedule 1 is taken to have commenced on
15
December 1999.
Subclause 3 - Schedule 2 is taken to have commenced on
10 March 2000.
Subclause 4 - Schedule 3 commences seven days after
the day on which this Act receives the Royal Assent.
Clause 3 -
Schedules
This clause is the formal enabling provision for the Schedules
to the Bill, providing that each Act specified in the Schedules is amended in
accordance with the applicable items of the Schedules. The clause also
provides that the other items of the Schedules have effect according to their
own terms.
Schedule 1 - The amendment in this Schedule is taken to have
effect from
15 December 1999.
The amendments contained in this
Schedule were tabled in the House of Representatives in Customs Tariff Proposal
No. 7 (1999) on
8 December 1999.
. Covers - On 19 September
1999, the Minister for Industry, Science and Resources announced that the
Government would remove the customs rate of duty on ‘nuisance
tariffs’. Items 1 to 44 of this Schedule implement that
decision.
‘Nuisance tariffs’ can generally be described as
tariff subheadings on which minimal customs duty is collected and which
therefore provide little tariff assistance for Australian manufacturers. The
removal of these tariff rates will provide lower input costs for local industry
and cheaper retail prices for Australian consumers.
The decision was
implemented by introducing free rates of duty for 268 tariff subheadings. For
most of the subheadings the current duty rate was repealed and replaced with a
free rate of duty. About another forty subheadings were amalgamated with
subheadings which were already free, to provide new composite subheadings. This
amalgamation is in accordance with the Government’s policy of tariff
simplification.
Item 46 of this Schedule inserts Additional Note 2 in
Chapter 57 of Schedule 3 to the Customs Tariff to direct importers that hand
tufted carpets are classified in tariff heading 5703. This action flows from a
decision of the Administrative Appeals Tribunal.
The amendment ensures
that the classification of hand tufted carpets is consistent with the Harmonized
Commodity Description and Coding System, the international convention for
classifying goods
Schedule 2 - The amendment in this Schedule is taken
to have effect from
10 March 2000.
The amendments contained in this
Schedule were tabled in the House of Representatives in Customs Tariff Proposal
No. 1 (2000) on
9 March 2000.
. Covers- In January 1998, the
Government introduced the fuel
substitution minimisation legislation to
combat the loss of revenue resulting from fuel substitution. This occurs when
fuel which is subject to a duty free or concessional rate of duty is used as a
transport fuel. Further amendments to the legislation were made in November
1999 and have been successful in controlling most fuel substitution
activities.
However, it became apparent that fuel substitution
activities were occurring using toluene, a product of the petroleum refining
industry, commonly used as a solvent in the chemical and paint industries. This
was made possible because of the different treatment of toluene in the Excise
Tariff and the Customs Tariff. When manufactured locally, toluene is covered by
the Excise Tariff and subject to excise duties. However, when the same product
was imported, it was not subject to excise equivalent rates of duty through the
Customs Tariff.
The amendments contained in this Schedule redress the
anomaly. Items 2 to 5 impose excise equivalent rates of duty on toluene,
benzene and xylenes of Chapter 29 of the Customs Tariff and mixed alkylbenzenes
of Chapter 38. While there was no evidence of fuel substitution using products
other than toluene, the other products are chemically similar to toluene and
could potentially be used for fuel substitution purposes. They are also covered
by the terms of the Excise Tariff.
Regulations and administrative
measures have been implemented to ensure that legitimate users of these imported
chemicals are not disadvantaged. The regulations were enacted on 8 March 2000,
operative from 10 March 2000, the date of operation of these tariff
amendments.
Item 1 of this Schedule updates the Table to section 19(1)
of the Customs Tariff. This Table provides a link between customable and
excisable goods (alcoholic beverages, tobacco and petroleum products) and
permits customs rates of duty to be adjusted in line with movements in the
excise rate of duty, as a result of indexation.
Schedule 3 - The
amendment in this Schedule commences seven days after the day on which this Act
receives the Royal Assent
. Covers- The Customs Tariff Amendment
(ACIS
Implementation) Act 1999 (Act No. 141 of 1999)
implemented the Government’s decision in relation to the post-2005 level
of industry assistance for the passenger motor vehicle industry. The Act
inserted, from 1 January 2005, a 10% general rate of duty for all goods the
subject of the Motor Vehicle Manufacturing Plan.
One tariff
subheading, 9031.89.11, covering automatic voltage regulators of a kind used in
passenger motor vehicles, was erroneously excluded from the list of tariff
subheadings. This amendment inserts the
1 January 2005 phasing rate of duty
for this subheading.