Bills Digest No. 32   1997-98 Customs Tariff Amendment Bill (No. 2) 1997


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History

Customs Tariff Amendment Bill (No. 2) 1997

Date Introduced: 25 June 1997
House: House of Representatives
Portfolio: Industry, Science and Tourism
Commencement: The amendments increasing the rate of duty from free to 5% on imports of certain Canadian petrochemicals are taken to have commenced from 1 January 1997. The amendments according developing-country rates of duty to imports from territories administered by the Palestinian Authority are taken to have commenced from 10 March 1997, and those removing the duty on imports of sugar and certain sugar by-products from 1 July 1997.

Purpose

The principal amendments:

  • increase the rate of duty from free to 5% on imports of certain Canadian petrochemicals in retaliation for Canada extending to several of its developing-country trading partners preferential rates of duty on Canadian imports of raw sugar;
  • accord developing-country rates of duty to imports from territories administered by the Palestinian Authority; and
  • remove the duty on imports of sugar and certain sugar by-products.

Background

As there is no central theme to the Bill, a brief background to each major amendment is outlined below.

The most controversial amendments proposed by the Bill are those removing the duty on imports of sugar and certain sugar by-products. The amendments are contained in Schedule 4 of the Bill and discussed at p. 3 of this Digest.

Main Provisions

Schedule 2 - Removal of Canadian Margin of Preference on certain Petrochemicals

The effect of the amendments proposed by Schedule 2 of the Bill is to remove the preferential rates of duty accorded to imports of certain Canadian petrochemicals.

Currently, imports of Canadian petrochemicals listed in subheadings 3903.11.0 - 3905.99.00 (eg. styrene-acrylonitrile and vinyl chloride-vinyl acetate copolymers) of Schedule 3 of the Customs Tariff Act 1995 are accorded a free rate of duty. Imports of such petrochemicals from other countries are subject to a duty rate of 5%.

The amendments give effect, according to the rationale given by the Government in the Second Reading Speech to the Bill, to an advise in 1995 given to the Canadian Minister for Trade of Australia's intention to remove CANATA (Canada-Australia Trade Agreement) preferential rates of duty from Canadian imports of certain petrochemical products.

It may be deduced from the Second Reading Speech to the Bill that Australia's action is in response to Canada extending to several of its developing-country trading partners preferential rates of duty on raw sugar equivalent to that enjoyed by Australia under CANATA. It is the current Government's belief that the Canadian action would substantially erode the overall value of CANATA preferences to Australia and shift the benefits under the agreement decisively in favour of Canada.

On-going trade disputes between Australia and Canada have impinged on the bilateral relationship. For example, the Canadian Government imposed a tariff quota on imported boneless beef in 1993 (extended in 1994), with a surtax of 25% on imports over the quota. In 1995, a new tariff quota of 76 000 tonnes was imposed in line with Canada's Uruguay Round obligations. However, a more flexible system of supplementary import permits for beef for 1995 and a country-specific share allocation for Australia in 1996 of 42 000 redressed some of Australia's concerns. On the other side of the coin, Canada has raised objections to Australian quarantine restrictions on the deboning and heat treatment of pork and the quarantine ban on imported fresh/chilled salmon. Most recently, as noted above, Australia has raised objections to Canada extending to several of its developing-country trading partners preferential rates of duty on raw sugar equivalent to that enjoyed by Australia under CANATA.

Schedule 3 - Developing Country Rates of Duty to Imports from Territories Administered by the Palestinian Authority

The effect of the amendment proposed by item 1 of Schedule 3 of the Bill is to accord developing-country rates of duty to imports from territories administered by the Palestinian Authority. The authority was appointed in May 1994, assuming some of the civil responsibilities formerly exercised by the Israeli Civil Administration in the Gaza Strip and parts of the West Bank.(1)

Schedule 4 - Removal of Duty on Imports of Sugar and certain Sugar By-Products.

The effect of the amendments proposed by items 1-5 of Schedule 4 is to remove the duty on imports of sugar and certain sugar by-products.

The amendments proposed by items 1-5 of Schedule 4 seek to validate Customs Tariff Proposal No. 2 (1997) which was tabled in the House of Representatives on 26 March 1997.(2)

Sugar Industry Review Working Party

The current debate on sugar tariffs was sparked by the report of The Sugar Industry Review Working Party (Working Party) released in November 1996. The Working Party was established by the Queensland and Commonwealth Governments in September 1995 to review regulatory arrangements and the need for a tariff on raw and refined sugar. The aim of the review was the removal of restrictions currently in place in the sugar industry. The Working Party's recommendations included removal of the tariff on imported sugar and strengthening of domestic anti-dumping measures.

History of Sugar Tariffs

In the May 1988 Economic Statement, the then Government announced it's intention to replace the embargo on sugar imports with ad valorem tariffs of 35% on raw sugar and 25% on refined sugar, both phasing down to 15% by mid-1992. Industry representations and a Senate Select Committee report led to the implementation of a specific rate tariff on imports of both raw and refined sugar of $115 per tonne in July 1989 falling to $95 per tonne in July 1991 and to $70 per tonne in July 1992 with lower rates for developing countries. The March 1991 Economic Statement announced further reductions in the sugar tariff from the scheduled $95 per tonne in July 1991 to $76 per tonne, and from $70 per tonne in July 1992 to $55 per tonne. At the time, the ad valorem equivalent of the revised rates was estimated at approximately 28% and 21% respectively. Amendments to the Customs Tariff Act 1995 removing the rate of duty of $55 per tonne from 1 July 1997 were formally tabled in the House of Representatives as Customs Tariff Proposal No. 2 (1997) on 26 March 1997.

Government Position

In a Media Release of 4 March 1997 the Minister for Primary Industries and Energy announced that the Federal Government had endorsed the recommendations of the Sugar Industry Review Working Party. In endorsing the recommendations the Minister stated:

... the recommendations provided an integrated package of reforms designed to promote a sustainable and internationally competitive sugar industry.

All 74 recommendations made by the joint industry and government Sugar Industry Review Working Party were endorsed by the Queensland Government on 18 December 1996.

The tariff is the only element which comes under the Commonwealth's jurisdiction, and the industry strongly supports the full adoption and implementation of the integrated package of reforms to achieve its goals.

In combination with the other measures recommended by the Working Party, this will ensure domestic refiners and industrial users have access to sugar at world prices.

Industry Comment

Reaction to the proposed removal of the duty on imports of sugar and certain sugar products has been mixed. Governments and manufacturers have welcomed the removal of the duty, seeing it in terms of promoting a sustainable and internationally competitive sugar industry and allowing access to sugar at world prices. Growers on the other hand have generally not welcomed the removal of the duty, seeing it in terms of lost revenue and asking what do they get in return.

a) In Favour

The Food Industry Council of Australia is reported in The Australian of 18 October 1996 has having made a strong plea for the import tariff on sugar to be scrapped to give some price relief to domestic consumers and commercial users of sugar.

In a Media Release of December 18 1996 the Confectionary Manufacturers of Australasia welcomed the recommendations of the Sugar Industry Review Working Party to remove the tariff on sugar.

In a Media Release of 18 December 1996 the Australasian Soft Drink Association Ltd welcomed and strongly supported the removal of the tariff on sugar and sugar products.

b) Opposed

Mr Bob Bebrouth, who manages the Innisfail office of CANEGROWERS, is reported in The Australian of 23 December 1996 as saying:

There is certainly going to be financial pain, there's no doubt about that, ... . If you take $2 million straight out of the bottom line of the economy, it's certainly going to have an effect not only in the sugar industry. It's going to have an effect on every other industry that's in this district.

President of the NSW Sugar Cane Growers Association, Neil Gregor, is reported in The Land of 2 January 1997 as saying:

removal of the $55 a tonne tariff would cost NSW growers $3 a tonne of cane compared with $1.40 a tonne for Queensland growers and that he could see no benefits in it for NSW growers.

Financial Impact

The benefits of the proposed removal of the duty on imports of sugar and certain sugar by-products are difficult to quantify. The Government in the Explanatory Memorandum to the Bill states that the financial impact of the removal of sugar tariff is difficult to quantify in monetary terms but are considered minimal.

Manufacturers and growers view the removal of the duty in terms of costs and benefits. For example, the Cairns City Council estimates that the Queensland Sugar Belt could loose $18 million annual and the Cairns Local Authority $1.2 million annually with $2 million for the whole Cairns region. The peak cane sugar grower organisation, CANEGROWERS, is reported in The Courier Mail of 19 December 1996 as saying the move to remove the sugar tariff will cost the industry $26.7 million. In the same issue it is reported that Queensland cane growers are each expected to each lose about $2 000 annually.

On the other hand, The Sugar Industry Review Working Party estimates lower industry revenue of approximately $27 million annually but with corresponding benefits to other sectors of the economy. The Australasian Soft Drink Associations Ltd estimates that the removal of the tariff has the potential to save up to $30 million per annum.

Endnotes

  1. 'The Middle East And North Africa 1997', Regional Surveys of the World, England, 43 ed, 1997: 606
  2. The conventional procedure for effecting customs tariff amendments is a tariff proposal followed by validating legislation. Ultimately a government cannot reduce customs tariffs, which are legislatively based, without parliamentary approval. However, as can be seen from the current sugar tariff situation, a government can introduce a tariff proposal which, temporarily, is not subject to parliamentary approval. While tariff proposals must be validated, it is the government which determines when the validating legislation is to be introduced. This can be a considerable time after the proposal comes into effect. Convention in the past 10 years has seen governments introduce validating legislation within 3 to 12 months of a proposal coming into effect.

    It should be understood that a tariff proposal is not legislation but an executive instrument. The Minister has absolute power with respect to tariff proposals. While a tariff proposal can be debated, by either Chamber, an amendment to a tariff proposal is a prerogative of the Minister. Certainly a Chamber can debate the merits of a tariff proposal or pass a motion expressing its concern with it. A Chamber could even indicate that it would reject the validating legislation.

    The law on the matter of how long does a government have to introduce a Bill to validate a tariff proposal is uncertain. The relevant law on the matter is contained in section 273EA and section 266 of the Customs Act 1901. The only certain matter in respect of tariff proposals is that the Government must introduce validating legislation at some point. Convention dictates that the legislation be introduced within 3 to 12 months of the proposal coming into effect. The House of Representatives Practice, however, states that in the absence of the Government introducing a tariff amendment bill changes "may be affirmed towards the end of a period of sittings by means of a tariff validation bill". The full text of House of Representatives Practice should be recalled

    In the absence of a tariff amendment bill, tariff proposals then before the House may be affirmed towards the end of a period of sittings by means of a tariff validation bill. In this case the proposals are not discharged from the Notice Paper as they have not yet been incorporated in the tariff schedule by means of a tariff amendment bill. A validation bill merely extends the force of tariff proposals (p. 415). It can be seen from the above quote that all a validation bill does is extend the life of a tariff proposal. It is still necessary for the government to introduce validating legislation. When this occurs a Chamber may reject or amend the legislation.

Contact Officer and Copyright Details

Ian Ireland
2 September 1997
Bills Digest Service
Information and Research Services

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1997

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1997.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 3 September 1997


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