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
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.
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.
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.
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.
- 'The Middle East And North Africa 1997', Regional Surveys
of the World, England, 43 ed, 1997: 606
- 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.
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
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Published by the Department of the Parliamentary Library,
1997.
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Last updated: 3 September 1997
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