Bills Digest No. 63 1999-2000 Customs Tariff Amendment Bill (No. 2) 1999


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
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details

Passage History

Customs Tariff Amendment Bill (No. 2) 1999

Date Introduced: 24 June 1999

House: House of Representatives

Portfolio: Justice and Customs

Commencement: The amendments reducing the rate of customs duty on: imports of inputs to the manufacture of information industries equipment are taken to have commenced on 1 July 1998; on imports of medical and scientific equipment are taken to have commenced on 1 September 1998; and imports of certain machines, parts or accessories for machine tools and robots are taken to have commenced on 1 April 1999.

Purpose

The major amendments proposed by the Bill:

  • reduce the rate of customs duty to free on imports of inputs to the manufacture of information industries equipment
  • reduce the rate of customs duty to free on imports of medical and scientific equipment, and
  • reduce the rate of customs duty for certain machines, parts or accessories for machine tools and robots.

Background

As there is no central theme to the Bill a brief background to each major amendment is outlined in the 'Main Provisions' section outlined below.

Main Provisions

Industry and public reaction to proposed amendments

The amendments proposed by the Bill have not been reported in the major dailies as having attracted any negative industry or public reaction.

Schedule 3 amendments - information industry imports

The major amendments proposed by Schedule 3 remove the customs duty on inputs to the manufacture of information industries equipment. The origin of the amendments can be said to be twofold, namely, to give effect to a commitment announced in the Government's Investing For Growth industry statement of December 1997, and to meet Australia's obligations under the international Information Technology Agreement.

The Information Technology Agreement (ITA) was the principal outcome of the first ministerial meeting of the World Trade Organisation (WTO) held in Singapore in 1996. The ITA seeks to eliminate tariffs on computers and other information technology equipment by January 1 2000. Basically, the ITA is a list of different hardware and software products on which duties will be eliminated.

Major categories of products included in the ITA are analogue and digital computer processing machines, input units (e.g. scanners, keyboards), output units, (e.g. printers), calculators, word processors, automatic teller machines, parts and accessories of the above; static converts (power supplies) for ADP machines and telecommunications devices, telephones and video phones, facsimile machines, microphones, loudspeakers, telephone answering machines, magnetic tapes and disks, transmission apparatus (other than radio or television broadcasting apparatus), digital still image video cameras, pagers, aerials and antennas, capacitors, resistors, printed circuits and semiconductors (including diodes, transistors, and photosensitive semiconductors), optical fibre cables, certain digital photocopiers, and certain measuring and checking apparatus.

Also included in the ITA is a broad range of computer software, including CD-ROMs for reproducing phenomena other than sound or image.

Australia, along with Canada, China (Taiwan), the countries of the European Union, Hong Kong, Iceland, Indonesia, Japan, Korea, Norway, Singapore, Switzerland, Turkey and the United States were founding signatories to the ITA. Passage of the Bill will enable Australia to implement the ITA.

On 8 December 1997 the Prime Minister released the Government's Investing For Growth industry statement. In relation to the Australian information technology industry the Prime Minister made the following commitment:

The Government will also remove tariffs on inputs to the manufacture of information industries equipment. (1)

The major amendments proposed by Schedule 3 reduce the rate of customs duty on inputs to the manufacture of information industries equipment from 5% to free.

Schedule 4 amendments - medical and scientific instruments

The major amendments proposed by Schedule 4 remove the customs duty on imports of medical and scientific equipment, with the exception of goods which are included in the passenger motor vehicle manufacturing plan (e.g. speed indicators and revolution counters).

The amendments represent, for the most part, the Government's response to the December 1996 report of the Industry Commission on Australia's medical and scientific equipment industries. In January 1996, the Government referred the medical and scientific equipment industries to the Industry Commission. The Industry Commission's report had two main aims, namely, to examine the development potential of the Australian medical and scientific equipment industries in domestic and export markets, and to identify barriers to that potential being realised and suggest measures to remove them.

In relation to tariffs on medical and scientific equipment imports, the Industry Commission's findings included:

The value of imported medical and scientific equipment, which is clearly classified as such in the Customs Tariff, is at least $1.8 billion. Total imports are certainly somewhat higher.

Prior to July 1996, virtually all imports entered duty free. Three quarters were classified as duty free by the Customs Tariff. The rest had a nominal tariff of 5 per cent but nearly all entered under some form of tariff concession. In July 1996, these concessions were modified - mainly to raise the concessional rate of duty from zero to 3 per cent.

The increase in the concessional duty rate has inflated costs to sections of the domestic medical and scientific industries. Some imported equipment and components are used to make other pieces of equipment. In such cases, the increase in concessional duty will simply inflate their manufacturing costs and erode the competitiveness of some companies within the industries.

At the same time, the changes will not appreciably benefit local production of any other equipment. There is little domestic production of the types of equipment that are imported. Where it does exist, most of it is unaffected by imports. Indeed many local manufacturers use imports to fill out their product range.(2)

The Industry Commission recommended that the remaining tariffs on medical and scientific equipment in Chapter 90 of the Customs Tariff Act 1995 be reduced to zero, with the exception of items used in passenger motor vehicles.(3)

In a Media Release of 24 July 1998, the then Minister for Industry, Science & Tourism the Hon. John Moore, released the Government's response to the Industry Commission's report on Australia's medical and scientific equipment industries. The Minister said:

The Government had also decided to remove a range of tariffs on medical and scientific equipment. Most imported medical and scientific equipment enters Australia duty-free, or is eligible for some form of tariff concession, because it doesn't compete with locally-produced equipment. There are also cases where imported equipment and components are used in local manufacture of equipment. In these cases, the existing 5% tariff rate inflates manufacturing costs and reduces the competitiveness of medical and scientific equipment industries. I see little justification for retaining the tariff.(4)

The major amendment proposed by Schedule 4 of the Bill reduces the rate of customs duty on imports of medical and scientific equipment from 5% to free.

The amendments in Schedule 4 of the Bill relating to components for passenger motor vehicles (e.g. speed indicators and tachometers) do not reduce the applicable rate of customs duty (i.e. 15%). However, the amendments do make provision for a reduction in the rate of duty from 15% to 10% from 1 January 2005. This is consistent with the Government's motor vehicle manufacturing plan.

Schedule 6 amendments - machine tools and robots

The major amendments proposed by Schedule 6 of the Bill reduce the rate of customs duty from 5% to free for certain machines, parts or accessories for machine tools and robots. The amendments represent the Government's response to the Industry Commission's August 1996 inquiry into the machine tools and robotics industries.

In January 1996 the then Assistant Treasurer referred the Australian machine tools and robotics industries to the Industry Commission for inquiry. The Industry Commission's report can be said to have had two main objectives, namely, to report on the effectiveness of the machine tools and robots bounty scheme and to identify and report on areas of overlaps between that form of assistance and other assistance.

The major recommendation of the Industry Commission in relation to tariff assistance to the Australian machine tools and robotics industries was to recommend that the tariff on items 8466.10, 8466.20, 8466.30, 8466.93 and 8466.94 of Schedule 3 be reduced to zero from 1 July 1997.(5) The rationale for this recommendation was:

Certain parts for machine tools are identified separately in the Tariff Schedule. As production of most parts is not in practice assisted by the bounty now, the status quo could be maintained simply by reducing the rate of duty on those items to zero. This would allow the by-law items 48, 49 and 55 to be abolished.(6)

Endnotes

  1. Investing For Growth, Address by the Prime Minister the Hon John Howard M.P., National Press Club, Canberra, 8 December 1997.

  2. Medical and Scientific Equipment Industries, Industry Commission, Report No. 56, December 1996, p. xxiii.

  3. ibid., at p. xxvi.

  4. Media Release, 'Government Responds To IC Report On Medical & Scientific Equipment Industries', Minister for Industry, Science & Tourism, 24 July 1998.

  5. The Machine Tools and Robotics Industries, Industry Commission, Report No. 52, August 1996, p. xii.

  6. ibid., at p. 68.

Contact Officer and Copyright Details

Ian Ireland
21 September 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

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 1999

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, 1999.

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