Customs Tariff Amendment (Schedule 4) Bill 2012

Bills Digest no. 166 2011–12

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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.

Les Nielson
Economics Section
22 June 2012

Contents
Purpose
Background
Financial implications
Main issues
Key provisions 


Date introduced:  21 March 2012
House:  House of Representatives
Portfolio:  Home Affairs

Commencement:  Sections 1 to 3 on Royal Assent. Schedules 1 and 2 commence on a date to be fixed by Proclamation. If this has not occurred within a six month period from the date of Royal Assent, then the Schedules commence on the day after that six month period ends.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

This purpose of this Bill is to repeal Schedule 4[1] of the Customs Tariff Act 1995 and replace it with a revised Schedule 4 which is designed to be more user-friendly.  In addition, the Bill formally incorporates the extension to the South Pacific Regional Trade and Economic Cooperation Agreement (Textile, Clothing and Footwear Provisions) Scheme (SPARTECA – TCF Scheme[2]) to 31 December 2014. This scheme formally ended on 31 December 2011 but was extended by the Government (see below).

This Bill also makes consequential amendments to:

  • A New Tax System (Goods and Services Tax) Act 1999
  • A New Tax System (Luxury Car Tax) Act 1999 and
  • A New Tax System (Wine Equalisation Tax) Act 1999.

Background

On 19 March 2010, the Rudd Government announced that it would rationalise the current tariff concession regime as part of the Government’s better regulation and micro-economic reform agenda.

To implement the tariff concession rationalisation a ‘Better Regulation Ministerial Partnership’ was established between the Minister for Finance and Deregulation; the Minister for Innovation, Industry, Science and Research; and the Minister for Home Affairs.

The Partnership reviewed Schedule 4 of the Customs Tariff Act, which provides tariff concessions for a range of imported goods under different circumstances.[3] A scoping paper seeking industry input for the rewriting of Schedule 4 was released by the Department of Finance and Deregulation on 19 March 2010.[4] The introduction of this Bill was preceded by the release of an exposure draft of both the proposed legislation and Explanatory Memorandum on 19 December 2011.[5]

Schedule 4 of the Customs Act

The current Schedule 4 of the Customs Tariff Act has 98 items and has been assessed as being difficult to use.[6] The proposed new Schedule 4 has 55 items and appears to use simplified language. The purpose of this particular Schedule is to impose concessional rates of duty on a range of imported goods, including goods imported under the SPARTECA – TCF Scheme (see below).

SPARTECA – TCF Scheme

SPARTECA is a non‑reciprocal trade agreement between Australia and New Zealand and Forum Island Countries (FICs), one of the objectives of which is to achieve progressively, in favour of FICs, duty free and unrestricted access to the markets of Australia and New Zealand for as wide a range of products as possible.[7]

The Government expanded the application of the SPARTECA rules by the introduction of the SPARTECA (TCF Provision) Scheme, which allows certain textiles, clothing and footwear (TCF) goods that are manufactured in FICs but do not meet all the provisions of SPARTECA to enter duty free in certain circumstances.[8]  The main circumstance is that the goods imported have a minimum of 25 per cent local content from the FIC exporting these goods.[9] The local content of other goods imported under the SPARTECA is usually well in excess of this figure.

Reportedly, a team of government officials visited Fiji to discuss the extension of the SPARTECA –TCF Scheme in mid 2011.[10]

Trade policy and the return to democratic rule in Fiji

The main beneficiary of the SPARTECA – TCF Scheme is Fiji.[11] On a previous occasion, the granting of trade concessions for exports from that country has been linked to developments in the return of democratic government in that country.[12] That noted, there is nothing to suggest that the proposed extension of this scheme is in any way linked to any such developments in Fiji.

Basis of policy commitment

The changes contained in this Bill to simplify Schedule 4 of the Customs Tariff Act were announced in a joint media release of 15 July 2011.[13] As noted above, this Bill also extends the SPARTECA – TCF Scheme to 31 December 2014. This extension was announced on 23 December 2011[14] and formally included in Customs Tariff Proposal (No. 1) 2012 of 20 February 2012.[15]

Committee consideration

The Senate Selection of Bills Committee resolved not to refer this Bill to Committee.[16]

Policy position of non-government parties/independents

As of the date of writing non-government parties and independents had not commented on this particular Bill.

Position of major interest groups

The Australian Council of Trade Unions (ACTU) has expressed concern that the renewal of the SPARTECA – TCF Scheme risks legitimising the current Fijian Government and does nothing for low paid Fijian textile workers.[17]

Other commentators consider that if the SPARTECA – TCF Scheme was not renewed it would have a limited effect on the behaviour of the current Fijian Government, but would have a dramatic effect on the TCF workers in that country.[18]

The Fijian Government welcomed the announced extension of the SPARTECA – TCF Scheme.[19]

Financial implications

The Explanatory Memorandum notes that this Bill has no financial impact on the Commonwealth’s fiscal balance.[20]

Main issues

A major theme in government administration is regulatory reform and, where possible, deregulation. The proposed amendments to the Customs Tariff Act are consistent with this emphasis.

Some Members and Senators may consider that the extension of the SPARTECA – TCF Scheme to 31 December 2014 is an unwarranted favour to the current Fijian Government. Against that, failure to extend this scheme may have dramatic effects on substantial numbers of low paid Fijians.[21]

Key provisions

Item 3 of Schedule 1 of the Bill repeals the current Schedule 4 of the Customs Tariff Act and inserts a new Schedule 4, with reclassification of related goods and descriptor headings to assist users in the identification of the concessional item applicable to their goods.

Item 31 of proposed new Schedule 4 of the Customs Tariff Act extends the SPARTECA – TCF Scheme to 31 December 2014.

Item 4 of Schedule 1 of the Bill applies the amendments made by item 3 of Schedule 1 to:

  • goods imported into Australia on or after the commencement of Schedule 1 of the Bill and
  • goods imported into Australia before the commencement date, where the time for working out the rate of import duty on the goods had not occurred before commencement date.

 

Schedule 2 of the Bill makes consequential amendments to a number of other tax Acts, which are necessitated by the changes to Schedule 4 of the Customs Tariff Act.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.


 

[1].       Schedule 4 of the Customs Tariff Act lists a number of concessional items in respect of which concessional rates of import duty have been granted.

[2].       The Scheme permits the duty free and unrestricted entry of certain textile, clothing and footwear that originate in and are imported from prescribed Pacific Island Forum countries.

[3].       Department of Finance and Deregulation, ‘Tariff concession rationalisation and simplification’, viewed 27 March 2012, http://www.finance.gov.au/deregulation/tarriff-concession-rationalisation.html

[4].       Department of Finance and Deregulation, ‘Scoping paper: tariff concession rationalisation and simplification’, viewed 27 March 2012, http://www.finance.gov.au/deregulation/docs/Scoping_Paper_Tarriff_Concessions.pdf

[5].       Australian Customs and Border Protection Service, ‘Tariff updates – release of exposure draft of the Customs Tariff Amendment (Schedule 4) Bill 2012’, viewed 27 March 2012, http://www.customs.gov.au/tariff/updates.asp

[6].       J Clare (Minister for Home Affairs), ‘Second reading speech: Customs Tariff Amendment (Schedule 4) Bill 2012’, House of Representatives, Debates, 21 March 2012, p. 3692, viewed 27 March 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fcd08e91c-1ffc-4955-a61a-1a9087358780%2F0028%22 

[7].       The Pacific Islands Forum is comprised of the following member countries: Australia, the Cook Islands, the Federated States of Micronesia, Fiji, Kiribati, Nauru, New Zealand, Niue, Palau, Papua New Guinea, the Republic of the Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu.  See Pacific Islands Forum Secretariat, ‘Member Countries’, viewed 22 June 2012, http://www.forumsec.org/pages.cfm/about-us/member-countries/

[8].       Department of Innovation, Industry, Science and Research, SPARTECA (TCF Provisions) Scheme: terms and conditions, February 2009, viewed 27 March 2012, http://www.innovation.gov.au/Industry/TextilesClothingandFootwear/TCFIndustries/Documents/S-TCFTermsandConditions.pdf

[9].       Australian Customs and Border Protection Service, SPARTECA (TCF Provisions) Scheme – change in requirement to the Minimum Local Area Content (MLAC), Customs Notice No. 2009/07, February 2009, viewed 27 March 2012, http://www.customs.gov.au/webdata/resources/notices/ACN0907.pdf

[10].      Government Alert, ‘Team studies TCF Scheme’, 19 July 2011, viewed 27 March 2012, http://www.governmentalert.com.au/index.php?option=com_content&view=article&id=2014:team-studies-tcf-scheme-&catid=45:general&Itemid=68 and E Baselala, ‘Parties negotiate renewal of trade deal’, fijitimes.com, 12 July 2011, viewed 27 March 2012, http://www.fijitimes.com/story.aspx?id=174892

[11].      Department of Innovation, Industry, Science and Research, SPARTECA (TCF Provisions) Scheme: mid-term review, Final report, 1 May 2008, viewed 27 March 2012, http://www.innovation.gov.au/Industry/TextilesClothingandFootwear/TCFIndustries/Documents/S-TCF_Mid-Term_Review.pdf

[12].      A Downer (then Foreign Minister), Fiji: election timetable and the SPARTECA – TCF Scheme, media release, 12 December 2000, viewed 27 March 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2FPJ236%22

[13].      K Carr (Minister for Innovation, Industry, Science and Research), B O’Connor (Minister for Home Affairs) and N Sherry (Minister for Small Business and Minister Assisting on Deregulation and Public Sector Superannuation), Simplifying tariff concessions, media release, 15 July 2011, viewed 27 March 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F932710%22

[14].      Australian Customs and Border Protection Service, ‘Extension of the SPARTECA (TCF Provisions) Scheme’, 23 December 2011, viewed 27 March 2011, http://news.customs.gov.au/newsletter.asp?article=484

[15].      Parliament of Australia, House of Representatives, Tariff Proposals – Customs Tariff Proposal (No. 1) 2012, 16 February 2012, viewed 27 March 2012, http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Tariff_Proposals/Result?tpId=legislation%2ftariffs%2ftariffs_b1378296-e7d9-49cb-a399-d5032d84ed3d

[16].      Senate Selection of Bills Committee, Report No. 5 of 2012, 10 May 2012, paragraph 3, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=selectionbills_ctte/reports/2012.htm

[17].      Australian Council of Trade Unions, Renewed trade agreement with Fiji risks legitimising an oppressive regime: unions, media release, 27 December 2011, viewed 27 March 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1329086%22 

[18].      M Skulley, ‘The cost of trade sanctions’, The Australian Financial Review, 11 August 2011, p. 61, viewed 27 March 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F991361%22 

[19].      T Vuibau, ‘Australia, NZ renew Sparteca Scheme’, Fiji Times Online, 26 December 2011, viewed 27 March 2012, http://www.fijitimes.com/story.aspx?id=189355

[20].      Explanatory Memorandum, Customs Tariff Amendment (Schedule 4) Bill 2012 (hereafter Explanatory Memorandum), p. 3, viewed 22 June 2012,  http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fr4791_ems_aa2c6039-8f05-4f39-8c0b-743be83d7898%22;rec=0

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