Bills Digest no. 64 2006–07
Customs Tariff Amendment (Incorporation of Proposals)
Bill 2006
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
Financial Implications
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Customs Tariff Amendment
(Incorporation of Proposals) Bill 2006
Date
introduced: 29
November 2006
House: House of Representatives
Portfolio: Justice and Customs
Commencement:
The formal provisions
commence on Royal Assent. The provisions in Schedules 1 and 2
commence retrospectively.
To amend the Customs Tariff Act 1995 in order to
introduce measures that were included in Customs Tariff Proposal
No. 4 of 2005 and Customs Tariff Proposal No. 1 of 2006.
Background
Customs tariff measures are usually introduced by way of a
customs tariff proposal that is moved and tabled in Parliament. It
is rare that these motions are debated. The collection of customs
duties commences on the date set out in the motion.(1) A
customs tariff amendment bill is usually introduced at an
appropriate time to consolidate most of the outstanding proposals
introduced into the House of Representatives. These bills are
retrospective in operation, in respect of each proposal, to the
date on which collection of customs duties commenced.
This Bill contains amendments to the Customs Tariff Act
1995 that were included in Customs Tariff Proposal No. 4 of
2005 and Customs Tariff Proposal No. 1 of 2006. Customs Tariff
Proposal No. 4 of 2005 was moved on 13 October 2005 but commenced
operation on 11 May 2005. The proposal reduced the rate of customs
duty from three per cent to zero for goods entered under item 47 of
Schedule 4 of the tariff. Item 47 applies to machinery that
incorporates or is imported with other goods, which for technical
reasons render the machinery ineligible for a tariff concession
order. Item 47 allows such goods to be dutiable at the same rate of
customs duty that would be apply if the goods were subject to a
tariff concession order. The lowering of the duty rate applying to
goods entered under item 47 maintains consistency with the 2005-06
budget decision to remove the three per cent duty on business
inputs that are subject to a tariff concession order and commences
retrospectively, on the same day. The financial impact of the
proposed reduction in duty will result in a loss of Government
revenue of approximately $2 million per annum.(2)
Customs Tariff Proposal No. 1 of 2006 contained two proposals.
It was moved on 15 June 2006 and both proposals commenced on 1 July
2006. The first proposal altered item 31 of Schedule 4 of the
customs tariff. This item allows the duty-free entry of certain
aircraft parts, materials and test equipment for use in the
manufacture, repair and maintenance of aircraft. The proposal,
which was announced in the 2006-07 budget, alters item 31 by
extending duty-free entry to certain goods used in the modification
of aircraft. According to the Minister s second reading speech:
[t]he extension of item 31 to include goods for
use in the modification of aircraft will reduce costs to business
and will provide a clear incentive to continue heavy maintenance
work in Australia. This will strengthen the international
competitiveness of Australia s aviation and maintenance industries,
and is consistent with the Government s policy to improve the
international competitiveness of Australia s aerospace and aviation
industries.(3)
The second proposal announced in Customs Tariff Proposal No. 1
of 2006 altered item 71 of Schedule 4 to the customs tariff by
expanding the Enhanced Project By-law Scheme to include the
duty-free entry of qualifying goods for the power supply and water
supply industries.
The Enhanced Project By-law Scheme (EPBS) provides tariff duty
concessions on eligible goods for large-scale projects in the
mining, resource processing, agriculture, manufacturing and gas
supply industries.(4) The EPBS enables eligible goods
that are not made in Australia, or that are technologically
superior to those made in Australia, to be imported duty free. It
is the successor to the Policy By-law Scheme (until 1 August 1998)
and the Project By-law Scheme (from 1 August 1998).(5)
The EPBS commenced on 1 July 2002. Since that time, approximately
175 projects have completed the scheme s processes with revenue
forgone to the Commonwealth estimated at $130 million, or around
$0.75 million per project.(6)
The scheme incorporates an Australian Industry Participation
Plan (AIP Plan) to encourage the use of Australian industry in
projects and global supply chains. Individuals wishing to obtain a
tariff duty concession for imported goods under the EPBS must
demonstrate in their application that Australian industry has been
given a full, fair and reasonable opportunity to participate in the
project, and describe in detail the goods that are to be imported.
According to the Explanatory Memorandum, experience suggests that a
well executed AIP Plan can increase Australian industry
participation by at least five per cent of the contestable share of
the project , and that the EPBS may have increased Australian
industry participation in major projects by at least $1.7 billion
since July 2002.(7)
The Government announced in May 2006 that the scheme would be
extended to include the duty-free entry of qualifying goods for the
power supply and water supply industries.(8) This
extension was recommended to overcome a perceived anomaly in the
operation of the scheme.(9) The loss of Government
revenue resulting from this measure is estimated to be $10 million
in each of the four financial years from 2006-07 to 2009-10
inclusive.(10)
The measures proposed by this Bill will reduce customs duty and
result in a loss of Government revenue of approximately $12 million
per annum.(11)
Item 1 amends item 47 of Schedule 4 of the
Customs Tariff Act 1995 by repealing the three per cent
rate of duty and replacing it with a rate of duty that is Free .
The amendment applies to goods that are imported into Australia on
or after 11 May 2005, and also to goods that were imported before
that date, warehoused and not entered into home consumption until
on or after 11 May 2005 (item 2).
Item 1 amends the text of item 31 of Schedule 4
of the Customs Tariff Act 1995 to read repair, maintenance
or modification . The effect of this amendment is to extend
duty-free entry to certain goods used in the modification of
aircraft. This amendment applies to goods imported and entered for
home consumption after 1 July 2006, as well as goods that were
warehoused on importation before 1 July 2006 and not entered into
home consumption until on or after 1 July 2006 (item
3).
Item 2 creates a new paragraph
(B) to item 71 of Schedule 4 of the Customs Tariff Act
1995. This paragraph will expand the Enhanced Project By-law
Scheme contained in item 71 to include the duty-free entry of
goods, as prescribed by by-law, for use in the power supply and
water supply industries. This amendment is taken to have commenced
on 1 July 2006 and applies to goods imported into Australia and
entered for home consumption on or after 1 July 2006.
Concluding comments
A review of Australia s general tariff arrangements was carried
out by the Productivity Commission in 1999-2000.(12) In
assessing the scope for further tariff reductions, the Commission
noted Australia s commitment to the Asia Pacific Economic
Cooperation Forum (APEC) goal of free and open trade and investment
in the Asia Pacific by 2010 for industrialised economies and 2020
for developing economies . The Commission commented that, although
there has been no definitive statement by APEC governments on the
meaning of the term free and open , further reduction or removal of
Australia s remaining general tariffs would be consistent with this
commitment .(13)
-
House of Representatives practice, 5th
edition, edited by I.C. Harris, Department of the House of
Representatives, 2005, pp. 428 429.
-
Explanatory Memorandum, Customs Tariff Amendment (Incorporation
of Proposals) Bill 2006, p. 2.
-
Second reading speech on the Customs Tariff Amendment
(Incorporation of Proposals) Bill 2006, House of Representatives,
Debates,
-
AusIndustry, Enhanced Project By-laws Scheme fact
sheet, version number 1.7, June 2006
at:
http://www.ausindustry.gov.au/library/Fact_sheet_22_June_200620060623094047.pdf
(site last visited 4/12/2006)
-
The operation of the earlier schemes is discussed in
Productivity Commission, Review of Australia s general tariff
arrangements , Inquiry report, no. 12, 2000, pp. 109
117.
-
Explanatory Memorandum, Customs Tariff Amendment (Incorporation
of Proposals) Bill 2006, p. 5.
-
ibid., p. 5.
-
AusIndustry, $10m annual boost to power and water projects and
their Australian suppliers , Media release, 9 May
2006.
-
Explanatory Memorandum, Customs Tariff Amendment (Incorporation
of Proposals) Bill 2006, p. 3.
-
ibid., p. 2.
-
ibid., p. 2.
-
The inquiry was announced by the Minister for Industry, Science
and Resources (Senator the Hon Nick Minchin) on 1 July 1999 , and
the report was published on 22 July 2000 as the Productivity
Commission s Inquiry report no. 12, 2000.
-
Productivity Commission, Review of Australia s general tariff
arrangements , Inquiry report, no. 12, 2000, p. 125.
Rosemary Bell
22 December 2006
Bills Digest Service
Parliamentary Library
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ISSN 1328-8091
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