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Customs Tariff Amendment Bill (No.2) 1995
House: House of Representatives
Portfolio: Industry, Science and Technology
Commencement: As specified in the 'Main Provisions' section below.
The major amendments proposed by this Bill to the Customs Tariff Act 1987 will:
ensure that only textile articles which are of 100% of a particular material attract a free rate of customs duty; and
make imports of unmanufactured tobacco and tobacco products free of customs duties.
As there is no central theme to the Bill, a brief background to each major amendment is outlined below.
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General Note: Customs tariffs can be altered by two methods, namely by direct legislation or through the introduction of Customs Tariff Proposals which are subsequently supported by legislation. When Parliament is sitting, notice of tariff changes may be by means of Customs Tariff Proposals introduced into the House of Representatives. When Parliament is not sitting, notice of tariff changes is by publication in the Commonwealth Gazette. Notifications are subsequently introduced into the House of Representatives as Customs Tariff Proposals. Customs Tariff Proposals are enacted by means of legislation which alters the Customs Tariff Act 1987.
Amendments Relating to Textiles and Textile Articles
Section XI of Schedule 2 of the Customs Tariff Act 1987 deals with textiles and textile articles. Subheading Note 2(A) to Section XI provides that:
Products of Chapters 56 to 63 containing two or more textile materials are to be regarded as consisting wholly of that textile material which would be selected under Note 2 to this Section for the classification of a product of Chapters 50 to 55 consisting of the same textile materials.
Note 2 provides:
(A) Goods classifiable in Chapters 50 to 55 or in 5809.00.00 or 5902 and of a mixture of two or more textile materials are to be classified as if consisting wholly of that one textile material which predominates by weight over any other single textile material.
When no one textile material predominates by weight, the goods are to be classified as if consisting wholly of that one textile material which is covered by the heading which occurs last in numerical order among those which equally merit, consideration.
In practical terms, subheading Note 2(A), in conjunction with Note 2(A), means that where goods specified in Chapters 56 to 63 contain two or more materials, the predominant material by weight is taken for classification purposes to consist "wholly" of that one material.
Chapters 56 to 63 contain a number of tariff subheadings that refer to goods that are "wholly" of the predominant textile fibre. For example, item 5702.39.20 imposes a free rate of duty on:
Goods, NSA [not specified above], as follows:
(a) of sisal or jute;
(b) wholly of cotton, or in which the pile is wholly of cotton
It is stated in the Explanatory Memorandum to this Bill that the word "wholly" in these cases was intended to mean goods that are composed completely of certain types of fibres.
In the example given above, floor coverings which are "wholly" of cotton, or in which the pile is "wholly" of cotton, attract a zero duty rate, or in other words, Australian manufacturers of floor coverings which are "wholly" of cotton, or in which the pile is "wholly" of cotton, receives no assistance.
The amendments proposed by clause 5 of this Bill arise from a decision of the Administrative Appeals Tribunal, Franklins Ltd and Collector of Customs. 1
According to the Explanatory Memorandum, the Administrative Appeals Tribunal (AAT) determined:
that blankets containing viscose rayon in quantities varying from 81% to 94% were "wholly" of viscose.
In practical terms, the AAT held that a product that was substantially of a certain material (eg 81% to 94% viscose rayon) can be classified as consisting "wholly" of that material. The effect of the amendments proposed by clause 5 is to replace the term "wholly" with the figure 100% which will ensure that only textile articles which are of 100% of a particular material attract a free rate of duty.
The amendments proposed by clause 5 will have effect from 18 November 1994 [ subclause 2(4)].
Amendments Relating to Tobacco and Tobacco Articles
On 13 December 1994 the Minister for Primary Industries, the Minister for Industry, Science and Technology and the Minister for Trade announced a package of measures "aimed at facilitating adjustment by the Australian tobacco growing industry towards international competitiveness." The announcement represents the Government's response to Industry Commission Report No 39 of June 1994, Tobacco Growing and Manufacturing Industries.
One element of the package was that all imports of tobacco leaf, manufacturer tobacco and tobacco products would be free of customs duties as from 1 January 1995.
The duty payable on imported tobacco and tobacco products is based on the net weight of the goods and any attachments imported with, and to be sold with, the goods. Schedules 3 and 4 of the Customs Tariff Act 1987 (the Principal Act) sets out the rates of duty for tobacco, manufactured tobacco and manufactured tobacco substitutes.
Excise duty is payable on locally manufactured tobacco products and is based on the weight of the product. The Schedule to the Excise Tariff Act 1921 sets out the rates of duty for locally produced tobacco and tobacco products.
While it is clear from media reports and the Government's announcement that the package of measures followed grower, manufacturer and relevant State Government consultation, industry response to the Government's package of measures has been mixed, particularly as regards the level of compensation payouts and the continued level of Federal and State tobacco taxation. For example in The Land (29 December 1994), the Chairman of the NSW Tobacco Leaf Marketing Board, said:
No tobacco has been planted this year due to the drought, so that the industry ceases to exist in NSW from this moment, ... . But the only change will be that tobacco will be imported from Third World countries, which will make our balance of payment figures even worse. ... While the Australian Government was moving to remove protection and drop the 50pc local- content requirement, the US Government was attempting to introduce regulations requiring 75pc local content for domestic and export tobacco products.
The Tobacco Leaf Marketing Board of Queensland Chairman, is reported in The Australian Farm Journal (February 1995) as saying:
There is an oversupply in the world of 800 million kilograms of tobacco. At the moment world prices are rising, but the dollar is also rising so any gains we make are nullified. ... [T]he high rate of government taxation on cigarettes and grower licensing charges are the greatest threats to the future of the industry. From a $5 packet of cigarettes the Federal Government siphons off $1.29 in excise, State Governments take $1.79, the retailer makes 86 cents, the manufacturer $1.06, and the grower gets only six cents.
The amendments proposed by clause 6 relating to tobacco and tobacco products are intended, from 1 January 1995 [ subclause 2(5)], to make imports of unmanufactured tobacco and tobacco products free of customs duties. However, customs duties will still be payable on imports of manufactured tobacco and tobacco products.
The Explanatory Memorandum states that imports of manufactured tobacco and tobacco products will continue to attract customs duties, but at the excise duty equivalent. This will principally be achieved by new item 2401 which will be substituted into the Principal Act by Schedule 2 of the Bill. The amendments also fix the rate of customs duties on manufactured tobacco and tobacco products from 1 January 1995.
The omission of items 35B and 35C of Schedule 4 of the Principal Act are consequential to the amendments making imports of unmanufactured imports of tobacco and tobacco products free of customs duties. Items 35B and 35C impose concessional rates of duty on tobacco and tobacco refuse used in combination with Australian tobacco in the manufacture of tobacco products, and tobacco and tobacco products used in medical or scientific research programmes.
Amendments Relating to Automatic Regulating or Controlling Instruments and Apparatus
Item 9032 deals with the duty payable on automatic regulating or controlling instruments and apparatus. The item contains sub- items dealing with various types of such goods and a general provisions dealing with such goods that are not covered by a specific sub- item. Schedule 2 of the Bill will insert new general provisions that will have the effect of distinguishing between such goods used as replacement components in passenger vehicles and those used in other ways. The rate of duty payable on the latter category will be reduced at a more rapid rate, with a 5% duty applying from 1 July 1996. For such goods used as replacement parts in passenger vehicles, the 5% rate will be reached in January 1999. The amendments will have effect from 1 January 1995 [ subclause 2(5)].
1. N93/529. This case has not yet been published and is not available on any commercially available database. However, transcripts are available at a cost of $7 per page from the Administrative Appeals Tribunal.
Ian Ireland (06 2772438)
Chris Field (06 2772439)
Bills Digest Service
Parliamentary Research Service
4 May 1995
This Digest does not have any legal status. Other sources should be consulted to
determine whether this Bill has been enacted and, if so whether the subsequent Act reflects further amendments.
Commonwealth of Australia 1995
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