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Wednesday, 29 April 1987
Page: 2196


Mr BARRY JONES (Minister for Science and Minister Assisting the Minister for Industry, Technology and Commerce)(4.15) —I move:

That the Bill be now read a second time.

The Customs Tariff Amendment Bill 1987 which is now before the House contains a wide variety of amendments to the Customs Tariff Act 1982. Two clauses in the Bill contain actual amendments to the Customs Tariff Act 1982 but the main amendments are contained in the Bill's 12 Schedules.

Schedule 1 to the Bill, operative on and from 1 April 1986, provides for changes in the duty treatment of certain goods of New Zealand origin. The operative date of this Schedule was selected to give the maximum period available, under customs regulations, for the payment of refunds of customs duty on the goods involved.

Agreement has been reached between the Australian and New Zealand governments that child safety and booster seats used in motor vehicles are not covered by the provisions of the furniture arrangement or the interim arrangement on motor vehicles under the Australia New Zealand closer economic relations trade agreement. Accordingly, such seats should have been subject to the normal liberalisation provisions of Article 4 of the agreement. The applicable 10 per cent tariff should therefore have commenced phasing from 1 January 1983 and have been removed on and from 1 January 1984. The relevant change in this Schedule totally removes the duty. The current 5 per cent duty on ball point pens and parts therefor of New Zealand origin is also being removed. This change follows consultation under ANZCERTA to provide liberalised arrangements for these goods.

Schedule 2 to the Bill, operative on and from 1 October 1986, contains a number of changes associated with the Government's sectoral policy for passenger motor vehicles. This Schedule extends the validity period for 1986 base quota for motor vehicles by two months to 31 March 1987 while the validity period for all new motor vehicle quotas is being extended to 18 months. The 18-month period for new motor vehicle quotas permits three months anticipation before the calendar year and a three month carryover after the conclusion of that year.

The 1987 single period tender scheme commenced on 1 October 1986. As the successful tender premium rate was zero, the general tariff rate to apply is 57.5 per cent-the base quota rate. The 1987 multiple period tender scheme operates for each of four periods of 18 months commencing on 1 October in each of the years 1986 to 1989 inclusive. Vehicles imported in each of these quota periods will attract a general tariff rate of 60.5 per cent, three percentage points higher than the base quota rate. The final change in this schedule involves the rate of duty to apply to under-quota imports of passenger motor vehicles qualifying for developing country preference.

In accordance with the principles of the revised Australian system of tariff preferences for imports from developing countries which formed part of the Customs Tariff Amendment Act 1986, all new quotas are to have a margin of preference of five percentage points. This is a change from the 7.5 percentage points applying to quotas in existence at the time of implementation of the revised developing countries preference scheme.

Schedules 3, 7, 9 and 12 to the Bill, operative on and from 16 October 1986, 17 January, 14 February and 14 March 1987 respectively, alter the rates of customs duty applicable to certain refined petroleum products. In each instance the customs tariff rates are varied in line with changes to the rates of excise duty applicable to equivalent locally produced goods.

Schedule 4 to the Bill, operative on and from 1 November 1986, contains the first steps in the implementation of the Government's decision on the Industries Assistance Commission's report on the chemicals and plastics industries. Duty free entry is provided for fertiliser grade phosphoric acid. This will enable Australian manufacturers to increase their output of high analysis phosphatic fertilisers in response to the changes in subsidy arrangements announced in the Budget, and to maintain supply to farmers at competitive prices.

In addition, an item is inserted into the concessional Schedule to the Customs Tariff Act to enable the issue of a policy by-law to permit the importation of high density polyethylene resin for use in the extrusion of film for bag production, at a general tariff rate of 20 per cent. This by-law is necessary because of a serious shortfall in the production of this resin in Australia. In the absence of the by-law, high density polyethylene bag manufacturers would have had to pay a general tariff rate of 45 per cent until the end of January 1987 and then pay a rate of 25 per cent until the end of December 1987. This would cause serious disruption to employment and investment in the industry. The by-law will only be necessary until the end of December 1987 as on and from 1 January 1988 the general tariff rate for the relevant provision in schedule 3 to the Customs Tariff Act will become 20 per cent. I will provide greater detail on the new assistance arrangements for the chemicals and plastics industries when I come to schedule 8 to the Bill.

Schedule 5 to the Bill, operative on and from 17 December 1986, implements the Government's decision on the Industries Assistance Commission's interim report on citrus fruit. The Government has decided to re-introduce the rates of duty which applied to citrus fruit juices of tariff sub-item 20.07.2 in Schedule 3 to the principal Act, prior to 10 December 1986, until 9 December 1987. The rates will then phase down on and from 10 December 1987. The Industries Assistance Commission's final report on the fresh fruit and fruit products industries is due in early 1988.

Schedule 6 to the Bill, operative on and from 1 January 1987, contains a variety of amendments. The first set of amendments provides for the phased reduction of duty to free on certain rubber goods of New Zealand origin. This action follows mutual determination by Australia and New Zealand under the Australia-New Zealand closer economic relations trade agreement. This Schedule also implements a decision taken in the context of the Government's consideration of the post-1988 assistance arrangements for the textiles, clothing and footwear industries. The general tariff rate of 25 per cent on knitted fabrics laminated with expanded or foam rubber is reduced to 2 per cent.

A series of amendments made in the context of the current textiles, clothing and footwear sectoral policy is also included. These cover variations to the developing country exclusions from preference which are made annually; the insertion of the 1987 tender quota rates of duty following the settlement of the relevant premium tender quota rates; the extension of the validity of the 1986 quota allocations; the phased duty reductions in certain items for goods of New Zealand origin which are made in accordance with article 5 of ANZCERTA; and changes providing special provisions in relation to footwear from New Zealand and hand-made footwear from developing countries to avoid large variations in duty rates which could occur because of currency fluctuations.

Amendments of Schedule 3 and Part II of Schedule 4 to the Customs Tariff Act regarding passionfruit products also form part of this Schedule. These changes complete the implementation of the new forum island countries preference scheme which came into operation for all other goods on 1 July 1986. The final amendments in this schedule cover phasing arrangements under article 4 of ANZCERTA and the deletion of redundant phasing rates in Schedule 3 and Part I of Schedule 4 to the principal Act.

Schedule 8 to the Bill, operative on and from 1 February 1987, commences the implementation of the main part of the Government's decision on the Industries Assistance Commission's report on the chemicals and plastics industries. The amendment in clause 4 of the Bill is consequential on a change in this schedule. Schedule 8 provides the first step in the phasing-in of the long term rates to apply to the chemicals and plastics industries. Most general tariff rates above 25 per cent fall to 25 per cent. Rates on certain basic chemicals are, however, reduced in the first phase to 20 per cent.

Also included in this schedule are new provisions in the Customs Tariff Act to enable the implementation of policy by-laws: To permit the duty free importation of caustic soda for use in the production of alumina and for use in the processing of specified rare earth compounds and metals; and to continue the duty free entry of certain films and plates used in educational, religious and related activities. The final change in this schedule is the amendment of the definition of refined glycerol.


Mr Blunt —What vintage?


Mr BARRY JONES —I bet that this has not been considered by any of the Opposition parties. In its decision on new assistance arrangements for the chemicals and plastics industries, the Government accepted the Industries Assistance Commission's major recommendation that a maximum long term tariff rate of 15 per cent be implemented. This and the related tariff changes contained in these arrangements will be phased in over three to five years. In reaching its decision, the Government recognised that Australia's chemicals and plastics industries have recorded a relatively strong economic performance over many years. This decision should encourage the establishment or expansion of efficient manufacturing facilities and of higher value-adding activities in Australia, thus providing the opportunity for our chemicals and plastics industries to become successful competitors in the international market place.

If there was one significant thread running through the evidence gathered during the inquiry into these industries, it was the general acceptance of the need for change. The combination of the new assistance arrangements and the recognition of the changes necessary to achieve and sustain growth should underpin the process of restructuring and provide a sound environment for new investment.

Schedule 9 to the Bill, operative on and from 14 February 1987, contains a change to implement the Government's decision on the Industries Assistance Commission's report on electric lamps. The Government has accepted the Commission's recommendation that all electric lamps and parts therefore under reference be dutiable at a general tariff rate of 15 per cent.

Schedule 10 to the Bill, operative on and from 1 March 1987, implements two tariff changes on which decisions were taken in the context of the Government's decision on the textiles, clothing and footwear industries post-1988 assistance arrangements. The general tariff rate on knitted towelling and knitted towels increases from 35 per cent to 60 per cent while the general tariff rate for interior textile blinds increases from 2 per cent to 25 per cent. These changes are being made to remove anomalies which permit the goods involved to be entered at rates lower than those applying to substitute products. These changes were deferred from their earlier operative date of 1 January 1987 in order not to penalise importers who were irrevocably committed to overseas purchases or who had goods `on the water'.

Schedule 11 to the Bill, operative on and from 10 March 1987, implements the Government's decision on the Industries Assistance Commission's report on the power electronics industry. The Government has decided on a uniform general tariff rate of 20 per cent for most power electronic goods under reference. Static converters, rectifiers and rectifying apparatus become dutiable at a general tariff rate of 25 per cent for one year and then phase to the long term rate of 20 per cent. All programmable controllers become free of duty and subject to bounty assistance.

The Government has decided not to change the tariff rates on electro-mechanical relays and switch gear as it believes that these goods are not ordinarily considered to form part of the power electronics industry. The 20 per cent rate for the power electronic goods industry aligns its assistance arrangements with those of other electronics-based activities, particularly the communications industry. The last amendment in the Bill is contained in clause 3. This amendment merely corrects a drafting error which was contained in the Customs Tariff Amendment Act (No. 3) 1986.

Financial Impact

The decreases in refined petroleum product excise and customs duty rates effective from 16 October 1986, 17 January and 14 February 1987 are expected to result in decreases in revenue of about $85m, $5m and $176m respectively in 1986-87. The increase effective from 14 March 1987 is expected to result in an increase in revenue of about $30m in 1986-87. These changes exactly offset the changes in revenue from crude oil excise and royalty. It is very difficult to quantify the financial consequences of a decision as complex as the one on the chemicals and plastics industries. Nevertheless, it is likely that as the new tariff rates are phased down the loss of revenue, assuming unchanged import levels, will be of the order of $35m to $45m a year. Part of this loss of revenue is likely to be compensated for over the longer term through growth taking place within the industries.

The Government's decision on electric lamps is likely to increase revenue by approximately $3m in a full year. This increase takes into account a reduction in revenue of about $0.5m caused by the lower general tariff rate of 15 per cent on fluorescent lamps. The net impact of the power electronics industry decision is expected to be an increase in revenue in the order of $10m in a full year. This additional revenue is largely attributable to the new general tariff rate of 20 per cent on goods such as variable speed drives which were previously duty free. It is estimated that the direct financial impact of the decision on citrus fruit juices will be an addition to government revenue totalling approximately $235,000 during 1987.

The reduction in duty on knitted fabrics laminated with expanded or foam rubber will result in a loss of revenue of the order of $0.7m in a full year. The changes on knitted towels and towelling and textile blinds will result in increases of approximately $1.3m and $1.5m respectively in a full year. The duty reductions for rubber goods, child booster and safety seats and writing implements of New Zealand origin are expected to be modest. There is expected to be minimal financial impact caused by the other amendments in the Bill. A summary of amendments for each schedule to the Bill has been prepared and copies are available from the Tables Office. I table the explanatory memorandum to the Bill and I commend the Bill to the House.

Debate (on motion by Mr Cadman) adjourned.