Mr SECKER (10:12 AM) —I agree with the concerns about the drafting of this Tradex legislation, and I thank the member for Denison for pointing that out. I think it is very important. I certainly do not have the constitutional expertise that the member for Denison would have. I think the best that I could boast is that I am a bit of a bush lawyer, which probably is not very useful in this day and age. However, it does give you some help in trying to seek out the truths of any legislation before us.

I also thank the member for Denison for informing the chamber of the opposition's support for these bills the Tradex Scheme Bill 1999 [No. 2] , the Tradex Duty Imposition (General) Bill 1999 , the Tradex Duty Imposition (Customs) Bill 1999 , the Tradex Duty Imposition (Excise) Bill 1999 , and the Customs Tariff Amendment (Tradex) Bill 1999 [No. 2].

I would like to give a general outline of these bills. The Tradex scheme is a key initiative arising from the government's `Investing for Growth' industry statement. The objective of the Tradex scheme is to allow for the importation of goods without payment of customs duty or other taxes, provided the goods are subsequently exported or incorporated in other goods that are exported. I will give a few examples of that later.

The Tradex Scheme Bill 1999 [No. 2] , Customs Tariff Amendment (Tradex) Bill 1999 [No. 2] , Tradex Duty Imposition (General) Bill 1999 , Tradex Duty Imposition (Customs) Bill 1999 and all the other relevant bills, together with the Customs Tariff Amendment (Tradex) Bill 1999 [No. 2] , provide the legislative basis for this new scheme.

The Tradex Scheme Bill 1999 establishes a Tradex scheme and provides for the administration of the program. The three Tradex duty imposition bills provide for circumstances where goods entered under the provisions of the Tradex scheme are not exported or are consumed in the Australian domestic market. In particular, these bills provide for the imposition of the Tradex duty—an amount equal to the customs duty that would have been payable if the goods had not been imported under the provisions of the Tradex scheme.

The Customs Tariff Amendment (Tradex) Bill 1999 [No. 2] inserts a new item into schedule 4 of the Customs Tariff Act 1995. This will allow for the importation, without payment of customs duty, of goods included in a Tradex order under the Tradex scheme where those goods are imported by the holder of the order. The Tradex scheme will replace the existing tariff export concession otherwise known as Texco. This scheme, which has been in existence for some time, as a result of these changes will allow most duty drawback users to gain up-front exemption from customs duty and other taxes on goods imported for re-export, either in their original or modified form. This gives greater cashflow benefits for the entity involved.

The financial impact of the introduction of Tradex is difficult to estimate accurately. The cost of revenue forgone will be highly dependent on the level of utilisation of the Tradex scheme. Analysis of unpublished Australian Bureau of Statistics data indicates that the utilisation rate of the existing Texco and duty drawback schemes is currently running at approximately 50 per cent. This suggests that approximately $100 million of eligible claims are currently being forgone by the export community. This figure provides an estimate of the amount of additional revenue forgone as a result of 100 per cent utilisation of the existing schemes.

With the introduction of Tradex, it is expected that the utilisation rate will increase because of the more streamlined processes associated with this scheme. However, the take-up rate is difficult to predict in an environment of low and declining tariffs where small claims may not be cost effective for business. Forward estimates make provision for an additional $30 million a year—that is, revenue forgone—as a result of the introduction of the Tradex scheme.

A review of Texco, duty drawback and temporary importation provisions was undertaken by a task force of officials during the latter half of 1997 as part of the Commonwealth legislation review schedule. The deliberations of the review task force and the recommendations included in the draft report form the basis of the government's Tradex initiative announced in the Prime Minister's `Investing for Growth' industry statement on 8 December 1997.

The key features of the Tradex scheme as announced in `Investing for Growth' were as follows: Tradex will provide relief from customs duty and sales tax on imported goods intended for re-export or use as inputs to exports. The existing duty drawback and Texco arrangements will be integrated into the single, simplified and more accessible scheme. Tradex will improve the effectiveness of existing arrangements by, firstly, moving to an exemption based system, thereby reducing compliance costs for users. A drawback facility will still be available for instances where, at the time of import, it was not known that the goods would be re-exported or used as inputs to exports. Secondly, it will adopt a more light-handed approach to access and compliance requirements and a stronger reliance on self-assessment in its day-to-day operation. Thirdly, it will relax some regulatory arrangements in relation to eligibility, registration and ongoing compliance requirements.

The key objective of the Tradex scheme is to provide exporters with up-front exemption from customs duties and sales tax on imported inputs and thus largely remove the need to draw back these charges after export—which in many cases could be several months down the track. This approach will result in substantially lower compliance costs for industry and lower processing costs for government as a result of a greater use of self-assessment and risk management strategies. These lower compliance costs, along with a targeted publicity and education program, should make the Tradex scheme more attractive to business and result in higher utilisation rates. This, in turn, will improve the international competitiveness of Australian exporters—something which I am sure we would all support.

The movement to an exemption based program would result in substantial gains to current and potential duty drawback users, as well as reducing administrative costs by removing the implicit `double handling' involved in a drawback type system. Evidence provided to the task force review suggested that business compliance costs in relation to duty drawback are of the order of 10 to 15 per cent of the amount refunded. If 1997-98, when approximately $80 million of drawback payments were made, is used as a base year, business compliance costs could equate to approximately $8 million to $12 million. In addition, evidence presented to the task force suggested that an exemption based program—in this case the current Texco scheme—was significantly cheaper to administer than the existing drawback process. For example, the average drawback claim costs around $49 to process, while the cost of a Texco exemption per import entry line is only around $9. Wider use of an exemption based system would drop the average cost towards the Texco level.

There were two distinct phases of consultation, the first being the review of the existing Texco, duty drawback and temporary importation provisions undertaken by a task force of officials during the latter half of 1997. The task force was chaired by the then Department of Industry, Science and Tourism. Other agencies represented were the Treasury, the Department of Foreign Affairs and Trade, the Australian Customs Service and the Australian Taxation Office. The task force received 35 written submissions from interested parties, including importers, exporters and customs brokers.

A significant outcome from the public consultation process was a general agreement on the need to retain the key elements of the current programs, with modifications and streamlining. In addition, many stakeholders advocated a greater availability of the up-front exemption based system available in Texco, rather than the more cumbersome drawback arrangements. The task force draft report formed the basis for the government's announcement of the Tradex scheme as part of the `Investing for Growth' industry statement.

The second phase of consultations involved discussions between the Department of Industry, Science and Resources and the Australian Customs Service on the best mechanism for the implementation of the Tradex initiative. During this time various stakeholders, including importers, exporters and customs brokers, were consulted prior to finalisation of this initiative.

The recommended option for the introduction of the Tradex initiative is via legislation. This option provides both industry and government with significant benefits in the delivery of an up-front exemption scheme. In particular, legislation for the implementation of Tradex will clearly spell out eligibility criteria so that the potential applicants have a degree of certainty as to the conditions they must meet in order to participate in the scheme. Secondly, it will enable unsuccessful applicants to have a right of review of the relevant adverse decision by the Administrative Appeals Tribunal. Thirdly, it will provide the administrators of the scheme with the appropriate audit and recovery powers and penalty provisions to help ensure compliance, given the self-assessment nature of the scheme.

I can see many areas of benefit from these proposed changes. For example, in the car industry, which is a very important part of industry in South Australia—and other states—some components are imported for production of vehicles to be subsequently exported. We should give some credit to the previous Labor senator John Button, who certainly got the ball rolling in this area. But previously there was a claim-back provision, and paying back had implications for cashflows. Now there will be no up-front component and the car industry will benefit from better cashflows.

Another example is the production of certain animal food preparations that need the importation of various vitamin supplements, with an up-front payment of tariffs and duty. One medium-sized business in my electorate of Barker immediately comes to mind as one that will benefit from this provision, as they have a thriving export business to New Zealand. If they have to pay the up-front taxes and customs duty, it does cause some cash flow problems. With these changes, they will no longer have those payments, because a large part of their export business is the New Zealand business. Unfortunately, they have no choice in where they buy their vitamin supplements to the feed mixture, because they are only produced overseas.

Certain chemicals are needed for the production of wine, some of which are imported from overseas. Again, this is an important industry in Barker and Australia. Indeed, last year, it produced over $1 billion worth of exports. The export part of their businesses will benefit from the ability not to have to pay these up-front duties and tariffs. That is another commitment and goal, and it is a provision that we have given to the wine industry to ensure that they continue to be the success that they are. I commend this bill and thank the opposition for their very generous support.