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Tariff concession system to continue

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The Hon. John M oore, MR M inister fo r Industry, Science and Tourism

No. 3 6 0 4 F. 2 / 6

M e d i a

Rel ease

Wednesday, S May, 1996 28/96


The Federal Government has confirmed that it will retain a modified T ariff Concession System.

• From 1 July, 1996, the TCS w ill operate at a concessional rate o f duty o f 3 per cent.

• The TCS w ill still apply to both consumer goods and business inputs.

• The Policy B y-Law System w ill also be revamped to contain costs.

The decision overcomes the unfair and unworkable proposal - put forward by the former Government - to totally abolish ta riff concessions on business inputs. Labor’ s proposal would have created an administrative nightmare.

Also, it would have unfairly penalised Australian manufacturers by imposing higher costs on business inputs while at the same time competing imports were to benefit from a reduction in the general ta riff

The Government’s solution is a pragmatic response to the concerns o f industry.

It spreads the cost more w idely and provides relief to key industries that would have been sorely hurt by Labor's proposal.

For example, under Labor’ s proposal producers in the car industry and in the textile, clothing and footwear industries would have had to contend with an increase in tariff paid on imported components and materials from zero up to 37 per cent.

Our solution ensures that these producers will pay no more than 3 per cent duty.

In making our decision we have carefully weighed the employment, investment and revenue implications o f the change

W hile we have limited the impact o f any additional cost to industry, we have been firm. Industry w ill still shoulder its share o f the burden needed to meet our commitments and improve the Budget situation.

Details o f the modified TCS and transitional arrangements are provided in Attachment 1.

Details o f changes to the Policy By-Law System are provided in Attachment 2.

Projected savings to revenue are described in Attachment 3.

Contact: CMR028

Cheryl Cartwright 06/2777580

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A tta ch m e n t 1


A number o f changes will be made to the T a riff Concession System (TCS) operative from 1 July 1996. Both consumer goods and business inputs w ill continue to be eligible for Tariff" Concession Orders (TCOs). A ll imports eligible for entry under TCO w ill be subject to a 3 percent duty This represents a concession o f at least 2 percent for most goods imported under the TCS.

The Government also announced that the changes to the TCS foreshadowed in December 1995 are to be implemented. This includes abolition o f the market test leaving substitutability w ith locally produced goods as the sole criterion for determining whether a TCO w ill be granted.

A minor amendment to the definition o f ‘ substitutable goods’ is to be made to ensure that the Government’ s intentions for the revised TCS are achieved. The revised definition w ill clarify that “ use” is not interpreted as a use in any particular market.

Further significant amendments designed to streamline the administration o f the TCS include:

. legislation w ill reflea that the onus o f identifying local manufacturers rests with the applicant; . the TCO date o f effect is the date the application is received by Customs; . Customs to have the discretion to refuse TCO applications on the basis o f verified local manufacture;

. discretion for Customs to revoke obsolete TCOs; and . amended TCO application wording to be re-gazetted

Duty payable on goods imported under the TCS and which are subsequently exported w ill be eligible for T ariff Export Concessions (TEXCO) and Duty Drawback under current criteria.

All existing Commercial T a riff Concession Orders and TCOs w ill be subject to revocation under the revised TCS criteria

Applications which have not been finally determined before the I July 1996 commencement o f the proposed amendments would be considered under the existing law (ie pre 1 July 1996). Any resulting TCO however, where substitutable goods are available, w ill only be valid from the date o f effect until 30 June, 1996.

The existing TCS "in transit" provision for revoked TCOs is retained but amended in line w ith the December 1995 announcement that the capital equipment provision be limited to made-to-order capital equipment on firm specific order before the date o f revocation.

Contact: Marion Grant

Customs 275 6371 019 442 575 (Mobile)



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A tta ch m e n t 2


The FederaJ Coalition announced its intention to revamp the Policy By-Law (PBL) System in a Press Release o f 15 February 1996. This revamp w ill streamline administration o f the P B L System and improve the effectiveness o f its policy objectives.

The PBL System refers to Items 43, 45, 46, 47, 52, 55, 56, 57 and 60 in Schedule 4 to the Tariff.

The following changes to the PBL System w ill be implemented from 1 July 1996:

a) Items 47, 55, 57 and 60 w ill be eligible for Policy By-Law at a concessional rate o f 3 per cent for successful applications;

b) Applications under Item 43 and Item 52 w ill be restricted to concessional entry for the split consignment o f whole goods unable to be transported on a single vessel, ship or aircraft, because o f their size or an inadvertent delay. A previous practice in respect o f these Items, where notional classifications o f plant have been the basis for concessional entry to complete projects rather than specific goods, w ill not be retained; and

c) Concessions for Items 45, 46 and 56 w ill be restricted to projects with a capital equipment value o f more than S10 million. The concessional rate o f duty w ill remain at ‘ Free’ fo r successful applications. The basis for the threshold w ill be determined by the Department o f Industry', Science and Tourism and Customs.

Apart from the announced changes the PBL System will be administered under the follow ing principles:

a) concessions are available for goods to be used in export oriented or im port replacement activity;

b) applicants w ill be required, as an initial and integral part o f the project purchasing decisions, to have implemented, and be able to demonstrate, measures to adequately consider local supply before decisions are taken to import goods; and

c) applicants w ill be required to demonstrate that the imported goods are not available in Australia. The TCS w ill continue to be used as the basis for testing the availability from Australian manufacturers o f the goods required.

Existing PBL concessions for Items 43, 45, 46, 52 and 56 w ill be revoked from 1 July 1996.

Concessions w ill be reassessed against the new criteria upon application.

Access to a revoked PBL w ill be retained for:

i) goods which have been imported on or before the date o f revocation, provided they are entered within 28 days o f the date o f revocation o f the PBL;

ii) goods on direct shipment to Australia before the date o f revocation o f the PBL provided they are entered within 28 days o f importation,

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iii) made-to-order capital equipment on firm specific order (as defined for the T a riff Concession System) before the date o f revocation, with this provision only available for goods imported by 15 February 1997.

These transitional arrangements are not relevant for Items 47, 55, 57 and 60.

AH PBL applications undecided on 1 July 1996 will be assessed against the new PBL guidelines.

An Australian Customs Notice w ill be published outlining details o f the revised Policy By-Law System.

Contact: Richard Janeczko Customs . > .

06 275 6462 0419 248 101 (mobile)

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No . 3 6 0 4 F. 6 / 6

Attachment 3

Projected Revenue Savings 1996-97 1997-98 1998-99 1999-00

Sm Sm Sm Sm

T a r iff Concession System

338 358 393 413

Policy B y-Law System 45 49 53 58

T otal Revenue Savings

383 407 446 471

Contact: John Grant DIST 06 276 1689