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Thursday, 2 April 1987
Page: 1941

Mr BARRY JONES (Minister for Science and Minister Assisting the Minister for Industry, Technology and Commerce)(11.00) —I move:

That the Bill be now read a second time.

The Customs Tariff Bill 1987, which is now before the House, proposes the replacement of the current Customs Tariff Act with a completely new document that represents the culmination of work which began in the early 1970s. At that time, the Customs Co-operation Council in Brussels, with Australian participation, undertook to modernise its international tariff nomenclature and to promote its use in other areas of commercial activity. The legislation provides that the new Act come into effect on a date to be fixed by proclamation. While it is expected that the actual operative date will be 1 January 1988, this depends on that date being the date of entry into force of the relevant international convention, that is, the International Convention on the Harmonised Commodity Description and Coding System.

Amendments to take account of Government decisions made before the new Act comes into effect, and to provide for changes necessary following negotiations on trade commitments, will be made by Commonwealth of Australia Gazette notice after proclamation but before the date of operation of the Act. The Customs Tariff Bill runs to 532 pages-much longer than the New Testament but not as long as War and Peace. The First Parliamentary Counsel confirms that as a single piece of legislation, introduced in one hit, only the Companies Act 1981 is longer-546 pages-and more densely packed. The Income Tax Assessment Act makes both pale into insignificance, weighing in at 1,522 pages at the last printing, but it took years of separate enactments to reach its present magnitude.

Before commenting on the more significant aspects of the actual Bill, for the information of honourable members I will provide a brief outline of the new international nomenclature and its development. Honourable members have been calling for this for years. The International Convention on the Harmonised Commodity Description and Coding System provides a new nomenclature for the classification of goods in international trade. The Convention has been developed by the Customs Co-operation Council to replace its existing and outdated nomenclature, which has been the basis of our national tariff since 1965. The Council approved the new Convention on 14 June 1983, and, for it to enter into force on 1 January 1988, a minimum of 17 contracting parties are required by 30 September 1987. Perhaps in a spirit of collaboration for the Bicentenary they will all help out. The Customs Co-operation Council confidently expects that most major trading nations, including Japan, the European Economic Community and the United States of America, will become contracting parties before that date. It is proposed that Australia also become a contracting party at the same time. It is important to note that the United States and Canada will be using an internationally-based tariff for the first time.

The new system aims to: Provide international uniformity in the classification of goods in customs tariffs; make it easier to collect, analyse and compare world trade statistics, both import and export statistics; provide a common international system for coding, describing and classifying goods for commercial purposes-for example, freight tariffs, transport requirements, documentation and so on. The basic structure of the harmonised system is much the same as the current international nomenclature but it has been extensively modernised and extended in detail to take account of trade and technological changes and to provide a uniform international basis for collection of trade statistics. The new system has 97 chapters, compared with the current 99 chapters, and 5,019 mandatory international references, compared with the current beggarly 1,009.

Mr Peter Fisher —You have streamlined government.

Mr BARRY JONES —That is right. The translation into the Australian Customs Tariff Act has followed public circulation of draft structures by the Australian Customs Service and a subsequent Industries Assistance Commission inquiry and report. The IAC, in its report, proposed two options for consideration. Option one resulted from an item by item examination of the existing tariff. It aimed at minimising unnecessary complexity and fragmentation in the new tariff while at the same time avoiding significant effects on the level of assistance to Australian industries. This option retained a considerable number of complexities and subdivisions which greatly increased the number of national tariff sub-headings over the number of new standard international provisions.

Option two removed all the major tariff complexities and brought the Australian tariff very much closer to the standard international requirements. While the changes to duties under this option were greater in certain cases than under the IAC's option one, the net effect on levels of assistance to Australian industry as a whole is considered to be minimal. It has clear advantages for both the public and private sectors through improved administrative efficiency and cost saving from a less complex, less fragmented tariff. The Government has therefore adopted option two, with some minor modifications to meet industry policy and trade commitment obligations, for the new Australian customs tariff.

Returning to the Bill itself, I will now outline the more important provisions and changes from the current Customs Tariff Act. The Bill comprises 29 clauses and 6 Schedules. While many of the clauses are similar in application to the current sections of the Customs Tariff Act, some significant revision and simplification has been undertaken. For example, sections 5 to 9 of the current Act refer to the status of off-shore installations for the purposes of Customs Acts generally and do not have specific relevance to the Customs Tariff. Consequently, they have not been included in the new Bill but will be covered more appropriately by a separate Bill. Current section 10, relating to the measurement of alcohol, is considered more appropriately located elsewhere in the Customs Tariff Act. It now forms part of Schedule 3 to the Bill.

The complicated provisions in various sections currently required to provide for preferences to `declared preference countries' have been removed as these countries no longer require specific reference in the new tariff. Should the need be seen for specific preferences to be given to such countries in the future, adequate provision exists under the proposed new special rates clauses. The ministerial discretion relating to duties applicable to substitutes and imitations-current section 25-has not been carried forward to the new Bill. The normal method of utilising the provisions of the IAC Act, including the public inquiry process for duty alterations, is regarded by this Government as the more appropriate and visible method of dealing with any such cases. Powers under the current section have not been exercised for several years.

I do not propose to go into detail-unless you insist, Mr Deputy Speaker- on those clauses of the Bill which are very similar in impact to current sections. Details of these are available in the explanatory memorandum with this Bill. However, specific mention should be made of some of the more significant clauses of the Bill. Clause 10 provides for the application of the interpretation rules which are fundamental to application of the harmonised system nomenclature to ensure international uniformity in the determination of the classification of goods. To provide specific guidance in this regard, the intended coverage of the headings and sub-headings of the nomenclature is laid down by the Customs Co-operation Council in its `Harmonised System Explanatory Notes'. The actual texts of the rules are set out in Schedule 2 of the Bill.

Clauses 12, 20 and 23 are provisions necessary for the application of a new system for determining duties for goods the subject of tariff quota restrictions. The actual duty structure is provided in proposed Schedule 5. This new system was considered necessary to avoid unacceptable fragmentation and complexity of the main duty Schedule-Schedule 3. It also allows for the determination of both the `within quota' rates and the rates applying for such goods not meeting quota requirements-`penalty rates'-by reference to a single Schedule rather than the current system which necessitates consultation of both current Schedule 3 and Part II of Schedule 4. While the scope of existing quota provisions has not been significantly altered, considerable administrative and tariff simplification will result from the new provisions.

I present, at this point, a brief outline of the coverage of each of the schedules of the proposed Bill to assist honourable members in their consideration of the structure of the new customs tariff. Schedule 1, as with current Schedule 1, lists the classes of countries and places to which special rates apply. These are limited to Forum island countries and developing countries in the proposed Bill. As indicated earlier, special provisions for declared preference countries are not required in the new tariff.

Schedule 2 covers the general rules for the interpretation of the harmonised system. I have previously indicated the importance of these principles in promoting international uniformity of classification. The first four of these rules are essentially the same as the rules provided by Schedule 2 in the current tariff. Rule 5 is a new international rule governing the classification of cases, boxes and similar containers and packing materials and packing containers. Rule 6 has been introduced to ensure uniform application of the rules and notes at the new harmonised system sub-heading level. The principles of both these new rules have always been applied in application of the current Australian customs tariff.

Schedule 3 is, as for the current tariff, the principal schedule for the purposes of determining the classification and rate of duty applicable to imported goods. Although the systematic structure follows the same pattern as that of the current tariff Schedule 3, there are extensive changes to reflect the more detailed and updated harmonised system.

Schedule 4 provides for the concessional entry of goods meeting certain prescribed conditions. This Schedule is similar to the current Schedule 4-Part I-provisions of the Customs Tariff. Some restructuring for simplification and rationalisation purposes has been undertaken but no significant duty changes will result. Current Schedule 4-Part II-provisions form part of the tariff quota Schedule 5 of the new Bill.

Schedule 5 is a new provision for determining the duties applicable to goods the subject of tariff quota restrictions. The purpose of this Schedule has been explained earlier in connection with my comments on clauses 12, 20 and 23 of the Bill. The provisions of current Schedule 5 of the Customs Tariff which listed the rates of duty applying in relation to New Zealand goods have been included in the main Schedule-Schedule 3-of the proposed Bill. Schedule 6 is similar to the current Schedule 6 and is simply the provision necessary for listing Acts repealed by the legislation.

In summary, the new Australian customs tariff proposed by this Bill reflects the culmination of a mammoth effort both nationally and internationally to produce the most rational, simple and modern tariff seen for decades. It represents a move away from the long standing `tailored' nature of the Australian tariff which has developed over the years in response to the special competitive needs of particular Australian products or narrow industries. A more neutral environment for investment and trade decisions is anticipated as a result. While changes to tariff rates for particular imports are inevitable, the net effects on levels of assistance to Australian industry as a whole, will be minimal.

The harmonised system of classification on which the tariff is based will be of major benefit to Australia and its major trading partners in a number of ways. It will reduce doubts as to the description and coding of goods, a significant source of error which today affects the accuracy of trade statistics and the application of tariffs. It will facilitate the international collection and dissemination of trade data and its common language will remove the cause of many interruptions to the movement of goods between countries, thus reducing the cost of trading transactions.

Financial Impact

The likely financial impact of the proposed new tariff is difficult to assess. However, the IAC report indicated that its option 2 proposals would result in a slight increase in the average general import weighted tariff rate of 0.7 of a percentage point. This increase would be marginally less with the modification to the option proposed by the Government. Administrative costs involved in implementing the new system will be mainly once only printing and dissemination costs of $0.9m. There will of course be initial costs to the community at large in converting to the new system but these are expected to be minimal. I commend the Bill to the House and present the explanatory memorandum to the Bill.

Debate (on motion by Mr Carlton) adjourned.