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Thursday, 5 December 1985
Page: 3046

Senator WALSH (Minister for Finance)(4.45) —I move:

That the Bills be now read a second time.

I seek leave to incorporate the second reading speeches in Hansard.

Leave granted.

The speeches read as follows-


This Bill proposes amendments to Customs and Excise Laws.

The most important measures are the amendments required to facilitate the introduction of inwards duty free shopping and the amendments required to enable a full rebate of the excise on diesel fuel to be paid to eligible primary producers.

The other provisions of the Bill are of a technical or administrative nature and I will provide brief details of these later.

The amendments related to inwards duty free shopping are part of a legislative package necessary to introduce this duty free and sales tax free facility at international airports in Australia. My colleague the Treasurer will bring forward the complementary changes to the Sales Tax laws. The necessary changes to the Customs and Excise Tariffs and regulations will be undertaken separately.

In September 1984 the Government announced that it had approved the introduction of limited inwards duty free shopping at international airports.

The shops are to be located in airports at a point somewhere between the disembarkation area and the Customs Barrier so as to enable the goods that are sold to incoming overseas passengers to be taken direct to the customs barrier for clearance. The only goods to be sold duty free at the shops will be spirituous liquor, tobacco products and perfume.

Introduction of restricted inwards duty free shopping will not however, alter the duty free concessions available to a passenger, which currently are limited to 1 litre of spirituous liquor and 250 grams of tobacco products. There is no specific limit on the amount of perfume which may be brought in by a passenger duty free, provided the amount does not represent a commercial quantity.

It might be noted that the Industries Assistance Commission has reviewed the passenger concessions recently and its report is being studied.

I should make it quite clear that the facility to purchase inwards duty free will be confined to international airports.

The provisions of clauses 9 and 19 of the Bill therefore provide for Ministerial declarations to make immediate changes to the diesel fuel rebate whenever they occur for policy or other reasons such as a change in the CPI index. The Ministerial declarations are of course subject to the usual disallowance procedures.

I now turn to the technical and administrative amendments contained in this Bill.

Clause 8 of the Bill introduces revised rules of origin for goods produced in Forum Island Countries. These new rules stem from the July 1984 meeting of the Regional Committee on Trade held in Kirabati. At that meeting Forum Island Countries asked Australia and New Zealand to include either or both countries inputs in the calculation of Forum Island content of goods for the determination of eligibility for preferential tariff treatment.

All parties have now agreed that the rules should be extended to provide for a minimum Forum Island Countries content of 25 per cent of the factory cost of goods where there is sufficient additional Australian or relevant New Zealand content to comply with the minimum 50 per cent factory cost rule for preferential tariff purposes.

The amendments to the working days and hours provisions of the Customs Act, contained in clause 5 of the Bill, provide for the Comptroller-General of Customs to determine the fees for the services of officers during normal working hours but at places where such services are not normally provided free of charge. The Comptroller-General already has the power to determine the fees for officers services outside normal working hours and the proposed amendment is designed to provide uniformity in the manner of determining fees for officers services. Provision is made in clause 13 for the determinations of the Comptroller-General to be reviewable by the Administrative Appeals Tribunal. The opportunity has been taken to also include a provision for the review of determinations made under the existing Act.

Clause 11 of the Bill proposes several minor changes to the powers to search persons suspected of carrying prohibited imports or prohibited exports. The changes, which are proposed as a consequence of complaints to the Commonwealth Ombudsman will permit the Comptroller-General of Customs to limit the classes of Customs officers who are to be empowered to direct a search.

The changes will also remove the present requirement that the same officer who established a reasonable cause for the search also conduct the search.

The first amendment is aimed at providing a legal basis for guidelines to prescribe only senior and experienced officers to establish the reasonable cause for a search. The second amendment is similar to an amendment made to section 196 of the Act by the Parliament in 1979 but not proclaimed pending further review of the search provisions. When proposing the similar amendments to section 196 of the Customs Act the then Minister said and I quote:

`This amendment will allow a person to be detained and searched by an officer other than the officer who has established a reasonable cause for the search. It is clear that in certain instances it would not be practicable for the latter officer to be continuously available at the location at which the person was detained or apprehended.'

The Government proposes the amendment in this Bill for the same reasons. The Commonwealth Ombudsman concurs with the proposed changes designed to rectify deficiencies in the existing search procedures.

The opportunity is also being taken to make a drafting correction to the provisions which relate to the sex of the persons who are to conduct a search.

Financial Impact Statement

The introduction of inwards duty free shops is expected to benefit airport concessions revenues by about $5m in a full year. Other revenue effects of the shops are not quantifiable at this stage nor are the administrative costs.

The rebate of duty on diesel fuel at the full rate of the excise duty payable is expected to cost about $35.5m in a full year and $24m in 1985-86.

Changes to the rebate for fuel used in mining operations is expected to cost approximately $350,000.

The other provisions of the Bill have no direct financial implications.

I commend the Bill to the Senate.


The Customs Tariff Amendment Bill (No. 2) 1985 which is now before the Senate covers a wide range of amendments to the Customs Tariff Act 1982.

In summary, the Bill includes three clauses relating to sections of the Principal Act and eight clauses which correspond to schedules which incorporate changes-

(i) initially introduced by gazette notice and subsequently proposed in the House of Representatives as Customs Tariff proposals;

(ii) introduced directly by Customs Tariff proposals; or

(iii) which are being introduced by this Bill.

Clauses 3 and 4 of the Bill contain amendments to sections 15 and 21 of the principal Act that are complementary to the insertion of new sub-section 151 (5A) in the Customs Act which is contained in the Customs and Excise Legislation Bill (No. 2) 1985. The Customs Tariff Act amendments keep the complementary provisions determining the duty rates applicable to goods from preferential sources in line with the relevant rules of origin provisions in the Customs Act. These amendments will come into effect at the same time as the relevant amendment to the Customs Act.

Clause 5 of the Bill will repeal section 30 of the principal Act on and from the eighteenth of October 1984. That date coincides with the operative date of changes made to the Industries Assistance Commission Act 1973 which, among other matters, abolished the temporary assistance authority and changed other provisions relating to temporary assistance. This action has removed the need to retain section 30 of the Customs Tariff Act which deals with temporary rates of duty.

Schedule 1 to the Bill is operative on and from the first of January 1985 and provides for the duty free entry under quota of new woven polypropylene bags of Forum Island origin. This concession follows the Government's agreement to a request by the Forum Island countries for increased access for these goods under the South Pacific Regional Trade and Economic Co-operation Agreement.

Schedule 2 to the Bill, operative on and from the ninth of February 1985, reduces the rate of duty applying to certain engine-powered lawnmowers of New Zealand origin from 7% to 5%.

This reduction follows a review of a compensating charge applied to certain New Zealand lawnmowers which had been in place since the Australia-New Zealand Closer Economic Relations-Trade Agreement came into effect. The charge resulted from the different duty treatment accorded lawnmower engines when imported into New Zealand or Australia. Following the Government's decision on the Industries Assistance Commission report on lawnmowers, certain engines and parts, the general tariff rate on certain lawnmower engines was lowered to 25% and a bounty of $6 per engine introduced. These arrangements led to a review of the compensating charge applied to New Zealand lawnmowers. A further review of the New Zealand rate will be undertaken before the thirty-first of December 1986.

The change contained in Schedule 3 is operative on and from the twenty-third of May 1985 and amends the Customs Tariff description of imported rum. This change is complementary to an excise tariff change and is done to reflect the revised standard for rum in accordance with the Government's decision on National Health and Medical Research Council Review of Wines and Spirits Legislation. Duty rates are not altered by this change.

Schedule 4 to the Bill is operative on and from the first of July 1985 and contains changes which-

(i) correctly reflect the official titles of countries and places specified in Schedule 1 to the principal Act. Duty rates are not affected by these amendments;

(ii) amend various provisions of the Principal Act by removing redundant phasing rates of duty and amalgamating certain tariff classifications where removal of phasing rates has made this action possible;

(iii) implement new arrangements to increase access for certain furniture and furniture components of New Zealand origin following consultations and agreement under the Anzcerta to provide liberalised arrangements for these goods;

(iv) amend item 56 in Part I of Schedule 4 to the principal Act. This change extends to prescribed shipbuilders concessional entry of goods used in the construction or modification of bountiable vessels following an amendment to the Bounty (Ships) Act 1980 which enabled these shipbuilders to be registered for bounty purposes.

Schedule 4 to this Bill also includes a number of changes which continue implementation of the Government's decision on the Industries Assistance Commission report on the commercial by-law system. That decision provided for the introduction of a commercial tariff concession system which came into operation on the first of July 1983 but provided a two-year transitional period during which concessions under the commercial by-law system were to be phased out. Accordingly, those items or parts of items in Part I of Schedule 4 to the Principal Act which included a reference to commercial by-law system criteria are omitted from the first of July 1985.

The decision to implement the commercial tariff concession system and subsequent decisions made by the Government in respect of particular goods do, however, require the continuation of certain concessional arrangements that would have otherwise lapsed on the first of July 1985. Accordingly, changes to the Customs Tariff Act are being made to maintain concessional entry of certain goods, as follows:

(1) goods entered under end-use under security provisions;

(2) goods imported to meet shortfall and fallshort situations;

(3) goods imported to enable the testing and evaluation of motor vehicles or motor vehicle components under the plan known as the passenger motor vehicle manufacturing plan;

(4) goods imported for use as prototypes for the manufacture of similar goods in Australia; and

(5) goods imported for use in petroleum exploration and development.

Concessional treatment for these goods is being maintained by providing new items 57 to 62 in Part I of Schedule 4 to the Principal Act. The concession in respect of goods entered under end-use under security provisions is, however, of an interim nature as these goods are currently the subject of inquiries by the IAC. Similarly, the long term future of the concession for goods imported to meet shortfall or fallshort situations is to be determined by the Government following reviews by the IAC. In this respect some of these goods are already under reference to the Commission.

Finally, Schedule 4 to the Bill contains changes which introduce part of the new assistance arrangements for metal working machine tools and robots. The Government's decision on these arrangements was announced on the thirtieth of May 1985.

Measures related to the bounty aspects of the arrangements were included in the Bounty (Metal Working Machings and Robots) Bill 1985 which was introduced earlier in this sittings. That Bill proposes that the basis on which bounty is calculated be changed from Australian content to a value added principle. The new bounty scheme incorporates different rates of bounty for high and low technology machines and extends coverage of the scheme to include robots and machines such as flame and laster cutting machines and flexible manufacturing cells and systems. The bounty also extends to parts and accessories for these goods and parts and accessories for use as original equipment in the production of all bountiable metal working machine tools.

To complement the bounty arrangements, this Schedule contains those Customs tariff changes where duties are being lowered, as follows:

the insertion of new provisions at minimum rates for gas-operated appliances and laser or electric operated metal working machines or apparatus when incorporating a computer control. These amendments have also resulted in new legal notes to define the term `computer control'; and

a new item in Part I of Schedule 4 to the principal Act to enable concessional entry of certain robots, and parts and accessories of a kind used solely or principally therewith.

Schedule 5 to the Bill is operative from 8 pm on Budget night, the twentieth of August 1985. This Schedule contains certain tariff changes which increase the customs duty on imported manufactured tobacco by $5 per kilogram. These changes are complementary to changes proposed to the Excise Tariff Act which increase excise duty on locally produced manufactured tobacco by the same amount.

Schedule 6 to the Bill is operative on and from a date seven days after the date of royal assent. This Schedule incorporates further changes arising from the Government's decision on assistance arrangements for metal working machine tools and robots. Some of the goods covered by that decision are not subject to the bounty assistance arrangements to which I have already referred. As these changes involve an increase in the rate of duty applying to certain metal working machine tools and parts and accessories therefor, the increased rates are not being brought into effect until seven days after the date of royal assent.

Schedule 6 also contains a minor change in the demarcation point between dutiable and duty free tractors following a government decision on assistance arrangements to apply to agricultural wheeled tractors and certain parts.

Other amendments contained in Schedule 6 ensure that the Customs Tariff Act uses correct spelling, grammatical and drafting forms. The need for these changes was identified during the ongoing review of the principal Act and they are not directed towards questions of industries assistance.

A further change relates to the rate of duty applying to chenille fabrics. These goods were under reference in the IAC's 1981 report on miscellaneous textile products. At that time the IAC recommended that Chenille fabrics continue to be dutiable at minimum rates but drew attention to the possibility that imports of fabrics containing Chenille yarn might erode the assistance provided to other fabrics. Accordingly, the IAC suggested that imports of Chenille fabrics be monitored. The government agreed with this approach. As a result of this monitoring, evidence of increasing imports of Chenille fabrics was considered by the Textiles, Clothing and Footwear Advisory Committee. The Committee concluded, in its May 1985 report, that imports of fabrics containing Chenille yarn were in fact eroding, and had the potential to further erode, assistance to woven man-made fibre fabrics. The Committee, therefore, recommended that imports of man-made fibre fabrics containing 20%, or less, by weight of Chenille yarn be dutiable at 40%-the base quota rate for the equivalent man-made fibre fabrics. The Government has accepted that recommendation.

Schedule 6 also introduces:

(1) two amendments to restore levels of assistance considered to have been removed by judgments of the Administrative Appeals Tribunal; and

(2) three amendments to maintain the technical accuracy, remove a potential ambiguity and restore the intended coverage of certain provisions of the principal Act.

Advice received from the Attorney-General's Department states that it is in order for such changes to be introduced directly by a Bill to amend the Customs Tariff Act.

This procedure is being followed for goods known as polypropylene grass yarns and certain photographic chemicals which, as a result of AAT judgments, have had their intended levels of assistance substantially reduced.

The level of assistance for polypropylene grass yarns, which are principally used for the production of outdoor carpet, was last considered by the IAC in its 1981 miscellaneous textile products report. Two major local manufacturers gave evidence to the IAC which recommended that the existing general tariff rate of 30% be maintained. The Government accepted the IAC's recommendation. An importer of polypropylene grass yarns subsequently challenged the tariff classification of these yarns and obtained a ruling that such yarns were classified in a different tariff item from the one in which the 30% rate of duty applied. As a result, the importer was able to enter goods which competed directly with the Australian product at minimum rates. Local manufacturers have made representations to the government concerning their loss of assistance and requested that assistance levels be restored to that recommended by the IAC. After consideration of this matter, the government accepts that intended assistance levels should be restored and, accordingly, an appropriate amendment to the Customs Tariff Act is being made by this Bill.

In respect of certain photographic chemicals, the wording of the relevant provision was amended as a result of the Govenment's decision on the IAC report on Customs Tariff simplification but a general rate of duty of 15% was maintained. An importer challenged the tariff classification applied to certain imported photographic chemicals before the AAT and the tribunal ruled that the wording contained in the simplified customs tariff enabled entry of the goods at minimum rates of duty. The terms of reference for the tariff simplification inquiry required that levels of assistance not be substantially altered. The revised wording applying to the photographic chemicals in question has, however, had the effect of substantially altering the intended level of assistance for such goods. Accordingly, the Government proposes in this Bill to restore the assistance level for the photographic chemicals involved.

The other changes in Schedule 6 which are being introduced directly by Bill relate to:

(i) the correct definition of goods known as ethylene oxide derivatives. The Government has accepted the need for these changes after considering technical advice received from officers of the Australian Government Analytical Laboratories;

(ii) the removal of a potential ambiguity in the tariff description applying to certain plastic coated man-made fibre fabrics. As presently worded, the description might be interpreted as applying to a different range of plastic coated fabrics than intended; and

(iii) a change in the tariff description of certain wrapping paper following research which confirms that the relevant provision should not apply to papers produced by a coating process.

Schedule 7 to the Bill introduces new assistance arrangements for the production of heavy commercial motor vehicles, parts and accessories, effective from the first of January 1986. In deciding upon these changes, the Government recognised that the level of activity and employment in the industry is related to the level of activity in the assembly sector. In recent years, the assistance afforded assembly activity has been high, the industry has become more fragmented and local content and market share have declined.

Accordingly, the Government has decided that a modest reduction in assistance levels is warranted and could lead to an improvement in the structure of the industry whilst restraining costs and maintaining significant employment levels. The new arrangements are reflected in the introduction of a uniform 20% general rate of duty for general purpose heavy commercial vehicles, most special purpose vehicles and fire-engines. This represents an increase in duties in respect of certain small fire-engines but a reduction in respect of the other vehicles to which I have referred. Split rates of duty on crane lorries are replaced by a single 30% general rate of duty.

The current bounty arrangements on selected components will be phased out over a period of three years and be progressively replaced by an equivalent customs tariff which, by the first of January 1989 will reach a general rate of duty of 25%. The change from bounty to tariff assistance is not designed to alter the level of assistance accorded these components.

Filters, which presently attract general rates of duty of 2%, 25% or 35% depending upon their tariff classification, will become dutiable at a uniform rate of 25%. Filters of New Zealand origin will, however, remain dutiable at current rates.

In addition, the Government has asked the automotive industry council to advise on what additional local components would be competitive with imports at the 25% general tariff rate.

Schedule 7 also includes changes to the customs value criteria applying to certain footwear from the first of January 1986. These changes arise from the Government's acceptance of a recommendation by the Textiles, Clothing and Footwear Advisory Committee, in its May 1985 report, that the value of certain footwear increase from $1.15 to $1.35 per pair to help maintain the basic character of footwear not subject to quota. The value criterion of certain non-leather footwear is also increased from $9.50 to $11 per pair to help maintain the basic character of the product mix covered by two footwear quota categories. These changes also include the developing country arrangements for footwear to apply during 1986 under the Textiles, Clothing and Footwear Sectoral Policy. Among the developing country arrangements is an increase from $3 per pair to $3.50 per pair in the value criterion for hand-made leather footwear.

Schedule 8 to the Bill is operative on and from the day on which certain sections of the Customs and Excise Legislation Amendment Bill (No. 2) 1985 come into operation. The change contained in Schedule 8 relates to an amendment to item 15 in Part I of Schedule 4 to the Customs Tariff Act to enable the duty free entry of certain goods purchased at airports by passengers arriving from overseas. This change is complementary to the changes being proposed to other Customs and Excise Legislation to implement the Government's decision in respect of inwards duty free shopping.

Financial Impact

The revenues raised by customs duties are regarded as incidental to their prime function of assistance to industry. With this proviso in mind, it has been possible to make estimates of the expected losses and gains in customs revenue in respect of the following new arrangements:

A revenue gain of approximately $1 million per annum could be expected in respect of metal working machine tools and robots; and

A reduction of some $4 million per annum in revenue is anticipated in relation to the heavy commercial motor vehicle changes. This reduction could be offset to some extent by increased imports of certain vehicles.

In both of the above cases there is also complementary bounty legislation. The bounty payments to be outlaid under the respective pieces of legislation also need to be taken into account to obtain the total impact of these assistance arrangements. For the financial year 1986/87 it is anticipated that a total of $16 million will be outlaid under the two bounty schemes.

In regard to the provision to enable the introduction of inwards duty free shopping, the second reading speech for the Customs and Excise Legislation Amendment Bill (No. 2) 1985 addresses the question of financial impact.

The changes in respect of polypropylene grass yarns and photographic chemicals, which are designed to restore levels of assistance considered to have been removed by administrative appeals tribunal judgments, have a financial impact when judged against the revenue which would otherwise have been collected under the tariff classifications applied by the tribunal. For polypropylene grass yarns, the change will result in approximately a $0.3 million gain in a full year. The change on photographic chemicals is expected to result in a gain of $0.7 million in a financial year.

The government's decision to increase the duty on certain chenille fabrics may, by reducing the possibility of fabrics containing minimal chenille yarn being used in substitution for other fabrics, result in a $0.2 million gain in a full financial year.

All the other changes in the Bill are expected to have minimal financial impact.

There are no significant administrative costs associated with the Bill.

A summary of amendments for each schedule to the Bill has been prepared. Copies are available from the records and tables office.

I commend the Bill.


This Bill is related to the Customs and Excise Legislation Amendment Bill (No. 2) 1985.

It proposes several technical and formal amendments to the Customs Undertakings (Penalties) Act 1981 as a consequence of the changes made to the tender quota arrangements in the Customs Act by the Customs and Excise Legislation Amendment Act 1985 passed earlier this year.

The Customs Undertakings (Penalties) Act 1981 provides for the imposition of penalties for Breaches of Undertakings required to be given for the purposes of the tender quota arrangements of Part 15 of the Customs Act 1901.

Part 15 of the Customs Act was altered this year to-

(1) enable the Minister administering the Customs Act to determine the periods of validity for which tender quota schemes are to run;

(2) change the requirements of the tender quota undertaking so that tenderers need only undertake to enter the relevant goods for home consumption and not also undertake to import the goods; and, consequently,

(3) change the importation requirement of quota instruments to a requirement that the goods be entered for home consumption.

Financial Impact Statement

The provisions of this Bill have no direct financial implications. I commend the Bill to the Senate.

Senator WALSH —Mr Deputy President, may I claim your indulgence to suggest that we debate these Customs Bills cognately with order of the day No. 5, a package of four sales tax Bills. I understand agreement has been reached on this matter.

The DEPUTY PRESIDENT —Is leave granted? There being no objection, it is so ordered.




(No. 2) 1985


(No. 11) 1985

SALES TAX BILL (No. 11A) 1985

SALES TAX BILL (No. 11B) 1985]