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Industries Assistance Commission - Reports - Filament, Fluorescent And Other Discharge Lamps - 27 August 1975 - Parliamentary Paper No. 265/1975


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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

1975—Parliamentary Paper No. 265

Industries Assistance Commission Report

FILAMENT, FLUORESCENT AND OTHER DISCHARGE LAMPS

27 A U G U S T 1975

Presented by Command 21 October 1975

Ordered to be printed 23 October 1975

THE GOVERNMENT PRINTER OF AUSTRALIA CANBERRA 1976

Printed by Authority by the Government Printer of Australia

INDUSTRIES ASSISTANCE COMMISSION REPORT

FILAMENT, FLUORESCENT AND OTHER DISCHARGE LAMPS

THE HONOURABLE THE SPECIAL MINISTER OF STATE

I am directed by the Commission to forward its report on "Filament, Fluorescent and Other Discharge Lamps" made in accordance with the reference, dated 7 December 1972, from the then Minister for Trade and Industry, under Section 15 of the Tariff Board Act 1921-1972.

I am also directed to indicate that the release of the report as soon as it is printed would not, in the view of the Commission, be likely to result in any damaging speculation.

27 August 1975

A.E.S. Davey Secretary

For the purpose of the inquiry and report on this matter, in accord­ ance with Section 19 of the Industries Assistance Commission Act 1973, the powers of the Commission have been exercised by :

D.L. McBRIDE COMMISSIONER

P.D.J. ROBINSON ASSOCIATE COMMISSIONER

K.L. BROWN ASSOCIATE COMMISSIONER

CONTENTS

Page

SUMMARY 1

PART 1 GENERAL 1.1 Reference and scope of report 1.2 The inquiry 1.3 Tariff provisions 1.4 Requests 1.5 The Australian lamp making industry

1.5.1 Background 1.5.2 Tariff levels during the industry’s development 1.5.3 Structure, location, ownership

and control

1.5.4 Employment 1.5.5 Funds employed and profitability 1.5.6 Marketing and pricing 1.5.7 Range and quality of Australian

production

3 3 3

4

4 4

5

6

7 7 8

8

PART 2 INCANDESCENT AND FLUORESCENT LAMPS 2.1 Introduction 10

2.2 Market supplies and demand 10

2.3 Local advantages and disadvantages 13

2.4 Conclusions 14

PART 3 OTHER DISCHARGE LAMPS, AIRFIELD LANDING LIGHTS AND PARTS 3.1 Other discharge lamps 15

3.1.1 Introduction 15

3.1.2 Market supplied and demand 15

3.1.3 Future demand 16

3.2 Airfield landing lights 16

3.3 Parts 16

3.4 Conclusions 17

PART 4 RECOMMENDATIONS 18

APPENDICES 1 Terms of reference 2 List of witnesses 3 Tariff provisions

19 20 22

SUMMARY

Tills report covers filament (Incandescent) lamps, fluorescent discharge lamps, discharge lamps other than fluorescent and airfield landing lights.

Duty rates currently applicable to these goods are set out In Appendix 3. Preferential rates are either free or very low and the specific General rates, if collected on an ad valorem basis, would, on the average, be equivalent to 5 per cent for incandescent lamps and 27 per cent for fluorescent lamps. Discharge lamps other than fluorescent attract General and Preferential rates of 41 per cent and 7 per cent respectively, including primage. Most lamps of this type are imported under by-law or at the low Preferential rate.

Local producers requested tariff rates of approximately 15 per cent ad valorem for incandescent lamps and 25 per cent ad valorem for fluor­ escent lamps.

The Australian market was valued at about $35 million at the whole­ sale level in 1974. About half of the market was supplied by imports, the local manufacturers being major importers. Local production and imports tend to be complementary, with local production concentrated on general lighting service

(GLS) incandescent lamps and the more common, high volume, fluorescent lines.

Thorn Lighting and Electric Lamp Manufacturers (Australia) (ELM(A)) are the only local manufacturers of incandescent and fluorescent lamps. They are located at Melbourne and Newcastle respectively. The former is owned by Thom of the United Kingdom and the latter by the overseas affiliates of Philips, GEC and Crompton Parkinson. These companies form part of a highly concentrated and integrated world industry.

There are a few small local manufacturers of specialised lamps such as printing, curing, and airfield landing lamps. The output of these manufacturers is almost negligible in relation to the total lamp market.

ELM(A) and T h o m purchase glass componentry from the Newcastle Glass Works which they jointly own. Materials usually account for about half of the unit cost of local production and between 30 and 40 per cent of these are generally imported.

Several witnesses stated that price rises had eroded protection afforded by specific duties but no evidence of harmful import competition was submitted.

Local incandescent lamps do not appear to suffer from any price disadvantage in relation to imports but some examples of lower priced imported fluorescent lamps were noted.

Import price data examined by the Commission showed that, on balance, freight costs are an important source of natural protection for the local industry. This was especially evidence-in the case of some fluorescent lamps where freight accounted for an average of about 60 per cent of the FOB price.

The fact that substantial sources of competition attract low or zero Preferential tariff rates, together with the apparent ability of the two manufacturers to choose between local production or importation under by-law,

strongly suggest that It Is mainly the cost of freight rather than the tariff which protects local production.

The local industry currently employs approximately 900 persons of whom about 60 per cent are production employees.

The Commission estimates that funds employed in the industry amount to approximately $7.3 million and that the return on funds* has been of the order of 20 per cent per annum.

It is recommended that minimum rates of duty be applied to in­ candescent lamps, airfield landing lights and discharge lamps other than fluorescent. In the case of fluorescent lamps the Commission recommends that the application of a duty rate of 15 per cent ad valorem. In the Commission's view production and employment are not likely to be adversely affected by the adoption of these recommendations.

The Commission noted that although incandescent lamps under different brand names are of the same quality, meet the same technical spec­ ifications and in fact are identical in all respects except name, substant­ ially different prices are charged at both wholesale and retail levels.

* The method used by the IAC in determining the funds position and returns achieved is outlined in Appendix 4.2 of the Commission's Annual Report 1973-74.

Funds employed are: net fixed assets plus working capital, being current trade assets less short term trade liabilities (not including bank overdrafts or other borrowed money used in the business).

Returns are operating profits derived as follows: net profit before tax plus interest paid on borrowed money less income from outside investments and less profit derived from other than manufacturing activities (for example, from the sale of fixed assets).

2.

J

'PART 1 - GENERAL 1.1 Reference and scope of report

This report covers filament (incandescent) lamps, fluorescent discharge and other discharge lamps, and airfield landing lights.

These products were included in the reference on Electronic and Electrical Equipment. The reference x

The following report (Sub-Industry H) covers products of the lamp making industry other than automobile lamps which were included in the Com­ mission's report of 10 July 1974 on Passenger Motor Vehicles.

1.2 The inquiry

Public hearings were held on 21 October and 29 October 1974 in Sydney and Melbourne respectively. A further public hearing to discuss the draft of this report was held in Canberra on 28 July 1975.

Evidence was received from the two major manufacturers, (which account for almost 100 per cent of the local production and over 50 per cent of imports), two small specialist manufacturers, a number of smaller special­ ist lamp importers, the Electricity Supply Authority of Australia (ESAA) and Canberra Consumers Incorporated. Twelve firms and organisations made

submissions to the Commission. The names of witnesses, and the firms or organisations which they represented, are listed in Appendix 2 together with the abbreviations used to refer to them throughout this report.

Copies of the official transcript of public evidence and of supplementary evidence submitted by witnesses, have been forwarded to the Minister.

1.3 Tariff provisions

The current rates of duty on goods covered by this report are set out in detail in Appendix 3. By-laws are numerous and are not published in this report.

The General rates of duty applicable to the major items under reference, may be summarised as follows:

Filament lamps $0.25 per kilogram (this is

equivalent to an average of 5 per cent ad valorem)

Fluorescent lamps

Discharge lamps

SO.41 per kilogram (this is equivalent to an average of 27 per cent ad valorem)

41 per cent (including primage)

Landing lights 6 per cent

* See page 5 of the Tariff Board report, Consumer Electronic Equipment and Components, 27 September 1973, for details.

3.

Preferential rates are low or free. Developing countries enjoy concessional rates or duty free treatment on most items and all goods under reference are free from New Zealand.

1.4 Requests

T h o m and ELM(A) requested the elimination of Preferential duties and a change from existing specific tariffs to ad valorem rates of 15 per cent for incandescent lamps and 25 per cent for fluorescent lamps. Noyes Brothers (Crompton Parkinson Division) requested ad valorem duties of 14 per cent and 26 per cent respectively for incandescent and fluorescent lamps but the other two ELM(A) partners, Philips and GEC requested the same rates as did ELM(A) and Thorn. Thorn requested duty free admission for discharge lamps other than fluorescent. Philips also made this request and, in addition, asked that landing lights and neon argon miniature discharge lamps be duty free and that the present by-law provisions continue to apply. Art Craft requested no particular rate of duty but suggested that the production of landing lights be protected. Oliphant requested an ad valorem duty of 35 per cent on dis­

charge lamps.

Of the importers, AGE requested the abolition of preferential rates of duty and expressed its opposition to any additional assistance to the Australian lamp industry. Tomasetti requested that the goods under reference be admitted free of duty or that short-fall by-laws be applied. Ajax requested by-law treatment or a free substantive rate for 1Verilux*

fluorescent lamps.

The ESAA, as a user, expressed no opposition to existing duties, but requested that discharge lamps (item 85.20.5) and tungsten halogen lamps be free of duty.

1.5 The Australian lamp making industry 1.5.1 Background

Large-scale commercial manufacture of electric lamps began in the United States of America, Germany and the United Kingdom at the end of the last century.

The world lamp industry was historically characterised by cartels, marketing and licensing agreements and the predominance of one international firm, General Electric Company.

World production of lamps is highly concentrated. A small number of multinational firms individually or jointly have manufacturing plants in many countries. Major manufacturers are listed below:

U.S.A. General Electric Company

Westinghouse G.T.E. Sylvania

U.K. Thorn

General Electric Company Limited

Europe Philips

Os ram Siemens Tungsram

4.

Japan Toshiba

National

The most significant firms with respect to size and technology are General Electric and Philips.

The relative size of the Australian industry is illustrated in the following table:-

TABLE 1 : LAMP PRODUCTION : AUSTRALIA AND OVERSEAS, 1971 ($Am)

U.S.A. U.K. Japan Australia

809 118 229 9.5

Note : Data is only indicative of the general order of mag­ nitude as the statistics are not necessarily directly comparable in different source documents.

Source : Statistical Yearbooks, U.S.A. (1973), U.K„ (1973) and Japan (1973-74); evidence.

In Australia production is carried on by Thorn Lighting, a subsidiary of Thorn U.K., and ELM(A), which is a consortium of Philips, GEC and Crompton Parkinson. These firms have access to the latest overseas technology.

ELM(A) began manufacturing incandescent lamps in 1931 after a Tariff Board inquiry which resulted in increases in duty to 40 cents/lb General and 20 cents/lb British Preferential, which were equivalent to ad valorem tariffs of up to 87 per cent and 27 per cent respectively. The

owners of ELM(A) had supplied 75 per cent of the imports of lamps until that time and their stated aims at that inquiry were to restrict imports from other sources and increase the range of local production and their purchases of local materials.

Domestic production increased rapidly in subsequent years and a new local manufacturer, Ensign Lamps, began production of incandescent lamps in 1937.

In 1941 the Newcastle Glass Works was established adjacent to the ELM(A) factory to supply glass bulbs and components to both the local manufacturers. Production of fluorescent tubes was commenced in 1943.

Thorn took over Ensign Lamps in 1954 and began producing fluor­ escent lamps in 1962.

Until 1970 there was a marketing association (Australian Lamp Industry Council). It was disbanded after discussions with the Commissioner for Trade Practices.

1.5.2 Tariff levels during the Industry’s development

There have been six Tariff Board reports on electric lamps since 1925. The level of protection has declined since high rates were granted for

5

the establishment of the Australian industry in 1931. In addition, price rises have eroded the ad valorem equivalent of the specific duty.

Exchange rate adjustments and negotiations under GATT reduced the level of protection between 1933 and 1958, and the Tariff Board report of 1958 recommended maintenance of this lower level of protection. After the 1959 Tariff Board report on fluorescent lamps the specific tariffs on

incandescent and fluorescent lamps were brought to parity, though with different ad valorem equivalents.

In its 1963 report on electric lamps the Tariff Board recomm­ ended minimum rates of duty for incandescent lamps and the maintenance of the rates for fluorescent lamps. The Government reduced the rates on in­ candescent lamps to free (Preferential) and 15 cents per pound (Most Fav­ oured Nation) and left the rates of fluorescent lamps unaltered. There were no further changes until the general 25 per cent tariff cut in 1973 when the rates were reduced to their present level.

A dumping inquiry into fluorescent lamps in 1968 disclosed that export prices of fluorescent lamps from Japan were below the tentative nor­ mal values set by the Department of Customs and Excise, and that Japanese lamps had secured 10 per cent of the Australian market. The Government applied dumping duties which were removed on 19 December 1973.

1.5.3 Structure, location, ownership and control

ELM(A) in Newcastle and Thorn Lighting in Melbourne manufacture over 98 per cent of the output of goods under reference in Australia and the ELM(A) partners and Thorn have between them most of the local market for incandescent and fluorescent lamps.*

Each local manufacturer produces a range of lamps which is supplemented by imports, mainly from overseas affiliates and also, in Thorn's case, by purchases from ELM(A). The range produced in Australia has been progressively rationalised over the past few years and production of the least economic categories such as miniature incandescent lamps and low wat­ tage fluorescent lamps has been discontinued.

Thorn Lighting is a wholly owned subsidiary of Thorn Holdings, in turn owned by Thorn of the United Kingdom while ELM(A) is jointly owned by Philips, of the Netherlands and GEC and Crompton Parkinson of the United Kingdom.

Members of the ELM(A) consortium and the Thorn Group are major manufacturers in other areas of the electronics and electrical equipment in­ dustry in Australia.

The Newcastle Glass Works (N.G.W.), the sole local supplier of glass bulbs, tubes and other glass components is jointly owned by ELM(A) and Thorn. ELM(A) has a majority interest with 73.5 per cent of the shareholding. Both companies generally source plant, machinery and imported components from overseas affiliates.

* Confidentiality problems caused by the small number of firms manufacturing most goods under reference has considerably restricted the amount of quantitative data which the Commission can present in this report.

6

Specialist lamps are produced locally in small quantities. Oliphant Pty. Ltd. in South Australia produces ultra-violet contamination control lamps. Silica Lamps Pty. Ltd., in works adjacent to Oliphant, produces medium pressure printing and curing lamps, and Art Craft Pty. Ltd. in Victoria produces airfield landing lights.

1.5.4 Employment

The lamp making industry currently employs approximately 900 persons of whom about 600 are production employees. Employment has been fairly stable over the past three years.

The table below gives an making industry for early 1975.

TABLE 2 : LAMP INDUSTRY EMPLOYMENT

estimate of employment in the lamp

Male Female Persons

Administrative, office, sales and distribution employees 251 102 353

Production employees 155 421 576

Total 406 523 929

Note: Data provided by witnesses was based on employment for various months between December 1974 and April 1975

Thorn, ELM(A), and the ELM(A) consortium members account for over 95 per cent of the industry's employment. Approximately 55 per cent of all employees and about 75 per cent of production employees are female. Most production employees are semi-skilled.

According to evidence, training periods for production employees range from 4 to 8 weeks and the number of apprentices employed represents 3 per cent of production employment.

1.5.5 Funds employed and profitability

Funds employed in the industry are largely accounted for by the ELM(A) consortium and Thom, and are estimated at $7.3 million.

The return on funds has been of the order of 20 per cent per annum, a level well above the 11.5 to 13 per cent achieved in recent years by the manufacturing sector as a whole.*

* The method used by the IAC in determining the funds position and returns achieved is outlined in Appendix 4.2 of the Commission's Annual Report 1973-74.

Funds employed are: net fixed assets plus working capital, being current trade assets less short term trade liabilities (not including bank overdrafts or other borrowed money used in the business).

Returns are operating profits derived as follows: net profit before tax plus interest naid on borrowed money less income from outside investments and less profit derived from other than manufacturing activities (for example, from the sale of fixed assets).

7.

Confidentiality considerations preclude the presentation of a more detailed analysis of production profits.

1.5.6 Marketing and pricing

Demand for incandescent lamps is widely diversified. They are distributed through agencies and branches of Thorn and the ELM(A) partners and at the retail level by chain stores and a wide variety of other outlets. While there are a few large industrial buyers and institutions in the market no individual buyer prossesses significant market strength. Fluorescent lamps are sold mainly through wholesale distributors and builders' suppliers

to customers mainly in the commercial sector.

Thorn and the ELM(A) shareholders each use several different brand names on their incandescent lamps. Both ELM(A) and Thorn confirmed in public evidence that the lamps made in their respective factories are all to the the same specification for each wattage and bulb type, even though they may be branded differently. In addition, some of Thorn's requirements are manufactured at ELM(A) but branded with Thorn's brand names.

The Commission noted that although products under different brand names are of the same quality, meet the same technical specifications and in fact are identical in all respects except name, substantially different prices are charged at both wholesale and retail levels.

Table 3 lists the brands manufactured by Thorn and EML(A).

TABLE 3 i BRAND NAMES_________ ___________________ __________________

Factory Distributor Name

ELM (A) Philips Argenta

Philips Condor Eveready

GEC Osram

Elasta

Crompton Crompton

Philips/GEC/Crompton Chevron Comet

Thorn GTE Sylvania

Thorn Mazda

Atlas Embassy Elton Astrol

Source : Evidence.

1.5.7 Range and quality of Australian production

Only the high volume incandescent and fluorescent lines are produced locally, the Australian market being too small to support production of the less common types. Except for the few specialised lamps produced

8.

locally, discharge lamps (other than fluorescent) are imported. In December 1972 EL11(A) ceased production of miniature lamps since these were uncompetit­ ive with imports.

! Locally produced incandescent and fluorescent lamps are all I produced to the British Standards or International Electrotechnical Commission (IEC) Specifications, there being no locally developed standards for these products.

There was no evidence to suggest that local products are in any way inferior to those produced overseas.

9.

PART 2 - INCANDESCENT AND FLUORESCENT LAMPS 2.1 Introduction

This section includes fluorescent discharge lamps and all incan­ descent (i.e. filament) lamps falling within tariff item 85.20 apart from those ordinarily used in motor vehicles.

In incandescent lamps, light is produced by passing an electric current through a filament, the electrical resistance of which heats it to incandescence. The resistance material, usually fine tungsten wire, is en­ closed in a glass bulb which, in order to preserve the filament, is either evacuated or filled with inert gas.

Incandescent lamps have a variety of bulb shapes, bases and filament construction. The bulk of local production consists of the common pear shaped and round GLS lamps. Bulbs may be clear, coloured, or frosted. Wattages range from 5 to 1500 but the heaviest demand is for lamps from 25 watts to 100 watts. The rated average life of most GLS lamps is 1000 hours.

Imported lamps include projection, sealed beam, miniatures, special purpose lamps, and some GLS types.

Also included in this section but not locally produced are infra­ red lamps which are essentially incandescent lamps which radiate energy in the infra-red segment of the electromagnetic spectrum. Infra-red lamps are used for therapeutic treatment and for heating applications in industry and the home.

In a fluorescent lamp the light is produced by the excitation of a uniform inner coating of fluorescent powder or 'phosphor* through ex­ posure to ultravoilet radiation produced when an electric discharge passes through low pressure mercury vapour in a glass envelope. Fluorescent lamps provide light at several times the efficiency of incandescent lamps, the exact ratio depending on lamp colour which is determined by the chemicals used in the phosphors.

These lamps need to be operated in conjunction with auxiliary electrical equipment known as 'chokes' or 'ballasts', which limit the lamp current to its design value. The main range of lamps is from 15W to 125W. They are generally in the form of straight tubes in lengths of 46cm to 244cm with diameters of 2.5cm to 3.8cm. They are also produced in short 1.9 cm

diameter tubes and in circular form, the normal life of most fluorescent lamps is about 7,500 hours.

2.2 Market supplies and demand . Sales

In 1974 the combined sales of importers and local producers amounted to approximately S22 million in the case of incandescent lamps and $9.0 million in the case of fluorescent lamps. It is estimated that by the time these goods reached the final consumer they realised around $30 million and $12 million respectively, including sales tax.

. Production

Since the Tariff Board's examination of the Australian lamp industry in 1963, production of incandescent and fluorescent lamps has in­ creased at long-term average annual rates of approximately five per cent and ten per cent respectively, although this rate of growth has not been main­

tained in recent years.

10.

Table 4, below was derived from evidence given to the Tariff Board in 1963 and to the Commission at this inquiry.

TABLE 4 : LAMP PRODUCTION - (million units)

1960 1961 1962 1971 1972 1973 1974

Incandescent (excluding miniature) 20.0 24.0 21.0 41.2 38.0 38.8 43.6

Fluorescent 2.6 3.3 3.3 8.3 8.3 9.3 10.3

Source : Evidence.

The combined capacity of ELM(A) and Thorn is greater than the Australian market and the proposed installation of more modern plant is expect­ ed to further increase their capacity. The limitations imposed by the size of the Australian market and the difficulty of obtaining export markets precludes the attainment of the scale of production reached overseas.

. Imports

Although 40 to 50 per cent of the local market by value, is supplied by imports very few of them are directly competitive with local pro­ duction. There have been some recent imports of competitive lines but these were mainly belated deliveries of goods ordered some time ago to offset short­

falls in local supply

Imports of incandescent and fluorescent lamps over the ten years to 1973-74 are included in Table 5.

TABLE 5 : IMPORTS (INCLUDING PARTS) ($'000 FOB)

1964-65 1965-66 1966-67 1967-68 1968-69 1969-70 1970-71 1971-72 1972-73 1973-74

Landing 1 Ights n.a. n.a. 22 50 32 41 33 118

Incandescent laaps 2,841 2,887 3,099 3,626 3,787 4,003 5,192 5,617 5,222 6,720

Fluorescent lamps 1,036 1,280 1,056 1,169 1,119 1,210 1.754 1,286 1,006 1,741

Discharge laaps 549 445 346 961 982 1,160 1,688 1,525 1,723 1,913

Total 4,426 4,612 4,523 5,806 5,920 6,414 8,667 8,428 7,951 10,492

Note: Since December 1972 miniature lamps have been imported, the value of local production replaced was $200,000 to $300,000 per annum.

Source: Compiled from Imports Cleared from Hone Consumption, ABS.

ELII(A) 's principals and Thorn are najor importers. t.1iile the overseas parents of the local firms do not compete with lines manufactured here by their subsidiaries there are independent importers who supply lines competitive with those imported by Thorn and the other companies associated with local production

11.

The Independent importers include: . Australian General Electric Ltd. . Tomasetti and Son Pty. Ltd. . Sixteen Millimetre Pty. Ltd. . Bell and Howell Australia Pty. Ltd. . GTE Australia Pty. Ltd.

. Hanimex Pty. Ltd. . Email Ltd.

A significant proportion of imports is entered free under by-law or in the case of incandescent lamps, free under the substantive tariff item.

Australian Government imports generally amount to less than 1 per cent of total imports.

Table 6 shows the origin of Australian incandescent and fluor­ escent lamp imports in 1973-74.

TABLE 6 : LAMP IMPORTS 1973-74 BY LAMP TYPE AND ORIGIN (FOB) (Excluding parts)

Incandescent Fluorescent

$'000 $ $'000 %

U.K. 1,656 29 308 26

Netherlands 907 16 220 18

U.S.A. 1,264 22 217 18

Germany (FR) 596 11 0 0

Japan 507 9 206 17

Canada 263 5 121 10

Other 482 8 134 11

Total 5,675 100 1,206 100

Source : Compiled from Imports Cleared for Home Consumption, ABS

The United Kingdom is consistently the major supplier. Imports from New Zealand and Developing Countries have been negligible. Canadian imports have not been large compared to other overseas suppliers.

. Exports

Exports of locally produced lamps are negligible, amounting to about one per cent of production. Manufacturers stated that there are no limitations on their freedom to export. Evidence suggests, however, that significant expansion of export activity is unlikely as lamp production is already well established in many countries, and freight costs inhibit ex­ ports of the types of lamp produced in Australia, just as they have inhibited

imports of those types.

. Future demand

Manufacturers’ forecasts of growth in the number of lamps required for the local market range from 3 per cent to 5 per cent per annum for incandescent lamps and 5 to 8 per cent for fluorescent. Factors cited 12.

as influencing demand include the level of activity in the building industry, daylight saving and maintenance economy drives in commercial and industrial lighting.

2.3 Local advantages and disadvantages

The two Australian manufacturers claim that their production techniques are as efficient as any overseas. ELM(A) supported this by confidential data showing an international 'inter-firm comparison' of Philips' lamp factories.

Both ELM(A) and Thorn provided detailed cost dissections of principal types of fluorescent lamp produced locally but did not provide requested cost comparisons with affiliated overseas plants.

Indicative average cost structures for lamp production in Australia are: Incandescent Fluorescent

% %

Materials . local 28 40

. imported 19 20

Labour 33 20

Depreciation, administration and other factory expenses 20 20

100 100

The major disadvantages claimed by local manufacturers were the unavailability and cost of labour, freight costs on imported components, and smaller scale of production compared with overseas.

In relation to major competitive sources of imports local labour cost disadvantages have not been shown to be pronounced. Labour accounts for one-third of the production cost of incandescent lamps and one-fifth of the cost of fluorescent lamps.

Witnesses expressed apprehension of rises in the prices of import­ ed materials but there was no evidence to suggest that such increases will not also be faced by overseas producers. Freight on imported materials accounts for only a very small percentage of landed cost.

The Commission was presented with some confidential evidence on scale economies which suggested local cost disadvantages of up to 20 per cent against the largest overseas plants.

Local manufacturers derive a substantial advantage from freight costs on finished goods. Import price data examined by the Commission showed that freight costs on fluorescent lamps of the types produced in Australia averaged about 40 per cent of the FOB price of 20 watt lamps, and in the case of 40 watt lamps, about 60 per cent. Freight accounts for about one-third of the landed duty free cost of incandescent lamps in the 25 watt to 100 watt range.

Comparison of Australian ex factory prices with the landed duty free prices of some comparable imports showed that local incandescent lamps enjoy price advantages without tariffs. The same cannot be said for 13.

fluorescent lamps. Despite high freight costs the landed duty free prices of some imports were below local ex factory prices.

2.4 Conclusions The two local producers supply almost all of the Australian market for GLS lamps and common fluorescent lamps.

Local cost disadvantages are outweighed in the case of incandescent lamps by the natural protection afforded by freight on imports. In the case of fluorescent lamps, while freight substantially reduces the advantages enjoyed by imports it does not eliminate that advantage.

The Commission accepts that lamps where dutiable should now be subject to an ad valorem rather than a specific rate and will recommend accord­ ingly.

In all cases except fluorescent lamps, there should be no need for by-law on goods under reference. Existing procedures are capable of providing, if necessary, for local production shortfalls of the type mentioned by Tomasetti and for such specialised products as the 'Verilux' lamp imported by Ajax.

The Commission concluded that local incandescent lamp production does not need assistance but will recommend the imposition of an valorem tariff of 15 per cent on fluorescent lamps. The latter represents an increase of about 7 per cent on 61 cm lamps and a decrease of about 12 per cent on 122cm lamps and will provide an effective rate of about 20 per cent. This is low cost by Australian standards and should allow Australian producers to continue

to hold a substantial share of the local market. The application of 15 per cent ad valorem to fluorescent lamps and minimum rates to incandescent is not, of itself, likely to result in a change in the market share of these two types of lamp. Local production and employment are not likely to be affected by the adoption of the Commission's recommendation.

14

PART 3 - OTHER DISCHARGE LAMPS, AIRFIELD LANDING LIGHTS AND PARTS

3.1 Other discharge lamps 3.1.1 Introduction

Discharge lamps other than fluorescent, are considered in this sub-section. These include:­

. Gas discharge tubes containing gases such as neon, helium, argon, nitrogen or carbon dioxide, including flashing discharge lamps used for photography or stroboscopic examination;

. Sodium vapour lamps;

. Mercury vapour lamps; and

. Gas filled dual lamps, in which the light is produced both by an incandescent filament and a gas discharge.

. A special type of discharge lamp under reference is the ultra-violet lamp used for medical, laboratory, germicidal or other purposes.

3.1.2 Market supplies and demand

The total domestic market for discharge lamps, other than fluorescent, is estimated at about $3 million in 1973-74, of which only a very small part (around five per cent) is manufactured locally. The local suppliers such as BWD Electronics Pty. Ltd., Claude Neon Ltd., Oliphant, and Silica Lamps manufacture small quantities of discharge lamps for specialised purposes, such as printing, illuminated signs, etc.

The value of imports of discharge lamps on an FOB basis, for the past ten years, is shown in Table 5.

The bulk of the imports are mercury and sodium vapour discharge lamps. These are used for street lighting and in commercial and industrial applications. About 86 per cent of imports of discharge lamps in 1973-74 were imported under by-law.

The value of imports by country of origin for 1973-74 is given in the table below. Overseas sources of supply are wdll dispersed but in past years the United Kingdom has consistently been a major supplier.

TABLE 7: OISGIARGE LAMPS: IMPORTS 19 73-74 BY COUNTRY OF ORIGIN (FOB)

$'000 /

U.K. 463 25

Ne tlier lands 283 15

Japan 507 27

U.S.A. 331 17

Germany (FR) 78 4

Canada 105 5

Other 127 7

Total 1,899 100

Source: Compiled from Imports Cleared for Home Consumption, ABS 15

The major importers of these lamps are GEC, AGE, Philips, GTE, T h o m Lighting and Tomasetti. Sales are mainly through specialist distributors and direct to principal users.

Of the local supply, Uliphant and Silica Lamps produce specialist lines, such as germicidal ultra-violet lamps and plan printing and curing lamps, mainly for incorporation into their own equipment. Claude Neon Ltd. and BWD Electronics Pty. Ltd. gave no evidence and made no requests but are believed to produce relatively minor quantities of specialist lamps.

3.1.3 Future demand

Various problems previously associated with discharge lamps, such as colour rendition and length of life, have been progressively over­ come since their introduction in the 1930s. There are further improvements anticipated which are expected to contribute to increased demand in the future.

Estimates of future demand and percentage increases for the four years to 1978 were given by a number of witnesses and ranged from about 7 per cent per annum for mercury vapour lamps to 13 per cent per annum for sodium vapour lamps.

ESAA estimates of its members' future demand for discharge lamps are shown in Table 8.

TABLE 8: DISCHARGE LAMPS - DEMAND FORCAST OF ESAA REQUIREMENTS ( Ό00 units)

1975 1976 1977 1978

Tariff item 85.20.5

Mercury vapour lamps - 50/80/125/250W 50 54 59 62

- 400/700/10,000W 25 26 30 34

Sodium vapour lamps (low pressure) 23 23 23 23

Source: Evidence

3.2 Airfield landing lights

The only known local manufacturer, Art Craft, did not provide the Commission with the detailed information requested, nor did the company state the level of protection it required. The Commission's own inquiries showed that sales of landing lights vary widely with airport construction from year to year and that imported lights account for most purchases. Sales of local products are confined to the simpler lamps. Production of landing lights has been a side-line for Art Craft and the duty rates of Free (Preferential) and 6 per cent ad valorem (General) do not appear to have influenced production.

3.3 Parts

The tariff items under reference include identifiable components for goods covered by those items, that is: parts for filament lamps and for fluorescent and other discharge lamps. Materials account for 50 to 60 per cent

16.

of the factory cost of most lamps and from 30 to 40 per cent of these are accounted for by imports. Almost all imports of parts are admitted duty free under their own tariff item or under by-law. The goods concerned are mainly electrodes, filaments, and caps. Glass bulbs, tubes and fittings are generally sourced locally.

Table 9 shows

past four years.

TABLE 9: IMPORTS OF LAMP ($'000 FOB)

the value of

PARTS

imports of lamp parts for the

1970-71 1971-72 1972-73 1973-74

For:-Incandescent lamps 1,054 1,069 815 1,046

Fluorescent lamps 518 227 286 535

Discharge lamps 4 10 3 14

Total: 1,576 1,306 1,104 1,595

Source: Imports Cleared for Home Consumption, ABS

The stated policy of ELM(A) at early Tariff Board hearings was to progressively increase the local materials content. This policy was followed until the early 1960s, when the present mix of imported and local parts was reached.

Apart from periods of shortage when supplies are obtained wherever available, the bulk of parts are obtained from the overseas affiliates of the local manufacturers.

The parts imported are those unsuitable for local production mainly because of economies of scale available abroad together with relatively low freight costs. If the firms involved jointly chose, any of the dutiable parts they currently produce locally could be imported duty free under by-law.

The Commission believes that such parts as are produced locally are not dependent upon protection afforded by the tariff. There were no requests for protection on parts. ,

3,4 Conclusions The Commission noted that only a small part of the local market for discharge lamps (other than fluorescent) is supplied by local producers. These producers appear to enjoy natural protection provided by the highly

specialised nature of the lamps and, in some cases, the use of the lamps in equipment manufactured by the same producer.

No case for assistance was made out and the Commission sees on reason for the continuation of the substantive duty rates on discharge lamps. Landing lights have been produced locally on an intermittent basis, local production being confined to the simpler types. The activity forms only a minor part of the operation of the sole local producer. Again.no evidence of any need for protection was forthcoming.

The Commission considers that the production of discharge lamps (other than fluorescent), airfield landing lights and lamps parts should not be adversely affected by the application of minimum rates and will recommend accordingly. 17

PART 4 - RECOMMENDATIONS

The Commission recommends that fluorescent discharge lamps be dutiable at the rate of 15 per cent ad valorem and that all other goods under reference be subject to minimum rates*.

The above recommendations are made on the assumption that primage duties will not apply.

* 'Minimum rates' means 'Free' subject to international commitments.

D.L. McBRIDE . . . .................. COMMISSIONER

P.D.J. ROBINSON .................... ASSOCIATE COMMISSIONER

K.L. BROWN ........................... ASSOCIATE COMMISSIONER

CANBERRA, AUSTRALIAN CAPITAL TERRITORY 27 August 1975

18.

APPENDIX I

TERMS OF REFERENCE

SUBJECT: ELECTRONIC AND ELECTRICAL EQUIPMENT

I, EDWARD GOUGH WHITLAM, Minister of State for Trade and Industry, hereby

refer the following questions to the Tariff Board for inquiry and report

in accordance with Section 15 of the Tariff Board Act 1921-1972:

(a) whether assistance should be accorded the production

in Australia of -

Electronic and electrical equipment - and other goods,

including parts therefor, falling within the following

items or parts of items of the First Schedule to the

Customs Tariff 1966-1972 -

83.15, 84.53, parts and accessories falling

within 84.55.9 for goods of a kind falling

within 84.53, 85.01, 85.02, 85.07.2, 85.07.9,

85.10 ex 85.12.1 being heating resistors

(elements), ex 85.12.9 being heating resistors

(elements), 85.13, 85.14, 85.15, 85.16, 85.17,

85.18.1, 85.18.3, 85.18.9, 85.19.2, 85.19.3,

85.19.42, 85.19.43 excluding lightning arresters

85.19.44, 85.19.45, 85.19.46, 85.19.47, 85.19.49,

85.19.5, 85.19.6, 85.19.9, 85.20.3, 85.20.4,

85.20.5, 85.21, 85.22, 85.24, 85.26, 85.28,

90.13.4, ex 90.19.1 being deaf aids, 90.20.1,

90.20.2, 90.26.3, 90.27.2, 90.27.3,* parts and

accessories falling within 90.29.9 for goods of a

kind falling within 90.26.3 or 90.27.2 or 90.27.3,

92.11, 92.12, 92.13, 97.03.2 and 98.16.2

and, if so the nature and extent of such assistance;

and

(b) if the Board's findings in respect of (a) are for assistance

through the Customs Tariff, what rates of duty should be

provided for in columns 3 and 4 of the First Schedule to the

Customs Tariff 1966-1972 in respect of the goods concerned.

E.G. WHITLAM

7 December 1972 Prime Minister

19.

26 Metropolitan Avenue Nunawading, Victoria

86-90 Bay Street, Ultimo, Sydney, New South Wales

Birmingham Road, Lilydale, Victoria

10 Windeyer Street, Watson Australian Capital Territory

Clyde Street, Hamilton, Newcastle, New South Wales

1 Exhibition Street, Melbourne, Victoria

Cnr, Percy and Boorea Streets, Auburn, New South Wales

Frederick Street, St. Leonards, New South Wales

95-99 York Street, Sydney, New South Wales

Abbreviation

Art Craft

AGE

Ajax

ELM(A)

ESAA

GEC

Crompton

Phillips

LIST OF WITNESSES - Continued

Address Abbreviation

John Thomas Baird, accountant T h o m Lighting Industries Pty. 19 Maidon Street,

Ltd. Broadmeadows, Victoria

Donald Henry Lambert, group managing director Albert Nelson, general manager technical division

Tomasetti and Son Pty. Ltd. 634 Graham Street, Port Melbourne, Victoria

T h o m Lighting

Tomasetti

Subsequent to the October 1974 public hearings the Commission received a submission from Oliphant Pty. Ltd. (Oliphant), 11 Shepley Avenue, Panorama, South Australia.

FILAMENT, FLUORESCENT LAMPS AMD OTHER DISCHARGE LAMPS TARIFF PROVISIONS APPENDIX 3

Goods under reference the produce or manufacture of New Zealand are free of duty.

CUSTOMS TARIFF

Item Goods

Rates oi Duty

General ■ Preferential

85.16 ELECTRIC TRAFFIC CONTROL EQUIPMENT FOR RAILWAYS, ROADS OR INLAND WATERWAYS AND EQUIPMENT USED FOR SIMILAR PURPOSES IN PORT INSTALLATIONS OR UPON AIRFIELDS:

85.16.2 - Landing lights of a kind used solely or principally upon airfields for night flying

6Z

DC: Free

Free

85.20 ELECTRIC FILAMENT LAMPS AND ELECTRIC DISCHARGE LAMPS (INCLUDING INFRA-RED AND ULTRA-VIOLET LAMPS); ARC LAMPS; ELECTRICALLY IGNITED PHOTOGRAPHIC FLASH BULBS:

85.20.1 - Filament lamps of a kind commonly used in motor vehicles for lighting purposes

Not Under Reference

85.20.2 - No sub-item

85.20.3 - Filament lamps, NSA $0.25 per kg Free

DEVELOPING COUNTRIES: As prescribed by by-law (quota available 1975 - $400,000) DC: Free

Other DC: $0.25

per kg

85.20.4 - Fluorescent discharge lamps $0.41 per

kg

$0.17 per kg

DC: Free

22.

FILAMENT, FLUORESCENT LAMPS AMD OTHER DISCHARGE LAMPS

TARIFF PROVISIONS Cont'd

CUSTOMS TARIFF

Item Goods Rates of Duty

General Preferential

85.20.5 - Discharge lamps, NSA

Mercury and sodium lamps

DEVELOPING COUNTRIES As prescribed by by-law*

Other

Other

DEVELOPING COUNTRIES As prescribed by by-law*

Other

Quota available 1975 - $100,000

34%

DC: 15%

DC: 34%

34%

Pr: 7%

7C: 15%

?r: 7%

)C: 34%

>r: 7%

4%

Pr: 3%

24130/75— L 23. R75/478