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2004-2005-2006
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CUSTOMS TARIFF AMENDMENT (INCORPORATION OF PROPOSALS)
BILL 2006
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Justice and Customs,
Senator the Honourable Christopher Martin Ellison)
CUSTOMS TARIFF AMENDMENT (INCORPORATION OF PROPOSALS) BILL
2006
OUTLINE
The purpose of this Bill is to amend the Customs Tariff Act 1995 (the Tariff Act) to:
amend item 47 of Schedule 4 to reduce the rate of customs duty from 3% to
·
Free for machinery that incorporates, or is imported with, other goods
which, for technical reasons, render the machinery ineligible for a Tariff
Concession Order;
amend item 31 of Schedule 4 to allow for duty free entry of certain aircraft
·
parts, materials and test equipment used in the modification of aircraft; and
amend item 71 of Schedule 4 to expand the Enhanced Project By-law
·
Scheme to include the duty free entry of qualifying goods for the power
supply and water supply industries.
FINANCIAL IMPACT STATEMENT
The financial impact of the proposed reduction of the duty under item 47 of
Schedule 4 will result in a loss of Government revenue of approximately $2 million
per annum.
The financial impact of the proposed amendment to item 31 of Schedule 4 is
unquantifiable but minor.
The proposed amendment to item 71 of Schedule 4 expanding the Enhanced Project
By-Law Scheme is estimated to result in a loss of Government revenue of
$10 million in each of the four financial years from 2006-07 to 2009-10 inclusive.
REGULATION IMPACT STATEMENT
PROBLEM
1. Regular consultations with industry stakeholders and the AusIndustry administrators
of the Enhanced Project By-law Scheme (the Scheme) have identified anomalies in
the operation of the Scheme. Power and water projects that are part of a major
resource or other eligible industry projects can utilise the Scheme to gain a tariff
concession. However, the power or water projects become ineligible for the Scheme
if they provide power or water to the public.
2. The Department of Industry, Tourism and Resources (DITR) estimates the annual
expected investment in power and water projects is around $2.8 billion and the tariff
costs are estimated at around $10.0 million per year, raising costs in the power and
water industries by somewhat less than 0.5 per cent.
3. Consultations with industry stakeholders have revealed that electricity producers in
eligible industries have been discouraged by the Scheme from linking their output to
the electricity grid or to supply electricity to nearby users. This is not consistent with
the Government Energy Market Reform Agenda as it reduces the efficiency of the
energy industry and reduces competition in the grid.
4. Specific examples provided on a confidential basis to DITR include electricity
producers for resource projects that have been discouraged from supplying to public
Customs Tariff Amendment (Incorporation of Proposals) Bill 2006 Page 3
(domestic and industrial) users because to do so would make the projects ineligible
for the Scheme. There have also been cases in the renewable energy sector. For
example, in order to maintain eligibility for the Scheme, surplus electricity from sugar
cane mills, which use bagasse (sugar-cane waste) as a power source, has not been
supplied to other users or the grid. This is inconsistent with Government policy to
increase investment, efficiency and competition in the energy sector.
5. A related anomaly is that one electricity project was able to access the Scheme
because the project 'manufactured' fly ash for sale, which enabled the project to be
defined as an eligible manufacturing project, despite this being a by-product of the
electricity production process.
6. Gas supply, including gas for electricity production, is eligible for the Scheme but
other sources of electricity for the public, including through the grid, such as wind
power and coal, are generally not eligible. Allocative efficiency suggests the
Scheme should not treat such close substitutes differently.
7. Consultations with stakeholders also identified that some water projects such as
desalination plants that can be categorised as manufacturing are eligible for the
Scheme but others such as recycling plants may not be, depending on the precise
circumstances. Additionally, water remediation projects that are part of an eligible
industry would also become ineligible if they sought to provide water to the public.
8. Allocative economic efficiency suggests that all sources of water, including
desalination and water recycling, should be treated equally for investment purposes
by the Scheme. The importance of this issue is expected to increase as there is
expected to be significant investment in water processing over the next decade to
help further secure Australia's water supplies and provide for growth in industrial
uses, especially resource processing.
Objective of the existing Scheme
9. The Enhanced Project By-law Scheme has four objectives, which are:
to encourage and enhance investment in the establishment of world class
·
operations;
to encourage the involvement of Australian industry in supplying goods and
·
services;
to lower input costs for industry where there are sound reasons for doing
·
so; and
to facilitate Australian industry participation in domestic and international
·
supply chains.
10. The design and scope of the Scheme balances these four objectives.
11. Eligible industries in the existing Scheme are mining, resource processing,
agriculture, food processing, food packaging, manufacturing (within the ANZSIC
meaning) and gas supply. As indicated in the 2001 Regulation Impact Statement for
the introduction of the Scheme, the main reason the eligibility was restricted to these
industries was for revenue and administrative cost reasons.
12. Projects must have a total expenditure of $10.0 million or more on eligible goods
(machinery, capital equipment and their components) with the tariff concession
limited to eligible goods not produced in Australia in the ordinary course of business
Page 4 Customs Tariff Amendment (Incorporation of Proposals) Bill 2006
or those that are technically more advanced, more efficient or more productive. The
restriction to larger projects balances the administrative costs with the greater
benefits that are expected for larger projects. Experience with the Scheme suggests
this threshold acts as a useful signal to companies. There has been little interest
from small projects in accessing the Scheme.
13. Only six projects with eligible capital equipment between $10.0 million and
$15.0 million have accessed the Scheme since the removal of the 3 per cent
revenue tariff on business inputs imported under Tariff Concession Orders, and a
number of these applications were already in progress before the removal of the
revenue tariff. For small projects the tariff benefits are low unless they have an
unusually high share of dutiable imports in the eligible goods.
14. In line with international obligations, the Scheme does not mandate the use of
domestic products over imported goods, it asks project proponents to develop and
implement an Australian Industry Participation (AIP) Plan to provide Australian
industry with full, fair and reasonable opportunities to participate in the project. A
rationale is that there is a market failure, in that Australian small to medium
enterprises (SMEs), regardless of their capability and competitiveness, may not be
known to the major project developers due to high search and transaction costs for
major projects seeking Australian suppliers.
15. Projects in all industries have access to an alternative process to seek a tariff
concession, known as Tariff Concession Orders, if substitutable goods are not
produced in Australia. There is no project size restriction for Tariff Concession
Orders. Before the 2005-06 Budget, goods with a Tariff Concession Order paid
3 per cent tariff. After the removal of the 3 per cent revenue tariff on business inputs
in 2005-06 Budget, a Tariff Concession Order provides tariff free access.
16. A Tariff Concession Order does not require an AIP Plan; may be overturned by
appeal; applies to goods that are not produced in Australia in the ordinary course of
business; and, a Tariff Concession Order must be specified for each shipment. The
Scheme remains an attractive programme for many major projects but for some
smaller or less complex projects Tariff Concession Orders may be sufficient.
17. The Scheme allows imports to arrive in split shipments coming from several sources
or over a period of time. The Scheme focuses on the equipment, as it will be used
by the project, that is, as a functional unit. The Scheme offers certainty and covers
the whole project up to commissioning. An application will typically identify ten to
fifteen eligible goods (functional unit) compared to the actual importation of several
hundred items, each of which would otherwise require separate Tariff Concession
Orders. The Scheme's equivalency test for goods is wider than for Tariff Concession
Orders. A concession also may be available for goods which are technologically
more advanced, more efficient or more productive.
18. Since 1 July 2002, over 270 projects with an investment value in excess of
$85.0 billion have applied to access the Scheme. Of these, around 175 projects
have completed the Scheme's processes with forgone revenue estimated at
$130.0 million, or around $0.75 million per project.
19. Experience within the Industry Capability Network and project developers suggests
that the contestable fraction of major project investment is at least 40 per cent and
that a well executed AIP Plan can increase Australian industry participation by at
least 5 per cent of the contestable share of the project, suggesting that the Scheme
has increased Australian industry participation in major projects by at least some
$1.7 billion. This increased Australian industry participation has led to technology
and skills transfers and it has increased strategic partnerships between project
Customs Tariff Amendment (Incorporation of Proposals) Bill 2006 Page 5
developers and supply industries thereby introducing Australian suppliers to global
supply markets for major projects, including those performed overseas by
international project developers.
OBJECTIVE
20. The objective is to reduce anomalies in the Scheme that currently create distortions
in investment, whilst recognising there is a budget constraint to increasing eligibility
for the Scheme due to the potential for forgone revenue and increased administrative
costs that restricted the scope of the Scheme when it was initially developed by
Government in 2001.
OPTIONS
Option 1
21. Do nothing.
Option 2
22. Expand the Enhanced Project By-law Scheme to include the power and water
industries as eligible industries.
23. The proposed change to the Scheme is designed to rebalance the Scheme's four
objectives given developments in Government policy and anomalies that have
become apparent in the operation of the Scheme.
24. The proposal aims to reduce anomalies in the operation of the Scheme, where close
substitutes are differently treated this leads to allocative inefficiency. These
anomalies are particularly apparent in the power and water industries and have been
identified by industry stakeholders.
25. The power and water industries are declared priorities for Government and this
increases the importance of the objective to reduce input costs for these industries.
26. The ability of the Scheme to support Australian industry participation has fallen with
the removal of the 3 per cent revenue duty on business inputs that are eligible for
Tariff Concession Orders and with the implementation of Free Trade Agreements
(reducing tariffs) with countries that are sources of imported capital goods. Average
annual estimated forgone revenue in 2003-04 and 2004-05 is around $50.0 million,
and this is estimated to have fallen to $35.0 million in 2005-06. The proposal
widens the scope of eligible industries, increasing the ability of the Scheme to
promote Australian industry participation in a fiscally sustainable manner. The
anomalous position of power and water industries, which can be eligible under
certain circumstances, has provided evidence that Australian industry participation
objectives can be achieved in these industries.
Option 3
27. Increase scope of the programme to cover all industries and reduce the project size
threshold from $10.0 million to $5.0 million of eligible capital equipment.
IMPACT
Option 1
28. This option does not address the problems with the operation of the Scheme.
Page 6 Customs Tariff Amendment (Incorporation of Proposals) Bill 2006
Option 2
29. The stakeholders are project developers, suppliers to projects, Government and,
less directly, downstream users.
30. For project developers the Scheme essentially has two elements, a tariff concession
and the required development and implementation of an approved AIP Plan. The
Scheme is optional, project developers need not apply, and Tariff Concession
Orders may provide an alternative route to tariff concessions.
31. The main direct effect of the Scheme's tariff concession is a transfer payment back
from the Government to the project developers (who would otherwise be paying a
tariff on their imports). For Option 2 the estimated transferred benefit is $10.0 million
per year. The effect of the tariff on investment in the power and water industries is
likely to be low as the tariff rate is low. (An estimate of the annual reduced
deadweight loss arising from the reduced tariff is $0.25 million.) However, the
distributional and perceived equity effect of the $10.0 million per year transfer from
projects to Government is more significant.
32. For project developers the Scheme is optional so their expected benefits from
participation must exceed their expected costs, or they would not participate in the
Scheme. This expectation has been confirmed by experience.
33. A recent post-benefit study by DITR of 31 completed projects based on project
developer participants in the Scheme found that 30 strongly agreed or agreed that
the financial benefits of the tariff concession outweighed the cost of applying.
Further, 26 strongly agreed or agreed that the development and implementation of
the AIP Plan had a positive impact on their company; 22 strongly agreed or agreed
that the AIP Plan had a positive impact on Australian suppliers; but only 10 strongly
agreed or agreed that the AIP Plan reduced project costs.
34. The majority of the 31 project developers believed the Scheme had a high or
moderate effect on Employment (27), Skills transfer (29), Creation of strategic
partnerships (19), Regional development (24), and Research and development (17).
These benefits are typically external to the project developer.
35. Quantifying these often intangible benefits is difficult but some perspective can be
given if we note annual investment in power and water is estimated at $2.8 billion.
Experience within the Industry Capability Network and project developers suggests
that the contestable fraction is at least 40 per cent and that a well executed AIP Plan
can increase Australian industry participation by at least 5 per cent of the contestable
share of the project so the additional Australian industry participation is at least
$58.0 million. Not all of this is a net economic benefit if these resources are
transferred from elsewhere in the economy, but equally this estimate does not
include any external benefits such as technology transfer or strategic partnerships
that are created.
36. It should be remembered that an AIP Plan provides for full, fair and reasonable
opportunities for Australian industry to compete for opportunities, it overcomes
information barriers and it does not mandate outcomes or workshare.
37. The main net economic benefits derive from the AIP Plan overcoming market failures
such as asymmetric information that reduce project developers' willingness to search
for Australian suppliers. This unquantifiable net benefit is not a result of the reduced
tariff the Scheme provides (that is a transfer payment), but of the development and
implementation of the approved AIP Plan overcoming market failures that prevent
Customs Tariff Amendment (Incorporation of Proposals) Bill 2006 Page 7
Australian companies, particularly SMEs, gaining full fair and reasonable
opportunities to compete.
38. The cost of the Scheme to project developers is primarily the cost of developing and
implementing an AIP Plan and is about $0.05 million per project, with this DITR
estimate based on consultations with industry, consultants and the Industry
Capability Network over the life of the programme. These estimates have been run
through the Office of Small Business Costing Model to confirm that all potential costs
to business have been identified and estimated. Option 2 is expected to lead to an
additional 12 to 15 projects per year, so the additional cost to major developers in
total would be about $0.7 million per year.
39. This framework suggests that the benefit-cost calculation for Option 2 is robustly
positive given the feasible range of assumptions.
Option 3
40. The option to increase the scope of the programme to cover all industries and
reduce the project size threshold from $10.0 million to $5.0 million of eligible capital
equipment was considered and rejected when the Scheme was first considered in
2001. Since that time the removal of the 3 per cent revenue tariff on business inputs
imported under Tariff Concession Orders further reduces the weight of the argument
to reduce the threshold for the Scheme or to widen the Scheme's eligibility to all
industry sectors.
41. The removal of the 3 per cent revenue tariff on business inputs imported under Tariff
Concession Orders means that there is now an alternative path for project
developers to seek a concessional rate of duty of zero, or free. This tends to reduce
the advantage for project developers of the Scheme over the alternative of Tariff
Concession Orders to one of administrative rather than tariff rate benefits.
42. The administrative benefits of the Scheme are greater for large projects rather than
for small projects because the latter require fewer Tariff Concession Orders and the
costs for the developers of developing and implementing an AIP Plan are typically
independent of the size of the project, as are the costs for Government in
administering the project. The Australian industry participation opportunities of a
large project are likely to be larger than for a small project.
43. The economic argument to reduce the threshold has reduced since the Government
made its original decision, because Tariff Concession Orders are relatively more
attractive than they previously were, noting that Tariff Concession Orders are
relatively more attractive for small or less complex projects. Only six projects with
eligible capital goods close to the minium threshold (between $10.0 million and
$15.0 million) have applied for the Scheme since July 2005, suggesting that the
threshold has limited effect, it is rather that for most small projects the costs of the
Scheme do not justify the benefits. The threshold provides a useful signal to firms
not to waste their time evaluating the applicability of the Scheme, and also prevents
an administrative cost being imposed on Government dealing with misplaced
inquiries.
44. The negotiation of Free Trade Agreements (FTAs) with countries such as the USA
and Thailand means that tariffs on eligible capital equipment under the Scheme may
be zero due to the FTA, thus tending to reduce the tariff benefit of the Scheme. This
also reduces the weight of the argument to widen the scope of the Scheme to all
industries because the scope of non-zero tariffs has in fact fallen compared with the
situation when the Government introduced the Scheme. The FTAs are an
Page 8 Customs Tariff Amendment (Incorporation of Proposals) Bill 2006
alternative way of reducing tariffs on business inputs. The FTAs also reduce the
likely cost to revenue of expanding the Scheme.
45. There is no evidence currently available from regular consultations with industry that
further extending the Scheme would assist the AIP objective.
CONSULTATION
46. The affected parties are government, industry and, less directly, the general public.
Industry includes both major project developers and suppliers (mostly SMEs) of
goods and services to projects.
47. In relation to Government stakeholders, consultations were undertaken with
Commonwealth Departments through the Cabinet Submission process.
Commonwealth Departments and Agencies with responsibility for power and water
were consulted and their views were taken into account in developing the final
proposal.
48. Consultations with major project developers are ongoing in relation to the Scheme.
Major project developers have raised the anomalies of the existing Scheme, in
particular the problems with respect to the power industry, and they have sought to
have them addressed. The proposal is expected to meet their main concerns.
49. Meetings around Australia were held in 2005 with suppliers of goods and services to
projects, most suppliers are SMEs. The issues were canvassed with them as part of
stakeholder consultation meetings. Their key concerns include getting the
opportunity to be involved in major projects in Australia and overseas, and the need
to go global to sustain capability and international competitiveness. There was no
view expressed that suppliers to the power and water industries have been
disadvantaged by the (limited) access that these projects have had to the Scheme or
that suppliers would be adversely affected if the Scheme was widened in the limited
way proposed.
50. Once the proposal was being developed it was not appropriate to consult with
companies. Confidentiality may have been compromised and investment decisions
could have been disrupted due to speculation about changes to the Scheme.
51. Consultations were not held with the general public or users of power or water. The
marginal positive effect on final users is such that consultations would not have been
meaningful. The Productivity Commission's assessment in the Inquiry Report on the
Review of Australia's General Tariff Arrangements is that 'these by-laws are likely to
be net contributors to economic welfare where they assist unprotected (as distinct
from protected) domestic production' (July 2000, page 136).
CONCLUSION
Option 1
52. To take no action would allow the anomalies in the operation of the Scheme to
continue.
Option 2
53. To expand the eligible industries to include the power and water industries is
supported. This is based on the assessment that the proposed incremental change:
Customs Tariff Amendment (Incorporation of Proposals) Bill 2006 Page 9
addresses anomalies in power and water in the existing Scheme,
·
is fiscally sustainable,
·
encourages investment in the power and water industries,
·
potentially reduces input costs for all businesses using water and power,
·
offers opportunities for Australian industry participation by SMEs, and
·
supports the Government's Reform Agenda in these industries.
·
Option 3
54. To expand the eligible industries to include all industries and reduce the $10.0 million
threshold is not supported at this time. This is not supported because:
it would be a much higher cost to revenue, consultations suggest other
·
industries do not face the same anomalies as power and water;
there is no evidence available at this time from regular industry
·
consultations that these industries would offer the opportunities for
increased Australian industry participation as power and water;
Tariff Concession Orders can provide a lower compliance cost alternative
·
solution for small, less complex projects;
the cost to access the Scheme for small projects would be out of proportion
·
to the benefits for small projects, and
it would impose a significant administrative burden on Government to
·
deliver the Scheme if the threshold is set too low.
IMPLEMENTATION AND REVIEW
55. The proposed implementation date for the change to the Enhanced Project By-law
Scheme is 1 July 2006. To ensure implementation by 1 July 2006, the Minister for
Justice and Customs would bring forward a Tariff Proposal amending Item 71 to
Schedule 4 of the Tariff Act and a Bill to amend the Tariff Act would be required
within twelve months of the Tariff Proposal.
56. No new implementation mechanisms and processes are required in expanding the
existing Scheme.
57. DITR's AusIndustry network around Australia will continue to provide information and
support to customers through its Customer Service Managers who are in direct
contact with companies. Also regular Customer Briefings on the Scheme are given
around Australia. In addition, there is extensive information publicly available
through the DITR's web site and the AusIndustry phone hotline.
58. The Scheme does not impose costs on small business. Small business benefits
from increased opportunities to supply to major investment projects. The Scheme
recognises that opportunities for SMEs can lead to increased innovation, increased
competition, and the potential to increase exports, as companies that successfully
supply goods and services to global projects in Australia are in a stronger position to
supply to overseas projects.
59. It is the developers of major projects that carry the cost when applying to access the
Scheme. These companies are well placed to make a commercial judgement on
their net benefits, and to decide whether to apply to access the Scheme.
60. This submission has a low implementation risk as the proposal seeks incrementally
to expand the existing Scheme.
Page 10 Customs Tariff Amendment (Incorporation of Proposals) Bill 2006
61. The Scheme is an ongoing programme. The inclusion of power and water industries
would be reviewed at the same time as the wider policy issues of the Scheme are
reviewed in DITR's rolling review of programmes.
Customs Tariff Amendment (Incorporation of Proposals) Bill 2006 Page 11
CUSTOMS TARIFF AMENDMENT (INCORPORATION OF PROPOSALS)
BILL 2006
NOTES ON CLAUSES
Clause 1 Short title
1. This clause provides for the Bill, when enacted, to be cited as the Customs Tariff
Amendment (Incorporation of Proposals) Act 2006.
Clause 2 Commencement
2. Subclause (1) provides that each provision of the Act specified in column 1 of the
table in subclause (1) commences or is taken to have commenced on the day or at
the time specified in column 2 of the table.
3. Item 1 of the table provides that sections 1 to 3 and anything in the Act not covered
elsewhere in the table will commence on the day on which the Act receives the
Royal Assent.
4. Item 2 of the table provides that Schedule 1 is taken to have commenced on
11 May 2005. The amendment contained in Part 1 of Schedule 1 was contained in
Customs Tariff Proposal No. 4 (2005) which took effect on 11 May 2005.
5. Item 3 of the table provides that Schedule 2 is taken to have commenced on
1 July 2006. The amendments contained in Schedule 2 were contained in Customs
Tariff Proposal No. 1 (2006) which took effect on 1 July 2006.
6. The Customs Tariff Proposal mechanism is used for effecting alterations to the Tariff
Act, particularly when such alterations are required to have effect in a short time
frame that cannot be achieved through a Customs Tariff Amendment Bill. Customs
Tariff Proposals are used most commonly for introducing new items, for changing
rates of duty and for restructuring items in the Schedules to the Tariff Act.
7. Following the introduction of a Customs Tariff Proposal in the House of
Representatives, the alterations contained in the Proposal are incorporated in a
Customs Tariff Amendment Bill that is introduced into and debated by the
Parliament. The amendments contained in such a Bill necessarily have the same
date of effect as the original Proposal.
Clause 3 Schedule(s)
8. This clause is the formal enabling provision for the Schedules to the Bill, providing
that each Act specified in a Schedule is amended in accordance with the applicable
items of the Schedule. In this Bill, the Customs Tariff Act 1995 is being amended.
9. The clause also provides that the other items of the Schedule have effect according
to their terms. This is a standard enabling clause for transitional, savings and
application items in amending legislation.
Page 12 Customs Tariff Amendment (Incorporation of Proposals) Bill 2006
SCHEDULE 1 - Amendments
Customs Tariff Act 1995
Item 1 Schedule 4 (item 47, the rates of duty in column 3)
1. This item amends the Tariff Act by repealing the 3% rate of duty for item 47 of
Schedule 4 to the Tariff Act and replacing it with a rate of duty of Free.
2. Item 47 applies to machinery that incorporates, or is imported with, other goods,
which, for technical reasons, render the machinery ineligible for a Tariff Concession
Order. This amendment will allow such goods to be dutiable at the same rate of
customs duty that would apply if the goods were subject to a Tariff Concession
Order.
3. This measure will be of particular benefit to the mining industry, which is the main
importer of goods covered under item 47.
4. The lowering of the duty rate applying to goods to which item 47 applies maintains
consistency with the 2005-06 Budget decision to remove the 3% duty on business
inputs that are subject to a Tariff Concession Order. The amendment will be taken
to have commenced on the same day as that Budget decision, being 11 May 2005.
Item 2 Application
5. This item provides that the amendment contained in Schedule 1 of the Bill applies to
goods that are imported into Australia on or after 11 May 2005 and also to goods
that were imported before that date but on which the time for working out the rate of
import duty on those goods had not occurred before that date. For example, this
application provision will apply to goods that were warehoused on importation before
11 May 2005 and not entered into home consumption until on or after 11 May 2005.
SCHEDULE 2 - Amendments
Customs Tariff Act 1995
Item 1 Schedule 4 (item 31, the description of goods in column 2)
6. This item amends the text of item 31 in Schedule 4 of the Tariff Act to read "repair,
maintenance or modification", instead of "repair and maintenance".
7. Item 31 currently allows for duty free entry of certain aircraft parts, materials and test
equipment for use in the manufacture, repair and maintenance of aircraft. This
amendment will alter item 31 by extending duty free entry to certain goods used in
the modification of aircraft.
8. The extension of item 31 to include goods for use in the modification of aircraft will
reduce costs to business and will provide a clear incentive to continue heavy aircraft
maintenance work in Australia. This will strengthen the international competitiveness
of Australia's aviation and maintenance industries and is consistent with the
Customs Tariff Amendment (Incorporation of Proposals) Bill 2006 Page 13
Government's policy to improve the international competitiveness of Australia's
aerospace and aviation industries.
9. The main beneficiaries of this measure will be domestic airline and defence
contractors, as well as Australia's vibrant general aviation aircraft manufacturing and
modification industry. Many of the firms in this sector are located in regional
Australia and this alteration to the Tariff Act will provide a new certainty to underpin
their competitiveness in the world market.
10. This amendment is taken to have commenced on 1 July 2006.
Item 2 Schedule 4 (item 71)
11. This item creates a paragraph (B) to item 71 of Schedule 4 to the Tariff Act. New
paragraph (B) will expand the Enhanced Project By-law Scheme contained in item
71 to include the duty free entry of goods, as prescribed by by-law, for use in the
power supply and water supply industries.
12. Currently, item 71 underpins the Enhanced Project By-law Scheme offering tariff
concessions to major projects in the mining, resource processing, agriculture, food
processing, food packaging, manufacturing and gas supply industries, for imported
eligible goods that are not available from Australian production.
13. The inclusion of the power supply and water supply industries in the terms of item 71
will encourage investment; reduce input costs for industry; encourage the
involvement of Australian industry in supplying goods and services; and facilitate
Australian industry participation in domestic and international supply chains.
14. This amendment is also taken to have commenced on 1 July 2006 and applies to
goods imported into Australia and entered for home consumption on or after
1 July 2006.
Item 3 Application - item 1
15. This item provides that the amendment contained in item 1 of Schedule 2 of the Bill
applies to goods that are entered for home consumption on or after 1 July 2006.
Therefore, it will apply to goods imported and entered for home consumption after
1 July 2006, as well as goods that were warehoused on importation before
1 July 2006 and not entered into home consumption until on or after 1 July 2006. It
will not, however, apply to certain special clearance goods that may be imported and
delivered into home consumption without entry.
Item 4 Transitional
16. This item provides that determinations made under subsection 273(1) of the
Customs Act 1901 for the purposes of item 71 of Schedule 4 to the Tariff Act, which
were in force immediately before the commencement of this item continue to have
effect after the amendments contained in this Bill come into effect.
Page 14 Customs Tariff Amendment (Incorporation of Proposals) Bill 2006
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