Penny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | Link to this | Hansard source

I rise to speak on behalf of the Labor Party on the Customs Legislation Amendment (New Zealand Rules of Origin) Bill 2006, which will amend the Customs Tariff Act 1995 to give effect to an agreement between Australia and New Zealand to amend the rules of origin under the CER trade agreement between our two countries. In particular this bill replaces the current regional value content rules of origin with the change of classification rules. The intent of rules of origin is to determine whether a product can be classified as domestically produced for the purposes of receiving preferential tariff treatment under a trade agreement.

Under existing rules a New Zealand product exported here can receive preferential treatment provided the last production process occurred in New Zealand and a minimum of 50 per cent of the cost of production also occurred in New Zealand. Under the proposed changes a good will receive preferential tariff treatment if it has been substantially transformed, which is defined as a change of tariff classification under the harmonised system of tariff codes, a system defined by the World Customs Organisation. The need for this change is based on the growing complexity in global supply chains, which is rendering the existing value based system irrelevant. Under the current RVC system, should the final process of manufacture occur in a third country, the product will not qualify for preferential treatment, no matter how minor the final process. This is the case if even more than 50 per cent of the cost of manufacture has occurred in Australia or New Zealand.

The Productivity Commission in 2004 completed a report on the Australia-New Zealand rules of origin, which concluded that they were both out of date and imposed unnecessary constraints on trade. In advocating a move towards a change of classification method the commission argued, first, that it would reduce compliance costs; second, that it would remove the impact of price changes or exchange rate movements on origin status; third, it would increase certainty; and, finally, it would require minimal records for Customs audits.

The change of classification method was also adopted under the Australia-US Free Trade Agreement and the Australia-Thailand Free Trade Agreement. Therefore, moving the arrangements between Australia and New Zealand in this direction will deliver greater consistency, and in particular practical benefits for companies that export to two or three of the countries mentioned.

By and large Labor is supportive of these amendments, since they deliver a modern and more consistent method for prescribing preferential tariff treatment. We did have a concern with the government’s inadequate consultation process in relation to these amendments. This is an emerging and continuing problem with this government that is not assisted by the short time that is now being allocated for Senate committee inquiries. In particular, there is at least one company that could needlessly be negatively affected by the change to the point where significant numbers of jobs may be at risk. I understand my colleague Ms Roxon has covered this issue in detail in the other place. We wish to make the point that more effective consultation prior to the introduction of the bill might have helped in this situation, particularly in relation to that company. Other than this, Labor is in support of the changes contained in the bill and we commend it to the Senate.

Chris Ellison (WA, Liberal Party, Minister for Justice and Customs) Share this | Link to this | Hansard source

As I undertook earlier, there are a couple of issues that Senator Ludwig raised in relation to the anti-money-laundering bill. I think there was a question in relation to why AUSTRAC could not share information with the United Nations. Section 27(11A) of the Financial Transactions Reports Act permits disclosure of intelligence to a foreign country. This section has been replicated in clause 132 of the AML/CTF bill. That carries through that the exchange of financial intelligence is designed to enable effective action to be taken to prevent the commission of money laundering or predicate offences or to enable effective investigation of those offences by law enforcement agencies. The United Nations is a diverse organisation which is neither a law enforcement agency nor an investigatory body. General disclosure of AUSTRAC information to such a body is an inappropriate approach to the proper use and protection of this information.

Basically, what we are saying is that it is appropriate that AUSTRAC deal with other law enforcement agencies—the authorities of other countries—and this applies domestically to state and territory police and to such a thing as a royal commission. Designated agencies in clause 5 include Commonwealth, state and territory royal commissions. In the event that a similar inquiry is established by the UN in the future, amendments to the act could be considered, but in the meanwhile we do not think it is appropriate that AUSTRAC share that information for those reasons. I think that has dealt with that issue.

The other issue deals with deregistration of providers of remittance services. I think the important point to note here is that, whether or not they are registered, remittance service providers are reporting entities under the bill and are subject to all relevant provisions of the bill. A power to remove providers of designated remittance services from the register under part 10 of the bill is not necessary. The government has decided to implement FTRA special recommendation 6 by establishing a registration scheme for remittance service providers. Registration will not confer any authority or seal of approval on providers of these services. It merely will enable AUSTRAC and law enforcement agencies to identify and locate the providers of these services and to take effective action against those who do not register. That is the rationale for that issue, and I put that on the record.

In relation to the Customs Legislation Amendment (New Zealand Rules of Origin) Bill 2006, I thank Senator Wong for her contribution. The proposed new Australia-New Zealand Closer Economic Relations Trade Agreement is the result of a lengthy process. It is a process that included a study by the Productivity Commission, extensive consultations within the Australian government and Australian industry and detailed negotiations with the New Zealand government. The Productivity Commission’s research report on the agreement released on 28 May 2004 concluded that the inserted ROO were outdated and acted as a constraint on further trans-Tasman trade.

The proposed amendments to the closer economic relations agreement allow for a change in tariff classification methods to be used in determining whether the goods meet the rules of origin for CER. Rules of origin—ROO, as they are known—are an important aspect in relation to the CER. The new CTS method, together with the current factory cost method, will allow importers on both sides of the Tasman to have the option of using either method until 31 December 2011, when the factory cost method will cease to operate.

The government and industry are aware of one manufacturer who does not support the change in tariff classification methodology. I am advised that, together with national newspaper advertising by the Department of Foreign Affairs and Trade, they and other departments undertook industry wide consultations. In December 2004 this resulted in the Australian Industry Group advising all its members, including that manufacturer, of potential changes to the CER rules in its newsletter in December 2004.

The amendments will simplify the process of determining whether a good from New Zealand is a New Zealand originating good. The current factory cost method can be administratively burdensome for the manufacturer and can lead to uncertainty because of exchange rates as an example. The proposed amendments will bring greater certainty and be administratively simpler. They will improve efficiency by allowing greater use of inputs not produced in Australia or New Zealand without an adverse impact on the ability to claim origin, and they are consistent with the international trend to use the CDC approach.

I commend the amendments as cementing even further the stronger economic and trade relationship between Australia and New Zealand that has grown significantly since the entry into force of the CER in 1983. I might add that, just recently, I met with my counterpart, the New Zealand Minister of Customs, and we enjoyed a very constructive session of talks. We are both totally committed to enhancing the closer ties between the Customs services of our two countries. I commend the bill to the Senate.

Question agreed to.

Bill read a second time.