Penny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share 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Commission in 2004 completed a report on the Australia-New Zealand rules of origin, which concluded that they were both out of date and imposed unnecessary constraints on trade.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.