1898

NEW ZEALAND GAZETTE

No. 84

REVIEW OF TARIFF DEFINITION OF “MANUFACTURER” - BACKGROUND AND ISSUES

1 Introduction

1.1 The Ministry of Commerce invites submissions to a review of the current definition of “manufacturer” for tariff assistance purposes. This is an important border issue, because tariffs can be removed when local production ceases, or New Zealand companies fail to achieve a particular level of local content or (potentially) certain production parameters.

2 Background

2.1 Several tariff reviews have taken place over the past decade, and a review is underway to decide a post-2000 tariff policy.

2.2 Concurrently, officials are considering options for simplifying Part I of the Tariff (“The Standard Tariff”), such as consolidating duty free tariff items; merging duty free tariff items into the six-digit “Harmonized System” tariff headings which govern those tariff items; and removing the statistical keys from the Tariff. The simplification exercise is aimed at reducing costs associated with entry procedures and improving the transparency of the Tariff.

2.3 Any “simplification” changes would not raise tariffs, and statistical keys would remain in a separate document available from Statistics New Zealand.

2.4 In association with these “simplification” exercises, the Ministry of Commerce is investigating the extent of New Zealand manufacture in several chapters of the Tariff (covering, for example, excavating machinery; toys/games; sporting goods; electric motors; and certain transport equipment). The intention is to restructure Part I of the Tariff in those areas. An associated result would be that many New Zealand products which are currently free under Part II (“Concessions”) could become duty free in the Part I Tariff document - and both Part I and Part II should become shorter and simpler.

2.5 Officials are also participating in a review of international nonpreferential rules of origin, based on a measure of “substantial transformation” which can be expressed in terms of the Harmonized System Tariff nomenclature. Our non-tariff import restrictions have also been reviewed. A review of New Zealand’s Generalised System of Preferences for developing countries was completed last year.

2.6 The Minister of Commerce, the Hon John Luxton, has now approved a further review process relating to the definition of “manufacturer” for tariff purposes. At present, New Zealand producers can only receive tariff assistance if they achieve a local content equal to or greater than 25 percent of the ex-factory cost of a particular product. Reviewing this definition will assist in the work mentioned above, and will allow us to continue the processes of updating the Tariff and its administration; both in Part I and in Part II.

3 Why Review the Definition of “Manufacture”?

3.1 New Zealand’s 25 percent definition is a one-dimensional measure which might be deemed inappropriate in an environment of increasing globalisation and significant changes to border assistance policies. A clearer and perhaps more broad-based definition should result from this process. Given the inherent unpredictability of a measure based on the relationship between local costs and import costs, a modified rule would ideally provide a more stable operating environment for New Zealand business.

4 Issues

4.1 Interested parties are asked to consider two sets of issues:

• general issues relating to qualification benchmarks/criteria;
• the specific issue of commercial availability.

(a) Definition of “Manufacture” for Purposes of Tariff Assistance

4.2 An obvious question is whether the 25 percent benchmark indicator is still a helpful measure of “manufacturer”, against the backdrop of the Government’s general policy on tariffs, its desire to make New Zealand producers as internationally competitive as possible, and the importance of reducing costs to business. Specifically, issues such as the following could be addressed in submissions (but people making submissions need not confine their responses to these questions):

• should the kitset-type assembly of specialised imported components permit a producer to be classified as a “manufacturer” as of right?
• should tariff assistance be provided if local production is based entirely on minimal processes such as (example only) operations based on the attachment of simple fastenings?
• does it make a difference if the process of “manufacture” comprises repairing, refurbishing, overhauling or reconditioning?
• should tariff assistance be retained when local production is insignificant (see “Commercial Availability” below)?

4.3 People responding to this call for submissions may like to consider whether it is important that an “irreversible” physical change should occur during the final production process.