INCOMING: AN UPDATE FOR IMPORTERS
A roundup of news and views for New Zealand’s trading companies, compiled by Daniel Silva of the Importers Institute. Topics this issue include New Zealand’s antidumping regime, GST on imported goods purchased through websites, and the upcoming review of the Customs Act.
Australians miss out on China FTA
New Zealand and China have a free trade agreement (FTA). For most items of clothing imported from China to New Zealand, the current duty rate is 4.2 percent, reducing to 2.1 percent in 2015 and zero in 2016. However, if those items are imported from a third country – even if made in China – then the duty rate that applies is ten percent.
This affects mainly Australian retailers with stores in this country, who source their goods from China for both countries and then sort them for distribution in their Australian distribution centres. Chinese garments shipped from Melbourne to Auckland end up paying a duty of ten percent, losing the benefit of the FTA preferential rates. The only solution to this problem is to have the New Zealand requirements shipped here direct from China.
The Government is finding it difficult to have a significant impact on the affordability of houses. The issue is actually quite simple. Some city councils are run by people who believe that we should all be living in high rises near train lines, so we can ride a bicycle to the closest lentil-and-soy-latte shop. To achieve this vision of life in East Berlin circa 1975, they prohibit people from building houses where they want. Then, the cost of the remaining land goes up, astronomically. As it would.
The Government does not seem to have the stomach to stem the ideological onslaught from the central planners, so something else is needed to try to convince people that they are doing something [about house affordability]. Minister Nick Smith put out a consultation paper that suggested exempting building products from anti-dumping laws. Apparently, plasterboard from Thailand and nails from China were found to have been sold too cheaply in New Zealand, so the local manufacturers persuaded an earlier government to protect their profits by slapping a large protective tariff against competition from imports, using the arcane anti-dumping laws.
The Minister is right when he says “I worry that high duties on some imported building products, combined with limited competition in New Zealand, is allowing excessive margins by building product manufacturers.”
That is just as true when the same tariffs are applied to canned peaches, diaries and hog bristle paint brushes, which are all subject to anti-dumping duties.
The Ministry said, “there is no intention to reform the fundamentals of [the anti-dumping] regime, such as by introducing a full public benefit test which would measure the impact of anti-dumping duties on New Zealand consumers.” So, they propose to change it just for building products, presumably because housing affordability is always in the news.
The Minister also proposed to corrupt the duty concession system, which exempts duty on goods without locally manufactured equivalents, again just for building components, again just to be seen to be doing something (other than the obvious).
This principles-free approach to public policy reminds me of Robert Muldoon who, when confronted with the problems caused to our exporters by the high costs of protecting local manufacturers, offered to eliminate duties on agricultural tractors.
GST on Internet sales: government kicks the can down the road
The Government set up a working party of Customs and Inland Revenue officials to look at the issue of GST on imported goods bought through websites. It promised a consultation paper by last Christmas, but it has now decided to fold this review into another larger review, that one charged with the impossible task of getting the likes of Facebook to pay more tax.
Customs Minister Maurice Williamson has said it would be virtually impossible to collect GST on all goods bought online. That is correct, as far as it goes, but it is not the issue. The main problem is that the Customs Service is allowing a large number of courier consignments to claim the exemption, virtually unchecked, even though the goods exceed the $400 limit.
Retailers, who continue to lose business in droves, were hoping to have that limit reviewed and some sensible proposals to enforce the law at the border introduced. It seems they will now have to wait until the issue of taxing Facebook is sorted. Probably, never.
Review of Customs Act
There is a root and branch review of the Customs Act under way. The last Act dates from 1996 and was an update of a 1966 statute which, in turn, was substantially based on one from 1913. Since 1996, 17 major amendments had to be made to try to keep up with a changing environment.
I first registered a web domain name that year, but it took me a while longer to figure out what that Internet thing was all about – so it is easy to appreciate just how much the trading environment has changed in the last 20 years alone. Customs law needs to keep up with a fast-changing environment.
The proposed approach is to confine the primary legislation (the Act) to principles and powers, while dealing with operational changes through secondary legislation (regulations through Orders in Council) and through tertiary-level rules, made by the chief executive under delegated authority. The primary legislation could also be designed to be sufficiently adaptable to cater for future border supply chain changes.
This approach seems to us to be eminently sensible, subject only to appropriate safeguards to protect the liberty of persons and their property from arbitrary bureaucratic action. Issues of culpability should always be left to the Courts and all significant decisions should be subject to simplified independent appeals. Given appropriate safeguards, the introduction of a more flexible rules-based system will be a good development.
Customs are to be congratulated on putting a high-powered team onto this task and discussing these issues openly with a reference group of sector representatives. This process will take two or three years to run and there will be opportunities for sector group members to comment, as policy development progresses.
The wave pick
One of the more common jobs that we do at DSL Logistics consists of fulfilling a daily distribution list for stock to be sent out to stores. For example, send 12 pink blouses and six skinny jeans in a range of sizes to the store in Hamilton, six blouses and two jeans to Ashburton, and so on. Multiply that by thousands of stock items, all in different sizes and colours, being distributed to dozens of stores every day, to an average of about 30,000 items per working day, and you start to get an idea of how complex this simple task can become.
In dedicated small distribution centres, it is not uncommon for the orders to be filled out straight from the shelves. That means going around looking for the Hamilton goods and then going around again to find the Ashburton stock. When you try to do that in a large warehouse catering for multiple companies, you could end up with the pickers walking the equivalent of a marathon and spending much of their day bumping into each other.
An alternative is to pick the requirements for all the stores (or a group of them) all at once, take that stock to a sorting area, where the items are scan-packed into cartons pre-addressed to each store. The item and the carton number are both scanned and, if someone tries to scan the incorrect item into a carton, the scanner makes an awful broken window noise (apparently, an electric shock to the sorter was not considered good employment practice).
This type of pick is known as a “wave pick” and is used by most third-party logistics operators. It is somewhat counter-intuitive, as the item is handled twice, but the efficiencies and gains in accuracy are impressive. We like to tell prospective clients “our systems are very good indeed, as they include the solution to every single mistake we have made in the past 15 years.”
Port of Auckland
Daniel Silva is the Secretary of the Importers Institute and Managing Director of DSL Logistics, an import services company and 3PL provider based in Auckland. firstname.lastname@example.org