EXPLANATORY STATEMENT
Subject - ACIS Administration Act 1999
ACIS Stage 2 Motor Vehicle Producer Research and Development Scheme 2004 (the 2004 Scheme)
ACIS Stage 2 Motor Vehicle Producer Research and Development Scheme Variation 2006 (No.1 ) (the Variation)
The ACIS Administration Act 1999 (the Act) establishes the Automotive Competitiveness and Investment Scheme (ACIS) as a transitional assistance scheme to encourage competitive investment and innovation in the Australian automotive industry in order to achieve sustainable growth, both in the Australian market and internationally, in the context of trade liberalisation. ACIS rewards eligible activity by registered participants in the form of duty credits which can be used to acquit a Customs duty liability on eligible automotive imports, or can be sold.
Section 60A(1) of the Act requires the Minister to formulate a scheme (the MVP R&D Scheme) that will issue, with respect to ACIS Stage 2, duty credits to motor vehicle producers (MVPs) in return for the MVPs undertaking type J investment. The aim of the MVP R&D Scheme is to encourage the Australian automotive industry to invest in high-end R&D technologies. It is merits based and provided up to $150 million in assistance for successful projects. The Scheme has now held two rounds and duty credits to the value of $142.8 million have been allocated.
Section 60A (2)(b) of the Act states that the MVP R&D Scheme may provide for the number of credits that can be issued under the MVP R&D Scheme. Section 60B (1) allows the Scheme to be varied but not revoked. The MVP R&D Scheme Instrument is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Minister has decided that no more rounds for allocation of credits under the MVP R&D Scheme will be held. Rather, the remaining $7.2 million, from the original $150 million allocation, will be used by the industry to establish a Supplier Capability Development Program (SCDP).
Under the SCDP:
- MVPs will undertake to work with their suppliers and expend equivalent funds on eligible SCDP activities; and
- MVP's may expend the funds between 1 January 2007 – 30 June 2008.
The unallocated $7.2 million from the MVP R&D Scheme will be returned to the ACIS MVP funding pool from 1 January 2007 by the Variation to the 2004 Scheme. This has been identified as the most efficient method of ensuring the unallocated $7.2 million is returned to the ACIS MVP funding pool from 1 January 2007.
The Variation will also omit the Reader's Guide that was incorporated as part of the 2004 Scheme, as it is no longer relevant now that no more rounds are to be held.
In accordance with the consultation requirements of Section 17 of the Legislative Instruments Act 2003, the proposed variation was discussed with and has been agreed to by the various stakeholders in the automotive industry as being the preferable method of use of the remaining unallocated funds from the MVP R&D Scheme as this will bring forward distribution of the funds from 2010 to 2007.
The proposed variation is to take effect from 1 January 2007.
Further details are set out in the following Attachment.
ACIS Stage 2 Motor Vehicle Producer Research and Development Scheme Variation 2006 (No.1)
Reader's Guide
The Reader's Guide was incorporated as part of the 2004 Scheme and was intended to assist readers of the Scheme. The Reader's Guide is not part of the legislated Scheme and has no legal force.
The proposed Variation will omit the Reader's Guide as it is no longer relevant now that no more rounds of the Scheme are to be held.
Section 8
Section 8 of the 2004 Scheme sets the amount of credits that are available to be issued under the MVP R&D Scheme. The MVP R&D Scheme was originally allocated $150 million and section 8 of the 2004 Scheme reflects this. The MVP R&D Scheme has held two rounds and duty credits to the value of $142.8 million have been allocated to the motor vehicle producers (MVPs) leaving $7.2 million unallocated.
The proposed variation to section 8 will provide that the amount of credits available to be issued under the Scheme will be $142.8 million.
The effect of this change is that no further duty credits will be issued under the MVP R&D Scheme. The credits will be returned to the ACIS MVP funding pool from
1 January 2007.
It is expected that this variation will affect the ACIS MVP modulation rate from the first quarter of 2007 and allow the $7.2 million to be distributed to the MVPs from this time.
The ACIS MVP modulation rate for a quarter (other than the final quarter) is worked out using the steps set out in section 11(8) of the ACIS Administration (Modulation) Guidelines 2006. One of the steps is to identify "the total funding that has been reserved for the MVP Research and Development Scheme". The total funding is currently $150 million, however, with the proposed variation the figure that will need to be used in the calculation will be $142.8 million. This will slightly inflate the MVP modulation rate and allow the unallocated $7.2 million to be distributed to the MVPs much earlier than is currently legislated and thus allow the MVPs to conduct their SDP projects.