With reference to my opinion of 5 January 1910⁽¹⁾ the Minister for Customs forwards the following memo for advice:

I have given consideration to this matter and I am much impressed by the view that the establishment of factories in Australia for the making of handkerchiefs would be an industry much to the advantage of the country.

The applicants are, I understand, prepared to give substantial security that the industry shall be effectually established, and the power of revoking any concession made at any time will always of course remain with the Department.

I propose therefore that the piece goods for handkerchiefs may be cut up and the article completed in bond under Customs supervision, and that a duty on the completed article of 15% be charged on delivery. The present duty charged on importation is 35% and 40% general.

This would give the Australian made article the benefit of 20% or, as the case might be, 25%, as against the imported article.

Before, however, finally disposing of the matter I should be glad of the Attorney-General's opinion as to whether the concession proposed would be illegal.

In my opinion, the action proposed would not be in accordance with law.

The Customs Act, as I pointed out in the previous opinion, is a machinery Act for carrying into effect the Customs Tariff. It does not impose, nor does it empower the Executive to impose, any duty. No duty can be levied except under the authority of the Tariff, and in accordance with some particular item in the Schedule to the Tariff.

The provision of section 89 of the Customs Act, that articles manufactured in bond may be delivered for home consumption 'subject only to the payment of such duty (if any) as may be prescribed' does not empower the Governor-General in Council to fix a new rate of duty. 'Duty', in the section, means a duty imposed by law. All that a regulation can do, in my opinion, is to declare, in a way not inconsistent with the Customs Act or the Customs Tariff, what Tariff item is applicable to the case, and how it shall be applied. (The power to make regulations under the Customs Act is only to make regulations 'not inconsistent with this Act'; and the Customs Tariff 1908, section 2, declares that 'The Customs Act 1901 shall be incorporated and read as one with this Act'.) The fixing of an arbitrary rate of duty on an article manufactured in bond is in my opinion inconsistent with the Tariff, and unauthorised by the Customs Act.

Moreover, the particular duty which it is proposed to fix in this case is in my opinion inconsistent with the Tariff for quite another reason.

I understand that the imported material, in this case, is governed by the footnote to Tariff item 123 (Piece Goods) which is as follows:

Definition of Piece Goods-When material is defined by selvedge or by pattern for cutting up into separate articles, it is not to be considered Piece Goods but as dutiable under the heading applying to the article into which it is designed to be made.

That is to say, the Tariff declares that material for handkerchiefs, defined by selvedge or pattern for cutting up, is to be dutiable as handkerchiefs. It expressly denies

protection to the process of completing the manufacture of separate handkerchiefs out of the material.

The contemplated manufacture in bond is merely for the purpose of converting the material into the separate articles which, for the purpose of duty, the Tariff declares it already to be-for converting into handkerchiefs material which, for tariff purposes, was already handkerchiefs. In my opinion, this is not 'manufacture' within the meaning of the Customs Act, read with the Customs Tariff.

[Vol. 7, p. 353]

(1) Opinion No. 366.