HC Deb 22 July 1965 vol 716 cc2127-36

Motion made, and Question proposed, That this House do now adjourn.—[Mr. O'Malley.]

5.56 a.m.

Mr. James A. Kilfedder (Belfast, West)

In my constituency there are a great number of industries, large, medium and small; some of local distribution only and some known internationally. One firm which, although small in size, is none the less known in many parts of the world is the firm of Atkinson & Company Ltd., the makers of, to give it its full title, Atkinson's Royal Irish poplin ties and scarves. These articles are made from material woven on hand looms in the traditional way for nearly a century and a half.

Last year, the company was forced through increased demands for export, and home market demands, and also through the shortage of skilled handstitchers in the locality, to import two slip-stitch sewing machines from the United States. The Board of Trade refused to grant remission of duty on the machinery. The amount of duty paid was £380. This is a small amount, certainly in comparison with the sums normally mentioned in this House but, none the less, an amount of importance to a small firm such as Atkinsons, which, to meet stiff competition overseas must, in addition to meeting other costs, put a fair amount of money into advertising.

What is much more important than the money, however, is the principle that is involved. It does not matter whether the amount of duty was £100, or £1,000, or even a large sum. The question is that a principle is involved, and Atkinsons feels a real sense of grievance at the attitude of the Board of Trade and the strict interpretation of the regulations governing the duty-free entry of machinery.

I am fortunate in having this opportunity to put the company's complaint before the House, because the Board of Trade should be ready to help firms in the export trade. This is certainly a case where the Department has not been sympathetic towards the firm. I hope that the Minister of State, Board of Trade, who is to reply to this debate, will change the decision of his Department, a decision which was made under the previous Administration, but which the hon. Gentleman confirmed not very long ago.

I should like briefly to say something about the firm's production. It is centred, in its only factory, in my constituency in West Belfast. The silk poplin hand-woven material is cut by hand. Each tie is handled separately by skilled workers, who finally hand-stitch the backing, the right name for which is, perhaps, stiffening, into the tie, and at the same time, drawing the poplin material together by what is known as a slip stitch running from one end of the tie to the other. This is a skilled operation done by skilled workers in the factory.

Atkinson's Royal Irish poplin ties are regarded in the trade as a quality product. They are sold in high-class shops throughout the United States, Canada, New Zealand, Japan and other countries, as well as countries in Europe.

This year, I am told, the booking of orders by the export market is 51 per cent up on last year's figures, and there is a 20 per cent. increase on last year's figures in the home market. This dramatic increase was due to the imported machinery. This is a splendid effort by a very small firm, and the refusal of the Board of Trade to grant a rebate of duty on the machinery is a sad commentary on the extent to which the Board of Trade is ready to help exporters.

Before this machinery was purchased by Atkinson's the company experienced a difficulty in meeting demands which were being made upon it by firms overseas who wished to buy its products, because of the lack of skilled hand stitchers in the locality. Then the management heard of a sewing machine patented in America for putting this slipstitch into ties. Until then, no sewing machine had been invented to do this job perfectly, and no such machine is manufactured in this country.

This is not a case in which the Board of Trade, in refusing a rebate of duty, is helping local industry, because no company in this country manufactures such a machine. Atkinson's decided to test the machine, and if it met the high standard expected of the firm, to instal one or more, to enable the whole production of ties with the slipstitch put in by hand to be released for the export market.

In May, 1964, Atkinson's wrote to Messrs. Clarkson's, Ltd. (Leeds), the British agent for the American company, A.M.F. of New York, who manufacture the machine, and a demonstration was arranged for 8th June last year. This arrangement was conveyed by the British agents to the American company in a letter dated 24th May. A photostat copy of the letter was sent later that year to the Board of Trade. The penultimate paragraph of this letter—the date of which is important—reads: While, initially, the interest"— the interest referred to was conveyed by telephone conversations before the demonstration— is in one machine, there is a possibility that two machines could be ordered so as to escape Import Duty. It is clear from that letter which the British agents sent to the American company that Atkinson's was contemplating buying a second machine and that it was aware of the ability to avoid payment of the duty.

As a result of the demonstration on 8th June last year, Atkinson's, though still somewhat doubtful whether the machine would meet its special requirements, ordered one. In the following month, July, 1964, Atkinson's told the British agents that, after it had had the machine working for some time—there was an absolute need for Atkinson's to make sure that the slipstitch drawn by this machine could match the sewing of the skilled hand worker—it would then decide on the placing of an order for a second machine.

If, instead of letting doubts make it hesitate about ordering a second machine—this is understandable in a firm so dependent on the quality of its products—Atkinson's had used the words, "We will order one and provisionally order a second machine, on condition that the first operates successfully", it would have been granted remission of the duty with no trouble. I think that the Minister would agree with that.

That is certainly what was stated by the Board of Trade in a letter dated 5th October, 1964, which was sent to Atkinson's, and which said: Therefore, unless you placed a provisional order with the American Machine and Foundry Company for the two machines, i.e., delivery of the second machine to depend upon the suitability of the first, it would seem that any application you may make in this connection would be ineligible for consideration. There is no difference, in effect, between the two. The intention of the firm was perfectly clear; to purchase a second machine, all being well with the first.

The first slip-stitching machine was delivered in September, 1964, and within a matter of four weeks from the delivery of that machine, on 5th October, Atkinson's told the British agents that it would take the second machine. On 7th October, Atkinson's received a letter from the British agents, part of which stated: It was very pleasing to learn from you, despite your fears, the installation of the first AMF. Class 59–87 New Mode Necktie Slip-Stitching Machine has proved satisfactory and we gratefully acknowledge receipt of the confirmation order for the second Machine which we discussed in July". There is was perfectly clear that the British agents for the American company referred to a confirmation order for the second machine. There was, therefore, no doubt as to the nature of the transaction in the mind of the British agents. Indeed, there should be no doubt in the mind of the Board of Trade about the transaction. The cost of the two machines exceeded £1,000 each, on which Atkinson's had to pay a 15 per cent. impost. In addition, the firm had to pay duty of £190 on each machine.

The hour is very late. I will, therefore, curtail my remarks. In appealing to the Minister to reconsider this matter, I would emphasise that, while a small amount may be involved, a principle is also involved. It is the principle of the interpretation of the regulations relating to the importation of machinery and the remission of duty, as well as the exercise of the discretion vested in the Board of Trade.

It is wrong that a company should be penalised for attempting to export more, in answer to the Government's calls for increased exports. The company has increased its production by 50 per cent. and this dramatic increase has been brought about by the introduction of these two machines. It is a shame that when this small company made this gallant attempt to meet its export orders the Board of Trade in effect showed no sympathy whatever, but, instead, made it pay duty on the two machines.

I hope that the Minister will agree that from the facts of the transaction, manifested in the letters which passed between Atkinson's and the British agents, and the British agents and the American company, it was perfectly clear that this company wanted to buy one machine and, if it proved successful, certainly intended to purchase a second one immediately. That is what happened. It is not too late for the Minister to change his mind and show that the Board of Trade can be sympathetic towards small companies. I hate to think how the Department deals with other firms, if the treatment of Atkinson's is indicative of its general dealings with others.

If, perhaps, Atkinson's has not followed the letter of the regulations as set out, none the less it was only at fault either because it did not want to be too rash in ordering two machines at once or else because it was more interested in making sure that the product of the machine was of the firm's high quality, rather than thinking solely in terms of obtaining a rebate of duty. I urge the Minister to reconsider this matter and allow Atkinson's the rebate of duty.

6.10 a.m.

The Minister of State, Board of Trade (Mr. Edward Redhead)

The hon. Member for Belfast, West (Mr. Kilfedder) has pursued this matter with great persistence, and he has my utmost sympathy—and I am sure that I enjoy his—that this further effort in the interests of his constituents, Messrs. Richard Atkinson and Company, should have fallen at such a very late hour. As the hon. Member has been brief in stating his case, I shall try to be equally brief in replying, but perhaps it would help if, in the first instance, I cleared up the administrative and legal background to duty remission on machinery, as the position is of some importance to a better understanding of the case.

The Import Duties Act of 1958 empowers the Treasury, on the recommenda- tion of the Board of Trade, to lay down, by Order, duties for the protection to goods produced in the United Kingdom. The prescribed rate of duty on sewing machines of the kind ordered by Messrs. Atkinson, subject to the determination of classification by Customs, appears to have been one of 15 per cent. In addition to providing for duties on goods entering the United Kingdom, the Act empowers the Treasury, again on the recommendation of the Board of Trade, to direct that payment shall not be required of any duty chargeable under the Act on particular importations of machinery if similar articles are not for the time being procurable in the United Kingdom. It is obvious that before the Board can recommend duty remission, it must be satisfied that the legal requirement that similar machinery is not procurable in the United Kingdom is met.

For this purpose it is relevant to point out that a large number of staff is needed to examine applications, and technical staff to advise them, and the cost of this falls on the taxpayer. In order to limit the cost by reducing the number of applications, the Board, with the agreement of the Treasury, has certain rules with which all applications have to comply before they can be accepted for examination. These rules are very well known, and are published in Notice No. 339, of which the company concerned has a copy.

The majority of these rules are based on the recommendations of an independent committee, the Wilson Smith Committee. This Committee, which was composed mainly of independent business men, was set up in 1953 to advise the Government on the future of the duty remission system for machinery. Such independent consideration of the future of the system was urgent then because, owing to the great number of applications, an overwhelming number, its operation had had to be suspended. The Committee took the view that it was not in the national interest that the Government should maintain a complicated and costly system of administration, and made certain recommendations designed to reduce the number of applications and the cost of administering the system.

One of these recommendations was that machinery valued at less than £2,000 should not be eligible for consideration. The Committee stated that it did not consider that the duty payable on such machinery—about £400 at that time—was a sufficiently serious burden, even on the smaller firms, to justify the expense of administration. It added that the cost of similar machines ordered at one time by one user for delivery at different times should be allowed to be aggregated for the purpose of reaching the proposed minimum value. This recommendation was accepted in its entirety by the Board of Trade and the Treasury, and the rule was operative at the relevant time in the present case. The minimum value limit has since been raised to £3,000, but this does not affect the present case.

As a concession, and I must emphasise that this is a concession, the Board was prepared to accept, as meeting the requirement of the rule, an order for several machines together worth £2,000 or more where the order was a conditional one—that is, where the total order is placed by one user at one time but the part of it relating to the second or subsequent machines is said to be dependent upon the satisfactory performance of the first.

Turning to the application by Richard Atkinson and Company, the company wrote to the Board on 25th September, 1964, saying that it had already imported a sewing machine valued at £1,071 from the United States. The company added that it understood that if two such machines were imported at the one time it was possible to have a duty free licence. It then explained that, having imported the first machine, and having found it satisfactory, it was considering the purchase of a second; in these circumstances the company asked if duty remission could be given on the second order, and repayment of duty paid on the first.

The Board of Trade in reply sent a copy of Notice No. 339, drawing attention to the rule that machines must be ordered—not necessarily delivered—at one time in order to qualify under the minimum value rule, and pointing out that an application on that basis proposed by the company would be ineligible for consideration. The company ordered a second machine on 5th October. 1964, and in further correspondence and telephone calls, sought to establish that it had given prior notice to the supplier or his agent of the company's intention to order the second machine, subject to the satisfactory performance of the first. Since, however, it is undeniable that the first machine was ordered in June, 1964, and the second in October, 1964, and that neither machine was valued at £2,000 or more, the Board of Trade could not accept the application without discriminating unfairly against other users who observe the rules, or without breaking the rules.

The hon. Gentleman has suggested that because the company intended to order a second machine at the time that it ordered the first, the Board of Trade should accept the application as meeting the minimum value rule. But this would be quite impracticable. The Board can identify an order, or even a conditional order without difficulty and, indeed, has to identify one or the other in the case of every application; but an "intention" could not be satisfactorily identified, for evidence of "intention" cannot be properly established and the evidence of "intention" in this case is not conclusive.

A certified photostatic copy of the order which the company has produced contains no reference whatever to any suggestion of any "intention", however provisional, to order a second machine, and it is difficult to establish that there was a clear contemplation at that stage. The second machine was ordered in October, 1964, and the Board of Trade could not, without breaking the rules and discriminating against other users who observed them, take any course other than it did. I am sorry to have to explain this to the hon. Gentleman, but it is the situation.

I readily agree with him that this firm has an extremely good exporting record and there is no reflection at all on the firm by this decision not to make a special concession to his constituents. We cannot do that because they are very successful exporters. We cannot be asked to bend the rules which must be applicable in all other cases because they are such good exporters. As all hon. Members know, there are incentives to exporters, and this is hardly a way in which to deal with this aspect of the matter.

Mr. Kilfedder

I am not basing my case on the success of the firm in the export field, but on the facts which would seem to be that this application is within the terms of the regulations.

Mr. Redhead

I understood the hon. Gentleman to say that this showed a lack of sympathy on the part of the Board of Trade and that it could not give any reason for taking the course which it did. We congratulate the firm on what it has done, but the hon. Member suggests that because the applicants intended to order the second machine when ordering the first, the Board of Trade should apply the minimum value rule. Where there is a conditional order, the Board can identify it, or a firm order, without difficulty and, indeed, the Board has to identify one or the other in the case of every application; but an "intention" cannot be satisfactorily identified. Evidence of "intention" cannot be properly established. Even if we were prepared to accept "intention" as qualifying for the application of this rule, I am bound to say that the evidence even of "intention" in this case is not conclusive.

The hon. Member has relied on two copy letters as evidence of that intention. The first copy letter was from the agents of the United States manufacturers dated 26th May, 1964, and the hon. Member quoted the relevant portion. While initially the interest was in one machine, there was the possibility that two could be ordered to escape import duty. The hon. Member suggests that Atkinsons knew of this possibility, but it was not Atkinsons who said that but the agents of the United States manufacturers. Nevertheless, we find that Atkinsons ordered only one machine on 8th June following that letter, a copy of which was not brought to the notice of the Board until after this correspondence had started and that order bore no reference whatever to the possibility of a second order.

The hon. Member went on to quote a copy of a letter dated 7th October, 1964, which acknowledged the receipt of a confirmation order for the second machine. He again quoted the phrase in that letter: which we discussed in July". The hon. Member suggests that the dates are important. I agree. If this had been discussed, the first evidence we have of a definite discussion was between the agents and Atkinsons in July. It is significant that the first machine had already been ordered on 8th June. We have to act on ascertainable fact. We have to decide, was there or was there not an order? If we were to agree to adopt intention as a criterion the argument about what constituted an intention in any particular case would be endless and the scheme involved in just the obligation which the Wilson Smith Committee thought should be avoided.

I assure the hon. Member that only after the most careful deliberation and exhaustive examination of all the evidence adduced we have reluctantly decided to adhere to the decision that this does not fall within the rules laid down.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes past Six o'clock a.m.