Yesterday's announcement by the Federal Government that it
would not reinstate the Home Insulation Program
("HIP") component of the Renewable
Energy Bonus Scheme, (as it had previously promised), represents a
significant additional blow to those in industry who have been
adversely affected by the previous cancellation of the HIP.
As reported in our e-alert of 2 March 2010, many freight
forwarders, customs brokers and transport companies had been
adversely affected by the cancellation of the HIP. In the main,
this arose from circumstances where these service providers found
that their clients would not take delivery or pay for the
insulation which had been transported (or could not) due to the
cancellation of the HIP. In those circumstances, those parties had
incurred significant costs with little prospect of recovering those
costs. Such costs included payment of customs duty, GST, container
detention, storage costs and related transport charges. The problem
for those service providers is that while normally they would sell
the goods under their control to defray their costs and take
proceedings to recover any amounts still outstanding, there was
next to no market available to sell the insulation under their
control and, in any event, there were significant doubts as to the
quality of that insulation. Even if they could sell the insulation,
their customers would not have been able to pay any balance of
costs outstanding as businesses had effectively terminated when the
HIP had been terminated. Accordingly, normal mechanisms to assist
in covering relevant costs would give little comfort in the ability
to recover amounts owing. Even so, a number of those affected had
hoped that the promised reinstatement of the HIP in June 2010 would
provide a market for the insulation at a reasonable price which
would have better enabled them to cover their losses and their
importer or insulation installer company clients would be more
financially able to pay any other amounts owing.
However, the announcement yesterday by the Federal Government
that the HIP would not be reinstated means that there is little (if
any) likelihood of there being a market for the insulation held by
affected service providers. This is a significant blow, especially
given that the customers of those service providers will also have
no prospects of re-establishing their businesses and paying any
amounts owing. A number of service providers are now faced with
difficult questions as to how to dispose of the insulation they
hold (so as to reduce storage costs), including whether the
insulation should merely be dumped (by way of landfill), or
re-exported to other markets overseas where there might be some
prospect of recovering some amounts even after payment of export
and other charges.
The announcement yesterday by the Federal Government has also
given little comfort to those affected that the type of
compensation which is being made available will extend to them. At
the time that the HIP was cancelled earlier this year, comments
from the Minister's office were to the effect that these were
largely commercial issues for those in the supply chain and that
they could seek to recover amounts owing through the sale of the
insulation they held. Presumably, even the Federal Government will
now recognise that by its failure to reinstate the HIP (as
expressly and unequivocally promised), there is no prospect of
those affected in industry being able to recover losses from the
insulation they currently hold. If (as it seems), the Federal
Government is looking at a support package for
"legitimate" operators adversely affected by the steps
taken by the Federal Government in relation to the HIP, then you
would hope that the Federal Government would take a similar stance
towards legitimate operators in the supply chain who have been
adversely affected through the manner in which the Government has
handled the HIP.
As you are aware, we are acting for a number of the service
providers and given that the announcement of the Federal Government
seems to have closed off avenues for commercial recovery of costs,
we will now move to a more direct call for compensation for those
parties without unnecessary delay or inconvenience.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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