Australia: The Federal Government’s Back Flip on the Home Insulation Program – A Further Blow for Industry

Customs, Trade and Transport Law e-alert
Last Updated: 27 April 2010
Article by Andrew Hudson

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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