BRITISH TENDERS FOR WIRE ROPE

Dominion, Volume 29, Issue 253, 22 July 1936, Page 10

BRITISH TENDERS FOR WIRE ROPE

Auckland Board’s Criticisms

INVESTIGATION MADE BY JU'A RD OF TRADE Dominion Special Service. Auckland, July 21. The formation of a price ring by British wire rope manufacturers who took advantage of British preference to quote unjustifiably high prices in New Zealand tenders, one of the principal accusations made last year when the Auckland Harbour Board diverted an order for steel wire ropes from Britain to Germany following its dissatisfaction with the prices submitted for British firms, is refuted in a memorandum prepared by the Department of Overseas Trade, a section of the Board of Trade, which was placed before the board at its meeting to-day. “The report bears out the contentions of those of us who supported giving these tenders to British manufacturers,” said Mr. T. A. Bishop, after the chairman, Mr. C. G. Macindoe, had moved that the memorandum be received. “I move as an amendment that, the explanation be accepted and that in future the British preference clause be restored in all contracts.” The chairman said it was only a question of receiving the memorandum and future policy was not to be decided on in any way. The board was not tied to any fixed policy and had been forced into the position by circumstances with which members were familiar. All things being equal the board would give preference to British manufacturers. The amendment was lost and the memorandum was received. The board’s criticism embraced the following allegations;—(a) ThatUnited Kingdom manufacturers having formed a ring took advantage of the board’s preferential clause to quote unfair prices; (b) that when fresh tenders were called and thrown open to foreign competition the United Kingdom prices were reduced by 16 per cent., thus proving the validity of the first criticism; (c) that United Kingdom firms attempted to compel the board to pay sales tax from which wire rope has been exempted; (d) that United Kingdom firms quoted for exchange at 274 per cent, instead of 25 per cent.

Manufacturers’ Agreement.

“Admittedly,” states the department in its reply, “there is among manufacturers in the United Kingdom a price agreement in force by which all members of the Federation of Wire Rope Manufacturers of Great Britain are bound. . , . The minimum price basis agreed between United Kingdom manufacturers for wire rope of standard quality and type is designed to secure stability of prices at a reasonable, but not excessive, level. “In connection with certain tenders called for overseas some measure o£. reduction below the domestic price basis is permitted. In the case of the tenders called by the Auckland Harbour Board, the agreed reduction was 10 per cent, below the domestic price. “So far from its being true, therefore, that United Kingdom manufacturers attempted, by mutual agreement, to charge the Auckland Harbour Board an excessive price for the wire ropes required, all the firms concerned quoted prices on the basis of 10 per cent, below the prices which would have been quoted in the United Kingdom, and that in spite of the fact that they knew themselves to be immune from foreign competition when submitting these tenders. It will be borne in mind that there is no manufacture of wire ropes in New Zealand: this reduction in price therefore . . . could not prove prejudicial to any manufacturing interests in New Zealand.

Why Tender Prices Dropped.

“The fact that United Kingdom manufacturers submitted tenders, in answer to the second call, when foreign competition was permitted, at about 16 per cent below the prices tendered in answer to the first call, was due entirely to:—

“(1) The omission of a charge for sales tax, the federation having ascertained that no sales tax was payable. “(2) The quotation for exchange rates was made in the second tender on the basis of 25 per cent, (telegraphic transfer rate) instead of, as in the first quotations, at 271 per cent. (90 days’ rate), because it was understood that the quotation at 27j per cent, allowance had led to some criticism locally. “(3) The specification in the second call for tenders was different from that in the first calk The second call specified a smaller supply of wire rope than the first. So far from its being the fact that United Kingdom firms lowered their quotations for fear of foreign competition, the schedule of basis prices for material upon which the second set of United Kingdom tenders was calculated was precisely the same as that upon which the first set of tenders was submitted; the allegation, which has been freely made in New Zealand, that the second lot of tenders was reduced owing to the fear of foreign competition is entirely devoid of substance and is accordingly unfair to the United Kingdom firms concerned. .. . Sales Tax Misunderstanding. “Much criticism seems-to have been directed against the United Kingdom manufacturers on the ground that, when tendering in response to the first call, they made an attempt to saddle the Auckland Harbour Board with a charge of 5 per cent, to cover ‘sales tax,’ which in fact was inapplicable to imported wire rope. . . . The federation sincerely, though mistakenly, believed that the sales tax was applicable to imported wire rope. In any case the intention was that the amount chargeable for sales tax should be ‘for buyer’s account’ exactly as in the ease of the exchange percentage. It may be thought that the federation should have been able to ascertain beyond doubt whether the sales tax did or did not apply as regards wire ropes, but the point was not clear in the New Zealand tariff schedule. “The Department of Overseas Trade feels that the federation can scarcely be held to blame for ignorance as to the applicability of the sales tax at that time in view of the fact that on a call for tenders closing on October 7, 1935, almost six months after these events, a public body in New Zealand was still apparently under the same misapprehension that sales tax was applicable upon imported wire rope. (An example of a call for tenders in which sales tax is itemised to be included in the price is here quoted.) "As regards the much reduced price at which German competitors eventually secured the order, United Kingdom

firms state that domestic prices in Germany for wire rope were then, and still are, approximately equivalent, type for type, to the domestic prices in the United Kingdom; they are forced to conclude that the system prevailing in Germany to-day of subsidising exports must therefore, in the main, be responsible for the disparity in price between the United Kingdom and German quotations.”