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Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006

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2004-2005-2006

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

CUSTOMS AMENDMENT (FUEL TAX REFORM                                                            AND OTHER MEASURES) BILL 2006

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by authority of the Minister for Justice and Customs,

Senator the Honourable Christopher Martin Ellison)



CUSTOMS AMENDMENT (FUEL TAX REFORM AND OTHER MEASURES) BILL 2006

OUTLINE

The purpose of this Bill is to amend the Customs Act 1901 (the Customs Act) to:

a)       strengthen Customs control over certain imported goods that are used in the manufacture of excisable goods; and

b)       repeal the customs-related provisions of the fuel penalty surcharge legislation; and

c)       replicate certain provisions of the Spirits Act 1906 (the Spirits Act), which is to be repealed.

Complementary amendments to the Customs Tariff Act 1995 (the Customs Tariff Act) are contained in the Customs Tariff Amendment (Fuel Tax Reform And Other Measures) Bill 2006.

Background

In June 2004, the Treasurer announced reforms that were designed to provide excise and customs duty relief for a wide range of businesses and households.  The main feature of these reforms was the removal of the effective excise and customs duty from burner fuels and the replacement of refunds and remissions with the fuel tax credit system.  At that time, it was also decided to conduct a review of the arrangements that apply to all excisable products (the Review), being alcohol (other than wine), petroleum products and tobacco and tobacco products.  The review was also to extend to the imported equivalents of excisable goods (excise-equivalent goods), which are governed by customs legislation including the Customs Act and the Customs Tariff Act.

Restructure of Schedule 3 to the Customs Tariff Act

One of the main outcomes of the Review is a major restructure of the Schedule to the Excise Tariff Act 1921 (the Excise Tariff Act) to remove redundant and unnecessarily complex provisions in the Schedule.  Amendments to the Schedule to the Excise Tariff Act to give effect to this restructure are contained in the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006.  Complementary amendments to Schedule 3 to the Customs Tariff Act are contained in the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006.

Repeal of fuel substitution legislation

Another of the main outcomes of the Review is the replacement of all existing rebates and subsidies for fuel products, including concessional and free rates of duty, with a new fuel tax credit scheme.  As a consequence, it will be necessary to repeal the fuel penalty surcharge suite of legislation, including provisions in the Customs Act, that was introduced in 1997.  The relevant provisions in the Customs Act will be repealed by this Bill.  The remainder of the legislation will be repealed by the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006.

Use of excise-equivalent goods in the manufacture of excisable goods

Another of the main outcomes of the Review is the decision to strengthen and clarify the compliance and other legal arrangements that apply to the use of imported excise-equivalent goods in the manufacture of excisable goods.  Most of the amendments contained in the Bill deal with the strengthening of the controls over these goods.  For example,   the Customs Act will be amended to clarify that the manufacture of excisable goods may occur in a customs warehouse and to provide that such manufacture must occur at a place licensed under both customs and excise legislation.  The Customs Act will also be amended to ensure that Customs control of imported excise-equivalent goods continues until such a time that an excisable liability has been created under the Excise Act.  Other amendments will deal with issues associated with duty extinguishment and accounting for such goods to Customs. 

There are two broad reasons for the strengthening of Customs control over these goods at this time. The first is that excise-equivalent goods are high value and therefore represent a greater likelihood of risk to the revenue, and with more significant consequences, than other imported goods. The second is that the current lack of legislative and administrative consistency in the treatment of excise-equivalent goods for excise manufacture may also potentially exacerbate that risk.

Associated amendments to the Customs Tariff Act to repeal the concessional duty rates that apply to excise-equivalent goods are contained in the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006.  All excise-equivalent goods will become dutiable at a rate of customs duty that is equal to the excise duty payable on their locally manufactured or produced equivalents.  However, such duty will not become payable until the goods are entered for home consumption.

Repeal of the Spirits Act 1906

Finally, another of the main outcomes of the Review is the decision to repeal the Spirits Act, as most of its provisions are considered outdated and no longer relevant to the effective management of Australia’s alcohol taxation regime.  The Spirits Act will be repealed by the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006.

However, the provisions of the Spirits Act that deal with the maturation period of certain imported spirits will be inserted in the Customs Act.

FINANCIAL IMPACT STATEMENT

There will be a slight impact on some manufacturers who utilise imported excise equivalent goods in manufacturing excisable goods.  An existing anomaly in the legislation that has allowed certain manufacturers to use imported excise equivalent goods to manufacture excisable goods without the imported goods being required to be warehoused will be removed.

The changes will clarify that that activity must take place at a place licensed under both customs and excise legislation.  Entities that currently do not hold a customs warehouse licence will incur the normal cost recovery charges associated with Customs warehouses.



CUSTOMS AMENDMENT (fuel tax reform AND OTHER MEASURES) BILL 2006

NOTES ON CLAUSES

Clause 1  Short title

1.              This clause provides for the Bill, when enacted, to be cited as the Customs Amendment (Fuel Tax Reform and Other Measures) Act 2006 .

Clause 2  Commencement

2.              Clause 2 provides that this Act commences on 1 July 2006. 

3.              This is the date on which the proposed complementary amendments to the Customs Tariff Act 1995 (the Customs Tariff), as well as the proposed amendments to the Excise Act 1901 (the Excise Act) and the Excise Tariff Act 1921 (the Excise Tariff) that give effect to the Review of the Excise Tariff also commence.

Clause 3  Schedule(s)

4.              This clause is the formal enabling provision for the Schedule to the Bill, providing that each Act specified in a Schedule is amended in accordance with the applicable items of the Schedule.  In this Bill the Customs Act is being amended.

5.              The clause also provides that the other items of the Schedule have effect according to their terms.  This is a standard enabling clause for transitional, savings and application items in amending legislation. 



SCHEDULE 1 - Amendments

Customs Act 1901

Items 1, 2 and 4 - Subsection 4(1) (definitions of clean fuel, designated fuel and marker )

6.              These items amend subsection 4(1) of the Customs Act 1901 (the Customs Act) by repealing the definitions of clean fuel , designated fuel and marker

7.              These definitions were inserted into the Customs Act for the purposes of the customs and excise regime that was designed to address issues associated with fuel substitution practices.  As this regime is being repealed as part of the simplification of the Schedule to the Excise Tariff Act 1921 (the Excise Tariff), these definitions are also being repealed.

Item 3 - Subsection 4(1)

8.              This item amends subsection 4(1) of the Customs Act by inserting a new definition of excise-equivalent goods.   These goods will be defined as goods prescribed by the regulations for the purposes of this definition.

9.              This definition is being inserted for the purposes of new Part VAA of the Customs Act, which is being inserted by item 14 below.  New Part VAA will set out the new compliance and other legal arrangements applying to the use of excise-equivalent goods in the manufacture of excisable goods.  Excise-equivalent goods are those imported goods that, if they were produced or manufactured in Australia, would be classified in the Schedule to the Excise Tariff and subject to excise duty.  This basically covers petroleum products, alcohol, and tobacco and tobacco products.  Excise-equivalent goods are subject to rates of customs duty that are equal to the rates of excise duty applying to their locally manufactured equivalents.  Some are also subject to ad valorem rates of duty.

10.           It is proposed to prescribe the excise-equivalent goods in the regulations by reference to their tariff classification under Schedule 3 to the Customs Tariff Act 1995 (the Customs Tariff Act).  This is considered the most precise method of identifying those goods to which the new regime will apply.  The relevant tariff classifications in Chapters 22, 24, 27, 29, 34 and 38 of Schedule 3 to the Customs Tariff Act will be prescribed.

Items 5 and 6 - Subparagraphs 30(1)(a)(ii) and (iv)

11.           These items amend subparagraphs 30(1)(a)(ii) and (iv) of the Customs Act by inserting the phrase “and are not excise-equivalent goods”.  This is a technical amendment only as a consequence of the new provisions in section 30 dealing with Customs control over excise-equivalent goods to be inserted by items 7 and 8 below.  These amendments will take excise-equivalent goods out of subparagraphs (ii) and (iv).

Item 7 - At the end of paragraph 30(1)(a)

12.           This item amends paragraph 30(1)(a) of the Customs Act by inserting new subparagraphs (v) and (vi).  These new subparagraphs deal with the control of the Customs (hereinafter referred to as “Customs control”) over excise-equivalent goods.

13.           New subparagraph (v) deals with goods that are both excise-equivalent goods and examinable food that has been entered for warehousing ( dual goods) .  This subparagraph provides that the control of the Customs over dual goods continues until whichever of the events listed in new subsection 30(1A) (to be inserted by item 8 below) happens first.  Examinable food in this context refers to alcohol.

14.           New subparagraph (vi) deals with goods that are excise-equivalent goods and are not examinable food.  This subparagraph provides that the control of the Customs over dual goods continues until whichever of the events listed in new subsection 30(1B) (to be inserted by item 8 below) happens first.  This provision will cover tobacco, tobacco products and petroleum products.

15.           The goods that are intended to be prescribed as excise-equivalent goods are currently subject to Customs control under the current terms of section 30 of the Customs Act.  However, as excise-equivalent goods will be differentiated from other imported goods for the purposes of new Part VAA of the Customs Act, it is necessary to insert specific provisions to deal with Customs control over these goods.  It is also necessary to insert a new point at which Customs control will cease for excise-equivalent goods that are used in the manufacture of excisable goods.  This will ensure that Customs control over excise-equivalent goods is maintained, and the revenue protected, up until the final process of the manufacture of excisable goods.

Item 8 - After subsection 30(1)

16.           This item amends section 30 of the Customs Act by inserting new subsections 30(1A) and (1B).

17.           New subsection 30(1A) sets out the events for the purposes of new subparagraph 30(1)(a)(v).  The four events in relation to examinable food are:

a)       the dual goods are destroyed in accordance with an imported food inspection advice delivered to the person who has possession of the goods;

b)       excisable goods are manufactured and the dual goods are used in that manufacture;

c)       the dual goods are delivered into home consumption in accordance with an authority to deal or in accordance with a permission under section 69, 70 or 162A; or

d)       the dual goods are exported to a place outside Australia.

18.           New subsection 30(1B) sets out the events for the purposes of new subparagraph 30(1)(a)(vi).  The three events in relation to goods that are not examinable food are the same as those applying to examinable food, with the exception of destruction. 



They are:

a)       excisable goods are manufactured and the excise-equivalent goods are used in that manufacture;

b)       the excise-equivalent goods are delivered into home consumption in accordance with an authority to deal or in accordance with a permission under section 69, 70 or 162A; or

c)       the excise-equivalent goods are exported to a place outside Australia.

Items 9 and 10 - Subsections 71K(1) and 71L(1) and (3)

19.           These items amend subsections 71K(1) and 71L(1) and (3) of the Customs Act by inserting a reference to new section 105C.  New section 105C will insert a new requirement to provide a return to Customs in relation to excise-equivalent goods used in the manufacture of excisable goods. 

20.           Sections 71K and 71L set out the requirements for making a return to Customs that is communicated by document, or communicated electronically, including the matters that must be set out in a return and, in relation to the latter, when the return is taken to have been communicated to Custom.  These amendments will ensure that these requirements will extend to the return under new section 105C.

Item 11 - Subsection 79(3)

21.           This item amends the Customs Act by inserting the phrase “manufacture of excisable goods” into subsection 79(3).

22.           Currently, subsection 79(3) (which is in Part V of the Customs Act) provides that a warehouse licence granted by the Chief Executive Officer of Customs may authorize blending or packaging, processing, trading or other activities specified in the licence to be carried on in the warehouse.

23.           As part of the new arrangements included in new Part VAA of the Customs Act, the manufacture of excisable goods using excise-equivalent goods can only take place that is both:

a)       a warehouse described in a warehouse licence granted under Part V of Customs Act; and

b)       premises specified in a manufacturer licence granted under the Excise Act 1901 (the Excise Act).

(See new section 105E of the Customs Act, to be inserted by item 14 below.)

24.           Section 33 of the Act makes it an offence for a person to move, alter or interfere with goods that are subject to Customs control where alteration or interference is not authorised by or under the Customs Act.

25.           However, subsection 79(3) does not specifically refer to manufacture as one of the allowable activities that a warehouse licence can authorise to be carried on in a warehouse.  It is, therefore, proposed to amend subsection 79(3) to provide clear authority for the manufacture of excisable goods to occur in a warehouse described in a warehouse licence.

Item 12 - Part VA (heading)

26.           This item amends the Customs Act by repealing and substituting the heading to Part VA.  The current heading refers to “Special provisions relating to customable beverages”, which are defined in section 103 of the Customs Act.  However, the amendments proposed in item 13 below will extend the operation of Part VA beyond customable beverages.  Therefore, the reference to “customable” has been removed from the heading to Part VA.

Item 13 - At the end of Part VA

27.           This item amends Part VA of the Customs Act by inserting new section 105A. 

28.           New section 105A will replicate the provisions of section 11 of the Spirits Act 1906 (the Spirits Act) The Spirits Act is being repealed by the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006, on the basis that most of its provisions are no longer relevant to the effective management of Australia’s alcohol taxation regime.  However, it was considered necessary to retain some of the requirements in the Spirits Act and these are being re-enacted in customs and excise related legislation.

29.           New section 105A provides that brandy, whisky or rum imported into Australia must not be delivered from the control of the Customs unless a Collector is satisfied that it has been matured by storage in wood for at least 2 years.  The current product standard in the Spirits Act requires a minimum 2-year maturation in wood.   

30.           The definitions of brandy, whisky and rum set out in new subsection 105A(2) are substantially the same as the current definitions of these goods in the Spirits Act.

Item 14 - After Part VA

31.           This item amends the Customs Act by inserting new Part VAA after Part VA.  New Part VAA contains the new compliance and other legal arrangements applying to the use of excise-equivalent goods in the manufacture of excisable goods and is headed “Special provisions relating to excise-equivalent goods”.

New section 105B

32.           New section 105B of the Customs Act sets out the circumstances in which the import duty payable on excise-equivalent goods will be extinguished.  Subsection 105B(1) provides that the liability to pay import duty on excise-equivalent goods is extinguished if:

a)       the goods are entered for warehousing; and

b)       excisable goods are manufactured and the excise-equivalent goods are used in that manufacture; and

c)       the excise-equivalent goods are subject to the control of the Customs at the time they are used in that manufacture; and

d)       that manufacture occurs at a place that is both:

i)        a warehouse described in a warehouse licence granted under Part V of the Customs Act; and

ii)       premises specified in a manufacturer licence granted under the Excise Act.

For the purposes of this Explanatory Memorandum, the place described in paragraph (f) is a “dual-licensed place”.

33.           All of these requirements must be satisfied before the import duty on the excise-equivalent goods is extinguished.  If all of the requirements are satisfied, the goods will be subject to Customs control at all times until excisable goods are manufactured.  This also, in effect, means that no import duty (except for ad valorem duty on some alcohol and fuel products) will ever be paid on these goods.  In addition, once these goods are used in the manufacture of excisable goods and become classifiable in the Schedule to the Excise Tariff Act, those goods will become subject to excise duty and will move immediately into the control of the Commissioner of Taxation under the Excise Act.

34.           If excise-equivalent goods are entered directly into home consumption prior to being used in the manufacture of excisable goods, the full rate of import duty will have to be paid on those goods at that time.  This is due to the repeal of items 44 and 67 of Schedule 4 to the Customs Tariff Act by the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006.  These items granted concessional entry to excise-equivalent goods at the time they were entered into home consumption where they were intended for use in the manufacture of excisable goods.  However, as part of the measures designed to improve the protection of the revenue, these concessional items will be repealed.  This will remove the current anomaly whereby some manufacturers of excisable goods that use excise-equivalent goods in their manufacturing process will no longer be able to enter their goods for home consumption and remit their Customs duty liability through items 44 or 67.

35.           Therefore, in order to avoid having to pay import duty on excise-equivalent goods that are intended for use in the manufacture of excisable goods, the incentive is to enter such goods for warehousing expeditiously and use them in the manufacture of excisable goods at a dual licensed place without ever entering them for home consumption.

36.           Subsection 105B(2) provides that the liability to pay import duty is extinguished at the time the excisable goods are manufactured.

37.           However, it is only intended to extinguish the equivalent amount of the import duty that would be payable on excise-equivalent goods if they were excisable goods produced or manufactured in Australia.  Therefore, subsection 105B(2) provides that subsection (1) does not apply to an amount of duty that is calculated as a percentage of the value of the excise-equivalent goods because of section 9 of the Customs Tariff Act.  This duty is known as the ad valorem duty.  This duty will then be payable in the circumstances set out in new section 105C of the Customs Act.

38.           At present, the only excise-equivalent goods that are subject to an ad valorem duty component are spirituous alcohol products of Chapter 22 of Schedule 3 to the Customs Tariff Act and a small number of fuel products, for example alkylbenzenes.

New section 105C

39.           New section 105C sets out the circumstances in which a return is to be provided to Customs in respect of excise-equivalent goods used in the manufacture of excisable goods.

40.           Subsection 105C(1) provides that section 105C applies where:

a)       excisable goods are manufactured within a manufacture period; and

b)       excise-equivalent goods are used in that manufacture (whether or not in that period); and

c)       the excise-equivalent goods are subject to the control of the Customs at the time they are used in that manufacture; and

d)       that manufacture occurs at a place that is both:

i)        a warehouse described in a warehouse licence granted under Part V of the Customs Act; and

ii)       premises specified in a manufacturer licence granted under the Excise Act.

41.           Subsection 105C(2) provides that the legal owner of the excise-equivalent goods at the time they are used in that manufacture must:

a)       give Customs a return within 8 days after the end of the manufacture period, providing particulars in accordance with section 71K or 71L in relation to the excise-equivalent goods; and

b)       at the time when each return is given to Customs, pay any amount of duty referred to in subsection 105B(3) that is owing at the rate applicable at the time the excisable goods are manufactured.

It will be an offence, with a penalty of 50 penalty units, to fail to provide the return in accordance with this section.

The use of the term “legal owner” will override the extended definition of “owner” in subsection 4(1) of the Customs Act.  Only the legal owner of the excise-equivalent goods at the time they are used in the manufacture of excisable goods will be required to make the return and pay any ad valorem duty that is owing on the excise-equivalent goods.

42.           New subsection 105C(3) provides that subsection (2) is an offence of strict liability.  As this offence is designed to ensure the integrity of the regulatory regime applying to the use of excise-equivalent goods in the manufacture of excisable goods, it is considered appropriate that this be a strict liability offence.  The return is the only means by which Customs will be able to reconcile the importation of excise-equivalent goods with their use in the manufacture of excisable goods.    

43.           The ability to reconcile the importation of excise-equivalent goods with their use in the manufacture of excisable goods is also essential to ensure the protection of the revenue.  Where excise-equivalent goods are not satisfactorily accounted for on a return, Customs will, under section 35A of the Customs Act, have the ability to demand an amount equal to the duty that would have been payable on the goods had they been entered for home consumption.  As a result of the repeal of items 44 and 67 of Schedule 4 to the Customs Tariff Act by the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006, excise-equivalent goods will be subject to import duty at the same rate of excise duty that would apply to the goods if they were excisable goods produced or manufactured in Australia.

44.           This new strict liability offence is applied in similar circumstances to the current strict liability offences in sections 69 and 70 of the Customs Act.

45.           If no excisable goods are manufactured during a manufacture period, no return will be required to be given.

46.           New subsection 105C(4) provides that, in this section, manufacture period means:

a)       a 7-day period beginning on a Monday; or

b)       if the regulations prescribe a different period for the purposes of this definition - that period.

Item 19 below sets out the transitional provisions that apply during the period from 1 July 2006 and the first Monday of July 2006 (3 July 2006).

47.           New subsection 105C(5) provides that if regulations do prescribe such a different period, the regulations may also prescribe matters of a transitional nature relating to the change to the different period.

New section 105D - GST matters

48.           New section 105D will ensure that the use of excise-equivalent goods that are still subject to Customs control in the manufacture of excisable goods will be a taxable importation and, therefore, subject to GST.

49.           Section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) provides that you make a taxable importation if goods are imported and you enter them for home consumption (within the meaning of the Customs Act).  However, excise-equivalent goods that are subject to Customs control and are used in the manufacture of excisable goods will never be entered for home consumption.  Section 114-5 of the GST Act sets out, in a table, the circumstances in which a taxable importation will be made in respect of imported goods that are not entered for home consumption.  However, the table does not include the circumstance where excise-equivalent goods that are subject to Customs control are used in the manufacture of excisable goods. 

50.           It is therefore necessary to include provisions in the Customs Act to ensure that the use of excise-equivalent goods that are still subject to Customs control in the manufacture of excisable goods is a taxable importation.

51.           Subsection 105D(1) provides that this section applies if:

a)       excise-equivalent goods are entered for warehousing; and

b)       excisable goods are manufactured and the excise-equivalent goods are used in that manufacture; and

c)       the excise-equivalent goods are subject to the control of the Customs at the time they are used in that manufacture.

52.           Subsection 105D(2) provides that for the purposes of the GST Act, the importer of the excise-equivalent goods is taken to have entered them for home consumption at the time the excisable goods are manufactured.  Therefore, there will be a taxable importation at that time for the purposes of section 13-5 of the GST Act.

53.           Under regulation 33-15.07 of the A New Tax System (Goods and Services Tax) Regulations 1999 (the GST Regulations), an approved entity can defer the payment of the GST on taxable importations until on or before the 21 st day after the end of the month in which the liability arose.  Under regulation 33-15.06 of the GST Regulations, an approved entity must enter goods for home consumption by computer.  However, as previously discussed, excise-equivalent goods that are still subject to Customs control and are used in the manufacture of excisable goods will never be entered for home consumption (by computer or otherwise).  It is therefore also necessary to include provisions in the Customs Act to ensure that an approved entity can defer the payment of GST on taxable importations that occur due to the use of excise-equivalent goods that are still subject to Customs control in the manufacture of excisable goods.

54.           New subsection 105D(3) provides that if the importer of excise-equivalent goods is an approved entity at the time the excisable goods are manufactured, then for the purposes of the GST Act and GST Regulations, the importer is taken to have entered the excise-equivalent goods for home consumption by computer at that time.

55.           New subsection 105D(4) inserts the definitions for approved entity and GST regulations for the purposes of section 105D.

New section 105E - Use of excise-equivalent goods in the manufacture of excisable goods to occur at a dual-licensed place

56.           New section 105E inserts the new requirement that a person must not use excise-equivalent goods subject to the control of Customs in the manufacture of excisable goods unless that manufacture occurs at a place that is both:

a)       a warehouse described in a warehouse licence granted under Part V of the Customs Act; and

b)       premises specified in a manufacturer licence granted under the Excise Act.

Item 15 - Subsection 132(1)

57.           This item amends subsection 132(1) of the Customs Act by inserting a reference to new section 105C.

58.           Subsection 132(1) sets out the time at which the rate of import duty that is payable on imported goods is determined.  However, new section 105C sets out this time for excise-equivalent goods that are used in the manufacture of excisable goods.  Therefore, the amendment to subsection 132(1) will make that subsection subject to new section 105C.

Item 16 - Subsection 234(2B)

59.           This item amends subsection 234(2B) of the Customs Act by inserting a reference to new section 105C.

60.           Subsection 234(1) of the Customs Act contains various offences, including the offences of making a false or misleading statement to an officer or omitting from a statement made to an officer any matter or thing that would make the statement misleading. These offences are contained in paragraph 234(1)(d).

61.           Subsection 234(2B) is a technical provision for the purposes of paragraph 234(1)(d) such that the electronic communications that are listed in subsection (2B), when communicated to Customs, are treated as a statement made to the Chief Executive Officer of Customs (the CEO).

62.           The purpose of this amendment is to extend the technical provision to the new return under new section 105C of the Customs Act.  When the new electronic return is communicated to Customs, it will also be treated as a statement to the CEO.

Item 17 - Subsections 234(4A) to (8)

63.           This item amends section 234 of the Customs Act by repealing subsection (4A) to (8).

64.           These subsections set out the customs related offences associated with the customs and excise regime that was designed to address issues associated with fuel substitution practices.  As this regime is being repealed as part of the simplification of the Schedule to the Excise Tariff, these offences are also being repealed.

Item 18 - Paragraph 240(1AA)(a)

65.           This item amends paragraph 240(1AA)(a) of the Customs Act by inserting a reference to new section 105C.

66.           Subsection 240(1AA) sets out the record keeping requirements for commercial documents relating to goods that are included in a return given to Customs under sections 69 and 70.  These documents must be kept until the end of the period of 5 years after the giving of the return.  This amendment will extend the record keeping requirements to the new return given under new section 105C of the Customs Act.

Item 19 - Application and transitional provisions

67.           This item sets out the application and transitional provisions for two of the new provisions governing the use of excise-equivalent goods in the manufacture of excisable goods.

68.           Subitem 1 provides that new section 105B (extinguishment of duty) and 105D (GST matters) of the Customs Act apply in relation to the manufacture of excisable goods that occurs on or after 1 July 2006, where the excise-equivalent goods:

a)       are entered for warehousing on or after 1 July 2006; or

b)       were entered for warehousing before 1 July 2006 and were in a warehouse immediately before 1 July 2006.

Therefore, even if excise-equivalent goods were already in a warehouse before 1 July 2006, those sections will still apply to them.

69.           Subitems (2) and (3) set out the application provision in relation to new section 105C (returns).  Subitem (2) provides that the first manufacture period for the purposes of section 105C is taken to be the period beginning on 1 July 2006 and ending at the end of 9 July 2006.  This provision is necessary because the manufacture period in section 105C covers a 7 day period beginning on a Monday.  However, 1 July 2006 is a Saturday so this provision will include the extra 2 days in the first manufacture period.

70.           Sub-item (3) provides that section 105C then applies in relation to Monday 10 July 2006 and each later Monday.  However, this item is subject to regulations made for the purposes of the definition of manufacture period , which may alter the manufacture period.