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Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012

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2010-2011-2012

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

CUSTOMS TARIFF AMENDMENT (malaysia-AUSTRALIA

FREE TRADE AGREEMENT IMPLEMENTATION) Bill 2012

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

(C irculated by authority of the Minister for Home Affairs

the Honourable Jason Clare MP )

 



CUSTOMS TARIFF AMENDMENT (MALAYSIA-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2012

 

 

OUTLINE

 

The purpose of the Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012 (the Tariff Bill) is to amend the Customs Tariff Act 1995 (the Customs Tariff) to implement the Malaysia-Australia Free Trade Agreement (the Agreement) by:

 

·          providing free rates of customs duty for goods that are Malaysian originating goods in accordance with new Division 1H of Part VIII of the Customs Act 1901 (the Customs Act).  New Division 1H is proposed to be inserted in the Customs Act by the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012 (the Customs Bill);

 

·          amending Schedule 4 to the Customs Tariff Act to maintain customs duty rates for certain Malaysian originating goods in accordance with the applicable concessional item; and

 

·          creating a new Schedule 9 in the Customs Tariff to accommodate excise equivalent rates of duty.

 

Complementary amendments will also be made to the Customs Act by the Customs Bill to give effect to the Agreement.

 

 

FINANCIAL IMPACT STATEMENT

 

The Agreement is estimated to reduce tariff revenue by $80 million over the forward estimates.

 

 

REGULATION IMPACT STATEMENT

 

A Regulation Impact Statement covering the tariff amendments is contained in the Explanatory Memorandum for the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012.

 



STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

 

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

 

CUSTOMS TARIFF AMENDMENT (AUSTRALIA-MALAYSIA FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2012

 

 

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

 

OVERVIEW OF THE BILL

 

The Bill amends the Customs Tariff by:

 

·          providing free rates of customs duty for goods that are Malaysian originating goods in accordance with new Division 1H of Part VIII of the Customs Act;

 

·          amending Schedule 4 to the Customs Tariff to maintain customs duty rates for certain Malaysian originating goods in accordance with the applicable concessional item;

 

·          inserting a new Schedule 9 in the Customs Tariff to maintain excise equivalent rates of duty on certain alcohol, tobacco and petroleum products.  These rates are equivalent to the rates of excise duty payable when locally manufactured.

 

 

HUMAN RIGHTS IMPLICATIONS

 

This legislative instrument does not engage, impact on, or limit in any way, the human rights and freedoms recognised or declared in the international instruments listed in the definition of human rights at section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

 

 

CONCLUSION

 

This Bill is compatible with human rights .

 

 

 

 

Minister for Home Affairs, the Honourable Jason Clare MP

 

 

 



CUSTOMS TARIFF AMENDMENT (MALAYSIA-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2012

 

NOTES ON CLAUSES

 

Clause 1 - Short Title

 

1.         This clause provides for the Tariff Bill, when enacted, to be cited as the Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Act 2012 .

 

Clause 2 - Commencement

 

2.         Subclause (1) provides that each provision of this Act specified in column 1 of the table in that subclause commences, or is taken to have commenced, on the day or at the time specified in column 2 of the table. This subclause also provides that any other statement in column 2 of the table has effect according to its terms.

 

3.         Item 1 of the table in this clause provides that sections 1 to 3 and anything in the Act not covered elsewhere in the table will commence on the day on which the Act receives the Royal Assent.

 

4.         Item 2 of the table provides that Schedule 1 of the Tariff Bill will commence at the same time as Schedule 1 to the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Act 2012 commences.

 

5.         Item 3 of the table provides that Schedule 2 Part 1 will commence at the same time as Schedule 1 to the Customs Bill.  However, Schedule 2 Part 1 will not commence at all if Schedules 1 and 2 to the Customs Tariff Amendment (Schedule 4) Act 2012 commence at for before that time.

 

6.         Item 4 of the table provides that Schedule 2 Part 2 of the Tariff Bill will commence on the later of:

 

(a)   immediately after the commencement of the provisions covered by table item 2; and

 

(b)   immediately after the commencement of the Customs Tariff Amendment (Schedule 4) Act 2012 .

 



Clause 3 - Schedule(s)

 

7.         This clause is the formal enabling provision for the Schedules to the Tariff Bill, providing that each Act specified in a Schedule is amended or repealed in accordance with the applicable items in the Schedule.  In the Tariff Bill, the Customs Tariff Act 1995 is being amended.

 

8.         Clause 3 also provides that any 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 - MAIN AMENDMENTS

 

Amendments to the Customs Tariff Act 1995

 

Introductory comments

 

9.         On entry into force of the Agreement, the Tariff Bill will amend the Customs Tariff to provide free rates of customs duty for Malaysian originating goods, as set out in the Schedule to the Agreement.

 

10.       Under the Agreement, rates of customs duty for Malaysian originating goods will be eliminated on entry into force of the Agreement.  Certain alcohol, tobacco and petroleum products will continue to be subject to rates of customs duty that are equivalent to the rates of excise duty payable on such goods when locally manufactured , which is permitted under the Agreement.  

 

11.       Rates of customs duty applicable to Malaysian originating goods that are alcohol, tobacco and petroleum products will be set out, as required, in a new Schedule 9 to the Customs Tariff.  If a rate of duty is not specified in Schedule 9 or any other Schedules for Malaysian originating goods, then the rate of duty of Free applies.

 

12.       The rules for determining whether goods are Malaysian originating goods will be set out in new Division 1H of the Customs Act.

 

13.       The Agreement is expected to enter into force for Australia on 1 January 2013.  Under the provisions of the Customs Bill, the Minister for Home Affairs is required to publish a Notice in the Commonwealth Gazette advising when the Agreement enters into force for Australia.

14.       Malaysia is currently listed as a Developing Country under Division 1 of Part 4 of Schedule 1 of the Customs Tariff.  Goods imported from Malaysia are therefore subject to DCS rates of duty.  Certain rubber goods from Malaysia are covered by the Malaysia-Australia Trade Agreement.  Malaysian goods are also accorded AANZ rates of duty under the ASEAN-Australia-New Zealand Free Trade Agreement.  When implemented, the Tariff Bill will not affect the existing preferential status for Malaysia.

 

15.       Amendments will be made to the Customs Tariff to include references to the new Schedule 9, to Malaysian originating goods, and to specify duty rates in Schedule 4 (Schedule of Concessional Rates) for Malaysian originating goods.  Sections 16 and 18 of the Customs Tariff will also be amended to provide rules for determining customs duty for Malaysian originating goods.



Item 1 Subsection 3(1) ( at the end of the definition of rate column )

 

16.       Item 1 amends the definition of rate column in subsection 3(1) of the Customs Tariff to include a reference to the third column of the table in new Schedule 9.  Schedule 9 of the Customs Tariff will be used to specify rates of duty, including phasing rates, for Malaysian originating goods that are alcohol, tobacco and petroleum products, as required.

 

Items 2 and 3 After paragraph 11(1)(bd)

 

17.       Items 2 and 3 add new paragraph (1)(be) to section 11 to include a reference to a rate of duty set out in the third column of an item in the table in new Schedule 9 of the Customs Tariff that applies to the goods.  Section 11 sets out the rules for determining when a phasing rate of duty takes effect.

 

Items 4 and 5 After paragraph 11(1)(h)

 

18.       Items 4 and 5 add new paragraph (1)(i) to section 11 to include a reference to a specified date set out in the third column of an item in the table in new Schedule 9 of the Customs Tariff that applies to Malaysian originating goods.

 

Items 6 and 7 After paragraph 11(2)(bd)

 

19.       Items 6 and 7 add new paragraph (2)(be) to section 11 to include a reference to a rate of duty set out in the third column of an item in the table in new Schedule 9 of the Customs Tariff that applies to Malaysian originating goods.

 

20.       The amendments provided by items 2 to 7 allow phasing rates of duty to be inserted in Schedule 9.

 

Item 8 After section 13E

 

21.       Item 8 amends the Customs Tariff by inserting a new section 13F.  The new section provides that, for the purposes of the Customs Tariff, goods are Malaysian originating goods if, and only if, they are Malaysian originating goods under new Division 1H of Part VIII of the Customs Act.  New Division 1H of Part VIII of the Customs Act sets out the rules for determining whether goods are Malaysian originating goods.

 

22.       Amendments to sections 16 and 18 of the Customs Tariff (items 9 to 16 refers) insert new provisions to determine the rate of customs duty that applies to goods that are Malaysian originating goods.  The purpose of new section 13F is to ensure that those rates will only apply to goods that satisfy the new rules set out in new Division 1H of the Customs Act.

 

 

 



Items 9 and 10 After subparagraph 16(1)(a)(vi)

 

23.       Items 9 and 10 amend the Customs Tariff by inserting new subparagraph 16(1)(a)(vii).  Section 16 of the Customs Tariff sets out how customs duty is calculated, including for goods that are the produce or manufacture of particular countries and classes of countries for preference purposes.  Paragraph 16(1)(a) provides that if the goods are not the produce or manufacture of a preference country or a country to which a free trade agreement applies, the duty must be worked out by reference to the general rate set out in the third column of the tariff classification in Schedule 3 under which the goods are classified.

 

24.       New subparagraph 16(1)(a)(vii) ensures that the general rate of duty set out in Schedule 3 does not apply to Malaysian originating goods.

 

Items 11 and 12 At the end of subsection 16(1)

 

25.       Items 11 and 12 insert new paragraph 16(1)(o) into the Customs Tariff.  This paragraph provides that a free rate of customs duty is payable on goods that are Malaysian originating goods unless the goods are classified to a heading or subheading in Schedule 3 that is specified in column 2 of an item in the table in new Schedule 9.  If the goods are so classified, the duty on those goods will be worked out by reference to the rate of duty set out in column 3 of the relevant item in Schedule 9.

 

Item 13 At the end of subsection 18(1)

 

26.       Section 18 of the Customs Tariff sets out how customs duty is calculated in those circumstances where a concessional rate of customs duty under an item in Schedule 4 of the Customs Tariff is provided for certain goods.  In particular, subsection 18(1) provides that a concessional rate of customs duty can be used only where the rate of customs duty is less than that which would otherwise be payable under Schedules 3, 5, 6, 7 or 8.

 

27.       Item 13 amends subsection 18(1) to add a new paragraph (1)(f).  This amendment provides that a concessional item in Schedule 4 only applies to goods if the duty is lower than the duty payable under Schedule 9.  This provision is consistent with the same provision for other schedules of the Customs Tariff, for example Schedule 7, Chilean originating goods.

 



 

Items 14 and 15 After subparagraph 18(2)(a)(vi)

 

28.       Items 14 and 15 amend the Customs Tariff by inserting a new subparagraph 18(2)(a)(vii).  Schedule 4 of the Customs Tariff lists approximately 100 items where a concessional rate of customs duty is provided for particular goods.  Section 18 of the Customs Tariff sets out how customs duty is calculated for such goods, in particular for goods that are the produce or manufacture of particular countries and classes of countries for preference purposes.  Paragraph 18(2)(a) provides that if the goods are not the produce or manufacture of a preference country or a country to which a free trade agreement applies, the duty must be worked out by reference to the general rate set out in the third column of an item in Schedule 4 that applies to the goods.

 

29.       New subparagraph 18(2)(a)(vii) ensures that the general rate of duty set out in Schedule 4 does not apply to Malaysian originating goods.

 

Item 16 At the end of subsection 18(2)

 

30.       Item 16 inserts new paragraph 18(2)(o) into the Customs Tariff to set out how customs duty is calculated for goods that are Malaysian originating goods and that are subject to a concessional item in Schedule 4.  This paragraph provides that if the goods are Malaysian originating goods and “MY” is specified in the third column of an item in Schedule 4, the amount of duty is calculated by reference to that rate of duty.  If there is no such rate, the rate is Free.

 

Items 17 and 18 After paragraph 19(1)(e)

 

31.       Section 6A of the Excise Tariff Act 1921 (the Excise Tariff) provides for the automatic indexation of certain excise rates of duty in line with movements in the Consumer Price Index (CPI), in February and August of each year.  The goods to which automatic indexation applies are certain alcohol and tobacco products.

 

32.       Section 19 of the Customs Tariff provides for the same indexation to be made to customs rates of duty for equivalent imported goods.  For this purpose, section 19 contains a table that pairs customs tariff subheadings with the corresponding excise tariff items.

 

33.       Items 17 and 18 amend subsection 19(1) of the Customs Tariff by adding, in new paragraph (f), a reference to the rate column in new Schedule 9 of the Customs Tariff to enable the indexation provisions to apply to the rates of customs duty for those alcohol and tobacco products that are Malaysian originating goods.

 



 

Item 19 Paragraphs 19A(1)(d) and (2)(d)

 

34.       Item 19 adds Schedule 9 to paragraphs 19A(1)(d) and (2)(d).

 

35.       Section 19A in the Customs Tariff provides future carbon price adjustments for aviation fuels.  Section 19A links duty rates for aviation fuels to the equivalent items in the Excise Tariff and will automatically adjust those duty rates when duty rates change in that Act. 

 

36.       These amendment will ensure that future carbon price adjustment will apply to aviation fuels imported as Malaysian originating goods.

 

Item 20 At the end of the Act

 

Schedule 9 - Malaysian originating goods

 

37.       Item 20 inserts new Schedule 9 into the Customs Tariff.

 

38.       Annex 1 (Schedule of Tariff Commitments Australia) of the Agreement provides that rates of customs duty for Malaysian originating goods are to be Free from entry into force of the Agreement. 

 

39.       Paragraph (f) of Article 1.2, the General Definitions, of Chapter 1 of the Agreement provides that customs duty does not include duties that are equivalent to an internal tax imposed on the same goods when domestically produced.  Such goods include alcohol, tobacco and petroleum products that are subject to customs duties at a rate that is equivalent to the excise duty imposed under the Excise Tariff, on those goods when domestically produced.

 

40.       Items 110, 111, 112 and 113 in Schedule 9 of the Customs Tariff impose phasing rates of customs duty on Malaysian originating goods as set out in the Customs Tariff Amendment (Taxation of Alternative Fuels) Act 2011 .  Column 3 of the table in Schedule 9 sets out, opposite the relevant headings and subheadings of Schedule 3, the timing of those phasing rates and also the rates of customs duty that will apply to Malaysian originating goods at each step of that phasing.

 

41.       Section 16 of the Customs Tariff, as amended, provides that the rates of customs duty for Malaysian originating goods are Free unless a rate of duty is specified for those goods in Schedule 9.  Therefore, it is necessary to specify the relevant headings and subheadings for the above alcohol, tobacco and petroleum products in Schedule 9 and the appropriate rate of customs duty.

 

42.       Items 1 to 135 of Schedule 9 impose customs duty on the alcohol, tobacco and petroleum products that are Malaysian originating goods, at a rate that is equivalent to the excise duty imposed under the Excise Tariff, on the same goods when domestically produced.

 



Items 21 to 25 User’s Guide

 

43.       These items omit and substitute text in the User’s Guide to the Customs Tariff, as required, to insert references to new Schedule 9 .

 

Item 26 Application provision

 

44.       This item provides that the amendments made by items 1 to 16 and 20 set out in Schedule 1 of the Tariff Bill will apply to goods imported into Australia on or after the commencement of item 26.  (Items 17, 18 and 19 relate to the indexation provisions in section 19 of the Customs Tariff and are not covered by the application provision - comments under item 27 refer).

 

45.       The commencement provisions of the Tariff Bill provide that item 26 will commence at the same time as Schedule 1 to the Customs Bill; that is on the day that the Agreement enters into force for Australia.

 

46.       Item 26 also applies to goods that were imported before the above day but for which the time for working out the rate of import duty on those goods had not occurred before that day.  For example, if the Agreement commences on 1 January 2013, item 26 provides that amendments to the Customs Tariff shall apply to goods that were imported and warehoused before 1 January 2013 but not entered into home consumption until on or after 1 January 2013.

 

Item 27 Transitional provision - indexation

 

47.       As noted, (refer comments under items 17 and 18), section 19 of the Customs Tariff provides that customs rates of duty, for certain alcohol and tobacco products, are adjusted automatically, twice yearly, in line with movements in the CPI.  These adjustments occur in February and August of each year.

 

48.       The Tariff Bill has been drafted using rates of duty that include the CPI increase that occurred on 1 August 2012, following the release of the June 2012 CPI figures.  Should the Agreement not enter into force for Australia before 1 February 2013, these rates of duty may be superseded by increased duty rates, as a consequence of the February 2013 indexation.  Without item 27, further legislative amendment would be required to include the post-1 February 2013 duty rates in Schedule 9.

 

49.       Item 27 is a transitional provision that provides for the circumstance if the February 2013 CPI increase occurs before the commencement of the Agreement; any increase in the duty rates as a consequence of the CPI increase will apply automatically to the rates of duty in the relevant items in Schedule 9.

 

50.       Item 27 is in accordance with the terms of the Agreement and will serve to avoid the requirement for further legislative amendments if the CPI increases on 1 February 2013.

 



SCHEDULE 2 - CONTINGENT AMENDMENTS

 

Part 1 - New Customs Tariff Schedule 4 has not commenced

 

Amendments to the Customs Tariff Act 1995

 

Introductory comments

 

51.       Schedule 4 of the Customs Tariff lists concessional items covering a range of goods and user categories in respect of which concessional rates of import duty have been granted. 

 

52.       The Customs Tariff Amendment (Schedule 4) Act 2012 (the Schedule 4 Act) will commence either by Proclamation or six months after the date the Act received the Royal Assent (which occurred on 25 September 2012) whichever is the earliest.

 

53.       The Schedule 4 Act will repeal the existing Schedule 4 of the Customs Tariff and replace it with a new Schedule.  The Schedule 4 Act will affect all the items in the present Schedule 4, including the re-numbering of the concessional items.

 

54.       However, at the time the Customs Tariff Bill is introduced, the commencement dates of the Schedule 4 Act and the Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012 (the Customs Tariff Bill) are not certain.  Consequently, Schedule 2 to the Customs Tariff Bill contains contingent provisions provide for the circumstances of either commencing first.

 

55.       Should the Customs Tariff Bill commence first, it will provide the necessary amendments to the existing Schedule 4 items.  In this circumstance, Part 2 of Schedule 2 of the Customs Tariff Bill provides equivalent amendments for the new Schedule 4, with that Part commencing immediately after the commencement of the Schedule 4 Act.

 

56.       Should the Schedule 4 Act commence before the Customs Tariff Bill, the Schedule 4 Act will repeal and replace the existing Schedule 4.  In this circumstance, the Customs Tariff Bill will only amend the new Schedule 4 items.

 

57.       Paragraph 18(2)(o) (item 16 of Schedule 1 refers) of the Customs Tariff provides that the rate of customs duty for Malaysian originating goods subject to a concessional item in Schedule 4 is Free, unless “MY” is specified in respect of a rate.  Consequently, it is necessary to specify rates of customs duty for Malaysian originating goods for those concessional items where the rate of duty is not Free.

 

Item 1 Schedule 4 (item 17A, column 3)

 

58.       Item 1 inserts “MY” into the duty rate in item 17A of existing Schedule 4 of the Customs Tariff.  Item 17A applies to goods exported from Australia and returned in an unaltered condition.  This amendment ensures that any outstanding Commonwealth taxes or charges are payable on Malaysian originating goods.



Item 2 Schedule 4 (item 34, column 3)

 

59.       Item 2 adds “MY” to the duty rate of item 34 of existing Schedule 4 of the Customs Tariff.  Item 34 applies to goods imported in containers, being containers that will be exported without being put to any other use.  This amendment ensures excise equivalent duty for Malaysian originating goods is paid.

 

Items 3 and 4 Schedule 4 (item 50, column 3)

 

60.       Item 50 applies to goods subject to a Tariff Concession Order.  In some circumstances, this item may apply to goods that are subject to excise equivalent rates of duty.

 

61.       The amendments in items 3 and 4 ensure these excise equivalent rates of duty will apply to Malaysian originating goods.

 

Item 5 Schedule 4 (item 70, column 3)

 

62.       Item 5 adds “MY” to item 70.  This item applies to split consignments goods.  The amendment in item 5 ensures that the concession will apply to Malaysian originating goods.

 

Item 6 Schedule 4 (item 72B, at the end of the last rate of duty in column 3)

 

63.       Item 6 inserts “MY” into the rate column of item 72B of Schedule 4 of the Customs Tariff.  Item 72B applies to goods of heading 3819.00.00 (hydraulic fluids) that are exempt from the Product Stewardship Oil Levy (PSOL).  This amendment ensures that Malaysian originating goods are eligible for PSOL exemption if they meet the terms of the item 72B.

 

Item 7 Application provision

 

64.       This item provides that the amendments contained in Part 1 of Schedule 2 of the Tariff Bill apply to goods imported into Australia on or after the commencement of this Part.

 

65.       Item 7 also applies to goods that were imported before the above date but on which the time for working out the rate of import duty on those goods had not occurred before that date.

 

66.       Item 3 of Clause 2 of the Tariff Bill provides the commencement provisions for Part 1 of Schedule 2 of the Tariff Bill.  The commencement provision provides that this Part will commence at the same time as the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Act 2012 commences.

 

67.       However, if the Customs Tariff Amendment (Schedule 4) Act 2012 commences first, the provisions in Part 1 of Schedule 2 do not commence at all. 

 



Part 2 - New Customs Tariff Schedule 4 has commenced

 

Items 8 to 12 (Table items, 17A, 22, 45, 50 and 53, column headed “Rate of duty”)

 

68.       Part 2 refers to the items of the new Schedule 4 of the Customs Tariff.  This Part makes equivalent amendments to the duty rates mentioned in Part 1 of Schedule 2 of the Tariff Bill.

69.       Items 8 to 12 insert “MY” in the duty rates of new Schedule 4 items 17A (returned Australian goods), item 22 (goods in containers), item 45 (split consignment goods), item 50 (goods subject to a Tariff Concession Order) and item 53 (certain goods that are exempt from the Product Stewardship Oil Levy) to specify rates for Malaysian originating goods.

 

Item 13 Application provision

 

70.       This item provides that the amendments contained in Part 2 of Schedule 2 of the Tariff Bill apply to goods imported into Australia on or after the commencement of this Part.

 

71.       Item 13 also applies to goods that were imported before the above date but on which the time for working out the rate of import duty on those goods had not occurred before that date.

 

72.       Item 4 of Clause 2 of the Tariff Bill provides the commencement provisions for Part 2 of Schedule 2 of the Tariff Bill.  The commencement provision provides that this Part will commence on the later of the commencement of the Customs Tariff Amendment (Schedule 4) Act 2012 and the Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Act 2012