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Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015

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2013-2014-2015

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

CUSTOMS TARIFF AMENDMENT (CHINA-AUSTRALIA

FREE TRADE AGREEMENT IMPLEMENTATION) Bill 2015

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

(C irculated by authority of the Minister for Immigration and Border Protection

the Honourable Peter Dutton MP )

 



CUSTOMS TARIFF AMENDMENT (CHINA-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2015

 

OUTLINE

 

The purpose of the Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015 (the Tariff Bill) is to amend the Customs Tariff Act 1995 (the Customs Tariff) to implement the China-Australia Free Trade Agreement (the Agreement) by:

 

·            providing free rates of customs duty on entry into force of the Agreement for most goods that are Chinese originating goods in accordance with new Division 1L of Part VIII of the Customs Act 1901 (the Customs Act).  New Division 1L is to be inserted into the Customs Act by the Customs Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015 (the Customs Bill);

 

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

 

·            phasing the preferential rates of customs duty for certain Chinese originating goods to Free by the fifth year of phasing; and

 

·            inserting a new Schedule 12 to the Customs Tariff to accommodate the preferential and phasing rates of customs duty and 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 on such goods that are manufactured in Australia.

 

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

In view of the Parliamentary sitting schedule, the benefits to Australian businesses of a double cut to tariffs on exports to the territory of China should the Agreement enter into force before the end of the year, and the importance to the Parliament and the community of seeing the changes that are required to be made under this Agreement, the Government has decided to introduce the implementing legislation before the Joint Standing Committee on Treaties has issued its report in relation to the Agreement.

 

FINANCIAL IMPACT STATEMENT

 

This financial impact of the amendments in this Bill and the Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill is as follows:

Underlying cash impact ($millions)

 

2015-16

2016-17

2017-18

2018-2019

Total

-610

-1,070

-1,210

-1,260

-4,150

 

REGULATION IMPACT STATEMENT

 

A Regulation Impact Statement covering the tariff amendments is contained in the Explanatory Memorandum for the Customs Bill.



Statement of Compatibility with Human Rights

 

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

 

CUSTOMS TARIFF AMENDMENT (CHINA-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2015

 

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 on entry into force of the Agreement for most goods that are Chinese originating goods in accordance with new Division 1L of Part VIII of the Customs Act;

 

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

 

·            phasing the preferential rates of customs duty for certain Chinese originating goods to Free by the fifth year of phasing; and

 

·            creating a new Schedule 12 in the Customs Tariff to accommodate the preferential, phasing and excise-equivalent rates of duty.

 

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 IMMIGRATION AND BORDER PROTECTION,                                            the Honourable PETER DUTTON MP

 



CUSTOMS TARIFF AMENDMENT (CHINA-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2015

 

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 (China-Australia Free Trade Agreement Implementation) Act 2015 .

 

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 (China-Australia Free Trade Agreement Implementation) Act 2015 commences that is, the later of the day on which that Act receives the Royal Assent and the day that the Agreement enters into force for Australia.

 

Clause 3 - Schedules

 

5.         This clause is the formal enabling provision for the Schedule 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 is being amended.

 

6.         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 -AMENDMENTS

 

Amendments to the Customs Tariff Act 1995

 

Introductory comments

 

7.         On entry into force of the Agreement, the Tariff Bill will amend the Customs Tariff to provide free rates of customs duty for those Chinese originating goods that are set out in Annex I: Schedules of Tariff Reduction Commitments of Australia and China.

 

8.         Under the Agreement, rates of customs duty for certain other Chinese originating goods will phase to Free over a number of years, and 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 .  

 

9.         Rates of customs duty applicable to Chinese originating goods that will phase to Free over a number of years, and alcohol, tobacco and petroleum products will be set out in a new Schedule 12 to the Customs Tariff.  If a rate of duty is not specified in Schedule 12 or any other Schedules to the Customs Tariff for Chinese originating goods, then the rate of customs duty of Free applies.

 

10.       The rules for determining whether goods are Chinese originating goods will be set out in new Division 1L of the Customs Act.  In close consultation with the Government of China, the Australian Government is working towards entry into force of the Agreement before the end of 2015 in order to maximise the business gains for both Parties.  Under the provisions of the Customs Bill, the Minister for Immigration and Border Protection is required to publish a notice in the Gazette advising when the Agreement enters into force for Australia.

 

11.       China is currently listed as a Developing Country under Division 1 of Part 4 of Schedule 1 to the Customs Tariff.  Goods imported from China are therefore subject to DCS rates of duty.  When implemented, the Tariff Bill will not affect the existing preferential status for China.  

 

12.       Amendments will be made to the Customs Tariff to include references to the new Schedule 12, to Chinese originating goods, and to specify duty rates in Schedule 4 (Schedule of Concessional Rates) for Chinese originating goods.  Sections 16 and 18 of the Customs Tariff will also be amended to provide rules for determining customs duty for Chinese originating goods.

 

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

 

13.       Item 1 amends the definition of rate column in subsection 3(1) to include a reference to the third column of the table in new Schedule 12.  Schedule 12 of the Customs Tariff will be used to specify rates of duty, including phasing rates, for Chinese originating goods, as required.



Item 2 Subsection 9(1)

 

14.       Item 2 adds a reference to Schedule 12 in subsection 9(1).

 

15.       This amendment allows rates of duty that apply to Chinese originating goods to be specified in the rate column in Schedule 12 of the Customs Tariff.

 

Items 3 and 4 Paragraph 11(1)(bg)

 

16.       Items 3 and 4 add new paragraph (1)(bh) 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 12 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 5 and 6 Paragraph 11(1)(k)

 

17.       Items 5 and 6 add new paragraph (1)(l) 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 12 of the Customs Tariff that applies to Chinese originating goods.

 

Items 7 and 8 Paragraph 11(2)(bg)

 

18.       Items 7 and 8 add new paragraph (2)(bh) 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 12 of the Customs Tariff that applies to Chinese originating goods.

 

19.       The amendments provided by items 2 to 8 allow phasing rates of duty to be inserted in Schedule 12.

 

Item 9 After section 13H

 

20.       Item 9 amends the Customs Tariff by inserting a new section 13J.  The new section provides that, for the purposes of the Customs Tariff, goods are Chinese originating goods if, and only if, they are Chinese originating goods under new Division 1L of Part VIII of the Customs Act.  New Division 1L of Part VIII of the Customs Act sets out the rules for determining whether goods are Chinese originating goods.

 

21.       Amendments to sections 16 and 18 of the Customs Tariff (items 10 to 17 refer) insert new provisions to determine the rate of customs duty that applies to goods that are Chinese originating goods.  The purpose of new section 13J is to ensure that those rates will only apply to goods that satisfy the new rules set out in new Division 1L of Part VIII of the Customs Act.

 



Items 10 and 11 subparagraph 16(1)(a)(x)

 

22.       Items 10 and 11 amend the Customs Tariff by inserting new subparagraph 16(1)(a)(x).  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.

 

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

 

Item 12 At the end of subsection 16(1)

 

24.       Item 12 inserts new paragraph 16(1)(r) into the Customs Tariff.  This paragraph provides that a free rate of customs duty is payable on goods that are Chinese 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 12.  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 12.

 

Item 13 After subsection 16(4)

 

25.       Item 13 inserts new paragraph 16(4A) in the Customs Tariff.  This paragraph provides that a reference to year 2, 3, 4 or 5 is a reference to the first, second, third or fourth calendar year, respectively, after the year that the Agreement first enters into force.  This is relevant to when phasing rates for certain goods come into effect.  For example:

 

Chinese originating goods

Column 1

Item

Column 2

Heading or subheading in Schedule 3

Column 3

Rate

460

6403.40.00

3.3%

From 1 January of year 2: 1.7%

From 1 January of year 3: Free

 

26.       If the Agreement enters into force before 1 January 2016, the rate of duty will be 3.3% from entry into force and will drop to 1.7% on 1 January 2016 (as 2016 would be the first calendar year after entry into force) and will further drop to Free on 1 January 2017 (as 2017 will be the second calendar year after entry into force).

 



Item 14 At the end of subsection 18(1)

 

27.       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, 8, 9, 10 or 11.

 

28.       Item 14 amends subsection 18(1) to add a new paragraph (1)(i).  This amendment will add that a concessional item in Schedule 4 only applies to goods if the duty is lower than the duty payable under Schedule 12.  This provision is consistent with the same provision for other schedules to the Customs Tariff, for example Schedule 7, Chilean originating goods.

 

Items 15 and 16 subparagraph 18(2)(a)(x)

 

29.       Items 15 and 16 amend the Customs Tariff by inserting a new subparagraph 18(2)(a)(x).  Schedule 4 of the Customs Tariff lists 57 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.

 

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

 

Item 17 At the end of subsection 18(2)

 

31.       Item 17 inserts new paragraph 18(2)(r) into the Customs Tariff to set out how customs duty is calculated for goods that are Chinese originating goods and that are subject to a concessional item in Schedule 4.  This paragraph provides that if the goods are Chinese originating goods and “CN” 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.

 

Item 18 Paragraph 19AAC(1)(b)

 

32.       Section 19 of the Customs Tariff provides for the automatic indexation of certain

excise-equivalent 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 petroleum products.

 

33.       For this purpose, section 19AAC contains a table that sets out the petroleum products subject to biannual indexation under section 19.



34.       Item 18 amends subsection 19AAC(1)(b) of the Customs Tariff by adding a reference to Schedule 12 so that the indexation provisions in section 19  apply to the rates of

excise-equivalent customs duty for those petroleum products that are Chinese originating goods.

 

Item 19 Paragraph 19AA(b)

 

35.       For section 19 of the Customs Tariff, section 19AA contains a table that sets out the alcohol products subject to biannual indexation under section 19.

 

36.       Item 19 amends subsection 19AA(b) of the Customs Tariff by adding a reference to Schedule 12 so that the indexation provisions in section 19 apply to the rates of

excise-equivalent customs duty for those alcohol products that are Chinese originating goods.

 

Item 20 Paragraph 19AC(b)

 

37.       Section 19AB of the Customs Tariff provides for the automatic indexation of certain

excise-equivalent rates of duty in line with movements in the full-time adult average weekly ordinary time earnings (AWOTE), in March and September of each year.  The goods to which this automatic indexation applies are tobacco products.

 

38.       For this purpose, section 19AC contains a table that sets out the tobacco products subject to biannual indexation under section 19AB.

 

39.       Item 20 amends subsection 19AC(b) of the Customs Tariff by adding a reference to Schedule 12 so that the indexation provisions in section 19AB apply to the rates of

excise-equivalent customs duty for those tobacco products that are Chinese originating goods.

 

Items 21 to 27 Schedule 4

 

40.       Schedule 4 of the Customs Tariff lists 57 items where a concessional rate of customs duty is provided for particular goods.  In most cases, the concessional rate of customs duty for such goods is Free.  However, in some circumstances, instead of a Free rate of duty, the items provide a lower rate of customs duty than the general rate that is otherwise payable.

 

41.       The Agreement only provides for duty concessions for goods in Schedule 3 of the Customs Tariff.  Paragraph 18(2)(r) of the Customs Tariff provides that the rate of customs duty for Chinese originating goods subject to a concessional item in Schedule 4 is Free, unless a rate for China is specified.  It is therefore necessary to specify rates of customs duty for Chinese originating goods for those concessional items in Schedule 4 where the rate of duty is not Free.



42.       Items 21, 23, 24, 25, 26 amends items 17A, 20, 22, 45 and 50 respectively and inserts “CN” in the third column of each of these items, so the amount of duty for Chinese originating goods that fall within the terms of these items is calculated by reference to the rate of duty set out in column 3. 

 

43.       Item 22 inserts a reference to new Schedule 12 in the description of goods for concessional item 20 (Goods exported for repair or renovation), to ensure the correct rate of duty applies to Chinese originating goods that come under this item.

 

44.       Item 27 amends the existing rates of customs duty for item 53 in Schedule 4 by adding the appropriate duty rate for Chinese originating goods.

 

Item 28 At the end of the Act

 

Schedule 12 - Chinese originating goods

 

45.       Item 28 inserts new Schedule 12 into the Customs Tariff.

 

46.       Annex I: Schedules of Tariff Reduction Commitments of Australia and China of the Agreement provides that rates of customs duty for certain Chinese originating goods are to be reduced to Free over a period of time (and not immediately on entry into force).  Section 16 of the Customs Tariff, as amended, provides that the rates of customs duty for Chinese originating goods are Free unless a rate of duty is specified for those goods in Schedule 12.  Therefore, items 1 to 6, 126, 135 and 144 to 657 in Schedule 12 of the Customs Tariff impose phasing rates of customs duty on Chinese originating goods in accordance with the Agreement.  Column 3 of the table in Schedule 12 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 Chinese originating goods at each step of that phasing.

 

47.       Article 1.3: 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 are alcohol, tobacco and petroleum products that are subject to customs duties at a rate that is equivalent to the excise duty imposed under the Schedule to the Excise Tariff Act 1921 (the Excise Tariff), on those goods when domestically produced.

 

48.       Section 16 of the Customs Tariff, as amended, provides that the rates of customs duty for Chinese originating goods are Free unless a rate of duty is specified for those goods in Schedule 12.  Therefore, it is necessary to specify the relevant headings and subheadings for the above alcohol, tobacco and petroleum products in Schedule 12 and the appropriate rate of customs duty.



 

49.       Items 7 to 125, 127 to 134 and 136 to 143 of Schedule 12 impose customs duty on the alcohol, tobacco and petroleum products that are Chinese originating goods, at a rate that is equivalent to the excise duty imposed under the Excise Tariff, on the same goods when domestically produced.  As mentioned above, these rates of duty may be subject to indexation in accordance with sections 19 and 19AB of the Customs Tariff.

 

Items 29 to 33 User’s Guide

 

50.       These items omit and substitute text in the User’s Guide to the Customs Tariff, as required, to insert references to new Schedule 12 .

 

Item 34 Application provision

 

51.       This item provides that the amendments made by items 1 to 17 and 21 to 28 set out in Schedule 1 of the Tariff Bill will apply to goods imported into Australia on or after the commencement of Schedule 1 to the Tariff Bill (items 18, 19 and 20 relate to the indexation provisions in sections 19AAC, 19AA and 19AC of the Customs Tariff and are not covered by the application provision - comments under items 18, 19 and 20 refer).

 

52.       The commencement provisions of the Tariff Bill provide that Schedule 1 commences at the same time as Schedule 1 to the Customs Bill; that is the later of the day on which that Act receives the Royal Assent and the day that the Agreement enters into force for Australia.

 

53.       Item 34 also applies to goods that were imported before that 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 December 2015, item 34 provides that amendments to the Customs Tariff shall apply to goods that were imported before

1 December 2015 but not entered for home consumption until on or after

1 December 2015.

 

Item 35 Transitional provision - indexation

 

54.       As noted under item 18, section 19 of the Customs Tariff provides that customs rates of duty, for certain alcohol and petroleum products, are adjusted automatically, twice yearly, in line with movements in the CPI.  These adjustments occur in February and August of each year.

 

55.       As noted under item 20, section 19AB of the Customs Tariff provides that customs rates of duty, for certain tobacco products, are adjusted automatically, twice yearly, in line with movements in the AWOTE.  These adjustments occur in March and September of each year.



 

56.       The Tariff Bill has been drafted using rates of duty that include the CPI and AWOTE increase that occurred on 1 August 2015 and 1 September 2015, following the release of the June 2015 CPI figures and May 2015 AWOTE figures.  Should the Agreement not enter into force for Australia before 1 February 2016 or 1 March 2016, these rates of duty may be superseded by increased duty rates, as a consequence of the February or March 2016 indexation.  Without item 35, further legislative amendment would be required to include the post 1 February 2016 and post 1 March 2016 duty rates in Schedule 12.

 

57.       Item 35 sets out two transitional provisions that provide for the circumstance if the February 2016 CPI or the March 2016 AWOTE increase, or both, occur before the commencement of Schedule 1 to the Tariff Bill.  Any increase in the duty rates as a consequence of the CPI or AWOTE increase will apply automatically to the rates of duty in the relevant items in Schedule 12.

 

58.       Item 35 is in accordance with the terms of the Agreement and will serve to avoid the requirement for further legislative amendments to the Customs Tariff should section 19 apply on 1 February 2016 and section 19AB apply on 1 March 2016 but, before Schedule 1 to the Tariff Bill commences.  If Schedule 1 does not commence until after 1 March 2016, both transitional provisions will apply.