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Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014

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2013-2014

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

CUSTOMS TARIFF AMENDMENT (Korea-AUSTRALIA

FREE TRADE AGREEMENT IMPLEMENTATION) Bill 2014

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

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

the Honourable Scott Morrison MP )

 



CUSTOMS TARIFF AMENDMENT (KOREA-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2014

 

 

OUTLINE

 

The purpose of the Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014 (the Tariff Bill) is to amend the Customs Tariff Act 1995 (the Customs Tariff) to implement the Korea-Australia Free Trade Agreement (the Agreement) by:

 

·            providing free rates of customs duty for goods that are Korean originating goods in accordance with new Division 1J of Part VIII of the Customs Act 1901 (the Customs Act).  New Division 1J is proposed to be inserted in the Customs Act by the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014 (the Customs Bill);

 

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

 

·            phasing the preferential rates of customs duty for certain goods to Free by 2021; and

 

·            inserting a new Schedule 10 in the Customs Tariff to accommodate the preferential and phasing rates of 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 when locally manufactured.

 

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

 

 

FINANCIAL IMPACT STATEMENT

 

Underlying cash impact ($millions)

 

2014-15

2015-16

2016-17

2017-18

Total

-100.0

-165.0

-180.0

-190.0

-635.0

 

 

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 (KOREA-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2014

 

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 Korean originating goods in accordance with new Division 1J of Part VIII of the Customs Act;

 

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

 

·            phasing the preferential rates of customs duty for certain goods to Free by 2021;

 

·            creating a new Schedule 10 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 SCOTT MORRISON MP

 



CUSTOMS TARIFF AMENDMENT (KOREA-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2014

 

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 (Korea-Australia Free Trade Agreement Implementation) Act 2014 .

 

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 (Korea-Australia Free Trade Agreement Implementation) Act 2014 commences that is, on 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 - MAIN 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 Korean originating goods that are set out in Annex 2-A: Elimination of Customs Duties to the Agreement.

 

8.         Under the Agreement, rates of customs duty for certain other Korean 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 Korean originating goods that will phase to Free over a number of years, and alcohol, tobacco and petroleum products will be set out, as required, in a new Schedule 10 to the Customs Tariff.  If a rate of duty is not specified in Schedule 10 or any other Schedules for Korean originating goods, then the rate of duty of Free applies.

 

10.       The rules for determining whether goods are Korean originating goods will be set out in new Division 1J of the Customs Act.  The Agreement is expected to enter into force for Australia in 2014.  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.       Korea is currently listed as a Developing Country under Division 1 of Part 4 and Division 1 of Part 5 of Schedule 1 of the Customs Tariff.  Goods imported from Korea are therefore subject to DCS and DCT rates of duty.  When implemented, the Tariff Bill will not affect the existing preferential status for Korea.  

 

12.       Amendments will be made to the Customs Tariff to include references to the new Schedule 10, to Korean originating goods, and to specify duty rates in Schedule 4 (Schedule of Concessional Rates) for Korean originating goods.  Sections 16 and 18 of the Customs Tariff will also be amended to provide rules for determining customs duty for Korean 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) of the Customs Tariff to include a reference to the third column of the table in new Schedule 10.  Schedule 10 of the Customs Tariff will be used to specify rates of duty, including phasing rates, for Korean originating goods, as required.



Item 2 Subsection 9(1)

 

14.       Item 2 adds a reference to Schedule 10.

 

15.       This amendment allows rates of duty to be specified in the rate column in Schedule 10 of the Customs Tariff that will apply to Korean originating goods.

 

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

 

16.       Items 3 and 4 add new paragraph (1)(bf) 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 10 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)(i)

 

17.       Items 5 and 6 add new paragraph (1)(j) 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 10 of the Customs Tariff that applies to Korean originating goods.

 

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

 

18.       Items 7 and 8 add new paragraph (2)(bf) 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 10 of the Customs Tariff that applies to Korean originating goods.

 

19.       The amendments provided by items 2 to 8 allow phasing rates of duty to be inserted in Schedule 10.

 

Item 9 After section 13F

 

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

 

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

 



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

 

22.       Items 10 and 11 amend the Customs Tariff by inserting new subparagraph 16(1)(a)(viii).  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)(viii) ensures that the general rate of duty set out in Schedule 3 does not apply to Korean originating goods.

 

Item 12 At the end of subsection 16(1)

 

24.       Item 12 inserts new paragraph 16(1)(p) into the Customs Tariff.  This paragraph provides that a free rate of customs duty is payable on goods that are Korean 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 10.  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 10.

 

Item 13 At the end of subsection 18(1)

 

25.       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 or 9.

 

26.       Item 13 amends subsection 18(1) to add a new paragraph (1)(g).  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 10.  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 subparagraph 18(2)(a)(vii)

 

27.       Items 14 and 15 amend the Customs Tariff by inserting a new subparagraph 18(2)(a)(viii).  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.

 

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

 

Item 16 At the end of subsection 18(2)

 

29.       Item 16 inserts new paragraph 18(2)(p) into the Customs Tariff to set out how customs duty is calculated for goods that are Korean originating goods and that are subject to a concessional item in Schedule 4.  This paragraph provides that if the goods are Korean originating goods and “KR” 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 17 Paragraph 19AA(b)

 

30.       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 products.

 

31.       For this purpose, section 19AA contains a table that pairs customs tariff subheadings with the corresponding excise tariff items.

 

32.       Item 17 amends subsection 19AA(b) of the Customs Tariff by adding a reference to Schedule 10 to enable the indexation provisions to apply to the rates of excise-equivalent customs duty for those alcohol products that are Korean originating goods.

 

Item 18 Paragraph 19AC(b)

 

33.       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 automatic indexation applies are tobacco products.

 

34.       For this purpose, section 19AC contains a table that pairs customs tariff subheadings with the corresponding excise tariff items.



35.       Item 18 amends subsection 19AC(b) of the Customs Tariff by adding a reference to Schedule 10 to enable the indexation provisions to apply to the rates of excise-equivalent customs duty for those tobacco products that are Korean originating goods.

 

Items 19 to 25 Schedule 4

 

36.       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.

 

37.       The Agreement only provides for duty concessions for goods in Schedule 3 of the Customs Tariff.  As paragraph 18(2)(p) of the Customs Tariff provides that the rate of customs duty for Korean originating goods subject to a concessional item in Schedule 4 is Free, unless a rate for Korea is specified, it is necessary to specify rates of customs duty for Korean originating goods for those concessional items where the rate of duty is not Free.

 

38.       Items 19, 20, 21, 22, 23, 24 and 25 amend the existing rates of customs duty for relevant Schedule 4 items by adding or inserting the appropriate duty rate for Korean originating goods.

 

39.       Item 19 amends item 17A (Goods exported and returned unaltered to Australia on which duties or taxes are owing) and inserts “KR” in the third column of item 17A, so the amount of duty is calculated by reference to that rate of duty. 

 

40.       Item 20 inserts a reference to new Schedule 10 in the description of goods for concessional item 20 (Goods exported for repair or renovation).

 

41.       Item 21 amends item 20 and inserts “KR” in the third column of item 20, so the amount of duty is calculated by reference to that rate of duty. 

 

42.       Item 22 amends item 22 (Containers used to import goods, being containers that will be exported without being put to any other use) and inserts “KR” in the third column of

item 22, so the amount of duty is calculated by reference to that rate of duty.

 

43.       Item 23 amends item 45 (Split consignment goods) and inserts “KR” in the third column of item 45, so the amount of duty is calculated by reference to that rate of duty.

 

44.       Item 24 amends item 50 (Tariff concession order goods) and inserts “KR” in the third column of item 50, so the amount of duty is calculated by reference to that rate of duty.

 

45.       Item 25 amends item 53 (Polyglycol brake fluids that are exempt from the Product Stewardship Oil Levy) and inserts “KR” in the third column of item 53, so the amount of duty is calculated by reference to that rate of duty.



Item 26 At the end of the Act

 

Schedule 10 - Korean originating goods

 

46.       Item 26 inserts new Schedule 10 into the Customs Tariff.

 

47.       Annex 2-A: Elimination of Customs Duties of the Agreement provides that rates of customs duty for certain Korean originating goods are to be reduced to Free over a period of time.  Items 136 to 696 in Schedule 10 of the Customs Tariff impose phasing rates of customs duty on Korean originating goods as specified in the Agreement.  Column 3 of the table in Schedule 10 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 Korean originating goods at each step of that phasing.

 

48.       Article 1.4 of Section B: 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.

 

49.       Section 16 of the Customs Tariff, as amended, provides that the rates of customs duty for Korean originating goods are Free unless a rate of duty is specified for those goods in Schedule 10.  Therefore, it is necessary to specify the relevant headings and subheadings for the above alcohol, tobacco and petroleum products in Schedule 10 and the appropriate rate of customs duty.

 

50.       Items 1 to 135 of Schedule 10 impose customs duty on the alcohol, tobacco and petroleum products that are Korean 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 27 to 31 User’s Guide

 

51.       These items omit and substitute text in the User’s Guide to the Customs Tariff, as required, to insert references to new Schedule 10 .

 

Item 32 Application provision

 

52.       This item provides that the amendments made by items 1 to 16 and 19 to 26 set out in Schedule 1 of the Tariff Bill will apply to goods imported into Australia on or after the commencement of item 32.  (Items 17 and 18 relate to the indexation provisions in sections 19AA and 19AC of the Customs Tariff and are not covered by the application provision - comments under items 17 and 18 refer).

 



53.       The commencement provisions of the Tariff Bill provide that item 32 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.

 

54.       Item 32 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 2014, item 32 provides that amendments to the Customs Tariff shall apply to goods that were imported and warehoused before 1 December 2014 but not entered for home consumption until on or after 1 December 2014.