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Customs Amendment (Pacific Agreement on Closer Economic Relations Plus Implementation) Bill 2018

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2016-2017-2018

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

 

 

 

 

CUSTOMS AMENDMENT (PACIFIC AGREEMENT ON CLOSER ECONOMIC RELATIONS PLUS IMPLEMENTATION) BILL 2018

 

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Law Enforcement and Cyber Security, the Honourable Angus Taylor MP)

 



CUSTOMS AMENDMENT (PACIFIC AGREEMENT ON CLOSER ECONOMIC RELATIONS PLUS IMPLEMENTATION) BILL 2018

 

OUTLINE

 

The purpose of the Customs Amendment (Pacific Agreement on Closer Economic Relations Plus Implementation) Bill 2018 (the Bill) is to amend the Customs Act 1901 (the Customs Act) to introduce new rules of origin for goods imported into Australia from a Party to the Pacific Agreement on Closer Economic Relations Plus (the Agreement).

 

The Agreement is a comprehensive World Trade Organisation consistent regional economic integration agreement, which covers goods, services and investment and established rules and commitment between the Parties to the Agreement.

 

Australia, the Cook Islands, Kiribati, Nauru, New Zealand, Niue, Samoa, Solomon Islands, Tonga and Tuvalu signed the Agreement in Nuku’alofa on 14 June 2017. Vanuatu signed the Agreement in Apia on 7 September 2017.

 

The amendments contained in the Bill will enable eligible goods that satisfy the new rules of origin to be entered into Australia at preferential rates of customs duty. The amendments will also impose obligations on exporters of eligible goods to a Party to the Agreement for which a preferential rate of customs duty is claimed, and on people who produce such goods.

 

Complementary amendments will also be made to the Customs Tariff Act 1995 by the Customs Tariff Amendment (Pacific Agreement on Closer Economic Relations Plus Implementation) Bill 2018 to give effect to the preferential treatment of customs duty in accordance with the Agreement.

 

The amendments contained in this Bill will be operative on the later of the day on which this Act receives the Royal Assent and the day on which the Agreement done at Nuku’alofa on 14 June 2017 enters into force for Australia.

 

FINANCIAL IMPACT STATEMENT

 

The 2017-18 Mid-Year Economic and Fiscal Outlook estimated that implementing the Agreement would have a negligible cost to revenue over the forward estimates.

 

Revenue ($m)

2016-17

2017-18

2018-19

2019-20

2020-21

Department of Home Affairs

-

..

..

..

..

 

.. Not zero, but rounded to zero.

 

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

 

A Statement of Compatibility with Human Rights in respect of the amendments contained in the Bill is at Attachment A . The Statement assesses the amendments to be compatible with Australia’s human rights obligations.



 

CUSTOMS AMENDMENT (PACIFIC AGREEMENT ON CLOSER ECONOMIC RELATIONS PLUS IMPLEMENTATION) BILL 2018

 

NOTES ON CLAUSES

 

Clause 1  Short title

 

1.         This clause provides for the ‘ Customs Amendment (Pacific Agreement on Closer Economic Relations Plus Implementation) Bill 2018’ (the Bill), when enacted, to be cited as the Customs Amendment (Pacific Agreement on Closer Economic Relations Plus Implementation) Act 2018 .

 

Clause 2  Commencement

 

2.         This clause sets out, in a table, the date on which provisions of the Bill, when enacted, will commence.

 

3.         Table item 1 provides for clauses 1 to 3 and anything in the Bill not elsewhere covered by the table to commence on the day the Bill, when enacted, receives the Royal Assent.

 

4.         Table item 2 provides for Schedule 1 of the Bill, when enacted, to commence on the later of the day on which the Act receives the Royal Assent, and the day on which the Pacific Agreement on Closer Economic Relations Plus (the Agreement) done at Nuku’alofa on 14 June 2017 enters into force for Australia.

 

5.         The date on which the Agreement enters into force will be announced by the Minister for Law Enforcement and Cyber Security by a notifiable instrument, which has the same meaning as in the Legislation Act 2003 (the Legislation Act).

 

Clause 3  Schedules

 

6.         This clause enables the Schedule to the Bill, when enacted, to amend or repeal provisions of legislation specified in that Schedule in accordance with the applicable items . In the context of the Bill, the Customs Act 1901 (the Customs Act) is being amended.

 

Schedule 1—Amendments

 

Part 1—Pacific Islands originating goods

 

Customs Act 1901

 

Introductory Comments

 

7.         On 14 June 2017, in Nuku’alofa in Tonga, representatives of Australia, New Zealand, the Cook Islands, Kiribati, Nauru, Niue, Samoa, Solomon Islands, Tonga and Tuvalu signed the Agreement . On 7 September 2017, a representative from Vanuatu signed the Agreement.

 

8.         The Agreement, on entry into force, provides in part for new rules of origin to determine ‘Pacific Islands originating goods’ and for the preferential treatment of customs duty that applies to such goods. ‘Pacific Islands originating goods’ in accordance with the Agreement are those goods that satisfy the requirement in new Division 1GA inserted by the Bill; see the notes on clauses below in respect of relevant requirements.

 

Item 1  Subparagraph 105B(3)(b)(ii)

 

9.         Section 105B of the Customs Act sets out circumstances where the liability to pay import duty on excise-equivalent goods is wholly or partly extinguished. ‘Excise-equivalent goods’ is defined in section 9 of the Customs Regulation 2015 to mean the goods prescribed under clause 1 of Schedule 1 to that Regulation.

 

10.     However, under subsection 105B(3) of the Customs Act, those circumstances do not apply to an amount of duty if the excise-equivalent goods are classified to subheading 2207.20.10 (denatured ethanol) or 3826.00.10 (biodiesel) of Schedule 3 to the Customs Tariff Act 1995 (the Customs Tariff Act), or an item in the table in Schedule 4A, 5, 6, 7, 8, 9, 10, 11 or 12 to that Act that relates to a subheading mentioned.

 

11.     As part of the implementation of the Agreement, a separate Customs Tariff Amendment Bill will in part insert new Schedule 8A into the Customs Tariff Act. New Schedule 8A will provide for excise-equivalent rates of duty on certain alcohol, tobacco, fuel petroleum products in accordance with the Agreement, and the related preferential rates of customs duty.

 

12.     This item amends subparagraph 105B(3)(b)(ii) of the Customs Act to insert a reference to Schedule 8A of the Customs Tariff Act.

 

13.     The purpose of this amendment is to ensure the collection of the correct import duties for biofuels and biofuel blends imported under the Agreement.

 

Item 2  Subsection 105B(4) (paragraph (b) of the definition of biofuel blend )

 

14.     Subsection 105B(4) of the Customs Act defines in part ‘biofuel blend’ as goods classified to certain subheadings under Schedule 3 of the Customs Tariff Act or an item in the table in the Schedules relating to originating goods under Free Trade Agreements (FTAs) that relate to the relevant subheadings.

 

15.     This item amends the definition of ‘biofuel blend’ under subsection 105B(4) of the Customs Act to insert a reference to new Schedule 8A of the Customs Tariff Act.

 

16.     For the same purpose as above for item 1, the purpose of this amendment is to ensure the collection of the correct import duties for biofuels and biofuel blends imported under the Agreement.

 

Item 3  After Division 1G of Part VIII

 

17.     This item amends Part VIII of the Customs Act to insert new Division 1GA.

 

18.     New Division 1GA is titled ‘Pacific Islands originating goods’ and sets out the new rules for determining whether or not goods are Pacific Islands goods and therefore eligible for a preferential rate of customs duty under the Customs Tariff Act applying to such goods that are imported into Australia. These new rules are being inserted to give effect to Chapter 3 of the Agreement.

 

19.     New Division 1GA contains seven Subdivisions (Subdivision A to Subdivision G) and they are set out below.

 

Subdivision A-Preliminary

 

20.     Subdivision A contains a simplified outline of Division 1GA and the interpretation provision for that Division.

 

New section 153ZKK  Simplified outline of this Division

 

21.     New section 153ZKK sets out a simplified outline of each of the Subdivision B to Subdivision G of new Division 1GA.

 

New section 153ZKL  Interpretation

 

22.     New subsection 153ZKL(1) sets out new definitions for the purposes of new Division 1GA as follows:

 

Agreement means the Pacific Agreement on Closer Economic Relations Plus, done at Nuku’alofa, Tonga on 14 June 2017, as amended and in force for Australia from time to time. The note to this definition indicates that in 2018, the text of the Agreement will be accessible through Australian Treaties Library on the AustLII internet website.

 

aquaculture has the meaning given by Article 1 of Chapter 3 of the Agreement. This term is necessary as it is referred to in the definition of ‘production’.

 

Convention means the International Convention on the Harmonized Commodity Description and Coding System done at Brussels on 14 June 1983, as in force from time to time. The note to this definition indicates that in 2018, the text of the Convention is accessible through the Australian Treaties Library on the AustLII internet website. This term is necessary and is referred to in the definition of ‘Harmonized Commodity Description and Coding System’.

 

customs value of goods has the meaning given by section 159 of the Customs Act. In most cases, it will be the transaction value but there are other valuation methods if this value cannot be ascertained.

 

Declaration of Origin means a declaration that is in force and that complies with the requirements of Article 15 of Chapter 3 of the Agreement. Article 15 sets out the information required for a declaration of origin, including such information as set out in Annex 3-B to Chapter 3 of the Agreement.

 

Harmonized Commodity Description and Coding System means the Harmonized Commodity Description and Coding System (the HCDC System) that is established by or under the Convention.

 

The HCDC System is the worldwide classification system that has been adopted by all countries that are members of the World Customs Organization (WCO). In Australia, the HCDC System has been adopted in the Customs Tariff Act.

 

The HCDC is a structure for classifying goods based on internationally agreed descriptors for goods and related six-digit codes administered by the WCO. This six-digit classification uniquely identifies all traded goods and commodities and is uniform across all countries that have adopted the HCDC System. The WCO reviews the system every five years to reflect changes in industry practice, technological developments and evolving international trade patterns.

 

This term is necessary and is referred to in the definition of ‘Harmonized System’ to ascertain the version of the HCDC System on which the Agreement, particularly the product-specific rules, is based.

 

Harmonized System means:

(a)     the Harmonized Commodity Description and Coding System as in force immediately before 1 January 2017; or

(b)    if the table in Annex 3-B to Chapter 3 of the Agreement is amended or replaced to refer to Chapters, headings and subheadings of a later version of the Harmonized Commodity Description and Coding System—the later version of the Harmonized Commodity Description and Coding System.

 

As per the notes for the definition of HCDC System above, updates to that System are undertaken every 5 years. The last review of the HCDC System (the fifth review) was completed in June 2014 and related amendments made entered into force on 1 January 2017.

 

While each signatory to the Convention is required to implement and reflect related amendments to the HCDC System in their domestic legislation, simultaneously on the entry into force date, the pace at which the amendments are implemented varies from country to country.

 

By way of example, while Australia has implemented, and currently uses, the latest HCDC System of 2017, many of our trading partners are still working towards implementing the latest version of the HCDC System. In light of this, and to avoid causing any disruption to international trade, Australia, through the Department of Home Affairs, publishes the changes between each HCDC System updates and relevant concordance associated with those updates on its website so that anyone can readily identify the appropriate tariff classification codes for importing goods from other countries into Australia.

 

Some of the Parties to the Agreement have not yet adopted the HCDC System of 2017. In light of this and because the Agreement was negotiated based on the HCDC System of 2012, it is necessary to ascertain the Harmonized System that is required for the Agreement. This is because the tariff classification codes set out in Annex 3-B to Chapter 3 of the Agreement, and incorporated by reference into the Customs Act for the purpose of the new rules of origin, are those codes from the HCDC System of 2012.

 

In light of this, the definition of ‘Harmonized System’ will expressly recognise, in the Customs Act, the version of the HCDC System on which the Agreement was based, and allow subsequent versions of that System to also be recognised when the relevant Annex of the Agreement is formally amended.

 

in a Party has the same meaning as it has in Chapter 3 of the Agreement.

 

indirect materials means:

(a)     goods or energy used in the production, testing or inspection of goods, but not physically incorporated in the goods; or

(b)    goods or energy used in the maintenance of buildings or the operation of equipment associated with the production of goods;

including:

(c)     fuel (within its ordinary meaning); and

(d)    tools, dies and moulds; and

(e)     spare parts and materials; and

(f)     lubricants, greases, compounding materials and other similar goods; and

(g)    gloves, glasses, footwear, clothing, safety equipment and supplies; and

(h)    catalysts and solvents.

 

This term, together with the definition of ‘originating material’, new Subdivision C and new Subdivision D implement Article 11 of new Chapter 3 of the Agreement.

 

Interpretation Rules means the General Rules (as in force from time to time) for the Interpretation of the Harmonized System provided for by the Convention.

 

non-originating materials means goods that are not originating materials.

 

Non-originating materials are goods that are not originating materials because they do not satisfy the requirements of new Division 1GA in their own right. For example, where frozen crumbed fish fillets processed in a Party to the Agreement from fish caught in the territory of that Party, coated with herbs and spices that are produced in Thailand (which is not a Party to the Agreement), the fish would be originating materials and the herbs and spices would be non-originating materials.

 

non-Party has the same meaning as it has in new Chapter 3 of the Agreement, which is a Party that is not a Party to that Agreement.

 

This term is necessary and referred to in new section 153ZKR, which deal with the consignment of Pacific Islands originating goods (see notes below for new subsection 153ZKR).

 

originating materials means:

(a)     goods that are originating goods, in accordance with Chapter 3 of the Agreement and that are used in the production of other goods; or

(b)    indirect materials.

 

In some circumstances, in order to determine whether goods that are imported into Australia are Pacific Islands originating goods, and therefore eligible for a preferential rate of customs duty, it may be necessary to have regard to the goods from which the final goods are produced (see Subdivision C and Subdivision D).

 

Pacific Islands originating goods means goods that, under new Division 1GA of Part VIII of the Customs Act, are Pacific Islands originating goods.

 

Party has the meaning given by Article 2 of Chapter 1 of the Agreement.

 

person of a Party has the same meaning as it has in Chapter 3 of the Agreement.

 

producer means a person who engages in the production of goods.

 

production has the same meaning given by Article 1 of Chapter 3 of the Agreement. That is, production means the methods of obtaining goods including but not limited to growing, mining, harvesting, farming, raising, breeding, extracting, gathering, collecting, capturing, fishing, trapping, hunting, manufacturing, aquaculture, processing or assembling a good.

 

This definition corresponds with, and is intended to implement, the definition of ‘production’ under Article 1 of Chapter 3 to the Agreement. The term ‘production’ is defined in the Agreement and the Bill as ‘methods of obtaining goods’. The definition then includes an indicative list of the processes most likely to be covered by the term. This list is non-exhaustive - the term ‘production’ is also capable of capturing any other process that falls within the meaning of ‘methods of obtaining goods’, including any currently existing methods that have not been listed and any new methods which may arise in the future. The determining factor will be whether something is a ‘method of obtaining goods’.

 

23.     New subsection 153ZKL(2) provides that the value of goods for the purposes of new Division 1GA is to be worked out in accordance with the regulations and that the regulations may prescribe different valuation rules for different kinds of goods. The value of goods is relevant, for example, in determining whether goods satisfy the de minimis requirement in Article 7 of Chapter 3 of the Agreement. The value of goods is to be distinguished from the customs value of goods, which is to be worked out under section 159 of the Customs Act.

 

24.     New subsection 153ZKL(3) provides that in specifying tariff classifications for the purposes of new Division 1GA, the regulations may refer to the Harmonized System. The product-specific rules of origin in Annex 3-B to Chapter 3 of the Agreement refer to the tariff classifications of the Harmonized System.

 

25.     New subsection 153ZKL(4) provides that subsection 4(3A) of the Customs Act does not apply for the purposes of new Division 1GA. Subsection 4(3A) provides that reference in the Customs Act to the tariff classification of goods is a reference to Schedule 3 of the Customs Tariff Act, which is not the case in new Division 1GA.

 

26.     New subsection 153ZKL(5) provides that, despite subsection 14(2) of the Legislation Act, regulations made for the purposes of Division 1GA may make provision in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in an instrument or other writing as in force or existing from time to time. The subsection is necessary to ensure there is an appropriate delegation of legislative power should it be necessary in order to implement the Agreement by applying, adopting or incorporating an instrument or other writing that is not an Act or disallowable legislative instrument. Any instrument and other writing so incorporated will be limited to those that are required for the operation of the Agreement and will be accessible through the Department’s website, and free of charge, to ensure they are readily available and at no cost to persons concerned. For example, in implementing other FTAs, this provision has enabled the regulations to refer to the general accounting principles of a country other than Australia for the purposes of the regional value content calculations.

 

27.     New subsection 153ZKL(6) provides that the Minister (for Law Enforcement and Cyber Security) must announce, by notifiable instrument, the day on which the Agreement enters into force for a Party (other than Australia). In this subsection, Party means a Party to the Agreement, not necessarily a Party for which the Agreement has entered into force. This means that the Minister will be required to publish by notifiable instrument setting out the date the Agreement enters into force for each Party to the Agreement.

 

Subdivision B-Goods wholly obtained or produced in a Party

 

28.     Subdivision B contains new section 153ZKM, which sets out the rules in relation to goods that are wholly obtained or produced in a Party to the Agreement.

 

29.     New subsection 153ZKM(1) will provide that goods are Pacific Islands originating goods if they are wholly obtained or produced in a Party, and either the importer of the goods has, at the time the goods are imported, a Declaration of Origin, or a copy of one, for the goods; or Australia has waived the requirement for a Declaration of Origin for the goods.

 

30.     New subsection 153ZKM(2) provides that goods are wholly obtained or produced in a Party if, and only if, the goods are:

(a)     plants, or goods obtained from plants, that are grown, harvested, picked or gathered in a Party (including fruit, flowers, vegetables, trees, seaweed, fungi and live plants); or

(b)    live animals born and raised in one or more of the Parties; or

(c)     goods obtained from live animals in a Party; or

(d)    goods obtained from hunting, trapping, fishing, farming, aquaculture, gathering or capturing in a Party; or

(e)     minerals, or other naturally occurring substances, extracted or taken from the soil, waters, seabed or beneath the seabed in a Party; or

(f)     goods of sea-fishing, or other marine goods, taken from the high seas, in accordance with international law, by any vessel that is registered or recorded with a Party and is entitled to fly the flag of that Party; or

(g)    goods produced, from goods referred to in paragraph (f), on board a factory ship that is registered or recorded with a Party and is entitled to fly the flag of that Party; or

(h)    goods taken by a Party, or a person of a Party, from the seabed, or beneath the seabed, beyond the outer limits of:

                                i.             the exclusive economic zone of that Party; and

                              ii.             the continental shelf of that Party; and

                            iii.             an area over which a third party exercises jurisdiction;

and taken under exploitation rights granted in accordance with international law; or

(i)      either of the following:

                                i.             waste and scrap that has been derived from production or consumption in a Party and that is fit only for the recovery of raw materials;

                              ii.             used goods that are collected in a Party and that are fit only for the recovery of raw materials; or

(j)      goods produced or obtained in a Party solely from goods referred to in paragraphs (a) to (i) or from their derivatives.

 

31.     New section 153ZKM gives effect to Articles 2(a), 3, 5(1), 17(1)(b),  18(1) of Chapter 3 of the Agreement in respect of rules of origin for goods wholly obtained or produced in a Party to the Agreement. The purpose of this new section is to enable goods that satisfy relevant requirements to be subject to preferential treatment of customs duty in accordance with the Agreement.

 

Subdivision C-Goods produced from originating materials

 

32.     Subdivision C contains new section 153ZKN, which sets out a rule for goods that are produced entirely in one or more Parties, by one or more producers, from originating materials only. Such goods are Pacific Islands originating goods if the importer of the goods has, at the time the goods are imported, a Declaration of Origin, or a copy of one, for the goods, or Australia has waived the requirement for a Declaration of Origin for the goods.

 

33.     New section 153ZKN gives effect to Articles 2(b), 15(1), 17(1b) and 18(1) of Chapter 3 of the Agreement in respect of rules of origin for goods produced exclusively from originating materials. The purpose of this new section is to enable goods that satisfy relevant requirements to be subject to preferential treatment of customs duty in accordance with the Agreement.

 

Subdivision D-Goods produced from non-originating materials

 

34.     Subdivision D contains new sections 153ZKO, which deals with Pacific Islands originating goods produced from non-originating materials.

 

35.     New subsection 153ZKO(1) provides that goods are Pacific Islands originating goods if:

(a)     they are classified to a Chapter, heading or subheading of the Harmonized System that is covered by the table in Annex 3-B to Chapter 3 of the Agreement; and

(b)    they are produced entirely in the territory of one or more of the Parties, by one or more producers, from non-originating materials only or from non-originating materials and originating materials; and

(c)     the goods satisfy the requirements applicable to the goods in that Annex; and

(d)    either:

                                i.             the importer of the goods has, at the time the goods are imported, a Declaration of Origin, or a copy of one, for the goods; or

                              ii.             Australia has waived the requirement for a Declaration of Origin for the goods.

 

36.     This provision incorporates Annex 3-B to Chapter 3 of the Agreement into the Customs Act, such that the product-specific rules negotiable for classified goods and related chemical reaction rules that may apply to those goods are also incorporated. As a result, and as per the definition of Harmonized System, Annex 3-B to Chapter 3 of the Agreement as amended from time to time, becomes part of the Customs Act for the purpose of satisfying a requirement to determine whether goods made from non-originating materials are Pacific Islands originating goods. This incorporation does not change the rules contained in Annex 3-B in any form.

 

37.     For certainty of abbreviations used in Annex 3-B, new subsection 153ZKO(2) provides that, without limiting paragraph 153ZKO(1)(c), a requirement may be specified in the table in Annex 3-B to Chapter 3 of the Agreement by using an abbreviation that is given a meaning for the purpose of that Annex. For example, the abbreviation of RVC(40) in the Annex means a regional value content of at least 40%. Another example of an abbreviation in the Annex is ‘CC’, which is an abbreviation for classification change.

 

Change in tariff classification

 

38.     New subsection 153ZKO(3) refers to the first of several requirements that may be prescribed in regulations made for the purposes of Subdivision D. It provides that, if a requirement that applies in relation to the goods is that all non-originating materials used in the production of the goods must have undergone a particular change in tariff classification, the regulations may prescribe when a non-originating material used in the production of the goods is taken to satisfy the change in tariff classification.

 

39.     The regulations made under this head of power include provisions to give effect to the cumulative rules of origin contained in Article 5 of Chapter 3 of the Agreement, and apply where the non-originating materials that are used or consumed in the production of the good do not satisfy the change in tariff classification.

 

40.     The concept of the change in tariff classification requirement applies to non-originating materials. Goods that have been sourced outside a Party to the Agreement and that are used in the production of other goods are non-originating materials. Goods sourced from a Party to the Agreement that have not fulfilled the requirements of new Division 1GA and that are used in the production of other goods are also non-originating materials.

 

41.     Non-originating materials used to produce other goods may not have the same classification under the Harmonized System as the final good. For example, non-originating materials used to produce a good may be classified to one tariff classification before the production process, and the final good may be classified under a different tariff classification after the production process. To satisfy the requirement of classification change, and therefore satisfy a requirement for the purposes of claiming preferential treatment of customs duty in accordance with the Agreement, the goods concerned must be sufficiently transformed such that they can be classified to a different tariff classification to that of the non-originating materials from which they are produced.

 

42.     For example, frozen fish fillets (classified to tariff code 0304) are produced from fish caught in a party to the Agreement and combined with herbs and spices produced in Thailand (which is not a Party to the Agreement) (classified to tariff code 0907 to 0910) to make crumbed fish fillets (classified to tariff code 1604 in Chapter 16 of the Harmonized System). The applicable tariff change for crumbed fish is ‘a change to Chapter 16 from any other chapter’. As the herbs and spices are classified to Chapter 9 of the Harmonized System, these non-originating materials meet the tariff change requirement, considering that the fish concerned is the produce of a Party to the Agreement, and is therefore an originating material and is not required to change its classification.

 

43.     As per the above example, it is necessary for the tariff classification of the final good and each of the goods that are non-originating materials used in the production of the final goods to be known in order to determine the applicable change in tariff classification.

 

44.     New subsection 153ZKO(4) allows for the change in tariff classification requirement to also be satisfied if the total value of all of the non-originating materials used in the production of the goods that do not satisfy the particular change in tariff classification of the goods, does not exceed 10% of the customs value of the goods.

 

45.     New subsection 153ZKO(4) gives effect to the de minimis requirement set out in Article 7(1)(a) of Chapter 3 of the Agreement. As a result, even if none of the non-originating materials used to produce a final good satisfy a particular change in tariff classification, the final good may still be a Pacific Islands originating good if it satisfies subsection 153ZKO(4) because the change in tariff classification will be taken to be satisfied.

 

46.     The value of non-originating materials for the purposes of subsection 153ZKO(4) is to be worked out in accordance with the method that will be included in the regulations.

 

47.     As an alternative to new subsection 153ZKO(4), to give effect to the de minimis requirement under Article 7(1)(b) of Chapter 3 of the Agreement, new subsection 153ZKO(5) provides that, if:

(a)      a requirement that applies in relation to the goods is that all non-originating materials used in the production of the goods must have undergone a particular change in tariff classification; and

(b)    the goods are classified to any of Chapters 50 to 63 of the Harmonized System; and

(c)     one or more of the non-originating materials used in the production of the goods do not satisfy the change in tariff classification;

then the requirement is taken to be satisfied if the total weight of the non-originating materials covered by paragraph (c) does not exceed 10% of the total weight of the goods.

 

Regional value content

 

48.     New subsection 153ZKO(6) provides that, if a requirement that applies in relation to the goods is that the goods must have a regional value content of not less than a particular percentage worked out in a particular way:

(a)     the regional value content of the goods is to be worked out in accordance with the Agreement; or

(b)    if the regulations prescribe how to work out the regional value content of the goods—the regional value content of the goods is to be worked out in accordance with the regulations.

 

49.     This provision provides the head of power to prescribe formulas for calculating regional value content and in doing so give effect to Article 4 of Chapter 3 of the Agreement.

 

50.     New subsection 153ZKO(7) provides that, if:

(a)     a requirement that applies in relation to the goods is that the goods must have a regional value content of not less than a particular percentage worked out in a particular way; and

(b)    the goods are imported into Australia with accessories, spare parts, tools or instructional or other information materials; and

(c)     the accessories, spare parts, tools or instructional or other information materials are not invoiced separately from the goods; and

(d)    the quantities and value of the accessories, spare parts, tools or instructional or other information materials are customary for the goods; and

(e)     the accessories, spare parts, tools or instructional or other information materials are non-originating materials;

the regulations must require the value of the accessories, spare parts, tools or instructional or other information materials covered by paragraph 157ZKO(7)(e) to be taken into account for the purposes of working out the regional value content of the goods.

 

51.     The note to this section indicates that the value of the accessories, spare parts, tools or instructional or other information materials is to be worked out in accordance with the regulations.

 

52.     New subsection 153ZKO(7) provides a head of power to prescribe regulations to give effect to Article 8(2) of Chapter 3 of the Agreement in respect of the value of the accessories, spare parts, tools or instructional or other information materials for working out regional value content. This provision is necessary because the value of such goods would not normally form part of the value of materials that are used in the production of the underlying goods.

 

53.     New subsection 153ZKO(8) gives effect to Article 8(1) of Chapter 3 of the Agreement and provides that section 153ZKQ should be disregarded for the purposes of subsection 153ZKO(7) when working out whether the accessories, spare parts, tools or instructional or other information materials are originating or non-originating materials. This provision ensures that consideration of applicable change in tariff classification only applies to final goods produced from non-originating materials and not the accessories, spare parts, tools or instructional or other information materials for the final goods.

 

54.     New subsection 153ZKO(9) gives effect to Article 6 of Chapter 3 of the Agreement, and provides that if the goods are claimed to be Pacific Islands originating goods on the basis that the goods have a regional value content of not less than a particular percentage worked out in a particular way, the following are to be disregarded in determining whether the goods are Pacific Islands originating goods:

(a)     operations to preserve the goods in good condition for the purpose of transport or storage of the goods;

(b)    operations or processes to facilitate the shipment or transportation of the goods;

(c)     packaging or presenting the goods for sale;

(d)    affixing of marks, labels or other distinguishing signs on the goods or on their packaging;

(e)     disassembly of the goods;

(f)     any combination of things referred to in paragraphs (a) to (e).

 

55.     Therefore, if any of the above operations are the only operations that take place in a Party to the Agreement in relation to goods (either alone or as a combination) such operations will not amount to production in relation to the goods. For example, if non-originating goods such as spices from Thailand (which is not a Party to the Agreement) are packaged into bottles in a Party to the Agreement, this will not confer the status of Pacific Islands originating goods on the spices.

 

56.     New section 153ZKO gives effect to the above-mentioned Articles in Chapter 3 of the Agreement (including Articles 2(c), 15(1), 17(1b) and 18(1)) for the new section and enables goods produced from non-originating materials that satisfy relevant requirements to be subject to preferential treatment of customs duty in accordance with the Agreement.

 

57.     Subdivision D also contains new section 153ZKP, which deals with packaging materials and containers in accordance with the Agreement.

 

58.     New subsection 153ZKP(1) gives effect to Articles 10(1) and (2) of Chapter 3 of the Agreement and provides that if:

(a)     goods are packaged for retail sale in packaging material or a container; and

(b)    the packaging material or container is classified with the goods in accordance with Rule 5 of the Interpretation Rules;

then the packaging material or container is to be disregarded for the purposes of this Subdivision.

 

59.     This provision has effect that packaging materials or containers do not need to satisfy the change in tariff classification requirement that may apply to the goods packaged within the materials or containers.

 

60.     However, in accordance with Articles 10(3) and (4) of Chapter 3 of the Agreement, new subsection 153ZKP(2) provides one exception to subsection 153ZKP(1). This exception applies where the goods are required to have a regional value content of at least a particular percentage worked out in a particular way. In this context, the regulations must provide for the value of the packaging material or container to be taken into account as non-originating materials for the purposes of working out the regional value content of the goods.

 

61.     Without this provision, the value of packaging materials and containers would not normally form part of the value of materials that are used in the production of the goods.

 

62.     The note to this section indicates that the value of packaging materials and containers for the purposes of this section is to be worked out in accordance with the regulations.

 

Subdivision E-Goods that are accessories, spare parts, tools or instructional or other information materials

 

63.     Subdivision E contains new section 153ZKQ, which sets out a specific rule that applies to goods that are accessories, spare parts, tools or instructional or other information materials.

 

64.     New section 153ZKQ provides that goods are Pacific Islands originating goods if:

(a)     they are accessories, spare parts, tools or instructional or other information materials in relation to other goods; and

(b)    the other goods are imported into Australia with the accessories, spare parts, tools or instructional or other information materials; and

(c)     the other goods are Pacific Islands originating goods; and

(d)    the accessories, spare parts, tools or instructional or other information materials are not invoiced separately from the other goods; and

(e)     the quantities and value of the accessories, spare parts, tools or instructional or other information materials are customary for the other goods.

 

65.     Therefore, under this provision, accessories, spare parts, tools or instructional or other information materials will be deemed Pacific Islands originating goods even if, in fact, they are non-originating goods, provided all of the requirements in this new section are satisfied. However, this deeming section is to be disregarded when performing a regional value calculation on goods under new subsection 153ZKO(7). The value of the accessories, spare parts, tools or other instructional or information materials that are originating or non-originating materials must be included in that calculation (see new subsection 153ZKO(8)).

 

66.     This provision gives effect to Article 8 of Chapter 3 of the Agreement with respect to specific rules for goods that are accessories, spare parts, tools or instructional or other information materials.

 

Subdivision F-Consignment

 

67.     Subdivision F contains new section 153ZKR, which deals with the consignment requirements applicable to Pacific islands originating goods in accordance with the Agreement.

 

68.     New subsection 153ZKR(1) provides that goods are not Pacific Islands originating goods under new Division 1GA if the goods are transported through a non-party and the goods undergo subsequent production or any other operation in the territory of a non-party other than:

(a)     unloading, reloading, storing, repacking, relabelling or any other operation that is necessary to preserve the goods in good condition or to transport the goods to the territory of Australia; or

(b)    showing the goods in, or utilising the goods at, an exhibition.

 

69.     New subsection 153ZKR(2) provides that section 153ZKR applies despite any other provision of new Division 1GA.

 

70.     The new section gives effect to Article 13 of Chapter 3 of the Agreement and ensures that operations and production processes for Pacific Islands originating goods are restricted to those that are undergone in one or more Parties to the Agreement.

 

Subdivision G-Regulations

 

71.     Subdivision G contains new section 153ZKS, which provides a head of power to prescribe regulations to make provisions for and in relation to determining whether goods are Pacific Islands originating goods under new Division 1GA.

 

Part 2—Verification powers

 

Customs Act 1901

 

Item 4  After Division 4E of Part VI

 

72.     This item amends Part VI of the Customs Act to insert new Division 4EA, which is titled ‘Exportation of goods to Parties to the Pacific Agreement on Closer Economic Relations Plus’.

 

73.     Division 4EA contains new sections 126AKE, 126AKF, 126AKG and 126AKH. Collectively, these new sections impose obligations on people who export eligible goods to a Party to the Agreement and who wish to obtain preferential treatment of customs duty in respect of those goods, and on people who produce such goods.

 

Section 126AKE  Definitions

 

74.     New section 126AKE defines the term ‘Agreement’, ‘Customs Administration’, ‘Pacific Islands customs official’, ‘Party’, ‘producer’ and ‘production’ for the purposes of new Division 4EA. With exception to the terms ‘Customs Administration’ and ‘Pacific Islands customs official’, the terms have the same meaning as defined in new Division 1GA of Part VIII of the Customs Act, inserted by item 3 of Part 1 of the Bill.

 

75.     ‘Customs Administration’ is defined under this section to have the same meaning given by Article 2 of Chapter 1 of the Agreement. This term is necessary and is referred to in the definition of ‘Pacific Islands customs official’ for the purposes of new sections 126AKG and 126AKH.

 

76.     ‘Pacific Islands customs official’ is defined under this section, for a Party to the Agreement, to mean a person representing the Customs Administration of that Party. This term is necessary and referred to in new sections 126AKG and 126AKH.

 

Section 126AKF  Record keeping obligations

 

77.     New section 126AKF inserts record keeping obligations that will apply only in respect of goods that are exported from Australia to a Party to the Agreement and that are claimed to be originating goods for the purpose of obtaining a preferential tariff in that Party in accordance with the Agreement. This new record keeping obligation is broader than the general record keeping obligations under the Customs Act and is necessary to ensure that all records envisaged by Article 12 of Chapter 3 of the Agreement are retained.

 

78.     New subsection 126AKF(1) enables regulations to prescribe record keeping obligations that apply in relation to goods that are exported to a Party and that are claimed to be originating under a law of that Party that implements the Agreement for the purpose of obtaining a preferential tariff in that Party.

 

79.     It is intended that the method of keeping the documents, such as the length of time for which they must be kept and the manner in which they must be kept, will be similar to current record keeping obligations. However, the type of documents that will be required to be kept will be much broader than current requirements. The requirements will extend to all records relating to the origin of the goods for which preferential tariff treatment is claimed in a Party to the Agreement and may include, amongst other things, records associated with the tariff classification of the goods and the origin or value of the materials used to produce the goods.

 

80.     New subsection 126AKF(2) provides that the obligations under subsection 126AKF(1) may be imposed on an exporter or producer of goods.

 

Section 126AKG  Power to require records

 

81.     New subsection 126AKG(1) provides that an authorised officer (as defined in existing section 4 of the Customs Act) may require a person who is subject to record keeping obligations under regulations made for the purposes of section 126AKF to produce to the officer such of those records as the officer requires.

 

82.     Under Article 19 of Chapter 3 of the Agreement, the Customs Administration of a Party to the Agreement may take action to verify the eligibility of goods for preferential treatment, including requesting the supply of records relating to the production or export of the goods.  New section 126AKG gives effect to this Article in respect of goods that are exported to a Party of the Agreement and that are claimed to be originating goods for the purpose of obtaining a preferential tariff in that Party.

 

83.     New subsection 126AKG(2) provides that an authorised officer (as defined in existing section 4 of the Customs Act) may disclose any records so produced to a Pacific Islands customs official for the purpose of verifying a claim for a preferential tariff in that Party. Records obtained by an authorised officer under new section 126AKG may be Immigration and Border Protection information within the meaning of Part 6 of the Australian Border Force Act 2015 (the ABF Act).

 

84.     Section 42 in Part 6 of ABF Act prohibits the disclosure of Immigration and Border Protection information except, amongst other things, where the disclosure is authorised by or under a law of the Commonwealth.

 

85.     By including an express provision in the Customs Act to permit the disclosure of information (that may be Immigration and Border Protection information) to a Pacific Islands customs official, the disclosure of such information is required or authorised by a law of the Commonwealth for the purposes of Part 6 of the ABF Act.

 

86.     The note to new section 126AKG indicates that, where an authorised officer has requested a person who is subject to record keeping obligations under regulations made for the purposes of section 126AKF, a failure to produce documents or records by that person may be an offence under existing section 243SB of the Customs Act. This offence is not a strict liability offence. The note also indicates that, under existing section 243SC of the Customs Act, a person does not have to produce a record if doing so would tend to incriminate the person.

 

Section 126AKH  Power to ask questions

 

87.     New subsection 126AKH(1) provides that an authorised officer (as defined in existing section 4 of the Customs Act) may require a person who is an exporter or producer of goods that:

(a)     are exported to a Party; and

(b)    are claimed to be originating goods, in accordance with Chapter 3 of the Agreement, for the purpose of obtaining a preferential tariff in the Party;

to answer questions in order to verify the origin of the goods.

 

88.     It is considered that the power to ask questions in the circumstances set out in this section is a necessary adjunct to the power to require records in new section 126AKG.

 

89.     Subsection 126AKH(2) enables an authorised officer (as defined in existing section 4 of the Customs Act), for the purpose of verifying a claim for a preferential tariff in a Party, to disclose any answers to questions covered by new subsection 126AKH(1) to a Pacific Islands customs official.

 

90.     The answers to questions obtained by an authorised officer under new section 126AKH may also be Immigration and Border Protection information within the meaning of Part 6 of the ABF Act and therefore cannot not be disclosed to a Pacific Islands customs official except as allowed by Part 6. By including an express provision in the Customs Act allowing for this information to be disclosed to a Pacific Islands customs official, the disclosure is required or authorised by a law of the Commonwealth for the purposes of Part 6 of the ABF Act.

 

91.     The note to new section 126AKH indicates that, where an authorised officer has requested a person to answer questions in order to verify the origin of goods in accordance with this section, a failure to answer questions by that person may be an offence under existing section 243SA of the Customs Act. This offence is not a strict liability offence. The note also indicates that, under existing section 243SC of the Customs Act, a person does not have to produce a record if doing so would tend to incriminate the person.

 

Part 3-Application provisions

 

Item 5  Application provisions

 

92.     This item gives effect to Article 14 of Chapter 3 of the Agreement and operates such that:

(a)     the amendments made by Part 1 of Schedule 1 of the Bill, when enacted, apply in relation to:

                                i.             goods imported into Australia on or after the commencement of that Part; and

                              ii.             goods imported into Australia before the commencement of that Part, where the time for working out the rate of import duty on the goods had not occurred before the commencement of that Part; and

(b)    The amendment made by Part 2 of Schedule 1 of the Bill, when enacted, applies in relation to goods exported to a Party on or after the commencement of that Part (whether the goods were produced before, on or after that commencement).

 



Attachment A

 

Statement of Compatibility with Human Rights

 

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

 

Customs Amendment (Pacific Agreement on Closer Economic Relations Plus Implementation) Bill 2018 (the Bill)

 

The 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

 

On 14 June 2017, in Nuku’alofa, Tonga, representatives of Australia, New Zealand, the Cook Islands, Kiribati, Nauru, Niue, Samoa, Solomon Islands, Tonga and Tuvalu signed the Pacific Agreement on Closer Economic Relations Plus (the Agreement). Vanuatu signed Agreement in Apia, Samoa on 7 September 2017.

 

The Agreement is a comprehensive World Trade Organisation consistent regional economic integration agreement, which covers goods, services and investment and establishes rules and commitments between the Parties to the Agreement.

 

The purpose of the Bill is to amend the Customs Act 1901 (the Customs Act) to introduce new rules of origin for goods imported into Australia from a Party to the Agreement. In particular, the Bill will:

 

·          introduce new rules of origin to determine eligible goods to be subject to preferential treatment of customs duty in accordance with the Agreement. Goods that satisfy the new rules of origin are referred to as Pacific Islands originating goods;

·          impose record keeping obligations on exporters that export goods to a Party to the Agreement and who make a claim that the goods exported are originating goods in accordance with the Agreement ; and

·          enable an authorised officer (as defined in subsection 4(1) of the Customs Act) to disclose personal information (including Immigration and Border Protection information within the meaning of the Australia Border Force Act 2015 ) to a Pacific Islands customs officials for the purposes of verifying the claims for origin of goods exported to a Party to the Agreement. Pacific Islands customs official means a person representing a Customs Administration to a Party to the Agreement.

 

The amendments contained in this Bill will be operative on the later of the day on which this Act receives the Royal Assent and the day on which the Agreement done at Nuku’alofa on 14 June 2017 enters into force for Australia.

 

A separate Customs Tariff Amendment (Pacific Agreement on Closer Economic Relations Plus Implementation) Bill 2018 will amend the Customs Tariff Act 1995 to make complementary amendments to set out the preferential rates of customs duty for the importation of Pacific Islands originating goods.

 

Human rights implication

 

·          This Bill engages the Right to not be subjected to arbitrary or unlawful interference with privacy in Article 17 of the International Covenant on Civil and Political Rights (ICCPR) .

 

Under Article 15 of Chapter 3 of the Agreement, a Declaration of Origin completed by the exporter or producer or an authorised representative of the exporter or producer shall support a claim that goods are eligible for preferential tariff treatment in accordance with the Agreement. The key information that must be included in a Declaration of Origin is detailed in Annex 3-A to Chapter 3 of the Agreement and includes personal information.

 

The Bill in part inserts new sections 126AKF, 126AKG and 126AKH into the Customs Act to enable regulations to prescribe record keeping obligations that apply in relation to originating goods in accordance with the Agreement exported from Australia to another Party to the Agreement.

 

The obligations imposed reflect those set out in Articles 12 and 19 of Chapter 3 of the Agreement in respect of the retention of records and the verification of origin. The new sections allow a Party to the Agreement to which originating goods are exported to verify the origin of such goods. This may include the collection and disclosure of personal information, including those set out in a Declaration of Origin, for limited purposes. This information may be disclosed to a Pacific Islands customs official for the purpose of verifying claim for a preferential tariff in a Party to the Agreement.

 

To the extent the Bill will allow for the collection and disclosure of information, the Bill engages the right to privacy under Article 17 of the ICCPR. Article 17(1) sets out:

 

No one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour and reputation.

 

Following the enactment of the Bill, the collection and disclosure of personal information in relation to goods claiming to be originating goods, will be permitted. Further, the collection and disclosure of personal information is authorised under Australian law and the Bill will not alter the existing protections.

 

The verification of the eligibility for preferential treatment is required under the Agreement and the measure in the Bill is directed at the legitimate purpose of facilitating and supporting Australia’s international obligations under the Agreement. This collection and disclosure of personal information will only be permitted for the limited purpose of verifying a claim made by a person for preferential tariff treatment making it a reasonable and proportionate response to a legitimate purpose. As such, the collection and disclosure of personal information in these circumstances will not constitute an unlawful or arbitrary interference with privacy.

 

Conclusion

 

The Bill is compatible with human rights because to the extent that it may engage the right to privacy, will not constitute an unlawful or arbitrary interference with privacy .

 

 

MINISTER FOR LAW ENFORCEMENT AND CYBER SECURITY

THE HONOURABLE ANGUS TAYLOR MP