Bills Digest No. 159 2002-03
Customs Amendment Bill (No.
1) 2003
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Customs
Amendment Bill
(No. 1) 2003
Date Introduced:
15 May 2003
House:
Representatives
Portfolio:
Justice and Customs
Commencement:
On the day on which the Act receives the Royal Assent except
for Schedule 1 amendments relating to Least Developed Countries (LDCs)
and East Timor(1) which commence on 1 July 2003. Schedule
2 relates to the Singapore-Australia Free Trade Agreement (SAFTA) and
the amendments commence on the day on which SAFTA enters into force.
The purpose of the Bill is to amend the Customs Act
1901 to allow preferential duty treatment (i.e. duty free) for the
importation of goods that are the produce or manufacture of LDCs and East
Timor, and by Singapore
under trade liberalisation initiatives.
Background
On 25 October
2002, the Prime Minister, the Hon. John Howard
MP, announced at the APEC Leaders CEO Summit in Los
Cabos that Australia
will grant tariff and quota free access for 50 of the world's poorest
countries.(2) These are referred to as Least Developed Countries
(LDCs) and they include countries such as Bangladesh,
Cambodia
and many parts of sub-Saharan Africa.
East Timor is yet to be formally
classified as a LDC but Australia
has included it in the Bill. East Timor separated
from Indonesia
on 26 October 1999
and after a period of civil unrest, which was brought under control by
United Nations peacekeepers, became an independent nation on 20 May 2002. Until East Timor
is able to rebuild its infrastructure and obtain revenue from oil and
gas resources in the Timor Sea it will remain one
of the poorest countries in the world in economic terms.
The initiative confirms Australia's
commitment to the integration of these countries into world economy by
facilitating market access. Australia
announced publicly that it would implement the initiative for LDCs and
East Timor by 1 July 2003.(3)
The Singapore–Australia Free Trade Agreement (SAFTA)
is a bilateral agreement that provides Singapore
and Australia
with more liberal access to each other's goods, services and investment
markets.
SAFTA was signed on 17
February 2003 and tabled in Parliament on 4 March 2003. SAFTA is expected to come into force
in the financial year 2003-04, subject to Australia's
treaty process and the exchange of diplomatic letters.
The Joint Standing Committee on Treaties examined witnesses
from the Department of Foreign Affairs and Trade and the Attorney-General's
Department at a meeting of the Committee in Canberra
on 24 March 2003.
The evidence taken includes the view that the treaty will significantly
improve the competitive position for Australian service providers and
provide greater protection to Australian investors operating in Singapore.(4)
The Government of Singapore has publicly welcomed the
treaty and has noted that:
SAFTA enhances business opportunities in both countries and
stimulates greater two-way investment.(5)
The Government of Singapore stated that bilateral trade
between Australia
and Singapore
totalled about S$ 9.9 billion (A$8.6 billion) in 2002 and is expected
to grow in the coming years.(6)
Features of SAFTA(7) include:
- elimination of tariffs on all imports (e.g. duty free entry for Australian
beer and stout into Singapore);
- no
export subsidies or safeguard measures against each other's goods;
- for most goods, a 50% value added rule of origin to satisfy country
of origin (e.g. Singapore
has Indonesian and Malaysian inputs in some of its products) and a 30%
rule for a limited number of goods such as certain electrical and electronic
items;
- closer
cooperation in Customs procedures and enhanced liaison with each country's
trading community;
-
non-discriminatory national treatment in tendering for government business;
- cooperation to protect intellectual property rights (e.g. preventing
the export of goods that infringe copyright or trade marks);
- exemption for procurement policies in relation to industry development,
including measures to assist small and medium enterprises and the promotion
of employment and training opportunities for indigenous people;
- Singapore's
environmental services sector will be open to Australian businesses
(with some restrictions in the areas of waste management and hazardous
waste);
- removal
of certain quantitative and market access restrictions on service suppliers;
these measures will improve access (and the easing of some residency
requirements) for Australian financial, legal, other professional, investment
services and telecommunications;
- the
recognition of more Australian tertiary education courses (such as law)
as available to Singaporean students attending those courses in Australian
institutions; and
- a commitment by both governments to address anti-competitive business
practices.
The cost of removing tariffs on imports from LDCs and
East Timor is expected to be a maximum of $2.5
million per annum. The estimated reduced revenue collection arising from
SAFTA is expected to be $30 million for each of the first two years and
rising marginally after that.(8) The offset to revenue loss
is progress in international trade liberalisation and economic support
for LDCs.
A failure to pass this Bill would impact on the preferential
access to Australia
by LDCs scheduled to commence on 1
July 2003. Australia's
commitment to assist LDCs is consistent with the Doha Ministerial Declaration
in November 2001 that stated that World Trade Organisation members should
work towards duty-free access for LDCs.
World Trade Organisation members, such as Australia,
have made a commitment to work towards duty-free access by Least Developed
Countries (LDCs) of goods that are the produce or manufacture of LDCs.
Item 3 amends section 153D of the Customs Act
1901 to provide a special rule that allows a LDC to include materials
that are inputs (e.g. raw materials or components) imported from a 'Developing
Country' and received at a factory in an LDC in that LDC's manufactured
goods. The amendment recognises that, generally, allowable costs of these
inputs will be 25% of the total factory cost of the goods claimed to be
manufactured in the LDC. This special rule will apply even where the
25% cost of inputs from a developing country is exceeded.
Item 4 limits the application of the existing
'Inland freight rule' in subsection 153D(3) of the Customs Act 1901
to Papua New Guinea
or a Forum Island Country. This rule recognises as 'allowable
expenditure' the cost of inland freight within Papua New Guinea or a Forum
Island Country where that freight relates to movement of materials from
a port or airport to a factory or plant where the materials are used in
the manufacture of goods.
Item 5 inserts a New section 153NA into
the Customs Act 1901. The proposed new section 153NA contains
the rules of origin for goods manufactured in an LDC. To satisfy the
rule, the goods must have the last process of their manufacture in the
LDC and the allowable factory cost must be at least 50%. The 'allowable
factory costs' means the sum of allowable expenditure of the factory on:
-
materials;
and
-
labour; and
- overheads.
SAFTA is a free trade agreement that provides Singapore
and Australia
with more liberal access to each other's goods, services and investment
markets.
Item 2 inserts a New Division 4A into Part
VI of the Customs Act 1901. Part VI deals with the exportation
of goods from Australia.
The new Division 4A will regulate the exportation of goods from Australia
to Singapore
to ensure that the goods that are exported comply with SAFTA. Compliance
will enable the exporter to obtain preferential treatment under SAFTA.
A proposed new section 126AA provides a
power to make regulations that set out declaration requirements and procedures
that exporters must satisfy concerning the goods which are claimed to
be the produce or manufacture of Australia
and which are exported to Singapore
under SAFTA.
New section 126AB provides a power to make
regulations that impose obligations for Australian producers, manufacturers
and exporters to maintain records that relate to goods exported to Singapore
under SAFTA. New section 126AC will empower an authorised
officer to inspect the records and to also disclose details to the relevant
authority in Singapore
to verify claims made about the goods. New section 126AD
empowers an authorised officer to ask questions of an exporter, producer
or manufacturer concerning goods falling within SAFTA and to disclose
such answers to the relevant authority in Singapore.
There are already provisions in the Customs Act 1901 that create
an offence for failing to answer a relevant question (section 243SA) or
to produce a relevant record (section 243SB).
Item 3 inserts a new Division 1B into Part VIII
of the Customs Act 1901. This new Division contains the rules
of origin requirements applicable under SAFTA for goods claimed to be
the produce or manufacture of Singapore.
Proposed New section 153U expressly states the purpose for
the proposed new Division 1B.
For goods to satisfy a claim under the SAFTA preference
that they are the produce or manufacture of Singapore, those goods must
be accompanied by a 'Certificate of Origin' —see proposed new section
153VE. The relevant authority that issues the Certificate of Origin
in each country is set-out in Annexe 2A of SAFTA. In the case of Singapore,
the issuers of a Certificate of Origin are International Enterprise Singapore
and any other body authorised by the Government of Singapore (subject
to the agreement of Australia).
The reference to 'CEO' (starting with the New
section 152UC) is to the Chief Executive Officer of Customs.
Broadly stated, goods imported from Singapore
into Australia
will satisfy the SAFTA preference if they are wholly produced or manufactured
in Singapore.
Goods 'partly manufactured' in Singapore
may still qualify under SAFTA if the local content is not less than 50%
of the total cost to manufacture the goods (i.e. see proposed New section
153VB). For a limited range of electrical and electronic goods, a
30% rule will apply.(9)
New section 153VC enables both the 50%
and 30% rule to be reduced by 2%, respectively, where the Chief Executive
Officer of Customs is satisfied and determines in writing that the goods
would have satisfied the rule had not unforeseen circumstances occurred
and that the unforseen circumstances are unlikely to continue.
New section 153VD empowers the Chief Executive
Officer of Customs to determine, by notice in the Gazette that
the 50% and 30% rules may be varied for a period of time where the Chief
Executive Officer of Customs is satisfied that exceptional circumstances
apply.
New section 153VF applies exclusions from
SAFTA preference goods that are, in reality, simply consigned through
Singapore
and are not the produce or manufacturer of Singapore.
New sections 153W to 153WC provide the
components and rules that are used to calculate the allowable cost/expenditure
on materials, labour and overheads for goods partly manufactured in Singapore
for which duty free entry into Australia
is claimed under SAFTA.
The reduction in revenue from allowing duty free
importation of goods from LDCs, East Timor
and Singapore
is noted but the trade-off is the improvement in international relations
between Australia
and these countries. In a time of international tension and uncertainty
measures such as these are commendable. In the case of SAFTA, the benefits
of trade liberalisation will assist Australian businesses to operate more
easily in the Singapore
market.
- As a courtesy, it is noted that the nation of East
Timor prefers the name Timor L'Este (also expressed as Timor-Leste).
See the comments of Mr K. W. Wilkie MP,
Second Reading debate in the House of Representatives, Debates,
5 March 2003, p. 12299
- The Hon. John Howard MP,
Prime Minister, 'Tariff-Free Access for the World's Poorest Countries',
Media Release, 25 October
2002.
- ibid.
- Joint Standing Committee on Treaties, Hansard
(Proof), 24 March 2003:
p. 2 of the transcript.
- See the statement of the Government of Singapore,
'Mr George Yeo, Minister for Trade and Industry, Singapore, at the Signing
Ceremony of the Singapore-Australia Free Trade Agreement on 17 February
2003' on www.mti.gov.sg.
- ibid.
- The full text of SAFTA is publicly available on the
government web sites of Australia
and Singapore
(see www.dfat.gov.au and www.mti.gov.sg).
- Explanatory Memorandum, Customs Amendment Bill
(No. 1) 2003, p. 12.
- The identification of 'electrical and electronic goods'
is drawn from the Minister's Second Reading Speech delivered on 15
May 2003. The actual list of goods is specified in Annex
2D of SAFTA but the list comprises a table of 8 digit tariff classification.
Brendan Bailey
27 May 2003
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
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