Bills Digest no. 54, 2016–17
PDF version [558KB]
Paul Davidson
Economics Section
19
January 2017
Contents
Purpose of the Bill
Structure of the Bill
Committee consideration
Selection of Bills Committee
Senate Standing Committee for the
Scrutiny of Bills
Financial implications
Table 1: expected financial impacts
as a result of closing the Enhanced Project By-law Scheme
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key issues and provisions
Amendments relating to the removal of
Schedule 1
Amendments relating to safeguard
provisions for certain Thai originating goods
Amendments relating to the
classification of certain goods
The potential economic effects of the
amendments relating to the classification of certain goods
Amendment relating to the closure of
the Enhanced Project By-law Scheme
Other amendments
Date introduced: 30
November 2016
House: House of Representatives
Portfolio: Immigration
and Border Protection
Commencement: On
proclamation or six months after Royal Assent, whichever occurs first.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at January 2017.
Purpose of
the Bill
The purpose of the Customs
Tariff Amendment Bill 2016[1] (Cth) (the Bill) is
to:
- amend
the Customs
Tariff Act 1995 (Cth)
(the Act) to remove Schedule 1 of the Act, with the intention of placing it in
the Customs Tariff
Regulations 2004 (Cth)
(the Regulations)
- remove
spent provisions relating to safeguards for certain Thai originating goods
- insert
three additional notes to clarify the intended classification of certain goods
- implement
a measure of the 2016–17 Budget, namely to close the Enhanced Project By-law
Scheme, which relates to providing concessional rates of duty to eligible goods
which support defined industries.
Structure
of the Bill
The Bill comprises one Schedule with 18 items:
- Item
11 proposes to remove Schedule 1 of the Act, with the intention of placing it
in the Regulations. Items 1, 3–5, 8–10 and 16–17 will then change
references to Schedule 1 within the Act to instead refer to ‘Schedule 1 of the Regulations’
- items
6 and 7 propose to remove now redundant provisions and references to
safeguards for certain Thai originating goods
- items
12–14 propose to provide additional notes to assist with the classification
of various goods
- item
15 proposes to close the Enhanced Project By-law Scheme
- item
2 proposes a minor amendment to enhance the clarity of paragraph 12(a) of
the Act
- item
18 is a proposed application provision.
Committee
consideration
Selection
of Bills Committee
At the time of writing, the Bill had not been considered by
the Selection of Bills Committee.[2]
Senate
Standing Committee for the Scrutiny of Bills
At the time of writing, the Bill had not been considered by
the Scrutiny of Bills Committee.[3]
Financial
implications
The Explanatory Memorandum to the Bill provides that the
closure of the Enhanced Project By-law Scheme is expected to increase customs
duty collections by $220 million over the forward estimates (table 1).
Table 1:
expected financial impacts as a result of closing the Enhanced Project By-law
Scheme
| |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
| Revenue ($m) |
- |
60.0 |
60.0 |
50.0 |
50.0 |
Source: Explanatory Memorandum, Customs Tariff Amendment Bill 2016 (Cth), p. 3.
The Government considers that the other amendments in the
Bill have no financial impact.[4]
However, as noted below, items 12–14 provide additional notes to the
classification of goods under Schedule 3 of the Act. These amendments may
result in certain goods being subject to a tariff rate, generally of five per
cent, where currently those goods may be imported duty-free. If this occurs,
there would be additional customs duty collections for those goods when they
are imported to Australia.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[5]
Parliamentary
Joint Committee on Human Rights
At the time of writing, the Bill had not been considered by
the Parliamentary Joint Committee on Human Rights.[6]
Key issues
and provisions
Amendments
relating to the removal of Schedule 1
Items 1, 3–5, 8–11 and 16–17 propose to enable
current Schedule 1 of the Act to be moved to the Regulations, and to make
related changes to the Act in order to carry out that purpose. The Explanatory
Memorandum to the Bill states that by moving Schedule 1 of the Act to the
Regulations it would be easier to update as required.[7]
The proposed amendments therefore assume that Schedule 1 has been, and will
continue to be, subject to frequent changes. Schedule 1 existed as part of the
original enactment of the Act which commenced on 1 July 1996. In the 20 years
since commencement, Schedule 1 has only been amended seven times, with the
latest amendment commencing on 1 March 2012.[8]
It is therefore somewhat curious that the rationale for the amendments is to
keep Schedule 1 up to date, yet it appears that Schedule 1 does not often
change. Whether there are expected to be significantly more frequent changes in
the future is open to conjecture, and there is no information provided in the
Explanatory Memorandum to the Bill to suggest that such an expectation will
arise. Although any changes to the Regulations are subject to disallowance by
the Parliament, there is generally a greater opportunity for Parliament to scrutinise
primary, rather than delegated, legislation.
Amendments
relating to safeguard provisions for certain Thai originating goods
Items 6 and 7 propose to amend the application of
concessional tariff rates to Thai originating goods. Item 7 repeals
section 16A of the Act which relates to special safeguards for Thai originating
goods. In accordance with Article 509 and Annex 5 of the Thailand-Australia
Free Trade Agreement, Australia had put in place special safeguards for certain
agricultural products.[9]
It was agreed between the countries that the safeguard provisions would expire
in 2008 and are as such now redundant. Item 6 removes a reference to
section 16A in paragraph 16(1)(l) relating to Thai originating goods.
Amendments
relating to the classification of certain goods
Schedule 3 of the Act classifies goods according to the International
Convention on the Harmonized Commodity Description and Coding System (the
Harmonized System) and sets out the rate of duty that applies to such goods.[10]
The Harmonized System aims to ensure that imports (and exports) are classified
on a standardised basis for customs purposes throughout the world. Australia
has been a signatory to the Harmonized System since 1988.
Items 12–14, according to the Explanatory
Memorandum to the Bill, propose to ‘correct the treatment’ of certain types of
vegetables, fruits and nuts, and pasta, following decisions of the
Administrative Appeals Tribunal (AAT), so that these goods are ‘classified in a
consistent manner with Australia’s trading partners and its international
obligations’.[11]
The Explanatory Memorandum to the Bill does not provide the decisions, although
there appear to be two decisions that are relevant to the proposed amendments.[12]
The first decision related to an import of gherkins and in
summary the issue to determine was whether the gherkins were properly classified
under Chapter 7 of Schedule 3 of the Act (which deals with edible vegetables
and certain roots and tubers), or under Chapter 20 (which deals with
preparations of vegetables, fruit, nuts or other parts of plants). The
Australian Customs and Border Protection Service (as it then was) argued that
the gherkins should be classified under Chapter 20 and in doing so relied on the
Explanatory Notes to the Harmonized System, as approved by the World Customs
Organization. Those Explanatory Notes (as currently relevant) referred to
Chapter 7 as the appropriate classification for vegetables ‘which have been
treated solely to ensure their provisional preservation during transport or
storage prior to use’.[13]
This contrasted with the description provided in the Act itself, which merely
referred to ‘vegetables provisionally preserved’.[14]
The AAT decided that the gherkins should be classified under Chapter 7 and that
the Explanatory Notes ‘cannot be used to override or contradict the meaning in
plain language of the legislative provision as enacted’.[15]
Item 12 adds an additional note to Chapter 7 of
Schedule 3, to incorporate the ‘sole purpose’ test set out in the Explanatory
Notes to the Harmonized System that the Government unsuccessfully sought to
rely on in the AAT case. This attempts to ensure that products such as the
gherkins that were the subject of the AAT case will be classified under Chapter
20, rather than Chapter 7. The consequence of being classified under Chapter 20
is that they will become subject to a five per cent tariff, whereas if the
products are imported under Chapter 7 they are imported duty-free.[16]
Item 13 proposes to amend Chapter 8 of Schedule 3
of the Act in an analogous manner to item 12, to confine the
circumstances in which fruits and nuts may be classified under heading 0812 to situations
where they ‘have been treated solely to ensure their provisional preservation
during transport or storage prior to use’. Fruits and nuts that meet the
current classification requirements of 0812 (that is, that have been
‘provisionally preserved’) are currently duty-free. If such goods do not meet
the stricter requirements set out in item 13, they may be classified under
Chapter 20. In that case, they will generally be subject to a five per cent
tariff.[17]
The second AAT decision related to an import of frozen
dumplings and wontons with a seafood filling. In summary, the issue to
determine was whether such goods should be classified under heading 1605 which broadly
relates to seafood,[18]
or under heading 1902 which broadly relates to pasta.[19]
Customs argued that the goods should be classified as stuffed pasta and item
14 attempts to ensure that such products will be classified under
heading 1902. The decision noted that pasta tends to refer to a group of
products made from flour and water, and that even though the frozen dumplings
and wontons in question were made from identical ingredients, they would not be
considered by consumers, retailers and restaurant proprietors as pasta
products.[20]
The consequence of frozen dumplings and wontons being specifically classified
under subheading 1902.20.00 as stuffed pasta is that they will generally become
subject to a five per cent tariff, whereas if the products are imported under
heading 1605 they are imported duty-free.
The
potential economic effects of the amendments relating to the classification of
certain goods
The potential effects of items 12–14 are that they
could be expected to provide additional customs duty collections (see
discussion in the financial implications section above). A further effect would
be that subjecting such goods generally to a five per cent tariff would provide
a level of protection to domestic producers of like products (to the extent
that any are produced). It would also be expected that consumers would be
forced to pay more for such goods—potentially from both domestic and
international producers—as a result of the imposition of the tariffs.
Amendment
relating to the closure of the Enhanced Project By-law Scheme
Item 15 proposes to implement a decision of the
2016–17 Budget to close the Enhanced Project By-law Scheme (EPBS) from 3 May
2016 to new applicants.[21]
The EPBS was introduced in 2001 as a Budget measure which rolled a number of
Policy and Project By-Laws together.[22]
The EPBS was a voluntary scheme and provided for the waiving of five per cent
tariffs on goods not produced in Australia for projects valued over $10
million.[23]
The EPBS provides duty-free tariff concessions for eligible goods which support
the mining, resource processing, agriculture, food processing, food packaging,
manufacturing, gas supply, power supply, and water supply industries.[24]
Other
amendments
Item 2 proposes to provide clarification that the
reference in paragraph 12(a) of the Act to ‘column 1’ relates to the table in
Part 1 of Schedule 1.
Item 18 proposes that items 1 to 14 will apply
in relation to goods imported into Australia on or after commencement of
Schedule 1 of the Bill, as well as to goods which have been imported prior to
commencement but where the time for calculating any applicable duty has not yet
occurred.
[1]. Parliament
of Australia, ‘Customs
Tariff Amendment Bill 2016 homepage’, Australian Parliament website.
[2]. Senate
Standing Committee for Selection of Bills, Report,
10, 2016, The Senate, 1 December 2016.
[3]. Senate
Standing Committee for the Scrutiny of Bills, Index
of bills considered by the committee, 2016, The Senate, Canberra,
30 November 2016.
[4]. Explanatory
Memorandum, Customs Tariff Amendment Bill 2016, p. 3.
[5]. The
Statement of Compatibility with Human Rights can be found at page 4 of the
Explanatory Memorandum to the Bill.
[6]. Parliamentary
Joint Committee on Human Rights, Report
10 of 2016, 30 November 2016.
[7]. Explanatory
Memorandum, Customs Tariff Amendment Bill 2016, op. cit., p. 2.
[8]. Items
1 and 2 of the Customs
Tariff Amendment (2012 Measures No. 1) Act 2012 (Cth) provided for the application of
concessional rates of duty to apply to goods imported into Australia from Saudi
Arabia, generally from 1 March 2012.
[9]. Australia-Thailand
Free Trade Agreement, done in Canberra 5 July 2004, [2005]
ATS 2, (entered into force 1 January 2005).
[10]. International
Convention on the Harmonized Commodity Description and Coding System, done
in Brussels, 14 June 1983, [1988]
ATS 30 (entered into force for Australia and generally 1 January 1988).
[11]. Explanatory
Memorandum, Customs Tariff Amendment Bill 2016, op. cit., pp. 2, 7.
[12]. Australian
Frozen Foods Pty Ltd and Chief Executive Officer of Customs and Border
Protection (2009) 112 ALD 201, [2009]
AATA 795; and Pacific Worldwide Pty Ltd
and Chief Executive Officer of Customs [2015] AATA
253.
[13]. Australian
Frozen Foods Pty Ltd and Chief Executive Officer of Customs and Border
Protection (2009), op. cit., [29] (Member Webb).
[14]. See
heading to 0711 in Chapter 7 of Schedule 3 to the Act.
[15]. Australian
Frozen Foods Pty Ltd and Chief Executive Officer of Customs and Border
Protection (2009), op. cit., [25] and [35] (Member Webb).
[16]. Compare
2005.99.00 (‘Other vegetables prepared or preserved otherwise than by vinegar
or acetic acid, not frozen, other than products of 2006’) with 0711.40.00
(‘Vegetables provisionally preserved (for example, by sulphur dioxide gas, in
brine, in sulphur water or in other preservative solutions), but unsuitable in
that state for immediate consumption’).
[17]. Compare
2008.99.00 (‘Fruit, nuts and other edible parts of plants, otherwise prepared
or preserved, whether or not containing added sugar or other sweetening matter
or spirit, not elsewhere specified or included’) with 0812.90.00 (‘Fruit and
nuts, provisionally preserved (for example, by sulphur dioxide gas, in brine,
in sulphur water or in other preservative solutions), but unsuitable in that state
for immediate consumption’).
[18]. Heading
1605 covers ‘crustaceans, molluscs and other aquatic invertebrates, prepared or
preserved’.
[19]. Heading
1902 covers ‘pasta, whether or not cooked or stuffed (with meat or other
substances) or otherwise prepared, such as spaghetti, macaroni, noodles,
lasagne, gnocchi, ravioli, cannelloni, couscous, whether or not prepared’.
[20]. Pacific
Worldwide Pty Ltd and Chief Executive Officer of Customs, op. cit., [50]
(Senior Member Handley).
[21]. Australian
Government, Budget
measures: budget paper no. 2: 2016–17, p. 14.
[22]. Australian
Government, Budget
measures: budget paper no. 2: 2001–02, pp. 7, 182.
[23]. Productivity
Commission (PC), Review
of Australia’s general tariff arrangements, Inquiry report, 12, PC, Canberra, 22 July 2000, pp. XXV, 110, 170–173.
[24]. Customs
Tariff Act 1995 (Cth), Schedule 4, item 44.
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