BILLS DIGEST NO. 15, 2012–13

10 September 2012

Customs Tariff Amendment (2012 Measures No. 1) Bill 2012

Eugenia Karanikolas
Economics Section

Date introduced:  20 June 2012

House:  House of Representatives

Portfolio:  Home Affairs

Commencement:  Schedule 1: items 1 and 2 commenced on 1 March 2012; items 3 to 6 and item 9 commence the day after this Act receives the Royal Assent; items 7 and 8 commenced on 1 January 2012. Sections 1-3 commence on Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose of the Bill

The Customs Tariff Amendment (2012 Measures No. 1) Bill 2012 (the Bill) amends the
Customs Tariff Act 1995 (Customs Tariff Act[1]) to:

•       list Serbia as a Developing Country for the purposes of Australian Tariff Preferences

•       reinsert coir yarn, which was incorrectly omitted, in the Customs Tariff Schedule and

•       correct a number of minor technical errors.

Background

The Customs Tariff Act is the primary legislative instrument governing Australia’s tariff regime. It contains eight schedules which list goods that are subject to customs duty and the rates of duty applicable to those goods. The rates fall into two broad categories: the general rate and other (special) rates of duty. The general rate, or so-called most favoured nation rate, is that applied to imports from countries that are members of the World Trade Organisation (WTO). The special category includes, for example, preferential rates for imports from developing countries, and the rates agreed under various bilateral free trade agreements.[2]

‘Developing Country’ status

According to the WTO, there is no definition of what constitutes a ‘developing country’. Instead it is up to the individual country to classify itself. This decision, however, can be challenged by other members. Whilst there are benefits in having ‘developing country’ status, it does not mean that these countries would be the automatic recipients of preferential trade measures. Under the rules of the WTO it is the ‘preference giving country’ who decides whether to list a country as ‘developing’ for the purposes of extending to it a benefit offered through the tariff preference scheme.[3]

System of Tariff Preferences

Australia’s System of Tariff Preferences is based on the Generalized System of Preferences (GSP) and has been in operation since the 1970s.[4]

The idea of providing assistance to developing countries by granting them favourable tariff rates was originally brought up at the first United Nations Conference on Trade and Development (UNCTAD) in 1964 by the first Secretary-General of UNCTAD, Raul Prebisch.[5]

In 1968, the GSP was adopted at the UNCTAD II in New Delhi. As stated in Resolution 21(ii) taken at the Conference:

"… the objectives of the generalized, non-reciprocal, non-discriminatory system of preferences in favour of the developing countries, including special measures in favour of the least advanced among the developing countries, should be:

(a) to increase their export earnings;

(b) to promote their industrialization; and

(c) to accelerate their rates of economic growth."[6]

In 1979 the General Agreement on Tariffs and Trade (GATT) contracting parties approved a permanent waiver to the most favoured nation clause in order to permit the preference-giving countries the ability to grant preferential tariff treatment under their respective GSP schemes. Australia became one of a total of 13 countries to grant GSP preferences to developing nations.[7]

Serbia’s economy

In 2011, Serbia’s gross domestic product (GDP) per capita was $10 800 compared to Australia’s $40 800.[8] According to the Economist Intelligence Unit, Serbia was one of the most exposed countries to the euro zone crisis because of the economy’s reliance on manufacturing and exports driven by foreign investment.  As a consequence, Serbia faces many challenges including high unemployment rates, rising public and private foreign debt and difficulty in attracting new foreign direct investment.[9]

To bring the country back on track in 2010 the Serbian Government adopted a new long-term economic growth plan which aims to quadruple its exports over the next ten years whilst making significant investments in basic infrastructure.[10]

Serbia and the EU

In March 2012 the European Council made Serbia a candidate for membership of the European Union. This followed years of political and economic reforms and improvements in relations with the former Serbian province of Kosovo.[11]

Serbia and the WTO

Serbia is currently preparing itself for admission to the WTO. At its latest meeting, the Working Party on Serbia’s accession stated that the country was on track in implementing WTO compliant rules and urged the country to continue with its implementation of bilateral agreements.[12]

The admission of countries like Serbia to the WTO may provide benefits to Australia through greater trading opportunities for its exporters. This is considered vital for the country’s long term prosperity as Australia’s economy is dependent on international trade and one in five jobs are linked to trade.[13]

Trade between Serbia and Australia

In 2011, the total two-way trade between Serbia and Australia was valued at $14 million. Australia exported goods to Serbia worth $2.8 million and imported goods valued at $11.3 million. Australia’s top four export commodities to Serbia were: hand/machine tools; prams, toys, games and sporting goods; medicaments; and specialised machinery and parts. Serbia’s top four commodities imported into Australia were: vegetables (prepared or preserved); electrical distributing equipment; fruit (prepared or preserved); and arms and ammunition.[14]

High profile visits

Serbia’s former First Deputy Prime Minister and Minister of Interior (now Prime Minister) Mr Ivica Dacic visited Australia in February 2012. During the visit Mr Dacic met with the Minister for Home Affairs, and signed an agreement to increase co-operation between the two countries on transnational crime matters including money laundering and drug trafficking.[15]

Main issues

•       Listing Serbia as a Developing Country for the purposes of Australian Tariff Preferences will accord the country a reduction in customs duty on a range of goods it exports to Australia. This may create export opportunities for Serbia and benefits for Australian consumers.

•       Forming closer economic ties with Serbia may also encourage Australian companies to look more closely at the investment opportunities available in that country. It may be worth noting for instance, the fact that Serbia is the only country outside the Commonwealth of Independent states[16] to have a Free Trade Agreement (FTA) with Russia.[17] For Australia, this could potentially mean the creation of trade and investment opportunities. This is because under the FTA goods produced in Serbia, with over 50 per cent value added in the country are considered to be of Serbian origin and therefore when exported to Russia will be subject to lower export duties.[18]

Basis of policy commitment

The proposed changes to the legislation are consistent with Australia’s trade and development commitment under the WTO Doha Round to help developing countries gain access to international economic opportunities through trade.[19] The changes are also consistent with Australia’s approach to other former Yugoslavian states including Croatia, Macedonia and Slovenia.

Committee consideration

At its meeting of 27 June 2012, the Senate Standing Committee for the Scrutiny of Bills made note of the fact that the Bill will commence retrospectively, but was satisfied with the reason for this given in the Explanatory Memorandum.[20] This issue is explained further under the Key provisions section of this digest.

At its meeting of 28 June 2012, the Senate Selection of Bills Committee determined that the Bill not be referred to any committee for inquiry and report.[21] In its first report, tabled 22 August 2012, the Parliamentary Joint Committee on Human Rights examined all Bills introduced in the 18–29 June 2012 period, which included this Bill.[22] The Committee reported that the Bill does not engage human rights, as defined by the Human Rights (Parliamentary Scrutiny) Act 2011.[23]

Policy position of non-government parties

The proposed amendments have been broadly supported by the Coalition, who highlighted the importance of the strong personal links between the two countries brought about through migration.[24]

Financial implications

The Explanatory Memorandum notes that the inclusion of Serbia on the list of Developing Countries will not have an impact on the Budget in 2011–12 and will have negligible fiscal impact from
2012–13 to 2014–15. The remainder of the measures proposed in the Bill will not have a financial impact. [25]

Key provisions

Item 1 of Schedule 1 of the Bill inserts Serbia into Division 1 of Part 4 of Schedule 1 to the Customs Tariff Act. This Division lists the countries that have been accorded Developing Country status (DCS) and are subject to DCS rates of duty, which are lower than general rates of duty.

Item 7 is a technical amendment which re-inserts the subheading 5308.10.00 relating to coir yarn into Schedule 3 of the Bill. This Schedule relates to the classification of goods and general and special rates of duty. Coir yarn was incorrectly omitted from the Customs Tariff by the
Customs Tariff Amendment (2012 Harmonized System Changes) Act 2011.[26] Coir yarn is used for geotextile manufacturing to produce mats and ropes.

Items 1, 2, 7 and 8 of Schedule 1 to the Bill will commence retrospectively – items 1 and 2 will commence on 1 March 2012 and items 7 and 8 will commence on 1 January 2012. This is in keeping with the way in which the Customs Tariff Proposal mechanism is used to change the Customs Tariff Act, in a shorter timeframe than could be achieved through sole reliance on legislative amendment. Customs Tariff Proposals are either tabled in the House of Representatives (when Parliament is sitting) or, when the Parliament is not sitting for a period exceeding seven days, published in the Commonwealth Gazette and then tabled in the House within the next seven days on which it sits.

The changes contained in Customs Tariff Proposals are then ‘incorporated in a Customs Tariff Amendment Bill that is introduced into and debated by Parliament’.[27]

The amendments made by Items 1 and 2 of Schedule 1 to the Bill (that is, the listing of Serbia as a Developing Country) were set out in Customs Tariff Proposal (No. 1) 2012, which was tabled in the House of Representatives on 16 February 2012 and came into effect on 1 March 2012.[28]

The amendments made by items 7 and 8 of Schedule 1 to the Bill (that is, the reinsertion of a reference to coir yarn in the Customs Tariff) were set out in Customs Notice (No. 1) 2011, which was published in the Commonwealth Gazette on 21 December 2011 and came into effect on 1 January 2012.[29] The changes were then included in Customs Tariff Proposal (No. 1) 2012.

As a result, although items 1, 2, 7 and 8 of Schedule 1 commence retrospectively to the Bill, they were announced through the Customs Tariff Proposal mechanism prior to commencing.  Therefore, although these items may be regarded as technically retrospective, the public was notified prior to the changes coming into effect. As recognised by the Senate Standing Committee for the Scrutiny of Bills, ‘[t]he retrospective commencement of these provisions is envisaged by the normal operation of the Customs Tariff Proposal’.[30]

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2463.

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ISSN 1328-8091

[1].               The Customs Tariff Act 1995 (Cth) is found at ComLaw at: http://www.comlaw.gov.au/Details/C2012C00408

[2].               R Webb, Customs Tariff Amendment (Taxation of Alternative Fuels) Bill 2011, Bills Digest, no. 151, 2010–11, Parliamentary Library, Canberra, 2011, viewed 10 August 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2F868185%22

[3].               World Trade Organisation (WTO), ‘Who are the developing countries in the WTO?’, WTO website, viewed 10 August 2012, http://www.wto.org/english/tratop_e/devel_e/d1who_e.htm

[4].               Organisation for Economic Co-operation and Development (OECD), The Australian preferential tariff regime, OECD Trade Policy Working Paper No. 33, 2006, viewed 10 August 2012, http://www.oecd.org/australia/36727558.pdf

[5].               United Nations Conference on Trade and Development (UNCTAD), ‘About GSP’, UNCTAD website, viewed 10 August 2012, http://unctad.org/en/Pages/DITC/GSP/About-GSP.aspx

[6].               Ibid.

[7].               Ibid.

[8].               This is GDP per capita on a purchasing power parity basis (PPP). Central Intelligence Agency, Serbia, The world factbook, 31 July 2012, viewed 13 August 2012, https://www.cia.gov/library/publications/the-world-factbook/geos/ri.html

[9].               Economist Intelligence Unit Limited (EIU), ‘Serbia: the impact of the euro zone crisis’, EIU website, 12 June 2012, viewed 10 August 2012, http://country.eiu.com/article.aspx?articleid=1609110545&Country=Serbia&topic=Economy

[10].               Central Intelligence Agency, Serbia, The world factbook, 31 July 2012, viewed 13 August 2012, https://www.cia.gov/library/publications/the-world-factbook/geos/ri.html

[11].               European Commission, ‘Enlargement: Serbia’, website, viewed 7 September 2012, http://ec.europa.eu/enlargement/countries/detailed-country-information/serbia/index_en.htm

[12].               World Trade Organisation (WTO), ‘Serbia’s accession is steadily moving towards end game’, WTO website, 30 September 2011, viewed 10 August 2012, http://www.wto.org/english/news_e/news11_e/acc_srb_30sep11_e.htm

[13].               Department of Foreign Affairs and Trade (DFAT), ‘Trade at a glance 2011’, Issues, DFAT, October 2011, viewed 10 August 2012, http://www.dfat.gov.au/publications/trade/trade-at-a-glance-2011.html#sect02

[14].               Department of Foreign Affairs and Trade (DFAT), Serbia, fact sheet, DFAT, 2011, viewed 10 August 2012, http://www.dfat.gov.au/geo/fs/serb.pdf

[15].               J Clare (Minister for Home Affairs and Justice), New international police agreement with Serbia to tackle transnational crime, media release, 14 February 2012, viewed 10 August 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1422105%22

[16].               Formed in 1991 by Russia and 11 other countries which were previously part of the Soviet Union.

[17].               Central Intelligence Agency (CIA), Serbia, The world factbook, 31 July 2012, viewed 13 August 2012, https://www.cia.gov/library/publications/the-world-factbook/geos/ri.html

[18].               Serbia Investment and Export Promotion Agency (SIEPA), Liberalised Trade, website, viewed 6 September 2012, http://www.siepa.gov.rs/site/en/home/1/investing_in_serbia/liberalized_trade/

[19].               Department of Foreign Affairs and Trade (DFAT), ‘WTO Doha Round Update’, DFAT, 2011, viewed 10 August 2012, http://www.dfat.gov.au/trade/negotiations/wto-doha-round-update.html

[20].               Senate Standing Committee for the Scrutiny of Bills, Alert Digest, Senate, Canberra, 27 June 2012, viewed 7 September 2012, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=scrutiny/alerts/2012/index.htm

[21].               Selection of Bills Committee, Report No. 8 of 2012, Senate, Canberra, 28 June 2012, viewed 9 August 2012, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=selectionbills_ctte/reports/2012/rep0812.htm

[22].               Parliamentary Joint Committee on Human Rights, Report No. 1 of 2012, Joint Committee, Canberra, 22 August 2012, p. 21, viewed 23 August 2012, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=humanrights_ctte/reports/1_2012/index.htm

[23]              Ibid.

[24].               M Keenan, ‘Second reading speech: Customs Tariff Amendment (2012 Measures No. 1) Bill 2012’, House of Representatives, Debates, 15 August 2012, p. 76, viewed 15 August 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fe62f1e0d-13c9-446f-9296-82fd78823b75%2F0159%22

[25].               Explanatory Memorandum, Customs Tariff Amendment (2012 Measures No. 1) Bill 2012, p. 2, viewed 10 August 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fr4847_ems_50275ef8-fdfa-4a3e-af2a-798f8f41f8ec%22

[26].               The Customs Tariff Amendment (2012 Harmonized System Changes) Act 2011 is found at ComLaw at: http://www.comlaw.gov.au/Details/C2011A00085

[27].               Explanatory Memorandum, Customs Tariff Amendment (2012 Measures No. 1) Bill 2012, op. cit., p. 5.

[28].               Customs Tariff Proposal (No. 1) 2012, 16 February 2012, viewed 7 September 2012, http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Tariff_Proposals/Result?tpId=legislation%2ftariffs%2ftariffs_b1378296-e7d9-49cb-a399-d5032d84ed3d

[29].               Commonwealth of Australia, Gazette, No. GN 50, 21 December 2011, p. 3017, viewed 7 September 2012, http://gazettes.ag.gov.au/portal/govgazonline.nsf/708759DA61C7975FCA25796D002191F7/$file/GN%2050.pdf

[30].               Senate Standing Committee for the Scrutiny of Bills, Alert Digest, Senate, Canberra, 27 June 2012, op. cit., p. 2.