Bills Digest No.
47, 2020–21
PDF version [500KB]
Ian Zhou
Economic Policy Section
11
February 2021
Contents
Purpose of
the Bill
Background
Committee
consideration
Financial
implications
Statement of
Compatibility with Human Rights
Key issues
and provisions
Concluding
comments
Date introduced: 3
December 2020
House: House of
Representatives
Portfolio: Home
Affairs
Commencement: Schedule
1, Part 1 commences on 1 February 2020. Schedule 1, Parts 2 to 8 commence 28 days
after 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 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 February 2021.
Purpose of the Bill
The purpose of the Customs
Tariff Amendment (Incorporation of Proposals and Other Measures) Bill 2020
(the Bill) is to amend the Customs Tariff Act
1995 (the Act) to:
- legislate
existing Customs Tariff Proposals to allow importers to retrospectively claim a
‘free’ rate of customs duty for eligible COVID-19 related medical and hygiene
products imported into Australia between 1 February and 31 December 2020
- amend
the tariff classification of certain goods
- remove
the $12,000 customs duty on imported used and second-hand motor vehicles that
are Peruvian or Trans-Pacific Partnership originating goods
- repeal
redundant provisions specifying phasing rates of customs duty.
Background
Australia’s
tariff classification system
The Act imposes tariff or customs duty on goods imported
into Australia. The rate of duty applicable to imported goods is determined by
the tariff classification to which those goods belong.[1] The rate of duty that the
importers pay affects the amount of customs/revenue received by the Government.
Furthermore, tariff/customs duty can be used to protect domestic producers from
foreign competition and imports.[2]
Australia’s tariff classification system is based on the International
Convention on the Harmonized Commodity Description and Coding System
(referred to as the Harmonized System).[3]
The Harmonized System (HS) has been developed by and is the responsibility of
the World Customs Organization (WCO).[4]
The HS is enforced in Australian law via the Customs Tariff Act 1995.
The Act contains thousands of HS codes. The HS codes are
typically 6 to 10 digits long and they describe specific goods. For example:
- Chapter
8 of the HS codes is a broad description, titled ‘Edible fruit and nuts, peel
of citrus fruit or melons’
- Heading
6 of Chapter 8 is more specific, titled ‘Grapes, Fresh or Dried’
- Subheading
10.00 of Heading 6 is very specifically called ‘Fresh’.[5]
The HS code given to fresh grapes is 0806.10.00,
indicating the goods’ classification Chapter, Heading and Subheading.
Businesses that wish to import fresh grapes into Australia must pay the customs
duty rate associated with the HS code 0806.10.00, which is currently five per
cent of the value of the import (unless the grapes are imported from a free
trade partner country and eligible for free trade agreement preferential duty
rates).
The HS codes are used by more than 200 countries and allow
customs authorities around the world to identify goods consistently.
Additionally, the HS codes are used to apply relevant customs duties, taxes and
regulations.[6]
According to the WCO, ‘the Harmonized Systems is thus a universal economic
language and code for goods, and an indispensable tool for international trade’.[7]
In his second reading speech for the Bill, the Assistant
Minister for Customs, Community Safety and Multicultural Affairs, Jason Wood,
explains:
The Harmonized Systems provides means for identifying a good
as it moves from one country to another, ensuring that what Australia calls a
‘tomato’ is the same as what every other user of the Harmonized System calls a
‘tomato’.[8]
It is important to keep in mind that tariff classification
is inherently imperfect because there are different ways to describe a product
and it can be difficult to attribute a HS code to a specific product. For
example, a tomato can be described as a fruit or a vegetable. As a result,
Australian Border Force and importing businesses sometimes disagree on the
tariff classification of imported goods.
Over the past few years, the Administrative Appeals Tribunal
(AAT) and the High Court did not accept the Government’s position in cases
concerning the tariff classification and tax treatment of certain imported
goods such as vitamin gummies, wheeled garbage bins and pipes.[9] The Government considers that
these decisions ‘have caused Australia’s [tariff] classifications to become
misaligned with international practice’.[10]
Consequently, the Australian Government seeks in this Bill to amend Australia’s
tariff classification of certain imported goods.[11]
Committee consideration
Senate
Standing Committee for the Scrutiny of Bills
The Scrutiny of Bills Committee had no comment on the Bill.[12]
Senate
Standing Committee for the Selection of Bills
The Selection of Bills Committee has twice deferred
consideration of whether the Bill should be referred to a committee for inquiry
and report.[13]
Financial implications
The amendments relating to the incorporation of Customs
Tariff Proposal (No. 1) 2020 and Customs
Tariff Proposal (No.2) 2020 into the Act are estimated to reduce customs
duty receipts by $15.8 million over the period between 1 February 2020 and 31
December of 2020.[14]
The Government considers that the amendments relating to
the realignment of Australian tariff classification practice and international
tariff classification practice will have negligible financial impact.[15] However, these
amendments may result in certain imported goods being subject to a new tariff
rate, currently those goods may be imported duty-free or at a lower rate. Further,
the Government may receive some additional customs duty collections for those goods.
Other amendments in this Bill will have no financial
impact.[16]
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 with human rights.[17]
Parliamentary
Joint Committee on Human Rights
The Committee had no comment on the Bill.[18]
Key issues and provisions
The Bill contains one schedule consisting of eight parts:
Part 1 –
Incorporation of proposals
|
Tariff proposal process
The
tariff proposal mechanism allows changes to be made to customs tariff rates
prior to the passage of legislation.[19] As explained in House of
Representatives Practice:
Customs and excise tariff
measures are usually not initiated by a bill, as considerations relating to
timing and drafting make a bill an unsuitable vehicle to initiate the variety
and number of tariff proposals that come before the House. Such measures are
generally introduced by way of motion, in the form of custom tariff and
excise tariff proposals. As ‘proposals dealing with taxation’, these may be
submitted to the House without notice.
The moving of a customs tariff
(or excise tariff) proposal is normally treated as a formal procedure for the
purpose of initiating the collection of the duty. It may be debated and an
amendment may be moved, although a private Member’s amendment cannot have the
effect of increasing or extending the scope of the charge proposed beyond the
total already existing in any Acts. It is usual for the debate to be
adjourned by an opposition Member and for all tariff proposals to be listed
together on the Notice Paper under the one order of the day. Debate on a
proposal may be resumed on a later day but this is a rare occurrence. Collection
of duties is thus commenced on the authority of an unresolved motion, and
this has been accepted as a convention.
When the Parliament is prorogued
or when the House has expired by effluxion of time or been dissolved or is
adjourned for a period exceeding seven days, a notice of a customs or
excise tariff proposal may be published in the Gazette and the proposal
is deemed to have effect as from such time after the publication of the
notice as is specified in the notice. Any proposals given notice in this way must
be proposed in the Parliament within seven sitting days of the next
meeting of the House.[20]
Customs officers are provided
with protection by the Customs and Excise Acts from commencement of
proceedings for anything done by them for the protection of the revenue in
relation to a tariff or tariff alteration:
-
until the close of a
parliamentary session in which a customs or excise tariff or tariff alteration
is moved, or until the expiry of 12 months, whichever happens first; or
-
where a notice of a
tariff proposal has been published in the Gazette, under section 273EA of the
Customs Act or section 160B of the Excise Act, within seven sitting days of
the House or six months from the date of publication of the notice, whichever
happens first. Where the details of the notice are subsequently proposed in
the Parliament within seven sitting days, the protection outlined in the
first paragraph applies.[21]
….
The duties proposed in custom and
excise tariff proposals must ultimately be levied by legislation. A
customs tariff amendment bill or an excise tariff amendment bill, as the case
may be, is usually introduced at an appropriate time to consolidate most of
the outstanding proposals introduced into the House and incorporate them in
the schedules of the Customs Tariff and Excise Tariff Acts. These bills
are retrospective in operation, in respect of each proposal, to the date on
which collection commenced.
After a tariff amendment bill has
received assent, unless a prorogation or dissolution has intervened causing
the motions on the proposals to lapse, the Minister or Parliamentary Secretary
usually moves to discharge the orders of the day in respect of those
proposals now contained in the Act. For convenience this is usually done on
the next occasion that tariff proposals are moved in the House.[22]
|
In accordance with the procedure explained in the box
above, on 29 April 2020, a Notice of intention to propose customs tariff
alterations was gazetted, giving notice under section 273EA of the Customs Act 1901
of the intention to propose a free rate of customs duty for medical and hygiene
products capable of use in combatting COVID-19, within seven sitting days of
the House of Representatives.[23]
The notice advised that the free rate of customs duty would apply from
1 February to 31 July 2020.[24]
Subsequently, on 13 May 2020 (which
was the second sitting day after the gazettal) the Assistant Minister for
Customs, Community Safety and Multicultural Affairs Jason Wood proposed Customs
Tariff Proposal (No. 1) 2020, to allow eligible COVID-19 medical and
hygiene products to be imported to Australia at a ‘free’ rate of customs duty
from 1 February to 31 July 2020. Regardless of the products’ country of origin.
Medical and hygiene products eligible for the ‘free’ customs duty rate included
face masks, gloves, clothes or gowns, goggles, glasses, eye visors or face
shields, disinfectant (excluding hand sanitisers), soaps and COVID-19 test
kits.[25]
In a media release, Assistant Minister Wood explained:
This measure will help ensure Australia remains a competitive
market for essential medical and hygiene goods, and allow the Australian
community to continue to source these goods for those who need it most such as
healthcare professionals and essential workers.[26]
When it became clear that easy access to supplies to
address COVID-19 would be needed past the original end date of 31 July 2020, a
further Notice of
Intention to Propose Customs Tariff Alterations - Notice (No. 2) 2020
was gazetted to extend the free rate of customs duty on relevant goods from 1
August to 31 December 2020.[27]
Again, in keeping with the procedure under section 273EA of the Customs
Act, this was followed by Assistant Minister Wood tabling the Customs
Tariff Proposal (No.2) 2020 on 27 August 2020 (the fourth sitting day after
the gazettal). It applied to the same
products as the original proposal.[28]
Part 1 of the Bill (item 1) incorporates the two
Tariff Proposals into the Act, inserting new table item 57 in Schedule 4 of the
Act that will cover the same goods covered by the Proposals and for the same
period covered by the Proposals. Schedule 4 of the Act sets out concessional
rates of duty for specified goods.
On 14 December 2020 a Notice of
Intention to Propose Customs Tariff Alterations - Notice (No. 3) 2020
was gazetted, indicating an intention for a further proposal to be moved within
seven sitting days of the House of Representatives, extending the ‘free’ rate
of customs duty for eligible medical and hygiene products from 1 January 2021
to 30 June 2021.[29]
Assistant Minister Wood tabled Customs
Tariff Proposal (No.1) 2021 on 3 February 2021 (the second sitting day
after the gazettal).[30]
As explained above, this change will be incorporated into the Act by a future
Bill.
Part 2 –
Used or second-hand vehicles
Part 2 of the Bill (items 2 to 6) contains
amendments to remove the $12,000 special customs duty on used or second-hand
motor vehicles that are Peruvian or Trans-Pacific Partnership originating goods
imported into Australia.
Tariff/customs duty on imported goods can be used to
protect domestic industries from foreign competition.[31] On the other hand, some
economists view tariffs as inefficient because tariffs could potentially
discourage international trade and have a negative effect on economic growth.[32]
Countries that pursue a free trade policy may be committed
to remove or reduce tariffs by signing free trade agreements. A free trade
agreement is an international treaty between two or more countries that reduces
or eliminates certain barriers to trade. At the time of writing, Australia has
signed 15 free trade agreements with other countries or economies, with a
number of other free trade agreements under negotiation.[33]
In 2014, the Productivity Commission recommended that the
$12,000 customs duty on imported second-hand vehicles be removed from the Customs
Tariff Act as soon as practicable.[34]
Mr Paul Fletcher, the former Minister for Major Projects,
Territories and Local Government, said:
Although this duty is not often applied, it is on the statute
books, costing more to administer than it raises — and is seen by consumers as
a hurdle to importing second-hand cars even in the specific circumstances where
such imports are permitted. By removing this duty, we will provide more options
for Australian consumers.[35]
In August 2017, the Customs Tariff
Amendment (Incorporation of Proposal and Other Measures) Act 2017
amended the Act to remove the $12,000 customs duty on imported second-hand
motor vehicles.[36]
The policy implication of customs duty removal is that
Australian consumers can potentially access more affordable overseas
second-hand vehicles, provided that the overseas vehicles meet Australian fuel
efficiency and road safety standards.[37]
The last of Australia’s domestic mass production car factories was closed down
in 2017 (Australia still locally produces trucks and buses and a very small
number of cars), therefore the removal of the $12,000 customs duty does not
affect domestic car manufacturing industry.
On the other hand, differences in fuel efficiency
standards and other administrative hurdles may continue to act as impediments
to the imports of second-hand vehicles into Australia.[38]
The Free
Trade Agreement between Australia and the Republic of Peru (PAFTA)[39]
and the Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP)[40]
were negotiated prior to 2017, using versions of the Act that predated the
removal of the $12,000 customs duty. The terms of both free trade agreements
required that no unilateral tariff reductions could occur before the agreements
were implemented, meaning the $12,000 customs duty had to remain for the time
being.[41]
The PAFTA and the CPTPP entered into force
in Australia on 11 February 2020 and 30 December 2018, respectively.[42] As the terms of
the agreements only prohibited changes to tariffs before the agreements were
implemented, their implementation meant that Australia can now unilaterally
remove the $12,000 customs duty applied to Peruvian and Trans-Pacific
Partnership originating goods, bringing them in line with the rest of the Act.[43]
Consequently, Part 2 of the Bill removes the $12,000
customs duty on used or second-hand motor vehicles that are Peruvian or
Trans-Pacific Partnership originating goods. Trans-Pacific Partnership
originating goods include goods originated from Canada, Japan, Mexico, New
Zealand, Singapore and Vietnam.[44]
Part 3 –
Formulated caffeinated beverages
Part 3 (items 7 to 9) contains amendments to
separately identify and establish formulated caffeinated beverages as a
new subheading under the broader, more generic water-based beverages
classification heading. The amendments intend to improve monitoring under the Imported
Food Inspection Scheme and tariff classification of formulated
caffeinated beverages.[45]
Part 4 –
Formulated supplementary food and formulated supplementary sports food
Similar to the amendments made by Part 3, the purpose of
Part 4 (items 10 to 14) is to separately identify formulated
supplementary food and formulated supplementary sports food as new
subheadings under the more generic food preparations classification
heading.[46]
The amendments intend to improve monitoring under the Imported
Food Inspection Scheme and tariff classification of formulated
supplementary food and formulated supplementary sports food, which
will be defined in the Australia New
Zealand Food Standards Code.[47]
Part 5 –
Vitamins and food supplements
Part 5 (items 15 to 18) introduces additional notes
to the Act to clarify the tariff classification of vitamins and food
supplements. This is intended to make a clear distinction between:
- products
that contain vitamins or food supplements and
- products
that are considered medicaments.[48]
According to the Explanatory Memorandum to the Bill, the
rationale behind the amendment is that the Australian Government considers the
outcome of Comptroller-General of
Customs v Pharm-A-Care Laboratories Pty Ltd (Pharm-A-Care) to
be inconsistent with international tariff classification practice used by other
countries and the WCO.[49]
In the Pharm-A-Care case, Pharm-A-Care Laboratories
had imported products containing vitamins or a plant extract (garcinia
cambogia) with reputed health and weight loss benefits. The products are sold
as gummies, this meant that the products appeared to be pastilles and included
other ingredients such as glucose syrup, sucrose, gelatine, and flavourings.
The Comptroller-General of Customs (Customs) argued that the imported products
should be classified as either food preparations or sugar
confectionary (under tariff classification heading 2106 and 1704 in the HS
codes, respectively). The importing company argued that the products should be
classified as medicaments under heading 3004.[50] Products classified as food
preparations and sugar confectionary attract a customs duty rate of four
per cent and five per cent respectively, whereas medicaments are
duty-free.[51]
The dispute was first heard in the AAT, which determined
that the classification heading 3004 ‘medicaments for therapeutic or
prophylactic uses’ provides the most appropriate description to the
imported products.[52]
The Government appealed the AAT’s decision to the Full Court of the Federal
Court, which dismissed the appeal.[53]
The Government then appealed to the High Court, which found that that the AAT
made no material error of law and had applied the Act correctly to the facts of
this case.[54]
The AAT determined that the essential characteristic of
the imported products is vitamins or the plant extract garcinia cambogia, not
glucose syrup.[55]
As such, the products could not be classified as sugar confectionary.
Further, the AAT held that vitamins or garcinia cambogia are not considered
foods in the ordinary way in which the term would be used. In other words,
vitamins or garcinia cambogia do not meet the definition of foods or food
supplements.[56]
Figure 1: a visual representation
of the vitamin gummies and weight loss gummies in question
Source: Hunt & Hunt Lawyers, Pharma-A-Care
and goods compliance update, 2019
The High Court did not express an opinion on whether the
products actually have a health benefit or not because this was not a point of
contention raised by Customs.[57]
The case is about the tariff classification of imported products, not whether
the products have a health benefit or not. The result of the Pharm-A
case is that it sets a legal precedent for Australian businesses to import
vitamin gummies and weight loss gummies duty-free as medicaments.
The Government relied on the Harmonized System Explanatory
Notes (HSEN) to support interpretation of the HS codes. The WCO periodically
publishes Explanatory Notes to provide guidance to interpret the HS codes.[58]
The Government believes international tariff
classification practice used by other countries and the WCO requires medicaments
to be medicines that treat or prevent particular diseases.[59] Vitamin gummies and weight
loss gummies do not meet the WCO’s definition of medicaments presumably because
they do not treat a particular disease. Further, the Government argues that the
WCO has consistently classified goods that contain low doses of vitamins as food
supplements rather than medicaments. Consequently, the Government
believes:
The ruling of the AAT and the High Court has resulted in
Australia’s classification of these goods being inconsistent with international
classification used by other countries and by the WCO.[60]
Items 15 to 17 of the Bill seek to amend the Act by
adding a new note that specifically excludes vitamin and food supplement
products from being classified as medicaments in the HS codes unless
they are included in Schedule 2, 3, 4 or 8 to the Poisons Standard,[61]
and to state that they must be included under heading 2106 (food
preparations not elsewhere specified or included) unless another
classification applies. If passed, the Bill will ensure:
- vitamin
gummies, weight loss gummies and similar products will be classified as food
preparations or food supplements rather than medicaments,
unless another more specific classification applies
- a
customs duty of four per cent or higher will apply to imported vitamin gummies
and weight loss gummies (unless they are imported from a free trade partner,
and eligible for free trade agreement preferential duty rates). This will
impose additional costs for Australian businesses that import those goods.
Part 6 –
Wheelie bins
Item 19 of the Bill amends the Act to exclude
wheeled garbage bins (commonly known as wheelie bins) and their parts from
being classified as vehicles, not mechanically propelled. The rationale
behind this change is that the Australian Government considers the outcome of Sulo
MGB Australia Pty Ltd and Comptroller-General of Customs to be inconsistent
with international tariff classification practice developed by the WCO.[62]
The Sulo case concerned the tariff classification
of wheels for wheelie bins. Sulo MGB Australia Pty Ltd had imported plastic
wheels as parts of wheeled garbage bins. The plastic wheels have a solid rubber
tire moulded to the wheel. The Comptroller-General of Customs (Customs)
initially classified the imported wheels as solid or cushion
tyres of rubber (HS code 4012.90.00).[63]
The importing company disagreed and argued that the imported wheels are
designed for wheelie bins and should be classified as vehicles, not
mechanically propelled (HS code 8716.90).[64]
Products classified as vehicles, not mechanically propelled are eligible
for a tariff concession.
In 2016, the AAT ruled against Customs and determined that
wheelie bins can be classified as vehicles, not mechanically propelled
under the HS code 8716.90 in Chapter 87.[65]
This is because the agreed definition of the word ‘vehicles’ refers to
something constructed for the primary purpose of transporting goods or people.[66]
The AAT found that Sulo’s wheelie bins are constructed for
the transport of goods (namely, waste and garbage), therefore the wheelie bins
met the definition of ‘vehicles’.[67]
In other words, garbage is accumulated in wheelie bins for the purpose of
transporting that garbage to a different location to be disposed of. This meant
that wheelie bins are vehicles.
The imported wheels are developed specifically to fit with
the wheelie bins.[68]
The wheels are integral to the overall product and the bins would be useless
without the wheels. Accordingly, the imported wheels are part of a vehicle. The
importer was able to rely on a tariff concession to import the wheels free of
customs duty.
Customs disagreed with the AAT’s decision and appealed to
the Federal Court, arguing that the AAT made an error of law because it had not
considered other potential HS codes that could be applied to the imported
wheels.[69]
Customs argued that classification heading 3924 or 3926 should be considered.[70] Headings 3924 and
3926 in Chapter 39 refer to other household articles of plastics
and other articles of plastics respectively.
If the decision to classify wheelie bins as vehicles were
overturned, then the importing company would be required to pay additional
customs duty because the products would not be eligible for a tariff
concession. The Federal Court was swayed by Customs’ argument and held that the
AAT had erred in its construction of the words ‘other vehicles, not
mechanically propelled’ in heading 8716, as it should have considered ‘not just
the text and explanatory materials for Chapter 87, but other headings and
subheadings in Sch 3 likely to apply to wheelie bins’.[71]
The Federal Court referred the matter back to the AAT for it to reclassify the
imported wheels according to law, taking into account other potential
classification headings.[72]
In 2018, the AAT reconsidered the case and once again
classified the imported wheels as vehicles, not mechanically propelled,
after taking into account other potentially relevant headings.[73]
The outcome of the Sulo case is that it sets a
legal precedent for Australian businesses to import wheelie bins and their
parts free of duty as vehicles, not mechanically propelled. The
Explanatory Memorandum to the Bill argues that the AAT’s decision in the Sulo
case has caused a misalignment with international tariff classification
practice.[74]
Consequently, item 19 of the Bill adds a new note
to Schedule 3 of the Act that specifically prevents wheeled garbage bins (and
their parts) from being classified as vehicles, not mechanically propelled.
Rather the note suggests that such items should be classified under Chapter 39 (plastics
and articles thereof) or Section XV (base metals and articles of base
metal).
If the Bill is passed, a customs duty may apply to
imported wheeled garbage bins and their parts. This may impose additional costs
for Australian businesses that wish to import those goods.
Part 7 –
Metal profiles and pipes
Part 7 (items 21 to 26) of the Bill amends the Act
to clarify the tariff classification of plates, rods, angles, shapes, sections,
tubes, pipes, and similar goods that require further modification. The
rationale behind this change is that the Australian Government considers the
outcome of Smoothflow Australia Pty Ltd and Comptroller-General of Customs
to be inconsistent with international tariff classification developed by the
WCO.[75]
In the Smoothflow case, Smoothflow Australia Pty
Ltd imported steel pipes that could be used for fire sprinkler systems in
buildings. The pipes had information printed on them showing that they met the
relevant safety standards and could be used in fire protection systems.[76] There was no
dispute that the pipes are designed to be used in buildings.[77]
Customs argued that the imported steel pipes should be
classified under the more generic classification heading 7306 titled other
tubes, pipes and hollow profiles. The importing company disagreed and
argued that the pipes are structures and parts of structures under the
heading 7308. The distinction is significant because different tariff treatment
applied to imported goods, depending on how the goods were classified.[78]
The AAT decided that heading 7308 is more specific as it
applies to pipes prepared for a particular purpose, not merely pipes in a
broader, more generic sense.[79]
Choosing a more specific classification over a less specific one is consistent
with the interpretation rules set out in Schedule 2 of the Customs
Tariff Act, which state that when goods are classifiable under two or more
headings, ‘the heading which provides the most specific description shall be
preferred’.[80]
The AAT’s decision in Smoothflow case was guided by
the High Court’s decision in Pharm-A-Care case (see above). The High
Court had decided in the Pharm-A-Care case that when interpreting the
Australian HS code to determine the tariff classification of an imported
product, an interpretation that ‘gives simultaneous effect to all of the terms
of the English text and of the French text must be preferred to a meaning that
does not’.[81]
The WCO, being an international organisation, publishes its work on the HS codes
in both English and French. The English and French versions are not intended to
be different; however, because of linguistic variations in the two languages,
the two versions are in fact complementary in establishing a single meaning.[82]
The AAT determined that neither the French text nor the
English text required the pipes to form part of the relevant structure to come
under heading 7308, but instead could fall under this heading if they were
‘prepared for use in connection with the construction of structures’.[83] The imported
steel pipes are designed to be used in fire sprinkler systems within buildings,
and therefore they are structures and parts of structures. The outcome
of the Smoothflow case is that the importer did not need to pay an
anti-dumping customs duty due to the tariff classification of the pipes.
Part 7 of the Bill adds a new note to Schedule 3 of
the Act which states that heading 7308 and 7610 (titled structures and parts
of structures and aluminium structures respectively) do not include
‘plates, roads, angles, shapes, sections, tubes, pipes and the like, requiring
further modification before use in structures, including, but not limited to,
cutting, drilling and bending’. In addition, heading 7308 does not include
‘tubes, pipes and the like prepared for the conveyance of fluids (including
water, oil and gas)’.
If passed, the amendments will ensure that tubes and pipes
and the like will not be classified under heading 7308 and 7610 in the future.
This may impose additional costs for Australian businesses that import those
goods.
Timing
Parts 2 to 7 of the Bill inclusive contain
provisions that specify when the amendments will apply. In each case they will
only apply to items imported on or after the date of commencement; or to items
imported before the commencement to which the period for calculating duty under
the Act had not yet expired.[84]
Part 8 –
Technical amendments
Part 8 of the Bill sets out some technical
amendments to repeal redundant provisions specifying phasing rates of customs duty
under Australia’s free trade agreements with Chile, the United States of
America, the Association of South-East Asian Nations and New Zealand, Malaysia,
Korea, Japan and China. The provisions regarding phasing rates of customs duty
have already been fully implemented, therefore are no longer required in the
Act.[85]
Concluding comments
The Bill contains one schedule consists of eight parts to
amend the Customs Tariff Act 1995. Most of these amendments are
technical and non-controversial.
The amendments proposed in Parts 5, 6 and 7 of the Bill
respond to interpretations of the current legislation by the AAT and the High
Court in relevant legal cases concerning the tariff classification of imported
goods such as vitamin gummies, wheeled garbage bins, and metal pipes. The
Government considers that these interpretations are not consistent with the
policy intent of the legislation and have caused a misalignment between
Australia’s tariff classification practice and the international classification
practice developed by the WCO.[86]
As a result, the Government proposes amendments to the Act to ensure that
future classification of similar products will align with its intended
interpretation. [87]
[1]. Customs Tariff Act
1995, User’s Guide: the operation of the Act.
[2]. J Law, ‘import
duty’, A dictionary of finance and banking, 6th edn., Oxford University
Press, Oxford, accessed 11 February 2021.
[3]. International
Convention on the Harmonized Commodity Description and Coding System,
done in Brussels 14 June 1983, [1988] ATS 30 (entered into force for Australia
1 January 1988).
[4]. Ibid.
[5]. Customs Tariff Act
1995 (Cth), Volume 2, Schedule 3, Chapter 8, Heading 6, Subheading
10.00.
[6]. World
Customs Organization (WCO), ‘What
is the Harmonized System (HS)?’, WCO website, n.d.
[7]. Ibid.
[8]. J
Wood, ‘Second
reading speech: Customs Tariff Amendment (Incorporation of Proposals and Other
Measures) Bill 2020’, House of Representatives, Debates, 3 December
2020, p. 10444.
[9]. The
detail of the legal cases and their impact on the Bill are described in the
‘Key issues and provisions’ section below.
[10]. Wood,
‘Second
reading speech’, op. cit., p. 10445.
[11]. Ibid.
[12]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 18, 2020, The Senate, 9 December 2020, p. 31.
[13]. Senate
Standing Committee for the Selection of Bills, Report,
12, 2020, The Senate, Canberra, 9 December 2020, p. [4]; Senate Standing
Committee for the Selection of Bills, Report,
1, 2021, The Senate, Canberra, 4 February 2021, p. [3].
[14]. Explanatory
Memorandum, Customs Tariff Amendment (Incorporation of Proposals and Other
Measures) Bill 2020, p. 2.
[15]. Ibid.
[16]. Ibid.
[17]. The
Statement of Compatibility with Human Rights can be found at page 20 of the Explanatory
Memorandum to the Bill.
[18]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 15, 2020, 9 December 2020, p. 6.
[19]. This
mechanism is facilitated by sections 226 and 273EA of
the Customs
Act 1901. An equivalent process is provided under the Excise Act 1901,
sections 114 and 160B.
[20]. Section
273EA of the Customs
Act 1901.
[21]. Section
226 of the Customs Act 1901.
[22]. D
Elder and P Fowler, House
of Representatives practice, 7th edn., Department of the House of
Representatives, Canberra, 2018, p. 440, references omitted, emphasis
added.
[23]. M
Duckworth, Notice
of Intention to propose Customs Tariff Alterations (No. 1), 29 April
2020.
[24]. Ibid.
[25]. J
Wood, Tariff
proposals: Customs Tariff Proposal (No.1) 2020, House of
Representatives, Debates, 13 May 2020, p. 3255; Summary
of Alterations - Customs Tariff Proposal (No. 1) 2020.
[26]. J
Wood (Assistant Minister for Customs, Community Safety and Multicultural
Affairs), Government
temporarily removes customs duty for essential medical and hygiene goods to
combat COVID-19, media release, 14 May 2020.
[27]. M
Duckworth, Notice
of Intention to Propose Customs Tariff Alterations - Notice (No. 2) 2020,
29 July 2020.
[28]. J Wood,
Tariff
proposals: Customs Tariff Proposal (No. 2) 2020, House of
Representatives, Debates, 27 August 2020, p. 5759; Summary
of Alterations - Customs Tariff Proposal (No. 2) 2020.
[29]. M
Duckworth, Notice
of Intention to Propose Customs Tariff Alterations - Notice (No. 3) 2020,
14 December 2020.
[30]. J
Wood, Tariff
proposals: Customs Tariff Proposal (No. 1) 2021, House of
Representatives, Debates, 3 February 2021, p. 8; Summary
of Alterations - Customs Tariff Proposal (No.1) 2021.
[31]. J
Law, ‘import
duty’, A dictionary of finance and banking, 6th edn., Oxford University
Press, Oxford, accessed 11 February 2021.
[32]. J
W Lee, International trade, distortions, and long-run
economic growth,
IMF working paper, International Monetary Fund, Washington DC, 1992.
[33]. Department
of Foreign Affairs and Trade (DFAT), ‘Australia's
free trade agreements (FTAs)’, DFAT website, n.d.
[34]. Productivity
Commission (PC), Australia’s
automotive manufacturing industry, Inquiry report, 70, PC, Canberra, 31 March 2014,
p. 32.
[35]. P
Fletcher (Minister for Major Projects, Territories and Local Government), More
choice for car buyers and less red tape for the car industry under planned
Government reforms to motor vehicle laws, media release, 10 February
2016.
[36]. For
further information see P Davidson, Customs
Tariff Amendment (Incorporation of Proposal and Other Measures) Bill 2017,
Bills digest, 10, 2017–18, Parliamentary Library, Canberra, 9 August 2017.
[37]. Department
of Infrastructure, Transport, Regional Development and Communications (DITRDC),
‘Importing
vehicles into Australia’, DITRDC website, last updated 5 August 2020.
[38]. Ibid.
[39]. Free
Trade Agreement between Australia and the Republic of Peru (PAFTA),
done in Canberra, 12 February 2018, [2020] ATS 6, (entered into force for
Australia on 11 February 2020).
[40]. Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP),
done in Santiago, 8 March 2018, [2018] ATS 23, (entered into force
for Australia on 30 December 2018). See also: DFAT, Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP), DFAT
website, n.d.
[41]. Explanatory
Memorandum, Customs Tariff Amendment (Incorporation of Proposals and Other
Measures) Bill 2020, p. 5.
[42]. DFAT,
Australia's
free trade agreements (FTAs), op. cit.
[43]. Wood,
Second
reading speech, op. cit., p. 10445.
[44]. DFAT,
‘Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP)’, DFAT
website, n.d.
[45]. Explanatory
Memorandum, op. cit., p. 20; Department of Agriculture, Water and the
Environment (DAWE), Imported
Food Inspection Scheme, DAWE website, last reviewed 4 February 2020. Under
the Imported Food Inspection Scheme, DAWE checks that imported food meets
Australian requirements for public health and safety and is compliant with
Australia’s food standards.
[46]. Explanatory
Memorandum, op. cit., p. 10.
[47]. Food
Standards Australia New Zealand (FSANZ), Food Standards
Code, FSANZ website, n.d.
[48]. Explanatory
Memorandum, op. cit., p. 10.
[49]. Ibid.,
p. 11.
[50]. Comptroller-General
of Customs v Pharm-A-Care Laboratories Pty Ltd (2020) 375 ALR 98, [2020]
HCA 2 [16].
[51]. Customs Tariff Act
1995 (Cth), Volume 2, Schedule 3, Chapter 30, Heading 4.
[52]. Pharm-A-Care Laboratories Pty Limited and
Comptroller-General of Customs [2017]
AATA 1816, [77]–[78] and [88]–[89]; Comptroller-General of Customs v Pharm-A-Care Laboratories Pty Ltd, op. cit., [22].
[53]. Comptroller-General
of Customs v Pharm-A-Care Laboratories Pty Ltd (2018) 262 FCR 449; [2018]
FCAFC 237.
[54]. Comptroller-General
of Customs v Pharm-A-Care Laboratories Pty Ltd (2020) 375 ALR 98; [2020] HCA 2, [65] to [66].
[55]. Pharm-A-Care Laboratories Pty Limited and
Comptroller-General of Customs [2017]
AATA 1816, [60], [79]–[80]; Comptroller‑General of Customs v
Pharm-A-Care Laboratories Pty Ltd [2020] HCA 2, [19].
[56]. Pharm-A-Care
Laboratories Pty Limited and Comptroller-General of Customs [2017]
AATA 1816, [61]–[62], [79]; Comptroller‑General of Customs v
Pharm-A-Care Laboratories Pty Ltd [2020] HCA 2, [70].
[57]. Comptroller-General of Customs v
Pharm-A-Care Laboratories Pty Ltd (2020) 375 ALR 98; [2020] HCA 2, [71].
[58]. World
Customs Organization (WCO), What
is the Harmonized System (HS)?, op. cit.
[59]. Explanatory
Memorandum, op. cit., pp. 10–11.
[60]. Ibid.,
p. 11.
[61]. Under
the Poisons Standard (which is made under the Therapeutic Goods
Act 1989) ‘medicines and poisons are classified into Schedules
according to the level of regulatory control over the availability of the
medicine or poison required to protect public health and safety’: Department of
Health, Therapeutic Goods Administration (TGA), ‘Scheduling basics’, TGA
website, n.d. Schedule 2 of the Poisons Standard covers Pharmacy medicine;
Schedule 3 covers Pharmacist Only Medicine; Schedule 4 covers Prescription Only
Medicine; and Schedule 8 covers Controlled Drugs.
[62]. Explanatory
Memorandum, op. cit., p. 12.
[63]. Sulo
MGB Australia Pty Ltd and Comptroller-General of Customs [2018]
AATA 1324 (Sulo 2018), [89].
[64]. Sulo
MGB Australia Pty Ltd and Chief Executive Officer of Customs [2016]
AATA 78 (Sulo 2016), [4].
[65]. Ibid.,
[46].
[66]. Ibid.,
[42].
[67]. Ibid.,
[52].
[68]. Ibid.,
[50].
[69]. Comptroller-General
of Customs v Sulo MGB Australia Pty Ltd [2017]
FCA 315 (Sulo 2017), [3].
[70]. Ibid.,
[54]; Sulo 2018, op. cit., [27].
[71]. Sulo
2017, op. cit., [5].
[72]. Ibid.,
[77].
[73]. Sulo
2018, op. cit., [89].
[74]. Explanatory
Memorandum, op. cit., p. 12.
[75]. Ibid.,
p. 13.
[76]. Smoothflow
Australia Pty Ltd and Comptroller-General of Customs [2020]
AATA 1890 (Smoothflow),
[7]–[8].
[77]. Ibid.,
[10].
[78]. Ibid.,
[1].
[79]. Ibid.,
[45] to [46].
[80]. Customs Tariff Act
1995 (Cth), Volume 1, Schedule 2, Rule 3(a).
[81]. Comptroller-General of Customs v
Pharm-A-Care Laboratories Pty Ltd (2020) 375 ALR 98, [2020]
HCA 2, [37].
[82]. Ibid.,
[36].
[83]. Smoothflow,
op. cit., [15] to [26].
[84]. Items
6, 9, 14, 18, 20 and 26 of the Bill.
[85]. Explanatory
Memorandum, op. cit., p. 2.
[86]. Wood,
‘Second
reading speech’, op. cit., p. 10445.
[87]. Ibid.
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