Introductory Info
Date introduced: 1 September 2021
House: House of Representatives
Portfolio: Home Affairs
Commencement: For commencement details refer to page 4 of this Digest.
Commencement
Sections 1-3 of both Bills commence on Royal Assent.
Schedule 1 of both Bills commence on the later of Royal Assent or the day the
Regional Comprehensive Economic Partnership (RCEP) Agreement enters into force
for Australia. If the RCEP Agreement does not enter into force, the provisions
do not commence at all. Schedule 2 of the Customs Tariff Amendment (Regional
Comprehensive Economic Partnership Agreement Implementation) Bill 2021
commences at the same time as Schedule 1, or 1 January 2022, whichever is
later.
Purpose of
the Bills
This Bills Digest relates to two Bills comprising:
The purpose of the two Bills is to amend the Customs Act 1901
and the Customs
Tariff Act 1995 to implement Australia’s commitments under the Regional
Comprehensive Economic Partnership (RCEP) Agreement.
Two separate Bills are needed in order to comply with the Australian
constitutional requirement that ‘laws imposing duties of customs shall deal
with duties of customs only’[1]
and provisions regarding other matters must be dealt with separately.[2]
As such, the Customs Act sets out the broad administrative rules regarding
the export and import of goods, while the Customs Tariff Act focuses
exclusively on the tariff/customs duty rates applicable to imported goods.
Structure of
the Bills
Customs Amendment
Bill
The Customs Amendment Bill has one Schedule comprising three
Parts:
- Part
1 is titled RCEP originating goods and deals with rules of origin for
goods imported into Australia. Goods imported into Australia that are
classified as ‘RCEP originating goods’ will be eligible for preferential tariff/customs
duty rates
- Part
2 is titled verification powers and
deals with businesses’ record-keeping obligations and customs officials’ powers
to verify claims of preferential tariff treatment
- Part
3 contains application provisions which set out the situations or
timeframes that the Bill will apply.
Customs
Tariff Amendment Bill
The Customs Tariff Amendment Bill has two Schedules:
- Schedule
1 makes amendments to the Customs Tariff Act to implement the
preferential tariff/customs duty rates applicable to RCEP originating goods
- Schedule
2 contains minor contingent amendments to the Customs Tariff Act.
Background
Overview of
the Australian tariff system
All goods (above a set minimum value) imported into
Australia, whether by air, sea or post, must be cleared through Australian
Customs/Border Force.[3]
The typical duties and taxes paid on imported goods include import processing
charge, Goods and Services Tax (GST), and customs duty (also known as tariff or
import duty).
Customs duty is payable as a rate/percentage of the total
value of the imported goods.[4]
Customs duty rate typically ranges from 0% to 10%. Different goods are taxed at
different customs duty rates (for example, 5%, 10%) according to the Australian
tariff classification system.
Free trade agreements (FTAs) aim to reduce tariffs for
goods traded between countries. In other words, goods imported from a FTA partner
country may be eligible to receive preferential (lower) duty rates. Some
economists argue that lower tariffs and fewer trade barriers promote economic
growth.[5]
What is the
RCEP Agreement?
The RCEP Agreement is a FTA between the ten member states
of the Association of Southeast Asian Nations (ASEAN) and five regional countries
which have signed FTAs with ASEAN. On 15 November 2020, Ministers
from 15 countries (Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia,
Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam)
signed the RCEP Agreement.
Negotiations for the RCEP Agreement were formally launched
during the 2012 ASEAN Summit in Cambodia.[6]
India, one of the original countries involved in the negotiations, announced in
November 2019 that it was leaving the negotiations as the RCEP Agreement ‘does
not address satisfactorily India’s outstanding issues and concerns’.[7]
Following India’s withdrawal, the remaining countries agreed to a Ministerial
Declaration which set out the process for India to accede to the RCEP Agreement
at a later date.[8]
Even without India, the RCEP Agreement is still the
world’s largest FTA. The 15 countries that signed the RCEP Agreement account
for approximately 30% of global gross domestic product and contain approximately
30% of the world’s population.[9]
Figure 1 below shows the 15 countries and economies that are
signatories/Parties to the RCEP Agreement.
Figure 1: signatories/Parties to the RCEP Agreement
Source: New
Zealand Department of Foreign Affairs and Trade, ‘Regional Comprehensive Economic
Partnership’, New
Zealand Government website, n.d.
What does
the RCEP Agreement aim to achieve?
The RCEP Agreement requires the 15 signatories to commit
to lower tariffs, open markets, and reduce barriers to trade.[10]
The RCEP Agreement will eliminate about 92% of tariffs on goods traded between
RCEP signatories within 20 years of the Agreement coming into effect.[11]
Furthermore, RCEP Parties commit to liberalise 65% of services sectors and
ensure transparency of regulations.[12]
According to the Department of Foreign Affairs and Trade, RCEP
will:
… help boost economic growth and job creation in Australia,
and deliver new opportunities to large and small Australian businesses through
greater trade and investment with important regional trading partners.[13]
Some stakeholders disagree with this assessment (discussed
below in the ‘Policy position of major interest groups’ section).
Committee
consideration
Joint
Standing Committee on Treaties
The Joint Standing Committee on Treaties (JSCOT) tabled a report
on the RCEP Agreement on 31 August 2021 and recommended that
binding treaty action be taken.[14]
The JSCOT concluded:
RCEP does not contain much in the way of innovation from a
trade agreement perspective, and its tariff reductions are not as significant
as Australia’s other trade agreements with RCEP Parties.
However, the benefits to Australia from RCEP lie in the
inclusion of both ASEAN and Australia’s other major trading partners under a
single agreement, enabling easier trade for Australian businesses across
the region and the commitment by RCEP Parties to integrate their economies into
the international trade environment.[15]
As such, the JSCOT is of the view that, on balance, it
would be in Australia’s interest to ratify the RCEP Agreement.[16]
The JSCOT also recommended:
- ‘the
Government continue to pursue the restoration of civilian, democratic rule in
Myanmar as a foreign policy priority, and considers making a declaration to
this effect at the time of ratification’ and
- ‘the
Government continue to pursue the inclusion of labour, human rights and
environmental provisions within the Regional Comprehensive Economic Partnership
Agreement at the time of the first review’.[17]
Additional comments were made by Australian Labor Party
(ALP) members and a dissenting report was made by Senator Janet Rice for the
Australian Greens (discussed below).
Senate
Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
had no comment on the Bills.[18]
Policy
position of non-government parties/independents
Australian
Labor Party
The ALP provided additional comments to the JSCOT report and
emphasised that trade agreements must align with Australia’s social and
economic values.[19]
The ALP noted stakeholders’ concerns about the absence of human rights, labour,
and environmental protection provisions in the RCEP Agreement (discussed below
in the ‘Position of major interest groups’).[20]
Furthermore, the ALP emphasised that it opposes FTAs that
waive labour market testing or include any investor-state
dispute settlement (ISDS) clauses (discussed below). The ALP expressed
concerns that ‘Article 10.18 [of the RCEP Agreement] identifies that the
Parties shall enter into discussions on an ISDS mechanism no later than two
years after RCEP’s date of entry into force’.[21]
The ALP also expressed concerns that the Government has not
commissioned an independent economic analysis regarding the potential impacts
of the RCEP on the Australian economy.[22]
As such, the ALP urged the Government to conduct an independent economic
analysis for the RCEP and argued that the result of the analysis should form
part of the public debate on the merits of the RCEP.[23]
Independent economic analysis of future trade agreements
has been a longstanding concern of the ALP and the Australian Greens. The ALP’s
support for independent economic analysis of trade agreements aligned with the
JSCOT’s recommendations in 2012 and 2021.[24]
Australian
Greens
The dissenting report tabled by Senator Janet Rice to the
JSCOT report on the RCEP Agreement indicated that the Greens would not support
the passage of the implementing legislation for the Agreement.[25]
The Greens raised several concerns regarding the RCEP Agreement,
which include:
- no
minimum requirements for signatory governments to uphold human rights, labour
rights, and environmental protections
- the
Government’s commitment to ‘lock in’ current levels of regulation in some
services sectors (this is discussed further below) and
- ‘a
gaping hole on human rights protections in the RCEP’.[26]
The Greens concluded that ‘there are no additional market
access benefits for Australian exports that come out of RCEP’ and recommended
that the RCEP not be ratified.[27]
Furthermore, the Greens recommended the process for signing and ratifying trade
agreements be amended to ensure:
- transparency
around the negotiations and final text of agreements
- ISDS
provisions are excluded from all trade agreements
- human
rights, labour, and environmental protection provisions are included in all
trade agreements.[28]
Position of
major interest groups
Agricultural
industry organisations
Agricultural industry organisations expressed support for
the ratification of the RCEP Agreement. For example, Meat & Livestock
Australia said:
Our industry is supportive of RCEP and particularly its
enhanced trade facilitation outcomes. RCEP is set to provide a single set
of rules and procedures for accessing preferential tariffs across the region -
rather than utilisation of the slightly different rules/procedures existing via
the 10 different FTAs applicable to the 15 RCEP members …
The ability of RCEP to provide additional avenues for
tackling non-tariff barriers is also encouraging - with NTB’s [non-tariff
barriers] amongst RCEP members impacting the Australian red meat industry to
the tune of $1.6 billion per annum. The promotion of compliance with WTO [World
Trade Organization] rules and further improvement in cooperation and
transparency are useful inclusions.[29]
[emphasis added]
Similarly, the National Farmers Federation (NFF) said:
The NFF is a strong supporter of free international trade and
believes that multilateral free trade agreements, such as the Regional
Comprehensive Economic Partnership (RCEP), promotes the global liberalisation
of trade.[30]
While agricultural industry organisations were broadly
supportive of the RCEP Agreement, they also expressed some disappointment with
the Agreement, including:
- India’s
refusal to sign the RCEP Agreement and therefore the missed opportunities for
Australia to strength trade ties with India (noting that Australia does not
have a FTA with India)
- Australia
already having signed existing FTAs with all 15 current signatories of the RCEP
Agreement and therefore the Agreement will not deliver additional market access
gains for Australian exporters.[31]
Australian
Chamber of Commerce and Industry
The Australian Chamber of Commerce and Industry (ACCI) was
broadly supportive of the RCEP Agreement. Specifically, the ACCI expressed
views on the following three issues.
1. The ‘noodle/spaghetti
bowl’ issue of overlapping FTAs
The ACCI supported the RCEP Agreement because it believed
the Agreement could potentially reduce the problem of the ‘noodle/spaghetti
bowl’ of overlapping FTAs.
The ACCI said:
RCEP has the capability to facilitate the removal of these
barriers by addressing the ‘noodle bowl’ issue of our overlapping agreements –
but only if we use it as an opportunity to remove precedent bilateral
agreements.[35]
Figure two below shows the multitude of FTAs
amongst the Asia-Pacific countries/economies and their trade partners, hence
the name ‘the noodle bowl’ of FTAs.
Figure 2: ‘the noodle bowl’ of FTAs
Source: Western Australian
Government, ‘South East Asia e-commerce markets’, PowerPoint presentation, Department of Primary
Industries and Regional Development website, August 2018.
2. RCEP
rules of origin
The ACCI welcomed the RCEP Agreement’s flexibility in
regard to the rules of origin requirements.
The ACCI argued the RCEP Agreement gives exporters the
flexibility to ‘use the traditional Certificate of Origin system or take the
riskier self-declaration approach’.[40]
The ACCI said:
We have examples of companies incurring significant costs
under the Australia-US Free Trade Agreement (AUSFTA) relating to their declared
claim for preference. They were able to finally satisfy the inquiry by
providing a Certificate of Origin as a government-backed claim. Most recently,
we have been made aware of an Australian exporter being investigated by Mexican
Customs for self-declarations over a 12-month period… While RCEP does allow
exporters to absorb this risk and self-declare their preferential claim, it
also gives exporters the opportunity to de-risk with a Government-authorised
Certificate of Origin.[41]
[emphasis added]
As such, the ACCI recommended:
The Australian Government should retain the Certificate of
Origin system for future trade agreement negotiations to ensure exporters are
insured by a globally standardised system. Government is encouraged to
provide exporters with the option to take on more risk through self-declaration
whilst ensuring there is a Government-supported system for those seeking to
mitigate risk.[42]
[emphasis added]
3. Independent
economic analysis of trade agreements
The ACCI argued that there is a need for independent
analysis of trade agreements because:
… trade agreements can foster trade diversion as well as
trade creation. It is therefore important to understand the various components
of trade and what drive them. With the global proliferation of trade agreements
in recent decades, the need to truly understand trade and the impact of these
agreements is increasingly urgent. Economic analysis of Australia’s
bilateral and regional trade agreements is needed to assess the impact of these
agreements – good or bad, and the consequence of this impact on various components,
stakeholders and economies.[43]
[emphasis added]
Trade unions
Several trade unions provided submissions to the JSCOT
inquiry on the RCEP Agreement. The trade unions argued that the ratification of
the RCEP Agreement would not be in the Australian national interest,[44]
therefore ‘the Parliament should not proceed with enabling legislation’.[45]
The unions expressed concerns regarding the following five aspects of the RCEP
Agreement:
1. RCEP’s
trade in services chapter
The Australian Council of Trade Unions (ACTU) and the NSW
Branch of the Australian Nursing and Midwifery Federation opposed the trade in
services chapter in the RCEP Agreement.
The ACTU argued that the trade in service chapter and
associated annexes ‘freeze regulation at existing levels and lock in
deregulation’.[47]
As such, the unions believe this will reduce the ability of the Government to
enact regulatory changes to respond to events like the COVID-19 pandemic and
climate change.[48]
In particular, the unions argued the ‘lock in’ obligation
will negatively affect the Australian aged care sector:
RCEP will mean the Australian Government may be limited in
their ability to enact the recommendations of the Aged Care Royal Commission,
including ensuring minimum staffing and qualification levels – it effectively
trades away our ability as a nation to provide the highest standard of care to
older Australians.[49]
As such, the ACTU recommended that the Australian Government
seek an amendment to Australia’s Annex III schedule to make the aged care
sector exempt from the ‘lock-in’ obligations in the trade in services chapter.[50]
2. RCEP
provisions on labour market testing
The ACTU and the Electrical Trades Union expressed
concerns that ‘the RCEP agreement entrenches the removal of labour market testing’
and this will jeopardise employment opportunities for Australian workers.[51]
The Electrical Trades Union emphasised that labour market
testing is a critical tool to protect Australian local workers and therefore
any ‘RCEP provisions which remove, exempt or water down labour market testing
requirements in Australia should be immediately stripped from the RCEP and its
accompanying documents’.[54]
On the other hand, the Department of Foreign Affairs and
Trade (DFAT) asserted:
Australia is not waiving labour market testing for
contractual service suppliers and is not making any new commitments on labour
market testing exemptions beyond existing commitments in AANZFTA
[ASEAN-Australia-New Zealand Free Trade Agreement] and GATS [General Agreement
on Trade in Services].[55]
According to the Explanatory Memorandum to the Customs
Amendment Bill:
Consistent with Australia’s existing commitments in AANZFTA
and GATS, Australia will waive labour market testing for intra-corporate
transferees and independent executives. Australia’s commitments do not waive
labour market testing for contractual service suppliers.[56]
[emphasis added]
3. Myanmar
The Electrical Trades Union argued that the Australian
Government should not enter into a trade agreement with Myanmar while the
military junta is in power because ‘doing so risks legitimatising the regime’.[57]
The ACTU agreed with this position, stating that the
Australian Government should adopt the same approach as the United States with
respect to Myanmar:
Instead of entering into a preferential trade deal with
Myanmar, the Australian Government should be implementing trade sanctions and
cutting off all support to the military junta.[58]
4. Absence
of labour rights provisions in the RCEP
The ACTU and the Electrical Trades Union noted that the
RCEP Agreement does not contain a chapter on labour rights. The unions argued
that ‘the lack of safeguards for workers’ rights is particularly concerning
given the RCEP agreement contains several countries with poor labour rights
records’.[59]
As such, the unions recommended ‘the RCEP be re-negotiated
to include enforceable commitments to labour rights’.[60]
5. Independent
economic analysis of the RCEP
The ACTU called for an independent economic analysis of
the RCEP, arguing that the negotiation process was largely carried out in
secret. The ACTU said:
… the fact the RCEP has been put together without a proper
transparent and inclusive process for public input into negotiations should
give this Inquiry and Parliament even greater cause to ensure the agreement is
now subject to comprehensive scrutiny. To this end, we call for an
independent, external inquiry into the costs and benefits of the RCEP.[61]
[emphasis added]
NT and ACT
Governments
The Northern Territory (NT) Government expressed support
for the ratification of the RCEP. The NT Government said:
Once ratified, RCEP will create an opportunity for closer
economic engagement, opening new markets and opportunities for businesses,
primary producers, service providers and investors. Similarly it will increase
opportunities for Northern Territory businesses to access regional value
chains. RCEP has the potential to simplify the regional trade and investment
environment, better integrate Northern Territory businesses into regional
supply chains and improve market access for Northern Territory exporters.[62]
[emphasis added]
Andrew Barr, the Chief Minister for the Australian Capital
Territory (ACT), said the RCEP will benefit ACT exporters and make it easier for
people conducting business in RCEP countries. As such, ‘the ACT Government
supports Australia's participation in RCEP’.[63]
Financial
implications
According to the Explanatory Memorandum to the Customs
Amendment Bill, the implementation of the RCEP Agreement will have no impact on
Australian customs duty receipts.[64]
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 compatibility of both Bills with the human rights and freedoms recognised
or declared in the international instruments listed in section 3 of that Act.
The Government considers that both Bills are compatible.[65]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights had no
comment on the Bills.[66]
Key issues
and provisions
Customs
Amendment Bill
Part 1 –
RCEP originating goods
All FTAs contain rules of origin. Under the RCEP
Agreement, only goods defined as ‘RCEP originating goods’ will be entitled to
receive preferential tariff treatment prescribed by the Agreement (discussed in
the ‘Explainer’ box above).
Broadly speaking, to be an RCEP originating good, a good
must be:
- wholly
obtained or produced in a RCEP Party (Rule 1) or
- produced
in a RCEP Party exclusively using materials from one or more RCEP Parties (Rule
2) or
- produced
in a Party with non-originating materials provided the good meets the Product
Specific Rules set out in Annex
3A to Chapter 3 of the RCEP Agreement (Rule 3).[67]
Rules also specify the treatment of:
- packaging
materials and containers (Rule 4)
- accessories,
spare parts, tools or instructional or other information materials (Rule 5) and
- originating
goods that are transferred through other countries before arriving in Australia
(referred to as consignment) (Rule 6).
Part 1 of Schedule 1 of the Customs Amendment Bill incorporates
the RCEP Agreement’s rules of origin provisions into Australian law by inserting
Division 1N into Part VIII of the Customs Act. Proposed Division
1N consists of six Subdivisions (A-F).
Proposed Subdivision A provides for key definitions
that apply to proposed Division 1N.[68]
Proposed Subdivisions B-F outline the circumstances and rules
under which goods are to be considered RCEP originating goods under the RCEP
rules of origin. Figure 3 is a visual representation of some of the
rules of origin that are typically used to determine a product’s origin.
Figure 3: rules of origin that are typically used to determine a product’s
origin
Source: D Kniahin, D Dinh,
M Mimouni, and X Pichot, ‘Global Landscape of Rules of Origin: Insights from the
New Comprehensive Database’, paper
presented at the 22nd Annual Conference on Global Economic Analysis, Warsaw,
21 June 2019, p. 8.
Rule 1 —
goods wholly obtained or produced in RCEP Parties are treated as RCEP
originating goods (proposed Subdivision B)
Subdivision B contains proposed subsection
153ZQC to define ‘goods wholly obtained or produced entirely in a [RCEP]
Party’ as RCEP originating goods.
In other words, goods will be treated as RCEP originating goods
if they are wholly obtained or produced entirely in one or more
of the Parties to the RCEP Agreement and either:
- the
importer of the goods has, at the time the goods are imported, a Proof of
Origin, or a copy of one, for the goods or
- Australia
has waived the requirement for a Proof of Origin for the goods.[69]
For example, if Australian importers can produce a Proof
of Origin to indicate that the products they are importing are wholly obtained
or produced in a Party to the RCEP Agreement,[70]
then the goods will be treated as RCEP originating goods and receive
preferential tariff treatment.
Rule 2—Goods produced in RCEP Parties from
originating materials are treated as RCEP originating goods (proposed Subdivision
C)
Subdivision C contains proposed section 153ZQD
which defines goods produced entirely in a [RCEP] Party from originating
materials only as RCEP originating goods.[73]
Originating materials do not need to be specifically from the RCEP country
producing the goods, they can be from ‘one or more of the [RCEP] Parties’.[74]
In other words, goods are RCEP originating goods if ‘they
are produced entirely in a Party, from originating materials only’ and the
importer has a Proof of Origin, or the need for this has been waived by
Australia.[75]
Originating materials are defined as:
Indirect materials are defined as:
- goods
or energy used in the production, testing or inspection of goods, but not
physically incorporated in the goods
- goods
or energy used in the maintenance of buildings or the operation of equipment
associated with the production of goods.[77]
Rule 3—goods
produced in RCEP Parties, from non-originating materials (proposed Subdivision D)
Subdivision D contains proposed section 153ZQE
which defines goods produced entirely in a [RCEP] Party from non-originating
materials only, or from a combination of non-originating materials and
originating materials, as RCEP originating goods.[78]
In other words, even if products contain materials from non-RCEP
countries (known as non‑originating materials), the products may nonetheless
be treated as RCEP originating goods if they satisfy the rules of origin
detailed in proposed Subdivision D.
The rules which deal with the treatment of goods produced
from non-originating materials are referred to as Product-Specific Rules (of
Origin) in the RCEP Agreement.
Under Product-Specific Rules, goods are considered to be
RCEP originating goods if:
- they are classified to
a Chapter, heading or subheading of Harmonized System[79]
that is covered by the table in Annex
3A to Chapter 3 of the RCEP Agreement
- they are produced
entirely in a [RCEP] Party from non-originating materials only or from
non-originating materials and originating materials
- the goods satisfy the
requirements applicable to the goods in Annex 3A and
- the importer of the
goods has, at the time the goods are imported, a Proof of Origin, or a copy of
one, for the goods or Australia has waived the requirement for a Proof of
Origin for the goods.[80]
The change in tariff classification requirement
under the RCEP Agreement
In order to meet the change-in-tariff-classification
requirement under the RCEP Agreement, non-originating materials used in the
production of the goods must undergo the applicable change as a result of
production occurring entirely in the territory of one or more RCEP Parties.
The regional value content requirement under the
RCEP Agreement
Regional value content (RVC) requirement prescribes that a
certain minimum percentage of the total value of a good must be from regional (that
is, domestic) origin. For example, in order for a product to be considered ‘made
in Australia’, a certain percentage of the product must have been produced in
Australia.
Different products have different regional value content
requirements. The requirements are specified in the Annex
3A to Chapter 3 of the RCEP Agreement. For example, for some products to be
considered as ‘RCEP originating products’, 40% of the components must be from
regional origin. This is given an abbreviation of RVC40 in Annex 3A.[84]
Proposed subsection 153ZQE(6) provides that
where there is a requirement that particular goods have a regional value content
of not less than a particular percentage calculated in a given way, then the RVC
is to be worked out in accordance with the method set out in Article 3.5, or as
prescribed in the Regulations.[86]
Rule 4—packaging
materials and containers
Goods imported into Australia from RCEP Parties frequently
come with packaging materials and containers. For example, when businesses
import fresh grapes into Australia, these grapes may come with crates or
plastic packaging.
For customs and tariff purposes, it is important to
determine how to treat these packaging materials and whether additional tariffs
should be applied to these packaging materials.
Rule 5 of the General Rules
for Interpretation of the Harmonized System provides guidance regarding the
treatment of cases and packing containers. In most cases, according to this
rule, containers are classified together with the goods they contain; they are
not classified separately.[87]
Proposed subsection 153ZQF(1) provides that if
goods are packaged for retail sale in packaging material or a container and the
packaging material or container is classified with the goods in accordance with
Rule 5 of the General Rules for Interpretation, then the packaging material or
container is to be disregarded for the purposes of proposed Subdivision D.
Put simply, the packaging materials for RCEP originating
goods will not attract additional tariffs provided that they meet the
requirements in proposed subsection 153ZQF(1).
However, if there is a requirement that the goods have a regional
value content of not less than a particular percentage, calculated in a
particular way, then the regulations must provide for the value of the
packaging material or container to be taken into account, for the purposes of
calculating the regional value content of the goods (proposed subsection
153ZQF(2)).
Rule 5—accessories,
spare parts, tools or instructional or other information materials will be
treated as RCEP originating goods if certain requirements are met (proposed
Subdivision D)
When goods are imported into Australia from RCEP countries,
the goods may come with accessories, spare parts, tools or instructional or
other information materials. These accessories/spare parts are not necessarily
treated as RCEP goods.
For customs and tariff purposes, it is important to
determine whether these accessories/spare parts should be treated separately
from the actual goods because additional tariffs may apply.
Proposed section 153ZQG gives effect to Article
3.9 of the RCEP Agreement.[88]
Proposed subsection 153ZQG(1) provides that accessories, spare parts,
tools or instructional or other information materials are to be disregarded for
the purposes of proposed Subdivision D if:
- goods
are imported into Australia with accessories, spare parts, tools or
instructional or other information materials
- the
accessories, spare parts, tools or instructional or other information materials
are presented with, and not invoiced separately from, the goods
- the
quantities and value of the accessories, spare parts, tools or instructional or
other information materials are customary for the goods.[89]
Put simply, accessories/spare parts will be treated as RCEP
originating goods (therefore will be eligible to receive preferential tariff
treatments) if the accessories/spare parts are not invoiced separately from the
actual goods and the quantities/value of these accessories do not exceed the customary
amount.
However, if there is a requirement that the goods have a regional
value content of not less than a particular percentage, calculated in a
particular way, then the regulations must provide for the value of the
accessories/spare parts to be taken into account for the purposes of
calculating the regional value content of the goods (proposed subsection
153ZQG(2)).[90]
Rule 6—Consignment
rules (proposed Subdivision F)
When goods are imported into Australia, they may travel
through several locations before finally arriving in Australia. This raises
questions about the origin of the goods.
For example, a New Zealand product (a RCEP Party) may have
travelled through Russia (a non‑RCEP Party) to be packaged first. When
the New Zealand product finally arrives in Australia, it is important to ask
whether the product has undergone any significant production process in Russia
in order for Customs authorities to determine whether the product is a RCEP originating
good.
The consignment or shipment rules in the RCEP Agreement stipulate
that the goods are not to be treated as RCEP originating goods if they are
shipped through non-RCEP countries and the goods undergo any process of
production or operation (other than unloading, re-loading, any operation to
preserve them in good condition or any operation that is necessary for them to
be transported to Australia).[91]
Goods must also remain under the control of Customs authorities in the
countries through which they are shipped. Proposed section 153ZQI incorporates
the RCEP consignment rules into Australian law.
To continue with the example above, if the New Zealand
product was merely unloaded and reloaded in Russia, then the product would
still be classified as a RCEP originating good. However, if the New Zealand
product has undergone any production process in Russia, then the product would
not be treated as a RCEP originating good.
Powers to
make regulations (proposed Subdivision G)
Proposed section 153ZQJ provides that regulations
may make provision for and in relation to determining whether goods are RCEP
originating goods under new Division 1N.
Part 2 –
Verification powers
Part 2 of Schedule 1 of the Bill deals with
businesses’ record keeping obligations and customs officials’ powers to verify
claims of preferential tariff treatment.
Item 4 amends Part VI of the Customs Act to
insert new Division 4L, which is titled ‘Exportation of goods to Parties
to the Regional Comprehensive Economic Partnership Agreement’. Proposed
sections 126AQA, 126AQB, 126AQC and 126AQD combine to set out new
obligations on exporters of eligible goods to a Party to the RCEP Agreement who
wish to obtain preferential treatment of customs duty in respect of those
goods, and on people who produce such goods.
Definitions
Proposed section 126AQA provides definitions of key
terms used in Division 4L including:
- Producer
means a person who engages in the production of goods
- Customs
authority has the same meaning given by Article
4.1 of the RCEP Agreement. It means ‘any authority that is responsible
under the law of each Party for the administration and enforcement of its
customs laws and regulations’[92]
- RCEP
customs official means a person representing the Customs authority of
that Party.
Record
keeping obligations
Proposed subsection 126AQB(1) provides that
regulations may prescribe record keeping obligations in relation to goods that
are exported to a RCEP Party and are claimed to be originating goods, in
accordance with Chapter 3 of the RCEP Agreement, for the purposes of obtaining
preferential tariff treatment. Proposed subsection 126AQB(2) provides
that record keeping obligations may be imposed on the exporter or producer of
goods.
Power to
require records
Proposed subsection 126AQC(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 126AQB to produce to the officer,
records as the officer requires.
Proposed subsection 126AQC(2) provides that
an authorised officer may disclose any records so produced to a RCEP customs
official for the purpose of verifying a claim for a preferential tariff in a
RCEP Party.
The note to subsection 126AQC(1) states that where an
authorised officer has requested a person to produce a record in order to
verify the origin of goods in accordance with this section, a failure to do so
may be an offence under existing section 243SB of the Customs Act. This
is a strict liability offence. The note states 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 them.
Power to ask
questions
Proposed subsection 126AQD(1) provides that an
authorised officer may require a person who is an exporter or producer of goods
that:
- are exported to a RCEP Party
and
- are claimed to be
originating goods, in accordance with Chapter 3 of the RCEP Agreement, for the
purpose of obtaining a preferential tariff in the Party
to answer questions in order to verify the origin of the
goods.
Proposed subsection 126AQD(2) provides that an
authorised officer may disclose any answers to a RCEP customs official for the
purpose of verifying a claim for a preferential tariff in a RCEP Party.
The note to subsection 126AQD(1) states 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. Existing section 243SC provides that a person does not have to answer
a question if doing so would tend to incriminate them.
Part 3 –
Application provisions
Part 3 of Schedule 1 of the Bill deals with
application provisions that give effect to the amendments made by Part 1 of
Schedule 1 of the Bill. It provides that the amendments apply in relation to
goods imported into Australia on or after the commencement of Part 1 (which
will be the later of the day the Bill receives Royal Assent or the day the RCEP
Agreement enters into force for Australia). It also applies to goods imported
into Australia before commencement of Part 1, where the time for working out
the rate of import duty on the goods had not occurred before the commencement.
The amendments made by Part 2 apply in relation to goods exported
to a RCEP Party on or after commencement of that Part. (Part 2 commences at the
same time as Part 1.)
Customs Tariff
Amendment Bill
Article
2.4 of the RCEP Agreement provides that each ‘each Party shall reduce or
eliminate its customs duties on originating goods of other Parties in
accordance with its Schedule in Annex I (Schedules of Tariff Commitments)’.[93]
The Customs Tariff Amendment Bill implements Australia’s commitments made under
Article 2.4.
Stuart Robert, the Minister for Employment, Workforce,
Skills, Small and Family Business, said in his second reading speech for the
Customs Tariff Amendment Bill:
The bill will insert a new schedule of duty rates into the Customs
Tariff Act. Schedule 14 will contain the preferential rates of customs duty
for imported goods that satisfy the rules of origin as agreed by Australia and
other RCEP signatory countries. Australia has committed to eliminating the
duty rate for most originating goods to 'free' over the years following the
entry into force of RCEP.[94]
[emphasis added]
Concluding
comments
The two Customs Bills amend Australian law to implement
Australia’s tariff commitments under the RCEP Agreement.
There are divided opinions about the potential effect of
the RCEP Agreement on Australian jobs and the economy. While some stakeholders
support the ratification of the RCEP Agreement,[95]
others argue that doing so would hurt the Australian national interest and therefore
‘the Parliament should not proceed with enabling legislation’.[96]