EXPLANATORY STATEMENT
CUSTOMS ACT 1901
SUBSECTION 153L(4)
SPECIFIED PERCENTAGE OF TOTAL FACTORY COSTS
DETERMINATION NO. 1 OF 2010
Background
The South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) provides preferential tariff treatment to goods manufactured in member countries that are parties to the Agreement. The rules of origin in Division 1A of Part VIII of the Customs Act 1901 (the Act) determine when goods are considered to be the produce or manufacture of a particular country.
Under SPARTECA, goods are normally the manufacture of a member country if not less than 50% of the total factory costs (labour, overheads and materials) are incurred in that member country and the last process of manufacture is performed in that member country. However, SPARTECA enables the Australian Government to lower the 50% local area content requirement in special circumstances. These terms are reflected in subsections 153L(2) and (4) of the Act.
Subsection 153L(4) of the Act allows the Chief Executive Officer of Customs to determine that, in respect of goods of a kind, a lesser percentage than 50% is the specified percentage of total factory costs.
The Government of Samoa has sought an extension of the reduction in the specified percentage of total factory costs, until 31 December 2013, of ten percentage points for wiring harness manufactured in Samoa and classified to subheading 8544.30.00 of Schedule 3 to the Customs Tariff Act 1995. The original reduction commenced on 11 October 2001 and was most recently extended on 23 October 2007, for a period of three years.
Instrument
Specified Percentage of Total Factory Costs Determination No 1 of 2010 (the Determination) determines that the specified percentage of the total factory cost of wiring harnesses claimed to be the manufacture of Samoa, where the wiring harnesses are of a kind used in passenger motor vehicles and are classified to subheading 8544.30.00 of Schedule 3 to the Customs Tariff Act 1995, is 40%. The continuation of this lesser percentage will commence on 23 October 2010 and continue in force until 31 December 2013.
Consultation
A reduction in the specified percentage of 10% in respect of the goods included in the Determination granted to Samoa may affect elements of the Australian automotive industry. However, consultation with industry has established that there is no opposition from the Australian automotive industry to the continuation of the derogation.
Commencement
Specified Percentage of Total Factory Costs Determination No 1 of 2010 commences on 23 October 2010 and ceases to have effect on 31 December 2013.
Overview
The Customs Act 1901, enacted by the Commonwealth Parliament, governs the administration of customs and excise in Australia. One of the issues the Act addresses is determining the origin of goods to apply appropriate tariff rates, particularly under trade agreements such as the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA). To facilitate preferential tariff treatment for goods manufactured in SPARTECA member countries, subsection 153L(4) of the Act allows the Chief Executive Officer of Customs to determine a specified percentage of total factory costs for goods, which can be lower than the standard 50%. This legislative provision was introduced to enable the Australian Government to provide preferential treatment under special circumstances as outlined in SPARTECA. The Specified Percentage of Total Factory Costs Determination No. 1 of 2010 extends a previously granted reduction in the specified percentage for wiring harnesses manufactured in Samoa, ensuring continuity in trade benefits for this particular product until 31 December 2013, following consultation with the Australian automotive industry.
Scope and Application
The Specified Percentage of Total Factory Costs Determination No. 1 of 2010 applies to wiring harnesses that are manufactured in Samoa and classified under subheading 8544.30.00 of Schedule 3 to the Customs Tariff Act 1995. This determination affects entities involved in the production and importation of these specific wiring harnesses, particularly those used in passenger motor vehicles. Geographically, the determination applies within the Commonwealth of Australia, aligning with the provisions of the Customs Act 1901. The determination allows for a reduction in the specified percentage of total factory costs from the standard 50% to 40% for these wiring harnesses, effective from 23 October 2010 until 31 December 2013. This reduction is an extension of previously granted derogations under SPARTECA, aimed at facilitating trade between Samoa and Australia. There are no stated exclusions or exemptions in this determination, but its application is limited to the specified wiring harnesses and the specified period. The determination can be further extended or modified through subordinate instruments as needed, although no such changes have been made under this Determination.
Key Provisions
The Specified Percentage of Total Factory Costs Determination No 1 of 2010 (the Determination) establishes that, for wiring harnesses classified under subheading 8544.30.00 of Schedule 3 to the Customs Tariff Act 1995, the specified percentage of the total factory cost for those claimed to be manufactured in Samoa is set at 40%. This decision is rooted in subsection 153L(4) of the Customs Act 1901, which allows for a lesser percentage than the standard 50% in special circumstances under the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA). This Determination ensures that wiring harnesses used in passenger motor vehicles, manufactured in Samoa, qualify for preferential tariff treatment if at least 40% of their total factory costs are incurred within Samoa, provided the final manufacturing process is also completed there.
The Determination imposes specific obligations on manufacturers and importers of wiring harnesses from Samoa. They must ensure that the goods in question meet the 40% local content requirement as outlined in the Determination. This involves maintaining detailed records and documentation to demonstrate that the specified percentage of total factory costs is met. Failure to comply with these requirements could result in the goods being classified incorrectly, leading to the imposition of higher tariffs or other trade penalties.
Under the Customs Act 1901, breaches of the rules governing the preferential tariff treatment of goods can result in significant consequences. Importers who fail to comply with the specified percentage of total factory costs may face penalties, including financial fines and potential criminal charges for fraudulent claims. The Act provides for penalties that can include fines up to a certain amount, as determined by the courts, and in severe cases, imprisonment. These provisions are designed to ensure compliance and maintain the integrity of the trade agreement provisions under SPARTECA.