EXPLANATORY STATEMENT
CUSTOMS ACT 1901
SPECIFIED PERCENTAGE OF TOTAL FACTORY COSTS
DETERMINATION NO. 1 OF 2005
Background
The South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) provides preferential 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 can only 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. These requirements are specified in subsections 153L(2) and (4) of the Act.
Appendix 8 of SPARTECA states that, in special circumstances, the Australian Customs Service may determine that a member country is eligible for a reduction in the percentage of factory costs stated in the Agreement. That determination is applied to goods originating from that member country.
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 a reduction in the specified percentage of total factory costs, for a two year period, 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.
Instrument
Specified Percentage Of Total Factory Costs Determination No 1 of 2005 (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%.
Consultation
A reduction in the specified percentage of 10% in respect of the goods included in the Determination granted to Samoa may effect elements of the Australian car manufacturing industry. However, consultation with industry has established that there are currently no manufacturers of wiring harnesses in Australia and as the Determination only relates to wiring harnesses classified to 8544.30.00, no adverse effects are anticipated.
Analysis of projected importations of wiring harness from Samoa has provided an estimated revenue reduction of $93,000 in duty and GST collection.
Commencement
Specified Percentage Of Total Factory Costs Determination No 1 of 2005 commences on 24 October 2005 and ceases to have effect on 23 October 2007.