EXPLANATORY STATEMENT
By-law No. 0440001
Customs Act 1901
Section 271 of the Customs Act 1901 (the Act) provides, in part, that where an item of a Customs Tariff is expressed to apply to goods, or to a class or kind of goods, as prescribed by a by-law, the Chief Executive Officer of Customs may make by-laws for the purposes of that item. A Customs Tariff is defined in section 4 of the Act to mean an Act imposing duties of customs, that is the Customs Tariff Act 1995 (the Customs Tariff Act).
Background
Item 22 in Part II of Schedule 4 to the Customs Tariff Act sets out a duty rate of ‘Free’ for goods, as prescribed by by-law, that are used in the exploration for oil or natural gas, or in the development of oil or natural gas wells.
For item 22 in Part II of Schedule 4, By-law No. 0440001, which was signed by a delegate of the Chief Executive Officer of Customs on 15 January 2004, prescribed goods that were subject to a letter issued by an Industrial Supplies Office (issued no earlier than twelve months prior to the entry for home consumption of the goods) which confirmed that there were no identified Australian producers of substitutable goods and that the goods were for use directly in the exploration for oil or natural gas or for the development of oil or natural gas wells from the reservoir up to and including the christmas tree cap.
On 1 October 2006 By-law No. 0440001 (as signed by the delegate of the Chief Executive Officer of Customs on 15 January 2004) ceased to be enforceable and was taken to have been repealed by the operation of section 32 of the Legislative Instruments Act 2003.
To preserve the duty rate of ‘Free’ for goods that were covered by the repealed by-law, a new By-law 0440001 prescribing the same goods as the repealed by-law has been made.
Instrument
New By-law No. 0440001, which has effect on and from 1 October 2006, prescribes for item 22 in Part II of Schedule 4 to the Customs Tariff Act, goods that are subject to a letter issued by an Industry Capability Network organisation (issued no earlier than twelve months prior to the entry for home consumption of the goods) confirming that there are no identified Australian producers of substitutable goods and that the goods are to be used directly in the exploration for oil or natural gas or in the development of oil or natural gas wells from the reservoir up to and including the christmas tree cap.
The new by-law reflects that before 1 October 2006 the Industrial Supplies Office in each State and Territory had been replaced with an Industry Capability Network organisation in each State and Territory.
Consultation
No consultation was undertaken in relation to new By-law No. 0440001 as it is of a minor and machinery nature and does not alter existing arrangements.
Commencement
New By-law No. 0440001 takes effect on and from 1 October 2006. Paragraph 273B(1)(b)(i) of the Act provides that a by-law shall take effect, or be deemed to have taken effect, from the date of publication, or from a date (whether before or after the date of publication) specified by or under the by-law. As the by-law does not increase duty, section 273C of the Act does not prohibit the by-law taking effect from 1 October 2006.
Overview
The Customs Act 1901, enacted by the Australian Parliament, provides a framework for the regulation of customs duties, including the authority for the Chief Executive Officer of Customs to make by-laws. This authority is exercised to ensure the efficient application of tariff duties, as specified in the Customs Tariff Act 1995. The Customs Tariff Act establishes a schedule of duties on imported goods, including a provision for a 'Free' duty rate on goods used in oil or natural gas exploration and development. By-law No. 0440001, effective from 1 October 2006, was introduced to continue the application of this 'Free' duty rate to specified goods, replacing a previously repealed by-law. This new by-law ensures that the duty exemption remains in effect for goods that meet the prescribed criteria, namely those confirmed by an Industry Capability Network organisation as necessary for oil or natural gas operations and having no Australian substitutes. The by-law was enacted without consultation due to its minor nature and does not alter existing arrangements.
Scope and Application
By-law No. 0440001 under the Customs Act 1901 applies to goods prescribed by the by-law that are used specifically in the exploration for oil or natural gas, or in the development of oil or natural gas wells. This includes goods that are subject to a letter from an Industry Capability Network organisation, which confirms the absence of Australian producers of substitutable goods and that the goods are intended for use directly in the specified oil or gas activities. The by-law applies to the entire Commonwealth of Australia and is effective from 1 October 2006. This by-law was enacted to preserve the duty rate of ‘Free’ for the specified goods, ensuring continuity in the regulatory framework concerning these particular goods, following the cessation of enforcement of the previous by-law. The by-law does not alter existing arrangements and no consultation was deemed necessary due to its minor and machinery nature.
Key Provisions
The main operative sections of By-law No. 0440001 under the Customs Act 1901 (section 271) and the Customs Tariff Act 1995 establish the conditions for goods to qualify for a 'Free' duty rate, which applies to those used in the exploration for oil or natural gas or the development of oil or natural gas wells. This by-law (section 4) replaces an earlier by-law (section 22 of Part II of Schedule 4) that had been repealed. The new by-law specifies that goods must be accompanied by a letter from an Industry Capability Network organisation, confirming that there are no identified Australian producers of substitutable goods and that the goods are intended for direct use in oil or gas exploration or development activities. This replacement ensures continuity in the application of the 'Free' duty rate for these specified goods.
The Act imposes several obligations on the entities it governs. Firstly, it requires that the Industry Capability Network organisation issue a letter confirming the absence of Australian producers of substitutable goods and the intended use of the goods in oil or gas exploration or development. This letter must be issued no earlier than twelve months prior to the entry for home consumption of the goods. The by-law also mandates that these goods must be directly used in the specified activities, and failure to comply with these requirements could result in the goods not qualifying for the 'Free' duty rate.
In terms of consequences for breach, the Act does not explicitly state civil or criminal penalties for non-compliance with By-law No. 0440001. However, non-compliance could result in the goods being subject to the standard duty rates rather than the 'Free' rate, which could incur additional costs for the importers. The by-law itself does not specify any maximum penalties for breaches, but the Customs Act 1901 generally includes provisions for penalties and enforcement actions for non-compliance with customs regulations.
By-law No. 0440001 came into effect on 1 October 2006, as stipulated by paragraph 273B(1)(b)(i) of the Customs Act 1901. This date was chosen to ensure continuity in the application of the 'Free' duty rate for the specified goods, reflecting the replacement of the Industrial Supplies Office with the Industry Capability Network organisation. Importantly, because the by-law does not increase duty, it is not subject to the prohibitions under section 273C of the Act, allowing it to take effect without delay.