Customs Regulations (Amendment)

Customs Regulations (Amendment) 1995 No. 321

EXPLANATORY STATEMENT

STATUTORY RULES 1995 No. 321

Issued by the Authority of the Minister for Small Business, Customs and Construction

Customs Act 1901

Customs Regulations (Amendment)

Section 270 of the Customs Act 1901 (the Act) provides in part that:

"(1)       The Governor-General may make regulations not inconsistent with this Act prescribing all matters which by this Act are required or permitted to be prescribed ... for giving effect to this Act or for the conduct of business relating to the Customs, ..."

The purpose of the Regulations is to amend the Customs Regulations (the Regulations) to:

(a)       prescribe the working days and hours of business for receiving applications for release of cargo under new contingency arrangements which are to apply in the event of a major fault in the computer system through which 98% of import information is lodged with and processed by Customs regulations 3 and 5 refer).

The new contingency arrangements (the COMPILE contingency arrangements) were introduced into the Act by Act No. 85 of 1995 (new sections 771C, 77D and 77E of the Act), which are due to commence by Proclamation on 9 November 1995;

(b)       prescribe depots appointed under paragraph 17(b) of the Act as places for the receipt of or manufacture of goods for export (regulation 4 refers).

The appointment of such places as export places makes the goods within such places subject to Customs control, giving Customs the right to examine the goods for control purposes;

(c)        clarify regulations 126, 128A, 128AB, and 185 regarding certain historic car parts, and reproductions of such parts (regulations 6, 7, 8, and 11 refer).

Statutory Rules 1995 No. 244 recently restored eligibility to apply for tariff concession orders (TCOs) for passenger motor vehicle parts and/or reproductions of such parts. These amendments are of a technical drafting nature and are designed to remove any doubt that a passenger motor vehicle part has to be at least 30 years of age to be eligible for a tariff concession order (TCO) under this provision, but a reproduction of such a part does not;

(d)       correct the unintended consequences of provisions of regulations 180 and 181 (regulations 9 and 10 refer).

Regulations 180 and 181 were inserted into the Regulations as a result of amendments to Australia's anti-dumping and countervailing regimes which enable Australia to meet its international obligations under the new World Trade Organization Agreement (Statutory Rules 1994 No. 435 refer). Regulations 180 and 181 prescribe factors to be taken into account by the Minister when working out whether the price paid for goods is in the ordinary course of trade and when calculating profit for the purposes of a dumping enquiry. The provisions of regulations 180 and 181, however, have placed unintended restrictions on the powers of the Minister to conduct a dumping enquiry. Regulations 180 and 181 are amended to remove these restrictions; and

(c)       amend Schedule 2 to the Regulations to include fight trucks weighing 3.5 to 7.5 tonnes in the class of goods in respect of which a TCO cannot be made for the period of one year, and to include capers packed in salt in the class of goods for which a TCO can be made (regulation 12 refers).

Details of the Regulations are set out in the Attachment.

The Regulations dealing with prescribed places for the receipt of or manufacture of goods for export ((b) above), historic cars ((c) above), the dumping changes ((d) above), and capers packed in salt ((e) above), commenced on gazettal. The COMPILE contingency regulations ((a) above) commence on the day on which the relevant provisions in Act No. 85 of 1995 are to be proclaimed (9 November 1995), and the removal for 1 year of fight trucks from eligibility for a TCO commences on 3 November 1995.

ATTACHMENT

Regulation 1 - Commencement

Subregulation 1.1 provides that regulations 3 and 5 commence on the day that item 9 of Schedule 4 to the Customs, Excise and Bounty Legislation Amendment Act 1995 (the CEBLA Act, Act No. 85 of 1995) commences. The amendments in regulations 3 and 5 are necessary for the proper administration of amendments to the Customs Act 1901 (the Customs Act) effected by item 9 of Schedule 4 to the CEBLA Act. Item commences on a day to be fixed by Proclamation. It is proposed that 9 November 1995 be fixed as that day.

Subregulation 1.2 provides that subregulation 12.3 commences on 3 November 1995. This is the starting date for the one year exclusion of fight trucks in the 3.5 to 7.5 tonne category from eligibility for duty free importation under a tariff concession order (TCO).

Subregulation 1.3 provides that subregulation 12.4 commences on 3 November 1996. This commencement date, in conjunction with subregulation 1.2 above, gives effect to the one year limitation on TCO ineligibility for trucks in the 3.5 to 7.5 tonne category. Subregulation 12.4 omits the version of item 39 of Schedule 2 in subregulation 12.3 and reinstates the current version of item 39.

Regulation 2 - Amendment

Subregulation 2.1 provides that the Customs Regulations are amended as set out in these Regulations.

Regulation 3 - Regulation 19 (Working days and hours of business)

Subregulation 3.1 inserts new item 9A into the table in subregulation 19(1) of the Regulations to prescribe the working days and hours of business for the receipt of applications for the release of cargo during major outages of the COMPILE computer system. COMPILE is the system by which over 98% of import entries are lodged with and processed by Customs.

Sections 77C, 77D and 77E of the Act, which are to commence on 9 November 1995, detail contingency arrangements which will apply during major outages of the COMPILE computer system. Sections 77D and 77E allow the release of goods during extended outages without completing normal entry requirements on condition that full Customs formalities will be met once COMPILE is restored.

Subsection 28(1) of the Act provides, in part that the regulations may prescribe the days on which, and the hours on those days between which, officers are to be available to perform a specified function in every State or Territory. Regulation 19 of the Regulations prescribes the working days and hours of business for various functions of Customs. Item 9 of the table in regulation 19 prescribes the times for the receipt of computer import entries transmitted to Customs using the COMPILE computer system.

Customs officers will be available for receiving applications under subsections 77D(1) or 77E(1) (with one exception as set out below) for a period shorter than that during which COMPILE would normally be available, but longer than normal business hours.

The exception relates to applications to which paragraph 77E(2)(d) applies. That is, at the time of making an application, the COMPILE user had been required under subsection 71D(2) to give Customs commercial documents or additional information but had not complied with that requirement, the application must be accompanied by the commercial documents or additional information so required. In respect of these applications, officers will only be available during normal business hours as a substantial amount of administrative processing will be necessary.

Item 9A of the table in regulation 19 therefore prescribes the following hours of business for the following functions.

Regulation 4 - Regulations 23 (Prescribed places for the reception or manufacture of goods for export)

Subregulation 4.1 is a technical amendment which corrects a reference in regulation 23 to paragraph 30(1)(d) of the Act.

Subregulation 4.2 adds paragraph (c) to regulation 23 to provide that places appointed under paragraph 17(b) of the Act as places for the examination of goods on landing are now also prescribed places for the purposes of paragraph 30(1)(d) of the Act. Therefore, goods for export are now subject to the control of Customs from the time the goods are made or prepared in, or are brought into a place appointed under paragraph 17(b) as a place for the examination of goods on landing, until their exportation to a place outside Australia or as otherwise provided by paragraph 30(1)(d) of the Act.

Subsection 30(1) of the Act defines the circumstances when goods are subject to Customs control. By the words "...or are brought into, any prescribed place for export, until their export from Australia ...", paragraph 30(1)(d) defines where goods for export become subject to Customs control. Regulation 23 prescribes the places.

Section 32 gives Customs the right to examine goods subject to Customs control. Customs often examines goods for export. Regulation 23 currently identifies places appointed under section 15 of the Act and places appointed in accordance with the Commerce (Trade Descriptions) Act 1905 as the two types of places where goods for export become subject to Customs control. Customs is therefore limited to examining goods for export at these two types of locations.

Since 1979 when regulation 23 was last amended, considerable changes have occurred in the transport industry in the way in which goods are prepared for shipment. A significant proportion of cargo is "consolidated", that is, it is grouped together based primarily on destination points for packing into containers in the case of sea cargo and unit load devices (ULDs) in relation to air cargo. Containers and ULDs have become the medium by which cargo is moved on ships and aircraft. Most of the consolidation occurs away from wharfs, terminals and airports appointed under section 15 of the Act. Much of the consolidation is done at depots appointed under paragraph 17(b) of the Act. The remainder of consolidations occur at exporters' premises or depots not licensed under paragraph 17(b) or at wharfs.

Because regulation 23 does not include depots appointed under paragraph 17(b), Customs' ability to examine goods is limited. Section 15 wharfs, terminals or airports are, in many cases, unsuitable to perform this task. Consequently exporters and shipping companies or airline companies or freight forwarders are subjected to considerable inconvenience and expense in having goods examined.

The regulations include paragraph 17(b) places under regulation 23 as places where goods for export become subject to Customs control.

Regulation 5 - New regulation 43A - Declarations of contingency arrangements under subsection 77C(5) of the Act

Subregulation 5.1 inserts new regulation 43A into the Regulations to prescribe the manner in which the Chief Executive Officer (CEO) of Customs must communicate declarations under section 77C of the Customs Act.

Section 77C sets out the procedure for triggering the new contingency arrangements in new sections 77D and 77E. Subsection 77C(1) provides that the contingency arrangements will only apply if the CEO makes a declaration in writing to that effect and will only cease to apply after a further declaration of the CEO. The CEO may make a declaration that the contingency arrangements apply if the COMPILE computer system is inoperative (subsection (3) refers). Conversely, the CEO may declare that the arrangements cease to apply if the system becomes operative again (subsection (4) refers).

Once the CEO has declared that the contingency arrangements apply or cease to apply, subsection 77C(5) requires the declaration to be communicated in a prescribed manner to all registered COMPILE users.

Regulation 43A provides that the CEO must communicate a declaration to registered COMPILE users under section 77C by any means of telecommunication, either personally or by requesting the COMPILE network provider to communicate the declaration on his or her behalf The "network provider" is defined as a person who Customs engages from time to time to provide electronic data interchange services to Customs.

The Note to new subregulation 43A(2) indicates that the means of telecommunication used include telephone, facsimile transmission or computer communication.

Regulation 6 - Regulation 126 (Circumstances under which refunds, rebates and remissions are made)

Subregulation 6.1 omits "or a reproduction of a passenger motor vehicle part," from subparagraph 126(1)(t)(i) to separate the provisions relating to original vehicle parts from the provisions relating to reproductions of those parts. This amendment is consequential upon the amendment of regulation 185 below (regulation 11 refers). The amendment aims to clarify that TCOs may be sought in relation to both original vehicle parts and reproductions of those parts.

Subregulation 6.2 omits "or reproduction" from subparagraph 126(1)(t)(i). The amendment is consequential upon the amendment of regulation 185 (regulation 11 refers) and upon the amendment to subparagraph 126(1)(t)(i) above (subregulation 6.1 refers).

Subregulation 6.3 is a technical drafting amendment to correct a date in subparagraph 126(1)(t)(ii) by omitting "16 August 1995" and substituting "15 August 1995". This ensures that the refund circumstance provided for by Statutory Rules 1995 No. 244, which commenced on 16 August 1995, only applies to goods which fulfil the requisite criteria stipulated in paragraph 126(1)(t), and which were entered for home consumption in the period commencing 18 October 1994 and ending on the day immediately prior to the commencement of Statutory Rules 1995 No. 244.

Subregulation 6.4 is a technical amendment and corrects subparagraph 126(1)(t)(iii) by omitting "applied" and substituting "extended", as TCOs extend to goods of a class and do not apply to specific goods. This reflects the wording in the head of power in subsection 269SJ(1) of the Act.

Subregulation 6.5 is a technical drafting amendment to insert a new provision relating to reproductions of passenger motor vehicle parts.

Part XVA of the Act provides for the duty free entry of certain goods via a TCO where it is established that the duty free entry of those goods is not likely to have a significant adverse effect on the market for Australian made substitutable goods. Section 269SJ of the Act provides in part that the Chief Executive Officer must not make a TCO in respect of goods declared by the Regulations to be goods to which a TCO should not extend.

Regulation 185 and Schedule 2 to the Regulations exclude certain goods from the Tariff Concession System (TCS) by listing goods by the tariff heading or subheading of such goods in Column 2 of Schedule 2. Column 3 of the Schedule provides the facility to list goods within the restricted tariff class for which a TCO can be made.

Concern has recently been raised regarding the form of amendment of regulation 185 of the Regulations (made in Statutory Rules 1995 No. 244). Statutory Rules 1995 No. 244 restored eligibility to apply for TCOs for parts for vehicles at least 30 years of age, and reproductions of such parts. While the policy to be translated into legislation was that the passenger motor vehicle part had to be at least 30 years of age, a reproduction of such a part did not. To remove any ambiguity concerning this, the regulation has been redrafted to distinguish the two circumstances.

Regulation 7 - Regulation 128A (Time for application for refund of duty)

Subregulation 7.1 is a technical amendment to subregulation 128A(4C), which is consequential on new paragraph 126(1)(u) (subregulation 6.5 above refers). It inserts "or (u)" into subregulation 128A(4C).

Regulation 8 - Regulation 128AB (Circumstances in which a fee is not payable under subsection 163(1C) of the Act)

Subregulation 8.1 is a technical amendment to regulation 128AB which is consequential on new paragraph 126(1)(u) (subregulation 6.5 above refers). It omits "or (t)" and substitutes "(t) or (u)".

Regulation 9 - Regulation 180 (Determination of costs (subsection 269TAAD(4) of the Act)

Regulation 9 omits subregulation 180(6) from the Regulations.

Regulation 180 was inserted into the Regulations for the purposes of amendments to Australia's anti-dumping and countervailing regime effected by the Customs Legislation (World Trade Organization Amendments) Act 1994 (the WTO Act). Regulation 181 was also inserted for these purposes and amendments to regulation 181 shall be dealt with below under regulation 10.

Section 8 of the WTO Act inserted section 269TAAD into the Customs Act 1901 (the Act). This section sets out the circumstances in which the price paid for goods is not to be taken to have been paid in the ordinary course of trade. This is one element relevant to the conduct of a dumping enquiry. New subsection 269TAAD(4) contains the method for working out the cost of goods for the purposes of the ordinary course of trade test and new subsection 269TAAD(5) provides that amounts determined for the purposes of subsection (4) must be worked out in such manner, and taking account of such factors as the regulations provide. Regulations 180 and 181 were prescribed for the purposes of subsection 269TAAD(4).

Section 10 of the WTO Act also amended section 269TAC of the Act, which governs the calculation of normal value of goods for the purposes of a dumping enquiry. One method of calculating normal value, under subsection 269TAC(2), is to construct a normal value based on specified amounts, including the profit on the sale of goods.

New subsection 269TAC(5A) provides that the costs for the purposes of constructing a normal value under subsection 269TAC(2) are to be worked out in such manner, and taking account of such factors as the regulations provide for subsection 269TAAD ie, regulations 180 and 181 of the Regulations. Subsection 269TAC(5B) provides that the amount determined to be profit for the purposes of subsection 269TAC(2) must be worked out in such manner, and taking account of such factors, as the regulations provide for that purpose. The provisions of regulation 18 1 also apply to this calculation.

The method of calculating normal value under subsection 269TAC(2) is only one of a hierarchy of methods set out in section 269TAC. Subsection 269TAC(6) provides that if the normal value cannot be ascertained under any of the other methods in section 269TAC due to sufficient information not being furnished or available, the normal value is such amount as is determined by the Minister having regard to all relevant information. Subsection 269TAC(6), in effect, allows the Minister to use any method, and have regard to a broader range of information than under the other methods specified in section 269TAC, in order to calculate the normal value of goods.

Legal advice now indicates, however, that subregulations 180(6) and 181(4) may cause difficulties when applied for the purposes of subsection 269TAC(2). Subregulation 180(6) provides that if the Minister is satisfied that sufficient information has not been furnished or is not available to enable the cost of production or manufacture to be identified under subregulations 180(2) to (5), the cost is the amount determined by the Minister having regard to all relevant information. Subregulation 181(4) contains a similar provision in relation to the calculation of administrative, selling and general costs and profits.

If subregulations 180(6) and 181(4) are applied for the purposes of subsection 269TAC(2), they might have the effect of compelling the Minister to determine costs and profits and, thereby, construct a normal value under subsection 269TAC(2). This would have the unintended effect that the application of the hierarchy of methodologies for determining normal value will be effectively truncated at this subsection. The Minister might, therefore, never be able to determine the normal value of goods in accordance with the broader provisions of subsection 269TAC(6). In order to eliminate this unintended effect of subregulations 180(6) and 181(4), these subregulations were deleted from the Regulations.

Subregulation 181(4) is deleted by subregulation 10.3 below.

Regulation 10 - Regulation 181 (Determination of costs and profits (subsections 269TAAD(4), 269TAC(5B) and 269TAC(6) of the Act)

Subregulation 10.1 amends paragraph 181(1)(b) by omitting "purpose" and substituting "purposes". This is a minor grammatical amendment.

Subregulation 10.2 amends subregulation 181(1) by inserting new paragraph 181(1)(c).

New paragraph 181(1)(c) is consequential upon the amendment to subregulation 181(5) by subregulation 10.5 below. Paragraph (c) inserts the requirement that, in determining the normal value of goods for the purposes of subsection 269TAC(6) of the Act, the Minister must take into account the matters, and use the methods of calculation, set out in regulation 181.

The amendment to subregulation 181(5) then sets out matters that must be taken into account in determining an amount representing profit for the purposes of a normal value calculation under subsection 269TAC(6).

Subregulation 10.3 amends subregulation 181(2) by omitting the phrase "in the ordinary course of trade".

Subregulation 181(2) presently requires that the Minister must calculate, under paragraph (a), the administrative, selling and general cost associated with the sale of goods, for the purposes of paragraph 269TAAD(4)(b) and, under paragraph (b), an amount of profit for the purposes of subsection 269TAC(5B), using data relating to the production, or manufacture, and sale of Eke goods by the exporter or other seller of the goods in the ordinary course of trade (emphasis added).

The purpose of the calculations under paragraph 269TAAD(4)(b) is to determine whether the sale of the goods is in the ordinary course of trade. Therefore, it is an anomaly to limit the data to which the Minister must use to determine the costs associated with the sale of the goods by reference to sales in the ordinary course of trade. At the stage that these calculations are performed, it has not been determined whether the sales are in the ordinary course of trade or not.

In addition, the calculation of profit in accordance with subsection 269TAC(5B) is already limited to sales in the ordinary course of trade under subsection 269TAC(2). Therefore, the inclusion of the phrase "in the ordinary course of trade' in subregulation 181(2) is a duplication of this requirement for the purposes of subsection 269TAC(5B).

The phrase "in the ordinary course of trade" is therefore omitted from subregulation 181(2).

Subregulation 10.4 amends the Regulations by omitting subregulation 181(4). The explanation of this amendment is set out in regulation 9 above.

Regulation 10.5 amends subregulation 181(5) by omitting from paragraph (a) "subregulation (4)" and substituting " subsection 269TAC(6) of the Act".

Presently, subregulation 181(5) sets out the circumstances where the Minister must disregard certain levels of profit where the profit of the exporter or seller of goods is calculated using a method under subregulation 181(4). This requirement gives effect to one of Australia's international obligations under the new World Trade Organization Agreement with respect to the calculation of profits. Subregulation (4), however, is omitted by subregulation 10.4 above.

Despite this omission of subregulation (4), it is necessary that the current requirement under subregulation 181(5) continues to apply to the calculation of profits under subsection 269TAC(6) of the Act. This will ensure that Australia continues to fulfil its international obligations with respect to the calculation of profit. Subregulation 10.5 gives effect to this requirement by omitting the reference to "subregulation (4)" in subregulation 181(5) and substituting the reference to "subsection 269TAC(6) of the Act".

Regulation 11 - Regulation 185 (Restrictions on TCOs)

Subregulation 11.1 is a technical amendment and is consequential upon the insertion of new subregulation 185(2) subregulation 11.3 refers). The effect is that a TCO may extend to goods referred to in subregulation (2).

Subregulation 11.2 omits paragraph 185(a) and substitutes new paragraph 185(a) which refers only to goods having a general rate of customs duty of 15% as specified in the Customs Tariff Act 1987. Although the effect of the Regulations in respect of original parts for certain historic cars and reproductions parts for certain historic cars is not affected, original parts and reproductions of parts are made distinct from each other in new subregulation 185(2).

Subregulation 11.3 adds new subregulation 185(2), which provides that the restriction on the extension of TCOs to certain goods does not apply to the goods specified in subregulation (2), being passenger motor vehicle parts manufactured at least 30 years before the day on which the TCO comes into force, or a reproduction, manufactured at any time, of a passenger motor vehicle part that was manufactured at least 30 years before the day on which the TCO comes into force. Subregulation (2) therefore clearly separates original passenger motor vehicle parts and reproductions of passenger motor vehicle parts so that it is clear that a TCO may extend to both types of goods, and the 30 year old limitation only applies to the passenger motor vehicle part, not the reproduction of that part.

Regulation 12

Schedule 2 to the Regulations excludes certain goods from the Tariff Concession System (TCS) by listing goods by the tariff heading or subheading of such goods in Column 2 of Schedule 2. Column 3 of the Schedule provides the facility to fist goods within the restricted tariff class for which a TCO can be made.

Subregulation 12.1 omits Tapers" from column 3 of item 1 of Schedule 2 to the Regulations. Although "capers" can be classified to subheading 0711.30.00 in Schedule 3 to the Customs Tariff Act 1987 (and therefore covered by item 1 of Schedule 2), this classification only applies to the raw product which has a general duty rate of Tree" and therefore derives no benefit from being eligible for a TCO.

Subregulation 12.2 inserts "Capers packed in salt" into column 3 of item 6 of Schedule 2 to the Regulations to provide that capers will be eligible for concessional entry into Australia via a TCO. Capers packed in salt are classified to tariff heading 2005 in Schedule 3 to the Customs Tariff Act 1987. Heading 2005 is covered by item 6 and therefore a TCO in respect of capers cannot at present be made. The amendment makes capers eligible for consideration for possible duty free entry via a TCO, as capers packed in salt are a distinctive product with no substitutes and are not grown in Australia.

Subregulation 12.3 omits current item 39 and substitutes new item 39. New item 39 will effectively exclude all imported completely built up trucks in the 3.5 to 7.5 tonne category being eligible for duty free entry into the country for the period of one year. Item 39 therefore provides that completely knocked down vehicles having a gross vehicle weight of more than 3.5 tonnes but not more than 7.5 tonnes and vehicles having a gross vehicle weight of more than 7.5 tonnes are the only vehicles eligible for a TCO.

The exclusion has resulted from concerns of the local truck assembling industry, which is experiencing difficulty in meeting the industry prescribed local content level of 25 per cent regarding certain built-up fight trucks. This threshold is the benchmark within industry for Customs to determine bona fide local manufacturing activity. When local manufacturing activity recently fell below that level, an importer of light trucks lodged a tariff concession application with Customs. The concessional entry applications of the importer were approved because local manufacture was deemed to be 'nonexistent'. Therefore, since the applications were approved, all imported completely built up trucks in the 3.5 to 7.5 tonne category have been eligible for duty free entry into the country.

The Government agreed to include fight trucks in the 3.5 to 7.5 tonne category in the class of goods for which a TCO cannot be made, for the period of one year.

The amendment is effective for a year only, as subregulation 12.4 will take effect from 3 November 1996.

Subregulation 12.4 gives effect to the time limit requested by the Government with respect to preventing fight trucks in the 3.5 to 7.5 tonne category from being eligible for a TCO for the period of one year (subparagraph 12.3 refers). The new version of item 39 of Schedule 2 (subregulation 12.3 refers) is omitted and the current version is reinstated, ie vehicles having a gross vehicle weight of more than 3. 5 tonnes, rock buggies, dumpers, shuttle dumpers, tailgate dumpers and the like and motorised golf carts will be eligible for a TCO.