Customs Regulations (Amendment) 1997 No. 255
EXPLANATORY STATEMENT
STATUTORY RULES 1997 No. 255
issued by the Authority of the Minister for Customs and Consumer Affairs
Customs Act 1901
Customs Regulations (Amendment)
Section 270 of the Customs Act 1901 ("the Act") provides the general head of power for the Governor-General to make regulations prescribing all matters which are required, necessary or convenient to be prescribed for giving effect to the Act or for the conduct of any business relating to the Customs.
Division 1A of Part VIII of the Customs Act 1901 ("the Act"), Which includes section 153G, contains the "rules of origin" provisions which set out the method for determining whether preferential rates of customs duty apply to goods imported into Australia from preference countries.
The Forum Island Countries and Papua New Guinea (PNG) are included in the list of preference countries as specified in subsection 3(1) of and Part 1 of Schedule 1 to the Customs Tariff Act 1995 so that preferential rates apply to goods manufactured in these countries.
Subsection 153L(2) of the Act provides, inter alia, that goods are the manufacture of PNG or a Forum Island Country if their allowable factory cost is not less than the specified percentage of their total factory cost. Section 153B of the Act defines "allowable factory costs" to mean, inter alia, "the allowable expenditure of the factory on overheads in respect of the goods worked out under section 153G".
Subsection 153G(1) of the Act provides the general head of power to prescribe by regulation the costs the sum of which is the allowable expenditure of a factory on overheads in respect of preference claim goods. Subsection 153G(2) provides that regulations prescribing a cost for the purposes of subsection (1) may also specify the manner of working out that cost.
Regulation 107B of the Customs Regulations prescribes costs for the allowable expenditure of a factory on overheads for the purposes of subsection 153G(1).
The South Pacific Regional Trade and Economic Cooperation Agreement ("SPARTECA") is an agreement between Australia, New Zealand and the Forum Island Countries of the South Pacific which provides the Forum Island Countries with, inter alia, duty free entry into Australia and New Zealand, on a non-reciprocal basis, of goods (except sugar) regarded as originating in those countries.
These Regulations were introduced to align the application of the "rules of origin" provisions of the Customs Regulations under the SPARTECA with their application under the Australia New Zealand Closer Economic Relations Trade Agreement by including, in regulation 107B(4), the costs of contracting out of part of the manufacturing process within PNG and the Forum Island Countries for the purposes of calculating allowable expenditure of a factory on overheads under subsection 153G(1) of the Act. The Customs Regulations currently only prescribe the cost of contracting out part of the manufacturing process within Australia and New Zealand (paragraph 107B(1)(q) of the Customs Regulations) for the purposes of calculating the allowable expenditure of a factory on overheads under subsection 153G(1).
This method of calculating the cost is for the purposes of determining whether or not the allowable factory cost is not less than the specified percentage of a goods total factory cost for the purpose of determining whether the goods are the produce of PNG or the Forum Island Countries so that preferential rates of duty might be applied when those goods are imported into Australia.
These regulations also effected a minor technical amendment to subregulation 107B(2) consequential to a change in the drafting style of subregulation 107B(4) (subregulation 2.1 refers).
These regulations commenced on gazettal.
Overview
The Customs Regulations (Amendment) 1997 No. 255, issued by the authority of the Minister for Customs and Consumer Affairs, is an amendment to the Customs Act 1901. It was introduced to address the need to align the application of the "rules of origin" provisions under the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) with those under the Australia New Zealand Closer Economic Relations Trade Agreement. Specifically, the regulations extend the calculation of allowable expenditure of a factory on overheads to include the costs of contracting out part of the manufacturing process within Papua New Guinea and the Forum Island Countries, ensuring that these costs are considered when determining whether preferential rates of duty apply to imported goods from these regions. This amendment is designed to ensure consistency in the application of preferential tariff rates and to facilitate trade under SPARTECA by providing a clear method for calculating allowable factory costs for goods manufactured in these countries. The objective is to streamline the process of determining eligibility for preferential treatment and to support regional trade agreements by harmonising the regulatory framework.
Scope and Application
The Customs Regulations (Amendment) 1997 No. 255 applies to the allowable expenditure of a factory on overheads for the purposes of calculating the costs of goods manufactured in Papua New Guinea (PNG) and the Forum Island Countries, as defined under the Customs Act 1901. This regulation specifically pertains to the calculation of allowable factory costs for determining whether goods qualify for preferential rates of customs duty when imported into Australia from these countries. The amendment aligns the application of the rules of origin provisions under the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) with those under the Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA). It extends the calculation of allowable factory costs to include costs of contracting out part of the manufacturing process within PNG and the Forum Island Countries, which were previously only prescribed for Australia and New Zealand. The geographic scope of these regulations is national, applying across Australia, and they commenced on gazettal. There are no specific exclusions or thresholds outlined in the amendment, but the applicability of the preferential rates is contingent on meeting the specified percentage of total factory cost as stipulated in the Customs Tariff Act 1995.
Key Provisions
The Customs Regulations (Amendment) 1997 No. 255 makes amendments to the Customs Regulations, primarily focusing on the calculation of allowable factory costs under the Customs Act 1901. Specifically, regulation 107B(4) has been introduced to include the costs of contracting out part of the manufacturing process within Papua New Guinea (PNG) and the Forum Island Countries when calculating allowable expenditure of a factory on overheads (subsection 153G(1) of the Act). This amendment aligns the application of the "rules of origin" provisions under the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) with those under the Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA). Previously, the Customs Regulations only prescribed the cost of contracting out part of the manufacturing process within Australia and New Zealand (paragraph 107B(1)(q) of the Customs Regulations).
The Customs Regulations impose specific obligations on entities claiming preferential tariff rates for goods originating from PNG and the Forum Island Countries. They must ensure that the allowable factory costs, including the costs of contracting out part of the manufacturing process, meet the specified percentage of the total factory cost, as defined in section 153L(2) of the Act. This requirement is critical for determining whether goods qualify for preferential rates of customs duty under the SPARTECA agreement. Compliance involves accurately calculating and documenting the allowable factory costs, including any costs associated with contracting out parts of the manufacturing process, to substantiate the preferential tariff claim.
Failure to comply with the requirements of the Customs Regulations may result in financial penalties and other consequences. Under section 270 of the Customs Act 1901, the Minister for Customs and Consumer Affairs has the authority to impose penalties for non-compliance with regulations. While the specific penalties are not detailed in the explanatory statement, penalties for breaches of customs regulations can include fines and potential legal action. The severity of the penalty may depend on the nature and extent of the non-compliance, and it could result in the forfeiture of the preferential tariff benefits for the goods in question.
The Customs Regulations (Amendment) 1997 No. 255 also includes a minor technical amendment to subregulation 107B(2), consequential to the drafting change in subregulation 107B(4). This amendment ensures that the regulations remain internally consistent and that the updated drafting style does not inadvertently affect the interpretation or application of the regulations. The changes in the regulations commenced on gazettal, meaning they came into effect immediately upon publication.