EXPLANATORY STATEMENT
CUSTOMS ACT 1901
SUBSECTION 153L(4)
SPECIFIED PERCENTAGE OF TOTAL FACTORY COSTS
DETERMINATION 1 OF 2016
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 Comptroller-General 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 of ten percentage points for wiring harnesses manufactured in Samoa and classified to subheading 8544.30.00 of Schedule 3 to the Customs Tariff Act 1995. The original tariff reduction commenced on
11 October 2001 and was most recently extended on 1 January 2014, for a period of three years. The current Determination will extend the reduction for another 12 months, until 31 December 2017. The sole commercial producer of wire harnesses for passenger motor vehicles in Samoa will close operations by the end of 2017.
Instrument
Specified Percentage of Total Factory Costs Determination No. 1 of 2016 (the Determination) determines that the specified percentage of the total factory cost of wiring harnesses claimed to be the manufacture of Samoa is 40% where the wiring harnesses:
(a) are classified to tariff subheading 8544.30.00 of Schedule 3 to the Customs Tariff Act 1995; and
(b) are of a kind used in, and are for use in, passenger motor vehicles, as defined in Chapter 87 of the Customs Tariff Act 1995 for the purposes of tariff heading 8703.
The continuation of this lesser percentage will commence on 1 January 2017 and continue in force until 31 December 2017.
Consultation
Consultations were held with stakeholders in the Australian automotive industry, who raised no objections to the continuation of the derogation.
Human Rights Implications
This determination does not engage, impact on, or limit in any way, the human rights and freedoms recognised or declared in the international instruments listed in the definition of human rights in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Commencement
Specified Percentage of Total Factory Costs Determination No. 1 of 2016 commences on 1 January 2017 and ceases to have effect on 31 December 2017.
Roman Quaedvlieg, Comptroller-General of Customs,
Department of Immigration and Border Protection
Overview
The Customs Act 1901 was enacted to provide for the administration of the Customs Tariff and to impose duties on imports, among other things. The Specified Percentage of Total Factory Costs Determination No. 1 of 2016 was introduced to address the need for a continued reduction in the specified percentage of total factory costs for wiring harnesses manufactured in Samoa, in line with the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA). This determination was made by the Comptroller-General of Customs under subsection 153L(4) of the Act, with the policy objective of supporting Samoa's automotive industry by reducing the local content requirement for wiring harnesses used in passenger motor vehicles. The determination reduces the specified percentage from 50% to 40% for a period of 12 months, from 1 January 2017 to 31 December 2017. The determination was made following consultations with stakeholders in the Australian automotive industry, who raised no objections to the continuation of the derogation.
Scope and Application
The Specified Percentage of Total Factory Costs Determination No. 1 of 2016 applies to wiring harnesses that are classified under tariff subheading 8544.30.00 of Schedule 3 to the Customs Tariff Act 1995 and are specifically used in passenger motor vehicles, as defined in Chapter 87 of the Customs Tariff Act 1995 for tariff heading 8703. This determination is pertinent to the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA), which facilitates preferential tariff treatment for goods produced in member countries under certain conditions. The application of this determination is limited to the reduction of the specified percentage of total factory costs from the standard 50% to 40% for wiring harnesses manufactured in Samoa, effective from 1 January 2017 until 31 December 2017. This is in response to a request by the Government of Samoa to extend the tariff reduction to support the local manufacturing industry until the end of 2017. The Determination is part of the Customs Act 1901 and is subject to the jurisdictional reach of the Commonwealth of Australia. There are no stated exclusions or exemptions in this Determination, and it does not engage with human rights considerations as outlined in the Human Rights (Parliamentary Scrutiny) Act 2011.
Key Provisions
The Specified Percentage of Total Factory Costs Determination No. 1 of 2016 (the Determination) primarily modifies the threshold for the percentage of total factory costs required for wiring harnesses manufactured in Samoa to qualify for preferential tariff treatment under the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA). Under subsection 153L(4) of the Customs Act 1901, the Determination sets the specified percentage of total factory costs at 40% for wiring harnesses classified under tariff subheading 8544.30.00 of Schedule 3 to the Customs Tariff Act 1995, and intended for use in passenger motor vehicles. This Determination applies to goods manufactured in Samoa, and it is designed to provide continued tariff benefits until 31 December 2017.
The obligations imposed by this Determination are primarily on importers and manufacturers of wiring harnesses in Samoa. Importers must ensure that the wiring harnesses they seek to import meet the specified 40% local content requirement and are used in passenger motor vehicles as defined under the Customs Tariff Act 1995. Manufacturers, on the other hand, must ensure that at least 40% of the total factory costs of the wiring harnesses are incurred in Samoa. Failure to comply with these requirements may result in the goods not qualifying for the preferential tariff treatment under SPARTECA.
Breach of the provisions outlined in the Determination could lead to several consequences. Firstly, the goods may be subject to higher tariffs, potentially increasing the cost of importing these items into Australia. Additionally, there could be administrative penalties or fines imposed by the Australian Government. Although the Determination itself does not specify maximum penalties, the Customs Act 1901 provides for penalties for false or misleading statements made in relation to the importation of goods, which could include fines and imprisonment. The specific penalties would be determined based on the nature and severity of the breach.
The Determination also highlights that it does not engage, impact on, or limit any human rights as recognised under the Human Rights (Parliamentary Scrutiny) Act 2011. This indicates that the changes to the tariff provisions are not expected to have any adverse effects on human rights in Samoa or Australia. The commencement and cessation dates of the Determination are clearly stated, with it taking effect on 1 January 2017 and expiring on 31 December 2017, providing a clear timeframe for compliance by all parties involved.