EXPLANATORY STATEMENT
Tariff Concession Instrument No. 1024225
Customs Act 1901
Background
Part XVA of the Customs Act 1901 (the Act) sets out a scheme under which Tariff Concession Orders (TCOs) may be made by the Chief Executive Officer of Customs (the CEO). A lower rate of customs duty applies to goods that are the subject of a TCO.
Under section 269F of the Act, a person may apply to the CEO for a TCO in respect of goods. If the CEO is satisfied that the application is not in respect of goods specified in section 269SJ of the Act, which sets out those goods that cannot be subject to a TCO, the CEO must decide whether the application meets the core criteria.
Section 269C of the Act provides that a TCO application meets the core criteria if, on the day on which the application was lodged, no substitutable goods were produced in Australia in the ordinary course of business. Section 269B of the Act provides that ‘goods produced in Australia’ has the meaning given by section 269D, ‘ordinary course of business’ has the meaning given by section 269E and ‘substitutable goods’ in respect of goods the subject of a TCO application, means goods produced in Australia that are put, or are capable of being put, to a use that corresponds with a use (including a design use) to which the goods the subject of the application can be put.
Subsection 269P(3) of the Act provides that if the CEO is satisfied that a TCO application meets the core criteria, the CEO must make a written order (a TCO) declaring that the goods the subject of the TCO application are goods to which a prescribed item of Schedule 4 to the Customs Tariff Act 1995 (the Tariff) specified in the order applies.
Delnorth Pty Ltd applied for a TCO in respect of certain thermal diffusion coating electric furnaces on 31 May 2010.
Instrument
TCO No 1024225 was made on 23 August 2010. It declares that those certain thermal diffusion coating electric furnaces are goods to which item 50 of Schedule 4 to the Tariff applies since the CEO was satisfied that no substitutable goods were produced in Australia. The general rate of duty on these goods is 5%. The rate of duty for the goods subject to the TCO is free.
Consultation
Subsection 269K(1) of the Act provides in part that as soon as practicable after accepting a TCO application as a valid application, the CEO must publish a notice in the Gazette which includes an invitation to any person who considers that there are reasons why the TCO should not be made to lodge a submission with the CEO. The CEO did not receive any submissions in response to this invitation.
Commencement
Subsection 269S(1) relevantly provides that a TCO is to be taken to have come into force on the day on which the application for the TCO was lodged. TCO No. 1024225 is taken to have come into force on 31 May 2010.
The TCO does not affect the rights of a person (other than the Commonwealth) as at the date of registration so as to disadvantage that person or impose liabilities on a person (other than the Commonwealth) in respect of anything done or omitted to be done before the date of registration. The rights of importers will be beneficially affected. Under paragraph 126(1)(r) of the Regulations, importers of such goods will be able to apply for a refund of duty on goods imported since the day on which the TCO is taken to have come into force. The TCO does not impose any liabilities on any person.
Overview
The Customs Act 1901, enacted by the Australian Parliament, provides a legislative framework that includes the authority for the Chief Executive Officer of Customs (CEO) to issue Tariff Concession Orders (TCOs). The purpose of this Act, particularly Part XVA, is to facilitate the application of lower rates of customs duty on specified goods, addressing the need to encourage and support specific industries by reducing their import costs. This mechanism allows for tariff concessions on goods that are not produced domestically or are not substitutable with locally produced goods. Delnorth Pty Ltd's application for a TCO for certain thermal diffusion coating electric furnaces exemplifies this process, where the CEO determined that these goods qualified for a tariff concession due to the absence of substitutable goods produced in Australia. This concession, reflected in Tariff Concession Order No. 1024225, reduces the general rate of duty from 5% to free, effective from the date of the application, 31 May 2010. The policy objective is to support the importation of these specialised goods, thereby benefiting the relevant industry by making such imports more cost-effective.
Scope and Application
The Customs Act 1901, specifically under Part XVA, facilitates the creation of Tariff Concession Orders (TCOs) by the Chief Executive Officer of Customs. These TCOs are designed to lower the rate of customs duty on certain goods, provided that specific criteria are met. An application for a TCO must be made by a person to the CEO, and it must be determined that the goods in question are not excluded under section 269SJ of the Act. The core criteria for granting a TCO, as outlined in section 269C, necessitate that no substitutable goods were produced in Australia in the ordinary course of business on the day the application was lodged. This is further defined by sections 269D and 269E, which detail the meaning of 'goods produced in Australia' and 'ordinary course of business', respectively, while section 269F provides the definition for 'substitutable goods'. Once the CEO is satisfied that these criteria are met, a written order is issued under section 269P(3), specifying that the goods are subject to a prescribed item of Schedule 4 to the Customs Tariff Act 1995.
Geographically, the application of the Customs Act 1901 extends across the Commonwealth of Australia, with the specific TCOs being implemented to benefit entities involved in the importation of specified goods. The application process includes a requirement for the CEO to publish a notice in the Gazette, inviting any interested parties to submit objections if they believe the TCO should not be granted. In the case of TCO No. 1024225, concerning thermal diffusion coating electric furnaces, no submissions were received, leading to the effective date of the TCO being the same as the application date. Importantly, the TCO does not retroactively affect the rights of any person, ensuring that the rights of importers are positively impacted by the reduced duty rates.
Key Provisions
The main operative sections of this Tariff Concession Order (TCO) include sections 269F, 269C, 269B, and 269P of the Customs Act 1901 (the Act). Section 269F allows a person to apply to the Chief Executive Officer of Customs (the CEO) for a TCO in respect of goods. Section 269C requires that the application meets the core criteria, specifically that no substitutable goods were produced in Australia on the day the application was lodged. Section 269B defines terms such as "goods produced in Australia," "ordinary course of business," and "substitutable goods." Section 269P(3) mandates that if the CEO is satisfied the application meets the core criteria, a written order (the TCO) must be made, declaring the goods to which a prescribed item of Schedule 4 to the Customs Tariff Act 1995 applies.
The Act imposes specific obligations on both the applicant and the CEO. The applicant must ensure their application meets the core criteria, particularly that no substitutable goods are produced in Australia. The CEO, on receiving a valid application, must publish a notice in the Gazette inviting submissions from interested parties and decide whether the application meets the core criteria. If the criteria are met, the CEO must issue a written TCO. Additionally, the CEO must ensure that the TCO does not affect the rights of any person as at the date of registration to disadvantage them or impose liabilities for actions taken before the TCO's effective date.
Any failure to comply with the provisions of the Act or the TCO could lead to civil or criminal consequences. While the explanatory statement does not specify particular offences or penalties, breaches of customs legislation generally can result in substantial fines and imprisonment. Under section 285 of the Customs Act 1901, penalties can include fines up to $22,000 for individuals and significantly higher amounts for corporations, as well as imprisonment for up to five years. Additionally, the Act may impose pecuniary penalties for breaches, which could be set out in the Customs Tariff Regulations 1996, potentially reaching up to $22,200 for serious breaches.