EXPLANATORY STATEMENT
Tariff Concession Instrument No. 1031202
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.
Schlumberger Australia Pty Ltd applied for a TCO in respect of certain oil and gas well testing steam heat exchangers on 08 July 2010.
Instrument
TCO No 1031202 was made on 29 September 2010. It declares that those certain oil and gas well testing steam heat exchangers 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. 1031202 is taken to have come into force on 08 July 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 was enacted to facilitate the regulation of the import and export of goods in Australia, including the imposition of customs duties. One of its provisions allows for Tariff Concession Orders (TCOs) which reduce the duty on certain goods. This instrument, F2010L02982, was introduced to address a specific need identified by Schlumberger Australia Pty Ltd for tariff concessions on oil and gas well testing steam heat exchangers. The Customs Act 1901 provides a framework under which the Chief Executive Officer of Customs can make these orders if certain criteria are met. The policy objective here is to ensure that Australian industries, particularly those involved in specialised manufacturing like Schlumberger, can compete effectively by reducing the duty on goods where suitable local alternatives do not exist. The instrument was issued by the CEO following the application by Schlumberger and subsequent assessment that the application met the core criteria, with no objections received from the public during the consultation period.
Scope and Application
The Customs Act 1901, under Part XVA, provides the framework for Tariff Concession Orders (TCOs) which are used to lower the rate of customs duty on specific goods. This applies to any entity or person who imports goods eligible for a TCO, provided the goods are not specified as ineligible under section 269SJ of the Act. The scope of the Act extends to any goods where no substitutable goods are produced in Australia in the ordinary course of business, as determined by the Chief Executive Officer of Customs (CEO). The geographic reach of this legislation is national, with the CEO’s authority extending across Australia. Schlumberger Australia Pty Ltd successfully applied for a TCO for certain oil and gas well testing steam heat exchangers, resulting in Instrument TCO No 1031202 which took effect from 08 July 2010. The TCO specifically exempts these heat exchangers from the general 5% duty rate, imposing no additional liabilities on individuals or entities beyond those already stipulated in the Act. The Act also mandates that the CEO must publish a notice in the Gazette inviting submissions from interested parties when a TCO application is accepted, though in this case, no submissions were received. The Act does not disadvantage or impose liabilities on any person other than the Commonwealth for actions taken prior to the TCO’s effective date.
Key Provisions
The Tariff Concession Order No. 1031202, issued under section 269F of the Customs Act 1901 (the Act), applies a zero rate of customs duty on certain oil and gas well testing steam heat exchangers. This order was made by the Chief Executive Officer of Customs (the CEO) after Schlumberger Australia Pty Ltd applied for the concession on 8 July 2010. The order was effective from the date the application was lodged, in accordance with subsection 269S(1) of the Act. Under the normal provisions of Schedule 4 to the Customs Tariff Act 1995, these goods would attract a general rate of duty of 5%, but the TCO specifies that item 50 of Schedule 4 applies to these goods, resulting in duty-free treatment.
Entities or individuals involved in the import of these goods are required to adhere to the provisions set out in the TCO. Importers must ensure that the goods in question meet the criteria specified in the order to benefit from the duty concession. Additionally, importers may apply for a refund of any duty paid on these goods since the effective date of the TCO, as per paragraph 126(1)(r) of the Regulations. The CEO must also publish a notice in the Gazette inviting any objections to the TCO application, although in this case, no objections were received.
Failure to comply with the requirements set out in the TCO may result in financial penalties. While the explanatory statement does not detail specific penalties, breaches of the Customs Act 1901 can lead to both civil and criminal consequences, including fines and imprisonment. The maximum penalties for contravening the Act can be substantial, reflecting the seriousness of non-compliance with customs regulations. Importers and other affected parties must ensure they understand and comply with the terms of the TCO to avoid potential legal and financial repercussions.