EXPLANATORY STATEMENT
Tariff Concession Instrument No. 1038747
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.
AW Faber-Castell Aust Pty Ltd applied for a TCO in respect of certain rechargeable highlighter pens on 19 August 2010.
Instrument
TCO No 1038747 was made on 8 November 2010. It declares that those certain rechargeable highlighter pens 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. 1038747 is taken to have come into force on 19 August 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 Commonwealth Parliament, established a framework under which Tariff Concession Orders (TCOs) could be issued by the Chief Executive Officer of Customs. The Act aimed to address the need for reduced customs duty rates on certain goods that were not produced in Australia or were not substitutable by locally produced goods. Specifically, section 269F of the Act allowed for applications to be made to the CEO for tariff concessions, with section 269C detailing the core criteria that must be met for an application to be approved. One such application from AW Faber-Castell Aust Pty Ltd for rechargeable highlighter pens resulted in TCO No. 1038747, which granted a duty-free rate for these specific goods starting from 19 August 2010. The TCO was implemented without any adverse effect on the rights of parties other than the Commonwealth and did not impose any new liabilities.
Scope and Application
The Customs Act 1901 provides for the creation of Tariff Concession Orders (TCOs) under its Part XVA, which facilitates the granting of reduced customs duty rates on specific goods. The process begins with an application to the Chief Executive Officer (CEO) of Customs, who is obligated to assess whether the application aligns with the core criteria outlined in the Act. Notably, the CEO must ascertain that no substitutable goods, defined as those produced in Australia and capable of serving the same use as the goods in question, are being produced domestically. If the CEO confirms that the application meets these criteria, a TCO is issued, effectively reducing the duty rate on the specified goods. The application of TCO No 1038747 to certain rechargeable highlighter pens exemplifies this process, with the duty rate for these goods dropping from 5% to free. Importantly, the Act stipulates that TCOs do not retroactively affect the rights of any person, ensuring that only future transactions are impacted. The legislation also mandates consultation with the public, although in the case of TCO No 1038747, no objections were received. This TCO came into force on the date the application was lodged, 19 August 2010, and provides significant benefits to importers by allowing them to apply for duty refunds on eligible goods imported since that date.
Key Provisions
The main operative sections of Tariff Concession Instrument No. 1038747, made under the Customs Act 1901, relate to the granting of Tariff Concession Orders (TCO) by the Chief Executive Officer of Customs (sections 269C, 269F, and 269P(3)). Section 269F allows for an application to be made for a TCO, while section 269C outlines the criteria that must be satisfied for the TCO to be granted, namely that no substitutable goods are produced in Australia at the time the application is made. Once the criteria are satisfied, the CEO must issue a written order declaring that the goods are subject to a prescribed tariff item (section 269P(3)). The TCO specifies that certain rechargeable highlighter pens are subject to a duty rate of free instead of the general rate of 5%, as outlined in item 50 of Schedule 4 to the Customs Tariff Act 1995.
The obligations and requirements imposed by the Act on the parties or entities it governs include ensuring that the application for a TCO is made in compliance with the criteria outlined in section 269C of the Customs Act 1901. The CEO must also ensure that an invitation for submissions is published in the Gazette, allowing interested parties to voice any objections to the TCO being made (subsection 269K(1)). The CEO is required to consider any submissions received and decide whether to proceed with the TCO based on the evidence and arguments presented. Once the TCO is issued, the CEO must ensure that it is published in the Gazette and that it comes into effect on the date the application was lodged (subsection 269S(1)).
Failure to comply with the requirements of the Customs Act 1901 may result in civil or criminal consequences for the parties involved. For example, if an entity submits a false or misleading application for a TCO, they may be subject to prosecution and penalties under section 271 of the Customs Act 1901, which applies to offences involving false statements or documents. The maximum penalty for this offence is 10,000 penalty units or imprisonment for five years, or both, depending on the severity of the offence. Additionally, if an entity fails to comply with the requirements of the TCO, they may be subject to penalties under section 138 of the Customs Act 1901, which applies to offences involving the contravention of a TCO. The maximum penalty for this offence is 10,000 penalty units or imprisonment for two years, or both, depending on the severity of the offence.