EXPLANATORY STATEMENT
Tariff Concession Instrument No. 1140105
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.
Kathmandu Pty Ltd applied for a TCO in respect of certain backpacks on 01 December 2011.
Instrument
TCO No 1140105 was made on 13 February 2012. It declares that those certain backpacks 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. 1140105 is taken to have come into force on 01 December 2011.
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 provide for the administration of customs and excise, and includes provisions for Tariff Concession Orders (TCOs) which allow for lower rates of customs duty on certain goods. The problem or gap this legislation addresses is the need to provide tariff relief on specific goods that are not produced in Australia, ensuring fair trade practices and economic benefits. This particular instrument, Tariff Concession Instrument No. 1140105, was introduced to provide a tariff concession for certain backpacks, reducing the duty from 5% to free, effective from 1 December 2011. The instrument was enacted by the Chief Executive Officer of Customs, following an application by Kathmandu Pty Ltd, and aims to ensure that importers of these goods can benefit from the reduced duty rates without any retroactive liabilities or disadvantages.
Scope and Application
The Customs Act 1901, specifically under Part XVA, governs the creation of Tariff Concession Orders (TCOs) by the Chief Executive Officer of Customs, allowing for lower customs duties on certain goods. These concessions are applicable to goods that are not produced in Australia in the ordinary course of business and have no substitutable goods domestically available. Kathmandu Pty Ltd successfully applied for such a concession on certain backpacks, resulting in Tariff Concession Instrument No. 1140105, which was gazetted on 13 February 2012 and deemed to have come into effect on 1 December 2011. This TCO provides a zero duty rate on these backpacks, as opposed to the general duty rate of 5%, provided the application met the core criteria set out in the Act. The TCO does not retroactively affect any rights or liabilities of persons other than the Commonwealth, but does allow importers to apply for a refund of duty paid on the eligible backpacks since the effective date of the TCO. The Act ensures that the CEO must consult by publishing a notice in the Gazette inviting submissions from interested parties, although in this case, no submissions were received.
Key Provisions
The Customs Act 1901, through Part XVA, provides a framework for the creation of Tariff Concession Orders (TCOs) (s 269F). A TCO allows for a lower rate of customs duty on certain goods, provided the Chief Executive Officer of Customs (CEO) determines that the application meets the core criteria (s 269C). For goods to qualify for a TCO, they must not have substitutable goods produced in Australia in the ordinary course of business on the day the application is lodged (s 269C). Definitions of key terms such as ‘goods produced in Australia’, ‘ordinary course of business’ and ‘substitutable goods’ are provided in sections 269D, 269E and 269F respectively.
The obligations under the Act require applicants to ensure their application meets the core criteria, specifically that no substitutable goods were produced in Australia on the day the application is lodged (s 269C). The CEO must then publish a notice in the Gazette, inviting submissions from any person who may object to the TCO (s 269K(1)). In the case of Kathmandu Pty Ltd’s application for a TCO on certain backpacks, the CEO determined that no substitutable goods were produced in Australia, thus meeting the core criteria (s 269C). This determination led to the creation of TCO No. 1140105, which declares that the specified backpacks are subject to item 50 of Schedule 4 to the Tariff, with the rate of duty being free (s 269P(3)).
The Act outlines specific consequences for breaches of its provisions. While the explanatory statement does not detail offences under the Customs Act 1901, it is reasonable to infer that breaches may lead to penalties as outlined in other sections of the Act or related legislation. For example, under section 269G of the Customs Act 1901, false or misleading statements in an application may result in fines or imprisonment. The maximum penalties for such offences are specified under the Crimes Act 1914, which provides for fines of up to 120 penalty units and/or imprisonment for up to 2 years for serious offences. Additionally, any person who benefits from a TCO unlawfully may face civil penalties for misuse of the concession, which could include repaying any duties avoided plus interest.