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2016-2017-2018
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CUSTOMS TARIFF AMENDMENT (PACIFIC AGREEMENT ON CLOSER ECONOMIC
RELATIONS PLUS IMPLEMENTATION) BILL 2018
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Law Enforcement and Cyber Security,
the Honourable Angus Taylor MP)
CUSTOMS TARIFF AMENDMENT (PACIFIC AGREEMENT ON CLOSER
ECONOMIC RELATIONS PLUS IMPLEMENTATION) BILL 2018
OUTLINE
The purpose of the Customs Tariff Amendment (Pacific Agreement on Closer Economic
Relations Plus Implementation) Bill 2018 (the Bill) is to amend the Customs Tariff Act 1995
(the Customs Tariff Act) to implement the Pacific Agreement on Closer Economic Relations
Plus (the Agreement) by:
providing 'Free' rates of customs duty, on entry into force of the Agreement, for all
goods, excluding excise-equivalent goods, that are Pacific Islands originating goods
determined in accordance with new Division 1GA of Part VIII of the Customs
Act 1901 (the Customs Act). New Division 1GA will be inserted by the Customs
Amendment (Pacific Agreement on Closer Economic Relations Plus Implementation)
Bill 2018 (the Customs Amendment Bill), when enacted into the Customs Act;
inserting new Schedule 8A to provide for excise-equivalent rates of duty on certain
alcohol, tobacco and fuel products in accordance with the Agreement; and
amending certain concessional items in Schedule 4 to the Customs Tariff Act to
maintain customs duty rates in line with the applicable concessional item and in
accordance with the Agreement.
Complementary amendments will be made to the Customs Act by the Customs Amendment
Bill to introduce new rules of origin for goods imported into Australia from a Party to the
Agreement. The new rules will determine the eligible goods that would be subject to
preferential treatment of customs duty in accordance with the Agreement.
FINANCIAL IMPACT STATEMENT
The 2017-18 Mid-Year Economic and Fiscal Outlook estimated that implementing the
Agreement would have a negligible cost to revenue over the forward estimates period.
Revenue ($m) 2016-17 2017-18 2018-19 2019-20 2020-21
Department of Home Affairs - .. .. .. ..
.. Not zero, but rounded to zero.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
A Statement of Compatibility with Human Rights in respect of the amendments contained in
the Bill is at Attachment A. The Statement assesses the amendments to be compatible with
Australia's human rights obligations.
Page 2 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018
CUSTOMS TARIFF AMENDMENT (PACIFIC AGREEMENT ON CLOSER
ECONOMIC RELATIONS PLUS) BILL 2018
NOTES ON CLAUSES
Clause 1 Short title
1. This clause provides for the 'Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018' (the Bill), when enacted, to be cited as
the Customs Tariff Amendment (Pacific Agreement on Closer Economic Relations Plus
Implementation) Act 2018.
Clause 2 Commencement
2. The table items in this clause sets out the date on which provisions of the Bill, when enacted,
will commence.
3. Table item 1 provides for clauses 1 to 3 and anything in the Bill not elsewhere covered by the
table to commence on the day the Bill, when enacted, receives the Royal Assent.
4. Table item 2 provides for Schedule 1 of the Bill, when enacted, to commence at the same
time as Schedule 1 to the Customs Amendment (Pacific Agreement on Closer Economic
Relations Plus Implementation) Act 2018 (the Customs Amendment Bill). That is, the later of
the day on which the Customs Amendment Bill, when enacted, receives the Royal Assent,
and the day on which the Pacific Agreement on Closer Economic Relations Plus (the
Agreement) done at Nuku'alofa on 14 June 2017 enters into force for Australia.
5. The date on which the Agreement enters into force will be announced by the Minister for
Law Enforcement and Cyber Security by a notifiable instrument, which has the same
meaning as in the Legislation Act 2003.
Clause 3 Schedules
6. This clause enables the Schedule to the Bill, when enacted, to amend or repeal provisions of
legislation specified in that Schedule in accordance with the applicable items. In the context
of the Bill, the Customs Tariff Act is being amended.
Schedule 1-Amendments
Customs Tariff Act 1995
Introductory Comments
7. On 14 June 2017, in Nuku'alofa in Tonga, representatives of Australia, New Zealand,
the Cook Islands, Kiribati, Nauru, Niue, Samoa, Solomon Islands, Tonga and Tuvalu signed
the Agreement. On 7 September 2017, a representative from Vanuatu signed the Agreement.
8. The Agreement, on entry into force, provides in part for new rules of origin to determine
Pacific Islands originating goods and for the preferential rates of customs duty that applies to
Page 3 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018
such goods. The rules to determine Pacific Islands originating goods are inserted by the
Customs Amendment Bill, when enacted, and are contained in new Division 1GA of
Part VIII of the Customs Act 1901 (the Customs Act).
9. To complement the amendments made by the Customs Amendment Bill, this Bill contains
amendments to give effect to the preferential treatment of customs duty for Pacific Islands
originating goods in accordance with Agreement. That is, for goods classified in new
Schedule 8A inserted by the Bill, when enacted, the preferential treatment of customs duty
would align with the expectation under Article 3(1)(b) of Chapter 2 of the Agreement. For
goods not covered by new Schedule 8A, the preferential treatment of customs duty is the rate
of 'Free' in accordance with Article 3(1)(a) of Chapter 2 of the Agreement.
Item 1 Subsection 3(1) (after paragraph (f) of definition of rate column)
10. This item amends the definition of 'rate column' in subsection 3(1) of the Customs Tariff Act
to include a reference to the third column of new Schedule 8A. New Schedule 8A will set out
the rates of customs duty for Pacific Islands originating goods specified in that Schedule.
Item 2 After paragraph 11(1)(bd)
11. This item inserts new paragraph 11(1)(bda) into the Customs Tariff Act to include a reference
to a rate of customs duty set out in the third column of an item in the table in new
Schedule 8A of the Customs Tariff Act that applies to the goods. Section 11 sets out the rules
for determining when a phasing rate of customs duty takes effect.
Item 3 After paragraph 11(1)(h)
12. This item inserts new paragraph 11(1)(ha) into the Customs Tariff Act to include a reference
to a specified date set out in the third column of an item in the table in new Schedule 8A that
applies to Pacific Islands originating goods.
Item 4 After paragraph 11(2)(bd)
13. This item inserts new paragraph 11(2)(bda) into the Customs Tariff Act to include a reference
to a rate of customs duty set out in the third column of an item in the table in the new
Schedule 8A of the Customs Tariff Act that applies to Pacific Islands originating goods.
Item 5 After section 13E
14. This item inserts new section 13EA into the Customs Tariff Act to ascertain the Pacific
Islands originating goods for the purposes of the Customs Tariff Act. That is, goods that are
Pacific Islands originating goods if, and only if they are Pacific Islands originating goods
under new Division 1GA of Part VIII of the Customs Act. New Division 1GA inserted by the
Customs Amendment Bill sets out the new rules of origin for determining whether goods are
Pacific Islands originating goods.
Page 4 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018
Item 6 After subparagraph 16(1)(a)(vi)
15. This item inserts new subparagraph 16(1)(a)(via) into the Customs Tariff Act.
16. Existing section 16 of the Customs Tariff Act sets out how customs duty is calculated,
including for goods that are originating goods of particular countries for preference purposes.
Paragraph 16(1)(a) sets out that, if goods are not the produce or manufacture of a Preference
Country, or originating goods to which a Free Trade Agreement (FTA) applies, the duty must
be worked out by reference to the general rate set out in the third column of the tariff
classification in Schedule 3 to the Customs Tariff Act under which the goods are classified.
17. The purpose of new subparagraph 16(1)(a)(via) is to accord with the Agreement and ensure
that the general rate of customs duty set out in Schedule 3 does not apply to Pacific Islands
originating goods.
Item 7 After paragraph 16(1)(n)
18. This item inserts new paragraph 16(1)(na) into the Customs Tariff Act.
19. The new paragraph accords with Article 3(1)(b) of Chapter 2 of the Agreement and provides,
where the Pacific Islands originating goods are classified to a tariff subheading in Schedule 3
that is specified in column 2 of an item in the table in new Schedule 8A, for the preferential
rate of customs duty on the goods to be worked out by reference to the rate of duty set out in
column 3 of the relevant item in Schedule 8A.
20. However, where the Pacific Islands originating goods are not classified to a tariff subheading
listed in new Schedule 8A, new paragraph 16(1)(na) provides for such goods to be subject to
a preferential rate of 'Free' in accordance with Article 3(1)(a) of Chapter 2 of the Agreement.
Item 8 After paragraph 18(1)(e)
21. Existing section 18 of the Customs Tariff Act sets out how customs duty is calculated in
circumstances where a concessional rate of customs duty under an item in Schedule 4 of the
Customs Tariff Act is provided for certain goods. In particular, subsection 18(1) provides for
a concessional rate of customs duty to only be used where the rate of customs duty is less
than that which would otherwise be payable under Schedules 3, 4A, 5, 6, 7, 8, 9, 10, 11 or 12.
22. This item inserts new paragraph 18(1)(ea) into the Customs Tariff Act. The paragraph will
add, that a concessional item in Schedule 4, only applies to goods if the duty is lower than the
duty payable under new Schedule 8A. This provision is consistent with similar provision for
other Schedules to the Customs Tariff Act for other FTAs.
Item 9 After subparagraph 18(2)(a)(vi)
23. This item inserts new subparagraph 18(2)(a)(via) into the Customs Tariff Act.
24. Schedule 4 of the Customs Tariff Act lists items where a concessional rate of customs duty is
provided for particular goods. Existing section 18 of the Customs Tariff Act sets out how
customs duty is calculated for such goods, in particular for originating goods to which a FTA
Page 5 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018
applies for preference purposes. Paragraph 18(2)(a) provides that, if the goods are not the
produce or manufacture of a preference country, or a country to which a FTA applies, the
duty must be worked out by reference to the general rate set out in the third column of an
item in Schedule 4 that applies to the goods.
25. New paragraph 18(2)(a)(via) accords with Article 3 of Chapter 2 of the Agreement and
ensures that the general rate of customs duty set out in Schedule 4 does not apply to Pacific
Islands originating goods.
Item 10 After paragraph 18(2)(n)
26. This item inserts new paragraph 18(2)(na) into the Customs Tariff Act to set out how customs
duty is calculated for goods that are Pacific Islands originating goods and that are subject to a
concessional item in Schedule 4 of that Act. This new paragraph provides that, if the goods
are Pacific Islands originating goods and 'PI' is specified in the third column of an item in
Schedule 4, the amount of duty is calculated by reference to that rate of customs duty. If there
is no such rate, the rate of customs duty is 'Free'.
Item 11 Paragraph 19AAC(1)(b)
27. Existing section 19 of the Customs Tariff Act provides for the automatic indexation of certain
excise-equivalent rates of customs duty in line with movements in the Consumer Price Index,
in February and August of each year. The goods to which automatic indexation applies are
certain alcohol and fuel products.
28. For this purpose, section 19AAC of the Customs Tariff Act contains a table that sets out the
fuel products subject to biannual indexation under section 19 of that Act.
29. Item 11 amends subsection 19AAC(1)(b) of the Customs Tariff Act to insert a reference to
new Schedule 8A so that the indexation provisions in section 19 of that Act apply to the rates
of excise-equivalent customs duty for those fuel products that are Pacific Islands originating
goods.
Item 12 Paragraph 19AA(b)
30. For section 19 of the Customs Tariff Act, existing section 19AA of that Act contains a table
that sets out the alcohol products subject to biannual indexation under section 19 that Act.
31. Item 12 amends subsection 19AA(b) of the Customs Tariff Act to insert a reference to new
Schedule 8A so that the indexation provisions in section 19 of that Act apply to the rates of
excise-equivalent customs duty for those alcohol products that are Pacific Islands originating
goods.
Page 6 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018
Item 13 Paragraph 19AC(b)
32. Existing section 19AB of the Customs Tariff Act provides for the automatic indexation of
certain excise-equivalent rates of customs duty in line with movements in the full-time adult
average weekly ordinary time earnings, in March and September of each year. The goods to
which this automatic indexation applies are tobacco products.
33. For this purpose, section 19AC of the Customs Tariff Act contains a table that sets out the
tobacco products subject to biannual indexation under section 19AB of that Act.
34. Item 13 amends subsection 19AC(b) of the Customs Tariff Act to insert a reference to new
Schedule 8A so that the indexation provisions in section 19AB of that Act apply to the rates
of excise-equivalent customs duty for those tobacco products that are Pacific Islands
originating goods.
Item 14 Paragraph 19ACA(1)(b)
35. Existing section 19ACA of the Customs Tariff Act provides for a list of tobacco products that
are not covered by section 19AC of that Act, specifically tobacco products where the amount
of customs duty is determined by the weight of the product or the weight of the tobacco
content in the product.
36. For goods classified to a subheading listed in section 19ACA, the rate of customs duty is
amended biannually on the same day as the tobacco products listed in section 19AC.
The applicable rate is determined with reference to the indexed rate associated with tariff
subheading 2402.20.20 adjusted by the relevant annual weight conversion factor provided for
in subsection 19ACA(2).
37. Item 14 amends subsection 19ACA(b) of the Customs Tariff Act to insert a reference to new
Schedule 8A so that the indexation provisions in section 19AB of that Act apply to the rates
of excise-equivalent customs duty for those tobacco products that are Pacific Islands
originating goods.
Items 15 to 19
38. Existing Schedule 4 to the Customs Tariff Act lists items where a concessional rate of
customs duty is provided for particular goods. In most cases, the concessional rate of customs
duty for such goods is the rate of 'Free'. However, in some instances, instead of the customs
duty rate of 'Free', the items provide for a lower rate than the general rate of customs duty
that is otherwise payable.
39. The Agreement only provides for duty concessions for goods in Schedule 3 of the Customs
Tariff Act. New paragraph 18(2)(na) provides that the rate of customs duty for Pacific Islands
originating goods subject to a concessional item in Schedule 4 is 'Free', unless a rate for 'PI'
is specified. It is therefore necessary to specify rates of customs duty for Pacific Islands
originating goods for those concessional items in Schedule 4 where the rate of duty is not
'Free'.
Page 7 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018
40. Items 15, 16, 17 and 18 amends existing table items 17A, 22, 45 and 50 under Schedule 4,
respectively, and inserts 'PI' in the third column of each of these items, so the amount of duty
for Pacific Islands originating goods that fall within the terms of these items is calculated by
reference to the rate of duty set out in column 3.
41. Item 19 amends existing table item 53 (column headed 'Rates of duty') in Schedule 4 by
adding the appropriate duty rate for Pacific Islands originating goods.
Item 20 After Schedule 8
42. This item inserts new Schedule 8A into the Customs Tariff Act. This new Schedule sets out
preferential rates of customs duty for goods that are determined to be Pacific Island
originating goods in accordance with new Division 1GA of Part VIII of the Customs Act,
inserted by the Customs Amendment Bill.
43. Article 3(1)(a) of Chapter 2 of the Agreement provides that, each Party shall not apply to
originating goods ordinary customs duties that are not specified, or in excess of levels set
forth in Part I (Commitments on Ordinary Customs Duties) of its Schedule at Annex 2-A to
Chapter 2 of the Agreement. Annex 2-A notes that pursuant to Article 3(1)(a) of Chapter 2,
Australia shall eliminate ordinary customs duties on originating goods from the date of entry
into force for the Agreement.
44. Article 2 of Chapter 1 of the Agreement provides in part that customs duty does not include
duties that are equivalent to an internal tax imposed on the same goods when domestically
produced. Such goods are certain alcohol, tobacco and fuel products that are subject to
customs duties at a rate that is equivalent to the excise duty imposed under the Schedule to
the Excise Tariff Act 1921 (the Excise Tariff), on those goods when domestically produced.
45. Section 16 of the Customs Tariff Act, as amended by items 6 and 7 of Schedule 1 to the Bill,
provides that the rates of customs duty for Pacific Islands originating goods are 'Free' unless
a rate of customs duty is specified for those goods in new Schedule 8A. Therefore, it is
necessary to specify the relevant tariff subheadings for the above alcohol, tobacco and fuel
products in Schedule 8A and the appropriate rate of customs duty.
46. The table items in new Schedule 8A operate to impose customs duty on certain alcohol,
tobacco and fuel products that are Pacific Islands originating goods, at a rate that is
equivalent to the excise duty imposed under the Excise Tariff Act, on the same goods when
domestically produced. These rates of duty may be subject to indexation in accordance with
sections 19 and 19AB of the Customs Tariff Act.
Items 21 and 22 User's guide
47. These items amend the text in the User's Guide in the preamble of the Customs Tariff Act, as
required, to insert references to new Schedule 8A for Pacific Islands originating goods.
Page 8 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018
Item 23 Application provision
48. This item provides that the amendments made by items 1 to 10 and 15 to 20 of Schedule 1 to
the Bill apply in relation to:
(a) goods imported into Australia on or after the commencement of Schedule 1 of the
Bill; and
(b) goods imported into Australia before the commencement of Schedule 1, where the
time for working out the rate of import duty on the goods had not occurred before the
commencement of this Schedule.
49. The amendments contained in Schedule 1 of the Bill will commence at the same time as
Schedule 1 to the Customs Amendment Bill (see the notes above in relation to
commencement of the Bill).
Item 24 Transitional provision-indexation
50. This item sets out transitional provisions for alcohol duty rates and fuel duty rates and
tobacco duty rates subject to indexation under section 19 and section 19AB of the Customs
Tariff Act.
51. As explained above in the notes for items 11,12, 13 and 14, excise-equivalent rates of
customs duty that apply to certain alcohol, tobacco and fuel products are adjusted
automatically twice a year. The next automatic indexation for alcohol and fuel products will
be in February 2019, and for tobacco will be in September 2018.
52. In light of this, and when the automatic indexations occurs, the transitional provisions will
operate to amend the alcohol, tobacco and fuel duty rates such that upon commencement the
customs duty rates for relevant tariff subheadings in Schedule 8A will be increased by the
indexation amount or the sum of the indexation amounts.
53. The purpose of the transitional provisions is to ensure that the alcohol, tobacco and fuel duty
rates applied to Pacific Islands originating goods are consistent with those that apply to the
same tariff subheadings listed in Schedule 3, 4A, 5, 6, 7, 8, 9, 10, 11 or 12.
Page 9 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018
Attachment A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Customs Tariff Amendment (Pacific Agreement on Closer Economic Relations Plus
Implementation) Bill 2018 (the Bill)
This Bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Overview of the Bill
On 14 June 2017, in Nuku'alofa, Tonga, representatives of Australia, New Zealand, the Cook
Islands, Kiribati, Nauru, Niue, Samoa, Solomon Islands, Tonga and Tuvalu signed the Pacific
Agreement on Closer Economic Relations Plus (the Agreement). Vanuatu signed Agreement
in Apia, Samoa on 7 September 2017.
The Agreement is a comprehensive World Trade Organisation consistent regional economic
integration agreement, which covers goods, services and investment and establishes rules and
commitments between the Parties to the Agreement.
To give effect to the rules of origin requirements under the Agreement, the Customs
Amendment (Pacific Agreement on Closer Economic Relations Plus Implementation)
Bill 2018 (the Customs Amendment Bill) will amend the Customs Act 1901 to implement the
new rules and related matters.
The purpose of this Bill is to amend the Customs Tariff Act 1995 (Customs Tariff Act) to:
provide for a preferential rate of customs duty of 'free' for certain goods on entry into
force of the Agreement determined to be eligible in accordance with new
Division 1GA of Part VIII of the Customs Act. The new Division 1GA is to be
inserted into the Customs Act by the Customs Amendment Bill;
amend certain concessional items in Schedule 4 to the Customs Tariff Act to maintain
customs duty rates in line with the applicable concessional item; and
insert new Schedule 8A to provide for excise-equivalent rates of duty on alcohol,
tobacco and certain fuel products in accordance with the Agreement.
The amendments contained in the Bill, when enacted, will commence at the same time as
Schedule 1 to the Customs Amendment Bill. That is, the later of the day on which this Act
receives the Royal Assent and the day on which the Agreement done at Nuku'alofa on
14 June 2017 enters into force for Australia.
Human rights implications
The Bill does not engage any of the applicable rights or freedoms.
Page 10 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018
Conclusion
The Bill is compatible with human rights as it does not raise any human rights issues.
MINISTER FOR LAW ENFORCEMENT AND CYBER SECURITY
THE HONOURABLE ANGUS TAYLOR MP
Page 11 Customs Tariff Amendment (Pacific Agreement on Closer
Economic Relations Plus Implementation) Bill 2018