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2004-2005
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CUSTOMS TARIFF AMENDMENT BILL (NO. 1) 2005
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Minister for Justice and Customs, Senator
the Honourable Christopher Martin Ellison)
CUSTOMS TARIFF AMENDMENT BILL (NO. 1) 2005
OUTLINE
The purpose of this Bill is to amend the Customs Tariff Act 1995 (the Tariff) to:
amend item 22 of Schedule 4 to the Tariff, relating to goods for use in oil and gas
exploration, to reflect changes in technology and to extend the coverage of the
item (Part 1 of Schedule 1 refers);
Deleted: ¶
amend Chapter 29 of the Tariff to insert a new Additional Note to allow the
chemical paraquat dichloride, with an added emetic, to be classified in subheading
2933.39.00 in that Chapter (Part 2 of Schedule 1 refers);
amend item 68 of Schedule 4 to the Tariff to extend the operation of the South
Pacific Regional Trade and Economic Co-operation Agreement (Textile, Clothing
and Footwear Provisions) Scheme (SPARTECA (TCF Provisions) Scheme) for a
further seven years to 31 December 2011 (Part 3 of Schedule 1 refers);
amend the country codes for Poland and Wake Island to reflect the codes used by
the International Organization for Standardization (Part 4 of Schedule 1 refers);
increase, on and from 1 January 2005, the rates of customs duty payable on certain
US originating alcohol and tobacco products in accordance with the Consumer
Price Index (CPI) announced on 28 July 2004 (Part 5 of Schedule 1 refers); and
increase, on and from 1 February 2005, the rates of customs duty payable on
certain US originating alcohol and tobacco products in accordance with the CPI
announced on 25 January 2005 (Part 6 of Schedule 1 refers).
Customs Tariff Amendment Bill (No. 1) 2005
Page 2
FINANCIAL IMPACT STATEMENT
It is estimated, on the basis of current imports, that the proposed amendment to item 22
will cost the Government approximately $220,000 per annum in duty forgone. However,
actual duty forgone will depend on the level of activity in the oil and gas exploration
industries.
The amendments relating to paraquat dichloride (Chapter 29) are expected to result in a
minimal revenue loss.
It is estimated that the cost to the Government in customs revenue forgone of the
extension of the SPARTECA (TCF Provisions) Scheme will be approximately $1.2 million
per annum for the first five years of the extended Scheme.
Based on import volumes of alcohol and tobacco products from the United States of
America (US) in 2004, it is estimated that the revenue shortfall in the first 12 month
period will be in the vicinity of $6 million if the CPI increases were not applied to US
originating alcohol and tobacco products. In subsequent 12 month periods the revenue
shortfall would be expected to increase due to the compounding effect of indexation.
The other proposed amendments in the Bill have no financial implications.
Customs Tariff Amendment Bill (No. 1) 2005
Page 3
CUSTOMS TARIFF AMENDMENT BILL (NO. 1) 2005
NOTES ON CLAUSES
Clause 1 - Short Title
This clause provides for the Act, when enacted, to be cited as the "Customs Tariff
Amendment Act (No. 1) 2005".
Clause 2 - Commencement
Subclause (1) provides that each provision of the Act specified in column 1 of the table in
that subclause commences or is taken to have commenced on the day or at the time
specified in column 2 of the table.
Item 1 of the table provides that sections 1 to 3 and anything in the Act not covered
elsewhere in the table will commence on the day on which the Act receives the Royal
Assent.
Item 2 of the table provides that Part 1 of Schedule 1 is taken to have commenced on
18 October 2003. The amendment in Part 1 of Schedule 1 was contained in Customs
Tariff Proposal No. 6 (2003) which took effect on 18 October 2003.
The Customs Tariff Proposal mechanism is used for effecting alterations to the Tariff,
particularly when such alterations are required to have effect in a short time frame that
cannot be achieved through a Customs Tariff Amendment Bill. Customs Tariff Proposals
are used most commonly for introducing new items, for changing rates of duty and for
restructuring items in the Schedules to the Tariff.
Following the introduction of a Customs Tariff Proposal in the House of Representatives,
the alterations contained in the Proposal are incorporated in a Customs Tariff Amendment
Bill that is introduced into and debated by the Parliament. The amendments necessarily
have the same date of effect as the original Proposal.
Item 3 of the table provides that Part 2 of Schedule 1 is taken to have commenced on
24 March 2003. The amendments in Part 2 of Schedule 1 were contained in Customs
Tariff Proposal No. 1 (2003) which took effect on 24 March 2003.
Item 4 of the table provides that Part 3 of Schedule 1 is taken to have commenced on
1 January 2005. The amendment in Part 3 of Schedule 1 was contained in Customs Tariff
Proposal No. 1 (2004) which took effect on 1 January 2005.
Item 5 of the table provides that Part 4 of Schedule 1 is taken to have commenced
immediately after the commencement of item 13 of Schedule 2 to the Customs Tariff
Amendment Act (No 1) 2003, that is on 1 July 2003.
Customs Tariff Amendment Bill (No. 1) 2005
Page 4
Item 6 of the table provides that Part 5 of Schedule 1 is taken to have commenced
immediately after the commencement of item 1 of Schedule 1 to the US Free Trade
Agreement Implementation (Customs Tariff) Act 2004, that is on 1 January 2005. The
amendments in Part 5 of Schedule 1 were also contained in Customs Tariff Proposal No. 1
(2004) and took effect on that date.
Item 7 of the table provides that items 60 to 112 of Schedule 1 are taken to have
commenced on 1 February 2005. The amendments in these items were contained in
Customs Tariff Proposal No. 1 (2005) which took effect on that date.
Item 8 of the table provides that item 113 of Schedule 1 will commence on the day on
which the Act receives the Royal Assent.
Clause 3 - Schedule(s)
This clause is the formal enabling provision for the Schedule to the Bill, providing that
each Act specified in the Schedule is amended in accordance with the applicable items of
that Schedule. The clause also provides that other items of the Schedules have effect
according to their own terms.
Customs Tariff Amendment (Oil, Gas and Other Measures) Act 2004
Page 5
Schedule 1 - Amendments
Part 1 - Oil and gas exploration
Customs Tariff Act 1995
Item 1 - Schedule 4 (item 22)
Item 1 substitutes item 22 in Part II of Schedule 4 to the Tariff with effect from
18 October 2003. The current item 22 allows for the duty-free entry of goods, prescribed
by by-law, for use in the exploration for oil or natural gas, or in the development of oil or
natural gas wells. In particular, it allows for the duty-free entry of goods, as prescribed by
by-law:
that are for use in connection with the exploration for petroleum or natural
gas;
or
that are for use in connection with the development of petroleum or natural
gas wells to the stage where a well-head assembly is attached, other than goods
for, or for use in connection with, controlling, treating, conveying or storing
petroleum or natural gas after leaving the well-head assembly;
other than goods in respect of which substitutable goods are produced in Australia or are
capable of being produced in Australia by any person in the ordinary course of business.
Proposed new item 22 will accommodate changes in technology and will extend the
coverage of the item to include the process of re-entering an existing well, extending the
well into a new oil or gas zone, and workovers for the maintenance of the well. This will
be specified in the by-law made under new item 22.
This amendment incorporates, in the Tariff, an alteration previously proposed in Customs
Tariff Proposal No. 6 (2003). This Proposal was introduced in Parliament on
16 October 2003 and took effect on 18 October 2003.
This alteration was included in the Customs Tariff Amendment (Oil, Gas and Other
Measures) Bill 2004 which lapsed with the prorogation of Parliament on
31 August 2004.
On 1 September 2004, under section 273EA of the Customs Act 1901, a delegate of the
Minister notified that the same alteration to item 22 would be proposed in the Parliament
in Customs Tariff Notice No. 1 (2004) published in Special Commonwealth Gazette
S367. This ensured that the oil and gas industry could continue to claim the additional
concessions under proposed new item 22 of Schedule 4 to the Tariff.
Under section 273EA of the Customs Act 1901, proposed amendments to the Tariff
made by a Notice published in the Gazette must be introduced in Parliament as a
Customs Tariff Amendment Bill (No. 1) 2005
Page 6
Customs Tariff Proposal within seven sitting days of the next meeting of the House of
Representatives. Customs Tariff Proposal No. 1 (2004) was tabled in the House of
Representatives on 1 December 2004 to meet this requirement.
Customs Tariff Amendment (Oil, Gas and Other Measures) Act 2004
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Part 2 - Paraquat dichloride
Customs Tariff Act 1995
Items 2 and 3 - Schedule 3 (Chapter 29, "Additional Notes.")
The amendments contained in these items insert a new Additional Note (Additional Note
2) into Chapter 29 of Schedule 3 to the Tariff with effect from 24 March 2003.
This Note will allow the chemical paraquat dichloride with an added emetic to be
classified in subheading 2933.39.00, which attracts a rate of duty of free. The insertion
of this Note corrects an anomaly in the Tariff where paraquat dichloride with an emetic
added as a safety agent is classified in Chapter 38 where it attracts a duty rate of 5%.
Paraquat dichloride with other added safety measures such as anti-dusting, colouring or
stenching agents is classified to Chapter 29 where it attracts a duty rate of Free. The
purpose of these amendments is to achieve the same duty outcome for paraquat
dichloride with an added emetic.
The alterations relating to paraquat dichloride were contained in Customs Tariff
Proposal No. 1 (2003) and have been in operation since 24 March 2003.
These alterations were included in the Customs Tariff Amendment (Paraquat Dichloride)
Bill 2004 which lapsed with the prorogation of Parliament on 31 August 2004.
On 1 September 2004, under section 273EA of the Customs Act 1901, a delegate of the
Minister notified that the same alterations to the Additional Notes in Chapter 29 would
be proposed in the Parliament (in Customs Tariff Notice No. 1 (2004) published in
Special Commonwealth Gazette S367).
This ensured that paraquat dichloride with an added emetic could continue to be
imported duty free under the proposed alteration to the Additional Note in Chapter 29
of Schedule 3 to the Tariff.
Under section 273EA of the Customs Act 1901, proposed amendments to the Tariff
made by a Notice published in the Gazette must be introduced in Parliament as a
Customs Tariff Proposal within seven sitting days of the next meeting of the House of
Representatives. Customs Tariff Proposal No. 1 (2004) was tabled in the House of
Representatives on 1 December 2004 to meet this requirement.
Customs Tariff Amendment Bill (No. 1) 2005
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Part 3 - Textile, clothing and footwear
Customs Tariff Act 1995
Item 4 - Schedule 4 (item 68, the description of goods in column 2)
This item amends item 68 of Schedule 4 to the Tariff to extend the operation of the
South Pacific Regional Trade and Economic Co-operation Agreement (Textile, Clothing
and Footwear Provisions) Scheme (the SPARTECA (TCF Provisions) Scheme), with
effect from 1 January 2005.
On 8 August 2004, the Prime Minister, the Hon John Howard MP, announced that the
SPARTECA (TCF Provisions) Scheme would be extended for seven years to
31 December 2011, from its current legislated end date of 31 December 2004.
The SPARTECA (TCF Provisions) Scheme provides for the duty-free entry of certain
textiles, clothing and footwear from Forum Island Countries covered by the South
Pacific Regional Trade and Economic Co-operation Agreement. The Scheme is
implemented legislatively through item 68 of Schedule 4 to the Tariff.
This alteration was proposed in Customs Tariff Proposal No. 1 (2004), tabled in the
House of Representatives on 1 December 2004 and has been in operation since
1 January 2005.
Customs Tariff Amendment Bill (No. 1) 2005
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Part 4 - Country abbreviations
Customs Tariff Act 1995
Item 5 - Schedule 1 (Division 1 of Part 4, cell at table item dealing with Poland,
column 2)
This item amends the country code abbreviation for Poland, specified in Division 1 of
Part 4 of Schedule 1 to the Tariff. The amendment aligns this code with that used by the
International Organization for Standardization, in this case "PL".
This amendment does not affect the customs duty applicable to goods imported from
Poland or the margins of tariff preference given to Poland.
Item 6 - Schedule 1 (Division 2 of Part 4, cell at table item dealing with Wake
Island, column 2)
This item amends the country code abbreviation for Wake Island, specified in Division 2
of Part 4 of Schedule 1 to the Tariff. The amendment aligns this code with that used by
the International Organization for Standardization, in this case "XC".
This amendment does not affect customs duty applicable to goods imported from Wake
Island or the margins of tariff preference given to Wake Island.
Customs Tariff Amendment (Oil, Gas and Other Measures) Act 2004
Page 10
Part 5 - August 2004 indexation of US duty rates
Customs Tariff Act 1995
Items 7 to 59 - Schedule 5
Part 5 of the Bill amends (with effect from 1 January 2005) the rates of customs duty
applicable to alcohol and tobacco products that are US originating goods and are subject
to indexation in line with the Consumer Price Index (CPI).
Subsection 19(1) of the Tariff provides for the increase of customs rates of duty on
certain alcohol and tobacco products, including US originating goods, in line with the
CPI movements in February and August each year.
The US Free Trade Agreement Implementation (Customs Tariff) Act 2004, (the
AUSFTA Act) inserted Schedule 5 to the Tariff, which sets out the rates of duty for
certain US originating goods, including alcohol and tobacco products. This Act, as
enacted, included rates of duty that applied at the time the US Free Trade Agreement
Implementation (Customs Tariff) Bill 2004 was introduced into the Parliament, that is
the rates that applied prior to the August 2004 CPI increases.
On 2 August 2004, the rates for alcohol and tobacco products increased. However,
since Schedule 5 to the Tariff had not commenced, the rates for US originating alcohol
and tobacco products were not increased.
Customs Tariff Proposal No. 1 (2004) was tabled in the House of Representatives on
1 December 2004 to impose the post-August 2004 duty rates on US originating alcohol
and tobacco products. The Proposal took effect immediately after the commencement
of the AUSFTA Act (on 1 January 2005) and ensured that the rates of duty for those
alcohol and tobacco products were consistent with duty rates for the same goods that
are not US originating goods.
The amendments in Part 5 of the Bill incorporate this Proposal into the Tariff.
Customs Tariff Amendment Bill (No. 1) 2005
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Part 6 - February 2005 indexation of US duty rates
Customs Tariff Act 1995
Items 60 to 112 - Schedule 5
Part 6 of the Bill (items 60 to 112) amends (with effect from 1 February 2005) the rates
of customs duty applicable to alcohol and tobacco products that are US originating
goods and are subject to indexation in line with the CPI.
Part 5 of this Bill imposes the post-August 2004 duty rates on US originating alcohol
and tobacco products, with effect from 1 January 2005.
On 25 January 2005, the CPI figures for the December 2004 quarter were announced,
requiring a further increase in duty rates for alcohol and tobacco products, with effect
from 1 February 2005.
As the post August-2004 duty rates for alcohol and tobacco products in Schedule 5 to
the Tariff had not been enacted at that time, it was necessary to publish Customs Tariff
Notice No. 1 (2005) in Special Commonwealth Gazette S21 on 31 January 2005 to
ensure that the correct rates, in line with the CPI, took effect from 1 February 2005.
Under section 273EA of the Customs Act 1901, proposed amendments to the Tariff
made by a Notice published in the Gazette must be introduced in Parliament as a
Customs Tariff Proposal within seven sitting days of the next meeting of the House of
Representatives. Customs Tariff Proposal No. 1 (2005) was tabled in the Parliament on
16 February 2005 to meet this requirement.
The alterations contained in Customs Tariff Proposal (No. 1) 2005 imposed the
February 2005 CPI duty rates on US originating alcohol and tobacco products, with
effect from 1 February 2005 to ensure that those duty rates are consistent with duty
rates for the same goods that are not US originating goods.
The amendments in Part 6 of the Bill incorporate this Proposal into the Tariff.
Customs Tariff Amendment Bill (No. 1) 2005
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Item 113 - Transitional - indexation of US rates of duty on 1 February 2005 is of no
effect
This item ensures that the increase of customs rates of duty, covered by paragraph
19(1)(b) of the Tariff, that occurred in respect of US originating goods on 1 February
2005 is taken to be of no effect.
Part 6 of Schedule 1 to this Bill amends the rates of duty for US originating alcohol and
tobacco products so that they reflect the February 2005 CPI. However, section 19 of
the Tariff also contains an automatic indexation provision, which should not apply to the
rates being amended by Part 6 (as they are the indexed rates).
This item ensures that the automatic indexation will not override the rates in Part 6 of
Schedule 1.
Customs Tariff Amendment Bill (No. 1) 2005
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