Bills Digest No. 74 1999-2000 Tradex Scheme Bill 1999


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details

Passage History

Tradex Scheme Bill 1999

Date Introduced: 14 October 1999

House: House of Representatives

Portfolio: Industry, Science and Resources

Commencement: On a day to be fixed by proclamation or if no such day is fixed within 6 months of the Bill receiving Royal Assent, at the end of that period.

Purpose

To establish the Tradex Scheme. The object of the Tradex Scheme is to allow for the importation of goods, without payment of duty, provided the goods are subsequently exported or incorporated in goods that are exported. The Tradex Scheme replaces the Duty Drawback and Tariff Export Concession schemes.

Background

Origin

In its 'Investing for Growth' industry statement the Government announced two schemes aimed at improving:

Australia's attraction as a site for regional manufacturing and warehousing.(1)

The two schemes were the Manufacture in Bond (MiB) scheme and the Tradex Scheme. The MiB Scheme, which came into effect on 20 March 1998, exempts certain manufacturers from duty on imported goods which are intended for re-export or used as inputs to exports. The MiB Scheme was the subject of recent legislative amendments.(2)

In relation to the Tradex Scheme, the Government announced in its 'Investing for Growth' industry statement:

the consolidation of the Duty Drawback and Tariff Export Concession schemes into one integrated and simplified scheme to be known as TRADEX at a cost to revenue of $105 million over four years.(3)

The proposed introduction of the Tradex Scheme follows an internal departmental review of the current regulatory arrangements. According to the Explanatory Memorandum, the review was undertaken in 1997 and found that up to 50% of eligible businesses were not using the existing TEXCO and Duty Drawback Schemes, allegedly because of the high costs of accessing and complying with the arrangements. The author of this Digest uses the term 'allegedly' because the rationale given in the Explanatory Memorandum could not be verified as the review documentation is not available to public scrutiny.

This Bill and the Tradex Duty Imposition (General) Bill 1999, Tradex Duty Imposition (Customs) Bill 1999, Tradex Duty Imposition (Excise) Bill 1999 and Customs Tariff Amendment (Tradex) Bill 1999 provide the legislative basis for the Tradex Scheme.

It may be noted that on 14 October 1999 the following Bills were discharged from the notice paper:

  • Tradex Scheme Bill 1999
  • Tradex Duty Imposition Bill 1999, and
  • Customs Tariff Amendment (Tradex) Bill 1999.

The above Bills were introduced in the House of Representatives on 24 June 1999.

It is unclear from the Second Reading Speech to this Bill and the other Bills which are intended to provide the legislative basis for the Tradex Scheme, why the above Bills were discharged. However, it is probable that the reason is to satisfy section 55 of the Constitution. Section 55 reads, in part, 'Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other material shall be of no effect.'

Accordingly the convention of separate Acts dealing with tax, assessment and collection, and those imposing the tax, is actually a requirement of section 55 of the Constitution.

Section 55 continues to state that 'Laws imposing taxation, except laws imposing duties of customs or of excise, shall deal with the subject of taxation only; but laws imposing duties of customs shall deal with duties of customs only, and laws imposing duties of excise shall deal with duties of excise only.'

Thus it is necessary for laws imposing a tax to be separated into three Acts. One Act imposing general taxation, a second Act imposing duties of customs and a third Act imposing duties of excise.

It is probable that the package of Bills introduced on the 24 June 1999 failed to comply with section 55 of Constitution.

Duty drawback scheme

The Duty Drawback Scheme allows exporters refunds of payments of customs duty, sales tax or excise duty where the goods will be treated, processed or incorporated in other goods for export or when the goods are exported unused since importation. Duty Drawback can only be claimed after goods have been exported. Claims have to be lodged within 12 months of export and the minimum claim per application is $50.(4)

Duty Drawback cannot be claimed where:

  • exported goods will be returned to Australia
  • goods have been used in Australia other than for the purposes of exhibition, processing, treatment or further manufacture
  • goods are valued at exportation at less than 25% of their imported value, or
  • for excisable goods that value of which is less than the amount of the drawback claimed.(5)

Duty Drawbacks are processed by the Australian Customs Service (ACS) on the basis of self assessment. Duty to be drawn back may be calculated by the claimant in a number of ways, including on: a shipment by shipment basis; a representative shipment basis; or by imputation.

Tariff export concession scheme (TEXCO)

The TEXCO Scheme allows exporters to obtain imported goods without up-front payments of customs duty, sales tax or excise duty where the goods are to be treated, processed or incorporated into other goods for export.(6)

The TEXCO Scheme is available to companies with prospects of future exports and a proven record of exporting. Participating companies are required to maintain certain accounts for goods using the scheme and a reconciliation of goods using the scheme and goods exported is required.

Main Provisions

Clause 5 sets out the criteria which have to be met by a person applying, varying or holding a tradex order. The criteria include:

  • that the person applying for, or an application for a variation of, a tradex order intends to import nominated goods that are to be subsequently exported
  • that the holder of a tradex order has imported, and intends to continue to import nominated goods that have been, or are to be, subsequently exported, and
  • that the export of nominated goods by a tradex order holder occurs within one year after their entry for home consumption.

Clause 6 sets out circumstances where the holder of a tradex order may be disqualified from participating in the Tradex scheme. The circumstances include:

  • where any of the criteria under clause 5 have not been complied with (except where a person became liable to pay tradex duty and has paid that duty under clause 21)
  • the person was ineligible to apply for a tradex order, and
  • the person has failed to pay tradex duty.

Clause 9 provides for the establishment of a Register of Tradex Orders. The Secretary of the Department of Industry, Science and Resources is required to establish the Register. The Register is to contain such particulars as the Secretary considers appropriate. Holders of tradex orders are to be notified of particulars entered in the Register in respect of orders.

Parts 3-5 of the Bill (clauses 10-20) deals with the making, variation, revocation, suspension and cessation of tradex orders. Major provisions include:

  • the Secretary of the Department of Industry, Science and Resources may refuse an application, wholly or partly, for a tradex order except where: clause 5 criteria are complied with for some or all of the nominated goods; the applicant is eligible to apply for a tradex order; and the applicant has not given the Secretary false or misleading material and the applicant has not failed to pay tradex duty
  • where the Secretary refuses an application for a tradex order the notice of the decision, must: set out the Secretary's findings on material questions of fact; refer to the evidence or other material on which the findings were based; and give reasons for the decision
  • where the holder of a tradex order becomes aware that they were ineligible to apply for the order, or have become ineligible to hold the order, they must within 7 days of becoming aware of the ineligibility inform the Secretary of such
  • the holder of a tradex order may apply for a variation of their tradex order
  • where it appears to the Secretary that any circumstances may be disqualifying circumstances (see clause 6), other than circumstances where the holder of a tradex order notifies the Secretary of ineligibility, the Secretary must give the holder a notice: setting out particulars of the circumstances; inviting the holder within 4 weeks to give evidence that the circumstances do not exist, or if the circumstances exist, that they are not disqualifying circumstances.
  • the Secretary must revoke a tradex order where the holder has given notice of ineligibility, or the holder has not satisfied the Secretary that disqualifying circumstances specified in a notice to give reasons why tradex order should not be revoked do not exist.

Part 6 of the Bill (clause 21) specifies the circumstances in which a tradex order holder will be liable to pay tradex duty. The circumstances include:

  • where the nominated goods are consumed or used by the tradex order holder in Australia
  • where the nominated goods are disposed of or dealt with in any way by the tradex order holder for the purpose of being consumed or used by someone else in Australia, and
  • the goods are not exported within one year of their entry for home consumption.

Part 7 of the Bill (clauses 22 and 23) imposes certain requirements on tradex order holders in relation to the keeping of records. For example, a tradex order holder will have to keep records containing particulars relating to the storage of the goods, the consumption or use of goods in Australia, and any payment of tradex duty. The records are to be kept for a period of 5 years from the last occasion on which any act was done in relation to the goods, or at the request or direction of, the tradex order holder.

Part 8 of the Bill (clauses 24 and 25) specifies the powers of authorised officers in relation to tradex order information. The powers accorded to authorised officers include the power to:

  • require the holder of a tradex order to make available for examination specified documents which are in the holder's possession, or to which the holder has access, and which are relevant to the disqualification criteria (see clause 6)
  • require the holder of a tradex order to demonstrate the operation of any record keeping or accounting system
  • examine and to make and keep copies or take extracts from any documents made available or found on premises entered.

The entry of premises will require a warrant.

Part 9 of the Bill (clauses 26-32) establishes a number of offences, including:

  • a failure by a tradex order holder to notify of any changes entered in the Register (maximum penalty of $3,300)
  • a failure by a tradex order holder to notify of ineligibility to hold a tradex order (maximum penalty of $3,300)
  • a failure by a tradex order holder to pay tradex duty (the penalty is an amount equal to the amount of tradex duty that was not paid), and
  • a failure by a tradex order holder to keep the required records in respect of any goods.

The Bill contains a mechanism for the issuing of an infringement notice in lieu of immediate prosecution for not paying tradex duty. Basically, under Part 10 of the Bill (clauses 33-38), the Secretary is provided with the option of issuing an infringement notice to a tradex order holder if she/he believes that the holder has failed to pay tradex duty. Where the person pays the unpaid tradex duty and penalty specified in the notice (ie. one-fifth of the duty that was not paid) any liability of the person for the offence specified in the notice will be taken to be discharged.

Part 11 of the Bill (clauses 39-49) contains miscellaneous provisions relating to the Tradex Scheme. The major provisions:

  • provide for the internal review of certain decisions (eg. refusal in whole or part to grant an application for a tradex order)
  • provide for review of by the Administrative Appeals Tribunal of certain decisions (eg. refusal in whole or part to grant an application for a tradex order), and
  • subject to disallowance by the Parliament, the Secretary may approve a form for the purposes of this Bill.

Endnotes

  1. Press Release (Prime Minister), Investing for growth: National Press Club, Canberra, 8 December 1997.

  2. Customs Amendment (Warehouses) Bill 1999 and Import Processing Charges Amendment (Warehouses) Bill 1999.

  3. 8 December 1997.

  4. Australian Customs Service, 'Export Concessions: Duty Drawback', FACT SHEET, August 1998.

  5. Ibid.

  6. Australian Customs Service, 'Tariff Export Concession (TEXCO) Scheme', FACT SHEET, August 1997.

Contact Officer and Copyright Details

Ian Ireland
9 November 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1999

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1999.

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