Bills Digest No. 200  1998-99 Customs Amendment (Warehouses) 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

Customs Amendment (Warehouses) Bill 1999

Date Introduced: 3 June 1999

House: House of Representatives

Portfolio: Justice and Customs

Commencement: The amendments, other than items 36, 37, 40 and 41 commence on 29 April 1999, the date the Minister announced that goods brought into MiB would be exempt from import processing charges. Items 36, 37, 40 and 41, which are saving and transitional provisions commence on Royal Assent.

 

Purpose

The major amendments proposed by the Bill:

  • insert manufacturing in bond (MiB) specific terms and concepts within the Customs Act 1901 (the Principal Act), and
  • exempt people operating MiB warehouses from paying warehoused goods entry fee when the manufactured goods are exported.

 

Background

The manufacturing in bond (MiB) scheme was announced by the Government in its "Investing for Growth" industry statement.(1) Under the scheme certain manufacturers are exempt from duty on imported goods which are intended for re-export or used as inputs to exports. Regulations giving effect to the MiB scheme came into effect on 20 March 1998.

Under the relevant Customs Regulations(2) persons who hold a warehouse licence and obtain approval may manufacture in bond, that is, import goods, store those goods in a licensed warehouse, and use those goods in a manufacturing process within the confines of the warehouse. Approval can be granted in relation to any goods where the Secretary of the Department of Industry, Science and Resources is satisfied that, having regard to a business plan submitted by the manufacturer, manufacture under the approval would increase the manufacturer's exports.

The Australian Customs Service (ACS) requires that MiB applications should be submitted together with a detailed business plan and an application for a customs warehouse licence, where the premises intended for manufacture are not already licensed.(3)

On the 29th April 1999, the then Minister for Justice and Customs, Senator Amanda Vanstone, announced that legislative amendments would be introduced this year which would allow goods imported into MiB to be free of customs processing charges until they are moved from the MiB facility.(4) The amendments proposed by the Bill and the Import Processing Charges Amendment (Warehouses) Bill 1999 give effect to the Minister's announcement.

The stated rationale for the exemption is that:

People who operated MiB warehouses complained that having to pay both these fees [ie. import processing charge and warehoused goods entry fee] made their operations uneconomic. The Government has therefore decided to remove the requirement for people operating from MiB warehouses to pay the import processing charge and the warehoused goods entry fee when the goods are exported.(5)

The General Manger of DHL Worldwide Express, the only company which has to date sought to manufacture in bond, is reported as saying that:

Prior to the government exemption, manufacturers faced a $22.80 customs compliance levy on each individual consignment of components brought temporarily into Australian manufacturing in bond facilities prior to re-export in finished products.(6)

The amendments proposed by the Bills have been welcomed by industry. The General Manager of DHL Worldwide Express is reported as saying that:

... the decision opened a significant opportunity for Australia to market itself as an ideal location for regional headquarters incorporating warehousing, manufacturing and distribution facilities for Asian markets.(7)

 

Main Provisions

Amendments to the Customs Act 1901

The amendments proposed by Schedule 1 have two major effects, namely:

  • provide MiB specific terms and concepts within the Customs Act 1901 (the Principal Act), and
  • exempt people operating MiB warehouses from paying the warehoused goods entry fee when the manufactured goods are exported.

Items 5 and 6 of Schedule 1 insert new definitions of the terms 'MiB warehouse' and 'MiB warehoused goods' in the Principal Act. The term 'MiB warehouse' is defined to mean a place that a person or partnership is allowed under subsection 79(2) to use for housing goods (see item 20) and subsection 79(5) to use for manufacturing goods (see item 20). The term 'MiB warehoused goods' is defined to mean goods received into a MiB warehouse under an entry for MiB warehousing or permission granted under section 71E (ie. a movement permission), or goods subjected to an authorised activity under section 79 to be undertaken in a MiB warehouse (see item 20).

The effect of items 12 and 13 of Schedule 1 is to exempt people operating MiB warehouses from paying the warehoused goods entry fee when the manufactured goods are exported.

A new section 79 is substituted in the Principal Act by item 20 of Schedule 1. The principal effect of proposed section 79 is to introduces two new classes of warehouses for which a licence may be issued, namely, an MiB warehouse and a general warehouse. Where a licence authorises the housing of goods and manufacturing to be carried on, it is a MiB warehouse licence (proposed subsection 79(7)).

A new section 80A is inserted in the Principal Act by item 22 of Schedule 1 making it a precondition for the grant of an MiB licence that an applicant has approval of the Secretary of the Department of Industry, Science and Resources (the Secretary) as someone who may manufacture in a MiB warehouse.

Subsection 82(1) of the Principal Act specifies events which if they occur (ie. there is a change in the membership of the partnership) a warehouse licence holder must notify the CEO of the ACS of. Item 23 of Schedule 1 makes it a condition of an MiB licence that a licensee notify the CEO of their approval by the Secretary as someone who may manufacture in a MiB warehouse has been revoked.

A new section 82A is inserted in the Principal Act by item 26 of Schedule 1 providing that a MiB warehouse licence is subject to a condition that the licence holder is a person in respect of whom a section 80A approval operates (see item 22 with respect to proposed section 80A).

The effect of item 27 of Schedule 1 is to allow the CEO of the ACS to refuse to renew a MiB warehouse licence if the holder does not have the approval under the regulations of the Secretary as someone who may manufacture in a MiB warehouse.

A new section 98 is substituted in the Principal Act by item 29 of Schedule 1. The purpose of proposed section 98 is to preserve the competitive position of different manufacturers for domestic consumption by requiring that manufacture in a MiB warehouse is subject to the same customs duty as manufacture in another factory which does not have MiB status. Thus, to achieve this equality, proposed section 98 provides that goods for domestic consumption made in MiB warehouses must be subject to duty on imported components in the same way that other domestic manufacturers of goods must pay duty on their imported components. In the absence of proposed section 98, MiB manufacturers for the domestic market would have a competitive advantage over other domestic suppliers.

 

Endnotes

  1. 8 December 1997.

  2. SR No 38 of 1998.

  3. ACN No 98/21.

  4. Minister for Justice and Customs, Media Release, 29 April 1999.

  5. Customs Amendment (Warehouses) Bill

  6. AAP News, DHL welcomes govt exemption of MiB goods, 5 February 1999.

  7. Ibid.

 

Contact Officer and Copyright Details

Ian Ireland
15 June 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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