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Appendix 2 - Response
to Questions on Notice for the Australian Customs Service
Inquiry into the
provisions of the Customs Tariff Amendment
(2007 Harmonized
System Changes) Bill 2006 and the Customs Amendment
(2007 Harmonized System Changes) Bill 2006
Questions on
Notice for the Australian Customs Service
1. The committee understands that member countries
of the International Convention on the Harmonized Commodity Description and
Coding System may notify the Secretary-General of the World Customs
Organization of an objection to a Harmonized System change within six months of
being officially notified of that change.
-
Did Australia make any official objections to
the amendments brought about by the latest review (HS2007)?
-
If objections were raised, what were they and what was the
response from the WCO?
Response
The Committee’s
understanding of the HS amendment process is correct. As Customs mentioned
briefly in paragraphs 12 and 13 of its Submission of 25 September 2006 to the
Committee, Contracting Parties to the HS Convention – including Australia – had
six months to lodge objections after the Secretary General’s 14
July 2004 notification of proposed amendments to the Convention’s Annex.
The Annex sets out the
‘Harmonized System Nomenclature’ – including the General Rules for the
Interpretation of the HS; Section, Chapter and Subheading Notes; and the
headings and subheadings. Each heading is identified by four digits – the
first two indicating the Chapter number and the second two showing the
numerical order in which the heading appears within that Chapter. Heading
numbers are shown in the first column of the Convention’s Annex. The second
column contains the six-digit codes for the HS, and the third column contains
the texts of the headings and subheadings.
No Contracting Party
(including Australia) lodged objections with the World Customs
Organization (WCO) during the six months to 12 January 2005. This is
because the amendments had been proposed and discussed at a technical level in
meetings of the WCO’s Harmonized System Committee during the five years since
the previous HS review. The International Chamber of Commerce has observer
status on this Committee.
Most HS amendments are
agreed by consensus among member countries, although some specific decisions
are voted on. The Australian Customs Service attends meetings of the HS
Committee, and seeks views about specific topics from Australian policy
departments, major industry groups and other stakeholders before each meeting.
HS Committee decisions are then submitted to WCO’s Council, and at its meeting
in June 2004 the Council adopted the proposed 2007 changes.
As no Contracting Party
objected to the proposed HS2007 amendments, under Article 16 of the
Convention the changes at four-digit (heading) and six-digit levels were deemed
to have been accepted.
On 19 January 2005
WCO’s Secretary General notified Australia that the amendments would therefore enter into force
on 1 January 2007, and that under Article 16(5) of the Convention, Contracting
Parties would need to amend their Customs tariff and statistical nomenclature
to conform with the HS changes.
2. The Law Council of Australia submission raised
a concern that Customs may not have had enough resources to provide advance
notice of the changes proposed by these bills at an earlier stage. In the light
of this concern, can Customs:
-
provide the committee with a timetable setting out the process
it has followed since the resolution of the WCO to adopt the HS2007 changes;
-
advise what materials Customs prepared in order to implement
the changes to the Harmonized System in the Customs Tariff; and
-
inform the committee of any additional resources which the
Government made available to enable Customs to implement the HS2007 changes in
a timely and comprehensive manner.
Response
At the outset Customs would like to affirm its commitment to
providing timely advice to importers or their agents about forecast changes in
the regulatory environment. In administering Customs laws, these responsibilities
are shared with policy agencies. In adopting changes to international
conventions, there is obviously a balance to be struck between giving early
notice about changes where possible, and providing up-to-date and accurate
information that reflects the Government’s policy intentions, and takes account
of Parliamentary processes.
As the 2007 changes are the outcome of a third five-yearly
review of tariff classifications, there was an expectation on the part of
industry that changes were likely to be implemented on 1 January 2007. The WCO maintains a website [www.wcoomd.org] that informs any
interested party about progress on HS changes. However, Customs has taken the
following key actions to provide more detailed advice to importers about the
impending changes:
- regular dialogue with industry groups as changes have been
gradually developed through the WCO;
- consultation with Australian policy agencies;
- careful development of Australian-based tariff classification
changes so that duty rates are maintained where practicable, and import
reporting is not unnecessarily complex;
- publishing the 2002 and 2007 proposed classification concordances
to coincide with introduction into Parliament of the related legislation;
- establishment of an HS2007 section on Customs website, with links
to all key documents;
- circulation of Australian Customs Notices about key issues;
- setting up a project team which acts as a contact point on
HS2007; and
- planned additional communication, subject to successful passage
of the Bills.
In March 2005 the first draft of the WCO’s correlation table
– which sets out the affected current (2002) HS Nomenclature at the
six-digit level and compares them with the 2007 changes, with explanatory
remarks – was made available to Contracting Parties to the HS Convention.
Customs commenced the translation of the WCO correlations into Australia’s
8-digit domestic tariff classifications during the following months.
In December 2005 the final draft of the WCO correlation
table was made available to Contracting Parties, and was published on the
WCO website on 19 December 2005. In February 2006, at a meeting
convened in Canberra, Customs provided its first draft of Australia’s
(2002 to 2007) concordance to relevant Government Departments and Agencies –
including the Departments of Foreign Affairs and Trade, Industry, Tourism and
Resources, Agriculture, Fisheries and Forestry, and the Australian Bureau of
Statistics. Customs also consulted the Treasury in relation to duty rate
issues.
Since that time Australia’s concordance has been updated in
minor ways – the final version being published on Customs’ website on 13
September 2006 to reflect the content of the Customs Amendment (2007 Harmonized
System Changes Bill) 2006 (the Customs Tariff Bill) that had been introduced
into Parliament the previous week. Customs has continued to consult with
policy departments and agencies in relation to their stakeholder and client
interests.
On 24 March 2006 Customs provided drafting
instructions to the Office of Parliamentary Counsel (OPC) to reflect the 1,200
changes that are contained in the Customs Tariff Bill. The first draft of the Bill
was provided to Customs in May 2006, and after multiple proof-reading and
editorial changes, the Bill was finalised in late-August 2006 for consideration
by relevant Ministers. The Explanatory Memorandum for the Bill was prepared by
Customs in consultation with policy agencies.
Customs has established a
separate part of its internet website for HS2007 matters. The website contains
the following material:
- the Customs Tariff Bill and the Customs Amendment (2007 Harmonized
System Changes Bill) 2006;
- the related Explanatory Memorandums;
- the Concordance;
- Australian Customs Notices setting out the proposed process for
implementation, subject to passage of the legislation.
Although the legislative changes were prepared within
existing resources, Customs set aside specific funds from 1 July 2006 to establish a small team within Trade Branch – the HS2007 Implementation
Project. Led by a Director, the team comprises some staff within the Branch
who have responsibility for tariff classification, Tariff Concession Orders,
Tariff Advices and Precedents. The team draws on the expertise of Customs’
regional tariff staff, and some recently retired tariff officers.
Free Trade Agreement administration aspects of HS2007 (rules
of origin, preferential duty rates) have been managed within Trade Branch’s
Valuation and Origin Section, in consultation with the Departments of Foreign
Affairs and Trade, and Industry, Tourism and Resources. Trade Branch also
liaises closely with other Branches within Customs (such as Compliance Branch,
Cargo Branch, Cargo Systems Branch and Intelligence Branch) in respect of their
regulatory or administrative responsibilities – such as cargo reporting,
declarations by importers or their agents, information technology impacts, and
risk assessment.
In July 2006 the HS2007 Implementation Project team
commenced an analysis of existing Tariff Concessions Orders (TCOs) to identify those
that will require revocation and re-issue as a result of the amendments
contained in the Customs Tariff Bill. This process is expected to be completed
by the end of October 2006. (Customs currently estimates that about 750
existing TCOs will need to be revoked and replaced with approximately 1,000 new
TCOs).
As mentioned in the recent Australian Customs Notices, more
information will be provided to interested parties as soon as this process is
complete – including a concordance of existing and proposed replacement TCOs
for the use of Customs clients. The other related Bill recently introduced
into Parliament – the Customs Amendment (2007 Harmonized System Changes) Bill
2006 (TCO Bill) – would allow anticipatory changes to be made to affected TCOs
between the date of Royal Assent and 1 January 2007. In 2002, under
the current legislation, this process was not able to be completed until after
the HS2002 classification changes took effect, so successful passage of the TCO
Bill would allow more timely implementation than occurred in 2002.
Funds have been set aside for the printing and publication
of new tariff and tariff concessions working pages, used by importers and/or
their agents. Funds have also been provided for expenses related to the provision
of newspaper advertisements and information sessions in capital cities around Australia
in the coming months.
3. Your submission
states that Customs is endeavouring to provide a "seamless
transition" into HS2007 and its associated changes by consulting parties
about the proposed changes. Describe the process by which Customs has consulted
with industry stakeholders about the proposed amendments, especially customs
brokers, importers and exporters? How widely, and by what methods, has
information been disseminated to relevant affected parties?
Response
As mentioned in response to
question 1, where there are significant changes proposed as part of the
five-year HS review process, Customs consults policy agencies and industry
groups at an early stage when issues are being considered by the WCO’s HS
Committee.
As an example: in 2001-2002 Australian Customs participated in a WCO project to
examine and update certain of the Explanatory Notes (ENs) to the HS and
recommend any changes. Australia undertook to examine and update the ENs for high technology goods (eg information
technology and telecommunications equipment), classified in Chapters 85 and 90
of the HS. This involved significant consultation with relevant industry
groups in Australia including
the Australian Electrical and Electronic Manufacturers Association and the
Australian Information Industry Association.
Many of the
issues raised by the industry groups that could not be resolved through
amendment to the ENs were referred to a WCO working party set up to examine
changes to the HS. This in turn led to significant changes to Chapters 85 and
90 as part of HS2007. Consultation with industry groups and bodies continued
throughout this process.
During the preparation of the Australian 8-digit classifications
and related duty rates, Customs also sought advice on technical aspects of the
proposed changes from relevant industry associations, including in consultation
with the Department of Industry, Tourism and Resources. Any discussions were
based on the Government’s intention that implementation of the HS2007 changes
within Australian legislation should, to the greatest extent possible, preserve
duty rates and margins of tariff preference.
Following introduction of the legislation in Parliament on 7 September 2006, Customs formally informed interested parties of the pending changes
through the processes outlined below.
On 13 September
2006, Customs issued Australian Customs
Notice 2006/44 about the proposed HS amendments, and ACN 2006/45 about
changes to Tariff Concession Orders, Tariff Advices and Precedents, and Origin Advice Rulings. Both ACNs are
available on the Customs website [www.customs.gov.au] and provide
directions to the HS2007 information page.
The HS2007 information page contains links to all available
information on the proposed tariff changes – including a copy of the
legislation, the associated Explanatory Memorandums and a concordance showing
linked current and proposed post-January 2007 tariff classifications. This
page will also be used to provide advice about the revocation and reissue of
Tariff Concession Orders, the voiding of and application for Tariff Advices,
and the replacement of Tariff Precedents affected by the changes.
Copies of the documents contained on the website are
available to Customs clients, on e-mail request, to an address specified in the
ACNs mentioned above. There will be broadcast messages made available on
Customs’ Integrated Cargo System (ICS), drawing the attention of importers and
their agents to the proposed changes. ICS also has a facility that allows
Customs to identify clients who routinely import goods likely to be affected by
the HS2007 changes, and regular messages will be supplied on-line to those
clients when they import those goods over the coming months.
Customs clients are also invited to forward specific queries
on the HS2007 changes to the address specified in the notice. We have received
a low but steady level of inquiries through this avenue since the ACNs were
published.
Due to the confidential nature of Origin Advice Rulings
Customs will be corresponding directly with a small number of clients who may
be affected by the HS2007 changes and therefore require new Advice Rulings.
Customs will also be contacting clients who have received Tariff Advices for
specific importations, in case they would be voided as a result of the HS2007
changes and replacement Tariff Advices might be needed for future importations.
In consultation with Customs, the Australian Bureau of
Statistics is also preparing new statistical codes, where required, for amended
or newly created tariff classifications. The proposed new statistical codes
are available on the ABS website [www.abs.gov.au] and interested
parties have been invited to provide comments to the ABS by 6 October 2006.
Customs proposes to hold information sessions in
respect of the HS changes, in capital cities around Australia.
Details of these sessions will be published in major metropolitan newspapers
and circulated more widely, including through Customs National Consultative
Committee members.
Subject to successful passage of the legislation, revised
hard-copy Customs Tariff ‘working pages’ incorporating the HS changes and new
statistical codes will be printed and distributed to Customs clients.
4. Australian
Customs Notice 2006/45 indicates that tariff advices affected by the HS2007
changes will lapse and that revised tariff advices cannot be lodged until after
1 January 2007. Is it the case that importers and their customs brokers will
therefore be at risk of liability for incorrect statements without being able
to rely on the protections in a tariff advice?
Response
Customs’ Compliance Philosophy is to improve the level of
voluntary compliance by clients within the broader context of managing the
security and integrity of Australia’s borders, which includes the prevention of
the illegal movement of cargo across our borders and the collection of revenue
on border related transactions.
In performing this role Customs believes that the correct
and timely reporting of information relating to cargo is crucial to the smooth
movement of goods into the marketplace and for our efforts in identifying
suspect transactions and cargo. With this in mind Customs and industry have
worked closely together in recent years to achieve improved reporting and
compliance. Customs has encouraged a regime of voluntary compliance through
education, examination and feedback.
There is a legislated Infringement Notice Scheme that deals
with non-compliance. The Infringement Notice Scheme (INS) Guidelines (a
legislative instrument tabled in Parliament) provide the importer or customs
broker with some protection from penalties issued under that scheme.
A decision to issue an infringement notice can only be made by a delegate
of the CEO of Customs. A judgement is made in each case based on the
individual circumstances of the case. The delegate of the CEO may exercise
discretion in this process, including whether an offence occurred as a result
of recent legislative change or a reliance on Customs advice.
The INS Guidelines provide the importer or customs broker
with protection from penalty by requiring a delegate of the Chief Executive
Officer of Customs to consider the:
- significance of the breach;
- effort/attempt to comply;
- any reliance on Customs advice; and
- reasons beyond the person’s control.
The Customs Act 1901 (the Act) also contains two
legislative defences to liability for a false and misleading statement – the
‘amberline’ defence and the voluntary disclosure defence. These defences can
protect importers and their customs brokers from liability where they are
awaiting a tariff advice. For example, penalties may not apply in certain
circumstances where a person specifies uncertainty as to the accuracy of
information included (or omitted) – that person will not be considered to have
committed an offence if the statement was incorrect.
In a self-assessment environment for import declarations,
false and misleading statement offences are generally identified by Customs
some time after the goods were first entered for home consumption. Therefore,
once an importer or customs broker has received a tariff advice indicating that
goods have previously been entered in error, it should be possible to voluntarily
disclose to Customs those entries in error and not be liable for the offence of
a false and misleading statement.
It should be noted that Customs is disseminating all
information about the proposed changes as it becomes available, including
information concerning the voiding and replacement of Tariff Advices, to
affected parties. Customs would expect those parties to take that information
into account when entering imported goods from 1 January 2007.
5. Why has Customs set a deadline of 6 October
2006 for comments to be provided on changes to the statistical codes being
drafted by the Australian Bureau of Statistics, to reflect the HS2007 changes?
How does this deadline give interested parties enough time to properly advise
Customs of concerns they may have?
Response
The Australian Bureau of Statistics (ABS) set
the deadline of 6 October 2006 for comments to be provided on changes to the statistical
codes being drafted by the ABS.
This deadline ensures that the ABS will have
sufficient time to consider any comments and provide Customs with final
statistical codes in time for the classifications to be advised to exporters,
importers, their agents and statistical users for a 1 January 2007 implementation.
The majority of the statistical codes proposed
by the ABS were released on the ABS website on 20 September with the remainder
released on 25 September. The timing proposed by the ABS was advised in a
discussion paper ABS Implementation in January 2007 of Revisions to
International Trade Classifications, 2007 (ABS Cat. no. 5368.0.55.005)
released on 9 June 2006. The availability of this information paper was announced
in relevant ABS publications and the Foreign trade theme page of the ABS
website and was notified to clients receiving detailed statistical information.
The ABS approach to determining the statistical
codes differed significantly from that used with the introduction of Harmonized
System 2002, in that, the ABS approach for HS2007 was to maintain the existing
statistical codes in the Customs Tariff and AHECC where possible.
The discussion paper
mentioned above contained the following statement:
USER OPPORTUNITY TO
REVIEW STATISTICAL CODE CHANGES
As the ABS is intending to maintain current
statistical codes wherever possible, the ABS will generally not consult clients
as part of this review. However, the ABS will appreciate feedback on any
apparent errors in the statistical codes or concordances.
The ABS will progressively issue proposed changes to the
8-digit export statistical codes from August 2006 and then provide a limited
period for interested parties to provide feedback. A similar process will be
followed for the 10-digit import statistical codes, once Customs has released
the 8-digit tariff items.
After the consultation period, the final new
classifications will be made available progressively on the ABS website, so
importers, exporters and their agents and statistical users can update their
systems. It is expected that these will be available by mid to late November
2006. [Subsequent note: this is dependent on the passage of the related
Customs’ legislation through Parliament].
The above timing did not provide a long period
for comment but the impact on statistical codes was not anticipated to be large
and no requests for additional timing have been received. Any such requests
would have been considered on a case-by-case basis.
While a longer period for feedback on errors may have
been desirable, there were several constraints including when the statistical
codes could be made public; the time required to ensure the classifications and
relevant systems were updated by 1 January; and the need to ensure that the
statistical codes reflected the latest concordances provided by Customs based
on concordances from the World Customs Organisation.
In relation to the first point, the statistical codes
could not be released before the Customs Tariff Bill was tabled in
Parliament, which occurred on 7 September 2006, as the import statistical
codes can not be interpreted without the additional 2 digits used for the
domestic imposition of customs duties detailed in that Bill. In relation to
the third point, the draft Customs 8-digit concordance was substantially
complete by the end of March 2006 but minor amendments continued to be made up
to the time that the related Customs Tariff Bill was introduced into
Parliament, and the draft concordance was published on the Customs website.
6. The Law Council of Australia submission argued
that Customs should provide a six‑month moratorium for importers and
customs brokers to prevent them being held liable for inadvertent errors and
for using “outdated” information in reporting to Customs as a result of the
proposed changes.
- What is Customs’ view on the idea of a moratorium?
- Why doesn’t the legislation contain a provision which
explicitly enables Customs to exercise discretion as to whether or not action
is taken against a person who makes an inadvertent error in reporting to
Customs?
- What is Customs’ response to the argument that a moratorium
may provide some protection from adverse consequences which might result in
financial penalties for imports and customs brokers?
Response
As identified in the answer to
Question 4, the two offences under the Act that would apply to ‘inadvertent
errors’ would be:
- a false and misleading statement resulting in a loss of duty (section
243T of the Act); and
- a false and misleading statement not resulting in a loss of duty
(section 243U of the Act).
The answer to Question 4 explains
the mechanisms in place to provide protections to importers and customs
brokers. Customs does not consider a moratorium to be appropriate for this
situation.
Under
subsection 243ZA(1) of the Customs Act, it is a requirement that the Chief
Executive Officer of Customs develop written guidelines in respect of the
administration of the infringement notice scheme. As identified in the answer
to Question 4, these guidelines must be considered when exercising powers in
relation to the Infringement Notice Scheme.
Discretion
currently exists in the legislation, as it is not mandatory for an infringement
notice to be served in relation to an offence. The Infringement Notice
Guidelines adequately enable such a discretion to be exercised.
Customs does not believe that a
moratorium will be able to afford importers and customs brokers any better
protection than is already available.
7. The committee is concerned about any unintended
consequences of the proposed amendments, which may not arise for some time.
What is your response to the argument that the proposed legislation include a
provision which enables the CEO of Customs to make such orders or regulations
as are necessary to overcome any unintended consequences?
Response
In respect of the amendments contained in the Customs Tariff
Bill - if an error was identified, and Parliament was sitting, the Government
could introduce a Customs Tariff Proposal into the House of Representatives to
correct the error. The moving of a Customs Tariff Proposal is normally treated
as a formal procedure for the purpose of initiating the collection of a duty.
Collection of duties is commenced on authority of an unresolved motion, and
this has been accepted by convention (House of Representatives Practice, Fourth
Edition, 2001).
In the event an error is detected when Parliament is not
sitting, a Notice of a Customs Tariff Proposal may be published by the CEO of
Customs in the Gazette, to correct the error. The Notice is deemed to have
effect from such time, after its publication in the Gazette, as specified in the
Notice. Any Customs Tariff Proposal given notice in this way must be proposed
in the Parliament within seven sitting days of the next meeting of the House of
Representatives.
A Customs Tariff Amendment Bill is introduced at an
appropriate later time to incorporate outstanding Tariff Proposals. These
Bills are necessarily retrospective in nature, reflecting the dates of effect
set out in each Tariff Proposal.
If an error were identified before 1 January 2007, ie before
any importations were impacted by an incorrect rate of duty, the Customs Tariff
Proposal or Notice mechanism could be applied, with a date of effect of 1
January 2007.
Similarly, if an error were identified after 1 January 2007,
which resulted in importers paying a higher rate of customs duty on goods than
that paid prior to the introduction of HS2007, the Customs Tariff Proposal or
Notice would be applied with a date of effect of 1 January 2007. This
would allow importers to claim refunds for any affected consignments.
If, however, an error were
identified after 1 January 2007 that resulted in importers paying a lower rate
of customs duty on goods than that paid prior to the introduction of HS2007,
the Customs Tariff Proposal or Notice could only be applied with a prospective
date of effect. In this case, Customs would not seek the recovery of any duty
shortpaid between 1 January 2007 and the date the error was corrected by the
Customs Tariff Proposal or Notice.
In respect of TCOs, existing provisions under section 269SD
of the Act allow the CEO to revoke and reissue TCOs where the tariff
classification is incorrect or has been changed. Therefore, should a TCO be
revoked or reissued incorrectly under proposed new subsection 269SD(2A),
existing provisions would allow that error to be corrected with effect from
1 January 2007.
Customs is of the view that provisions already exist to
ensure that inadvertent errors made in translating tariff classifications and
TCOs as a result of HS2007 do not adversely impact on importers. Therefore, it
is unnecessary for the proposed legislation to include a provision to enable
the CEO of Customs to make orders or regulations to overcome any unintended
consequences.
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