Bills Digest No. 55, 2012–13

27 November 2012

Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012

Leah Ferris, Law and Bills Digest Section

Eugenia Karanikolas, Economics Section

Date introduced: 1 November 2012

House: House of Representatives

Portfolio: Home Affairs

Commencement: Sections 1-3 commence on Royal Assent. Schedule 1 and Part 1 of Schedule 2 commence at the same time as Schedule 1 to the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Act 2012 commences.[1] However, if Schedules 1 and 2 to the Customs Tariff Amendment (Schedule 4) Act 2012 commence at or before that time, Part 1 of Schedule 2 does not commence at all.[2] Part 2 of Schedule 2 commences immediately after the provisions in Schedule 1 or immediately after the commencement of Schedules 1 and 2 to the Customs Tariff Amendment (Schedule 4) Act 2012, whichever occurs later.[3]

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose of the Bill

The purpose of the Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012 (the Customs Tariff Bill) is to amend the Customs Tariff Act 1995 (the Customs Tariff Act)[4] to:

·         provide free rates of customs duty for goods that are considered to be Malaysian originating goods

·         amend Schedule 4 to maintain customs duty rates for certain Malaysian originating goods in accordance with the applicable concessional item and

·         insert new Schedule 9 to maintain excise equivalent duties on certain alcohol, tobacco and petroleum products.[5]

Background

This Bills Digest should be read in conjunction with the Digest for the companion Bill—the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012 (Customs Amendment Bill)[6] — which amends the Customs Act 1901 (the Customs Act) to give effect to the Malaysia-Australia Free Trade Agreement, done at Kuala Lumpur on 22 May 2012 (MAFTA).[7]

Specifically, the Customs Amendment Bill will insert new Division 1H into Part VII of the Customs Act, which sets out when goods will be considered to be Malaysian originating goods and therefore eligible to receive preferential rates of duty upon entering Australia. The Customs Tariff Bill will amend the Customs Tariff Act to give effect to the new tariff rates available to goods being exported from Malaysia.

Committee consideration

Selection of Bills

At its meeting on the 19 November 2012, the Senate Selection of Bills Committee determined that the Bill not be referred to any committee for inquiry and report.[8]

Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills had no comment to make in regards to this Bill.[9]

Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights has yet to report on this Bill.

Financial implications

As stated in the Explanatory Memorandum:

The Agreement is anticipated to reduce tariff revenue by $80 million over the forward estimates.[10]

Key issues and provisions

The Bill is divided into two schedules:

·         Schedule 1 of the Bill set out the main amendments, which include amending the Customs Tariff Act to reflect the new tariff rates for Malaysian originating goods and ensure that Malaysian exporters will still be subject to the same excise payments as Australian produced goods with regards to alcohol, tobacco and petroleum and

·         Schedule 2 of the Bill provides for contingent amendments with regards to Schedule 4 of the Customs Tariff Act, to address the uncertainty surrounding the commencement of the Customs Tariff Amendment (Schedule 4) Act 2012 (the Schedule 4 Act) and the Customs Amendment Bill.

Schedule 1

Items 1-19 of Schedule 1 of the Bill amend the Customs Tariff Act to provide free rates of customs duty for Malaysian originating goods. In particular, these items update the Customs Tariff Act to include references to Malaysian originating goods and to specify duty rates in Schedule 4 (Schedule of Concessional Rates) for Malaysian originating goods.[11]

Some of the key provisions include:

·         Items 1-7 set out various amendments, which allow for rates of duty to be inserted under proposed Schedule 9 of the Customs Tariff Act

·         Item 8 inserts new section 13F into the Customs Tariff Act. Proposed section 13F provides that goods will only be considered Malaysian originating goods under the Tariff Act, if they are considered to be Malaysian originating goods under new Division 1H of Part VII of the Customs Act and

·         Items 9-16 amend sections 16 and 189 of the Customs Tariff Act, to allow for the determination of rates of custom duty that apply to goods considered to be Malaysian originating goods.[12]

Item 20 inserts new Schedule 9 into the Customs Tariff Act. While MAFTA provides that free rates of duty will be applied to Malaysian originating goods, some goods will still be subject to duties where the goods would have been subject to an internal tax had they been produced in Australia. Therefore, Malaysian exporters of these goods will be subject to paying a duty equal to the amount of excise duty imposed on domestic producers under the Excise Tariff Act 1921 (Excise Tariff Act).[13]

Under the proposed amendments to section 16 of the Customs Tariff Act (at items 9-12 of Schedule 1 of the Bill), the rates of customs duty for Malaysian originating goods are free unless a rate of duty is specified for those goods in proposed Schedule 9. Therefore items 1-135 of proposed Schedule 9 ‘impose customs duty on the alcohol, tobacco and petroleum products that are Malaysian originating goods, at a rate that is equivalent to the excise duty imposed under the Excise Tariff [Act], on the same grounds when domestically produced’.[14] These inclusions can be seen as rationale and consistent with Australia’s trade and health policy. For example, it would be unreasonable for a Malaysian exporter to be able to freely export tobacco into Australia when Australian companies pay a high excise duty and it is the policy of the Government to reduce tobacco use.[15]

Items 21-25 of Schedule 1 to the Bill amend the User Guide contained in the Customs Tariff Act to clarify that both the ASEAN-Australia-New Zealand Free Trade Agreement (AANZ)[16] and MAFTA will operate alongside one another, and that the amendments to the Customs Tariff Act will not affect the existing preferential status that Australia receives under AANZ.[17]

Schedule 2

Schedule 2 of the Bill provides for various amendments with respect to Schedule 4 of the Customs Tariff Act. Schedule 4 sets out the concessional rates of import duty that apply to certain goods and services. It is therefore necessary for Schedule 4 to be amended to specify rates of customs duty for Malaysian originating goods for those concessional items where the rate of duty is not free.[18]

There are two possible ways in which these amendments may occur:

The Customs Tariff Amendment (Schedule 4) Act 2012 (the Schedule 4 Act) will commence either by Proclamation or six months after the date the Act received the Royal Assent (which occurred on 25 September 2012) whichever is the earliest.

The Schedule 4 Act will repeal the existing Schedule 4 of the Customs Tariff [Act] and replace it with a new Schedule.  The Schedule 4 Act will affect all the items in the present Schedule 4, including the re-numbering of the concessional items.

However, at the time the Customs Tariff Bill is introduced, the commencement dates of the Schedule 4 Act and the Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012 (the Customs Tariff Bill) are not certain.  Consequently, Schedule 2 to the Customs Tariff Bill contains contingent provisions provide for the circumstances of either commencing first.

Should the Customs Tariff Bill commence first, it will provide the necessary amendments to the existing Schedule 4 items.  In this circumstance, Part 2 of Schedule 2 of the Customs Tariff Bill provides equivalent amendments for the new Schedule 4, with that Part commencing immediately after the commencement of the Schedule 4 Act.

Should the Schedule 4 Act commence before the Customs Tariff Bill, the Schedule 4 Act will repeal and replace the existing Schedule 4.  In this circumstance, the Customs Tariff Bill will only amend the new Schedule 4 items.[19]

It is unclear why the Government has not simply chosen to proclaim a date on which the substantive provisions of the Schedule 4 Act will commence and therefore avoid the ‘tale of two Acts’ scenario. However, as the Bill adequately addresses the situation, this is not a real concern.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2430 or (02) 6277 2463.

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ISSN 1328-8091

[1].              The Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012 is currently before Parliament. The Bill homepage is at: http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query%3DId%3A%22legislation%2Fbillhome%2Fr4923%22

[2].              The Customs Tariff Amendment (Schedule 4) Act 2012 received Royal Assent on 25 September 2012. Schedules 1 and 2 of that Act will commence on a date to be proclaimed, the day after six months after Royal Assent (which would be 26 March 2013). The Customs Tariff Amendment (Schedule 4) Act 2012 is available at: http://www.comlaw.gov.au/Details/C2012A00138

[3].              As MAFTA is scheduled to come into force on 1 January 2013, it is important for the Government that this Bill and the Customs Amendment Bill be passed this year.

[4].              The text of the Customs Tariff Act 1995 can be viewed at: http://www.comlaw.gov.au/Details/C2012C00847

[5].              Explanatory Memorandum, Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012, p. 2, viewed 5 November 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fr4922_ems_fcdac3c1-5b9b-4507-8a0b-6065c0376af3%22

[6].              The Digest for the Customs Amendment Bill is available on the Bill’s homepage: http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query%3DId%3A%22legislation%2Fbillhome%2Fr4923%22

[7].              Malaysia-Australia Free Trade Agreement done at Kuala Lumpur on 22 May 2012, [2011] ATNIF 9 (not yet entered into force), viewed 26 November 2012, http://www.austlii.edu.au/au/other/dfat/treaties/notinforce/2012/9.html

[8].              Selection of Bills Committee, Report No. 15 of 2012, Senate, Canberra, 19 November 2012, viewed 22 November 2012, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=selectionbills_ctte/reports/2012/rep1512.htm

[9].              Scrutiny of Bills Committee, Alert Digest No. 14 of 2012, Senate, Canberra, 21 November 2012, p. 5, viewed 22 November 2012, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=scrutiny/alerts/2012/index.htm

[10].              Explanatory Memorandum, op. cit., p. 2.

[11].              Ibid., p. 6.

[12].              Ibid., p. 7.

[13].              The text of the Excise Tariff Act 1921 can be viewed at: http://www.comlaw.gov.au/Details/C2012C00655

[14].              Explanatory Memorandum, op. cit., p. 10.

[15].              Further information on tobacco excise is set out in a previous Digest: C Barker, L Ferris and M Thomas, Customs Amendment (Smuggled Tobacco) Bill 2012, Bills Digest, no. 28, 2012–13, Parliamentary Library, Canberra, 2012, viewed 25 November 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2F1968741%22

[16].              Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area done at Cha-am, Phetchaburi on 27 February 2009, [2010] ATS 1 (entered into force on 1 January 2010), viewed 26 November 2012, http://www.austlii.edu.au/au/other/dfat/treaties/ATS/2010/1.html

[17].              Explanatory Memorandum, op. cit., p. 6.

[18].              Ibid., p. 12.

[19].              Ibid., p. 12.