BILLS DIGEST NO. 10, 2017–18              9 August 2017

Customs Tariff Amendment (Incorporation of Proposal and Other Measures) Bill 2017

Paul Davidson
Economics Section 

Date introduced:  21 June 2017

House:  House of Representatives

Portfolio: Immigration and Border Protection

Commencement: Schedule 1 and Schedule 2, Part 3 commence on 1 January 2017. Schedule 2, Parts 1, 2, and 5 commence 28 days after Royal Assent. Schedule 2, Part 4 commences on 1 January 2018.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at August 2017.

Purpose of the Bill

The purposes of the Customs Tariff Amendment (Incorporation of Proposal and Other Measures) Bill 2017 (the Bill) are to amend the Customs Tariff Act 1995 (the Act) so as to:

•       remove the $12,000 duty on imported used and second-hand motor vehicles and

•       make a number of corrections and technical amendments.

Structure of the Bill

The Bill contains two Schedules. Schedule 1 incorporates a tariff proposal in the Act. Schedule 2 contains five parts where Parts 1–3 and 5 provide for a number of corrections and technical amendments to the Act. Part 4 provides for amendments to the Act in relation to the importation of used and second-hand motor vehicles.

Committee consideration

Senate Standing Committee for the Scrutiny of Bills

At the timing of writing, the Bill had not been considered by the Committee.[1]

Senate Standing Committee for the Selection of Bills

The Selection of Bills Committee recommended that the Bill not be referred to a committee for inquiry.[2]

Financial implications

The Government considers that the Bill will reduce customs duty revenue by $13.5 million over the forward estimates (Table 1).

Table 1: financial impact statement

Revenue ($m)

2016–17

2017–18

2018–19

2019–20

2020–21

Extending concessions for automotive prototypes

-1.5

-3.0

-3.0

-3.0

-3.0

Removing the $12,000 special duty on used and second-hand motor vehicles

-

-

..

..

..

.. Not zero, but rounded to zero.

Source: Explanatory Memorandum, Customs Tariff Amendment (Incorporation of Proposal and Other Measures) Bill 2017, p. 4.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[3]

Parliamentary Joint Committee on Human Rights

At the timing of writing, the Bill had not been considered by the Committee.[4]

Key issues and provisions

The Act imposes customs duty on goods imported into Australia. The rate of duty applicable to particular goods is determined by the classification to which those goods belong.[5] In most cases reference will need to be made to Schedule 3 of the Act, which classifies goods according to the International Convention on the Harmonized Commodity Description and Coding System (the Harmonized System) and sets out the rate of duty that applies to such goods.[6] The Harmonized System aims to ensure that imports (and exports) are classified on a standardised basis for customs purposes throughout the world. Australia has been a signatory to the Harmonized System since 1988. Schedule 1 and parts 1 to 2 and 4 to 5 of Schedule 2 to the Bill amend Schedule 3 to the Act.

Part 4 of Schedule 2 to the Bill amends Schedule 4 to the Act, under which goods imported into Australia in specified circumstances, including goods imported for use by particular persons or bodies in particular industries, may be subject to a lesser rate of duty than would otherwise apply.[7]

Schedule 1—Incorporation of Proposal

Item 1 repeals existing subheading 6907.30.10 of Schedule 3 which relates to specific mosaic tiles and provides that the duty rate is free, replacing the current rate of five per cent. The Customs Tariff Proposal (No. 1) 2017 which item 1 relates to, corrects an error in the Customs Tariff Amendment (2017 Harmonized System Changes) Act 2016 which erroneously referred to mosaic tiles under subheading 6907.30.10 as being subject to a customs duty of five per cent.[8]

Item 2 provides that the amendment made in item 1 takes effect from 1 January 2017 in order to ensure that businesses are not unduly subject to an erroneous customs duty of five per cent.

Schedule 2—Other amendments

Part 1—Machining centres

Item 1 repeals Schedule 3 subheadings 8465.20.10 to 8465.20.60 (inclusive) which deal with machining centres. Currently, machine operations are differentiated according to: seven operations across three tariff subheadings subject to a five per cent duty rate; and a further seven operations across three tariff headings which are duty-free.

Item 1 repeals subheadings 8465.20.10 to 8465.20.60 and replaces them with proposed subheadings 8465.20.70 and 8465.20.80 to provide for machining centres that can provide two or more identified operations. Those relating to two or more of sawing, planing, milling, moulding (by cutting), grinding, sanding, or polishing will remain subject to a five per cent duty rate. Those relating to two or more of bending, assembling, drilling, morticing, splitting, slicing, or paring remain duty-free.

The Explanatory Memorandum to the Bill explains that the reason for item 1 is due to industry feedback that ‘the composite nature of these goods made classifying them … difficult’.[9] Item 1 therefore better allows for the composite nature of the goods by permitting them to be classified according to performing two or more operations.

Part 2—Paraquat dichloride

Paraquat dichloride is a chemical commonly used as a herbicide. The effect of items 3 and 4 is to repeal the Additional Note of Schedule 3 Chapter 29 (which deals with chemicals) relating to paraquat dichloride. Currently paraquat dichloride is classified as a residual category under heterocyclic compounds with nitrogen hetero-atom(s) only.

Item 5 amends the Act to add a new classification specifically relating to paraquat dichloride in Schedule 3 Chapter 38. Currently, herbicides, anti-sprouting products and plant-growth regulators are all subject to a five per cent customs duty rate. Item 5 replaces this with proposed subheadings 3808.93, 3808.93.10 and 3808.93.90 to add paraquat dichloride with added emetic (a substance commonly inserted to induce vomiting if ingested) and to provide that it be duty-free (consistent with its current duty rate status in Chapter 29). The item also provides that a five per cent customs duty remains on all other herbicides, anti-sprouting products and plant-growth regulators.

Part 3—Automotive service providers

Item 7 amends table item 39 paragraph (b) in Schedule 4 of the Act, which provides a concessional rate of duty to certain goods in relation to motor vehicles (or components of motor vehicles) designed or engineered, (or in the process of design or engineering) under the Automotive Transformation Scheme.[10]

Currently, only ‘motor vehicle producers’ are eligible to receive concessional duty rates (currently duty-free), which essentially apply to prototype design or engineered motor vehicles or components. Item 7 extends the concessional duty to automotive service providers. The amendment is largely as a result of the announcements by Australian motor vehicle producers—Ford, Holden, and Toyota—that they will cease manufacturing in Australia. However, all three companies have announced that they will provide other automotive industry services. Therefore, the addition of ‘automotive service providers’ to table item 39 paragraph (b) will permit those companies (and other automotive service providers) to import prototype design or engineered motor vehicles duty-free.

Part 4—Used or second-hand vehicles

Part 4 proposes to remove the $12,000 special customs duty that currently applies to used or second-hand motor vehicles, which are generally classified according to engine size and/or vehicle type. In addition, such imports are generally subject to a five per cent customs duty rate, unless they are imported from a Forum Island Country, a Least Developed Country, a Developing Country, or Canada, in which case they are duty-free (but still subject to the $12,000 special customs duty). The five per cent customs duty will remain on used or second-hand motor vehicles.

Therefore, as a result of the amendments, imported used or second-hand motor vehicles from a Forum Island Country, a Least Developed Country, a Developing Country, or Canada will become completely duty-free. Imported used or second-hand motor vehicles from any other country will remain subject to a five per cent customs duty, apart from where those vehicles imported are from the United States or from Japan.

Item 35 repeals table items which cover used or second-hand motor vehicles which originate from the United States. Table items 935, 937, 939, 941, 943, 945, 947, and 949 in Schedule 5 of the Act provided for a transitional customs duty arrangement in accordance with the Australia-United States Free Trade Agreement.[11] Under that Agreement, since 1 January 2010, all used or second-hand motor vehicles have been subject only to the special customs duty of $12,000 (that is, the general customs duty has been zero). Item 35 repeals the special customs duty and as a result such vehicles will no longer be subject to a customs duty of any kind.

Item 36 repeals analogous table items with regards to Australia’s commitments under the Japan-Australia Economic Partnership Agreement (which are covered in Schedule 11 to the Act).[12] From 1 April 2016, imported used or second-hand motor vehicles from Japan were subject only to the special customs duty of $12,000 (that is, the general customs duty has been zero). Item 36 repeals the special customs duty and as a result such vehicles will no longer be subject to a customs duty of any kind.

Part 5—Technical amendments

Item 38 amends the description relating to tanned or crust skins of sheep or lambs in Schedule 3 Chapter 41 to correct the number of dashes that appear before the description.

Item 39 amends the description relating to other woven fabrics of cotton under Schedule 3 subheading 5212.2 to correct the number of dashes that appear before the description where the fabric weighs more than 200 g/m2.

© Commonwealth of Australia

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.

Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library’s Central Enquiry Point for referral.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

[1].              Senate Standing Committee for the Scrutiny of Bills, Index of bills considered by the committee, 2017, The Senate, Canberra, 21 June 2017.

[2].              Senate Standing Committee for the Selection of Bills, Report, 7, 2017, The Senate, Canberra, 22 June 2017.

[3].              The Statement of Compatibility with Human Rights can be found at page 5 of the Explanatory Memorandum to the Bill.

[4].              Parliamentary Joint Committee on Human Rights, Index of bills and legislative instruments, 2017, The Senate, Canberra, 20 June 2017.

[5].              User’s Guide: the operation of the Act in Customs Tariff Act 1995.

[6].              International Convention on the Harmonized Commodity Description and Coding System, done in Brussels on 14 June 1983, [1988] ATS 30, (entered into force for Australia and generally on 1 January 1988).

[7].              User’s Guide: the operation of the Act in Customs Tariff Act 1995.

[8].              For information on Customs Tariff Proposal (No. 1) 2017 see: P Dutton, Summary of alterations: Customs Tariff Proposal (No. 1) 2017, Australian Parliament, Canberra, 15 February 2017.

[9].              Explanatory Memorandum, Customs Tariff Amendment (Incorporation of Proposal and Other Measures) Bill 2017, p. 2.

[10].              The Automotive Transformation Scheme (ATS) is established under the Automotive Transformation Scheme Act 2009. The ATS ‘provides eligible businesses that are involved in the Australian automotive industry with cash payments to cover up to 15% of the cost of investing in plant and equipment, and 50% of the cost of investing in research and development. Cash payments are also available for activities related to the production of motor vehicles, engines and engine components’. Australian Government, ‘Automotive Transformation Scheme (ATS)’, business.gov.au website.

[11].              Australia-US Free Trade Agreement, done in Washington on 18 May 2004, [2005] ATS 1 (entered into force on 1 January 2005).

[12].              Agreement between Australia and Japan for an Economic Partnership, done in Canberra on 8 July 2014, [2015] ATS 2 (entered into force on 15 January 2015).