Bills Digest no. 68 2007–08
Tradex Scheme Amendment Bill 2008
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
Financial implications
Main provisions
Concluding comments
Contact officer and copyright details
Passage history
Tradex Scheme Amendment Bill
2008
Date
introduced: 21
February 2008
House: House of Representatives
Portfolio: Innovation, Industry, Science and
Research
Commencement:
Sections 1-3 on the day of
Royal Assent. For all other provisions, on a day to be fixed by
Proclamation, or six months after the date of Royal Assent,
whichever is the earlier.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To amend the Tradex Scheme
Act 1999 (Tradex Scheme Act) to remove direct links to the
Drawback Regulations [1] and improve the administration of the Tradex Scheme.
The Tradex Scheme Amendment Bill 2007 (the 2007 Bill) was
introduced into the 41st Parliament on 20 September
2007. There had been no debate on the Bill and the Bill had not
been passed when the Parliament was prorogued in October 2007. As a
result, the 2007 Bill lapsed.
This current Bill was introduced in the same form and without
any alteration to the 2007 Bill.
In his
Investing for Growth industry statement, made in 1997, the
former Prime Minister stated:
A key driving force behind the growth of
world trade in manufactures is an increasing globalisation of
corporate production strategies. As a result, various components of
final goods tend to be traded several times, with value adding
occurring in a number of different locations around the world.
This phenomenon is fostering investment in hub
activities. Our proximity to the rapidly growing Asian economies
and other advantages such as low outbound cargo costs, makes
Australia well placed to attract this type of investment and to
become a regional base for distribution and manufacturing
operations.
The competitiveness of the customs regime is an
important factor in fostering hub activities. In reviewing
Australia s customs regime, it is necessary to take account of the
internationally recognised principle that goods should be taxed
only in the country in which they are consumed. There is also a
need to ensure that compliance costs incurred by companies in
importing and exporting goods are minimised. Australia s
performance in relation to these two aspects of competitiveness can
be improved.
To address these concerns the Government will
consolidate the existing duty drawback and tariff export concession
schemes into one integrated and simplified scheme TRADEX. It will
provide export oriented businesses with streamlined customs
procedures, reduced compliance costs and improved access to relief
from customs duty and sales tax on imported products that are
re-exported or used as inputs to exports. [2]
The Explanatory Memorandum states that the Bill will implement
the Tradex related recommendation from the Review of the Tradex and
Manufacturing in Bond Schemes. [3] At the time of writing this Digest the Review has
not been published.
Tradex is an Australian Government Scheme which
commenced on 24 June 2000. It provides up-front exemptions from
customs duty and GST on imported goods that are intended for direct
export or imported goods that are used, lost or wasted in the
manufacture of other goods that are exported later on.
Normally, importers of goods destined for export later on would
have to pay duty and GST at the time of import. Before the
Tradex scheme was introduced those importers had to claim
a refund ( drawback ) after exporting the goods.
Under Tradex, duty and GST are exempted up-front. For
example, if goods normally attract 5% customs duty and 10% GST, a
Tradex order means an up-front saving of 15% on the value of the
imported goods when they first arrive in Australia. [4]
Duty Drawback allows the
following:
- a repayment of import duty on imported goods after they are
exported provided the goods have not been used in the manufacture
of goods or subjected to a process or treatment or, after their
importation, used for a purpose other than being inspected or
exhibited
- a repayment of import duty on imported goods that are used in
the manufacture of other goods for export, or that were subjected
to a process or treatment in Australia for the purpose of producing
manufactured goods which are exported. Associated loss or wastage
in the manufacture may also be allowed upon the exportation of the
manufactured goods
- a repayment of import duty for imported goods that have been
mixed with like goods produced in Australia and the mixture or part
of the mixture is used in the manufacture or treatment of other
goods which are subsequently exported. The amount of drawback
allowed is a fair and reasonable amount considering:
- the amount of import duty that was paid on imported goods
contained in the mixture
- the quantity of the mixture that has been lost or wasted or has
been used otherwise than in the manufacture or treatment of goods
for exportation, and
- the amount of drawback of import duty that has previously been
paid on the exportation of goods in the manufacture or treatment on
which part of the mixture was used. [5]
Drawback Regulations provide for the return of duties
paid on imported goods if and when those goods are
exported, provided the goods were not inappropriately used or
consumed while in Australia. Exporters are the focus of the benefit
under the Drawback Regulations. [6]
The Tradex Scheme provides access to up front duty
exemption for imported goods intended to be exported. It
also establishes liability to Tradex duty should the goods fail to
be exported, or should they be used or consumed contrary to the
Tradex Scheme Act while in Australia. Importers are the focus of
the benefit under the Tradex Scheme. [7]
The recommendations and proposals are expected to have no
significant impact on revenue. The changes are of an administrative
nature and, while they are designed to improve the administration
of Tradex, they are not expected to generate significant
savings.
The main provisions are contained in Schedule
1.
Items 1-3 amend section 4 of the existing
Tradex Scheme Act by removing the following definitions:
- drawback regulations
- exempt class of goods , and
- requirements of the Drawback Regulations .
The purpose of this Bill is to remove the direct links between
the Tradex Scheme Act and the Drawback Regulations. As a result,
these terms will no longer be referred to in the Tradex Scheme
Act.
Item 4 amends existing paragraph 5(1)(b) of the
Tradex Scheme Act by repealing the requirement that nominated goods
comply with the Drawback Regulations or that the goods are included
in an exempt class of goods, and inserting proposed
paragraph 5(1)(b) which merely requires that the nominated
goods meet the requirement of regulations made for the purposes of
the paragraph. Those regulations are the Tradex Regulations which
are concurrently being amended. [8]
Item 5 is an application provision which
provides that the above amendment to subsection 5(1) of the Tradex
Scheme Act will apply to both:
- an application that has been made but not determined before the
commencement of Schedule 1, and
- an application made on or after the commencement of Schedule
1.
Existing subsection 5(2) sets out the core
criteria for a person who holds a tradex order. Item
6 repeals the existing paragraph 5(2)(b) which requires
that the Drawback Regulations are complied with, and substitutes
proposed paragraph 5(2)(b) which merely requires
that the regulations which have been made for the purposes of the
paragraph have been met. These changes to the core criteria for
holding a tradex order will apply in relation to nominated goods
exported on or after the commencement of Schedule 1: item
7.
Existing paragraph 10(3)(b) provides that the
Secretary may require an applicant to give the Secretary notice in
writing of the measures that the applicant for a tradex order
proposes to take to ensure that the requirements of the Drawback
Regulations will be complied with. Item 8 omits
the reference to the Drawback Regulations and inserts a requirement
that the provisions of the Tradex Regulations will be met in
relation to the nominated goods. This a consequential amendment of
the separation of the regulations.
Item 9 amends existing
subsection 11(1) to omit the requirement that, if the Secretary is
satisfied with certain matters, then the Secretary must make an
order stating that the nominated goods are eligible to be entered
under item 21A of Schedule 4 of the Customs Tariff Act
1995. The reason is that, under the proposed amendments,
nominated goods will automatically be covered by item 21A and the
Secretary simply has to specify the nominated goods that comply.
[9]
Item 10 repeals the existing
subsection 11(8) which provides that a tradex order is not a
statutory rule. This is a technical amendment to remove a redundant
section of the Tradex Scheme Act. The redundancy was caused by the
enactment of the Legislative Instruments Act 2003.
[10]
Items 11 and 12 amend the
numbering of existing section 16 which allows the Secretary to give
notice to the holder of a tradex order to show cause why the tradex
order should not be revoked where a disqualifying
circumstance [11]
exists.
Item 13 inserts proposed
subsection 16(2) which allows the Secretary to give notice
to the holder of a tradex order in circumstances where the
Secretary believes that the goods are not going to be exported.
Upon receipt of the notice, the holder of the tradex order will
have 28 days in which to provide evidence to the contrary. The
Secretary has the power to extend the period either before or after
the end of the period: subsection 43(2).
Existing section 17 of the Tradex Scheme Act
provides for the suspension of a tradex order.
Item 14 amends paragraph 17(1)(b)
to provide for an additional ground on which to suspend a tradex
order, being that the holder does not intend to export the
goods.
Items 15 to 18 amend the
existing section 19 which relates to the revocation of a tradex
order.
Item 17 inserts proposed
subsection 19(1A) which empowers the Secretary to revoke a
tradex order where:
- the Secretary has given the holder of the tradex order a notice
under subsection 16(2), and
- the holder does not satisfy the Secretary within the specified
period that they intend to export the goods referred to in the
notice.
According to the Explanatory Memorandum this will
enable tradex orders to be revoked where holders do not intend to
export the goods and are using the scheme to defer duty payment.
[12]
Under section 9 of the Tradex Scheme Act, the
Secretary must keep a Register of Tradex Orders. The Secretary must
notify the holder of a tradex order of the particulars that have
been entered on to the Register in respect of the order: existing
subsection 9(5). If a change occurs in any of those particulars,
the holder of the tradex order must notify the Secretary of the
nature of the changes within 14 days of the date that they
occur.
Item 18 inserts proposed
section 19A which will allow the Secretary to revoke a
tradex order in circumstances where, after reasonable efforts have
been made to contact the holder of a tradex order, they cannot be
contacted.
Items 19 to 24 amend section 21
which deals with liability to pay tradex duty in certain
circumstances.
Existing subsection 21(2) states that the holder
of a tradex order is liable to pay tradex duty in respect of
certain goods. The goods are described in proposed
subsection 21(1) as:
- goods that are nominated goods in respect of tradex order,
whether that order is current or has been suspended or revoked, and
which were imported before the date of suspension or
revocation
where
- the goods are consumed or used by the holder of the tradex
order in Australia or
- the goods are disposed of, or otherwise dealt with in any way
by the holder of the tradex order for the purpose of being consumed
or used by a person in Australia or
- a requirement of the regulations is not met in relation to the
goods,
- the goods are not exported within the time required by
paragraph 5(2)(c) of the Tradex Scheme Act. [13]
In essence, where imported goods have obtained
the benefit of a tradex order (that is, they have entered Australia
without paying customs duty or GST), they remain liable for tradex
duty if they fail to meet tradex requirements. [14]
Item 22 repeals the existing
paragraph 21(3)(c) which provides that tradex duty is payable
within 28 days after a day on which the Drawback Regulations are
not complied with and substitutes proposed paragraph
21(3)(c) which provides that tradex duty is payable within
28 days of a date on which a requirement of the Tradex regulations
is not met. As with item 13, the Secretary has the power to extend
the period either before or after the end of the period: subsection
43(2).
Item 24 inserts a new definition
of holder into existing subsection 21(6) so that a holder includes
a person who is the holder of a suspended or revoked tradex
order.
A tradex order covers imported goods that are
subsequently exported. The holder of a tradex order can import
goods, duty and tax free relying upon that order, only if the
holder has a reasonable expectation that the goods will be
exported. If, in reality, the goods are not exported, the holder of
the tradex order is liable for tradex duty. Under the existing
Tradex Scheme Act, the onus is on the Commonwealth to prove that
there has been no export.
In order to do so, the Commonwealth must check
every export declaration during a period to confirm that the holder
of the tradex order has not, in fact, exported the goods which are
the subject of the tradex order. [15]
That being the case, item 27
inserts proposed section 40A which effectively
reverses the onus of proof so that the holder of the tradex order
must prove that the goods have been exported rather than the
Commonwealth having to prove that they have not. The rationale for
this reversal is that the evidence that goods have been exported is
in the knowledge of the defendant, not the prosecution, in such
matters. Proposed subsection 40A(2) empowers the
Secretary to give a copy of an evidentiary certificate to the
holder of the tradex order.
Existing section 28 of the Tradex Scheme Act
provides that a person is guilty of an offence if the person is
liable to pay tradex duty in respect of goods and fails to pay the
duty within a specified period. Where a person is being prosecuted
by the Commonwealth under section 28, the evidentiary certificate
issued under proposed section 40A is prima facie
evidence of the matters which are set out in the certificate in
relation to the goods for which duty is alleged to be payable.
Item 28 inserts proposed
section 42A which allows for an amount of tradex duty
which has been overpaid by a person to be refunded, upon request,
by the Commonwealth. Proposed subsection 42A
requires that the request for refund be made in writing, within
four years of the date of the overpayment. An overpayment may occur
where duty is paid in the expectation that goods will not be
exported, during the prescribed period, but the goods are
subsequently exported. [16]
Item 31 repeals existing
subsection 44(2) of the Tradex Scheme Act which states that an
approval by the Secretary of a form is a disallowable instrument.
This provision pre-dates the Legislative Instruments Act
2003 and is not consistent with how other approved forms and
applications for concessional entry are treated. [17]
As already stated, the Bill is said to implement
the recommendations from the Review of the Tradex and Manufacturing
in Bond Schemes. Unfortunately, as the outcomes of the Review were
not published, it is not possible to comment on whether the Bill
achieves this purpose. Nevertheless the Bill does not appear to be
contentious.
Paula Pyburne
3 March 2008
Bills Digest Service
Parliamentary Library
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