Bills Digest no. 35,
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Purpose of the Bills
Structure of the Bills
Selection of Bills Committee
Senate Standing Committee for the
Scrutiny of Bills
Statement of Compatibility with Human
Parliamentary Joint Committee on
Key issues and provisions
Customs Amendment Bill
Customs Tariff Amendment Bill
Date introduced: 13
House: House of
and Border Protection
operative provisions of both Bills will commence 1 January 2017.
Links: The links to the
Bills, their Explanatory Memoranda and second reading speeches can be found
on the homepages for the Customs
Amendment (2017 Harmonized System Changes) Bill 2016 and the Customs
Tariff Amendment (2017 Harmonized System Changes) Bill 2016, or through
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
All hyperlinks in this Bills Digest are correct as
at November 2016.
Purpose of the Bills
The purpose of the Customs
Amendment (2017 Harmonized System Changes) Bill 2016
(Customs Amendment Bill) and the Customs
Tariff Amendment (2017 Harmonized System Changes) Bill 2016
(Customs Tariff Amendment Bill) (collectively, the Customs Bills) are to amend
the Customs Act
1901 (Cth) and Customs Tariff Act
1995 (Cth) (collectively, the Acts) to implement changes to the
Harmonized System (HS) in response to the fifth review of the International
Convention on the Harmonized Commodity Description and Coding System.
of the Bills
The Customs Tariff Amendment Bill contains one Schedule
that proposes to amend various provisions of the Customs Tariff Act,
2 relating to fuel duty rates
3 relating to the classification of goods, and general and specific rates of
in technology will be reflected by creating new classifications to separately
identify hybrid and electric motor vehicles, and light-emitting diodes
in classifications to better monitor trade in certain fish and tropical woods
by the United Nations Food and Agriculture Organization (FAO), to support food
security objectives and management of endangered species
the request of the International Narcotics Control Board, the insertion of new
subheadings to enhance monitoring and control pharmaceutical preparations
containing ephedrine, pseudoephedrine or norephedrine and for
alpha-phenylacetoacetonitrile, to facilitate the monitoring and control of
narcotic drugs and psychotropic substances
subheadings to assist data collection, comparison and monitoring of certain
goods pursuant to Australia’s obligations under international conventions such
as the Rotterdam Convention on the Prior Informed Consent Procedure for Certain
Hazardous Chemicals and the Stockholm Convention on Persistent Organic Pollutants
4 relating to concessional rates of duty
5 to 12 inclusive relate to various trade agreements in force.
The Customs Amendment Bill contains one Schedule that is
proposed to amend Part VAA of the Customs Act. Part VAA provides for
special provisions relating to excise-equivalent goods. The amendments are
intended to parallel the changes to the Customs Tariff Act proposed by
the Customs Tariff Amendment Bill. The Customs Amendment Bill also makes a minor
amendment in relation to biofuels imported under the Chin-Australia Free Trade
Agreement (ChAFTA) to make the duty treatment for biofuel imports under ChAFTA
consistent with that applied to biofuel imports from other countries and
regions with which Australia has trade agreements.
The Harmonized System (HS) is the International Convention
on the Harmonized Commodity Description and Coding System, and is the
responsibility of the World Customs Organization (WCO).
The Harmonized System provides the description and coding system to ensure that
imports (and exports) are classified on a standardised basis for customs
purposes. At an international level, these goods are categorised on a
consistent six-digit basis. Australia has been a signatory to the HS since
1988. The HS is implemented via the Customs Tariff Act for imported
goods and via the Australian Harmonized Export Commodity Classification (AHECC)
for exports. In addition to the six-digit HS classification, Australia has
added further digits (four for imports, two for exports) for domestic and
statistical purposes by the Australian Bureau of Statistics. Only the first two
additional digits for imported products are reflected in the Customs Tariff
The Customs Bills implement changes that emanated from the
fifth review of the Harmonized System. The review resulted in an initial 234
sets of amendments to the current Harmonized System and a recommendation to
implement those changes was accepted by the WCO Council at its 123rd and 124th
sessions in June 2014. As part of the review it was agreed that the new
Harmonized System (HS 2017) would enter into force on 1 January 2017.
Selection of Bills Committee
At the time of publication, the Selection of Bills Committee
had not considered either of the Customs Bills.
Senate Standing Committee for the Scrutiny of Bills
At the time of publication, the Senate Standing Committee
for the Scrutiny of Bills had not considered either of the Customs Bills.
The Customs Amendment Bill is not expected to result in
any financial impact.
The Customs Tariff Amendment Bill may result in a loss of
revenue associated with reclassifying certain electronic integrated circuits to
include multi-component integrated circuits. Some of the multi-component
integrated circuits may currently be subject to a customs duty rate that is not
free. As a result of Australia entering into the expanded Information
Technology Agreement, the duties (such as they exist) cannot be maintained, and
will reduce to a customs duty rate of free.
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 Customs
Bills’ 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 Bills are compatible.
Committee on Human Rights
At the time of publication, the Parliamentary Joint
Committee on Human Rights had not considered either of the Customs Bills.
Part VAA of the Customs Act covers special
provisions relating to excise-equivalent goods. Excise-equivalent goods are
goods that, if manufactured in Australia, would be subject to duties of excise under
Tariff Act 1921 (Cth). An excise-equivalent duty is imposed on imported
goods at the same rates as excise for identically produced domestic goods in
order to maintain equivalent treatment.
Section 105B currently provides for rules around the
extinguishment of duty on excise‑equivalent goods. That is, if the
criteria set out in section 105B are met, then the excise-equivalent duty
amount may be extinguished. There are a number of exceptions to section 105B
and item 1 of the Customs Amendment Bill proposes to extend the
exceptions to include certain items in Schedule 12 of the Customs Tariff Act,
which deals with Chinese originating goods. The relevant goods are biofuel blends
originating in China. Item 1 would ensure that these goods would
not be eligible to have their excise-equivalent rate of duty extinguished. That
is, item 1 ensures that excise-equivalence duties are maintained on biofuel
blends originating in China. This means that biofuel blends from China will be
treated in the same way as biofuel blends originating from other countries.
Item 2 updates the six-digit HS nomenclature in the
definition of ‘biofuel blend’ in subsection 105B(4) to reflect the HS 2017
Specifically, there are two tariff lines that are substituted for the new
nomenclature as they relate to biofuel blends. Item 3 ensures that item
2 applies to Chinese originating goods by extending its application to
include items in Schedule 12 of the Customs Tariff Act.
Tariff Amendment Bill
Section 19 of the Customs Tariff Act provides for
the automatic indexation of customs duty rates for certain alcohol and fuel
products. Section 19AAC sets out the HS classifications for fuel products that are
subject to automatic indexation under section 19. Section 19AA sets out the
relevant HS classifications for alcohol products subject to automatic
indexation. Items 1 and 2 propose to amend subsection 19AAC(1) and
section 19AA of the Customs Tariff Act to change some of the listed HS
classifications to reflect updated nomenclature arising from the HS review
relating specifically to identified blends of gasoline and ethanol, and wine
products holding at least two but not more than ten litres.
Schedule 3 of the Customs Tariff Act classifies
goods according to the HS (with additional digits for domestic and statistical
purposes) and provides for the rate of duty that applies to such goods. Items
3 to 284 of the Customs Tariff Amendment Bill propose to amend Schedule 3
to reflect the updated nomenclature that arose from the WCO review. The updates
reflect technical amendments to the classification of goods, as well as
establishing new classifications of goods reflecting new technologies, and
removing obsolete or otherwise unwarranted classifications of goods based on
trade flows or industry standards.
By way of illustration, item 3 proposes to amend paragraph
(c) of Note 1 to Chapter 3 which classifies fish and crustaceans, molluscs and
other aquatic invertebrates. Note 1 provides for a number of goods not covered
under Chapter 3 and item 3 proposes to add milt to the list. Items 3
to 38 propose to amend various descriptions of Chapter 3 largely as a
result of improved coverage of species and product forms which can then be
monitored for food security and resource management through trade statistics.
The changes include a further split for more detailed product forms for
crustaceans, molluscs, and other invertebrates such as cuttlefish and squid.
Amendments relating to Chapter 30 (Pharmaceuticals)
propose new subheading notes and some tariff changes (items 99 to 102). The
Chapter also amended to provide detailed information for several categories of
products that are used as anti-malarial drugs.
The amendments do not affect the rate of duty that applies
to the classification of goods, apart from consequential amendments as a result
of item 229 which relates to expanding the definition of electronic
integrated circuits to include multi-component integrated circuits (MCOs). Item
229 implements agreed commitments under the expanded Information Technology
Agreement (eITA) administered by the World Trade Organization to include MCOs
under heading 8542.
Amendments to the scope of heading 8542 may result in a change of tariff
classification of certain goods from Chapters 84, 85, 90, 93 and 95. As part of
the eITA, it has been agreed that all goods under heading 8542 will become duty
free on 1 January 2017. Some of the goods that are transferred from other
headings to heading 8542 may currently be subject to a rate of duty that is not
Items 285 and 286 propose to amend Schedule 4 of
the Customs Tariff Act which relates to concessional rates of duty. Item
285 ensures that the new classifications of vehicle components as brought
about by the HS review are maintained in the concessional rates of duty
schedule. Item 286 proposes to expand the operation of heading 3907 (which
relates to ‘polyacetals, other polyethers and epoxide resins, in primary forms;
polycarbonates, alkyd resins, polyallyl esters and other polyesters, in primary
forms’) to reflect the fact that the classification of goods covered under it
will become more refined (see item 113).
The remainder of the Customs Tariff Amendment Bill amends
Schedules 5 to 12 of the Customs Tariff Act, which set out the rates of
duty that apply to goods that originate in countries or regions with which
Australia has trade agreements.
The changes to the HS classifications recommended in the fifth review of the HS
and made to Schedule 3 of the Customs Tariff Act by the amendments
discussed above will also be reflected in changes to Schedules 5 to 12 of the Customs
Tariff Act, to ensure those Schedules reflect the updated classification
Item 322 proposes that the amendments contained in
Schedule 1 of the Customs Tariff Amendment Bill apply in relation to goods
imported into Australia on or after 1 January 2017, and goods imported prior to
1 January 2017 in circumstances where the time for calculating the
applicable duty on the goods does not occur prior to 1 January 2017.
of Australia, ‘Customs
Amendment (2017 Harmonized System Changes) Bill 2016 homepage’, Australian
of Australia, ‘Customs
Tariff Amendment (2017 Harmonized System Changes) Bill 2016 homepage’,
Australian Parliament website.
Memorandum, Customs Tariff Amendment (2017 Harmonized System Changes) Bill
2016 (the Customs Tariff Amendment Bill 2016), p. 2.
Convention on the Harmonized Commodity Description and Coding System,
done in Brussels, 14 June 1983,  ATS 30 (entered into force
1 January 1988).
Customs Organization, New
Harmonized System standards to enter into force on 1 January 2017,
media release, 11 July 2014.
Standing Committee for Selection of Bills, Report,
7, 2016, The Senate, 13 October 2016.
Standing Committee for the Scrutiny of Bills, Index
of bills considered by the committee, 2016, The Senate, Canberra, 12
Memorandum, Customs Amendment (2017 Harmonized System Changes) Bill 2016
(the Customs Amendment Bill), p. 2.
Memorandum, Customs Tariff Amendment Bill, op. cit., p. 3.
Statement of Compatibility with Human Rights can be found at page 3 of the Explanatory
Memorandum to the Customs Amendment Bill, and on page 4 of the Explanatory
Memorandum to the Customs Tariff Amendment Bill.
Joint Committee on Human Rights, Index
of bills and legislative instruments considered by the committee, 2016,
The Senate, Canberra, 14 October 2016.
previously noted, Australia has provided for additional digits for domestic and
statistical purposes, and the amendments therefore relate to the eight-digit
of Australia’s Schedule of Concession under the General Agreement on Tariffs
and Trade 1994 (GATT) and the Marrakesh Agreement establishing the World Trade
Organization for Implementation of: Ministerial Declaration on the Expansion of
Trade in Information Technology Products, done at Nairobi on 16
December 2015,  ATNIF 34, (has not yet entered into force)
Memorandum, Customs Tariff Amendment Bill, op. cit., pp. 86–87.
Schedules deal with goods originating from: the USA—Schedule 5;
Thailand—Schedule 6; Chile—Schedule 7; the Association of Southeast Asian
Nations (ASEAN) and New Zealand—Schedule 8; Malaysia—Schedule 9; Korea—Schedule
10; Japan—Schedule 11; and China—Schedule 12.
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