Navigation >> Home >> Performance reporting >> The Customs outcome >> Output 4

Output 4

Administration of Customs duty and indirect taxes, other border-related revenue collection, and import/export statistics

This output covers processing of:

• all imported cargo and mail
• items entering Australia with passengers and crew.

Related activity includes:

• tariff classification and valuation services related to duty/indirect tax assessment
• licensing
• real time and post-transaction compliance activity related to revenue protection and collection
• investigation of industry referrals
• administration of drawback, refund and concessional arrangements for importers and exporters
• investigations and prosecutions related to import fraud and Customs duty evasion.

This output also includes:

• Customs revenue collections associated with craft movements, and collection of the Passenger Movement Charge
• processing and compliance activity related to imported and exported goods, in order to collect and validate import and export statistics
• development and implementation of the Customs aspects of the Government’s taxation reforms, including the Goods and Services Tax (GST), Luxury Car Tax (LCT), Wine Equalisation Tax (WET) and the Tourist Refund Scheme (TRS)
• the assessment and collection of GST, LCT and WET
• compliance activity associated with these taxes
• administration of the TRS.

Back to top

Performance measures

Figure 20: Performance against targets set in the 2000-01 PBS - output 4#

Back to top

Performance assessment

Customs participated in a number of international trade initiatives related to duty collections and import/export statistics, particularly negotiations for a free-trade agreement with Singapore. The proposed agreement will include free trade in goods, rules of origin, customs facilitation and cooperation, intellectual property and electronic commerce.

A joint Australia-New Zealand study on the rules of origin for the Australia and New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) was undertaken. The results of the study were expected in August 2001.

Customs continued to contribute to the development of the harmonised non-preferential rules of origin for the World Trade Organization (WTO) agreement on rules of origin. The harmonisation work program was due for completion by November 2001, to coincide with the fourth WTO Ministerial Conference.

Figure 21: Revenue collected on behalf of other agencies ($million)*

Import and export entries

Further information on import and export entry workloads during 2000-01 is available under Output 1.

Duty-free shopping

Customs administers the duty-free shopping system in accordance with the provisions of the Customs Act 1901 and the Customs Regulations 1926. To enable the duty-free industry to maximise the benefits and efficiencies offered through electronic commerce, the Customs Regulations 1926 were amended to enable duty-free sales through the Internet and other electronic communication modes.

Tariff activity

A number of Customs tariff proposals and tariff amendment Bills was introduced into Parliament in 2000-01 to give effect to Government decisions on tariffs.

• Amending an item in the concessional schedule of the tariff to clarify the eligibility criteria for reimported goods.
• Reinstating a 5 per cent duty on certain woven fibreglass fabric.
• Reducing duty rates for 30 tariff subheadings from 5 per cent to free as a result of the Howe Leather trade dispute.
• Listing Angola and Madagascar as least-developed countries.
• Ending the Passenger Motor Vehicle Manufacturing Plan on 31 December 2000 and introducing the Automotive Competitiveness and Investment Scheme on 1 January 2001.
• Implementing decisions on beer, wine and other alcoholic beverages, arising from the GST, and increasing the rate of customs duty on aviation kerosene.
• Creating a new item in the concessional schedule of the tariff for the SPARTECA Textiles Clothing and Footwear Provisions Scheme (see further information).
• Reducing the rate of duty on certain petroleum products.
• Reducing the rate of duty on draft beer in containers over 48 litres.
• Creating a new item in the concessional schedule of the tariff for space-related goods.
• Establishing a new project by-law scheme, and consolidating the provisions relating to goods consigned to Australia in one or more shipments.
• Implementing the Government’s decision to cease the automatic indexation of import duty on petroleum fuels.

Customs Tariff Amendment (Product Stewardship for Waste Oil) Act 2000 received the Royal Assent on 6 July 2000 and came into effect on 1 January 2001. This Act gave effect to a Government decision to introduce a levy on imported petroleum-based oils and greases and their synthetic equivalents.

Tariff classification

Customs provides a tariff advice service to assist importers to determine the tariff classification of goods imported into Australia. The tariff classification is used to determine the rate of customs duty applicable to the goods.

Customs provides binding tariff classification advice on specific products in the form of tariff advices. There were 3563 of these tariff advices issued during 2000-01. Information on external reviews of these decisions is available in Appendix C.

Customs also provides general advice on tariff classification matters to assist both importers and exporters. Only formal advices are recorded on the electronic systems used by Customs. Options for recording general advice are being explored.

Tariff and Precedents Information Network (TAPIN)

The redeveloped electronic tariff system TAPIN was introduced on 6 August 2000. Work on this system began in January 1999. The original implementation date of December 1999 was delayed because of technical difficulties with the retrieval and display of data. A further implementation date, scheduled for May 2000 was postponed because of unforseen user access limitations.

Since its implementation, TAPIN functioned well and was used by Customs officers for a variety of research purposes. A subsequent series of GST-related screen amendments was made on 9 June 2001.

Productivity Commission review of general tariffs

The Productivity Commission issued its final report on a Review of Australia’s General Tariff Arrangements on 22 July 2000. The review investigated a possible reduction in the general tariff. This covers rates of duty of 5 per cent or less, and excludes the passenger motor vehicle and textile, clothing and footwear sectors.

In response, the Government announced a number of changes to the policy and project by-laws scheme to increase the competitiveness of Australian industry. The changes increase the number of industry sectors eligible for the scheme, and included the manufacturing and gas supply sectors. These changes came into effect in June 2001.

Valuation

Customs provides a valuation advice service to assist importers to determine the correct customs value of goods imported into Australia. The customs value is used to determine the duty payable and other revenue liabilities and to compile import trade statistics.

Customs issued 176 valuation advices, 35 per cent of which related to the price of the imported goods. Three advices were the subject of requests for internal review by Customs, the initial decision being affirmed in each case. Information on external reviews conducted by the Administrative Appeals Tribunal is available in Appendix C.

Broker licensing

To act on behalf of importers, people must obtain a brokers licence by demonstrating that they possess the necessary skills and experience. Of the 66 new applications for brokers licences received, 63 applications resulted in licences being issued.

Over 2100 existing brokers licences were renewed during December 2000. Following discussion with the Customs Brokers and Forwarders Council of Australia, regulations were introduced to increase the length of licence validity. Initially, licences were extended until 30 June 2003. After this date, the licence period will be three years. The increased licence length eases administrative work for both Customs and brokers.

Licence renewal fees were also increased for the first time since the mid-1980s, to cover the additional work involved in granting three-year licences.

Compliance activity

Compliance activity was undertaken to ensure the integrity of information supplied to Customs. Rather than examining every transaction, a range of companies were sampled in each industry sector. Compliance activity can include audits examining commercial documents, systems and processes, education programs, transaction monitoring and, in severe cases, prosecution.

Figure 22 outlines major compliance activities undertaken during 2000-01. Compliance activity during this time concentrated on companies with large revenue responsibility. This significantly increased the percentage of total revenue that was compliance audited (23.5 per cent compared with 15.4 per cent in 1999-2000).

Transaction errors for imports declined. The increased focus on export data integrity (see below) is expected to also lead to a reduction in export errors. However levels of compliance were still extremely low in some key areas.

Figure 22: Compliance activity undertaken 2000-01

Highlights during 2000-01 are outlined below.

• Over 1000 clothing and footwear importers were advised about the correct method of including the cost of production assists (inputs provided to the manufacturer by the purchaser) in the customs value, resulting in many inquiries and voluntary declarations of errors.
• The failure of a firm to enter eight major imports for home consumption (use in Australia) was detected, involving $28.3 million in unpaid GST.
• Changes to various automotive and transport schemes by the Department of Transport and Regional Services resulted in increased scrutiny of the sector by Customs to ensure compliance.
• Air couriers, freight forwarders and brokers were audited and areas of compliance risk identified. Customs is working closely with industry to improve internal industry systems and processes to address these concerns.
• New controls over exporting tobacco products were introduced, to minimise the risk of diversion into the Australian market. These controls were developed in consultation with the Australian Taxation Office and major tobacco companies. They proved effective, one major result being the interception of a diverted tobacco shipment with a revenue liability of $800 000
• A shipment of counterfeit cigarettes with a revenue liability of $1.8 million was seized and destroyed.

A compliance and education program was introduced with an emphasis on small to medium enterprises and GST issues. This included compliance action on:

• GST exemptions used by the medical/pharmaceutical industry, resulting in a decline in the number of errors detected
• the food industry, where issues associated with the application of GST require further analysis.

Figure 23: Summary of recoveries* and refunds# ($’000)

Export data integrity

Customs worked actively with industry to improve the reporting of export data. A national export strategy team was established, which worked actively with industry to improve export data integrity and export cargo compliance.

One key objective of Customs was to improve exporter compliance with requirements by 30 per cent by June 2002. Several national programs were introduced including a national export compliance strategy and a national export targeting methodology.

Significant results achieved include:

• identifying a large number of incorrectly reported export values
• increasing reporting of Australian Business Numbers on export entries from 49 per cent to 90 per cent
• improving compliance with export permits required by permit-issuing authorities.

Customs also introduced a marketing and information campaign targeted at industry, to improve awareness of export requirements.

Refunds

Customs introduced an Electronic Lodgement of Refunds system in October 2000. The importing industry reacted positively as the system allows faster processing of refunds. A review of the system’s effectiveness was planned for late 2001.

Three per cent of refund applications were completed outside the 30-day requirement. This was the result of a higher than expected workload in one regional office during one month.

Concessional arrangements

Figure 24 shows the customs duty forgone as a result of concessional arrangements available under a range of industry schemes.

Figure 24: Duty forgone through concessional arrangements ($m)

Figure 25: Tariff concession system statistics

A total of 12 internal reviews of Customs decisions on tariff concession applications and revocation requests were finalised, compared with 16 in 1999-2000. All reviews were completed within the legislated time limits, with an average review time of 22 days from receipt. There were also 11 external reviews of tariff concession applications.

SPARTECA (Textile, Clothing and Footwear Provisions) Scheme

Customs was involved in developing and implementing the SPARTECA (Textile, Clothing and Footwear Provisions) Scheme. This scheme allows certain textiles, clothing and footwear manufactured in the islands of the Pacific Forum to enter Australia duty free where they do not meet the requirements of the South Pacific Regional Trade and Economic Cooperation (SPARTECA) Scheme. The new scheme is intended to assist Fiji’s textiles, clothing and footwear industry to adjust to the end of the Import Credit Scheme (ICS), which finished in September 2000. The end of the ICS without a replacement scheme would have caused severe structural adjustment problems in Fiji. The scheme is administered by the Department of Industry, Science and Resources and is planned to operate until 31 December 2004.

Fraud investigation

Customs investigates suspected cases of fraud relating to output 4, such as the evasion of customs duty.

Detections of duty evasion, particularly for cigarettes, continued to increase. Cigarette fraud cases are complex and time-consuming to investigate and achieve successful outcomes. During 2000-01 there were 14 successful prosecutions for cigarette smuggling.

Figure 26: Fraud investigations*

There was a drop in the number of fraud cases completed compared with previous years. This was because of a greater emphasis on community protection cases, particularly in the lead-up to and during the Sydney 2000 Olympic and Paralympic Games. It was also because of investigations of more complex and time-consuming cases such as tobacco fraud.

Significant results during the year included:

• a sports clothing importer was found guilty on 23 charges of evasion, smuggling and false statements and received fines and penalties of nearly $600 000
• an earth-moving machinery importer was ordered to pay penalties of $280 000 for undervaluing imports over a number of years
• two people were each sentenced to two and a half years jail on one count and one and a half years jail on another for evasion of duty on two million cigarettes. They were also ordered to pay reparations for the duty evaded.

Passenger Movement Charge (PMC)

The Australian National Audit Office (ANAO) released its report Passenger Movement Charge – Follow-up Audit 2000-01 on 3 October 2000. The report covered action taken by Customs to address the recommendations of the ANAO’s 1996-97 audit of the PMC. The ANAO found that Customs had taken action to implement all recommendations in the initial audit.

The ANAO also made four follow-up recommendations. Three of these dealt with formal arrangements between Customs and regular public transport airlines. New arrangements were being negotiated with airlines in accordance with these recommendations. The fourth recommendation called for enhanced revenue control for cruise ship operations and has been fully addressed.

Implementing tax reform

Further information on the implementation of tax reform is available under Key priorities for 2000-01.

Tourist Refund Scheme

As part of the Government’s tax-reform measures, the Tourist Refund Scheme (TRS) began on 1 July 2000. The TRS is administered by Customs and allows tourists and Australian residents travelling overseas to recover the GST and WET they pay on goods purchased in Australia.

TRS facilities are available at Australia’s eight major international airports and at seaports with cruise liner terminals. In addition, Customs provides TRS processing for travellers departing Australia on small craft and private aircraft. There are several options for refunds:

• cash in Australian dollars
• direct credit to a credit card
• cheque in one of ten foreign currencies or
• direct deposit to an Australian bank account.

In the first 12 months of the TRS:

• 246 904 claims were made
• 97 per cent of claims were approved for payment
• $29.7 million in GST was refunded – meaning retail under the TRS of over $300 million
• 100 per cent of refund claims at international airports were processed within 15 minutes
• 92 per cent of claims posted to Customs for processing were finalised within 30 days
• Over 7000 Australian retailers participated in the TRS.

During 2000-01 about 3 per cent of departing travellers used the scheme. Customs is pursuing strategies to promote the scheme and increase the passenger take-up rate. This includes:

• revising existing information to include recent changes to the administration of the TRS
• surveying passengers, retailers and travel agents
• undertaking a comprehensive mail-out campaign to retailers highlighting the advantages of the scheme.

A number of complaints was received from travellers about the requirement for Customs to physically verify export of the goods. To address these concerns, export verification procedures based on risk assessment are being introduced.

Back to top