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Output 4 - Administration of Customs duty and indirect taxes, other border-related revenue collections, and import/export statistics

Trade

Valuation and origin

Rules of origin

Customs implemented the rules of origin for the Australia–United States Free Trade Agreement (AUSFTA) and for the Thailand–Australia Free Trade Agreement (TAFTA).

Both AUSFTA and TAFTA commenced on 1 January 2005. The rules of origin for the Free Trade Agreements (FTAs) are specified in:

• US Free Trade Agreement Implementation Act 2004
• Customs (Australia–US Free Trade Agreement) Regulations 2004
• Customs Amendment (Thailand–Australia Free Trade Agreement Implementation) Act 2004
• Customs (Thailand–Australia Free Trade Agreement) Regulations 2004.

Information sessions for Customs brokers and training courses for Customs staff were conducted in all States and in the Northern Territory. Customs also redeveloped the Internet site devoted to preferential rules of origin and produced a new Customs manual for each of the FTAs.

With the implementation of the AUSFTA and TAFTA, Customs also introduced a formal origin advice service to clients. To date, Customs has issued 37 binding origin advices in relation to the FTAs.

Under the TAFTA, special safeguards apply to certain sensitive agricultural goods. For Australia, special safeguards are claimed for certain tuna products (including canned tuna), pineapple products and pineapple juice for the period from the commencement of the FTA until 31 December 2008.

Where the volume of safeguard goods imported in a particular calendar year exceeds a specified volume, safeguards may be imposed. If special safeguards are imposed, the duty rate for safeguard goods will return to the general rate for the remainder of the calendar year.

Customs will monitor imports of the special safeguard goods and advise the Department of Agriculture, Fisheries and Forestry if the annual volume for any of those goods is reached.

In December 2004, Australia and New Zealand announced that the rules of origin under the Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) would be reformed and that the Change in Tariff Classification approach would be adopted. Customs is supporting the Department of Foreign Affairs and Trade and the Department of Industry, Tourism and Resources on the redrafting of the rules of origin for the ANZCERTA.

The process of identifying changes for the existing rules of origin, based on the Change in Tariff Classification approach has commenced. This is to reflect the World Customs Organization Harmonized Commodity Description and Coding System (known as the Harmonized Tariff). The latest changes to the Harmonized Tariff are due to commence on 1 January 2007.

Customs is assisting other government agencies in the negotiation of rules of origin for possible FTAs with China, the Association of Southeast Asian Nations (ASEAN), the United Arab Emirates and Malaysia.

Valuation

Determining the correct customs value of imported goods is essential to collect Customs duty, indirect taxes and trade statistics. To assist importers, Customs provides a valuation advice service.

Customs issued 94 binding valuation advices in 2004–05. Two valuation advices were subject to internal review and both decisions were affirmed. For details of external reviews conducted by the Administrative Appeals Tribunal and the Federal Court, refer to Appendix D.

Customs met with the Australian Taxation Office to discuss the possible harmonisation to the treatment of cross-border dealings between related parties. The customs value of imported goods may be able to be determined on the basis of information contained in an Advanced Pricing Arrangement with the Australian Taxation Office. An Advanced Pricing Arrangement establishes a transfer pricing methodology to be used to determine arm’s-length prices for future transactions. Customs and the Australian Taxation Office will explore further options for harmonisation.

Tariff concessions

Customs directly administers or assists in the administration of a number of concessional items under Schedule 4 of the Customs Tariff Act 1995 (the Tariff). The concessional items cover a range of goods and people eligible to access concessional arrangements. These are in line with international agreements on industry schemes offered by government agencies including the Department of Industry, Tourism and Resources and the Department of Agriculture, Fisheries and Forestry.

Figure 36 shows the Customs duty forgone as a result of the concessional arrangements available under Schedule 4 of the Tariff.

Figure 36: Duty forgone through concessional arrangements ($m)

Industry assistance measure	Concession Item	2002–03	2003–04	2004–05
Tariff Concession Scheme	50	489.1	479.0	548.4
Textile clothing and footwear policy by-law	40A	38.5	26.8	20.4
TRADEX*	21A	138.7	129.3	93.4
Project by-law scheme#	45, 46, 56	7.1	..	..
Enhanced project by-laws	71	20.5	47.0	43.0
Cheese and curd quota scheme	62	10.7	11.8	12.5
Textile clothing and footwear overseas assembly provisions	61	5.6	5.4	4.8
Automotive Competitiveness Investment Scheme (ACIS)	41E, 41G	555.6	586.9	531.1
Other Concessions		101.8	105.0	112.8
Total		1 367.6	1 391.1	1 366.4

* The TRADEX scheme replaced the Tariff Export Concession Scheme (TEXCO) in July 2000 when the Department of Industry, Science and Resources assumed responsibility under the TRADEX Scheme Act 1999. Under item 21A of Schedule 4 to the Customs Tariff Act 1995, Customs facilitates the entry of goods imported under the scheme.

# Project by-law scheme was replaced with Enhanced Project By-Laws in July 2002.

Figure 37 shows the number of applications and revocations under the Tariff Concession Scheme. The number of applications increased from 506 in 2003–04 to 562 in 2004–05.

Eleven internal reviews of decisions on tariff concession applications and revocation requests were finalised, compared with eight in 2003–04. All reviews were completed within legislated time limits, with an average time of 37 days from receipt. There were two external reviews of tariff concession applications.

Figure 37: Item 50 in Schedule 4 of the Tariff —Tariff Concession Scheme

		2002–03	2003–04	2004–05
Applications
Received		526	506	562
Approved		446	407	455
Not approved		107	82	62
Revocations
Received		20	25	8
Approved		16	22	9
Not approved		2	2	2
Customs initiated		542	753	462

Tariff classification

Customs provides tariff classification advice services to assist importers and exporters of goods. Tariff classification is important as it is used to determine the rate of Customs duty for imported goods and facilitates the collection of trade statistics by the Australian Bureau of Statistics.

The service includes an internal administrative review process, to deal with appeals lodged by clients where they disagree with the tariff advice. The role of internal review has been centralised in Canberra since July 2002.

Customs Central Office staff undertook a series of training sessions for regional officers.

Figure 38 shows the total number of tariff advices issued and a breakdown of the reviews undertaken since the role was centralised in 2002.

Figure 38: Tariff advices and reviews

		2002–03	2003–04	2004–05
Tariff advices issued		4 232	3 602	3 254
Reviews
	Customs decision overturned	59	38	21
	Customs decision affirmed	42	47	36
	Review decision substituted	20	5	4
	Reviews withdrawn	4	1	4
	Reviews yet to be finalised	-	3	3
Total reviews undertaken		125	94	68

Tariff legislation

Several Bills involving changes to the Customs Tariff Act 1995 were introduced into or passed by Parliament. Due to the specialist nature of the legislation, drafting was primarily undertaken within Customs prior to the final Bills being produced by the Office of Parliamentary Counsel. The creation of those Bills involved liaison with a number of government departments including the Department of Foreign Affairs and Trade, the Department of the Treasury and the Department of Industry, Tourism and Resources.

Trade and tax liaison

Cooperation with the Australian Taxation Office

Indirect taxes that apply to goods produced or supplied in Australia (i.e. GST, excise duty, wine equalisation tax and luxury car tax) also apply to imported goods. Customs assesses and collects the indirect tax payable on imported goods on behalf of the Australian Taxation Office. The two organisations also cooperate on the administration of tax concessions that are based on the export of goods.

Customs receives funding for administration of GST for imported and exported goods as part of the Commonwealth-State arrangements on GST administration. Customs received $47m in 2004–05 to carry out GST-related activities such as import and export processing, compliance activities and administration of the Tourist Refund Scheme.

An interagency liaison committee meets every two months to oversee indirect tax administration at the border and to actuate coordination. The committee dealt with issues including data transfer, export cargo examination procedures and transition to the ICS. Sub-committees continued to focus on specific issues such as compliance and administrative penalties.

GST Administration Subcommittee

Customs provides half-yearly performance and cost reports on GST administration as part of reporting requirements under the Intergovernmental Agreement. This Agreement covers the distribution of GST revenue after costs are deducted.

International cooperation with Malaysia

In March 2005, a delegation of Malaysian Customs officers visited Australia to study GST administration. Customs facilitated meetings between the Department of the Treasury and the Australian Taxation Office to provide a broad understanding of Australia’s GST system and also provided details of Customs administration of GST on imported goods.

International cooperation with United Arab Emirates

In March 2005, Customs provided information about Australia’s administration of GST on imported goods to a representative of the United Arab Emirates Customs Service. These discussions were in conjunction with a United Arab Emirates delegation in Australia to discuss a Free Trade Agreement.

Harmonized System Committee

Australia is a member of the WCO and is a contracting party to the Harmonised System Convention. Customs represents Australia at the WCO, and attends meetings of the Harmonized System Committee and the Review Sub-Committee. Changes for the new Harmonized System nomenclature (2007) have been approved and confirmed by the WCO Council. Work is underway to implement these changes into the Australian Tariff for 2007. Further work is progressing into implementing changes approved by the WCO on streamlining Harmonized System procedures.

 

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