Commonwealth Numbered Regulations - Explanatory Statements
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CUSTOMS (TRANS-PACIFIC PARTNERSHIP RULES OF ORIGIN) REGULATIONS 2018 (F2018L01468)
EXPLANATORY STATEMENT
Issued by the Assistant Minister for Home Affairs and Parliamentary Secretary to the Minister for Home Affairs
Customs Act 1901
Customs (Trans-Pacific Partnership Rules of Origin) Regulations 2018
The Customs Act 1901 (the Act) concerns customs related functions and is the legislative authority that sets out the customs requirements for the importation, and exportation, of goods to and from Australia.
Subsection 270(1) of the Act provides, in part, that the Governor-General may make regulations not inconsistent with the Act prescribing all matters, which by the Act are required or permitted to be prescribed or as may be necessary or convenient to be prescribed for giving effect to the Act.
The Customs Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Act 2018 (the TPP-11 Implementation Act) amends the Act to fulfil Australia's obligations under Chapter 3 of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the TPP-11), which deals with rules of origin. These rules determine whether goods imported into Australia from a Party to the TPP-11 are 'Trans-Pacific Partnership originating goods' and are thereby eligible for preferential rates of customs duty. 'Trans-Pacific Partnership originating goods' are goods imported from the territory of a Party to the TPP-11 that satisfy the new rules of origin contained in new Division 1GB of Part VIII of the Act, inserted by the TPP-11 Implementation Act.
The provisions of the TPP-11 Implementation Act will commence on the later of the day after the Act receives the Royal Assent, and the day the TPP-11 enters into force for Australia.
The purpose of the Customs (Trans-Pacific Partnership Rules of Origin) Regulations 2018 (the Regulations) is to prescribe matters relating to the rules of origin that will be required to be prescribed under the Customs Act as amended by the TPP-11 Implementation Act. The relevant provisions for which the Regulations prescribe matters are set out in Attachment A.
The Regulations:
* explains the method used to determine the regional value content (a calculation used in determining whether a good is a Trans-Pacific Partnership originating good) of goods for the purposes of some of the product-specific requirements set out in Annex 3-D to Chapter 3, and Annex 4-A to Chapter 4, of the TPP-11;
* specifies the valuation rules for different kinds of goods;
* sets out the record keeping obligations that apply to Australian exporters or producers who export goods to a Party to the TPP-11 for which preferential tariff treatment may be claimed;
* prescribes other matters that are required to be prescribed under new Division 1GB of Part VIII of the Act.
Details of the Regulations are set out in Attachment B. A Statement of Compatibility with Human Rights has been prepared in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011, and is at Attachment C.
A separate Customs (International Obligations) Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Regulations 2018 amend the Customs (International Obligations) Regulations 2015 to make complementary amendments to enable a refund of duties paid on Trans-Pacific Partnership originating goods, or on goods that would have been such goods, in specified circumstances.
In addition, the Customs Tariff Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Regulations 2018 amend the Customs Tariff Regulations 2004 to prescribe goods to support the implementation of the revised customs tariff arrangements for Trans-Pacific Partnership originating goods.
Government Departments conducted extensive public and targeted stakeholder consultations during the negotiations of the original Trans-Pacific Partnership Agreement and the TPP-11. The consultation process encompassed all matters set out in the Amendment Regulations. Details of these consultations were set out in the consultation attachment to the National Interest Analysis of the TPP-11.
The Joint Standing Committee on Treaties also conducted an inquiry on the TPP-11. The inquiry included written submissions and a public hearing that resulted in a report recommending binding treaty action be taken.
The Regulations are a legislative instrument for the purposes of the Legislation Act 2003.
The Regulations commences at the same time as Schedule 1 to the TPP-11 Implementation Act commences, which is the later of the day after that Act receives the Royal Assent, and the day the TPP-11 enters into force for Australia.
OPC62101 - A
ATTACHMENT A
Details of provisions in new Division 1L of Part VIII of the Customs Act 1901 relevant to the Customs (Trans-Pacific Partnership Rules of Origin) Regulation 2018
The Customs Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Act 2018 will insert new Division 1GB into Part VIII of the Customs Act 1901 (the Act). New Division 1GB will contain the rules of origin under Chapter 3 of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the TPP-11). These rules determine whether goods imported into Australia from a Party to the TPP-11 are Trans-Pacific Partnership originating goods and are thereby eligible for preferential rates of customs duty.
Subdivision D of new Division 1GB deals with goods that are produced from non-originating materials (relevant goods). Subdivision D contains new sections 153ZKX and 153ZKY.
New section 153ZKX(1) of the Act provides that goods are Trans-Pacific Partnership originating goods if:
(a) they are classified to a Chapter, heading or subheading of the Harmonized System that is covered by the table in Annex 3-D to Chapter 3, or in Annex 4-A to Chapter 4, of the TPP-11; and
(b) they are produced entirely in the territory of one or more of the Parties from non-originating materials only or from non-originating materials and originating materials; and
(c) the goods satisfy the requirements applicable to the goods in that Annex; and
(d) either:
i. the importer of the goods has, at the time the goods are imported, a certification of origin, or a copy of one, for the goods; or
ii. Australia has waived the requirement for a certification of origin for the goods.
Annex 3-D to Chapter 3, and Annex 4-A to Chapter 4, of the TPP-11, amongst other matters, set out product specific rules and related requirements that may need to be satisfied in order for relevant goods to satisfy a requirement under new subsection 153ZKX(1) of the Act. Regulations may be prescribed to specify or provide for the requirements.
One of the requirements that may be prescribed in the regulations is a change in tariff classification requirement. Under new subsection 153ZKX(3) of the Act, if a requirement that applies in relation to the relevant goods is that all non-originating materials used in the production of the goods must have undergone a particular change in tariff classification, the regulations may prescribe when a non-originating material used in the production of the relevant goods is taken to satisfy the change in tariff classification. The Regulations specifies the circumstances under which relevant goods are taken to satisfy the change in tariff classification.
Another of the requirements that may be prescribed in the regulations is a requirement in respect of Regional Value Content (RVC). Under new paragraph 153ZKX(8)(b), if a requirement that applies in relation to the relevant goods is that the goods must have a RVC of not less than a particular percentage worked out in a particular way, the regulations may prescribe how to work out the RVC of the goods. The Regulations specify four methods of calculating RVC.
For the purposes of new Division 1GB, new subsection 153ZKU(2) will provide that the value of goods is to be worked out in accordance with the regulations, and that the regulations may prescribe different valuation rules for different kinds of goods.
The Regulations prescribes how the value of materials is to be worked out for the purposes of new Division 1GB and in accordance with the TPP-11.
Under new subsection 153ZKX(10) of the Act, if:
(a) a requirement that applies in relation to the relevant goods is that the goods must have a RVC of not less than a particular percentage worked out in a particular way; and
(b) the goods are imported into Australia with accessories, spare parts, tools or instructional or other information materials; and
(c) the accessories, spare parts, tools or instructional or other information materials are classified with, delivered with and not invoiced separately from the goods; and
(d) the types, quantities and value of the accessories, spare parts, tools or instructional or other information materials are customary for the goods;
the regulations must provide for the value of the accessories, spare parts, tools or instructional or other information materials to be taken into account for the purposes of working out the RVC of the relevant goods (whether the accessories, spare parts, tools or instructional or other information materials are originating materials or non-originating materials).
For the purposes of new subsection 153ZKX(10) of the Act, the Regulations prescribe the circumstances under which the value of the accessories, spare parts, tools or instructional or other information materials must be taken into account for the purposes of working out the RVC of the relevant goods.
Under new subsection 153ZKY(2) of the Act, if a requirement that applies in relation to the relevant goods is that the goods must have a RVC of not less than a particular percentage worked out in a particular way, the regulations must provide for the value of the packaging material or container to be taken into account for the purposes of working out the RVC of the relevant goods (whether the packaging material or container is an originating material or non-originating material).
For the purposes of new subsection 153ZKY(2) of the Act, the Regulations prescribe the circumstances under which the value of the packaging material or container in which the goods are packaged must be taken into account for the purposes of working out the RVC of the relevant goods.
ATTACHMENT B
Details of the Customs (Trans-Pacific Partnership Rules of Origin) Regulations 2018
Part 1-Preliminary
Section 1 Name
This section provides that the name of the instrument is the Customs (Trans-Pacific Partnership Rules of Origin) Regulations 2018 (the Regulations).
Section 2 Commencement
This section sets out, in a table, the date on which each of the provisions contained in the Regulations commences.
Table item 1 provides that the whole instrument commences at the same time as Schedule 1 to the Customs Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Act 2018 (the TPP-11 Implementation Act) commences.
Schedule 1 to the TPP-11 Implementation Act will commence on the later of the day on which that Act receives the Royal Assent, and the day on which the TPP-11 done at Santiago, Chile on 8 March 2018, enters into force for Australia.
Section 3 Authority
This section sets out the authority under which the Regulations are to be made, which is the Customs Act 1901 (the Act).
Section 4 Definitions
This section defines terms frequently referred to throughout the Regulations. The following terms are not defined in the Act:
(a) 'Act' means the Act; and
(b) 'Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994' means the Agreement of that name set out in Annex 1A of the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh on 15 April 1994.
The following terms and expressions have the same meanings as in new Division 1GB of Part VIII of the Act:
(a) 'Agreement', which is the TPP-11, as amended and in force for Australia from time to time;
(b) 'certification of origin', which is certification that is in force and that complies with the requirements of Article 3.20 of Chapter 3 of the TPP-11;
(c) 'Harmonized System', which is either of:
i. the Harmonized Commodity Description and Coding System as in force immediately before 1 January 2017; or
ii. if the table in Annex 3-D to Chapter 3, or in Annex 4-A to Chapter 4, of the TPP-11 is amended or replaced to refer to Chapters, headings and subheadings of a later version of the Harmonized Commodity Description and Coding System--the later version of the Harmonized Commodity Description and Coding System;
(d) 'non-originating materials', which are goods that are not originating materials;
(e) 'originating materials', which are:
i. goods that are originating goods, in accordance with Chapter 3 of the TPP-11, and that are used in the production of other goods; or
ii. recovered goods derived in the territory of one or more of the Parties and used in the production of, and incorporated into, remanufactured goods; or
iii. indirect materials;
(f) 'Party', which has the meaning given by Article 1.3 of Chapter 1 of the TPP-11. That is any State or separate customs territory for which the TPP-11 is in force for Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam;
(g) 'production', which means operations including growing, cultivating, raising, mining, harvesting, fishing, trapping, hunting, capturing, collecting, breeding, extracting, aquaculture, gathering, manufacturing, processing or assembling a good; and
(h) 'territory', which means the territory of the Party to the TPP-11 set out in Annex 1-A to Chapter 1 of the TPP-11.
Part 2-Tariff change requirement
Section 5 Change in tariff classification requirement for non-originating materials
Annex 3-D to Chapter 3, Annex 4-A to Chapter 4, of the TPP-11, amongst other matters, set out product specific rules and related requirements, that may need to be satisfied in order for goods to to satisfy a requirement under new subsection 153ZKX(1) of the Act. Regulations may be prescribed to specify or provide for the requirements.
One of the requirements under Annex 3-D and Annex 4-A that may apply to goods is the change in tariff classification requirement. Under new subsection 153ZKX(3) of the Act, if a requirement in an Annex that applies in relation to goods is that all non-originating materials used in the production of the goods must have undergone a particular change in tariff classification, the regulations may prescribe when a non-originating material (see notes for section 4 above for the related definition) used in the production of the goods is taken to satisfy the change in tariff classification.
For the purposes of subsection 153ZKX(3), section 5 of the Regulations provides that a non-originating material used in the production of goods that does not satisfy a particular change in tariff classification is taken to satisfy the change in tariff classification if:
(a) it was produced entirely in the territory of one or more of the Parties from other non-originating materials; and
(b) each of those other non-originating materials satisfies the change in tariff classification, including by one or more applications of this section.
Paragraph 5(b) of the Regulations gives effect to the accumulation provisions contained in Article 3.10 of Chapter 3 of the TPP-11, and applies where the non-originating materials used to produce the final good do not satisfy the change in tariff classification.
In practice, in producing a final good, a producer may use goods that are produced in the territories of one or more Parties to the TPP-11 by one or more other producers. The components of these goods may be produced by yet another producer in another Party to the TPP-11 or may have been imported into that Party by another importer. It is possible that the change in tariff classification rule will not be satisfied at each step in the production process from the imported component to the final good, which may mean that the final good is non-originating.
In such circumstances, it will be necessary to examine each step in the production process of each non-originating material that occurs in each of the Parties in order to determine whether each step satisfies the change in tariff classification rule for the final good. If each material satisfies the change in tariff classification rule, then the material will be an originating material and the final good will be an originating good (subject to satisfying all other requirements of new Division 1GB of Part VIII of the Act). This is how paragraph 5(b) of the Regulations operates.
Example: The following diagram relates to the production of particular goods made from non-originating materials that occurred entirely in a Party to the TPP-11. The diagram and the accompanying text illustrate the application of paragraph 5(b) of the Regulations.
The goods are produced from non-originating materials 1 and 2.
First application of paragraph 5(b) of the Regulations
Non-originating materials 1 and 2 must satisfy the change in tariff classification. Under paragraph 5(2)(a), the transformation of non-originating material 1 satisfies the relevant change in tariff classification requirement. However, under paragraph 5(2)(b), the transformation of non-originating material 2 does not satisfy the relevant change in tariff classification requirement, but it has been produced by non-originating materials 3 and 4.
Second application of paragraph 5(b) of the Regulations
Non-originating materials 3 and 4 must satisfy the change in tariff classification. Under paragraph 5(2)(a), non-originating material 3 satisfies the relevant change in tariff classification requirement. Under paragraph 5(2)(b), non-originating material 4 does not satisfy the relevant change in tariff classification requirement, but it has been produced by non-originating material 5.
Third application of paragraph 5(b) of the Regulations
For non-originating material 4 to be originating, non-originating material 5 must satisfy the change in tariff classification requirement. Under paragraph 5(2)(a), the transformation of non-originating material 5 (into non-originating material 4) satisfies the relevant change in tariff classification requirement.
Final result
The result of the three applications of paragraph 5(b) is that goods produced from non-originating materials 1 and 2 are originating goods. This is because the three applications of paragraph 5(b) results in all materials (being non-originating materials 1 to 5) satisfying the change in tariff classification requirement and therefore transformed into originating materials.
Part 3-Regional value content requirement
Under new subsection 153ZKX(8) of the Act, if a requirement under Annex 3-B to Chapter 3 of the TPP-11 that applies in relation to the goods is that the goods must have a Regional Value Content (RVC) of not less than a particular percentage worked out in a particular way:
(a) the RVC of the goods is to be worked out in accordance with the TPP-11; or
(b) if the regulations prescribe how to work out the RVC of the goods, the RVC of the goods is to be worked out in accordance with the regulations.
For the purposes of new subsection 153ZKX(8) of the Act, Part 3 of the Regulations specifies different methods by which the RVC of goods can be calculated. These methods include the focused value method (section 6), build-down method (section 7), build-up method (section 8) and the net cost method (section 9).
Section 6 Focused value method
For the purposes of subsection 153ZKX(8) of the Act, subsection 6(1) of the Regulations provides that the RVC of goods under the focused value method is worked out using the formula:
RVC = Customs value - Value of specified non-originating materials x 100
Customs value
where:
'customs value' means the customs value of the goods worked out under Division 2 of Part VIII of the Act; and
'value of specified non-originating materials' means the value, worked out under Part 4, of the non-originating materials that:
(a) are specified in the second column of the table in Annex 3-D to Chapter 3 of the TPP-11 that applies to the goods, to the extent that column refers to the focused value method; and
(b) are used in the production of the goods.
Subsection 6(2) of the Regulations provides that RVC must be expressed as a percentage.
For example, a manufacturer in a Party to the TPP-11 makes wired glass sheets classified to 7005.30, from cast glass of 7003.10 that is imported from the USA (a non-party), and domestically produced wire. The wired glass sheets are sold to an Australian importer for the equivalent of AUD$200 each (including international shipment costs). The imported cast glass costs the manufacturer the equivalent of $18/kg, with each sheet of wired glass using five kilos of cast glass. Cost of originating materials and production processes are $40 per sheet. Annex 3-D to Chapter 3 of the TPP-11 identifies that the 'focussed value' PSR for cast glass of 7003.10 is:
50 per cent under the focused value method taking into account only the non-originating materials of heading 70.03 through 70.05
Using the focussed value method:
RVC = Customs value ($200) - Value of specified non-originating materials (5x$18) x 100
Customs value ($200)
Therefore, the RVC for the wired glass sheets is 55 per cent (since the focussed value method has established that 45 per cent of the value of the good originates from outside the territories covered by the TPP-11).
Section 7 Build-down method
For the purposes of subsection 153ZKX(8) of the Act, subsection 7(1) of the Regulations provides that the RVC of goods under the build-down method is worked out using the formula:
RVC = Customs value - Value of non-originating materials x 100
Customs value
where:
'customs value' means the customs value of the goods worked out under Division 2 of Part VIII of the Act; and
'value of non-originating materials' means the value, worked out under Part 4, of the non-originating materials used in the production of the goods.
Subsection 7(2) of the Regulations provides that RVC must be expressed as a percentage.
For example, the build-down method may be used to calculate the RVC for cans of 'ready-to-drink coffee' that is made from Trans-Pacific Partnership originating materials and non-originating ingredients, and packaged in a steel can. The customs value of each can of coffee is $1 (including the costs of international shipment - calculated as set out under Part 4 - Determination of Value) and the value of the non-originating materials (including packaging) is $0.48. Using the relevant method, the RVC is calculated as follows:
RVC = $1 (Customs value) - $0.48 (Value of the non-originating material) x 100
$1 (Customs value)
Therefore, the RVC for the canned coffee is 52 per cent (since the build down method has established that 48 per cent of the value of the good originates from outside the territories covered by the TPP-11).
Section 8 Build-up method
For the purposes of subsection 153ZKX(8) of the Act, subsection 8(1) of the Regulations provides that the RVC of goods under the build-up method is worked out using the formula:
RVC = Value of originating materials x 100
Customs value
where:
'customs value' means the customs value of the goods worked out under Division 2 of Part VIII of the Act; and
'value of originating materials' means the value, worked out under Part 4, of the originating materials used in the production of the goods.
Subsection 8(2) of the Regulations provides that RVC must be expressed as a percentage.
For example, the build-up method may be used to calculate the RVC for wooden cabinets classified to 9403.60.00 that are made from Trans-Pacific Partnership originating timber. Each piece of furniture is sold for $100 (customs value) and the value of the originating materials used to produce the furniture is $43. Using the relevant method, the RVC is calculated as follows:
RVC = $43 (Value of the originating material) x 100%
$100 (Customs value)
Therefore, the RVC for the wooden cabinets is 43 per cent.
Section 9 Net cost method
For the purposes of subsection 153ZKX(8) of the Act, subsection 8(1) of the Regulations provides that the RVC of goods under the net cost method is worked out using the formula:
RVC = Net cost - Value of non-originating materials x 100
Net cost
where:
'net cost' means the net cost of the goods worked out in accordance with Article 3.9 of Chapter 3 of the TPP-11; and
'value of non-originating materials' means the value, worked out under Part 4, of the non-originating materials used in the production of the goods.
Subsection 9(2) of the Regulations provides that RVC must be expressed as a percentage.
For example, the net cost method may be used to calculate the RVC for a reciprocating piston engine (with a cylinder capacity less than 50 cc) classified to 8407.31. The engine is made from a Trans-Pacific Partnership originating engine block, and non-originating components such as pistons, cylinders and valves. The engine is sold for $1000 (net cost), and the engine block is valued at $400.
RVC = $1000 (Net cost) - $600 (Value of non-originating materials) x 100
$1000 (Net cost)
Therefore, the RVC for the engine is 40 per cent.
A further example of the use of the net cost method may be to calculate the RVC for a Personal Motor Vehicle of HS heading 8703. Each vehicle contains $9,200 of non-originating parts. Each vehicle is sold for $20,000, and the sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs for the model line of motor vehicles is $32,500,000 for the year. There are 10,000 vehicles of this model line sold in one year.
Net cost = (($20,000 x 10,000) - $32,500,000)/10,000 = $16,750
RVC = ($16,750 (Net cost) - $9,200 (Value of non-originating materials) x 100)
$16,750 (Net cost)
Therefore, the RVC using the net cost method for each vehicle is 45.07 per cent.
(Note: Under the build down method, the RVC would be 54 per cent and would not meet the 55 per cent under the build-down method.)
Part 4-Determination of value
For the purposes of new Division 1GB of Part VIII of the Act, new subsection 153ZKU(2) of that Act provides that the value of goods is to be worked out in accordance with the regulations, and the regulations may prescribe different valuation rules for different kinds of goods.
Part 4 of the Regulations deals with the determination of the value of different kinds of goods that are materials used in the production of goods for the purposes of new Division 1GB of Part VIII of the Act. The values of these materials are necessary to determine the RVC of goods for the purpose of satisfying a requirement under Annex 3-D to Chapter 3 of the TPP-11.
Part 4 of the Regulations contains sections 10 (Value of goods that are originating materials or non-originating materials), 11 (Value of accessories, spare parts or tools) and 12 (Value of packaging material or container).
Section 10 Value of goods that are originating materials or non-originating materials
For the purposes of new subsection 153ZKU(2) of the Act, section 10 of the Regulations explains how to work out the value of goods that are originating materials or non-originating materials used in the production of goods (subsection 10(1) of the Regulations refers).
Subsection 10(2) of the Regulations provides that the value of the materials is as follows:
(a) for materials imported into the territory of a Party by the producer of the goods, the value of the materials worked out in accordance with the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994;
(b) for materials acquired in the territory of a Party where the goods are produced:
i. the price paid or payable for the materials by the producer of the goods; or
ii. the value of those materials worked out under paragraph (a) on the assumption that those materials had been imported into the territory of the Party by the producer of the goods; or
iii. the earliest ascertainable price paid or payable for the materials in the territory of the Party;
(c) for materials that are produced by the producer of the goods, the sum of:
i. all the costs incurred in the production of the materials, including general expenses; and
ii. an amount that is the equivalent of the amount of profit that the producer would make for the materials in the normal course of trade or of the amount of profit that is usually reflected in the sale of goods of the same class or kind as the materials.
However, for the purposes of paragraph 10(2)(a) of the Regulations, in working out the value of particular materials, subsection 10(3) of the Regulations provides that the costs included in the international shipment of the materials must be included.
If the materials are originating materials, in working out the value of the originating materials under subsection 10(2) of the Regulations, subsection 10(4) of the Regulations provides that the following may be included, to the extent that they have not been taken into account under subsection 10(2):
(a) the costs of freight, insurance, packing and all other costs incurred to transport the materials to the producer of the goods;
(b) duties, taxes and customs brokerage fees on the materials that:
i. have been paid in the territory of one or more of the Parties; and
ii. have not been waived or refunded; and
iii. are not refundable or otherwise recoverable;
including any credit against duties or taxes that have been paid or that are payable;
(c) the costs of waste and spoilage resulting from the use of the materials in the production of the goods, reduced by the value of reusable scrap or by-products.
If the materials are non-originating materials, in working out the value of the non-originating materials under subsection 10(2) of the Regulations, subsection 10(5) of the Regulations allows the following to be deducted:
(a) the costs of freight, insurance, packing and all other costs incurred in transporting the materials to the producer of the goods;
(b) duties, taxes and customs brokerage fees on the materials that:
i. have been paid in the territory of one or more of the Parties; and
ii. have not been waived or refunded; and
iii. are not refundable or otherwise recoverable;
including any credit against duties or taxes that have been paid or that are payable;
(c) the costs of waste and spoilage resulting from the use of the materials in the production of goods, reduced by the value of reusable scrap or by-products.
The purpose of section 10 of the Regulations is to set out the associated costs and expenses in accordance with the TPP-11 that could be included, or deducted, when working out the value of goods that are originating materials or non-originating materials.
Section 11 Value of accessories, spare parts or tools
Under new subsection 153ZKX(10) of the Act, if:
(a) a requirement, under Annex 3-D to Chapter 3 or Annex 4-A to Chapter 4 of the TPP-11, that applies in relation to the goods is that the goods must have a RVC of not less than a particular percentage worked out in a particular way; and
(b) the goods are imported into Australia with accessories, spare parts, tools or instructional or other information materials; and
(c) the accessories, spare parts, tools or instructional or other information materials are classified with, delivered with and not invoiced separately from the goods; and
(d) the types, quantities and value of the accessories, spare parts, tools or instructional or other information materials are customary for the goods;
the regulations must provide for the value of the accessories, spare parts, tools or instructional or other information materials to be taken into account for the purposes of working out the RVC of the goods (whether the accessories, spare parts, tools or instructional or other information materials are originating materials or non-originating materials).
Where new paragraphs 153ZKO(10)(a), (b), (c) and (d) of the Act are satisfied in relation to goods, section 11 of the Regulations rovides that:
(a) the value of the accessories, spare parts, tools or instructional or other information materials must be taken into account for the purposes of working out the RVC of the goods under Part 3 of the Regulations; and
(b) if the accessories, spare parts, tools or instructional or other information materials are non-originating materials, for the purposes of Part 3 and section 10 of the Regulations, those accessories, spare parts, tools or instructional or other information materials are taken to be non-originating materials used in the production of the goods; and
(c) if the accessories, spare parts, tools or instructional or other information materials are originating materials, for the purposes of Part 3 and section 10 of the Regulations, those accessories, spare parts, tools or instructional or other information materials are taken to be originating materials used in the production of the goods.
Section 12 Value of packaging material or container
Under new subsection 153ZKY(1) of the Act, if:
(a) goods are packaged for retail sale in packaging material or a container; and
(b) the packaging material or container is classified with the goods in accordance with Rule 5 of the Interpretation Rules;
then the packaging material or container is to be disregarded for the purposes of Subdivision D of new Division 1GB of Part VIII of the Act.
However, if a requirement, under either Annex 3-D to Chapter 3, or Annex 4-A to Chapter 4, of the TPP-11, that applies in relation to the goods is that the goods must have a RVC of not less than a particular percentage worked out in a particular way, new subsection 153ZKY(2) of the Act provides that the regulations must provide for the value of the packaging material or container to be taken into account for the purposes of working out the RVC of the goods (whether the packaging material or container is an originating material or non-originating material).
Where new paragraphs 153ZKY(2)(a) and (b) of the Act are satisfied in relation to goods and the goods must have a RVC of not less than a particular percentage worked out in a particular way, section 12 of the Regulations provides that:
(a) the value of the packaging material or container in which the goods are packaged must be taken into account for the purposes of working out the RVC of the goods under Part 3 of the Regulations; and
(b) if that packaging material or container is a non-originating material, for the purposes of Part 3 and section 10 of the Regulations, that packaging material or container is taken to be a non-originating material used in the production of the goods; and
(c) if that packaging material or container is an originating material, for the purposes of Part 3 and section 10 of the Regulations, that packaging material or container is taken to be an originating material used in the production of the goods.
Part 5-Record keeping obligations
Under new section 126AKJ(1) of the Act, the regulations may prescribe record keeping obligations that apply in relation to goods that:
(a) are exported to a Party; and
(b) are claimed to be originating goods, in accordance with Chapter 3 of the TPP-11, for the purpose of obtaining a preferential tariff in the Party.
Part 5 of the Regulations specifies the records that must be kept for goods exported to a Party to the TPP-11 and are claimed to be originating goods for the purpose of obtaining a preferential tariff treatment in accordance with the TPP-11 in that Party.
Section 13 Exportation of goods to territory of a Party--record keeping by exporter who is not the producer of the goods
For the purposes of new subsection 126AKJ(1) of the Act, subsection 13(1) of the Regulations provides that an exporter of goods mentioned in that subsection, who is not also the producer of the goods, must keep the following records:
(a) records of the purchase of the goods by the exporter;
(b) records of the purchase of the goods by the person to whom the goods are exported;
(c) evidence that payment has been made for the goods;
(d) evidence of the classification of the goods under the Harmonized System;
(e) if the goods include any accessories, spare parts, tools or instructional or other information materials that were purchased by the exporter:
i. records of the purchase of the accessories, spare parts, tools or instructional or other information materials; and
ii. evidence of the value of the accessories, spare parts, tools or instructional or other information materials;
(f) if the goods include any accessories, spare parts, tools or instructional or other information materials that were produced by the exporter:
i. records of the purchase of all materials that were purchased for use or consumption in the production of the accessories, spare parts, tools or instructional or other information materials; and
ii. evidence of the value of the materials so purchased; and
iii. records of the production of the accessories, spare parts, tools or instructional or other information materials;
(g) if the goods are packaged for retail sale in packaging material or a container that was purchased by the exporter:
i. records of the purchase of the packaging material or container; and
ii. evidence of the value of the packaging material or container;
(h) if the goods are packaged for retail sale in packaging material or a container that was produced by the exporter:
i. records of the purchase of all materials that were purchased for use or consumption in the production of the packaging material or container; and
ii. evidence of the value of the materials; and
iii. records of the production of the packaging material or container;
(i) a copy of the certification of origin for the goods.
The goods mentioned in subsection 126AKJ of the Act are goods that are exported to a Party to the TPP-11 and are claimed to be originating goods for the purpose of obtaining a preferential tariff treatment in accordance with the TPP-11 in that Party.
For the records referred to in subsection 13(1) of the Regulations, subsection 10(2) have the effect that the records must be kept for at least five years starting on the date the certification of origin for the goods is issued.
Subsection 13(3) of the Regulations sets out the manner in which a record is to be kept. A record may be kept in any place, whether or not in Australia, and the exporter must ensure that:
* the record is kept in a form that would enable a determination of whether the goods are originating goods in accordance with the TPP-11; and
* if the record is not in English, the record is kept in a place and form that would enable an English translation to be readily made; and
* if the record is kept by mechanical or electronic means, the record is readily convertible into a hard copy in English.
Section 14 Exportation of goods to territory of a Party--record keeping by the producer of the goods
For new subsection 126AKJ(1) of the Act, subsection 14(1) of the Regulations provides that a producer of goods mentioned in that subsection, whether or not the producer is the exporter of the goods, must keep the following records:
(a) records of the purchase of the goods;
(b) if the producer is the exporter of the goods--evidence of the classification of the goods under the Harmonized System;
(c) evidence that payment has been made for the goods;
(d) evidence of the value of the goods;
(e) records of the purchase of all materials that were purchased for use or consumption in the production of the goods and evidence of the classification of the materials under the Harmonized System;
(f) evidence of the value of those materials;
(g) records of the production of the goods;
(h) if the goods include any accessories, spare parts, tools or instructional or other information materials that were purchased by the producer:
i. records of the purchase of the accessories, spare parts, tools or instructional or other information materials; and
ii. evidence of the value of the accessories, spare parts, tools or instructional or other information materials;
(i) if the goods include any accessories, spare parts, tools or instructional or other information materials that were produced by the producer:
i. records of the purchase of all materials that were purchased for use or consumption in the production of the accessories, spare parts, tools or instructional or other information materials; and
ii. evidence of the value of the materials so purchased; and
iii. records of the production of the accessories, spare parts, tools or instructional or other information materials;
(j) if the goods are packaged for retail sale in packaging material or a container that was purchased by the producer:
i. records of the purchase of the packaging material or container; and
ii. evidence of the value of the packaging material or container;
(k) if the goods are packaged for retail sale in packaging material or a container that was produced by the producer:
i. records of the purchase of all materials that were purchased for use or consumption in the production of the packaging material or container; and
ii. evidence of the value of the materials; and
iii. records of the production of the packaging material or container;
(l) a copy of the certification of origin for the goods.
For the records referred to in subsection 14(1) of the Regulations, and similar to subsection 13(2), subsection 14(2) has effect that records must be kept for at least five years starting on the date the certification of origin for the goods is issued. Similar to subsection 13(3) of the Regulations, subsection 14(3) sets out a similar manner in which a record is to be kept.
ATTACHMENT C
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Customs (Trans-Pacific Partnership Rules of Origin) Regulations 2018
The Disallowable Legislative Instrument titled the Customs (Trans-Pacific Partnership Rules of Origin) Regulations 2018 (the Regulations) is compatible with human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Regulations
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the TPP-11) was signed on 8 March 2018 in Santiago in Chile, by the former Minister for Trade, Tourism and Investment, the Hon. Steve Ciobo MP for Australia and by representatives for Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam.
As a result, the Customs Act 1901 (the Customs Act) and the Customs Tariff Act 1995 (Customs Tariff Act) is amended by the Customs Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Act 2018 (the TPP-11 Implementation Act) and the Customs Tariff Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Act 2018, respectively, to fulfil Australia's obligations under Chapter 3 of the TPP-11.
Chapter 3 of the TPP-11 deals with rules of origin, which determine whether goods imported into Australia from the territory of a Party to the TPP-11 are Trans-Pacific Partnership originating goods and thereby eligible for preferential rates of customs duty, and also set out record keeping obligations that apply to procedures and exporters of originating goods.
The rules to determine Trans-Pacific Partnership originating goods are contained in new Division 1GB of Part VIII of the Customs Act, and the record keeping obligations are contained in new Division 4EB of Part VI of that Act. These new Divisions enable regulations to be prescribed.
The purpose of the Regulations is to prescribe matters relating to the rules of origin that will be required to be prescribed under new Division 1GB of Part VIII, and new Division 4EB of Part VI, of the Customs Act. In particular, the Regulations:
* explain the method used to determine the regional value content (a calculation used in determining whether a good is a Trans-Pacific Partnership originating good) of goods for the purposes of some of the product-specific requirements set out in Annex 3-D to Chapter 3, and Annex 4-A to Chapter 4, of the TPP-11;
* specify the valuation rules for different kinds of goods;
* set out the record keeping requirements that apply to Australian exporters or producers who export originating goods to a Party to the TPP-11 and who make a claim for preferential tariff treatment in that Party for those goods;
* prescribe other matters that are required to be prescribed under new Division 1GB of Part VIII of the Customs Act.
The Regulations will commence at the same time as Schedule 1 to the TPP-11 Implementation Act commences, which is the later of the day after that Act receives the Royal Assent, and the day the TPP-11 enters into force for Australia.
Human rights implications
The Regulations engages the following right:
* the right to protection against arbitrary and unlawful interferences with one's privacy or home in Article 17 of the International Covenant on Civil and Political Rights (ICCPR).
To the extent the Regulations facilitate the collection and disclosure of information, the Regulations engage the right to privacy under Article 17 of the ICCPR. Article 17(1) sets out:
No one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour and reputation.
Under Article 3.20 of Chapter 3 of the TPP-11, a certification of origin document completed by the exporter or producer or an authorised representative of the exporter or producer shall support a claim that goods are eligible for preferential tariff treatment in accordance with the TPP-11. The key information that must be included in a 'certification of origin' document as detailed in Article 3.20 of, and Annex 3-B to, Chapter 3 of the TPP-11 and includes personal information.
The TPP-11 Implementation Act in part inserts new sections 126AKJ, 126AKK and 126AKL into the Customs Act to enable regulations to prescribe record keeping obligations that apply in relation to originating goods, in accordance with the TPP-11, exported from Australia to another Party to the TPP-11.
The regulations prescribed for record keeping obligations are contained in Part 5 of the Regulations, which amongst other things require records and evidence of the purchase of material, value of material, production goods, and certification of origin to be kept for at least five years starting on the date the certification of origin for the goods is issued. The records required to be kept accord with Article 3.26 of Chapter 3 of the TPP-11.
Part 5 of the Regulations together with new sections 126AKJ, 126AKK and 126AKL of the Customs Act operate to allow a Party to the TPP-11 to which Trans-Pacific Partnership originating goods are exported to assist with the verification of the origin of such goods. This may include the collection and disclosure of personal information, including those set out in a 'certification of origin' document, for limited purposes. This information may be disclosed to a Trans-Pacific Partnership customs official (within the meaning of the Customs Act) for the purpose of verifying a claim for a preferential tariff in a Party to the TPP-11.
Through the amendments to the Customs Act made by the TPP-11 Implementation Act, the collection and disclosure of personal information in relation to goods claiming to be originating goods, will be permitted. Further, the collection and disclosure of personal information is authorised under Australian law and the above-mentioned new sections of the Customs Act and the Regulations do not alter the existing protections.
The verification of the eligibility for preferential treatment is required under the TPP-11 and above-mentioned new sections of the Customs Act and the Regulations are directed at the legitimate purpose of facilitating and supporting Australia's international obligations under the TPP-11. This collection and disclosure of personal information will only be permitted for the limited purpose of verifying a claim made by a person for preferential tariff treatment making it a reasonable and proportionate response to a legitimate purpose. As such, the collection and disclosure of personal information in these circumstances will not constitute an unlawful or arbitrary interference with privacy.
Conclusion
The Regulations are compatible with human rights because to the extent that it may engage the right to privacy, it will not constitute an unlawful or arbitrary interference with privacy.
Senator the Hon. Linda Reynolds CSC
Assistant Minister for Home Affairs and Parliamentary Secretary to the Minister for Home Affairs