Commonwealth Numbered Regulations - Explanatory Statements

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Issued by the authority of the Minister for Customs and Consumer Affairs

Customs Act 1901

Customs Regulations (Amendment)

Section 270 of the Customs Act 1901 (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 for giving effect to the Act.

Fuel Substitution Package

During the 1997 Spring sittings, Parliament passed the Government's fuel substitution legislation, a package of 9 Acts which implements the Government's Budget decision to combat revenue loss through the minimisation of fuel substitution practices. These practices involve the substitution of fuel entered at concessional rates of duty (generally for non-automotive use) for fuel used in automotive engines. Such substitution practices are harmful to the engines of the (usually unwitting) motorist concerned, and cause significant revenue leakage in respect of the duty avoided on the substituted fuel.

The legislation package addresses the problem by providing for the introduction of a chemical marker into concessionally entered fuel, and imposing document keeping and retention obligations, audit powers and sanctions in relation to the acquisition, storage and disposal of fuel. Importantly, these measures are directed at those dealing in large volumes of fuel, and it is intended that the average motorist be exempted from these obligations in the normal course of dealing.

Supporting Regulations

Supporting Regulations are required to:

*       amend the Excise Regulations to prescribe the chemical marker and the proportions which are to be added to fuels;

*       enact the Fuel (Penalty Surcharges) Administration Regulations to prescribe the record keeping particulars and to exempt the "average motorist" from the document keeping and retention obligations and audit provisions in the package;

*       amend the Customs (Prohibited Imports) Regulations to prohibit the importation of fuel that is not appropriately marked;

*       amend the Excise Regulations and the Customs Regulations to allow concessions in relation to certain uses of fully duty paid fuels (such as their use as solvents, which are non-fuel uses) ; and

*       make consequential amendments to the Customs Regulations and Excise Regulations to take account of revised structures of Customs and Excise tariff headings which apply to petroleum products to incorporate the introduction of the chemical marker.

The purpose of these Regulations is to amend the Customs Regulations to:

1.       insert a new remission circumstance for petroleum products which do not contain the chemical marker, and are therefore dutiable at the highest rate, but which are delivered for use as solvents (new paragragph 126(1)(mb), subregulation 3.1 refers).

Under the new structure of subheadings 2702, 2707 and 2710 of Schedule 3 to the Customs Tariff Act 1995 (the Tariff Act), petroleum products which are intended for non-fuel use are dutiable at the rate of "Free". In order to be eligible for the "Free" rate of duty, the petroleum products are to contain the chemical marker. However, some of the non-fuel applications of petroleum products include their use as solvents in the production of foodstuffs such as margarine and in the manufacture of paints. Where a petroleum product is used as a solvent in these circumstances, it is considered inappropriate on health and efficiency grounds that the petroleum product contains the chemical marker.

A remission circumstance has been inserted to apply to petroleum products which are clean fuels and which are suitable for use as a fuel in an internal combustion engine but which are delivered for use otherwise than as a fuel and as a solvent. Clean fuels are fuels which do not contain the chemical marker and are, therefore, dutiable at the highest rate. The fuels must be delivered in accordance with a permission under section 69 of the Act, which must be expressed to be given for the purposes of ensuring the efficacy of the fuel as a solvent.

2.       insert a new refund circumstance to complement new paragraph 126(1)(mb).

The new refund circumstance will apply to clean fuels which have been used as a solvent only (new paragraph 126(1)(mb), subregulation 3.1 refers). Under this new refund circumstance, where a clean fuel has been fully duty paid and is then used as a solvent only ie, a non-fuel use, there will be an entitlement to a refund of the duty paid.

3.       amend paragraph 126(1)(q) by omitting "2710.00.20" and substituting "2710.00.29".

This is a technical amendment only to update the cross references to the classification of petroleum products under subheading 2710 of Schedule 3 to the Tariff Act as a result of the new structure of the subheading.

The proposed regulations commence on 31 January 1998 (regulation 1 refers), which is the date on which the fuel substitution legislation package has been proclaimed to commence.

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