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2016-2017-2018
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CUSTOMS TARIFF AMENDMENT (COMPREHENSIVE AND PROGRESSIVE
AGREEMENT FOR TRANS-PACIFIC PARTNERSHIP IMPLEMENTATION) BILL 2018
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Law Enforcement and Cyber Security,
the Honourable Angus Taylor MP)
CUSTOMS TARIFF AMENDMENT (COMPREHENSIVE AND PROGRESSIVE
AGREEMENT FOR TRANS-PACIFIC PARTNERSHIP IMPLEMENTATION)
BILL 2018
OUTLINE
The purpose of the Customs Tariff Amendment (Comprehensive and Progressive Agreement
for Trans-Pacific Partnership Implementation) Bill 2018 (the Bill) is to amend the Customs
Tariff Act 1995 (the Customs Tariff Act) to implement the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (the TPP-11) by:
providing preferential rates of customs duty, on entry into force of the TPP-11, for all
goods, excluding excise-equivalent goods, that are Trans-Pacific Partnership
originating goods determined in accordance with new Division 1GB of Part VIII of
the Customs Act 1901 (the Customs Act). New Division 1GB will be inserted by the
Customs Amendment (Comprehensive and Progressive Agreement for Trans-Pacific
Partnership Implementation) Bill 2018 (the Customs Amendment Bill);
inserting new Schedule 8B to provide for excise-equivalent rates of duty on certain
alcohol, tobacco and fuel products and for phasing rates of customs duty in
accordance with the TPP-11; and
amending certain concessional items in Schedule 4 to the Customs Tariff Act to
maintain customs duty rates in line with the applicable concessional item and in
accordance with the TPP-11.
Complementary amendments will be made to the Customs Act by the Customs Amendment
Bill to introduce new rules of origin for goods imported into Australia from a Party to the
TPP-11. The new rules will determine the eligible goods that would be subject to preferential
treatment of customs duty in accordance with the TPP-11.
FINANCIAL IMPACT STATEMENT
The cost of implementing the original Trans-Pacific Partnership Agreement, signed on
4 February 2016, was included in the 2016-17 Budget and was estimated to reduce customs
duty collections by $195 million over the forward estimates. The 2018-19 Budget estimated
that there would be no additional cost in implementing the TPP-11.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
A Statement of Compatibility with Human Rights in respect of the amendments contained in
the Bill is at Attachment A. The Statement assesses the amendments to be compatible with
Australia's human rights obligations.
REGULATION IMPACT STATEMENT
A Regulation Impact Statement covering the tariff amendments is contained in the
Explanatory Memorandum for the Customs Amendment Bill.
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CUSTOMS TARIFF AMENDMENT (COMPREHENSIVE AND PROGRESSIVE
AGREEMENT FOR TRANS-PACIFIC PARTNERSHIP IMPLEMENTATION)
BILL 2018
NOTES ON CLAUSES
Clause 1 Short title
1. This clause provides for the 'Customs Tariff Amendment (Comprehensive and Progressive
Agreement for Trans-Pacific Partnership Implementation) Bill 2018' (the Bill), when
enacted, to be cited as the Customs Amendment (Comprehensive and Progressive Agreement
for Trans-Pacific Partnership Implementation) Act 2018.
Clause 2 Commencement
2. This clause sets out, in a table, the date on which provisions of the Bill, when enacted, will
commence.
3. Table item 1 provides for clauses 1 to 3 and anything in the Bill not elsewhere covered by the
table to commence on the day the Bill receives the Royal Assent.
4. Table item 2 provides for Schedule 1 of the Bill, when enacted, to commence at the same
time as Schedule 1 to the Customs Amendment (Comprehensive and Progressive Agreement
for Trans-Pacific Partnership Implementation) Bill 2018 (the Customs Amendment Bill).
That is, the later of the day on which the Customs Amendment Bill receives the Royal
Assent, and the day on which the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (the TPP-11) done at Santiago, Chile on 8 March 2018 enters into
force for Australia.
5. The TPP-11 will enter into force 60 days after the date on which at least six or at least 50 per
cent of the number of signatories to the TPP-11, whichever is smaller, have notified the
Depository in writing of the completion of their applicable legal procedures (i.e. ratified the
TPP-11). For any signatory that is not among the ratifying parties on the entry-into-force
date, the TPP-11 shall enter into force 60 days after the date on which that signatory has
notified the Depositary in writing of the completion of its applicable legal procedures.
6. The date on which the TPP-11 enters into force will be announced by the Minister for Law
Enforcement and Cyber Security by notifiable instrument, which has the same meaning as in
the Legislation Act 2003.
Clause 3 Schedules
7. This clause enables the Schedule to the Bill, when enacted, to amend or repeal provisions of
legislation specified in that Schedule in accordance with the applicable items. In the context
of the Bill, the Customs Tariff Act is being amended.
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Schedule 1-Amendments
Part 1-Trans-Pacific Partnership originating goods
Customs Tariff Act 1995
Introductory Comments
8. The TPP-11 is a new treaty that incorporates, by reference, the provisions of the original
Trans-Pacific Partnership (the TPP) as signed by Ministers on 4 February 2016 in Auckland,
New Zealand (Article 1 of the TPP-11 refers). For example, this means that Chapters 1 and 3
of the TPP are Chapters 1 and 3 of the TPP-11. Under the TPP-11, signatories will implement
the TPP between them, with the exception of a limited number of provisions, which will be
suspended. Suspensions will remain in place until the Parties agree to end them, by
consensus. The text of the TPP-11 is to be read in conjunction with the text of the TPP.
9. On entry into force, the TPP-11 provides in part for new rules of origin to determine
Trans-Pacific Partnership originating goods and for the preferential rates of customs duty that
applies to such goods. The rules to determine Trans-Pacific Partnership originating goods are
inserted by the Customs Amendment Bill, when enacted, and will be contained in new
Division 1GB of Part VIII of the Customs Act 1901 (the Customs Act).
10. To complement the amendments made by the Customs Amendment Bill, this Bill contains
amendments to give effect to the preferential customs duty rates for Trans-Pacific Partnership
originating goods in accordance with the TPP-11. In line with the definition of 'customs duty,
under Article 1.3 of Chapter 1 and Article 2.4.2 of Chapter 2 of the TPP-11, the preferential
treatment of customs duty on eligible goods is reflected in the rates of customs duty set out in
Annex 2-D (Tariff Schedule of Australia) to Chapter 2 of the TPP-11.
Item 1 Subsection 3(1) (before paragraph (g) of the definition of rate column)
11. This item amends the definition of 'rate column' in subsection 3(1) of the Customs Tariff Act
to include a reference to the third column of new Schedule 8B. New Schedule 8B will set out
the preferential rates of customs duty for Trans-Pacific Partnership originating goods
specified in that Schedule.
Item 2 Subsection 9(1)
12. Item 2 amends subsection 9(1) of the Customs Tariff Act to insert a reference to new
Schedule 8B.
13. This amendment allows ad valorem rates of custom duty that apply to Trans-Pacific
Partnership originating goods to be specified in the 'rate column' in new Schedule 8B of the
Customs Tariff Act.
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Item 3 to 5
14. Section 11 of the Customs Tariff Act sets out the rules for determining when a phasing rate of
customs duty takes effect. The amendments made by items 3 to 5 provide for phasing rates of
customs duty for Trans-Pacific Partnership originating goods.
15. Item 3 inserts new paragraph 11(1)(bdb) into the Customs Tariff Act to include a reference to
a rate of customs duty set out in the third column of an item in the table in new Schedule 8B
of the Customs Tariff Act that applies to the goods.
16. Item 4 inserts new paragraph 11(1)(hb) into the Customs Tariff Act to include a reference to a
specified date set out in the third column of an item in the table in new Schedule 8B that
applies to Trans-Pacific Partnership originating goods.
17. Item 5 inserts new paragraph 11(2)(bdb) into the Customs Tariff Act to include a reference to
a rate of customs duty set out in the third column of an item in the table in the new
Schedule 8B of the Customs Tariff Act that applies to Trans-Pacific Partnership originating
goods.
Item 6 Before section 13F
18. This item inserts new section 13EB into the Customs Tariff Act which sets out when goods
are Trans-Pacific Partnership originating goods for the purposes of that Act. Goods are
Trans-Pacific Partnership originating goods if, and only if they are Trans-Pacific Partnership
originating goods under new Division 1GB of Part VIII of the Customs Act.
New Division 1GB inserted by the Customs Amendment Bill sets out the new rules of origin
for determining whether goods are Trans-Pacific Partnership originating goods.
Item 7 Before subparagraph 16(1)(a)(vii)
19. This item inserts new subparagraph 16(1)(a)(vib) into the Customs Tariff Act.
20. Existing section 16 of the Customs Tariff Act sets out how customs duty is calculated,
including for goods that are originating goods of particular countries for preference purposes.
Paragraph 16(1)(a), in part, sets out that if goods are not the produce or manufacture of a
Preference Country, or are not originating goods under a Free Trade Agreement (FTA) , the
duty must be worked out by reference to the general rate set out in the third column of the
tariff classification in Schedule 3 under which the goods are classified.
21. The purpose of new subparagraph 16(1)(a)(vib) is to ensure that the general rate of customs
duty set out in Schedule 3 does not apply to Trans-Pacific Partnership originating goods.
Item 8 Before paragraph 16(1)(o)
22. This item inserts new paragraph 16(1)(nb) into the Customs Tariff Act.
23. The new paragraph provides that, where the Trans-Pacific Partnership originating goods are
classified to a tariff subheading in Schedule 3 that is specified in column 2 of an item in the
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table in new Schedule 8B, the rate of customs duty on the goods is to be worked out by
reference to the rate of duty set out in column 3 of the relevant item in Schedule 8B.
24. However, where the Trans-Pacific Partnership originating goods are classified to a tariff
subheading not listed in new Schedule 8B, new paragraph 16(1)(nb) provides for such goods
to be subject to a preferential rate of 'Free'.
Item 9 Before subsection 16(4A)
25. This item amends section 16 of the Customs Tariff Act to insert new subsections 16(4AA)
and 16(4AB).
26. New subsection 16(4AA) provides that for the purposes of new Schedule 8B, a reference to
year 2, 3 or 4 is a reference to the first, second or third calendar year, respectively, after the
subsection commences (that is when the TPP-11 first enters into force for Australia). This is
relevant to when phasing rates for certain goods come into effect. For example:
Trans-Pacific Partnership originating goods
Column 1 Column 2 Column 3
Item Heading or subheading in Rate
Schedule 3
468 8419.50.20 2%
(Prescribed goods only) From 1 January of year 2: 1%
From 1 January of year 3: Free
27. Therefore, if the TPP-11 enters into force on 1 January 2019, the rate of duty will be 2 per
cent from entry into force and will be reduced to 1 per cent on 1 January 2020 and will be
further reduced to 'Free' on 1 January 2021. This is because 2020 and 2021 would be the first
and second calendar years respectively after the agreement entered into force.
28. However, where column 2 of an item in the table in Schedule 8B includes '(prescribed goods
only)', subparagraph 16(1)(nb)(i) does not apply to the goods unless the goods are also
prescribed for the purpose of that item (new subsection 16(4AB) refers). Further the note
under new subsection 16(4AB) explains that, for goods that are covered by
subsection 16(4AB) and that are not prescribed for the purpose of an item in new
Schedule 8B, the rates of duty in respect of the goods is 'Free'.
Items 10 to 12
29. Schedule 4 of the Customs Tariff Act lists items where a concessional rate of customs duty is
provided for particular goods and section 18 sets out how concessional rates of customs duty
are calculated. In particular, subsection 18(1) provides for a concessional rate of customs
duty to apply only where the rate is less than that which would otherwise be payable under
Schedules 3, 4A, 5, 6, 7, 8, 9, 10, 11 or 12.
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30. Item 10 inserts new paragraph 18(1)(eb) into the Customs Tariff Act. The new paragraph will
provide that a concessional item in Schedule 4 only applies to goods if the concessional duty
is lower than the duty payable under new Schedule 8B. This provision is consistent with
similar provision for other Schedules to the Customs Tariff Act for other FTAs.
31. Paragraph 18(2)(a) provides that, if the goods are not the produce or manufacture of a
preference country or a country to which a FTA applies, the duty must be worked out by
reference to the general rate set out in the third column of an item in Schedule 4 that apply to
the goods.
32. Item 11 inserts subparagraph 18(2)(a)(vib) into the Customs Tariff Act to ensure that the
general rate of customs duty set out in the third column of the item in Schedule 4 does not
apply to Trans-Pacific Partnership originating goods.
33. Item 12 inserts new paragraph 18(2)(nb) into the Customs Tariff Act to set out how
concessional customs duty is calculated for goods that are Trans-Pacific Partnership
originating goods and that are subject to a concessional item in Schedule 4 of that Act. This
new paragraph provides that, if the goods are Trans-Pacific Partnership originating goods and
'TPP' is specified in the third column of an item in Schedule 4, the amount of duty is
calculated by reference to that rate of customs duty. If there is no such rate, the rate of
customs duty is 'Free'.
Item 13 Paragraph 19AAC(1)(b)
34. Section 19 of the Customs Tariff Act provides for the automatic indexation of certain
excise-equivalent rates of customs duty in line with movements in the Consumer Price Index,
in February and August of each year. The goods to which automatic indexation applies are
certain alcohol and fuel products.
35. For this purpose, section 19AAC of the Customs Tariff Act contains a table that sets out the
tariff subheadings for fuel products subject to biannual indexation under section 19 of that
Act.
36. Item 13 amends paragraph 19AAC(1)(b) of the Customs Tariff Act to insert a reference to
new Schedule 8B so that the indexation provisions in section 19 of the Act apply to the rates
of excise-equivalent customs duty for those fuel products that are Trans-Pacific Partnership
originating goods.
Item 14 Paragraph 19AA(b)
37. For section 19 of the Customs Tariff Act, section 19AA of that Act contains a table that sets
out the tariff subheadings for alcohol products subject to biannual indexation under
section 19 that Act.
38. Item 14 amends paragraph 19AA(b) of the Customs Tariff Act to insert a reference to new
Schedule 8B so that the indexation provisions in section 19 of the Act apply to the rates of
excise-equivalent customs duty for those alcohol products that are Trans-Pacific Partnership
originating goods.
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Item 15 Paragraph 19AC(b)
39. Section 19AB of the Customs Tariff Act provides for the automatic indexation of certain
excise-equivalent rates of customs duty in line with movements in the full-time adult average
weekly ordinary time earnings, in March and September of each year. The goods to which
this automatic indexation applies are tobacco products.
40. For this purpose, section 19AC of the Customs Tariff Act contains a table that sets out the
tariff subheadings for tobacco products subject to biannual indexation under section 19AB of
the Act.
41. Item 15 amends paragraph 19AC(b) of the Customs Tariff Act to insert a reference to new
Schedule 8B so that the indexation provisions in section 19AB of that Act apply to the rates
of excise-equivalent customs duty for those tobacco products that are Trans-Pacific
Partnership originating goods.
Item 16 Paragraph 19ACA(1)(b)
42. Section 19ACA of the Customs Tariff Act provides for a list of tariff subheadings for tobacco
products that are not covered by section 19AC of that Act, specifically tobacco products
where the amount of customs duty is determined by the weight of the product or the weight
of the tobacco content in the product.
43. For goods classified to a tariff subheading listed in section 19ACA, the rate of customs duty
is amended biannually on the same day as the tobacco products listed in section 19AC.
The applicable rate is determined with reference to the indexed rate associated with tariff
subheading 2402.20.20 adjusted by the relevant weight conversion factor provided for in
subsection 19ACA(2) that applies during that period.
44. Item 16 amends paragraph 19ACA(1)(b) of the Customs Tariff Act to insert a reference to
Schedule 8B so that the indexation provisions in section 19AB of that Act apply to the rates
of excise-equivalent customs duty for those tobacco products that are Trans-Pacific
Partnership originating goods.
Items 17, 18, 19, 20, 22, 23 and 24
45. Existing Schedule 4 to the Customs Tariff Act lists items where a concessional rate of
customs duty is provided for particular goods. In most cases, the concessional rate of customs
duty for such goods is the rate of 'Free'. However, in some instances, instead of the customs
duty rate of 'Free', the items provide for a lower rate than the general rate of customs duty
that is otherwise payable.
46. New paragraph 18(2)(nb) provides that the rate of customs duty for Trans-Pacific Partnership
originating goods subject to a concessional item in Schedule 4 is 'Free', unless a rate for
'TPP' is specified. It is therefore necessary to specify rates of customs duty for Trans-Pacific
Partnership originating goods for those concessional items in Schedule 4 where the rate of
duty is not 'Free'.
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47. Items 17, 19, 20, 22, 23 and 24 amend existing table items 17A, 20, 22, 45 and 50 in
Schedule 4, respectively, and insert 'TPP' in the third column of each of these items, so the
amount of duty for Trans-Pacific Partnership originating goods that fall within the terms of
these items is calculated by reference to the rate of duty set out in column 3.
48. Item 18 amends paragraph (d), under the column headed 'Description of goods', of table
item 20 in Schedule 4 to insert a reference to new Schedule 8B to enable duty on goods under
that Schedule to be worked out by reference to a percentage (the applicable percentage) of the
value of the goods.
49. Item 24 amends table item 53 (column headed 'Rates of duty') in Schedule 4 by adding the
appropriate duty rate for Trans-Pacific Partnership originating goods.
Item 21 Schedule 4 (table item 37, column headed "Rate of duty")
50. This item amends the column headed 'Rate of duty' for table item 37 of Schedule 4 to the
Customs Tariff Act to insert 'TPP: Free'. Table item 37 deals with the rate of duty for the
importation of used or second-hand passenger motor vehicles, as prescribed by a customs
by-law.
51. The proposed amendment provides for the rate of duty for eligible used or second-hand
passenger motor vehicles imported from a Party to the TPP-11 to be 'Free'.
Item 25 Before Schedule 9
52. This item inserts new Schedule 8B into the Customs Tariff Act. This new Schedule sets out
preferential rates of customs duty for goods that are determined to be Trans-Pacific
Partnership originating goods in accordance with new Division 1GB of Part VIII of the
Customs Act, inserted by the Customs Amendment Bill.
53. Section 16 of the Customs Tariff Act, as amended by items 7 and 8 of Schedule 1 to the Bill,
provides that the rates of customs duty for Trans-Pacific Partnership originating goods are
'Free' unless they are classified to a tariff subheading listed in Schedule 8B.
54. Article 2.4.2 of Chapter 2 of the TPP-11 provides that, unless otherwise provided in the
TPP-11, each Party shall progressively eliminate its customs duties on originating goods in
accordance with its Schedule to Annex 2-D (Tariff Commitments).
55. Table items 1, 123 to 125, 134 to 140 and 149 to 570 inclusive in Schedule 8B operate to
reduce the ad valorem component of customs duties on Trans-Pacific originating goods in
accordance with the staging categories specified in clause 3 under the General notes for
Annex 2-D (Tariff Schedule of Australia). By 1 January of the fourth calendar year after the
TPP-11 enters into force, the ad valorem component of the customs duties on all originating
goods will be eliminated.
56. Article 1.3 of Chapter 1 of the TPP-11, in part, has effect that customs duty does not include
duties that are equivalent to an internal tax imposed on the same goods when domestically
produced. Such goods are certain alcohol, tobacco and fuel products that are subject to
customs duties at a rate that is equivalent to the excise duty imposed under the Schedule to
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the Excise Tariff Act 1921 (the Excise Tariff Act), on those goods when domestically
produced.
57. Table items 2 to 122, 126 to 133 and 141 to 148 inclusive in new Schedule 8B operate to
impose customs duty on certain alcohol, tobacco and fuel products that are Trans-Pacific
Partnership originating goods, at a rate that is equivalent to the excise duty imposed under the
Excise Tariff Act, on the same goods when domestically produced.
Items 26 and 27
58. These items amend the text in the User's Guide in the preamble of the Customs Tariff Act, as
required, to insert references to new Schedule 8B for Trans-Pacific Partnership originating
goods.
Item 28 Application provision
59. This item provides that the amendments made by items 1 to 12 and 17 to 25 of Schedule 1 to
the Bill apply in relation to:
(a) goods imported into Australia on or after the commencement of Schedule 1 of the
Bill; and
(b) goods imported into Australia before the commencement of Schedule 1, where the
time for working out the rate of import duty on the goods had not occurred before the
commencement of this Schedule.
60. The amendments contained in Schedule 1 to the Bill will commence at the same time as
Schedule 1 to the Customs Amendment Bill (see the notes above in relation to
commencement of the Bill).
Item 29 Transitional provisions-indexation
61. This item sets out transitional provisions for alcohol duty rates and fuel duty rates and
tobacco duty rates subject to indexation under section 19 and section 19AB of the Customs
Tariff Act.
62. As explained above in the notes for items 13 to 16, excise-equivalent rates of customs duty
that apply to certain alcohol, tobacco and fuel products are adjusted automatically twice a
year. The next automatic indexation for tobacco will be in September 2018, and for alcohol
and fuel products will be in February 2019.
63. In light of this, and when the automatic indexations occurs, the transitional provisions will
operate to amend the alcohol, tobacco and fuel duty rates such that upon commencement the
customs duty rates for relevant tariff subheadings in Schedule 8B will be increased by the
indexation amount or the sum of the indexation amounts.
64. The purpose of the transitional provisions is to ensure that the alcohol, tobacco and fuel duty
rates applied to Trans-Pacific Partnership originating goods on commencement are consistent
with those that apply to the same tariff subheadings listed in Schedule 3, 4A, 5, 6, 7, 8, 9, 10,
11 or 12.
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Attachment A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Customs Tariff Amendment (Comprehensive and Progressive Agreement for
Trans-Pacific Partnership Implementation) Bill 2018 (the Bill)
This Bill is compatible with the 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 Bill
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the TPP-11) is
a separate treaty that incorporates, by reference, the provisions of the original Trans-Pacific
Partnership (TPP) as signed by Ministers on 4 February 2016 in Auckland, New Zealand.
Under the TPP-11, signatories will implement the TPP between them, with the exception of a
limited number of provisions, which will be suspended. Suspensions will remain in place
until the Parties agree to end them, by consensus. The text of the TPP-11 is to be read in
conjunction with the text of the TPP.
On entry into force, TPP-11 provides in part for new rules of origin to determine Trans-
Pacific Partnership originating goods and for the preferential rates of customs duty that
applies to such goods. The rules to determine Trans-Pacific Partnership originating goods are
inserted by the Customs Amendment (Comprehensive and Progressive Agreement for
Trans-Pacific Partnership Implementation) Bill 2018 (the Customs Amendment Bill), when
enacted, and are contained in new Division 1GB of Part VIII of the Customs Act 1901
(the Customs Act).
The purpose of this Bill is to amend the Customs Tariff Act 1995 (Customs Tariff Act) to:
provide preferential rates of customs duty, on entry into force of the TPP-11, for all
goods, excluding excise-equivalent goods, that are Trans-Pacific Partnership
originating goods determined in accordance with new Division 1GB of Part VIII of
the Customs Act inserted by the Customs Amendment Bill into the Customs Act;
insert new Schedule 8B to provide for excise-equivalent rates of duty on certain
alcohol, tobacco and fuel products and phasing rates of customs duty in accordance
with the TPP-11; and
amend certain concessional items in Schedule 4 to the Customs Tariff Act to maintain
customs duty rates in line with the applicable concessional item and in accordance
with the TPP-11.
The amendments contained in the Bill, when enacted, will commence at the same time as
Schedule 1 to the Customs Amendment Bill. That is, the later of the day on which the
Customs Amendment Bill receives the Royal Assent, and the day on which the TPP-11 enters
into force for Australia.
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Human rights implications
The Bill does not engage any of the applicable rights or freedoms.
Conclusion
The Bill is compatible with human rights as it does not raise any human rights issues.
MINISTER FOR LAW ENFORCEMENT AND CYBER SECURITY
THE HONOURABLE ANGUS TAYLOR MP
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