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2019-2020-2021 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES CUSTOMS TARIFF AMENDMENT (REGIONAL COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT IMPLEMENTATION) BILL 2021 EXPLANATORY MEMORANDUM (Circulated by authority of the Assistant Minister for Customs, Community Safety and Multicultural Affairs, the Honourable Jason Wood MP)CUSTOMS TARIFF AMENDMENT (REGIONAL COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT IMPLEMENTATION) BILL 2021 OUTLINE The purpose of the Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021 (the Bill) is to amend the Customs Tariff Act 1995 (the Customs Tariff Act) to implement the Regional Comprehensive Economic Partnership Agreement (the Agreement). The Bill will achieve this by: providing a 'Free' rate of customs duty for goods that are RCEP originating goods (other than goods listed in new Schedule 14), with effect from entry into force of the Agreement for Australia; inserting a new Schedule 14 to: (i) specify the phasing rates of customs duty for certain RCEP originating goods that will incrementally reduce to 'Free' by, at the latest, the 19th calendar year after the Agreement enters into force for Australia; (ii) maintain rates of customs duty on certain alcohol, tobacco and petroleum products equivalent to the rates of excise duty payable on the same good when locally manufactured; and (iii) maintain rates of customs duty on certain goods consistent with the negotiated outcomes of the Agreement; and amending Schedule 4 to maintain customs duty rates for certain RCEP originating goods in accordance with the applicable concessional items. The Customs Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021 (the Customs Amendment Bill) will make complementary amendments to the Customs Act 1901 (the Customs Act) to introduce new rules of origin for goods imported into Australia from a Party to the Agreement. The new rules will determine whether goods are RCEP originating goods and therefore eligible for preferential customs duty treatment in accordance with the Agreement. These rules will be set out in new Division 1N of Part VIII of the Customs Act. FINANCIAL IMPACT STATEMENT The 2020-21 Mid-Year Economic and Fiscal Outlook estimated that implementing the Agreement will have no impact on customs duty receipts. 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 for the Agreement, covering the tariff amendments, is contained in the Explanatory Memorandum for the Customs Amendment Bill. Page 2 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
CUSTOMS TARIFF AMENDMENT (REGIONAL COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT IMPLEMENTATION) BILL 2021 NOTES ON CLAUSES Clause 1 Short title 1. This clause provides for the 'Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021' (the Bill), when enacted, to be cited as the Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Act 2021. 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 to commence at the same time as Schedule 1 to the Customs Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Act 2021. 5. In accordance with the commencement provision for the Customs Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Act 2021, the Minister must announce the day on which the Agreement enters into force for Australia by notifiable instrument. However, the provisions do not commence at all if the Agreement does not enter into force for Australia. 6. Table item 3 provides for Schedule 2 of the Bill to commence at the later of: (a) immediately after the commencement of the provisions covered by table item 2; and (b) immediately after the commencement of the Customs Tariff Amendment (2022 Harmonized System Changes) Act 2021 (the Harmonized System Tariff Amendment Act). 7. Schedule 2 of the Bill will update the tariff classification codes to which goods in new Schedule 14 are classified. That is, from the tariff classification codes of the 2017 version of the Harmonized Commodity Description and Coding System (the Harmonized System) to the tariff classification codes of the 2022 version of that System. 8. However, Schedule 2 of the Bill does not commence if the Harmonized System Tariff Amendment Act implementing the 2022 version of the Harmonized System is not enacted. Clause 3 Schedules 9. This clause enables the Schedules of the Bill, when enacted, to amend or repeal provisions of legislation specified in that Schedule in accordance with the applicable items. The Customs Tariff Act 1995 (the Customs Tariff Act) is being amended by the Bill. Page 3 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
Schedule 1-Amendments Customs Tariff Act 1995 Introductory Comments 10. On 15 November 2020, the Hon. Simon Birmingham, former Minister for Trade, Tourism and Investment, and his counterparts from Brunei Darussalam, Cambodia, Indonesia, Lao People's Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet Nam, China, Japan, New Zealand and Republic of Korea signed the Regional Comprehensive Economic Partnership Agreement (the Agreement). 11. The Agreement includes rules of origin to determine whether goods imported into Australia are originating goods (referred to as 'RCEP originating goods'). Such goods are subject to preferential rates of customs duty under the amendments to the Customs Tariff Act proposed by the Bill. These rules of origin are inserted by the Customs Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021 and are contained in new Division 1N of Part VIII of the Customs Act 1901 (the Customs Act). 12. The Bill sets out customs duty rates for RCEP originating goods in accordance with the Agreement. For goods classified to the tariff subheadings listed in new Schedule 14 inserted by the Bill, the customs duty rate would accord with Article 2.4 of Chapter 2 of the Agreement. For goods classified to tariff subheadings not listed in new Schedule 14, a preferential customs duty rate of 'Free' will apply in accordance with Annex 3A to Chapter 3 of the Agreement. Item 1 Subsection 3(1) (at the end of the definition of rate column) 13. 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 the table in new Schedule 14. 14. New Schedule 14 will set out the rates of customs duty for RCEP originating goods classified to tariff subheadings listed in that Schedule. Item 2 Subsection 9(1) 15. This item amends subsection 9(1) of the Customs Tariff Act to insert a reference to new Schedule 14. 16. This amendment allows ad valorem rates of custom duty that apply to RCEP originating goods to be specified in the "rate column" in new Schedule 14 of the Customs Tariff Act. Items 3 to 5 17. Section 11 of the Customs Tariff Act sets out the rules for determining when a phasing rate of customs duty has effect. The amendments made by these items provide for phasing rates of customs duty for RCEP originating goods. Page 4 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
18. Item 3 inserts new paragraph 11(1)(bj) 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 14 of the Customs Tariff Act that applies to the goods. 19. Item 4 inserts new paragraph 11(1)(n) into the Customs Tariff Act to include a reference to the third column of an item in the table in new Schedule 14 that applies to RCEP originating goods. 20. Item 5 inserts new paragraph 11(2)(bj) 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 14 of the Customs Tariff Act that applies to RCEP originating goods. Item 6 After section 13K 21. This item inserts new section 13L into the Customs Tariff Act, which sets out when goods are RCEP originating goods for the purposes of the Customs Tariff Act. 22. Goods are RCEP originating goods if, and only if, they are RCEP originating goods under Division 1N of Part VIII of the Customs Act. New Division 1N, inserted by the Customs Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021, sets out the new rules of origin for determining whether goods are RCEP originating goods. Item 7 After subparagraph 16(1)(a)(xi) 23. This item inserts new subparagraph 16(1)(a)(xii) into the Customs Tariff Act. 24. Section 16 of the Customs Tariff Act sets out how duty is to be worked out, including for goods that are originating goods of particular countries. Paragraph 16(1)(a) specifies that, where 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 to the Customs Tariff Act, under which the goods are classified. 25. The purpose of new subparagraph 16(1)(a)(xii) is to ensure that the general rate of customs duty set out in Schedule 3 does not apply to RCEP originating goods. Item 8 At the end of subsection 16(1) 26. Item 8 inserts new paragraph 16(1)(t) into the Customs Tariff Act. New paragraph 16(1)(t)(i) provides that where RCEP originating goods are classified to a tariff subheading in Schedule 3 that is specified in column 2 of an item in the table in new Schedule 14, the rate of customs duty on the goods is to be calculated by reference to the rate of duty set out in column 3 of the relevant item in Schedule 14. 27. However, where RCEP originating goods are not classified to a tariff subheading listed in new Schedule 14, new paragraph 16(1)(t)(ii) provides for such goods to be subject to a customs duty rate of 'Free,' in accordance with Article 2.4 of Chapter 2 of the Agreement and Annex 3A to Chapter 3 of the Agreement. Page 5 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
Item 9 After subsection 16(4AB) 28. This item inserts new subsection 16(4A) and 16(4B) into the Customs Tariff Act. 29. New subsection 16(4A) provides that a reference to year 2, 3, 4, 5, 7, 10, 11, 13, 15, 16, 17, 18, 19 and 20 in new Schedule 14 for RCEP originating goods, is a reference to the first, second, third, fourth, sixth, ninth, tenth, 12th, 14th, 15th, 16th, 17th, 18th and 19th calendar year, respectively, after this subsection commences. 30. This subsection commences when the Agreement enters into force for Australia. This accords with the General Notes under Annex I and the Schedule of Australia under that Annex, and is relevant to when phasing rates for certain RCEP originating goods come into effect. For example: RCEP originating goods Column 1 Column 2 Column 3 Item Heading or subheading Rate in Schedule 3 263 3808.59.90 4% (prescribed goods only) From 1 January of year 3: 3% From 1 January of year 5: 2% From 1 January of year 7: Free 31. If the Agreement enters into force after 1 January 2022, the rate of duty will be 4 per cent from entry into force and will decrease to 3 per cent on 1 January 2024 (as 2024 would be the second calendar year after entry into force), and will reduce further to 2 per cent on 1 January 2026, and will become 'Free' on 1 January 2028 (as 2028 will be the sixth calendar year after entry into force). See the notes for item 24 of the Bill with respect to the consideration of the most favoured nation applied rates of customs duty that applies to goods listed under new Schedule 14. 32. New subsection 16(4B) provides that if column 2 of an item in the table in new Schedule 14 includes the reference to '(prescribed goods only)', subparagraph (1)(t)(i) will not apply to those goods unless the goods are also prescribed for the purposes of that item. Where goods are not prescribed for any of such table item, the relevant goods are subject to a 'Free' rate of customs duty. 33. New Schedule 14 contain several table items for tariff subheadings that include the reference to '(prescribed goods only)' where the same tariff heading or subheading is subject to different preferential rates of customs duty. 34. For example, table items 1542, 1543 and 1544 set out different rates of customs duty for different prescribed goods classified to subheading 8703.40.19. Page 6 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
RCEP originating goods Column 1 Column 2 Column 3 Item Heading or subheading Rate in Schedule 3 1542 8703.40.19 5% (prescribed goods only) From 1 January of year 11: 4% From 1 January of year 13: 3% From 1 January of year 16: 2% From 1 January of year 18: 1% From 1 January of year 20: Free 1543 8703.40.19 4% (prescribed goods only) From 1 January of year 3: 3% From 1 January of year 5: 2% From 1 January of year 7: Free 1544 8703.40.19 4% (prescribed goods only) From 1 January of year 3: 3% From 1 January of year 5: 2% From 1 January of year 7: 1% From 1 January of year 10: Free 35. In these circumstances, a table item only applies where goods are prescribed for that item and does not apply where goods are prescribed in relation to the same tariff subheading but for another table item. Items 10 to 12 36. Schedule 4 to 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 apply under Schedules 3 and the Schedules that provide for preferential rates for originating goods under an agreement to which Australia is a party. 37. Item 10 inserts new paragraph 18(1)(k) into the Customs Tariff Act. This paragraph will specify that a concessional item in Schedule 4 only applies to goods if the duty is lower than the duty payable under new Schedule 14. This provision is consistent with the similar provision for other Schedules to the Customs Tariff Act for other FTAs. 38. 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 applies to the goods. 39. Item 11 inserts new subparagraph 18(2)(a)(xii) into the Customs Tariff Act which provides that the general rate of customs duty set out in Schedule 4 will not apply to RCEP originating goods. Page 7 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
40. Item 12 inserts new paragraph 18(2)(t) into the Customs Tariff Act to set out how customs duty is calculated for goods that are RCEP 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 RCEP originating goods and 'RCEP' is specified in the third column of an item in Schedule 4, the amount of duty is calculated by reference to that customs duty rate. If there is no such rate specified, the rate of customs duty is 'Free'. Item 13 Paragraph 19AAC(1)(b) 41. Section 19 of the Customs Tariff Act provides for the automatic indexation of certain excise equivalent customs duty rates in line with movements in the Consumer Price Index (CPI) in February and August of each year. The goods to which automatic indexation applies are certain alcohol and fuel products. 42. For this purpose, section 19AAC of the Customs Tariff Act includes a table that specifies the fuel products subject to biannual indexation under section 19 of the Customs Tariff Act. 43. This item amends paragraph 19AAC(1)(b) of the Customs Tariff Act to insert a reference to new Schedule 14 so that indexation under section 19 applies to the rates of excise equivalent customs duty for those fuel products that are RCEP originating goods. Item 14 Paragraph 19AA(b) 44. Section 19AA of the Customs Tariff Act includes a table, which sets out the alcohol products subject to biannual indexation for the purposes of section 19 of the Customs Tariff Act. 45. This item amends paragraph 19AA(b) of the Customs Tariff Act to insert a reference to new Schedule 14 so that the indexation provisions in section 19 of the Customs Tariff Act apply to the rates of excise equivalent customs duty for those alcohol products that are RCEP originating goods. Item 15 Paragraph 19AC(b) 46. Section 19AB of the Customs Tariff Act provides for the automatic indexation of certain excise equivalent rates of duty in line with movements in the full-time adult average weekly ordinary time earnings (AWOTE), in March and September of each year. The goods to which this automatic indexation applies are tobacco products. 47. For this purpose, section 19AC of the Customs Tariff Act contains a table that sets out the tobacco products subject to biannual indexation under section 19AB of the Customs Tariff Act. 48. This item amends paragraph 19AC(b) of the Customs Tariff Act to insert a reference to new Schedule 14 so that the indexation provisions in section 19AB apply to the rates of excise equivalent customs duty for those tobacco products that are RCEP originating goods. Page 8 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
Item 16 Paragraph 19ACA(1)(b) 49. Section 19ACA of the Customs Tariff Act provides for a list of tobacco products that are not covered by section 19AC of the Customs Tariff 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. 50. For goods classified to a 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 annual weight conversion factor provided for in subsection 19ACA(2). 51. This item amends paragraph 19ACA(1)(b) of the Customs Tariff Act to insert a reference to new Schedule 14 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 RCEP originating goods. Item 17 Schedule 4 (table item 17A, column headed "Rate of duty") 52. Table item 17A of Schedule 4 to the Customs Tariff Act provides for a concessional rate of customs duty for goods produced in Australia that have been exported and returned to Australia in an unaltered condition containing one or more components defined as 'tradex components', 'drawback components' or 'excise components' within the meaning of the table item on which taxes or charges to the Commonwealth are owing. 53. For goods that satisfy these criteria, the rate of concessional customs duty is determined to be the amount that would apply to each tradex component, drawback component and excise component if imported separately. For excise components, duty that is determined by reference to a percentage of the value of the good is to be disregarded. 54. This item amends the rate column of table item 17A of Schedule 4 to the Customs Tariff Act to insert a reference to 'RCEP' so that the concessional rate of customs duty applies to RCEP originating goods that satisfy the eligibility criteria. Item 18 Schedule 4 (table item 20, column headed "Description of goods", paragraph (d)) 55. Table item 20 of Schedule 4 to the Customs Tariff Act provides a concessional rate of customs duty for goods prescribed by by-law being goods exported for repair or renovation that are not new or upgraded versions of the exported goods, for which the duty on the good applied under a specified Schedule of the Customs Tariff Act is worked out by reference to a percentage of the value of the goods. 56. For goods that satisfy these criteria, a concessional rate of customs duty of 'Free' applies to the value of the good that was exported and the applicable percentage set out in a specified Schedule of the Customs Tariff Act applies to the value of the repair or renovation. Page 9 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
57. This item amends paragraph (d) of the description column of table item 20 of Schedule 4 to the Customs Tariff Act to insert a reference to Schedule 14 so that the concessional rate of customs duty applies to RCEP originating goods that satisfy the eligibility criteria. Item 19 Schedule 4 (table item 20, column headed "Rate of duty") 58. This item amends the rate column of table item 20 of Schedule 4 to the Customs Tariff Act to insert a reference to "RCEP" so that the concessional rate of customs duty applies to RCEP originating goods that satisfy the eligibility criteria. Item 20 Schedule 4 (table item 22, column headed "Rate of duty") 59. Table item 22 of Schedule 4 to the Customs Tariff Act provides a concessional rate of customs duty for goods prescribed by by-law being containers used to import goods that will be exported without being put to any other use. 60. For goods that satisfy these criteria, a concessional rate of customs duty of 'Free' applies. Table item 22 further provides that the goods imported on or in such containers are subject to the rate of customs duty that would apply to the goods if they had been imported separately. 61. This item amends the rate column of table item 22 of Schedule 4 to the Customs Tariff Act to insert references to "RCEP" so that the concessional rate of customs duty applies to RCEP originating goods that satisfy the eligibility criteria. Item 21 Schedule 4 (table item 45, column headed "Rate of duty") 62. Table item 45 of Schedule 4 to the Customs Tariff Act provides a concessional rate of customs duty for goods prescribed by by-law, being original components of a completed machine or equipment that would be classified to a single tariff classification in Chapters 84 to 87 inclusive, or Chapters 89 to 90 inclusive, ordered and shipped from a single overseas supplier at the same time that arrive in Australia on two or more vessels or aircraft. 63. Table item 45 does not apply to goods to which table item 44 of Schedule 4 to the Customs Tariff Act applies. 64. For goods that satisfy these criteria the rate of customs duty that would apply to the completed machine or equipment applies. 65. This item amends the rate column of table item 45 of Schedule 4 to the Customs Tariff Act to insert a reference to "RCEP" so that the concessional rate of customs duty applies to RCEP originating goods that satisfy the eligibility criteria. Item 22 Schedule 4 (table item 50, column headed "Rate of duty") 66. Table item 50 of Schedule 4 to the Customs Tariff Act provides a concessional rate of customs duty for goods that are subject to a Tariff Concession Order (TCO). A TCO made by the Comptroller-General of Customs under Part XVA of the Customs Act grants a concessional rate of customs duty for the goods meeting the description set out in the TCO. Page 10 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
67. For goods subject to a TCO the concessional rate of customs duty that applies is determined by the tariff classification of the goods. 68. This item amends the rate column of table item 50 of Schedule 4 to the Customs Tariff Act to insert references to "RCEP" so that the concessional rate of customs duty applies to RCEP originating goods that are described in a TCO. Item 23 Schedule 4 (table item 53, at the end of the column headed "Rate of duty") 69. Table item 53 of Schedule 4 to the Customs Tariff Act provides a concessional rate of customs duty for goods of tariff subheading 3819.00.00 that are exempt from the Product Stewardship Oil Levy. 70. Table item 53 does not apply to goods to which table item 50 of Schedule 4 to the Customs Tariff Act applies. 71. For goods that satisfy this criteria the concessional rate of customs duty of 5 per cent applies. 72. The item amends the rate column of table item 53 of Schedule 4 to the Customs Tariff Act to insert a reference to "RCEP:5%" so that the concessional rate of customs duty applies to RCEP originating goods. Item 24 At the end of the Act 73. This item inserts new Schedule 14 into the Customs Tariff Act to provide for excise-equivalent rates of duty on certain alcohol, tobacco, fuel and petroleum products and for preferential rates of customs duty and phasing rates of customs duty in accordance with the Agreement that applies to certain goods. 74. Section 16 of the Customs Tariff Act, as amended by items 7 and 8 of Schedule 1 to the Bill, provides that the customs duty rate for RCEP originating goods is 'Free' unless a customs duty rate is specified for those goods in new Schedule 14. 75. Article 2.4 of Chapter 2 of the Agreement provides in part that, except as otherwise provided in the Agreement, each Party shall reduce or eliminate its customs duties on originating goods of other Parties in Accordance with its Schedule in Annex I. The Schedule of Australia under Annex I of the Agreement sets out the tariff commitments, for Australia, under that Agreement in relation to the reduction of tariffs in stages. 76. Table items 1 to 5, 7 to 24, 26 to 37, 39, 41 to 43, 55 to 59, 61 to 77, 80 to 87, 89, 90, 104 to 107, 111, 113, 128 to 132, 137, 186 to 189, 191 to 194, 201 to 240, 249 to 270, 273, 274, 276 to 286, 289 to 300, 303 to 309, 313, 315, 317 to 321, 323 to 328, 330 to 345, 347 to 349, 351, 354, 356 to 358, 360 to 364, 366 to 383, 385 to 388, 391, 392, 394 to 437,439 to 475, 477 to 505, 507 to 580, 582 to 1124, 1127 to 1148, 1150 to 1152, 1154 to 1160, 1162, 1164 to 1170, 1172, 1174, 1176 to 1197, 1199 to 1231, 1234 to 1262, 1265 to 1276, 1278 to 1280, 1282 to 1288, 1290 to 1295, 1298 to 1316, 1318 to 1326, 1328 to 1331, 1334 to 1336, 1339 to 1355, 1357, 1360, 1361, 1363 to 1372, 1375 to 1379, 1381, 1384 to 1386, 1388 to 1429, 1433, 1436, 1440 to 1443, 1445, 1446, 1448 to 1462, 1465, 1467 to 1469, 1471 to 1505, 1512 to 1590, 1592 to 1597, 1601 to 1607, 1610, 1612, 1613, 1615 to 1617, 1619 to 1627, 1630, 1636 to 1640, 1643 to 1655, 1657, 1658, 1662 to 1664, 1667 to 1672, and 1674 to 1687 Page 11 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
in new Schedule 14 reduce the ad valorem component of customs duty on RCEP originating goods in accordance with the staging categories specified in the Schedule for Australia under Annex I of the Agreement. By 1 January of the 19th calendar year after the Agreement enters into force, the ad valorem component of the customs duties on all RCEP originating goods in these table items will be eliminated. 77. Table items 6, 25, 38, 40, 190, 310 to 312, 314, 316, 322, 329, 346, 350, 355, 352, 353, 359, 365, 384, 389, 390, 393, 438, 476, 506, 581, 1125, 1126, 1149, 1153, 1161, 1163, 1171, 1173, 1175, 1198, 1232, 1233, 1263, 1264, 1277, 1281, 1289, 1296, 1297, 1317, 1327, 1332, 1333, 1337, 1338, 1356, 1358, 1359, 1362, 1373, 1374, 1380, 1382, 1383, 1387, 1430, 1431, 1432, 1434, 1435 1437 to 1439, 1444, 1447, 1463, 1464, 1466, 1470, 1506 to 1511, 1591, 1598 to 1600, 1608, 1609, 1611, 1614, 1618, 1628, 1629, 1631 to 1635, 1641, 1642, 1656, 1659 to 1661, 1665, 1666, 1673, 1688, 1689 and 1690 in new Schedule 14 maintain the customs duty on RCEP originating goods in accordance with the commitments made in the Schedule for Australia under Annex I of the Agreement. As such, the customs duties on RCEP originating goods classified to the tariff subheadings listed in these table items will not be eliminated. 78. Paragraph 2 of Article 2.4 provides that originating goods of other Parties shall be eligible, at the time of importation, for the most favoured-nation applied rate of customs duty for those goods in a Party, where that rate is lower than the rate of customs duty provided in that Party's Schedule in Annex I. 79. For Australia, the most favoured-nation rate of customs duty is the rate of customs duty that is set out in Schedule 3 of the Customs Tariff Act. To give effect to Paragraph 2 of Article 2.4 for goods referred to in new Schedule 14, where the rate of customs set out in the Schedule in Annex 1 for Australia is higher than the rate in Schedule 3 to the Customs Tariff that applies to the goods, this lower rate is expressly set out in Schedule 14. Consequently, for these goods, the threshold rate at which the rate begins to phase down is the lower rate. 80. Article 2.1 of Chapter 2 of the Agreement provides in part 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, fuel and petroleum products that are subject to customs duties at a rate that is equivalent to the excise duty imposed under the Schedule to the Excise Tariff Act 1921 (the Excise Tariff Act), on those goods when domestically produced. 81. Table items 44 to 54, 56, 57, 59, 60, 62, 63, 65, 66, 68, 69, 72, 73, 76 to 83, 87, 88, 90, 91 to 104, 106 to 112, 114 to 127, 133 to 136, 138 to 185, 195 to 200, 241 to 248, 271, 272, 275, 276, 287, 288, 301 and 302 in new Schedule 14 impose customs duty on certain alcohol, tobacco, fuel and petroleum products that are RCEP 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. 82. Table items 56, 57, 59, 62, 63, 65, 66, 68, 69, 72, 73, 76, 77, 80 to 83, 87, 90, 104, 106, 107, 111 and 276 in new Schedule 14 impose both an ad valorem rate, which is incrementally reduced to 'Free' in accordance with the commitments made in the Schedule for Australia under Annex I of the Agreement, and a customs duty rate that is equivalent to the excise duty imposed under the Schedule to the Excise Tariff Act, on those goods when domestically produced. Page 12 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
Items 25 to 28 83. The User's Guide is located in the preamble of the Customs Tariff Act and provides a general overview of the operation and organisation of the Customs Tariff Act. 84. These items amend the text of the User's Guide as required, to insert references to new Schedule 14 for RCEP originating goods so that users can identify provisions relating to these originating goods. Item 29 Application provision 85. This item provides that the amendments made by items 1 to 12 and 17 to 24 of Schedule 1 to the Bill apply in relation to: (a) goods imported into Australia on or after the commencement of this Schedule; and (b) goods imported into Australia before the commencement of this Schedule, where the time for working out the rate of import duty on the goods had not occurred before the commencement of this Schedule. 86. The amendments contained in Schedule 1 to the Bill will commence at the same time as Schedule 1 to the Customs Amendment (Regional Comprehensive Economic Partnership Implementation) Bill 2021. Item 30 Transitional provisions--indexation 87. This item provides for transitional provisions for alcohol duty rates and fuel duty rates, and tobacco duty rates subject to indexation under sections 19 and 19AB respectively. 88. Sections 19 and 19AA of the Customs Tariff Act provide that customs rates of duty for certain alcohol products are adjusted automatically, twice yearly, in line with movements in the CPI. These adjustments occur in February and August of each year. Sections 19AB and 19AC of the Customs Tariff Act provides that customs rates of duty for certain tobacco products, are adjusted automatically twice yearly, in line with movements in the AWOTE. The adjustments occur in March and September of each year. 89. The Bill has been drafted using rates of customs duty that include those indexed as part of the CPI and AWOTE increases that occurred on 2 August 2021 and 1 September 2020 respectively, following the release of the June 2021, CPI and May 2020 AWOTE figure. 90. The transitional provisions, if required, will amend the alcohol, fuel and tobacco duty rates currently on the face of the Bill such that upon commencement of Schedule 1, the customs duty rates for relevant tariff subheadings in Schedule 14 will be increased by the indexation amount or the sum of the indexation amounts in the case if multiple indexation events, without the need for further legislative amendments. Page 13 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
Schedule 2--Contingent amendments Customs Tariff Act 1995 Items 1 to 22 91. The Customs Tariff Amendment (2022 Harmonized System Changes) Bill 2021, when enacted will implement the outcomes of the World Customs Organization's sixth review of the Harmonized System. 92. The Harmonized System is a framework of codes and descriptions used to identify all tradeable goods. At the international level, the Harmonized System comprises 97 chapters with associated two-digit codes, which are then each divided into headings (four-digit codes) and subheadings (five- and six-digit codes). The tariff classification codes used to classify goods in new Schedule 14 are the codes of the 2017 version of the Harmonized System. 93. Items 1 to 22 amend new Schedule 14 to update the tariff classification codes from the 2017 version of the Harmonized System to the codes of the 2022 version of the Harmonized System. The purpose of the amendments is to ensure that the preferential rates of customs duty continue to apply to the RCEP originating goods in accordance with the Agreement and at the rate as intended by that Agreement. Page 14 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
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 (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021 The Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021 (the Bill) 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 Bill The purpose of the Bill is to amend the Customs Tariff Act 1995 (the Customs Tariff Act) to give effect to the Regional Comprehensive Economic Partnership Agreement (the Agreement), signed on 15 November 2020. In particular, the Bill will: provide a 'Free' rate of customs duty for goods that are RCEP originating goods (other than goods listed in new Schedule 14), with effect from entry into force of the Agreement for Australia; insert a new Schedule 14 to: (i) specify the phasing rates of customs duty for certain RCEP originating goods that will incrementally reduce to 'Free' by, at the latest, the 19th calendar year after the Agreement enters into force for Australia; (ii) maintain rates of customs duty on certain alcohol, tobacco and petroleum products equivalent to the rates of excise duty payable on the same good when locally manufactured; and (iii) maintain rates of customs duty on certain goods for example electric buses; and amend Schedule 4 to maintain customs duty rates for certain RCEP originating goods in accordance with the applicable concessional item. The amendments contained in Schedule 1 to the Bill, give effect to commitments made under the Agreement and when enacted, will commence at the same time as Schedule 1 to the Customs Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021 (the Customs Amendment Bill). That is, the later of the day on which this Act receives the Royal Assent and the day on which the Agreement, done on 15 November 2020, enters into force for Australia. The amendments contained in Schedule 2 to the Bill, updates the tariff classification codes of the Harmonized Commodity Description and Coding System (the Harmonized System) to which goods under new Schedule 14 are classified. The Customs Tariff Amendment (2022 Harmonized System Changes) Bill 2021 will, when enacted, amend the Customs Tariff Act to update the tariff classification codes of the Harmonized System from the 2017 tariff classification codes to the 2022 tariff classification codes. Page 15 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021
The tariff classification codes to which goods are classified under Schedule 14 are the codes of the 2017 version of the Harmonized System. These codes are updated to ensure that originating goods in accordance with the Agreement continues to be subject to the preferential rates in accordance with that Agreement and that such rates continue to apply to the specific goods. The Customs Amendment Bill will make complementary amendments to the Customs Act 1901 (the Customs Act) to introduce new rules of origin for goods imported into Australia from a Party to the Agreement. The new rules will determine whether goods are RCEP originating goods and therefore eligible for preferential tariff treatment in accordance with the Agreement. These rules will be set out in new Division 1N of Part VIII of the Customs Act. Human rights implications The Bill does not engage any of the applicable rights or freedoms. Conclusions The Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in the definition of human rights in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. The Hon. Jason Wood, Assistant Minister for Customs, Community Safety and Multicultural Affairs and Parliamentary Secretary to the Minister for Home Affairs Page 16 Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021