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2013-2014
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CUSTOMS TARIFF AMENDMENT (KOREA-AUSTRALIA
FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2014
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Immigration and Border Protection
the Honourable Scott Morrison MP)
CUSTOMS TARIFF AMENDMENT (KOREA-AUSTRALIA FREE TRADE AGREEMENT
IMPLEMENTATION) BILL 2014
OUTLINE
The purpose of the Customs Tariff Amendment (Korea-Australia Free Trade Agreement
Implementation) Bill 2014 (the Tariff Bill) is to amend the Customs Tariff Act 1995 (the
Customs Tariff) to implement the Korea-Australia Free Trade Agreement (the Agreement)
by:
providing free rates of customs duty for goods that are Korean originating goods
in accordance with new Division 1J of Part VIII of the Customs Act 1901 (the
Customs Act). New Division 1J is proposed to be inserted in the Customs Act by
the Customs Amendment (Korea-Australia Free Trade Agreement
Implementation) Bill 2014 (the Customs Bill);
amending Schedule 4 to the Customs Tariff to maintain customs duty rates for
certain Korean originating goods in accordance with the applicable concessional
item;
phasing the preferential rates of customs duty for certain goods to Free by 2021;
and
inserting a new Schedule 10 in the Customs Tariff to accommodate the
preferential and phasing rates of duty and to maintain excise-equivalent rates of
duty on certain alcohol, tobacco and petroleum products. These rates are
equivalent to the rates of excise duty payable when locally manufactured.
Complementary amendments will also be made to the Customs Act by the Customs Bill to
give effect to the Agreement.
FINANCIAL IMPACT STATEMENT
Underlying cash impact ($millions)
2014-15 2015-16 2016-17 2017-18 Total
-100.0 -165.0 -180.0 -190.0 -635.0
REGULATION IMPACT STATEMENT
A Regulation Impact Statement covering the tariff amendments is contained in the
Explanatory Memorandum for the Customs Bill.
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
Page 2
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
CUSTOMS TARIFF AMENDMENT (KOREA-AUSTRALIA FREE TRADE AGREEMENT
IMPLEMENTATION) BILL 2014
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 Bill amends the Customs Tariff by:
providing free rates of customs duty for goods that are Korean originating goods
in accordance with new Division 1J of Part VIII of the Customs Act;
amending Schedule 4 to the Customs Tariff to maintain customs duty rates for
certain Korean originating goods in accordance with the applicable concessional
item;
phasing the preferential rates of customs duty for certain goods to Free by 2021;
creating a new Schedule 10 in the Customs Tariff to accommodate the
preferential, phasing and excise-equivalent rates of duty.
Human rights implications
This legislative instrument does not engage, impact on, or limit in any way, the human rights
and freedoms recognised or declared in the international instruments listed in the definition
of human rights at section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Conclusion
This Bill is compatible with human rights.
MINISTER FOR IMMIGRATION AND BORDER PROTECTION,
THE HONOURABLE SCOTT MORRISON MP
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
Page 3
CUSTOMS TARIFF AMENDMENT (KOREA-AUSTRALIA FREE TRADE AGREEMENT
IMPLEMENTATION) BILL 2014
NOTES ON CLAUSES
Clause 1 - Short Title
1. This clause provides for the Tariff Bill, when enacted, to be cited as the Customs Tariff
Amendment (Korea-Australia Free Trade Agreement Implementation) Act 2014.
Clause 2 - Commencement
2. Subclause (1) provides that each provision of this Act specified in column 1 of the table in
that subclause commences, or is taken to have commenced, on the day or at the time
specified in column 2 of the table. This subclause also provides that any other statement in
column 2 of the table has effect according to its terms.
3. Item 1 of the table in this clause provides that sections 1 to 3 and anything in the Act not
covered elsewhere in the table will commence on the day on which the Act receives the
Royal Assent.
4. Item 2 of the table provides that Schedule 1 of the Tariff Bill will commence at the same
time as Schedule 1 to the Customs Amendment (Korea-Australia Free Trade Agreement
Implementation) Act 2014 commences that is, on the day that the Agreement enters into
force for Australia.
Clause 3 - Schedules
5. This clause is the formal enabling provision for the Schedule to the Tariff Bill, providing
that each Act specified in a Schedule is amended or repealed in accordance with the
applicable items in the Schedule. In the Tariff Bill, the Customs Tariff is being amended.
6. Clause 3 also provides that any other items of the Schedule have effect according to their
terms. This is a standard enabling clause for transitional, savings and application items in
amending legislation.
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
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SCHEDULE 1 - MAIN AMENDMENTS
Amendments to the Customs Tariff Act 1995
Introductory comments
7. On entry into force of the Agreement, the Tariff Bill will amend the Customs Tariff to
provide free rates of customs duty for those Korean originating goods that are set out in
Annex 2-A: Elimination of Customs Duties to the Agreement.
8. Under the Agreement, rates of customs duty for certain other Korean originating goods will
phase to Free over a number of years, and certain alcohol, tobacco and petroleum
products will continue to be subject to rates of customs duty that are equivalent to the
rates of excise duty payable on such goods when locally manufactured.
9. Rates of customs duty applicable to Korean originating goods that will phase to Free over
a number of years, and alcohol, tobacco and petroleum products will be set out, as
required, in a new Schedule 10 to the Customs Tariff. If a rate of duty is not specified in
Schedule 10 or any other Schedules for Korean originating goods, then the rate of duty of
Free applies.
10. The rules for determining whether goods are Korean originating goods will be set out in
new Division 1J of the Customs Act. The Agreement is expected to enter into force for
Australia in 2014. Under the provisions of the Customs Bill, the Minister for Immigration
and Border Protection is required to publish a notice in the Gazette advising when the
Agreement enters into force for Australia.
11. Korea is currently listed as a Developing Country under Division 1 of Part 4 and Division 1
of Part 5 of Schedule 1 of the Customs Tariff. Goods imported from Korea are therefore
subject to DCS and DCT rates of duty. When implemented, the Tariff Bill will not affect the
existing preferential status for Korea.
12. Amendments will be made to the Customs Tariff to include references to the new
Schedule 10, to Korean originating goods, and to specify duty rates in Schedule 4
(Schedule of Concessional Rates) for Korean originating goods. Sections 16 and 18 of
the Customs Tariff will also be amended to provide rules for determining customs duty for
Korean originating goods.
Item 1 Subsection 3(1) (at the end of the definition of rate column)
13. Item 1 amends the definition of rate column in subsection 3(1) of the Customs Tariff to
include a reference to the third column of the table in new Schedule 10. Schedule 10 of
the Customs Tariff will be used to specify rates of duty, including phasing rates, for Korean
originating goods, as required.
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
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Item 2 Subsection 9(1)
14. Item 2 adds a reference to Schedule 10.
15. This amendment allows rates of duty to be specified in the rate column in Schedule 10 of
the Customs Tariff that will apply to Korean originating goods.
Items 3 and 4 Paragraph 11(1)(be)
16. Items 3 and 4 add new paragraph (1)(bf) to section 11 to include a reference to a rate of
duty set out in the third column of an item in the table in new Schedule 10 of the Customs
Tariff that applies to the goods. Section 11 sets out the rules for determining when a
phasing rate of duty takes effect.
Items 5 and 6 Paragraph 11(1)(i)
17. Items 5 and 6 add new paragraph (1)(j) to section 11 to include a reference to a specified
date set out in the third column of an item in the table in new Schedule 10 of the Customs
Tariff that applies to Korean originating goods.
Items 7 and 8 Paragraph 11(2)(be)
18. Items 7 and 8 add new paragraph (2)(bf) to section 11 to include a reference to a rate of
duty set out in the third column of an item in the table in new Schedule 10 of the Customs
Tariff that applies to Korean originating goods.
19. The amendments provided by items 2 to 8 allow phasing rates of duty to be inserted in
Schedule 10.
Item 9 After section 13F
20. Item 9 amends the Customs Tariff by inserting a new section 13G. The new section
provides that, for the purposes of the Customs Tariff, goods are Korean originating goods
if, and only if, they are Korean originating goods under new Division 1J of Part VIII of the
Customs Act. New Division 1J of Part VIII of the Customs Act sets out the rules for
determining whether goods are Korean originating goods.
21. Amendments to sections 16 and 18 of the Customs Tariff (items 10 to 16 refer) insert new
provisions to determine the rate of customs duty that applies to goods that are Korean
originating goods. The purpose of new section 13G is to ensure that those rates will only
apply to goods that satisfy the new rules set out in new Division 1J of Part VIII of the
Customs Act.
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
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Items 10 and 11 subparagraph 16(1)(a)(vii)
22. Items 10 and 11 amend the Customs Tariff by inserting new subparagraph 16(1)(a)(viii).
Section 16 of the Customs Tariff sets out how customs duty is calculated, including for
goods that are the produce or manufacture of particular countries and classes of countries
for preference purposes. Paragraph 16(1)(a) provides that if the goods are not the
produce or manufacture of a preference country or a country to which a free trade
agreement applies, 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.
23. New subparagraph 16(1)(a)(viii) ensures that the general rate of duty set out in Schedule 3
does not apply to Korean originating goods.
Item 12 At the end of subsection 16(1)
24. Item 12 inserts new paragraph 16(1)(p) into the Customs Tariff. This paragraph provides
that a free rate of customs duty is payable on goods that are Korean originating goods
unless the goods are classified to a heading or subheading in Schedule 3 that is specified
in column 2 of an item in the table in new Schedule 10. If the goods are so classified, the
duty on those goods will be worked out by reference to the rate of duty set out in column 3
of the relevant item in Schedule 10.
Item 13 At the end of subsection 18(1)
25. Section 18 of the Customs Tariff sets out how customs duty is calculated in those
circumstances where a concessional rate of customs duty under an item in Schedule 4 of
the Customs Tariff is provided for certain goods. In particular, subsection 18(1) provides
that a concessional rate of customs duty can be used only where the rate of customs duty
is less than that which would otherwise be payable under Schedules 3, 5, 6, 7, 8 or 9.
26. Item 13 amends subsection 18(1) to add a new paragraph (1)(g). This amendment
provides that a concessional item in Schedule 4 only applies to goods if the duty is lower
than the duty payable under Schedule 10. This provision is consistent with the same
provision for other schedules of the Customs Tariff, for example Schedule 7, Chilean
originating goods.
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
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Items 14 and 15 subparagraph 18(2)(a)(vii)
27. Items 14 and 15 amend the Customs Tariff by inserting a new subparagraph 18(2)(a)(viii).
Schedule 4 of the Customs Tariff lists 57 items where a concessional rate of customs duty
is provided for particular goods. Section 18 of the Customs Tariff sets out how customs
duty is calculated for such goods, in particular for goods that are the produce or
manufacture of particular countries and classes of countries for preference purposes.
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 free trade agreement 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.
28. New subparagraph 18(2)(a)(viii) ensures that the general rate of duty set out in Schedule 4
does not apply to Korean originating goods.
Item 16 At the end of subsection 18(2)
29. Item 16 inserts new paragraph 18(2)(p) into the Customs Tariff to set out how customs
duty is calculated for goods that are Korean originating goods and that are subject to a
concessional item in Schedule 4. This paragraph provides that if the goods are Korean
originating goods and "KR" is specified in the third column of an item in Schedule 4, the
amount of duty is calculated by reference to that rate of duty. If there is no such rate, the
rate is Free.
Item 17 Paragraph 19AA(b)
30. Section 19 of the Customs Tariff provides for the automatic indexation of certain
excise-equivalent rates of duty 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 products.
31. For this purpose, section 19AA contains a table that pairs customs tariff subheadings with
the corresponding excise tariff items.
32. Item 17 amends subsection 19AA(b) of the Customs Tariff by adding a reference to
Schedule 10 to enable the indexation provisions to apply to the rates of excise-equivalent
customs duty for those alcohol products that are Korean originating goods.
Item 18 Paragraph 19AC(b)
33. Section 19AB of the Customs Tariff 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 automatic indexation applies are tobacco products.
34. For this purpose, section 19AC contains a table that pairs customs tariff subheadings with
the corresponding excise tariff items.
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
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35. Item 18 amends subsection 19AC(b) of the Customs Tariff by adding a reference to
Schedule 10 to enable the indexation provisions to apply to the rates of excise-equivalent
customs duty for those tobacco products that are Korean originating goods.
Items 19 to 25 Schedule 4
36. Schedule 4 of the Customs Tariff lists 57 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 Free. However, in some circumstances, instead of a Free rate of duty, the
items provide a lower rate of customs duty than the general rate that is otherwise payable.
37. The Agreement only provides for duty concessions for goods in Schedule 3 of the
Customs Tariff. As paragraph 18(2)(p) of the Customs Tariff provides that the rate of
customs duty for Korean originating goods subject to a concessional item in Schedule 4 is
Free, unless a rate for Korea is specified, it is necessary to specify rates of customs duty
for Korean originating goods for those concessional items where the rate of duty is not
Free.
38. Items 19, 20, 21, 22, 23, 24 and 25 amend the existing rates of customs duty for relevant
Schedule 4 items by adding or inserting the appropriate duty rate for Korean originating
goods.
39. Item 19 amends item 17A (Goods exported and returned unaltered to Australia on which
duties or taxes are owing) and inserts "KR" in the third column of item 17A, so the amount
of duty is calculated by reference to that rate of duty.
40. Item 20 inserts a reference to new Schedule 10 in the description of goods for
concessional item 20 (Goods exported for repair or renovation).
41. Item 21 amends item 20 and inserts "KR" in the third column of item 20, so the amount of
duty is calculated by reference to that rate of duty.
42. Item 22 amends item 22 (Containers used to import goods, being containers that will be
exported without being put to any other use) and inserts "KR" in the third column of
item 22, so the amount of duty is calculated by reference to that rate of duty.
43. Item 23 amends item 45 (Split consignment goods) and inserts "KR" in the third column of
item 45, so the amount of duty is calculated by reference to that rate of duty.
44. Item 24 amends item 50 (Tariff concession order goods) and inserts "KR" in the third
column of item 50, so the amount of duty is calculated by reference to that rate of duty.
45. Item 25 amends item 53 (Polyglycol brake fluids that are exempt from the Product
Stewardship Oil Levy) and inserts "KR" in the third column of item 53, so the amount of
duty is calculated by reference to that rate of duty.
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
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Item 26 At the end of the Act
Schedule 10 - Korean originating goods
46. Item 26 inserts new Schedule 10 into the Customs Tariff.
47. Annex 2-A: Elimination of Customs Duties of the Agreement provides that rates of
customs duty for certain Korean originating goods are to be reduced to Free over a period
of time. Items 136 to 696 in Schedule 10 of the Customs Tariff impose phasing rates of
customs duty on Korean originating goods as specified in the Agreement. Column 3 of the
table in Schedule 10 sets out, opposite the relevant headings and subheadings of
Schedule 3, the timing of those phasing rates and also the rates of customs duty that will
apply to Korean originating goods at each step of that phasing.
48. Article 1.4 of Section B: General Definitions, of Chapter 1 of the Agreement provides 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 alcohol, tobacco 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),
on those goods when domestically produced.
49. Section 16 of the Customs Tariff, as amended, provides that the rates of customs duty for
Korean originating goods are Free unless a rate of duty is specified for those goods in
Schedule 10. Therefore, it is necessary to specify the relevant headings and subheadings
for the above alcohol, tobacco and petroleum products in Schedule 10 and the appropriate
rate of customs duty.
50. Items 1 to 135 of Schedule 10 impose customs duty on the alcohol, tobacco and
petroleum products that are Korean originating goods, at a rate that is equivalent to the
excise duty imposed under the Excise Tariff, on the same goods when domestically
produced.
Items 27 to 31 User's Guide
51. These items omit and substitute text in the User's Guide to the Customs Tariff, as
required, to insert references to new Schedule 10.
Item 32 Application provision
52. This item provides that the amendments made by items 1 to 16 and 19 to 26 set out in
Schedule 1 of the Tariff Bill will apply to goods imported into Australia on or after the
commencement of item 32. (Items 17 and 18 relate to the indexation provisions in
sections 19AA and 19AC of the Customs Tariff and are not covered by the application
provision - comments under items 17 and 18 refer).
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
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53. The commencement provisions of the Tariff Bill provide that item 32 will commence at the
same time as Schedule 1 to the Customs Bill; that is on the day that the Agreement enters
into force for Australia.
54. Item 32 also applies to goods that were imported before that day but for which the time for
working out the rate of import duty on those goods had not occurred before that day. For
example, if the Agreement commences on 1 December 2014, item 32 provides that
amendments to the Customs Tariff shall apply to goods that were imported and
warehoused before 1 December 2014 but not entered for home consumption until on or
after 1 December 2014.
Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014
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