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2013-2014-2015
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CUSTOMS TARIFF AMENDMENT (CHINA-AUSTRALIA
FREE TRADE AGREEMENT IMPLEMENTATION) BILL 2015
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Immigration and Border Protection
the Honourable Peter Dutton MP)
CUSTOMS TARIFF AMENDMENT (CHINA-AUSTRALIA FREE TRADE AGREEMENT
IMPLEMENTATION) BILL 2015
OUTLINE
The purpose of the Customs Tariff Amendment (China-Australia Free Trade Agreement
Implementation) Bill 2015 (the Tariff Bill) is to amend the Customs Tariff Act 1995 (the
Customs Tariff) to implement the China-Australia Free Trade Agreement (the Agreement)
by:
providing free rates of customs duty on entry into force of the Agreement for most
goods that are Chinese originating goods in accordance with new Division 1L of
Part VIII of the Customs Act 1901 (the Customs Act). New Division 1L is to be
inserted into the Customs Act by the Customs Amendment (China-Australia Free
Trade Agreement Implementation) Bill 2015 (the Customs Bill);
amending Schedule 4 to the Customs Tariff to maintain customs duty rates for
certain Chinese originating goods in line with the applicable concessional item;
phasing the preferential rates of customs duty for certain Chinese originating
goods to Free by the fifth year of phasing; and
inserting a new Schedule 12 to the Customs Tariff to accommodate the
preferential and phasing rates of customs 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 on such goods that are
manufactured in Australia.
Complementary amendments will also be made to the Customs Act by the Customs Bill to
implement the Agreement.
In view of the Parliamentary sitting schedule, the benefits to Australian businesses of a
double cut to tariffs on exports to the territory of China should the Agreement enter into force
before the end of the year, and the importance to the Parliament and the community of
seeing the changes that are required to be made under this Agreement, the Government
has decided to introduce the implementing legislation before the Joint Standing Committee
on Treaties has issued its report in relation to the Agreement.
FINANCIAL IMPACT STATEMENT
This financial impact of the amendments in this Bill and the Customs Tariff Amendment
(China-Australia Free Trade Agreement Implementation) Bill is as follows:
Underlying cash impact ($millions)
2015-16 2016-17 2017-18 2018-2019 Total
-610 -1,070 -1,210 -1,260 -4,150
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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REGULATION IMPACT STATEMENT
A Regulation Impact Statement covering the tariff amendments is contained in the
Explanatory Memorandum for the Customs Bill.
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2014
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Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
CUSTOMS TARIFF AMENDMENT (CHINA-AUSTRALIA FREE TRADE AGREEMENT
IMPLEMENTATION) BILL 2015
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 on entry into force of the Agreement for most
goods that are Chinese originating goods in accordance with new Division 1L of
Part VIII of the Customs Act;
amending Schedule 4 to the Customs Tariff to maintain customs duty rates for
certain Chinese originating goods in line with the applicable concessional item;
phasing the preferential rates of customs duty for certain Chinese originating
goods to Free by the fifth year of phasing; and
creating a new Schedule 12 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 PETER DUTTON MP
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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CUSTOMS TARIFF AMENDMENT (CHINA-AUSTRALIA FREE TRADE AGREEMENT
IMPLEMENTATION) BILL 2015
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 (China-Australia Free Trade Agreement Implementation) Act 2015.
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 (China-Australia Free Trade Agreement
Implementation) Act 2015 commences that is, the later of the day on which that Act
receives the Royal Assent and 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 (China-Australia Free Trade Agreement Implementation) Bill 2015
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SCHEDULE 1 -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 Chinese originating goods that are set out in
Annex I: Schedules of Tariff Reduction Commitments of Australia and China.
8. Under the Agreement, rates of customs duty for certain other Chinese 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 Chinese originating goods that will phase to Free over
a number of years, and alcohol, tobacco and petroleum products will be set out in a new
Schedule 12 to the Customs Tariff. If a rate of duty is not specified in Schedule 12 or any
other Schedules to the Customs Tariff for Chinese originating goods, then the rate of
customs duty of Free applies.
10. The rules for determining whether goods are Chinese originating goods will be set out in
new Division 1L of the Customs Act. In close consultation with the Government of China,
the Australian Government is working towards entry into force of the Agreement before the
end of 2015 in order to maximise the business gains for both Parties. 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. China is currently listed as a Developing Country under Division 1 of Part 4 of Schedule 1
to the Customs Tariff. Goods imported from China are therefore subject to DCS rates of
duty. When implemented, the Tariff Bill will not affect the existing preferential status for
China.
12. Amendments will be made to the Customs Tariff to include references to the new
Schedule 12, to Chinese originating goods, and to specify duty rates in Schedule 4
(Schedule of Concessional Rates) for Chinese originating goods. Sections 16 and 18 of
the Customs Tariff will also be amended to provide rules for determining customs duty for
Chinese 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) to include a reference to
the third column of the table in new Schedule 12. Schedule 12 of the Customs Tariff will
be used to specify rates of duty, including phasing rates, for Chinese originating goods, as
required.
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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Item 2 Subsection 9(1)
14. Item 2 adds a reference to Schedule 12 in subsection 9(1).
15. This amendment allows rates of duty that apply to Chinese originating goods to be
specified in the rate column in Schedule 12 of the Customs Tariff.
Items 3 and 4 Paragraph 11(1)(bg)
16. Items 3 and 4 add new paragraph (1)(bh) 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 12 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)(k)
17. Items 5 and 6 add new paragraph (1)(l) 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 12 of the Customs
Tariff that applies to Chinese originating goods.
Items 7 and 8 Paragraph 11(2)(bg)
18. Items 7 and 8 add new paragraph (2)(bh) 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 12 of the Customs
Tariff that applies to Chinese originating goods.
19. The amendments provided by items 2 to 8 allow phasing rates of duty to be inserted in
Schedule 12.
Item 9 After section 13H
20. Item 9 amends the Customs Tariff by inserting a new section 13J. The new section
provides that, for the purposes of the Customs Tariff, goods are Chinese originating goods
if, and only if, they are Chinese originating goods under new Division 1L of Part VIII of the
Customs Act. New Division 1L of Part VIII of the Customs Act sets out the rules for
determining whether goods are Chinese originating goods.
21. Amendments to sections 16 and 18 of the Customs Tariff (items 10 to 17 refer) insert new
provisions to determine the rate of customs duty that applies to goods that are Chinese
originating goods. The purpose of new section 13J is to ensure that those rates will only
apply to goods that satisfy the new rules set out in new Division 1L of Part VIII of the
Customs Act.
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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Items 10 and 11 subparagraph 16(1)(a)(x)
22. Items 10 and 11 amend the Customs Tariff by inserting new subparagraph 16(1)(a)(x).
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)(x) ensures that the general rate of duty set out in Schedule 3
does not apply to Chinese originating goods.
Item 12 At the end of subsection 16(1)
24. Item 12 inserts new paragraph 16(1)(r) into the Customs Tariff. This paragraph provides
that a free rate of customs duty is payable on goods that are Chinese 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 12. 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 12.
Item 13 After subsection 16(4)
25. Item 13 inserts new paragraph 16(4A) in the Customs Tariff. This paragraph provides that
a reference to year 2, 3, 4 or 5 is a reference to the first, second, third or fourth calendar
year, respectively, after the year that the Agreement first enters into force. This is relevant
to when phasing rates for certain goods come into effect. For example:
Chinese originating goods
Column 1 Column 2 Column 3
Item Heading or subheading Rate
in Schedule 3
460 6403.40.00 3.3%
From 1 January of year 2: 1.7%
From 1 January of year 3: Free
26. If the Agreement enters into force before 1 January 2016, the rate of duty will be 3.3%
from entry into force and will drop to 1.7% on 1 January 2016 (as 2016 would be the first
calendar year after entry into force) and will further drop to Free on 1 January 2017 (as
2017 will be the second calendar year after entry into force).
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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Item 14 At the end of subsection 18(1)
27. 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, 9, 10 or
11.
28. Item 14 amends subsection 18(1) to add a new paragraph (1)(i). This amendment will add
that a concessional item in Schedule 4 only applies to goods if the duty is lower than the
duty payable under Schedule 12. This provision is consistent with the same provision for
other schedules to the Customs Tariff, for example Schedule 7, Chilean originating goods.
Items 15 and 16 subparagraph 18(2)(a)(x)
29. Items 15 and 16 amend the Customs Tariff by inserting a new subparagraph 18(2)(a)(x).
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.
30. New subparagraph 18(2)(a)(x) ensures that the general rate of duty set out in Schedule 4
does not apply to Chinese originating goods.
Item 17 At the end of subsection 18(2)
31. Item 17 inserts new paragraph 18(2)(r) into the Customs Tariff to set out how customs
duty is calculated for goods that are Chinese originating goods and that are subject to a
concessional item in Schedule 4. This paragraph provides that if the goods are Chinese
originating goods and "CN" 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 18 Paragraph 19AAC(1)(b)
32. 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 and petroleum products.
33. For this purpose, section 19AAC contains a table that sets out the petroleum products
subject to biannual indexation under section 19.
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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34. Item 18 amends subsection 19AAC(1)(b) of the Customs Tariff by adding a reference to
Schedule 12 so that the indexation provisions in section 19 apply to the rates of
excise-equivalent customs duty for those petroleum products that are Chinese originating
goods.
Item 19 Paragraph 19AA(b)
35. For section 19 of the Customs Tariff, section 19AA contains a table that sets out the
alcohol products subject to biannual indexation under section 19.
36. Item 19 amends subsection 19AA(b) of the Customs Tariff by adding a reference to
Schedule 12 so that the indexation provisions in section 19 apply to the rates of
excise-equivalent customs duty for those alcohol products that are Chinese originating
goods.
Item 20 Paragraph 19AC(b)
37. 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 this automatic indexation applies are tobacco products.
38. For this purpose, section 19AC contains a table that sets out the tobacco products subject
to biannual indexation under section 19AB.
39. Item 20 amends subsection 19AC(b) of the Customs Tariff by adding a reference to
Schedule 12 so that the indexation provisions in section 19AB apply to the rates of
excise-equivalent customs duty for those tobacco products that are Chinese originating
goods.
Items 21 to 27 Schedule 4
40. 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.
41. The Agreement only provides for duty concessions for goods in Schedule 3 of the
Customs Tariff. Paragraph 18(2)(r) of the Customs Tariff provides that the rate of customs
duty for Chinese originating goods subject to a concessional item in Schedule 4 is Free,
unless a rate for China is specified. It is therefore necessary to specify rates of customs
duty for Chinese originating goods for those concessional items in Schedule 4 where the
rate of duty is not Free.
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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42. Items 21, 23, 24, 25, 26 amends items 17A, 20, 22, 45 and 50 respectively and inserts
"CN" in the third column of each of these items, so the amount of duty for Chinese
originating goods that fall within the terms of these items is calculated by reference to the
rate of duty set out in column 3.
43. Item 22 inserts a reference to new Schedule 12 in the description of goods for
concessional item 20 (Goods exported for repair or renovation), to ensure the correct rate
of duty applies to Chinese originating goods that come under this item.
44. Item 27 amends the existing rates of customs duty for item 53 in Schedule 4 by adding the
appropriate duty rate for Chinese originating goods.
Item 28 At the end of the Act
Schedule 12 - Chinese originating goods
45. Item 28 inserts new Schedule 12 into the Customs Tariff.
46. Annex I: Schedules of Tariff Reduction Commitments of Australia and China of the
Agreement provides that rates of customs duty for certain Chinese originating goods are to
be reduced to Free over a period of time (and not immediately on entry into force).
Section 16 of the Customs Tariff, as amended, provides that the rates of customs duty for
Chinese originating goods are Free unless a rate of duty is specified for those goods in
Schedule 12. Therefore, items 1 to 6, 126, 135 and 144 to 657 in Schedule 12 of the
Customs Tariff impose phasing rates of customs duty on Chinese originating goods in
accordance with the Agreement. Column 3 of the table in Schedule 12 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 Chinese originating goods at each
step of that phasing.
47. Article 1.3: 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.
48. Section 16 of the Customs Tariff, as amended, provides that the rates of customs duty for
Chinese originating goods are Free unless a rate of duty is specified for those goods in
Schedule 12. Therefore, it is necessary to specify the relevant headings and subheadings
for the above alcohol, tobacco and petroleum products in Schedule 12 and the appropriate
rate of customs duty.
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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49. Items 7 to 125, 127 to 134 and 136 to 143 of Schedule 12 impose customs duty on the
alcohol, tobacco and petroleum products that are Chinese originating goods, at a rate that
is equivalent to the excise duty imposed under the Excise Tariff, on the same goods when
domestically produced. As mentioned above, these rates of duty may be subject to
indexation in accordance with sections 19 and 19AB of the Customs Tariff.
Items 29 to 33 User's Guide
50. These items omit and substitute text in the User's Guide to the Customs Tariff, as
required, to insert references to new Schedule 12.
Item 34 Application provision
51. This item provides that the amendments made by items 1 to 17 and 21 to 28 set out in
Schedule 1 of the Tariff Bill will apply to goods imported into Australia on or after the
commencement of Schedule 1 to the Tariff Bill (items 18, 19 and 20 relate to the
indexation provisions in sections 19AAC, 19AA and 19AC of the Customs Tariff and are
not covered by the application provision - comments under items 18, 19 and 20 refer).
52. The commencement provisions of the Tariff Bill provide that Schedule 1 commences at the
same time as Schedule 1 to the Customs Bill; that is the later of the day on which that Act
receives the Royal Assent and the day that the Agreement enters into force for Australia.
53. Item 34 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 2015, item 34 provides that
amendments to the Customs Tariff shall apply to goods that were imported before
1 December 2015 but not entered for home consumption until on or after
1 December 2015.
Item 35 Transitional provision - indexation
54. As noted under item 18, section 19 of the Customs Tariff provides that customs rates of
duty, for certain alcohol and petroleum products, are adjusted automatically, twice yearly,
in line with movements in the CPI. These adjustments occur in February and August of
each year.
55. As noted under item 20, section 19AB of the Customs Tariff provides that customs rates of
duty, for certain tobacco products, are adjusted automatically, twice yearly, in line with
movements in the AWOTE. These adjustments occur in March and September of each
year.
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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56. The Tariff Bill has been drafted using rates of duty that include the CPI and AWOTE
increase that occurred on 1 August 2015 and 1 September 2015, following the release of
the June 2015 CPI figures and May 2015 AWOTE figures. Should the Agreement not
enter into force for Australia before 1 February 2016 or 1 March 2016, these rates of duty
may be superseded by increased duty rates, as a consequence of the February or March
2016 indexation. Without item 35, further legislative amendment would be required to
include the post 1 February 2016 and post 1 March 2016 duty rates in Schedule 12.
57. Item 35 sets out two transitional provisions that provide for the circumstance if the
February 2016 CPI or the March 2016 AWOTE increase, or both, occur before the
commencement of Schedule 1 to the Tariff Bill. Any increase in the duty rates as a
consequence of the CPI or AWOTE increase will apply automatically to the rates of duty in
the relevant items in Schedule 12.
58. Item 35 is in accordance with the terms of the Agreement and will serve to avoid the
requirement for further legislative amendments to the Customs Tariff should section 19
apply on 1 February 2016 and section 19AB apply on 1 March 2016 but, before Schedule
1 to the Tariff Bill commences. If Schedule 1 does not commence until after 1 March
2016, both transitional provisions will apply.
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
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