Commonwealth Numbered Regulations - Explanatory Statements

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CUSTOMS (INTERNATIONAL OBLIGATIONS) AMENDMENT (AUSTRALIA-UNITED KINGDOM FREE TRADE AGREEMENT IMPLEMENTATION) REGULATIONS 2022 (F2022L01513)

EXPLANATORY STATEMENT

Issued by the Minister for Home Affairs

Customs Act 1901

Customs (International Obligations) Amendment (Australia-United Kingdom Free Trade Agreement Implementation) Regulations 2022

The Customs Act 1901 (the Customs Act) concerns customs-related functions and is the legislative authority that sets out the customs requirement for the importation of goods into, and the exportation of goods from, Australia.

Subsection 270(1) of the Customs Act provides, in part, that the Governor-General may make regulations, not inconsistent with the Customs Act, prescribing all matters which by the Customs Act are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for giving effect to the Customs Act.

Subsection 163(1) of the Customs Act provides that refunds, rebates and remissions of duty may be made:

(a)    in respect of goods generally or in respect of the goods included in a class of goods; and

(b)   in such circumstances as are prescribed, being circumstances that relate to goods generally or to the goods included in the class of goods.

On 17 December 2021, the Hon. Dan Tehan MP, then Minister for Trade, Tourism and Investment, with the UK Secretary of State for International Trade signed the Free Trade Agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (the Agreement). The Agreement, among other things, delivers outcomes for trade in goods and services and sets out related customs procedures and rules of origin for claiming preferential rates of customs duty. These rules determine whether goods imported into Australia from the United Kingdom are originating goods (referred to as 'UK originating goods') and are thereby eligible for preferential rates of customs duty.

The Customs Amendment (Australia-United Kingdom Free Trade Implementation) Act 2022 (the Customs Implementation Act) amends the Customs Act to, among other things, insert new Division 1P into Part VIII of the Customs Act to implement the provisions under the Agreement dealing with trade in goods and rules of origin, enabling goods that satisfy the rules of origin to enter Australia at preferential rates of customs duty.

The purpose of the Customs (International Obligations) Amendment (Australia-United Kingdom Free Trade Agreement Implementation) Regulations 2022 (the Regulations) is to amend the Customs (International Obligations) Regulation 2015 (the International Obligations Regulation) to prescribe, as required under the Treaty, the following two new refund circumstances in respect of goods imported into Australia from the United Kingdom:

*               for UK originating goods, the refund applies when customs duty has been paid;

*               if at the time of importation and refund, the importer a declaration of origin or a copy of one or other documentation to support that the goods are originating, the refund circumstance applies when customs duty has been paid on such goods.

Details of the Regulations are set out in Attachment A.

A Statement of Compatibility with Human Rights has been prepared in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011, and is at Attachment B.

Public consultation and stakeholder engagement commenced on 17 June 2020. Stakeholders were engaged during the four years of preparatory discussions under the bilateral Trade Working Group (TWG), established in September 2016. Once negotiations formally commenced, DFAT, in conjunction with other government agencies, consulted widely with industry and other stakeholders. In the 12 months leading up to conclusion of the agreement, DFAT communicated with over 140 organisations and participated in over 250 meetings. These are set out in detail in Attachment 1 to the National Interest Analysis.

In the lead-up to negotiations and throughout negotiations, negotiators regularly engaged with representatives of the business sector, academia and civil society organisations to provide them with an opportunity to share their views and expectations. After every negotiating round, online stakeholder consultation events took place, hosted by the Australian British Chamber of Commerce and/or the Australia-UK Chamber of Commerce.

DFAT hosted a number of peak industry body events updating industry on the Agreement's negotiations, including biannual peak organisation meetings on trade and investment agreement negotiations and implementation as well as with peak bodies such as the Australian Services RoundTable. The Government also convened meetings of the Ministerial Advisory Council to add to transparency around negotiations. Participants in these meetings included representatives from peak industry bodies and civil society. The Agreement was discussed in this forum on 12 August 2020, 25 November 2020 and 26 March 2021.  

The Regulations are a legislative instrument for the purposes of the Legislation Act 2003.

The Regulations commence on the later of the day after the Regulations are registered, and the day on which Schedule 1 to the Customs Implementation Act commences. Schedule 1 to the Customs Implementation Act commences on the later of the day after that Act receives the Royal Assent, and the day the Agreement enters into force for Australia.

ATTACHMENT A

Details of the Customs (International Obligations) Amendment (Australia-United Kingdom Free Trade Agreement Implementation) Regulations 2022

Section 1 - Name

This section provides that the title of the instrument is the Customs (International Obligations) Amendment (Australia-United Kingdom Free Trade Agreement Implementation) Regulations 2022 (the Amendment Regulations).

Section 2 - Commencement

This section sets out, in a table, the date on which each of the provisions contained in the Regulations commence.

Table item 1 provides for the Regulations to commence on the later of the day after the Regulations are registered, and the day on which Schedule 1 to the Customs Amendment (Australia-United Kingdom Free Trade Agreement Implementation) Act 2022 (the Customs Implementation Act) commences. Schedule 1 to the Customs Implementation Act commences on the later of the day after that Act receives the Royal Assent, and the day the Free Trade Agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (the Agreement) enters into force for Australia.

Section 3 - Authority

This section sets out the authority under which the Regulations are to be made, which is the Customs Act 1901 (the Act).

Section 4 - Schedules

This section is the formal enabling provision for the Schedule to the Regulations, and provides that, each instrument that is specified in a Schedule to the Regulations is amended or repealed as set out in the applicable items in the Schedule concerned, and that any other item in a Schedule to this instrument has effect according to its terms.

The Customs (International Obligations) Regulation 2015 (the International Obligations Regulation) are amended by the Regulations.

Schedule 1--Amendments

Customs (International Obligations) Regulation 2015

Article 4.26 of Chapter 4 of the Agreement contains the obligation to allow importers of goods to apply for a refund of any excess duties paid as a result of the goods not having been granted preferential tariff treatment, on presentation of the following to the customs authority of the Party to which the goods are imported:

*               a declaration of origin and other evidence that the good qualifies as a UK originating good; and

*               such other documentation in relation to the importation as the customs authority may require to satisfactorily evidence the preferential tariff treatment claimed.

The purpose of the Regulations is to specify the circumstances under which an importer of goods may apply for a refund of any excess duty paid on UK originating goods and goods that would have been UK originating goods. The amendments in items [1] to [6] of the Regulations implement the obligation under Article 4.26 of the Agreement.

Item [1] - Section 4

This item amends section 4 of the International Obligations Regulation to insert a new definition of originating materials, which has the same meaning as given by subsection 153ZRB(1) of new Division 1P of Part VIII of the Customs Act.

Under subsection 153ZRB(1) of the Customs Act, originating materials means goods that, under Division 1P, are UK originating goods. These are goods that are:

*         UK originating goods that are used in the production of other goods; or

*         Australian originating goods that are used in the production of other goods; or

*         recovered materials derived in the territory of Australia, or in the territory of the United Kingdom, and used in the production of, and incorporated into, remanufactured goods; or

*         indirect materials.

Item [2] - Section 23 (at the end of the table)

This item amends the table in section 23 of the International Obligations Regulation to insert two new table items to enable a refund of duty for the following goods in the following circumstances:

*               table item 19 - UK originating goods, where duty has been paid on the goods;

*               table item 20 - goods that would have been UK originating goods if, at the time the goods were imported, the importer held a declaration of origin or a copy of a declaration of origin for the goods or other documentation to support that the goods are originating where both of the following apply:

(i)           duty has been paid on the goods;

(ii)         the importer holds either:

                                                              i.      a declaration of origin or a copy of a declaration of origin for the goods; or

                                                            ii.      other documentation to support that the goods are originating

at the time of making the application for the refund.

A declaration of origin is a document that has the same meaning given by subsection 153ZRB(1) of the Customs Act. That is, a declaration that is in force and that complies with the requirements of Article 4.18 of Chapter 4 of the Agreement.

Under paragraph 2 of Article 4.18 of Chapter 4 of the Agreement, each Party to the Agreement shall provide that a declaration of origin:

• need not follow a prescribed format;
• be in writing, including electronic format;
• specifies that the good is both originating and meets the requirements of this Chapter;
• be attached to, or provided on, an invoice or any other commercial document that describes the goods concerned in sufficient detail to enable them to be identified; and
• fulfils the data requirements as set out in Annex 4A (Data Requirements) of the Agreement.

Under paragraph 3 of Article 4.19 of the Agreement, each Party shall provide that if an importer of the good makes a claim for preferential tariff treatment on the basis of the importer's knowledge the good is originating, the claim is made on the basis of:

• the importer having documentation that the good is originating; or
• reasonable reliance on supporting documentation provided by the exporter or producer that the good is originating.

Item [3] - At the end of section 24

Section 24 of the International Obligations Regulation provides that a refund is not payable under table item 6 of the table in clause 1 of Schedule 6 to the Customs Regulation 2015 (the Customs Regulation) to the extent that an application for a refund relates to factors relates to one or more of the factors mentioned in this section.

This item amends section 24 of the International Obligations Regulation to include paragraph 24(j) to reference new table items 19 and 20 of the table in section 23 of that Regulation.

Table item 6 of the table in clause 1 of Schedule 6 to the Customs Regulation provides that refunds of duty are payable where duty has been paid because of manifest error of fact or patent misconception of the law. A refund of duty could be paid under item 6 in respect of goods mentioned in table items 19 and 20 of the table in section 23 if it does not relate to the factors that determine whether the goods are UK originating goods.

The purpose of paragraph 24(j) is to restrict refunds of duty in relation to UK originating goods to the extent that the application for a refund relates to any of the factors that determine whether goods mentioned in table items 19 and 20 in section 23 of the International Obligations Regulation are UK originating goods.

Item [4] to [6] - Subsection 31(2)

These items amend the definitions of duty payable and relevant originating goods in subsection 31(2) of the International Obligations Regulation.

Items 4 and 5 of the Regulations insert a reference to the new table items 19 and 20 respectively into the definition of 'duty payable' under subsection 31(2). Item 6 of the Regulations inserts new subparagraph 31(2)(j), for UK originating goods, into the definition of relevant originating goods.

The purpose of these amendments is to enable the refund of duty paid on UK originating goods to be calculated in accordance with section 31 of the International Obligations Regulation, and subsequently made by a Collector.

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Customs (International Obligations) Amendment (Australia-United Kingdom Free Trade Agreement Implementation) Regulations 2022

The Disallowable Legislative Instrument 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 Disallowable Legislative Instrument

On 17 December 2021, the Hon. Dan Tehan MP, the then Minister for Trade, Tourism and Investment and the UK Secretary of State for International Trade signed the Free Trade Agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (the Agreement).

The Agreement, among other things, delivers outcomes for trade in goods and services and sets out related customs procedures and rules of origin for claiming preferential rates of customs duty.

The Customs Amendment (Australia-United Kingdom Free Trade Agreement Implementation) Act 2022 (Customs Implementation Act) amends the Customs Act 1901 (the Customs Act) to, among other things, insert new Division 1P into Part VIII of the Customs Act to implement the provisions under the Agreement dealing with trade in goods and rules of origin.

The new rules of origin determine whether goods imported into Australia from the United Kingdom are originating goods (referred to as UK originating goods) and are thereby eligible for preferential rates of customs duty. UK originating goods are goods that satisfy the rules of origin; the framework of which is contained in new Division 1P of Part VIII of the Customs Act.

Under paragraph 2 of Article 4.26 of Chapter 4 of the Agreement, each Party, subject to its laws and regulations, shall provide that where a good would have qualified as an originating good when it was imported into that Party, the importer of the good may, within a period specified by its laws and regulations, and after the date on which the good was imported, apply for a refund of any excess duties paid for a good as the result of the good not having been granted preferential tariff treatment, on presentation of the following to the customs authority of that Party:

*               a Declaration of Origin and other evidence that the good qualifies as an originating good; and

*               such other documentation in relation to the importation as the customs authority may require to satisfactorily evidence the preferential tariff treatment claimed.

The purpose of the Customs (International Obligations) Amendment (Australia-United Kingdom Free Trade Agreement Implementation) Regulations 2022 (the Regulations) is to amend the Customs (International Obligations) Regulation 2015 to prescribe two new refund circumstances in respect of goods imported into Australia from the United Kingdom, in order to fulfil the above-mentioned obligation, as follows:

*               for UK originating goods, the refund circumstance applies when customs duty has been paid on such goods; and

*               for goods that would have been UK originating goods if at the time the goods were imported, the importer held a Declaration of Origin or a copy of that document for the goods, the refund circumstance applies when customs duty has been paid on such goods and the importer holds a Declaration of Origin or a copy of that document for the goods at the time of making the application for the refund.

The expression 'Declaration of Origin' is inserted into new subsection 153ZRB(1) of the Customs Act by the Customs Implementation Act. It means a declaration that is in force and that complies with the requirements of Article 4.18 of Chapter 4 of the Agreement. The information required to be provided as part of a Declaration of Origin includes personal information. The Regulations bring UK originating goods within the scope of the customs duty refund scheme, where an importer did not make a claim for preferential treatment at the time of importation. 

The Regulations commences the later of the day after the instrument is registered, and the day on which Schedule 1 to the Customs Implementation Act commences. Schedule 1 to the Customs Implementation Act commences on the later of the day after that Act receives the Royal Assent, and the day the Agreement enters into force for Australia.

Human rights implications

The Regulations engage the right to not be subjected to arbitrary or unlawful interference with privacy in Article 17 of the International Covenant on Civil and Political Rights (ICCPR).

To the extent that the Regulations involve the disclosure of personal information by requiring an importer to hold a copy of the Declaration of Origin when applying for a refund of customs duty paid where the importer did not make a claim for preferential tariff treatment at the time of importation, the Regulations may engage and limit the right to privacy under Article 17 of the ICCPR. Article 17(1) sets out:

No one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour and reputation.

Under Article 4.22 of Chapter 4 of the Agreement, a Declaration of Origin document provided by the exporter or producer shall support a claim that goods are eligible for preferential tariff treatment in accordance with the Agreement. The information that must be included in a Declaration of Origin document is detailed in Articles 4.18 and Annex 4A to Chapter 4 of the Agreement and includes personal information. The measures in the Regulation implement the requirements of the Agreement by bringing UK originating goods within the customs duty refund scheme, including the requirement that the importer hold a Declaration of Origin document in order to be eligible for a refund. Existing provisions in the Customs Act and the Customs Regulations 2015 in relation to obtaining a refund may require an importer to provide a copy of the Declaration of Origin with an application for a refund. To the extent that the Declaration of Origin may need to be provided in support of a claim for a refund, the right to privacy may be engaged.

The verification of the eligibility for preferential treatment is required under the Agreement and the measures in the Regulations to hold a Declaration of Origin are directed at the legitimate purpose of facilitating and supporting Australia's international obligations under the Agreement. To the extent that this measure may involve the disclosure of personal information, it will only be permitted for the limited purpose of verifying a claim made by a person for preferential tariff treatment making it a reasonable and proportionate response to a legitimate purpose. As such, any disclosure of personal information in these circumstances will not constitute an unlawful or arbitrary interference with privacy.

Conclusion

The Regulations are compatible with human rights because to the extent that it may limit the right to privacy, the limitation is reasonable, necessary and proportionate in achieving a legitimate objective.

The Hon Clare O'Neil MP, Minister for Home Affairs