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CUSTOMS (THAILAND-AUSTRALIA FREE TRADE AGREEMENT) REGULATIONS 2004 2004 NO. 338
STATUTORY RULES 2004 NO. 338
Issued by the Authority of the Minister for Justice and Customs
Customs Act 1901
Customs (Thailand-Australia Free Trade Agreement) Regulations 2004
Subsection 270(1) of the Customs Act 1901 (the Act) provides, in part, that the Governor-General may make regulations not inconsistent with the Act prescribing all matters which by the Act are required or permitted to be prescribed or as may be necessary or convenient to be prescribed for giving effect to the Act or for the conduct of any business relating to the Customs.
The Customs Amendment (Thailand-Australia Free Trade Agreement Implementation) Act 2004 (the FTA Act) amends the Act to fulfil Australia's obligations under Chapter 4 of the Thailand-Australia Free Trade Agreement (the Agreement), which deals with rules of origin. These rules determine whether goods imported into Australia are Thai originating goods and are thereby eligible for preferential rates of customs duty. These rules will be contained in new Division 1D of Part VIII of the Act (new Division 1D).
Relevant provisions of the FTA Act which amend the Act are expressed to commence on the later of 1 January 2005 or the entry into force of the Agreement. Details of the commencement provisions are set out in Attachment A.
The purpose of the amending Regulations is to prescribe matters relating to the rules of origin that will be required to be prescribed under new Division 1D (Thai originating goods). The relevant provisions of new Division 1D are set out in Attachment B.
The amending Regulations:
• set out a table in Schedule 1 detailing the product-specific requirements relevant to each tariff classification for goods;
• explain the method used to determine the regional value content of goods for the purposes of some of the product-specific requirements set out in Schedule 1;
• specify the valuation rules for different classes of goods; and
• prescribe other matters that are required to be prescribed under new Division 1D.
Details of the amending Regulations are set out in Attachment C.
The amending Regulations commence on the commencement of Parts 1 and 2 of Schedule 1 to the FTA Act. Parts 1 and 2 of Schedule 1 to the FTA Act will commence on the later of 1 January 2005 or the entry into force of the Agreement for Australia.
0411629A
ATTACHMENT A
DETAILS OF THE COMMENCEMENT PROVISIONS FOR THE CUSTOMS AMENDMENT (THAILAND-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION) ACT 2004
The Customs Amendment (Thailand-Australia Free Trade Agreement Implementation) Act 2004 (the FTA Act) contains amendments to the Customs Act 1901 (the Act) to implement the rules of origin contained in Chapter 4 of the Thailand-Australia Free Trade Agreement (the Agreement). These rules determine whether goods imported into Australia originate in Thailand and are thereby eligible for preferential rates of customs duty. These rules are contained in new Division 1D of Part VIII of the Act, which will be inserted by Part 1 of Schedule 1 to the FTA Act.
New Division 1D will commence when Parts 1 and 2 of the Schedule 1 to the FTA Act commence, pursuant to item 2 of the table in subsection 2(1) of the FTA Act. Under this item, Parts 1 and 2 of Schedule 1 will commence on the later of 1 January 2005 or the day on which the Agreement comes into force for Australia. The item further provides that Parts 1 and 2 of Schedule 1 will not commence at all if the Agreement does not come into force for Australia, and that the Minister for Trade must announce by notice in the Gazette the day the Agreement comes into force for Australia.
ATTACHMENT B
DETAILS OF PROVISIONS IN NEW DIVISION 1D OF PART VIII OF THE CUSTOMS ACT 1901 RELEVANT TO THE CUSTOMS AMENDMENT (THAILAND-AUSTRALIA FREE TRADE AGREEMENT) REGULATIONS 2004
The Customs Amendment (Thailand-Australia Free Trade Agreement Implementation) Act 2004 (the FTA Act) will insert new Division 1D of Part VIII into the Customs Act 1901 (the Act). New Division 1D of Part VIII of the Act (new Division 1D) will contain the rules of origin set out in Chapter 4 of the Thailand-Australia Free Trade Agreement (the Agreement). These rules determine whether goods imported into Australia are Thai originating goods and are thereby eligible for preferential rates of customs duty.
Subdivision C of new Division 1D will relate to goods produced entirely in Thailand or entirely in Thailand and Australia and produced wholly or partly from non-originating materials (relevant goods).
Under new subsection 153ZA(1) of the Act, `non-originating materials' will mean goods that are not originating materials. `Originating materials' will be further defined to mean:
(a) goods that are used in the production of other goods and that are Thai originating goods; or
(b) goods that are used in the production of other goods and that are Australian originating goods, being goods that are Australian originating goods under a law of Thailand that implements the Agreement.
New section 153ZD of the Act will provide that goods are Thai originating goods if:
(a) they are classified to a heading or subheading of the Harmonized Commodity Description and Coding System (the Harmonized System) that is specified in column 1 or 2 of the tariff table; and
(b) they are produced entirely in Thailand, or entirely in Thailand and Australia, from originating materials or non-originating materials, or both; and
(c) any applicable requirement specified in column 4 of the tariff table is satisfied; and
(d) the importer of the goods holds, at the time the goods are imported, a Certificate of Origin, or a copy of one, for the goods.
New subsection 153ZA(1) of the Act will define the tariff table to mean the table in Schedule 1 to the amending Regulations.
One of the requirements that may be specified in column 4 of the tariff table would be a change in tariff classification. Under new subsection 153ZD(2) of the Act, the regulations may make it a requirement that each non-originating material (if any) used to produce goods must satisfy a particular change in tariff classification and when the material will be taken to satisfy the change. The amending Regulations include this requirement and also specify each particular change in tariff classification for each relevant heading or subheading of the Harmonized System.
Another of the requirements that may be specified in the tariff table would be a regional value content (RVC) requirement. New subsection 153ZD(4) of the Act will provide that the regulations may make it a requirement that the goods must satisfy a regional value content (RVC) requirement and that the regulations may prescribe different RVC requirements for different kinds of goods. The tariff table would set out the RVC requirements and, at this stage, the amending Regulations also specify only one manner of calculating RVC.
Further, new section 153ZE of the Act will provide that relevant goods classified to any of Chapters 28 to 40 (goods that are chemicals, plastics or rubber) in the Harmonized System are Thai originating goods if they are the product of a chemical reaction (within the meaning of the Customs Amendment (Thailand-Australia Free Trade Agreement) Regulations 2004 and the importer holds, at the time the goods are imported, a Certificate of Origin, or a copy of one, for the goods. The goods must also be produced entirely in Thailand or entirely in Thailand and Australia.
For the purposes of new Division 1D, new subsection 153ZA(2) will provide that the value of goods is to be worked out in accordance with regulations, and the regulations may prescribe different valuation rules for different kinds of goods.
The amending Regulations prescribe how the value of non-originating materials is to be worked out for the purposes of new Division 1D and the amending Regulations.
Under new subsection 153ZF(3) of the Act, the regulations must require the value of certain accessories, spare parts or tools imported together with underlying goods to be taken into account for the purposes of any RVC requirement applicable to the underlying goods. For the purposes of new subsection 153ZF(3) of the Act, the amending Regulations require that the value of such accessories, spare parts or tools be taken into account for the purposes of any RVC requirement applicable to the underlying goods, and prescribe how such value is to be worked out and taken into account.
Under new subsection 153ZG(2) of the Act, the regulations must require the value of certain packaging materials or containers used to package relevant goods for retail sale to be taken into account for the purposes of any RVC requirement applicable to the relevant goods. For the purposes of new subsection 153ZG(2) of the Act, the amending Regulations require that the value of such packaging materials or containers be taken into account for the purposes of any RVC requirement applicable to the relevant goods, and prescribe how such value is to be worked out and taken into account.
ATTACHMENT C
DETAILS OF THE CUSTOMS AMENDMENT (THAILAND-AUSTRALIA FREE TRADE AGREEMENT) REGULATIONS 2004
PART 1 INTRODUCTORY
Regulation 1.1 - Name of Regulations
Regulation 1.1 provides that the amending Regulations are the Customs (Thailand-Australia Free Trade Agreement) Regulations 2004.
Regulation 1.2 - Commencement
Regulation 1.2 provides that the amending Regulations commence on the commencement of Parts 1 and 2 of Schedule 1 to the Customs Amendment (Thailand-Australia Free Trade Agreement Implementation) Act 2004 (the FTA Act). Parts 1 and 2 of Schedule 1 to the FTA Act will commence on the later of 1 January 2005 or the entry into force of the Thailand-Australia Free Trade Agreement (the Agreement) for Australia.
Regulation 1.3 - Definitions
Regulation 1.3 provides that in the amending Regulations, "Act" means the Customs Act 1901 (the Act), and the following words and expressions have the meanings as in new Division 1D of Part VIII of the Act (new Division 1D):
(a) Harmonized System;
(b) Interpretation Rules;
(c) non-originating materials;
(d) originating materials;
(e) produce; and
(f) Thai originating goods.
New Division 1D would be inserted into the Act by Schedule 1 to the FTA Act.
PART 2 TARIFF CHANGE REQUIREMENTS
Regulation 2.1 Tariff change requirement for non-originating materials
Subregulation 2.1(1) provides that for subsection 153ZD(2) of the Act, each non-originating material used to produce goods must satisfy a particular change in tariff classification. This requirement will apply only to non-originating materials. The particular change in tariff classification for each relevant heading or subheading of the Harmonized Commodity Description and Coding System (the Harmonized System) would be included in the tariff table in Schedule 1 to the amending Regulations.
Under new subsection 153ZA (1) of the Act, `non-originating materials' will mean goods that are not originating materials. `Originating materials' will be further defined to mean:
(a) goods that are used in the production of other goods and that are Thai originating goods; or
(b) goods that are used in the production of other goods and that are Australian originating goods, being goods that are Australian originating goods under a law of Thailand that implements the Agreement.
Subregulation 2.1(2) provides that each non-originating material used to produce goods is taken to satisfy a particular change in tariff classification if:
a) it satisfies the change in tariff classification mentioned in column 4 of the tariff table opposite the heading or subheading that applies to the goods; or
b) it does not satisfy the change in tariff classification mentioned in paragraph (a) but:
(i) it was produced entirely in Thailand or in Thailand and Australia from other non-originating materials; and
(ii) each of those materials satisfies the change in tariff classification mentioned in paragraph (a), including by one or more applications of this subregulation.
Paragraph (b) gives effect to the accumulation provisions contained in Article 402.1 of the Agreement and applies where the non-originating materials that are used to directly produce the final good do not satisfy the change in tariff classification.
In producing a final good, a producer may use goods that are produced in Thailand by another producer. The components of these goods may be produced by yet another producer in Thailand or imported into Thailand. It is possible that the change in tariff classification rule may not be satisfied at each step in the production process from the imported component to the final goods which may mean that the final goods are non-originating.
In such circumstances, it may be possible to examine each step in the production process of each non-originating material that occurs in Thailand or Australia in order to determine whether each step satisfies the change in tariff classification rule for the final goods directly from that step to the final goods. If this does occur, the material will be an originating material and the final goods may be originating goods (subject to satisfying all other requirements of new Division 1D of Part VIII of the Customs Act). This is how paragraph 2.1(2)(b) operates.
The following example illustrates the above concept:
A producer imports uncoated kraft paper of heading 4804 to make kraft paper lightly coated with plastics of subheading 481159. The specific rule of origin for goods of subheading 481159 allows a change from any other heading except from heading 4804. The imported uncoated kraft paper is a non-originating material and was classified in excepted heading 4804. Therefore, the kraft paper lightly coated with plastics is not a Thai originating good.
The kraft paper lightly coated with plastics of subheading 481159 is then forwarded to another producer in Thailand. That producer coats the goods with another plastic material, producing kraft paper heavily coated with plastics of subheading 481151. The specific rule for that subheading is a change from any other heading. As the change from 481159 to 481151 is not a change in heading, the goods would normally not be Thai originating goods.
However the producer of the kraft paper heavily coated with plastics can accumulate the production of the kraft paper lightly coated with plastics from uncoated kraft paper, because that process also occurred in Thailand. The change in classification becomes a change from uncoated kraft paper of 4804 to kraft paper heavily coated in plastics of subheading 481151. As this is a change in heading, the goods meet the specific rule for 481151. The kraft paper heavily coated in plastics is therefore a Thai originating good.
The following example, with diagram and explanation, also clearly demonstrates the operation of paragraph 2.1(2)(b).
Example: The following diagram relates to the production of particular goods that occurred entirely in Thailand. The diagram and the accompanying text illustrate the application of paragraph 2.1(2)(b).
The goods are produced from non-originating materials 1 and 2.
First application of paragraph (b)
Non-originating materials 1 and 2 must satisfy the change in tariff classification. Under paragraph 2.1(2)(a), non-originating material 1 does satisfy the relevant change in tariff classification. Under paragraph 2.1(2)(b), non-originating material 2 does not satisfy the relevant change in tariff classification, but it has been produced by non-originating materials 3 and 4.
Second application of paragraph (b)
Non-originating materials 3 and 4 must satisfy the change in tariff classification. Under paragraph 2.1(2)(a), non-originating material 3 does satisfy the relevant change in tariff classification. Under paragraph 2.1(2)(b), non-originating material 4 does not satisfy the relevant change in tariff classification, but it has been produced by non-originating material 5.
Third application of paragraph (b)
Non-originating material 5 must satisfy the change in tariff classification. Under paragraph 2.1(2)(a), non-originating material 5 does satisfy the relevant change in tariff classification.
Final result
The result of the 3 applications of paragraph (b) is that non-originating material 2 does satisfy the transformation test.
PART 3 REGIONAL VALUE CONTENT REQUIREMENT
Regulation 3.1 Regional value content
New subsection 153ZD(4) of the Act will provide that the regulations may make it a requirement that the goods satisfy a regional value content requirement. The regional value content for each relevant heading or subheading of the Harmonized System would be included in the tariff table in Schedule 1 to the amending Regulations. New subsection 153ZD(4) will also provide that the regulations may prescribe different regional value requirements for different kinds of goods. At this stage, regulation 3.1 specifies only one manner of calculating the regional value content.
Regulation 3.1 provides that for the purposes of the subsection 153ZD(4) and the tariff table, the regional value content is determined using the formula:
where:
customs value means the customs value of the goods, determined in accordance with Division 2 of Part VIII of the Act; and
value of non-originating materials means each of the following:
a) the value of non-originating materials imported into Thailand by the producer of the goods and used in the production of the goods; or
b) the value of non-originating materials imported into Thailand, and acquired by the producer of the goods in the form in which they were imported into Thailand and used in the production of the goods;
c) the value of non-originating materials imported into Thailand by the producer in Thailand of other non-originating materials that are used in the production of the goods and that are:
(i) produced using the imported non-originating materials; and
(ii) supplied directly to the producer of the goods;
d) the value of non-originating materials imported into Thailand, and acquired, in the form in which they were imported into Thailand, by the producer in Thailand of other non-originating materials that are used in the production of the goods and that are:
(i) produced using the imported non-originating materials; and
(ii) supplied directly to the producer of the goods.
Subregulation 3.1(2) provides that RVC is to be expressed as a percentage.
Regulation 3.2 Non-originating materials produced in a developing country
Regulation 3.2 sets out a modification to the calculation of the regional value content under regulation 3.1 in respect of textiles, clothing and footwear classified in chapters 50 to 64 of the Harmonized System.
Subregulation 3.2(1) provides that this regulation applies to goods classified in chapters 50 to 64 (inclusive) of the Harmonized System, if:
a) non-originating materials produced in a country or place listed in Schedule 1 to the Customs Tariff Act 1995 on the date on which the amending Regulations commence (a developing country) are used in the production of the goods; and
b) a regional value content requirement applies to the goods.
Subregulation 3.2(2) provides that in calculating the regional value content, the value of non-originating materials produced in developing countries may be subtracted from the total value of non-originating materials used in the production of goods (up to an amount that is 25% of the customs value of the goods).
The following examples illustrate the operation of this provision:
Example 1
An Australian importer purchases women's overcoats from a manufacturer in Thailand.
The product specific requirement for women's overcoats of heading 6102 of the Harmonized System is:
"Change to heading 6102 from any other chapter provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or both Parties and there is a regional value content of not less than 55 percent".
In this example, the non-originating material used to produce the overcoats is fabric (heading 5210) imported from China. The fabric cost $30.00 and the customs value of each overcoat is $40.00.
The overcoats meet the tariff change requirement because the fabric changes chapter from heading 5210 to heading 6102. The overcoats have also been sewn or assembled in Thailand.
In this example 25% of the customs value is $10, therefore the value of non-originating materials using regulation 3.2(2) is $30-$10=$20.
The calculation of the regional value content is:
Therefore, the regional value content is 50%.
Therefore, the overcoats are not Thai originating goods because the product-specific tariff change requirement of a change to heading 6102 from heading 5210 has been met and they were assembled in Thailand, but the requirement of a RVC of at least 55% has not been met.
Example 2:
An Australian importer purchases women's overcoats from a manufacturer in Thailand.
The product specific requirement for women's overcoats of heading 6102 of the Harmonized System is:
"Change to heading 6102 from any other chapter provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or both Parties and there is a regional value content of not less than 55 percent".
In this example, the non-originating materials used to produce the overcoats is fabric (heading 5210) imported from China. The fabric cost $30.00 and the customs value of each overcoat is $80.00.
The overcoats meet the tariff change requirement because the fabric changes chapter from heading 5210 to heading 6102. The overcoats have also been sewn or assembled in Thailand.
In this example 25% of the customs value is $20, therefore the value of non-originating materials using regulation 3.2(2) is $30-$20=$10.
The calculation of the regional value content is:
Therefore, the regional value content is 87%.
Therefore, the overcoats are Thai originating goods because the product-specific tariff change requirement of a change to heading 6102 from heading 5210 has been met and they were assembled in Thailand, and the requirement of a RVC of at least 55% has been met.
Regulation 3.3 Value of accessories, spare parts or tools
Under new subsection 153ZF(1) of the Act, if goods (the underlying goods) are imported into Australia with standard accessories, standard spare parts or standard tools, then the accessories, spare parts or tools will be Thai originating goods if:
a) the underlying goods are Thai originating goods; and
b) the accessories, spare parts or tools are not invoiced separately from the underlying goods; and
c) the quantities and value of the accessories, spare parts or tools are the usual quantities and value in relation to the underlying goods.
However, new subsection 153ZF(3) will provide that, in working out if the underlying goods are Thai originating goods, if the goods must satisfy a RVC requirement under section 153ZD, the regulations must require the value of the accessories, spare parts or tools to be taken into account for the purposes of the RVC requirement.
Regulation 3.3 provides that for subsection 153ZF(3) of the Act, if underlying goods mentioned in subsection 153ZF(1) of the Act must satisfy a RVC requirement under the tariff table:
a) in working out the RVC of the underlying goods, the value of standard accessories, standard spare parts or standard tools that are imported with the underlying goods and are not Thai originating goods must be included in the value of non-originating materials used in the production of the underlying goods; and
b) the value of accessories, spare parts or tools is to be worked out under regulation 4.1 as if the accessories, spare parts or tools were non-originating materials used in the production of the underlying goods.
Regulation 3.4 Value of packaging materials and containers
Under new subsection 153ZG(1) of the Act, if:
a) goods are packaged for retail sale in packaging material or a container; and
b) the packaging material or container is classified with the goods in accordance with Rule 5 of the Interpretation Rules of the Harmonized System;
then the packaging material or container is to be disregarded for the purposes of new Division 1D, with 1 exception.
Under new subsection 153ZG(2), the exception is that in working out if the goods are Thai originating goods, if the goods must satisfy a RVC requirement under section 153ZD, the regulations must require the value of the packaging material or container to be taken into account for the purposes of that RVC requirement.
Regulation 3.4 provides that for subsection 153ZG(2) of the Act, if goods (the relevant goods) mentioned in subsection 153ZG(1) of the Act must satisfy a RVC requirement under the tariff table:
a) in working out the RVC of the relevant goods, the value of the packaging material or container in which the relevant goods are packaged and that is not a Thai originating good must be included in the value of non-originating materials used in the production of the relevant goods; and
b) the value of the packaging material or container in which the relevant goods are packaged is to be worked out under regulation 4.1 as if the packaging material or container were a material used in the production of the relevant goods.
PART 4 DETERMINATION OF VALUE
For the purposes of new Division 1D, new subsection 153ZA (2) will provide that the value of goods is to be worked out in accordance with regulations, and the regulations may prescribe different valuation rules for different kinds of goods.
Part 4 deals with the determination of the value of different kinds of goods for the purposes of new Division 1D and the amending Regulations.
Regulation 4.1 Value of materials
Regulation 4.1, for the purposes of new Division 1D and the amending Regulations, sets out how the value of materials is to be worked out.
Subregulation 4.1(1) provides that for Division 1D of Part VIII of the Act, and for the definition of value of non-originating materials in regulation 3.1, the value of non-originating materials is to be worked out:
a) in accordance with Articles 1 to 8, Article 15 and the corresponding interpretative notes of the World Trade Organization Agreement on the Implementation of Article VII of the General Agreement on Tariffs and Trade, done at Marrakesh in 1994; and
b) with any reasonable modifications of those provisions as may be required to reflect the fact that the non-originating materials were not imported.
The World Trade Organization Agreement on the Implementation of Article VII of the General Agreement on Tariffs and Trade is a multilateral Agreement which is intended to provide a fair, uniform and neutral system for the valuation of goods for Customs purposes.
Subregulation 4.1(2) provides that the value of non-originating materials must include the cost of:
a) transportation of the non-originating materials to Thailand from their country of export; and
b) insurance related to the transportation of the non-originating materials to Thailand from their country of export; and
c) other services related to the transportation of the non-originating materials to Thailand from their country of export;
to the extent that these costs have not already been included.
SCHEDULE 1 PRODUCT-SPECIFIC REQUIREMENTS FROM ANNEX 4.1 TO THE AGREEMENT
New subsection 153ZA(1) of the Act will define the tariff table to mean the table in Schedule 1 to the amending Regulations.
Schedule 1 sets out the tariff table, which specifies the different product-specific requirements applicable to goods for each heading and subheading in the Harmonized System. Schedule 1 also sets out interpretation provisions relevant to the product-specific requirements in the tariff table. Schedule 1 is based on Annex 4.1 to the Agreement.
Part 1 of Schedule 1 sets out the Interpretation provisions relevant to the product-specific requirements specified in the tariff table.
Part 2 of Schedule 1 sets out the tariff table.