Commonwealth Numbered Regulations - Explanatory Statements

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CUSTOMS REGULATIONS (AMENDMENT) 1994 NO. 82

STATUTORY RULES 1994 No. 82

       Issued by the authority of the Minister for Small Business, Customs and Construction

Customs Act 1901

Customs Regulations (Amendment)

Section 270 of the Customs Act 1901 (the Act) provides in part that the GovernorGeneral may make regulations not inconsistent with the Act prescribing all matters which by the Act arc required or permitted to he prescribed for giving effect to the Act.

Subsection 4(1A) of the Acts Interpretation Act 1901 provides that, where an amending Act amends a principal Act in such a way as to confer additional power to make regulations, then, unless the contrary intention appears, the regulation-making powers contained in the principal Act prior to and after the commencement of the amending Act may be exercised by making a single instrument, and that instrument is deemed to be made under subsection 4(1) of the Acts Interpretation Act 1901.

Subsection 4(1) of the Acts Interpretation Act 1901 provides that, where an amending Act amends a principal Act in such a way that the principal Act will confer power to make regulations, then the power may be exercised before the amendments come into operation as if they had come into operation.

The Customs Legislation Amendment Act 1993, amongst other things, inserted a new Division 1A of Part VIII of the Act in substitution for the old section 151 as a consequence of the 1992 Closer Economic Relations review. The new Division is intended to provide greater guidance on the use of the rules of origin and to close loopholes which had enabled some claimants for preference to abuse their spirit. The amending provisions which insert the new Division 1A are intended to commence by Proclamation on 1 April 1994.

•       Rules of origin determine whether goods are the produce or manufacture of countries other than Australia for the purposes of claiming a preferential rate of duty on their importation.

The regulations prescribe the costs that ran be taken into account when determining the country of origin of goods the subject of a claim for a preferential duty rate.

In order to gain the benefit of a preferential rate of duty it is first necessary to establish that the imported goods arc the produce or manufacture of a country in respect of which preferential duty rates apply. One way in which preference claim goods will be regarded as the manufacture of a particular country is if the last process in their manufacture takes place in the particular country and their allowable factory cost is not less than the specified percentage (normally 50%) of their total factory cost.

Total factory cost in relation to preference claim goods, is the sum of the allowable expenditure on labour and overheads by the factory where the last process of manufacture occurred together with the total expenditure of that factory on materials in respect of the goods (section 153B).

Section 153F of the Act provides the mechanism for calculating the allowable expenditure of the factory on labour as a component of allowable factory cost and total factory cost. The allowable expenditure is the sum of the part of each prescribed cost incurred by the manufacturer on labour, in relation to the manufacture of preference claim goods, which can reasonably be allocated to that manufacture.

Section 153G of the Act provides the mechanism for calculating the allowable expenditure of the factory on overheads as a component of allowable factory cost and total factory cost in the same way as section 153F does for labour.

Subregulation 3.1 inserts two new regulations into the Customs Regulations, which prescribe allowable costs for the purposes of sections 153F and 153G of the Act as follows:

New regulation 107A prescribes allowable costs for the purposes of calculating the allowable expenditure of a factory on labour under section 153F of the Act.

New regulation 107B prescribes allowable costs for the purposes of calculating the allowable expenditure of a factory on overheads under section 153G of the Act.

Subregulation 1.1 provides that the regulations commence on the date of commencement of section 10 of the Customs Legislation Amendment Act 1993. That section inserts the new Division 1A which contains sections 153F and 153G, into the Act. It is proposed that section 10 would be proclaimed to commence on and from 1 April 1994.