Commonwealth Numbered Regulations - Explanatory Statements

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CUSTOMS REGULATIONS (AMENDMENT) 1997 NO. 131

EXPLANATORY STATEMENT

STATUTORY RULES 1997 No. 131

Issued by the Authority for the Minister for Industry, Science and Tourism

Customs Act 1901

Customs Regulations (Amendment)

Section 270 of the Customs Act 1901 (the Customs 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 for giving effect to the Act.

The Tariff Concession System (TCS) set out in Part XVA of the Customs Act provides for a regime whereby imported goods can receive a concessional rate of duty (either 3 per cent or Free under items 50 and 50A of Schedule 4 to the Customs Tariff Act 1995) via a Tariff Concession Order (TCO), when it is established that no substitutable goods are produced in Australia in the ordinary course of business.

Section 269SJ of the Customs Act provides that the CEO of Customs must not make a TCO in respect of certain goods, including goods which are declared by the regulations, to be goods to which a TCO should not mend.

Regulation 185 provides, for the purposes of subsection 269SJ(1) of the Customs Act, that a TCO should not extend to goods in respect of which the general rate of customs duty specified in the Customs Tariff 1995 is 15 per cent; or to goods which are otherwise listed in Schedule 2 to the Regulations. Generally, Schedule 2 excludes from TCO eligibility goods covered by the Government's specific industry sector plans (passenger motor vehicles, textile clothing and footwear etc).

These Regulations amend the Customs Regulations (the Regulations) to:

(i)       restore access to the TCS to certain, passenger-motor vehicle parts and components with a general rate of Customs duty of 15 per cent that were the subject of Commercial Tariff Concession Orders (CTCOs) on 14 July 1996. Some CTCOs covering such goods have been revoked since amendments were made to the TCS on 15 July 1996. The revocations resulted in an increase in duty from Free to 15 percent, which was an increase of a magnitude specifically ruled out in the Government's announcement of the 1996 changes to the TCS; and

(ii)       make "super touring" racing cars eligible to apply for a TCO, and therefore gain a concessional rate of duty when imported into Australia if it is established that no substitutable goods are produced in Australia in the ordinary course of business.

The amendments are explained in detail in the Attachment.

The Regulations commenced on gazettal.

ATTACHMENT

Amendments to regulation 185 and Schedule 2 to the Customs Regulations

(i) Passenger motor vehicle (PMV) parts

When the TCS was introduced on 1 November 1992 by the Customs Legislation (Tariff Concessions and Anti-Dumping) Amendment Act 1992 (Act No. 89 of 1992) it replaced its predecessor the "Commercial Tariff Concession System" (the CTCS). Subsection 20(1) of Act No. 89 of 1992 continued the operation of the CTCS, including its revocation provisions, in respect of the thousands of Commercial Tariff Concession Orders (CTCOs) in force on that date. This meant that from 1 November 1992, two Part XVAs of the Customs Act operated in parallel, one in respect of TCOs, the other in respect of CTCOs.

Under the TCS, section 269SJ provides a mechanism to exclude by regulation certain goods from eligibility for a TCO. Regulation 185 and Schedule 2 to the Customs Regulations prescribe goods for the purposes of subsection 269SJ(1). Administratively this list of goods is known as the Excluded Goods Schedule (EGS).

Although a similar list existed under the CTCS, after 1 November 1992 it has been considered that the terms of regulation 185 and schedule 2 to the Regulations could only apply to the TCS and exclude goods from eligibility for a TCO.

On 18 October 1994 regulation 185 was amended to exclude from eligibility for a TCO any good with a general rate of customs duty of 15 per cent (paragraph 185(1)(a) refers). This amendment was intended as a broad "catch-all" to exclude passenger motor vehicle (PMV) parts and components, which were the only goods subject to customs duly at 15 per cent. The amendment was undertaken as being in accordance with the spirit of the PMV plan, ie that plan goods were not to be eligible for concessional importation under the TCS. This amendment resulted in the deemed revocation of several TCOs in respect of PMV parts and components with a general rate of customs duty of 15 per cent (subsection 269SJ(2) of the Customs Act refers), but did not affect the operation of the CTCOs in respect of such goods which remained in force by virtue of subsection 20(1) of Act No. 89 of 1992.

After a review of the TCS in 1995, the TCS was further revised by the Customs Amendment Act 1996 (Act No. 30 of 1996). These reforms were designed to streamline the administration of the WS and to result in significant savings to the Revenue.

One of the reforms implemented by Act No. 30 of 1996 was that, for the purposes of revocation, the Chief Executive Officer of Custom's (the CEO) was to treat a CTCO as a TCO, and therefore apply the same rules when considering whether to revoke a CTCO or a TCO (item 38 of Schedule 1 to the Act refers).

A second reform to the TCS by Act No. 30 of 1996 was that the CEO was empowered to revoke TCOs at his or her own initiative if satisfied that if:

(i) the TCO were not in force on a particular day; and

(ii) an application for that TCO were lodged on that day,

the CEO would not have made the TCO (subsections 269SD(1AA) and (1AB) of the Customs Act refer). This new power is to enable the CEO to ensure that all concessional instruments in force under the scheme meet the new TCS criteria.

Following passage of Act No. 30 of 1996 the Australian Customs Service commenced a systematic review of all TCOs and CTCOs to ensure that all concessions satisfied the new TCS criteria. In this context, CTCOs are now treated as TCOs for the purposes of revocation. Under this new arrangement for revocation about 30 CTCOs were revoked for goods covered by the EGS. Where such goods were motor vehicle parts and accessories the general rate of customs duty was 15 per cent. This has resulted in an increase of customs duty on imports previously covered by these CTCOs from "Free" to 15 per cent.

After representations from industry sectors affected by the revocation of the CTCOs, the Government has decided to restore TCO eligibility to those goods which were the subject of the revoked CTCOs. The basis of this decision is that increases in duty of the magnitude of 15 per cent were explicitly ruled out in the Government's announcement of the 1996 TCS changes, and that the total savings achieved since the implementation of the changes have greatly exceeded (by over $22m in 1996-97) the originally anticipated savings. This is partly because the revocation of CTCOs was not included in the original estimates.

Subregulation 2.1 amends subregulation 195(2) to insert a new exception to the general rate of 15 per cent exclusion in paragraph 185(1)(a). The exception to the exclusion (and therefore eligibility to apply for a TCO) applies to goods that are:

passenger motor vehicle parts or components that, if entered for home consumption on 14 July 1996, would have been the subject of a Commercial Tariff Concession Order that was in force on that date.

This amendment will allow applications for TCOs to he lodged with the CEO under section 269F (or be deemed to have been lodged under section 269J) of the Customs Act in respect of those goods which were the subject of the revoked CTCOs. Likewise, it will prevent the CEO from using subsections 269SD(1AA) and (1AB) to revoke other CTCOs that remain in force on the basis that they relate to PMV goods that have a general rate of customs duty of 15 per cent.

(ii)       Super touring racing cars

Paragraph 185(1)(b) of the Customs Regulations provides in part that a TCO should not extend to goods classified under a heading or subheading in Column 2 of an item in Schedule 2 unless the goods are listed in Column 3 of the item as goods to which the restriction does not apply.

Presently, super touring racing cars are covered by Column 2 of item 38 of Schedule 2 to the Regulations and are thus unable to be considered for a TCO. Column 3 of item 38 currently provides for an exception to the exclusion for other specialised racing cars such as Formula Ford racing cars, Prostock drag racing cars and single-seat openwheel racing cars.

The Government has decided that super touring racing cars should also be removed from Column 2 of Schedule 2.

The amendments allow super touring racing cars to be eligible for a TCO by removing the cars from the ambit of item 38 by including them in the Column 3 to the item. Subregulation 3. 1 amends Column 3 of item 3 8 to include vehicles that:

(a) are classified to subheadings 8703, 23.20 or 8703.23.90 of Schedule 3 to tile Customs Tariff Act 1995 (these classification relate to assembled and unassembled non-passenger motor vehicles with spark-ignition internal combustion reciprocating piston engines, of a cylinder capacity exceeding 1500cm3 but not exceeding 3000cm3); and

(b) are the subject of an approval to import a non-standard road vehicle under subsection 19(1) of the Motor Vehicle Standards Act 1989; and

(c) comply with the Regulations for Group 3B motor racing set out in the '1997 Manual of Motor Sport published by the confederation of Australian Motor Sports.

These criteria for super touring racing cars have bow included to ensure that manufacturers of passenger cars can not use the new exclusion to item 38 to avoid the current arrangements for importing into Australia passenger motor vehicles intended for use on roads.


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