Attachment B

 

Details of the proposed Customs (Japanese Rules of origin) Regulation 2014

 

Proposed Part 1 - Preliminary

 

Section 1         Name

 

Section 1 provides that the title of the Regulation is the Customs (Japanese Rules of Origin) Regulation 2014.

 

Section 2         Commencement

 

Section 2 provides that sections 1 to 4 of the Regulation commence on the day after the instrument is registered and that Parts 2 to 5 and Schedule 1 of the Regulation will commence at the same time as Schedule 1 to the Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Act 2014
 (the JAEPA Act).  Schedule 1 to the JAEPA Act will commence on the later of the day the Act receives the Royal Assent and the day the Agreement enters into force for Australia.

 

Section 3         Authority

Section 3 provides that the instrument is made is under the Customs Act 1901.

 

Section 4         Definitions

 

Section 4 provide that in the Regulation:

(a)    'Act' means the Customs Act 1901;  

(b)   'Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994' means the Agreement of that name set out in Annex 1A of the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh on 15 April 1994;

(c)    'chapter' means the first 2 digits in the tariff classification number under the Harmonized System;

(d)   'heading' means the first 4 digits in the tariff classification number under the Harmonized System;

(e)    'subheading' means the first 6 digits in the tariff classification number under the Harmonized System; and

the following words and expressions have the meanings as in new Division 1K of Part VIII of the Act (new Division 1K):

(f)    Agreement;

(g)   Area of Australia or Japan;

(h)   Australian originating goods;

(i)Certificate of Origin;

(j)Harmonized System;

(k)   Japanese originating goods;

(l)non-originating materials;

(m) originating materials;

(n)   origin certification document;  and

(o)   produce;

 

New Division 1K will be inserted into the Act by Schedule 1 to the JAEPA Act.

 

Part 2 - Tariff change requirements

 

Section 5         Change in tariff classification requirement for non-originating materials

 

Subsection 5(1) provides that for subsection 153ZNE(2) of the Act, each non-originating material used in the production of goods mentioned in an item in the table in Part 2 of Schedule 1 must satisfy the change in tariff classification (if any) mentioned in the item.  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 table in Schedule 1 to the proposed Regulation.

 

Under new subsection 153ZNB(1) of the Act, 'non-originating materials' will mean goods that are not originating materials.  'Originating materials' will be further defined to mean:

(a)    Japanese originating goods that are used in the production of other goods; or

(b)   Australian originating goods, that are used in the production of other goods; or

(c)    indirect materials.

 

Indirect materials is defined in subsection 153ZNB(1) as:

(a)    goods or energy used in the production, testing or inspection of goods, but not physically incorporated in the goods; or

(b)   goods or energy used in the maintenance of buildings or operation of equipment or buildings associated with the production of goods;

including:

(c)    fuel (within its ordinary meaning); and

(d)   tools, dies and moulds; and

(e)    spare parts and materials; and

(f)    lubricants, greases, compounding materials and other similar goods; and

(g)   gloves, glasses, footwear, clothing, safety equipment and supplies; and

(h)   catalysts and solvents.

 

Subsection 5(2) provides that for subsection 153ZNE(3) of the Act, a non-originating material used in the production of goods mentioned in an item in the table in Part 2 of Schedule 1 that does not satisfy the change in tariff classification (if any) mentioned in the item is taken to satisfy the change in tariff classification if:

(a)    it was produced entirely in Japan or in Japan and Australia from other non-originating materials; and

(b)   each of those materials satisfies the change in tariff classification mentioned in subsection (1), including by one or more applications of this subsection.

 

Paragraph (b) gives effect to the accumulation provisions contained in Article 3.6 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 Japan by another producer.  The components of these goods may be produced by yet another producer in Japan or imported into Japan.  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 Japan 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 1K of Part VIII of the Act).  This is how paragraph 5(2)(b) of the proposed Regulation would operate.

 

Example: The following diagram relates to the production of particular goods that occurred entirely in Japan.  The diagram and the accompanying text illustrate the application of paragraph 5(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 5(2)(a), non-originating material 1 does satisfy the relevant change in tariff classification.  Under paragraph 5(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 5(2)(a), non-originating material 3 does satisfy the relevant change in tariff classification.  Under paragraph 5(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 5(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 substantial transformation.

 

Part 3 - Regional value content requirement

 

Section 6         Regional value content

 

New subsection 153ZNE(6) of the Act will provide that the regulations may prescribe that goods are required to have a regional value content of at least a prescribed percentage.  The regional value content for each relevant heading, subheading or split subheading of the Harmonized System would be included in the table in Schedule 1 to the proposed Regulation.  New subsection 153ZNB(2) of the Act will provide that the regulations may prescribe different regional value content requirements for different kinds of goods.

 

Section 6(1) provides that for new subsection 153ZNE(6) of the Act, goods mentioned in an item in the table in Part 2 of Schedule 1 must have the regional value content (RVC) (if any) mentioned in the item.

 

Proposed section 6(2) provides that, for new subsection 153ZNB(2) of the Act, the RVC of goods is worked out using the following formula:  

 

RVC = value - value of non-originating materials  x 100

    value

where:

 

value means the customs value of the goods, as worked out under Division 2 of Part VIII of the Act; and

 

value of non-originating materials means the value, worked out under Part 4, of the non-originating materials, including materials of undetermined origin, that are acquired and used by the producer in the production of the goods.

 

For example, an electric toaster is made from non-originating toaster housings. Each toaster is sold for $5.00 and the value of the non-originating parts is $2.00.  Using the above formula, the RVC is calculated as follows:

 

RVC =    $5.00 - $2.00   x 100

         $5.00

Therefore, the RVC equals 60%.

 

Subsection 6(3) provides that RVC is to be expressed as a percentage.

 

Part 4 - Determination of value

 

For the purposes of new Division 1K, new subsection 153ZNB(3) will provide that the value of goods is to be worked out in accordance with sections, and the sections may prescribe different valuation rules for different kinds of goods.

 

Part 4 deals with the determination of the value of different kinds of goods that are materials used in the production of the relevant goods for the purposes of new Division 1K and the Regulation.

 

Section 7         Value of goods that are originating materials or non-originating materials

 

Section 7 would, for the purposes of new subsection 153ZNB(3) and the Regulation, set out how the value of materials is to be worked out.

 

Subsection 7(1) provides that for the purposes of subsection 153ZNB(3) of the Act, section 7 explains how to work out the value of goods that are originating materials or non-originating materials for Japanese originating goods.

 

Subsection 7(2) provides that the value of materials is to be worked out as follows:

(a)    for  materials imported into Japan by the producer of the Japanese originating goods - the value of the materials worked out under a law of Japan that implements the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994;

(b)   for  materials acquired in Japan, the earliest ascertainable cost of acquisition of the materials;

(c)    for materials that are produced by the producer of the Japanese originating goods and used in the production of the Japanese originating goods - the sum of:

(i)     the expenses incurred in the production of the materials, including general expenses; and

(ii)   an amount for profit equivalent to the profit that the producer would make for the materials in the ordinary course of trade.

 

Subsection 7(3) provides that for materials that are originating materials, their value may include the costs of the following matters, to the extent that they have not been taken into account under proposed subsection 7(2):

(a)    freight, insurance, packing and any other transportation of the materials to the producer:

(i)     in Japan; or

(ii)   between Australia and Japan;

(b)   duties, taxes and customs brokerage fees on the materials that:

(i)     have been paid in either or both of Australia and Japan; and

(ii)   have not been waived or refunded; and

(iii) are not refundable or otherwise recoverable, including any credit against duties or taxes that have been paid or that are payable;

(c)    for non-originating materials:

(i)     originating materials that are used or consumed in the production of the non-originating materials in Australia or Japan; and

(ii)   other costs incurred in Australia or the Japan in the production of the non-originating materials.

 

Section 8         Value of accessories, spare parts or tools

 

New subsection 153ZNE(7) provides that, when working out if goods are Japanese originating goods, if the goods must have a RVC of at least a particular percentage, the sections may require the value of the accessories, spare parts or tools to be taken into account as originating or non-originating materials, as the case may be, for the purposes of working out the RVC requirement.

 

Section 8 provides that for subsection 153ZNE(7) of the Act, if goods and accessories, spare parts or tools for the goods are imported into Australia in the circumstances mentioned subsection 153ZNE(7) of the Act, then:

(a)    for subsection 153ZNE(7) of the Act, the value of the accessories, spare parts or tools must be taken into account as originating materials or non-originating materials, as the case may be, for the purpose of working out the RVC of the goods; and

(b)   for subsection 153ZNB(3) of the Act, the value of the accessories, spare parts or tools must be worked out under proposed section 7 as if the accessories, spare parts or tools were materials used in the production of the goods. 

 

Section 9         Value of packaging material and container

 

Under new subsection 153ZNF(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 Subdivision D of Division 1K, with one exception.

 

Under new subsection 153ZNF(2), in working out whether the goods are Japanese originating goods, if the goods are required to have a RVC of at least a particular percentage, the sections must require the value of the packaging material or container to be taken into account as originating or non-originating materials, as the case may be, for the purposes of that RVC requirement.

 

Section 9 provides that if goods are packaged as mentioned in subsection 153ZNF(1) of the Act and are goods mentioned in subsection 153ZNF(2) of the Act:

(a)    for subsection 153ZNF(2) of the Act, the value of the packaging material or container for the goods must be taken into account as originating materials or non-originating materials, as the case may be, for the purpose of working out the RVC of the goods; and

(b)   for subsection 153ZNB(3) of the Act, the value of the packaging material or container in which the goods are packaged must be worked out under proposed section 7 as if the packaging material or container were a material used in the production of the goods. 

 

Part 5 - Record keeping obligations

 

Section 10 Exportation of goods to Japan-record keeping by exporter who is not the producer of the goods

 

Subsection 10(1) provides that for new section 126ANB(1) of the Act, an exporter of goods mentioned in that subsection, who is not also the producer of the goods, must keep the following records:

(a)    records of the purchase of the goods by the exporter;

(b)   records of the purchase of the goods by the person to whom the goods are exported;

(c)    evidence that payment has been made for the goods;

(d)   evidence of the classification of the goods under the Harmonized System;

(e)    if the goods include any spare parts, accessories or tools that were purchased by the exporter - records of the purchase of the spare parts, accessories or tools and evidence of their value;

(f)    if the goods include any spare parts, accessories or tools that were produced by the exporter - records of the purchase of all materials that were purchased for use or consumption in the production of such goods, evidence of the value of these materials and records of the production of the spare parts, accessories or tools;

(g)   if the goods are packaged for retail sale in packaging material or a container that was purchased by the exporter - records of the purchase of the packaging material or container and evidence of their value;

(h)   if the goods are packaged for retail sale in packaging material or a container that was produced by the exporter - records of the purchase of all materials that were purchased for use or consumption in the production of such goods, evidence of the value of these materials and records of the production of the packaging material or container; and

(i)     a copy of the Certificate of Origin or origin certification document for the goods.

 

The goods mentioned in subsection 126ANB(1) are goods that are exported to Japan and are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Japan.

 

Subsection 10(2) provides that the records must be kept for a period of at least 5 years starting on the date the Certificate of Origin for the goods is signed or the origin certification document is completed.

 

Subsection 10(3) sets out the manner in which a record is to be kept.  Records may be kept in any place, whether or not in Australia, and the exporter must ensure that:

(a)    the record is kept in a form that would enable a determination of whether the goods are Australian originating goods in accordance with the Agreement; and

(b)   if the record is not in English - the record is kept in a place and form that would enable an English translation to be readily made; and

(c)    if the record is kept by mechanical or electronic means - the record is readily convertible into a hard copy in English.

 

Section 11 Exportation of goods to Japan - record keeping by the producer of the goods

 

Section 11 provides that for section 126ANB of the Act, the producer of goods mentioned in that subsection, whether or not the producer is the exporter of the goods, must keep the following records:

(a)    records of the purchase of the goods;

(b)   if the producer is the exporter of the goods-evidence of the classification of the goods under the Harmonized System;

(c)    evidence that payment has been made for the goods;

(d)   evidence of the value of the goods;

(e)    records of the purchase of all materials that were purchased for use or consumption in the production of the goods and evidence of the classification of the materials under the Harmonized System;

(f)    evidence of the value of those materials;

(g)   records of the production of the goods;

(h)   if the goods include any spare parts, accessories or tools that were purchased by the producer - records of the purchase of these materials and evidence of their value;

(i)     if the goods include any spare parts, accessories or tools that were produced by the producer - records of the purchase of all materials that were purchased for use or consumption in the production of such goods, evidence of the value of these materials and records of the production of the spare parts, accessories or tools;

(j)     if the goods are packaged for retail sale in packaging material or a container that was purchased by the producer - records of the purchase of the packaging material or container and evidence of their value;

(k)   if the goods are packaged for retail sale in packaging material or a container that was produced by the producer - records of the purchase of all materials that were purchased for use or consumption in the production of such goods, evidence of the value of these materials and records of the production of the packaging material or container; and

(l)     a copy of the Certificate of Origin or the origin certification document for the goods.

 

Subsection 11(2) provides that the records must be kept for a period of at least 5 years starting on the date the Certificate of Origin for the goods is signed or the origin certification document is completed.

 

Subsection 11(3) sets out the manner in which a record is to be kept.  Records may be kept in any place, whether or not in Australia, and the exporter must ensure that:

(a)    the record is kept in a form that would enable a determination of whether the goods are Australian originating goods in accordance with the Agreement; and

(b)   if the record is not in English - the record is kept in a place and form that would enable an English translation to be readily made; and

(c)    if the record is kept by mechanical or electronic means - the record is readily convertible into a hard copy in English.

 

Schedule 1 - Product    specific rules of origin

 

Schedule 1 sets out the table, which specifies the different product-specific rules of origin applicable to goods for each heading, subheading and split subheading in the Harmonized System.  Schedule 1 also sets out interpretation provisions relevant to the product-specific requirements in the table.  Schedule 1 is based on Annex 2 to the Agreement.

 

Part 1 of Schedule 1 sets out the Interpretation provisions relevant to the product-specific rules of origin specified in the table.  Part 2 of Schedule 1 sets out the table.