PRODUCT EMISSIONS STANDARDS (CUSTOMS) CHARGES REGULATIONS 2018 (F2018L00761) EXPLANATORY STATEMENT

Commonwealth Numbered Regulations - Explanatory Statements

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PRODUCT EMISSIONS STANDARDS (CUSTOMS) CHARGES REGULATIONS 2018 (F2018L00761)

EXPLANATORY STATEMENT

Product Emissions Standards (Customs) Charges Act 2017

Product Emissions Standards (Customs) Charges Regulations 2018

(Issued by authority of the Assistant Minister for the Environment
Parliamentary Secretary to the Minister of the Environment and Energy)

The Product Emissions Standards Act 2017 (the PES Act) establishes a national framework to address the adverse impacts of air pollution from certain products on human and environmental health. The PES Act and the Product Emissions Standards Rules 2017 (the PES Rules) implement a key aspect of the National Clean Air Agreement established by Australia's Environment Ministers on 15 December 2015 and regulate 'emissions-controlled products'. Under that Agreement, a key initial action was the introduction of national emission standards for new non-road spark ignition engines and equipment. The PES Rules prescribe certain propulsion marine engines and non-road engines as 'emissions-controlled products' which must be certified as meeting the Australian emissions standard, or a recognised foreign standard, in order to be imported or supplied in Australia.

The Product Emissions Standard (Customs) Charges Act 2017 (the Act) imposes a charge on the import of emissions-controlled products to assist with the recovery of the costs of implementation, compliance and enforcement and other activities that support the delivery of the regulatory scheme.

Section 8 of the Act provides for the Governor-General to make regulations prescribing matters required or permitted by the Act to be prescribed; or necessary or convenient to be prescribed for carrying out or giving effect to the Act. Section 6 of the Act provides that the Governor-General may make regulations prescribing the amount of the charge.

The purpose of Product Emissions Standards (Customs) Charges Regulations 2018 (the Regulations) is to prescribe the amount of charge to be imposed on the import of emissions-controlled products. The charge is set at 0.45% of the value of the product, subject to the operation of a high item value threshold and an importation threshold. The high item value threshold limits the amount of charge on any one item to ensure that importers of high value products do not face a disproportionate share of the costs of the scheme. The importation threshold is based on the sum of the product values of emissions-controlled products imported by a person each financial year and reduces the overall administrative costs of the scheme by ensuring that the cost of recovering a charge from an importer is not greater than the charge itself.

The charge imposed on each liable importer is calculated over a 12 month period using import data obtained from the Department of Home Affairs for the previous financial year. The collection and recovery of the customs charge is set out in Part 9 of the PES Rules.

The Department of the Environment and Energy (the Department) undertook consultation with industry on cost recovery arrangements at two roundtables in September and November 2017. Industry and the public were invited to submit comments on the Cost Recovery Implementation Statement (CRIS) which was released on 13 October 2017 for a four week consultation period. Following stakeholder consultation, the levy rate was reduced from 0.5% to 0.45% as a result of additional information on the size of the industry and the future impact of technology on the sector. The high item value threshold was reduced from $40,000 to $20,000 to better reflect the costs of administration. Industry representatives indicated their general acceptance of the cost recovery arrangements and willingness to continue working co-operatively with the Department.

The Department also consulted with the Department of Home Affairs on definitions used to calculate the term 'total declared value' to ensure accuracy and consistency with the Customs Act 1901.

Details of the Regulations are set out in the Attachment.

The Act specifies no conditions that need to be satisfied before the power to make the Regulations may be exercised.

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

The Regulations commence on 1 July 2018 to coincide with the commencement of the relevant import offences pursuant to section 51 of the PES Rules.

Authority: Section 6 of the Product Emissions Standards (Customs) Charges Act 2017

Statement of Compatibility with Human Rights

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

Product Emissions Standards (Customs) Charges Regulation 2018

The Regulations are 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 Legislative Instrument

The Product Emissions Standards Act 2017 (PES Act) establishes a national framework to address the adverse impacts of air pollution from certain products on human and environmental health.

The PES Act and the Product Emissions Standards Rules 2017 (PES Rules) implement a key aspect of the National Clean Air Agreement established by Australia's Environment Ministers on 15 December 2015 and regulate 'emissions-controlled products'. Under that Agreement, a key initial action was the introduction of national emission standards for new non-road spark ignition engines and equipment. The PES Rules prescribes certain propulsion marine engines and non-road engines as 'emissions-controlled products' which must be certified as meeting the Australian emissions standard, or a recognised foreign standard, in order to be imported or supplied in Australia.

The Product Emissions Standard (Customs) Charges Act 2017 (Customs Charges Act) imposes a charge on the import of emissions-controlled products to assist with the recovery of the costs of implementation, compliance and enforcement and other activities that support the delivery of the regulatory scheme.

The purpose of the Regulations is to prescribe the amount of charge to be imposed on the import of emissions-controlled products. The charge is set at 0.45% of the value of the product, subject to the operation of a high item value threshold and an importation threshold. The high item value threshold limits the amount of charge on any one item to ensure that importers of high value products do not face a disproportionate share of the costs of the scheme. The importation threshold is based on the sum of the product values of emissions-controlled products imported by a person each financial year and reduces the overall administrative costs of the scheme by ensuring that the cost of recovering a charge from an importer is not greater than the charge itself.

Human rights implications

The Regulations do not engage with any of the applicable rights or freedoms. Human rights implications associated with the PES Rules, PES Act and Customs Charges Act were considered and outlined in the relevant Statement of Compatibility with Human Rights included with both the Explanatory Memorandum for the Product Emissions Standards Act 2017 and the Explanatory Statement for the Product Emissions Standards Rules 2017. The Regulations prescribe the charges amount and therefore do no change the operation of the PES Act or Rules in a way which would affect the previous analysis of human rights implications.

Conclusion

The Regulations are compatible with human rights as they do not raise any human rights issues.

The Hon Melissa Price MP
Assistant Minister for the Environment
Parliamentary Secretary to the Minister for the Environment and Energy

ATTACHMENT

Details of the Product Emissions Standards (Customs) Charges Regulations 2018

Section 1 - Name

1. This section provides that the title of the Regulations is the Product Emissions Standards (Customs) Charges Regulations 2018 (the Regulations).

Section 2 - Commencement

2. The table in this section provides for the commencement of the Regulations.

3. The whole instrument commences on 1 July 2018.

Section 3 - Authority

4. This section provides that the Regulations are made under the Product Emissions Standards (Customs) Charges Act 2017 (the Customs Charges Act).

Section 4 - Definitions

5. This section defines the key terms used in the Regulations. A number of expressions used in the Regulations are defined in the Customs Charges Act, including 'emissions-controlled product', and so are not redefined in the Regulations.

6. A key term used in the calculation of the customs charge is 'product value'. Product value is defined with reference to the 'total declared value' which is the sum of the customs value of the imported product and amounts paid or payable for overseas freight and overseas insurance in relation to the product. Customs value, overseas freight and overseas insurance are amounts which are declared on an Import Declaration - a statement made by the importer (owner of the goods) or their agent (licensed customs broker) to the Department of Home Affairs about the goods being imported. Accordingly, total declared value reflects the costs or value of the goods as landed in Australia. Customs value, overseas freight and overseas insurance are defined according to the Customs Act 1901.

7. The 'product value' definition sets the maximum product value at $20,000. This operates as a 'high item value threshold' where the charge amount is calculated using a product value of $20,000 if the total declared value of an imported product is greater than $20,000. This threshold ensures that the amount charged closely matches the estimated administrative costs of the scheme, as analysis of import data shows that there is no extra administrative costs to the Department in administering the scheme for higher value imports.

Section 5 - Amount of charge imposed on the importation of emissions-controlled products

8. Section 5, which is made for the purposes of section 6 of the Customs Charges Act, prescribes the amount of charge to be imposed on the import of emissions-controlled products.

9. This section prescribes formulas to be used to calculate the charge for each imported emissions-controlled product. The charge is specified at a rate of 0.45% of the value of the product, subject to the operation of a high item value threshold and an importation threshold.

10. The rate of 0.45% was determined by using an estimate of the total volume of emissions-controlled products imported and manufactured in 2015 and 2016. The rate will be reviewed annually based on actual import and manufacturing figures and the actual costs of delivering the scheme. The first opportunity to review the levy rate will be following the first full year of the scheme's operation in July 2019.

11. As stated above, the customs charge is subject to a high item value threshold and an importation threshold (or 'low levy threshold'). The high item value threshold limits the amount of charge on any one item to ensure that importers of high value products do not face a disproportionate share of the costs of the scheme. The importation threshold is based on the sum of the product values of emissions-controlled products imported by a person each financial year and reduces the overall administrative costs of the scheme by ensuring that the cost of recovering a charge from an importer is not greater than the charge itself.

12. The high item value threshold is given effect through the definition of product value in section 4. The low levy threshold is given effect through the definition of importation threshold in subsection 5(5).

13. As the Customs Charges Act imposes a charge on the import of each individual emissions-controlled product, the amount of the charge must be able to be determined for each product at the time of import. This is despite the fact that the invoicing of the customs charge will not take place until the following financial year (as provided for by Part 9 of the Rules). For this reason, subsections 5(2) to 5(5) provides for the amount of the charge, or the formula to be used to determine this amount, for each imported product in relation to whether the importation threshold has been passed.

14. Subsection 5(2) provides that, if at the time of import of a particular product, the importer has not passed the importation threshold for the financial year, then the amount of the charge for that product is nil.

15. Subsection 5(3) provides a formula to calculate the charge for a particular product where, at the time of import of the particular product, the importer passes the importation threshold for the financial year. The formula provides that this amount is 0.45% of the sum of the product values of imported emissions-controlled products at that point in time. This takes into account the product values of emissions-controlled products which were imported in the same financial year prior to the importer passing the importation threshold.

16. Subsection 5(4) provides a formula to calculate the charge for a particular product where, at the time of import of the particular product, the importer has passed the importation threshold for the financial year. The formula provides that this amount is 0.45% of the product value of the emissions-controlled product being imported at that point in time. The practical effect of subsections 5(3) and 5(4) is that an importer will be liable to the 0.45% levy charge for all products imported in a financial year once the importation threshold is passed.

17. Subsection 5(5) sets out when the importation threshold is passed. The importation threshold will be passed at the time when, on importing a particular product, the product value of that product plus the product value of any products previously imported in that same financial year, is more than $32,000. The importation threshold is calculated independently of the product values of any emissions-controlled products that the importer is yet to import in the same financial year.

18. It is not economical to recover charges from importers where the sum of the product values of imported products in a financial year is $32,000 or less. This is because 0.45% of $32,000 results in a charge of $144 which is the approximate cost of the collection and recovery of the charge. The practical effect of the importation threshold is to set a low levy threshold of $144 for each financial year. If the importer has not passed the importation threshold of $32,000 (which corresponds to a total charge payable of $144), then the charge payable by the importer for that financial year will be nil. The threshold amount has been set by determining the cost of administering the customs charge which includes calculating the liability, contacting the importer to confirm the liability amount, sending an invoice and processing the payment. The importation threshold reduces the overall administrative costs of the scheme by ensuring that the cost of recovering the charge from the importer is not greater than the charge itself.

19. Subsection 5(6) provides that the charge amount be rounded to the nearest cent. This provides clarity for importers on the monetary amount they will be liable for under subsections 5(3) and 5(4).