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Customs propose amendments to the "Production Assist Costs"Provisions of the Customs Act 1901

By way of Australian Customs and Border Protection Notice No. 2012/20 ("Notice") dated 10 April 2012 but only appearing on the website of the Australian Customs and Border Protection Service ("Customs") on 13 April 2012 (Friday the 13th), Customs has given notice of a proposed amendment to the "Production Assist Costs" provisions of the Customs Act 1901 ("Act").


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The starting proposition in the Notice is that the valuation provisions of the Act must be consistent to the provisions of the World Trade Organisation ("WTO") Valuation Agreement. The second general proposition in the Notice is that the valuation provisions are intended to require the "Production Assist Costs", where relevant, should be included in determining the Customs value of the goods.

This leads to the Customs’ belief that some of the "Production Assist Costs Provisions" in the Act may not completely align with the WTO Valuation Agreement.

According to Customs, the proposed changes are intended to correctly reflect various articles of the WTO Valuation Agreement by including in customs value of imported goods the value, (apportioned as appropriate), of the materials, design, works, parts or tools where supplied directly or indirectly by the buyer free of charge or at reduced costs for use in connection with the production of the imported goods. At the moment, Customs indicates that the Act provides that where a buyer acquires such materials, parts or tools free of charge or at a reduced cost from an unrelated person, the cost of acquisition is treated as zero under the Act and not included in the value of the goods for the calculation of Customs duty when imported by the buyer.

The proposal by Customs to amend the Act and to:

"attribute a reasonable value to the materials supplied directly or indirectly by the buyer for use in the production of imported goods and to include that value in the Customs value despite the fact that the buyer acquired material from a third party at zero cost or reduced cost".

In relevant circumstances, this could inflate customs value of certain imported goods provided by an Australian buyer to an overseas vendor (for example in corporate groups) which is currently not included in Customs value. This would mean the payment of increased customs duty as well as GST and also create compliance issues as to how much is to be included. This would also have an impact for importers who may be unable to pass on those additional charges.

Customs is seeking comment on the proposed amendments by the end of April.

Interestingly, we were recently involved in a case where Customs tried to argue that the WTO Valuation Agreement required the payment of duty on the value of fabric provided by our client to its overseas producer of clothing, where that fabric had been provided to our client by its customer at no value. We maintained that the Act would apply and no duty should be paid on the value of the fabric, which argument was eventually accepted.

It is also interesting that other provisions of the Act may be inconsistent to the WTO Valuation Agreement, leading to different results here and overseas.

As always, we would be happy to assist. As many would be aware, we have already been extensively involved in submissions to Government on proposed legislative and practice changes with Customs and other Government agencies over time.

We will also keep you informed of developments.


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