The China Free Trade Agreement (FTA) is the customs and trade topic dominating headlines at the moment, and it makes sense given China is our biggest trading partner. However, there are a number of other recent and important customs and trade developments that impact importers and exporters, which we have set out below.
1. So long Customs, hello Australian Border Force
The Australian Customs and Border Protection Service ceased to exist on 30 June 2015 and was replaced by the Department of Immigration and Border Protection (Department). The majority of previous Customs compliance functions are now being carried out by the Australian Border Force (ABF), an agency within the Department, and the Department will handle policy, regulatory and corporate functions.
The merging of Immigration and Customs is designed to result in some efficiencies and operational cost savings. So far as it relates to trade, we expect the day to day impact of the merger will be minimal. However, from a compliance perspective, we believe that the name Australian Border “Force” does send a stronger message than Australian Customs “Service”. It appeared that in the lead up to the name change there was a marked increase in customs compliance action being undertaken.
While a name change on its own does not change the character of a Government Department, the stronger compliance approach by Customs in its final year was more reflective of the stance you associate with the name “Border Force”.
A quick review of the new website for the Department and the ABF suggests that there is new customs related content and we suggest spending some time becoming familiar with the website.
2. China Free Trade Agreement – proving origin
We couldn’t release a customs update without mentioning the China FTA. One of the surprising outcomes under the FTA is that a declaration of origin could only be used if an origin ruling has been obtained from the Customs Authority of the importing country. This means Australian exporters will require a ruling from Chinese Customs as to the origin of Australian products in order to use a declaration of origin. There is hope that this is only an interim measure, as the FTA contains a clause that specifically states that the declarations of origin provisions will be reviewed in 3 years. Until then, we expect most traders will use certificates of origin.
This outcome is especially disappointing given the flexible outcomes regarding origin in the Korea and Japan FTAs. If nothing else, we are sure traders would have appreciated greater consistency across the recent FTAs. No doubt the Department of Foreign Affairs and Trade will be very keen to see some relation of the declaration of origin requirements when the issue is revisited in 3 years’ time. Further, given that Customs was already struggling to meet timeframes on providing rulings, we are sure that the new Department will also be hoping that the ruling requirement is removed.
3. Customs duty refunds – would you like an audit with that refund?
It has been commonly reported to us that if a refund application is made by way of amending an import declaration, the refunds department may review the entire declaration, not only the line you are amending. In the recent edition of Border News, it was made clear that lodgement of a refund application alters the previous version of the import declaration. As such, the ABF may seek additional information relating to any goods the subject of the declaration before a decision is made to approve or reject the refund application.
This will have an impact on those in the industry who provide a service of identifying refunds in respect of import declarations lodged by other brokers. Importers seeking refunds will now need to be confident about not only the right to a refund, but also the tariff classification and concessions claimed in respect of any other goods covered by the same import declaration.
In order to facilitate trade, our view is that the Refunds Centre should limit their review to the refund being claimed and not use a refund application as a prompt to audit the balance of the entry. The ABF has wide rights to audit past entries and does not need to link this power to the seeking of a refund.
4. Australian Trusted Trader Program
There is now budgetary funding, allocated staff, a launch date and enabling legislation. The Australian Trusted Trader Program is happening and now is the time to decide whether you would like to be involved. The potential benefits under the program have been well published (duty deferral, streamlined reporting, mutual recognition, less intervention). However, the enabling legislation potentially allows for the relaxation of almost all requirements relating to the import and export of goods.
This means that the Trusted Trader Branch has the ability to grant a wider range of benefits than the main benefits currently foreshadowed. Every supply chain and customs profile is different and traders should be asking – what is my customs problem to which the Trusted Trader Program is potentially the answer.
Trusted Trader is not one size fits all and the legislation clearly allows for bespoke benefits. In our view, the best chance of obtaining those benefits is to be an early participant in the program. Early participation means that you are involved while the parameters of the program are still being shaped.
The pilot of the program will be conducted in the 2015/16 financial year. Importers and exporters interested in being part of the pilot should contact us and we will assist with passing on their interest to the Trusted Trader Branch.
5. TCOs – Federal Court considers the approach to interpretation
Becker Vale Pty Ltd v CEO of Customs is a Federal Court case primarily concerning the classification of goods. However, the last nine paragraphs of this 65 paragraph case deal with the application of tariff concession orders (TCOs). In those 9 paragraphs, the Federal Court referred to the past Administrative Appeals Tribunal (AAT) cases that held that in order for a TCO to apply to goods, those goods must completely and precisely meet the requirements of that TCO. The Federal Court appeared to adopt this reasoning and interpreted the requirements of the TCO by reference to the requirement that the TCO application contain a precise description of the goods.
This is an important development as the current strict interpretation of TCOs had previously been restricted to AAT decisions and had not been fully tested before the Federal Court. It is hoped that the ABF does not take this ruling as a strong endorsement of the strict approach to TCO interpretation, as it was clear that the matter was not fully argued before the Court.
The meaning of TCOs, and the breadth of goods covered by a TCO, is a very hot topic at the moment. It is an issue that is causing great uncertainty in the importing community. Given this, it is unfortunate that the Federal Court did not fully consider this issue in Becket Vale and instead chose to simply adopt previous AAT decisions.
6. FTA tool
The Export Council of Australia (ECA) has recognised a need for exporters to be better informed about FTAs and how to access the benefits under those FTAs. Hunt & Hunt has worked with the ECA and ANZ bank to develop the website. The website allows exporters to search by general good description or country and see the duty rates that apply under the various FTAs. In most cases, exporters are provided with a comparison between the general rate and the FTA rate allowing a clear demonstration of the benefits of the applicable FTA.
It is hoped that the FTA tool will help increase the utilisation of FTAs by both increasing awareness of FTA benefits and the steps that must be taken to qualify for those benefit. We anticipate that once the benefits of FTAs are known, exporters will more regularly take FTAs into account when designing their supply chain and deciding which foreign markets to pursue.