House of Representatives

Explanatory Memorandum

Circulated By Authority of the Minister for Home Affairs, the Honourable Brendan O'Connor Mp

SCHEDULE 1 - AMENDMENTS

Customs Act 1901

Item 1 After Division 1F of Part VIII

9. This item amends the Customs Act 1901 (the Customs Act) by inserting new Division 1G into Part VIII. New Division 1G is headed ASEAN-Australia-New Zealand (AANZ) originating goods and sets out the rules for determining whether goods are AANZ originating goods and therefore eligible for a preferential rate of customs duty under the Customs Tariff Act 1995 (the Customs Tariff Act). These rules are being inserted to give effect to the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (the Agreement), in particular Chapter 3 of the Agreement.

10. New Division 1G contains six Subdivisions which are set out below.

Subdivision A - Preliminary

11. Subdivision A contains a simplified outline of Division 1G and contains the interpretation provision for Division 1G.

Section 153ZKA Simplified outline

12. New section 153ZKA sets out a simplified outline of each of the Subdivisions B to F of new Division 1G.

New section 153ZKB Interpretation

13. New subsection 153ZKB(1) sets out several new definitions for the purposes of Division 1G. These definitions are:

AANZ originating goods which means goods that, under new Division 1G, are AANZ originating goods;

Agreement which means the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area done at Thailand on 27 February 2009, as amended from time to time. The Note to this definition indicates that in 2009, the text of the Agreement was accessible through the Australian Treaties Library on the AustLII Internet site;

aquaculture which has the meaning given by Article 1 of Chapter 3 of the Agreement, which is the farming of aquatic organisms including fish, molluscs, crustaceans, other aquatic invertebrates and aquatic plants, from seedstock such as eggs, fry, fingerlings and larvae, by intervention in the rearing or growth processes to enhance production such as regular stocking, feeding, or protection from predators;

Certificate of Origin which means a certificate that is in force and that complies with the requirements of Rule 7 of the Annex to Chapter 3 of the Agreement. Rule 7 sets out the format of, and the matters that are to be included in, a Certificate of Origin;

Convention which means the International Convention on the Harmonized Commodity Description and Coding System done at Brussels on 14 June 1983, as in force from time to time. The Note to this definition indicates that in 2009, the text of the Agreement was accessible through the Australian Treaties Library on the AustLII Internet site;

customs value, of goods, which has the meaning given by section 159. In most cases it will be the transaction value but there are other methods if this value cannot be ascertained;

exclusive economic zone which has the same meaning as in the Seas and Submerged Lands Act 1973. This definition is taken from Articles 55 and 57 of UNCLOS which provide as follows:

The exclusive economic zone is an area beyond and adjacent to the territorial sea, subject to the specific legal regime established in this Part, under which the rights and jurisdiction of the coastal State and the rights and freedoms of other States are governed by the relevant provisions of this Convention.

The exclusive economic zone shall not extend beyond 200 nautical miles from the baselines from which the breadth of the territorial sea is measured.

Harmonized System which means the Harmonized Commodity Description and Coding System (as in force from time to time) that is established by or under the Convention.

The Harmonized System (HS) is the worldwide classification system that has been adopted by all countries that are members of the World Customs Organization. In Australia, the HS has been adopted in the Customs Tariff Act. The HS organises goods according to the degree of manufacture, and assigns classification numbers to all goods. It is arranged into 96 chapters covering all goods, and each chapter is divided into headings, subheadings, and tariff classifications. Under the HS, the chapter, heading, and subheading numbers (6 digits) for any good are adopted in any country using the HS. The Australian Customs Tariff is an 8 digit classification, with the 4 and 6 digit international classification supplemented for the domestic imposition of customs duty;

in a Party includes:

a.

the territorial sea of a Party;

b.

the exclusive economic zone of a Party over which the Party exercises sovereign rights or jurisdiction in accordance with international law; and

c.

the continental shelf of a Party over which the Party exercises sovereign rights or jurisdiction in accordance with international law.

Under the Agreement, activities are required to take place "in a Party" and this definition ensures that these activities will be eligible activities if they take place in the territorial sea, the EEZ and the continental shelf of a Party as well as on the land mass of a Party;

indirect materials which means:

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 the operation of equipment 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.

Interpretation Rules which means the General Rules (as in force from time to time) for the Interpretation of the Harmonized System provided for by the Convention;

non-originating materials which means goods that are not originating materials;

originating materials which means:

a.

AANZ originating goods that are used or consumed in the production of other goods;

In some circumstances, in order to determine whether goods imported into Australia are AANZ originating goods, and therefore eligible for a preferential rate of customs duty, it may be necessary to have regard to the goods from which the final goods are produced (see Subdivisions C and D). These goods which are used to produce other goods can be originating or non-originating.

Originating materials are those goods that are used to produce other goods and that are also AANZ originating goods, which means that, in their own right, they satisfy the requirements of new Division 1G. Non-originating materials are goods that are not originating materials because they do not satisfy the requirements of Division 1G in their own right. For example, where frozen crumbed fish fillets are made in New Zealand from fish caught in New Zealand that is coated with herbs and spices imported from Argentina, the fish would be originating materials and the herbs and spices would be non-originating materials (as Argentina is not a Party to the Agreement); or

b.

indirect materials.

Party which means a Party (within the meaning of the Agreement) for which the Agreement has entered into force.

Under Article 3 of Chapter 1 to the Agreement, a Party means an ASEAN Member State or Australia or New Zealand. The ASEAN Member States are Brunei Darussalam, the Kingdom of Cambodia, the Republic of Indonesia, the Lao People's Democratic Republic, Malaysia, the Union of Myanmar, the Republic of the Philippines, the Republic of Singapore, the Kingdom of Thailand and the Socialist Republic of Viet Nam.

Under Article 7 of Chapter 20 of the Agreement, the Agreement cannot enter into force until Australia, New Zealand and at least four ASEAN Member States have notified each Party to the Agreement, in writing, that the internal requirements to implement the Agreement have been completed. However, at that point in time, the Agreement will only enter into force for those countries that have completed the internal requirements at that time. If there are any ASEAN Member States that have not completed their internal requirements at the time of the initial entry into force of the Agreement, the Agreement shall only enter into force for these countries after the date these countries notify each Party to the Agreement that they have also completed their internal requirements. (See subsection 153ZKB(7) below for requirement for the Minister to announce in the Gazette when the Agreement enters into force for a Party other than Australia.)

If the Agreement is not in force for a Party, new Division 1G will not apply in relation to that Party. For example, goods cannot claim to be wholly obtained goods of a Party for which the Agreement has not entered into force.

produce which means grow, farm, raise, breed, mine, harvest, fish, trap, hunt, capture, gather, collect, extract, manufacture, process or assemble;

territorial sea which has the same meaning as in the Seas and Submerged Lands Act 1973. This definition is taken from Articles 3 and 4 of UNCLOS which provide as follows:

Every State has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baselines determined in accordance with this Convention.

The outer limit of the territorial sea is the line every point of which is at a distance from the nearest point of the baseline equal to the breadth of the territorial sea.

14. New subsection 153ZKB(2) provides that the regional value content of goods for the purposes of Division 1G is to be worked out in accordance with the regulations. The regulations may prescribe different regional value content rules for different kinds of goods.

15. New subsection 153ZKB(3) provides that the value of goods for the purposes of Division 1G is to be worked out in accordance with the regulations and that the regulations may prescribe different valuation rules for different kinds of goods. The value of goods is relevant, for example, in determining whether goods satisfy the de minimis requirement in subsection 153ZKE(4). The value of goods is to be distinguished from the customs value of goods which is to be worked out under section 159 of the Customs Act.

16. New subsection 153ZKB(4) provides that in specifying tariff classifications for the purposes of Division 1G, the regulations may refer to the Harmonized System. The product specific rules in Annex 2 of the Agreement refer to tariff classifications of the Harmonized System.

17. New subsection 153ZKB(5) provides that subsection 4(3A) of the Customs Act does not apply for the purposes of Division 1G. Subsection 4(3A) provides that reference in the Customs Act to the tariff classification of goods is a reference to Schedule 3 of the Customs Tariff Act, which is not the case in new Division 1G.

18. New subsection 153ZKB(6) provides that for the purposes of Division 1G, the regulations may apply, adopt or incorporate any matter contained in any instrument or other writing as in force or existing from time to time. This provision will override section 14 of the Legislative Instruments Act 2003 should it be necessary to refer to the laws of a Party to the Agreement (other than Australia) in the Customs (ASEAN-Australia-New Zealand Rules of Origin) Regulations 2009.

19. New subsection 153ZKB(7) provides that the Minister (for Home Affairs) must announce by notice in the Gazette the day on which the Agreement enters into force for a Party (other than Australia). In this subsection , Party means a Party to the Agreement, not necessarily a Party for which the Agreement has entered into force. This means that the Minister will be required to publish a notice in the Gazette setting out the date the Agreement enters into force for each ASEAN Member State and New Zealand. New subsection 153ZKB(8) provides that notice referred to in subsection (7) is not a legislative instrument. This means that the notice will not have to be registered on the Federal Register of Legislative Instruments and is consistent with the Legislative Instruments Regulations 2004, which provide that a notice published in the Gazette that announces the day on which an international agreement comes into force for Australia is not a legislative instrument. Such notices are not legislative instruments within the meaning of section 5 of the Legislative Instruments Act 2003.

Subdivision B - Wholly obtained goods of a Party

20. Subdivision B sets out the rules in relation to goods that are wholly obtained goods of a Party.

Section 153ZKC Goods wholly obtained of a Party

21. New subsection 153ZKC(1) provides that goods are AANZ originating goods:

a.

if they are wholly obtained goods of a Party; and

b.

the importer has, at the time the goods are imported, a Certificate of Origin, or a copy of one, for the goods.

22. New subsection 153ZKC(2) provides that goods are wholly obtained of a Party if, and only if, the goods are:

a.

plants, or goods obtained from plants that are grown, harvested, picked or gathered in a Party. These goods include all fruit, flowers, vegetables, trees, seaweed, fungi and live plants; or

b.

live animals born and raised in a Party; or

c.

goods obtained from live animals in a Party; or

d.

goods obtained from hunting, trapping, fishing, farming, gathering, capturing or aquaculture in a Party; or

e.

minerals or other naturally occurring substances extracted or taken in a Party; or

f.

fish, shellfish or other marine goods taken from the high seas in accordance with international law, by ships that are registered or recorded in a Party and are flying, or are entitled to fly, the flag of that Party; or

g.

goods produced from goods referred to in paragraph (f) on board factory ships that are registered or recorded in a Party and are flying, or are entitled to fly, the flag of that Party; or

h.

goods taken by a Party, or by a person of a Party, from the seabed, or beneath the seabed, outside:

(i)

the exclusive economic zone of that Party; or

(ii)

the continental shelf of that Party; or

(ii)

an area over which a third party exercises jurisdiction;

and taken under exploitation rights granted in accordance with international law; or

i.

waste and scrap that has been derived from production or consumption in a Party and that is fit only for the recovery of raw materials; or

j.

used goods that are collected in a Party and that are fit only for the recovery of raw materials; or

k.

goods produced or obtained entirely in a Party exclusively from goods referred to in paragraphs (a) to (j) or from their derivatives. Under this provision, all of the relevant activities must take place in the one Party. For example, pork sausages that are made in Vietnam from pigs born and raised in Vietnam and cereals and spices harvested in Vietnam will be AANZ originating goods. It would not be possible to claim that pork sausages made in Vietnam from pigs born in Cambodia and cereals and spices harvested in Vietnam are AANZ originating goods under this provision. However, such sausages could be AANZ originating goods under new section 153ZKD below.

Subdivision C - Goods produced in a Party from originating materials

23. Subdivision C sets out the rule in relation to goods that are produced entirely in the territory of a Party from originating materials only under section 153ZKD. Such goods are AANZ originating goods where the importer of the goods has, at the time the goods are imported, a Certificate of Origin, or a copy of one, for the goods.

24. Under this section, it will be possible to combine originating materials from any Party to make AANZ originating goods, as long as the goods are produced entirely in a Party. Therefore, following on from the above example, pork sausages made in Vietnam from pigs born in Cambodia and cereals and spices harvested in Vietnam would be AANZ originating goods under this section.

Subdivision D - Goods produced from non-originating materials

25. Subdivision D sets out the rules for determining whether goods that are produced from non-originating materials only, or from non-originating materials and originating materials, are AANZ originating goods.

26. Under the Agreement, there are two different sets of rules of origin that apply in relation to goods produced using non-originating materials. Except for goods listed in Annex 2 to the Agreement, the relevant rule of origin is a "general rule" of either a change in tariff heading or a regional value content of at least 40% of the FOB value of the goods. For the goods listed in Annex 2 to the Agreement, the product-specific rules contained in the Annex are applicable.

Section 153ZKE Goods produced from non-originating materials and classified in the tariff table

27. New section 153ZKE applies to goods that are classified to a heading or subheading that is specified in the table in Schedule 1 to the Customs (ASEAN-Australia-New Zealand Rules of Origin) Regulations 2009 (the AANZ Regulations). New subsection 153ZKE(1) provides that goods are AANZ originating goods if:

a.

they are classified to a heading or subheading of the Harmonized System specified in column 1 or 2 of the table in Schedule 1 to the Customs (ASEAN-Australia-New Zealand Rules of Origin) Regulations 2009; and

b.

each requirement that is specified in the regulations to apply in relation to the goods is satisfied; and

c.

the importer of the goods has, at the time the goods are imported, a Certificate of Origin, or a copy of one, for the goods.

28. The table in Schedule 1 to the AANZ Regulations will incorporate the product specific rules relating to change in tariff classification, regional value content and other rules that are included in Annex 2 to the Agreement for the purposes of determining whether goods are AANZ originating goods. Columns 1 and 2 of this table will set out the tariff classifications, column 3 will set out the description of the goods and column 4 will set out the product specific rules.

29. New subsection 153ZKE(2) refers to the first of the requirements that may be specified in Schedule 1 to the AANZ Regulations. It provides that the regulations may specify that each non-originating material used or consumed in the production of the goods is required to satisfy a specified change in tariff classification.

30. New subsection 153ZKE(3) provides that the regulations may also specify when a non-originating material used or consumed in the production of the goods is taken to satisfy the change in tariff classification. Regulations made under these heads of power would include provisions that would apply where the non-originating materials that are used or consumed in the production of the good do not satisfy the change in tariff classification.

31. The concept of the change in tariff classification only applies to non-originating materials. Goods that have been sourced from outside any of the Parties and that are used in the production of other goods are non-originating materials. Goods sourced from within a Party that have not fulfilled the requirements of Division 1G and that are used in the production of other goods are also non-originating materials. All non-originating materials used to produce other goods may not have the same classification under the Harmonized System as the final good into which they are produced. This means that the goods must be classified under one tariff classification before the production process and under a different tariff classification after the production process. This approach ensures that sufficient transformation of materials has occurred within a Party, or Parties, to justify the claim that the goods originate in a Party.

32. For example, frozen fish fillets (HS 0304) are produced from fish caught in Thailand (originating materials) and combined with herbs and spices from Argentina (non-originating materials) (HS 0907 - 0910) to make crumbed fish fillets (HS 1604.20). The applicable tariff change for crumbed fish is "a change to subheading 1604.20 from any other chapter". As the herbs and spices are classified to Chapter 9, these non-originating materials meet the tariff change requirement. (The fish is the wholly obtained good of a Party and is therefore an originating material and is not required to change its classification.)

33. In order to determine whether goods meet the applicable change in tariff classification requirement, the tariff classification of the final goods and each of the goods that are non-originating materials used in the production of the goods needs to be known.

34. New subsection 153ZKE(4) incorporates the first de minimis provision set out in Article 8 of Chapter 3 of the Agreement. This subsection provides that the change in tariff classification is also taken to be satisfied if the total value of all of the non-originating materials used in the production of the goods that do not satisfy the particular change in tariff classification requirement for the goods does not exceed 10% of the customs value of the goods. This provision applies to all goods listed in the table in Schedule 1 to the AANZ Regulations.

35. New subsection 153ZKE(5) incorporates the second de minimis provision set out in Article 8 of Chapter 3 of the Agreement. This provision applies only in relation to goods that are classified to Chapters 50 to 63 of the Harmonized System, which apply to textiles and textile articles. This subsection provides that the change in tariff classification is also taken to be satisfied if the total weight of all of the non-originating materials used or consumed in the production of the goods that do not satisfy the particular change in tariff classification of the goods does not exceed 10% of the total weight of the goods

36. Therefore, under these two de minimis provisions, even if all the non-originating materials used to produce a final good do not satisfy a particular change in tariff classification, the final goods may still be AANZ originating goods because the change in tariff classification will be taken to be satisfied.

37. The value of non-originating materials for the purposes of this section is to be worked out in accordance with the methods that will be included in the AANZ Regulations.

38. New subsection 153ZKE(6) provides that the regulations may specify that the goods are required to have a regional value content of at least a specified percentage. The methods of calculation to determine the regional value content will be included in the AANZ Regulations.

39. New subsection 153ZKE(7) provides that if:

a.

the goods are required to have a regional value content of at least a particular percentage; and

b.

the goods are imported into Australia with accessories, spare parts, tools or instructional or other information materials; and

c.

the accessories, spare parts, tools or instructional or other information materials are not invoiced separately from the goods; and

d.

the quantities and value of the accessories, spare parts or tools are customary for the goods;

then the regulations must require the value of the accessories, spare parts, tools or instructional or other information materials to be taken into account as originating or non-originating materials, as the case may be, for the purposes of working out the regional value content of the goods. Without this provision, the value of accessories, spare parts, tools or instructional or other information materials would not normally form part of the value of materials that are used in the production of the underlying goods.

40. The Note to this section indicates that the value of the accessories, spare parts, tools or instructional or other information materials is to be worked out in accordance with the AANZ Regulations.

41. New subsection 153ZKE(8) provides that for the purposes of subsection 153ZKE(7), section 153ZKI is to be disregarded in working out whether the accessories, spare parts, tools or instructional or other information materials are originating or non-originating materials. However, new subsection 153ZKE(9) provides that subsection 153ZKE(7) does not apply if the accessories, spare parts, tools or instructional or other information materials are imported solely for the purpose of artificially raising the regional value content of the goods.

42. Subsection 153ZKE(9) and paragraph 153ZKI(c) (see below) are required to ensure that accessories, spare parts, tools, instructional or other information materials that are of a kind customarily provided with other goods are not simply added to ensure one or both of the goods are AANZ originating goods by artificially raising the regional value content of the other goods.

For example, woollen trousers are made in Malaysia, and are to be sold to a buyer in Australia for $80 each. Amongst other requirements, under the Indirect/Build-down method for calculating regional value content in the Agreement, woollen trousers must have a regional value content of 40% to be AANZ originating goods. Because these trousers include Italian fabric worth $48 per pair, the regional value content would be worked out as follows:

( $80 - $48 ) / $100 = 32%


The trousers are non-originating, and ineligible for importation into Australia at preferential rates of duty under the Agreement.

To get around this dilemma, the producer arranges for each pair of trousers to be sold with a belt and agrees to buy the belt back later to ensure the buyer ultimately pays no more than originally intended. On return of the belts to the producer, they could then be used for subsequent shipments under similar arrangements.

The belt is complete with a buckle and is classified to subheading 4203.30 and is sold to the producer for $12. It is made from a pre-made belt without a buckle imported from a country that is not a Party to the Agreement. The pre-made belt is classified to the same subheading as the complete belt, and is valued at $2. The belt is non-originating because it did not undergo an appropriate tariff change requirement.

Without subsection 153ZIE(8) and paragraph 153ZIG(c), the addition of the belt to the trousers would mean that the regional value content of the trousers would be worked out as follows:

( $92 (trousers + belt) - $50 (imported fabric + belt without buckle) ) / $92 = 45.65%


Therefore, the artificial inclusion of the belt would raise the price of the goods (and to a lesser extent, the value of the imported content) to enable both goods to become AANZ originating goods. Subsection153ZKE(9) and paragraph 153ZKI(c) are required to deter traders from resorting to artificial arrangements to meet the required regional value content.

43. New subsection 153ZKE(10) provides that subsections (2) and (6) do not limit paragraph (1)(b). It is proposed that the regulations will include other requirements in addition to change in tariff classification and regional value content requirements.

44. For example, in addition to meeting a tariff change requirement, in respect of textile articles classified in the headings of Chapter 63 of the Harmonized System where the starting material is fabric, the fabric must be raw or unbleached and fully finished in one or more of the Parties.

Section 153ZKF Goods produced from non-originating materials and not classified in the tariff table

45. New section 153ZKF sets out the rules of origin that apply to goods that are classified to a heading or subheading that is not specified in the table in Schedule 1 to the AANZ Regulations. The reason they are not specified in the table is because their qualification as originating goods is that they need to meet a "general rule" of either a change in tariff heading or a regional value content of at least 40%.

46. There are two different rules of origin that can be applied to goods that are classified to a heading or subheading that is not specified in the table.

47. This first rule is set out in subsection 153ZKF(1), and provides that goods are AANZ originating goods if:

a.

they are classified to a heading or subheading of the Harmonized System that is not specified in column 1 or 2 of the table in Schedule 1 to the Customs (ASEAN-Australia-New Zealand Rules of Origin) Regulations 2009; and

b.

the final process in their production was performed in a Party; and

c.

the goods have a regional value content of at least 40%; and

d.

the importer of the goods has, at the time the goods are imported, a Certificate of Origin, or a copy of one, for the goods.

48. New subsection 153ZKF(2) provides that if:

a.

the goods are imported into Australia with accessories, spare parts, tools or instructional or other information materials; and

b.

the accessories, spare parts, tools or instructional or other information materials are not invoiced separately from the goods; and

c.

the quantities and value of the accessories, spare parts or tools are customary for the goods;

then the regulations must require the value of the accessories, spare parts, tools or instructional or other information materials to be taken into account as originating or non-originating materials, as the case may be, for the purposes of working out the regional value content of the goods. Without this provision, the value of accessories, spare parts, tools or instructional or other information materials would not normally form part of the value of materials that are used in the production of the underlying goods. This provision is identical to the provision that applies under 153ZKE(7) in relation to goods that are classified to a heading or subheading of the Harmonized System that is specified in column 1 or 2 of the table in Schedule 1 to the AANZ Regulations.

49. The Note to this subsection indicates that the value of the accessories, spare parts, tools or instructional or other information materials is to be worked out in accordance with the AANZ Regulations.

50. Similar to new subsection 153ZKE(8), subsection 153ZKF(3) provides that for the purposes of subsection 153ZKF(2), section 153ZKI is to be disregarded in working out whether the accessories, spare parts, tools or instructional or other information materials are originating or non-originating materials. However, new subsection 153ZKF(4) provides that subsection 153ZKF(2) does not apply if the accessories, spare parts, tools or instructional or other information materials are imported solely for the purpose of artificially raising the regional value content of the goods.

51. Subsections 153ZKF(4) and paragraph 153ZKI(c) (see below) are, like subsection 153ZKE(9), required to ensure that accessories, spare parts, tools, instructional or other information materials that are of a kind customarily provided with other goods are not simply added to ensure one or both of the goods are AANZ originating goods by artificially raising the regional value content of the other goods.

52. New subsection 153ZKF(5) sets out the second rule, and provides that goods are AANZ originating goods if:

a.

they are classified to a heading or subheading of the Harmonized System that is not specified in column 1 or 2 of the table in Schedule 1 to the AANZ Regulations; and

b.

they are produced entirely in one or more Parties from non-originating materials only, or from non-originating and originating materials; and

c.

each non-originating material used or consumed in the production of the goods undergoes a change in tariff classification that is a change to a heading of the Harmonized System from any other heading of the Harmonized System; and

d.

the importer of the goods has, at the time the goods are imported, a Certificate of Origin, or a copy of one, for the goods.

53. New subsections153ZKF(6) and (7) set out the same de minimis provisions in relation to non-originating materials to those that apply to goods that are classified to a heading or subheading of the Harmonized System that is specified in column 1 or 2 of the table in Schedule 1 to the AANZ Regulations (see new subsections 153ZKE(4) and (5) above).

Section 153ZKG Non qualifying operations or processes

54. New subsection 153ZKG(1) provides that new section 153ZKG applies for the purposes of working out if goods are AANZ originating goods under either:

a.

subsection 153ZKE(1), where, in relation to paragraph 153ZKE(1)(b), goods are claimed to be AANZ originating goods solely on the basis that the goods have a regional value content of at least a specified percentage. This means that column 4 of the item in Schedule 1 to the AANZ Regulations that applies to these goods must specify only a regional value content requirement - this provision will not apply for example where column 4 specifies a regional value content and a change in tariff classification requirement; or

b.

subsection 153ZKF(1).

55. New subsection 153ZKG(2) provides that goods are not AANZ originating goods merely because of the following:

a.

operations or processes to preserve goods in good condition for the purpose of transport or storage of the goods;

b.

operations or processes to facilitate the shipment or transportation of the goods;

c.

packaging (other than the encapsulation of electronics) for transportation or sale or presenting goods for transportation or sale;

d.

simple processes of sifting, classifying, washing, cutting, slitting, bending, coiling, uncoiling or other similar simple processes;

e.

affixing of marks, labels or other distinguishing signs on goods or on their packaging;

f.

dilution with water or another substance that does not materially alter the characteristics of goods;

g.

any combination of things referred to in paragraphs (a) to (f).

Therefore, if any of these operations are the only operations that take place in a Party in relation to goods (either alone or as a combination), this will not amount to production in relation to the goods. For example, if non-originating goods such a spices from Bolivia are packaged into bottles in Cambodia, this will not confer the status of AANZ originating goods upon the spices.

Section 153ZKH Packaging materials and containers.

56. New subsection 153ZKH(1) provides that 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 General Rules for the Interpretation of the Harmonized System provided for by the Convention;

then the packaging material or container is to be disregarded for the purposes of Subdivision D except for the purposes of the exception detailed below. For example, this means that the packaging material or container that are non-originating materials does not need to satisfy the change in tariff classification test that might apply to the goods under the AANZ Regulations.

Exception

57. However, subsection 153ZKH(2) provides one exception, which applies where the goods are required to have a regional value content of at least a particular percentage. Under this exception, the regulations must require the value of the packaging material or container to be taken into account as originating materials or non-originating materials, as they case may be, for the purposes of working out the regional value content of the goods. Without this provision, the value of packaging materials and containers would not normally form part of the value of materials that are used in the production of the goods.

58. The value of packaging materials and containers for the purposes of this section is to be worked out in accordance with the methods that will be included in the AANZ Regulations.

Subdivision E - Goods that are accessories, spare parts, tools or instructional or other information materials

59. Subdivision E sets out a specific rule that applies to goods that are accessories, spare parts, tools or instructional or other information materials.

Section 153ZKI Accessories, spare parts, tools or instructional or other information materials

60. New section 153ZKI provides that goods are AANZ originating goods if:

a.

they are accessories, spare parts, tools or instructional or other information materials in relation to other goods; and

b.

the other goods are imported into Australia with the accessories, spare parts, tools or instructional or other information materials; and

c.

the accessories, spare parts, tools or instructional or other information materials are not imported solely for the purpose of artificially raising the regional value content of the other goods; and

d.

the other goods are AANZ originating goods; and

e.

the accessories, spare parts, tools or instructional or other information materials are not invoiced separately from the other goods; and

f.

the quantities and value of the accessories, spare parts, tools or instructional or other information materials are customary for the other goods.

Therefore, under the provision, accessories, spare parts, tools or instructional or other information materials will be deemed to be AANZ originating goods even if, in fact, they are non-originating materials, provided all of the requirements of this section are satisfied. However, this deeming section is to be disregarded when performing a regional value calculation on goods under subsections 153ZKE(7) and 153ZKF(2).

Subdivision F - Consignment

61. Subdivision F sets out the consignment requirements that must be satisfied in transporting AANZ originating goods to Australia, including in relation to production in other countries that are not Parties to the Agreement during transportation to Australia.

Section 153ZKJ Consignment

62. New subsection 153ZKJ(1) provides that goods are not AANZ originating goods under Division 1G if:

a.

the goods are transported through a country or place other than a Party; and

b.

at least one of the following applies:

(i)

the goods undergo subsequent production or any other operation in that country or place (other than unloading, reloading, storing or any operation that is necessary to preserve them in good condition or to transport them to Australia); or

(ii)

the goods enter the commerce of that country or place; or

(ii)

the transport through that country or place is not justified by geographical, economic or logistical reasons.

63. Subsection 153ZKJ(2) provides that this section applies despite any other provision of Division 1G. This means that even if goods are AANZ originating goods in accordance with any other provisions of Division 1G, if they do not comply with section 153ZKJ(1), they will not be AANZ originating goods.

Item 2 Application

64. Item 2(1) provides that the amendment made by item 1 applies in relation to:

a.

goods imported into Australia on or after the commencement of item 2; and

b.

goods imported in Australia before the commencement of item 2, where the time for working out the rate of import duty on the goods had not occurred before the commencement of item 2. This means that if goods are imported from a Party before the commencement date and are still in a warehouse on that date, the new rules set out in item 1 will also apply to them.

65. Item 2(2) applies in relation to a Party for which the Agreement enters into force on a day later than the day on which the Agreement enters into force for Australia (see the definition of Party in subsection 153ZKB(1) above). This later day is the start day for the purposes of item 2(2). Under this item, the amendment made by item 1 applies in relation to:

a.

goods imported into Australia on or after the start day; and

b.

goods imported in Australia before that the start day, where the time for working out the rate of import duty on the goods had not occurred before the start day. Again, this means that if goods are imported from a relevant Party before the start day and are still in a warehouse on that day, the new rules set out in item 1 will also apply to them.

66. In this item , Agreement means the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area done at Thailand on 27 February 2009, as amended from time to time and Party means a Party within the meaning of the Agreement (ie any one of the ten ASEAN Member States, Australia and New Zealand).