Senate

Supplementary Explanatory Memorandum

(Circulated by authority of the Assistant Minister for Immigration and Border Protection, the Honourable Alex Hawke MP)

NOTES ON AMENDMENTS

Amendment (1) - Schedule 1, item 3, page 5 (after line 6)

1. This amendment would amend proposed subsection 153XD (1) of the Customs Act 1901 (the Customs Act) to be inserted by item 3 of the "Customs Amendment (Singapore-Australia Free Trade Agreement Amendment Implementation) Bill 2017" (the Bill) to insert, after line 6 on page 5, a new definition of "Harmonized Commodity Description and Coding System".

2. The Harmonized Commodity Description and Coding System (the HCDC System) is defined to mean the HCDC System that is established by or under the International Convention on the Harmonized Commodity Description and Coding System (the Convention) done at Brussels on 14 June 1983, as in force from time to time.

3. The HCDC System is a structure for classifying goods based on internationally agreed descriptors for goods and related six-digit codes administered by the World Customs Organization (the WCO). This six-digit classification uniquely identifies all traded goods and commodities and is uniform across all countries that have adopted the HCDC System. The WCO reviews the system every five years to reflect changes in industry practice, technological developments and evolving international trade patterns.

4. The purpose of this amendment is to give effect to the amendments made by Amendment (2) below, which clarify that the version of the Harmonized System incorporated into domestic legislation for the purpose of the "Singapore-Australia Free Trade Agreement" (as amended by the "Agreement to Amend the Singapore-Australia Free Trade Agreement" (Amendment Agreement); collectively, referred as the "Amended Agreement").

Amendment (2) - Schedule 1, item 3, page 5 (lines 7 to 9)

5. The notes for Amendment (1) explain that updates to the HCDC System are undertaken every 5 years. The last review of the HCDC System (the fifth review) was completed in June 2014 and related amendments made entered into force on 1 January 2017.

6. While each signatory to the Convention is required to implement and reflect related amendments to the HCDC System in their domestic legislation, simultaneously on the entry into force date, the pace at which the amendments are implemented varies from country to country.

7. By way of example, while Australia has implemented, and currently uses, the latest HCDC System of 2017, many of our trading partners are still working towards implementing the latest version of the HCDC System. In light of this, and to avoid causing any disruption to international trade, Australia through the Department of Immigration and Border Protection publishes the changes between each HCDC System updates and relevant concordance associated with those updates on its website so that anyone can readily identify the appropriate codes for importing goods from other countries into Australia.

8. Singapore currently uses the HCDC System of 2012, and their Government has publicly expressed through their Customs Agency's website that they intend to move to the HCDC System of 2017 in 2018.

9. The Bill currently defines "Harmonized System", in subsection 153XD(1), to mean the HCDC System (as in force from time to time) that is established by or under the Convention. The policy intention underlying the Amended Agreement is to recognise Singapore's use of the HCDC System of 2012 for the purpose of the product-specific rules, and any later versions of the HCDC System Singapore may adopt (including the 2017 version and any further versions).

10. Accordingly, this amendment would omit the definition of "Harmonized System" under subsection 153XD(1) to be inserted by item 3 of the Bill, and substitute with a new definition.

11. The new definition would expressly recognise in the Customs Act the version of the HCDC System currently used by Singapore, and allow subsequent versions of that System to also be recognised. This is because Singapore publicly expressed through their Customs Agency's website that they intend to move to the HCDC System of 2017 in 2018.

Amendment (3) - Schedule 1, item 3, page 7 (lines 6 to 10)

12. This amendment is consequential to the amendments proposed by Amendment (4) below, and would omit new subsection 153XD(2) to be inserted by item 3 of the Bill. This provision enables regulations to be prescribed to set out how the regional value content of goods is to be calculated. This head of power is proposed to be incorporated into new substituted subsection 153XG(6); see paragraphs 18 and 19 below.

Amendment (4) - Schedule 1, item 3, page 9 (line 26) to page 12 (line 2)

13. This amendment would omit new section 153XG to be inserted into the Customs Act by the Bill, and substitute a new section 153XG.

14. The new substituted section 153XG would be substantially the same as section 153XG as proposed to be inserted by the Bill, but would incorporate, by reference, the new Annex 2 to the Amended Agreement, for the purpose of identifying the product-specific rules that apply to goods as set out in that Agreement, instead of prescribing for those same rules by way of a regulation.

15. To this end, new subsection 153XG(1) would provide that goods are Singaporean originating goods if:

(a)

they are classified to a Chapter, heading or subheading of the HCDC System that is specified in the first column of the table in Annex 2 to the Amended Agreement; and

(b)

they are produced entirely in the territory of Singapore, or entirely in the territory of Singapore and the territory of Australia, from non-originating materials only or from non-originating materials and originating materials; and

(c)

either:

i.

each requirement that is specified in the third column of that table to apply in relation to the goods is satisfied; or

ii.

without limiting subparagraph (i), if the regulations specify one or more alternative requirements that apply in relation to the goods-those alternative requirements are satisfied; and

(d)

either:

i.

the importer of the goods has, at the time the goods are imported, a certification of origin, or a copy of one, for the goods; or

ii.

Australia has waived the requirement for a certification of origin for the goods.

16. The incorporation of new Annex 2 to the Amended Agreement, by reference, does not change the intended operation of the product-specific rules as set out in that Annex. Rather, as that Agreement is relevantly defined in new subsection 153XD(1) to be inserted by the Bill to be the Agreement as amended from time to time, to facilitate for the revised Annex that would be contained in that Agreement when Singapore implements the HCDC System of 2017 to also be incorporated.

17. With consideration to the incorporation of new Annex 2 to the Amended Agreement, substituted subparagraph 153XG(1)(c)(ii) would enable regulations to be prescribed for other requirements that will need to be satisfied in order for goods produced in Singapore, or in Singapore and Australia, from non-originating materials in accordance with new Annex 2 of the Amended Agreement. For example, where non-originating materials are subject to purification, new Annex 2 sets out a rule for such a process to ensure that a minimum threshold must be met before the non-originating materials concerned are to be considered as originating goods. This provision is similar to similar provisions prescribed for the purposes of implementing other Free Trade Agreements.

18. In addition, as noted above in the notes for Amendment (3), new substituted subsection 153XG(6) would incorporate the head of power in subsection 153XD(2) such that, if it is a requirement in the third column of the table in new Annex 2 to the Amended Agreement that goods must have a regional value content of not less than a particular percentage worked out in a particular way:

(a)

the regional value content of the goods is to be worked out in accordance with the Agreement; or

(b)

if the regulations prescribe how to work out the regional value content of the goods-the regional value content of the goods is to be worked out in accordance with the regulations.

19. The incorporation of the head of power in new substituted subsection 153XG(6) is necessary to recognise that, for some goods set out in the table in new Annex 2, column 3 of that table sets out a requirement on how the regional value content is to be worked out. This amendment will not change the rule intended to apply, but instead allow for such a rule to be prescribed in the regulation.

20. Otherwise, as explained above, the new substituted section 153XG does not change or alter the intended operation of the previous section 153XG.

Amendment (5) - Schedule 1, item 3, page 12 (lines 12 and 13)

21. This amendment is consequential to the amendments proposed by Amendment (4), and would omit the words "the goods are required to have a regional value content of at least a particular percentage under a particular method", and substitute "a requirement that applies in relation to the goods is that the goods must have a regional value content of not less than a particular percentage worked out in a particular way".

22. This is a technical amendment to reflect the incorporation of new Annex 2 to the Amended Agreement proposed by Amendment (4) above. This amendment does not change the intended operation of subsection 153XH to be inserted by the Bill.