House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Justice and Customs, Senator the Honourable Christopher Martin Ellison)

Notes on clauses

Clause 1 - Short title

This clause provides for the Act to be cited as the Customs Amendment (Thailand-Australia Free Trade Agreement Implementation) Act 2004.

Clause 2 - Commencement

Subclause (1) provides that each provision of this Act specified in column 1 of the table in that subclause commences or is taken to have commenced on the day or at the time specified in column 2 of the table.

Item 1 of the table in this clause provides that sections 1 to 3 and anything in this Act not elsewhere covered commence on the day on which the Act receives the Royal Assent.

Item 2 of the table provides that Parts 1 and 2 of Schedule 1 will commence on the later of:

(a)

1 January 2005; and

(b)

the day on which the Thailand-Australia Free Trade Agreement (the Agreement), done at Canberra on 5 July 2004, comes into force for Australia.

However, Parts 1 and 2 do not commence at all if the event mentioned in paragraph (b) does not occur.

This item also provides that the Minister for Justice and Customs must announce by notice in the Gazette the day on which the Agreement comes into force for Australia.

Item 3 of the table provides that item 3 of Schedule 1 commences at the same time as the provision covered by table item 2. However, the provision(s) do not commence at all unless item 1 of Schedule 1 to the US Free Trade Agreement Implementation (Customs Tariff) Act 2004 commences before, or at the same time as, the provisions covered by table item 2.

Item 4 of the table provides that item 4 of Schedule 1 commences at the same time as the provision covered by table item 2. However, the provision does not commence at all if item 1 of Schedule 1 to the US Free Trade Agreement Implementation (Customs Tariff) Act 2004 commences before, or at the same time as, the provisions covered by table item 2.

Item 5 of the table provides that item 5 of Schedule 1 commences at the same time as item 1 of Schedule 1 to the US Free Trade Agreement Implementation (Customs Tariff) Act 2004 commences. However, the provision does not commence at all if item 1 of Schedule 1 to the US Free Trade Agreement Implementation (Customs Tariff) Act 2004 commences before, or at the same time as, the provisions covered by table item 2.

Item 6 of the table provides that item 6 of Schedule 1 commences at the same time as the provisions covered by table item 3.

Item 7 of the table provides that item 7 of Schedule 1 commences at the same time as the provisions covered by table item 4.

Item 8 of the table provides that item 8 of Schedule 1 commences at the same time as the provisions covered by table item 5.

The commencement provisions in table items 3 to 8 are explained in more detail with the amendments in Part 3 of Schedule 1 to this Bill.

Clause 3 - Schedule(s)

This clause is the formal enabling provision for the Schedule to the Bill, providing that each Act specified in a Schedule is amended in accordance with the applicable items of the Schedule. In this, Bill the Customs Act is being amended.

The clause also provides that the other items of the Schedules have effect according to their terms. This is a standard enabling clause for transitional, savings and application items in amending legislation.

Schedule 1 - Amendments

Part 1 - Thai originating goods

Customs Act 1901

Item 1 - Before Division 2 of Part VIII

This item amends the Customs Act 1901 (the Customs Act) by inserting new Division 1D into Part VIII. New Division 1D is headed Thai originating goods and sets out the rules for determining whether goods are Thai 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 Thailand-Australia Free Trade Agreement (the Agreement), in particular Chapter 4 of the Agreement.

New Division 1D contains six subdivisions which are set out below.

Subdivision A - Preliminary

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

Section 153Z - Simplified outline

New section 153Z sets out a simplified outline of each of the subdivisions B to F of new Division 1D.

New section 153ZA - Interpretation

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

Agreement which means the Thailand-Australia Free Trade Agreement done at Canberra on 5 July 2004, as amended from time to time. The Note to this definition indicates that in 2004, the text of the Agreement was accessible on the Internet through the web site of the Department of Foreign Affairs and Trade;

Australian originating goods which means goods that are Australian originating goods under a law of the Thailand that implements the Agreement. In limited circumstances, such goods are also Thai originating goods (see definition of originating materials);

Certificate of Origin which means a certificate that is in force and that complies with the requirements of Annex 4.2 of the Agreement. Annex 4.2 sets out the matters that are to be included in an application for a Certificate of Origin and in a Certificate itself;

continental shelf which has the same meaning as in the Seas and Submerged Lands Act 1973;

Convention which means the International Convention on the Harmonized Commodity Description and Coding System done at Brussels on 14 June 1983. The Note to this definition indicates that the text of the Convention set out in Australian Treaty Series 1988 No. 30 and that in 2004, the text of the Agreement was accessible on the Internet through the web site of the Department of Foreign Affairs and Trade;

customs value which, in relation to goods, has the meaning set out in section 159 of the Customs Act. Section 159 sets out the various methods for determining the customs value of goods;

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 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 97 chapters covering all goods, and each chapter is divided into headings, subheadings, and tariff classifications. Under the Harmonized System, the chapter, heading, and subheading numbers for any good are identical in any country using the HS. However, the final two digits of the tariff classification are not harmonised - each importing country individually assigns them.

Interpretation Rules which means the General Rules 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.

goods that are used in the production of other goods and that are Thai originating goods. In some circumstances, in order to determine whether goods that are imported into Australia are Thai 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 Subdivision C). 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 Thai originating goods, which means that in their own right, they satisfy the requirements of new Division 1D. Non-originating materials are goods that are not originating materials because they do not satisfy the requirements on Division 1D in their own right. For example, where pork sausages are made in Thailand from pork derived from pigs born and raised in Thailand, spices imported from Laos and rice imported from Vietnam, the pork would be originating materials and the spices and rice would be non-originating materials; or

b.

goods that are used in the production of other goods and that are Australian originating goods. If goods used in the production of other goods are Australian originating goods under a law of Thailand that implements the Agreement, they are also originating materials for the purposes of new Division 1D;

produce which means grow, raise, mine, harvest, fish, trap, hunt, manufacture, process, assemble, or disassemble. Producer and production have corresponding meanings;

tariff table which means the table in Schedule 1 to the Customs (Thailand-Australia Free Trade Agreement) Regulations 2004 (the TAFTA Regulations). The TAFTA Regulations are being made under the Customs Act and will incorporate in Schedule 1 the product specific rules relating to change in tariff classification, regional value content and other rules for the purpose of determining whether goods are Thai originating goods. The table in Schedule 1 to the TAFTA Regulations will incorporate Annex 4.1 of the Agreement;

territorial sea which has the same meaning as in the Seas and Submerged Lands Act 1973;

Thai originating goods which means goods that, under this Division (i.e. Division 1D) are Thai originating goods.

New subsection 153ZA(2) provides that the value of goods for the purposes of Division 1D 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 s.153ZD(3). 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.

New subsection 153ZA(3) provides that in specifying tariff classifications for the purposes of Division 1D, the regulations may refer to the Harmonized System. The product specific rules in Annex 4.1 of the Agreement refer to tariff classifications of the Harmonized System.

New subsection 153ZA(4) provides that subsection 4(3A) of the Customs Act does not apply for the purposes of Division 1D. 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 1D.

New subsection 153ZA(5) provides that for the purposes of Division 1D, the regulations may apply, adopt or incorporate any matter contained in any instrument or other writing in force or existing from time to time. This provision will override section 49A of the Acts Interpretation Act 1901 in order to enable to TAFTA Regulations to refer to the general accounting principles of Thailand for the purposes of the regional value content calculations.

Subdivision B - Wholly obtained goods of Thailand

Subdivision B sets out the rules in relation to goods that are wholly obtained in Thailand.

Section 153ZB - Wholly obtained goods of Thailand

New subsection 153ZB(1) provides that goods are Thai originating goods if they are:

c.

wholly obtained in Thailand; and

d.

the importer holds, at the time of importation of the goods, a Certificate of Origin, or a copy of one, for the goods.

New subsection 153ZB(2) provides that goods are wholly obtained in Thailand, if and only if, the goods are:

e.

minerals extracted in Thailand; or

f.

agricultural goods harvested, picked, or gathered in Thailand; or

g.

live animals born and raised in Thailand; or

h.

products obtained from live animals in Thailand (for example milk or eggs); or

i.

goods obtained directly from hunting, trapping, fishing, gathering or capturing carried out in Thailand; or

j.

fish, shellfish, plant or other marine life taken:

k.(i)

within the territorial sea of Thailand; or

l.(ii)

within any other maritime zone in which Thailand has sovereign rights under the law of Thailand and in accordance with UNCLOS; or

m.(iii)

from the high seas by ships flying the flag of Thailand; or

n.

goods obtained or produced exclusively from goods referred to in paragraph (f) on board factory ships flying the flag of Thailand; or

o.

goods taken from the seabed, or the subsoil beneath the seabed of the territorial sea of Thailand or of the continental shelf of Thailand:

p.(i)

by Thailand; or

q.(ii)

by a national of Thailand; or

r.(iii)

by a body corporate incorporated in Thailand; or

s.

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

t.

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

u.

goods produced entirely in the Thailand exclusively from goods referred to in paragraphs (a) to (j) or from their derivatives. For example, pork sausages that are made from pigs born and raised in Thailand and cereals and spices harvested in Thailand will be Thai originating goods.

Subdivision C - Goods produced entirely in Thailand or in Thailand and Australia

Subdivision C sets out the rule in relation to goods that are produced entirely in Thailand or in Thailand and Australia from originating materials, non-originating materials or both.

Section 153ZC - Simplified outline

New section 153ZC sets out a simplified outline of Subdivision C.

Section 153ZD - Goods produced entirely in Thailand or in Thailand and Australia

New section 153ZD sets out the general rules for determining whether goods that are produced entirely in Thailand or in Thailand and Australia from originating materials, non-originating materials or both are Thai originating goods.

New subsection 153ZD(1) provides that, subject to subsection (6), goods are Thai originating goods if:

v.

they are classified to a heading or subheading of the Harmonized System that is specified in column 1 or 2 of the tariff table; and

w.

they are produced entirely in Thailand, or entirely in Thailand and Australia, from originating materials or non-originating materials or both; and

x.

the requirement or requirements that are specified in column 4 of the tariff table and that apply to the goods are satisfied; and

y.

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

As referred to previously, the tariff table will be the table in Schedule 1 to the TAFTA Regulations which will incorporate the product specific rules relating to change in tariff classification, regional value content and other rules for the purpose of determining whether goods are Thai 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.

New subsection 153ZD(2) refers to the first of the requirements that may be specified in the tariff table. It provides that the regulations may make it a requirement (the tariff change requirement) that each non-originating material (if any) used to produce the goods must satisfy a particular change in tariff classification. The regulations may also set out when a non-originating material shall be taken to satisfy the change. Regulations made under this head of power would include provisions to give effect to the accumulation provisions contained in paragraph (b) of Article 402.1 of the Agreement and would apply where the non-originating materials that are used to directly produce the final good do not satisfy the change in tariff classification.

The concept of the change in tariff classification only applies to non-originating materials. Goods that have been sourced from outside Thailand or Australia and that are used in the production of other goods are non-originating materials. Goods sourced from within Thailand or Australia that have not fulfilled the requirements of Division 1D 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 Thailand, or Thailand and Australia, to justify the claim that the goods originate in Thailand.

For example, frozen pork (HS 0203) is derived from pigs born and raised in Thailand and combined with spices from Laos (HS 0907 - 0910) and rice from Vietnam (HS 1006) to make pork sausages (HS 1601). The applicable tariff change for pork sausages is "a change to heading 16.01 to 16.05 from any other chapter, except from Chapter 2". As the rice is classified to Chapter 10 and the spices to Chapter 9, these non-originating materials meet the tariff change requirement (the frozen pork is the produce of Thailand and is therefore an originating material and is not required to change its classification).

In order to determine which is the applicable change in tariff classification, 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.

New subsection 153ZD(3) provides that the tariff change requirement is also taken to be satisfied if the total value of all the non-originating materials that do not satisfy the particular change in tariff classification and that are used to produce the goods does not exceed 10% of the customs value of the goods.

The provisions of subsection 153ZD(3) incorporate the de minimis provisions that are set out in Article 402.3 of the Agreement. Therefore, even if all the non-originating goods used to produce a final good do not satisfy a particular tariff change requirement, the final goods may still be Thai originating goods because the tariff change requirement will be taken to be satisfied.

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

New subsection 153ZD(4) provides that the regulations may make it a requirement that the goods must satisfy a regional value requirement and that the regulations may prescribe different regional value requirements for different kinds of goods.

In respect of goods in the tariff table, approximately 15% of these goods may also be required to satisfy a regional value content requirement. The regional value content varies between 40% and 55%. The method of calculation to determine the regional value content will be included in the TAFTA Regulations.

New subsection 153ZD(5) provides that subsections (2) and (4) do not limit the requirements the regulations may specify under paragraph (1)(c). It is proposed that the regulations will include other requirements in addition to change in tariff classification and regional value content requirements. For example, in addition to meeting a tariff change requirement and a regional value content requirement, clothing classified in the headings of Chapters 61 and 62 must be cut (or knit to shape) and sewn (or otherwise assembled) in Thailand or Australia.

New subsection 153ZD(6) sets out a specific rule for when goods will not be Thai originating goods. It provides that goods are not Thai originating goods under the section if:

z.

they are classified to any of the Chapters 1 to 40 of the Harmonized System;

aa.

they are produced merely as a result of non-originating materials being diluted with water and another substance; and

bb.

that dilution does not materially alter the characteristics of the non-originating materials.

Therefore, even if the dilution of the non-originating materials with water to produce another good satisfies the change in tariff classification requirement, but the dilution does not materially alter the characteristics of the non-originating materials, the final good will not be a Thai originating good.

Section 153ZE - Goods that are chemicals, plastics or rubber

New section 153ZE sets outs a special rule that will apply only in respect of goods that are classified to Chapters 28 to 40 of the Harmonized System, being chemicals, plastics and rubber. This section provides that these goods are Thai originating goods if:

cc.

they are produced entirely in Thailand or entirely in Thailand and Australia; and

dd.

they are classified to any of Chapters 28 to 40 of the Harmonized System; and

ee.

they are the product of a chemical reaction (within the meaning of the TAFTA Regulations); and

ff.

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

If goods satisfy all of the requirements of this section, they will be Thai originating goods and will not have to satisfy the requirements of section 153ZD.

Subdivision D - Other Thai originating goods

Subdivision D sets out a specific rule that applies to goods that are standard accessories, spare parts or tools.

Section 153ZF - Standard accessories, spare parts and tools

New section 153ZD provides that if goods (the underlying goods) are imported into Australia with standard accessories, standard spare parts or standard tools, then the accessories, spare parts or tools are Thai originating goods if:

a.

the underlying goods are Thai originating goods; and

b.

the accessories, spare parts or tools are not invoiced separately from the underlying goods; and

c.

the quantities and value of the accessories, spare parts or tools are the usual quantities and value in relation to the underlying goods.

However, subsection 153ZF(2) provides that the accessories, spare parts or tools are not Thai originating goods under this section if:

a.

the underlying goods must satisfy a regional value content requirement under section 153ZD to be Thai originating goods; and

b.

the accessories, spare parts or tools are imported with the underlying goods solely for the purpose of artificially raising the regional value content of the underlying goods.

Subsection 153ZF(3) provides that if:

a.

the underlying goods must satisfy a regional value content requirement under section 153ZD; and

b.

the accessories, spare parts or tools are not imported with the underlying goods solely for the purpose of artificially raising the regional value content of the underlying goods

the regulations must require the value of the accessories, spare parts or tools be taken into account for the purposes of that requirement. Without this provision, the value of accessories, spare parts and tools would not normally form part of the value of materials that are used in the production of the underlying goods.

Subsection 153ZF(2) and paragraph 153ZF(3)(b) are required to ensure that accessories, spare parts or tools that are of a kind normally provided with the underlying goods are not simply added to ensure one or both of the goods are originating by artificially raising the regional value content of the underlying goods.

For example, trousers are made in Thailand, and are to be sold to a buyer in Australia for $100 each. Amongst other requirements, trousers must have a regional value content of 55% to be originating goods under TAFTA. Because these trousers include Italian fabric worth $48 per pair, the regional value content would be worked out as follows:

($100 - $48 = 52%) / $100


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

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, is classified to subheading 420330 and is sold to the producer for $12. It is made from a pre-made belt without a buckle imported from Vietnam. 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 153ZF(2) and paragraph 153ZF(3)(b), the addition of the belt to the trousers would mean that the regional value content of the trousers would be worked out as follows:

[$112 (trousers + belt) - $50 (imported fabric + belt without buckle) = 55.35%] / $112


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 originating. Subsection 153ZF(2) and paragraph 153ZF(3)(b) are required to deter traders from resorting to machinations of this kind.

The value of the accessories, spare parts and tools for the purposes of this section is to be worked out in accordance with the method that will be included in the TAFTA Regulations

Subdivision E - Packaging materials and containers

Subdivision E sets out a specific rule that applies to goods that are packaging materials and containers.

Section 153ZG - Packaging materials and containers

New subsection 153ZG(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 Interpretation Rules;

then the packaging material or container is to be disregarded for the purposes of this Division except for the purposes of the exception detailed below. For example, this means that the packaging material or container does not need to satisfy the change in tariff classification test that might apply to the goods under the TAFTA Regulations.

However, similar to section 153ZE, subsection 153ZG(2) provides that the exception is that in working out if the goods are Thai originating goods, if the goods must satisfy a regional value content requirement under section 153ZD, the regulations must require the value of the packaging materials or container to be taken into account for the purposes of that requirement. 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.

The value of packaging materials and container for the purposes of this section is to be worked out in accordance with the method that will be included in the TAFTA Regulations.

Subdivision F - Consignment

Subdivision F sets out the consignment requirements that must be satisfied in transporting Thai originating goods to Australia.

Section 153ZH - Consignment

New subsection 153ZH(1) provides that goods are not Thai originating goods under Division 1D if:

a.

they are transported through a country or place other than Thailand or Australia; and

b.

they undergo any process of production or other operation in that country or place, (other than any operation to preserve them in good condition or any operation that is necessary for them to be transported to Australia) or they are traded or used in that country or place.

For example, if goods are produced in Thailand and are shipped to a third country and undergo further processing in that country, they are not Thai originating goods. This would be the case even if the goods were sent to a third country for storage to await sale as part of a centralised distribution operation, as the storage in these circumstances would not be necessary to preserve them in good condition or to transport them to Australia.

Subsection 153ZH(2) provides that this section applies despite any other provisions on this Division. This means that even if goods are Thai originating goods in accordance with any other provisions of Division 1D, if they do not comply with section 153ZH(1), they will not be Thai originating goods.

Part 2 - Verification powers

Customs Act 1901

Item 2 - Before Division 5 of Part VI

This item amends the Customs Act 1901 (the Customs Act) by inserting new Division 4C into Part VI. New Division 4C is headed Exportation of goods to Thailand and will impose obligations on people who export goods to Thailand and who wish to obtain preferential treatment in respect of the goods in Thailand, and on people who produce such goods.

New section 126AF - Definitions

New section 126AF inserts two new definitions for the purposes of new Division 4C as follows:

producer which has the same meaning as in new Division 1D of Part VIII of the Customs Act; and

Thai customs official which means a person representing the customs administration of Thailand.

New section 126AG - Record keeping obligations

New section 126AG inserts record keeping obligations that will apply only in respect of goods that are exported from Australia to Thailand and that are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Thailand. While there are record keeping obligations in the Customs Act at present, these are not broad enough to cover the record keeping obligations under TAFTA.

New subsection 126AG(1) provides that the regulations may prescribe record keeping obligations that apply in relation to goods that:

c.

are exported to Thailand; and

d.

are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Thailand.

It is intended that the method of keeping the documents, such as the length of time for which they must kept and the manner in which they must be kept, will be similar to current record keeping obligations. However, the type of documents that will be required to be kept will be much broader than current requirements. The requirements will extend to all records relating to the origin of the goods for which preferential tariff treatment is claimed in Thailand and may include, amongst other things, records associated with the classification, origin or value of the materials used to produce the goods.

New subsection 126AG(2) provides that the obligations under subsection (1) may be imposed on a producer or exporter of goods.

New section 126AH - Power to require records

New subsection 126AH(1) provides that an authorised officer (which is defined in section 4 of the Customs Act) may require a person who is subject to record keeping obligations under regulations made for the purposes of section 126AG to produce to the officer such of those records as the officer requires.

Under Article 412 of the Agreement, Australia or Thailand may take action to verify the eligibility of goods for preferential treatment, including requesting the supply of records relating to the production or export of the goods. New section 126AH gives effect to this Article in respect of goods exported to Thailand and that are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Thailand.

New subsection 126AH(2) provides that an authorised officer may disclose any records so produced to a Thai customs official for the purpose of verifying a claim for a preferential tariff in Thailand. Section 16 of the Customs Administration Act 1985 prohibits the disclosure of protected information except:

(i)

as authorised by section 16; or

(ii)

as required or authorised by any other law; or

(iii)

in the course of performing the person's duties.

Records obtained by an authorised officer under new section 126AG would be protected information within the meaning of section 16 and therefore cannot be disclosed to Thailand except as allowed by section 16. By including an express provision in the Customs Act allowing for this information to be disclosed to a Thai customs official, the disclosure is required or authorised by any other law for the purposes of paragraph 16(2)(d) of the Customs Administration Act 1985.

Under existing section 243SB of the Customs Act, it shall be an offence to fail to produce a record in accordance with new section 126AH. This offence is not a strict liability offence.

New section 126AI - Power to ask questions

New subsection 126AI(1) provides that an authorised officer (which is defined in section 4 of the Customs Act) may require a person who is an exporter or producer of goods that:

(a)

are exported to Thailand; and

(b)

are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Thailand;

to answer questions in order to verify the origin of the goods.

It is considered that the power to ask questions in the circumstances set out in this section is a necessary adjunct to the power to require records in new section 126AH.

Subsection 126AI(2) provides that an authorised officer may disclose any answers to such questions to a Thai customs official for the purpose of verifying a claim for a preferential tariff in Thailand. Section 16 of the Customs Administration Act 1985 prohibits the disclosure of protected information except:

(i)

as authorised by section 16; or

(ii)

as required or authorised by any other law; or

(iii)

in the course of performing the person's duties.

Answers to questions obtained by an authorised officer under new section 126AI would be protected information within the meaning of section 16 and therefore cannot not be disclosed to Thailand except as allowed by section 16. By including an express provision in the Customs Act allowing for this information to be disclosed to a Thai customs official, the disclosure is required or authorised by any other law for the purposes of paragraph 16(2)(d) of the Customs Administration Act 1985.

Under existing section 243SA of the Customs Act, it shall be an offence to fail to answer a question accordance with new section 126AD. This offence is not a strict liability offence.

Part 3 - Other amendments

Customs Act 1901

Item 3 - Subsection 4(3C)

This item amends subsection 4(3C) of the Customs Act to insert a reference to the third column of the table in Schedule 5 or 6 of the Customs Tariff Act 1995 (the Tariff Act).

Subsection 4(3C) is a technical provision that provides that if the word "Free" is set out in section 16 or 18 of the Tariff Act or in the third column of Schedule 3 or 4 to that Act, that word is taken to be a rate of duty for the purposes of the Customs Act or any other law of the Commonwealth.

The word "Free" will also appear in Schedules 5 and 6 to the Tariff Act. Schedule 5 to the Tariff Act is to be inserted by the US Free Trade Agreement Implementation (Customs Tariff) Act 2004 (the US Tariff Act) and will introduce the phasing rates of customs duty for certain goods and rates of customs duty for alcohol, tobacco and petroleum products for the purposes of the Australia-US Free Trade Agreement (the US Agreement). Schedule 6 to the Tariff Act is to be inserted by the Customs Tariff (Thailand-Australia Free Trade Agreement Implementation) Act 2004 (the Thai Tariff Act) and will introduce the phasing rates of customs duty for certain goods and rates of customs duty for alcohol, tobacco and petroleum products for the purposes of the Thailand-Australia Free Trade Agreement (the Thai Agreement). Some phasing rates in Schedules 5 and 6 may end up as a "Free" rate of duty.

This item will commence at the same time as Parts 1 and 2 of Schedule to this Bill and assumes that the US Tariff Act commences before, or at the same time as, the Thai Tariff Act.

Item 4 - Subsection 4(3C)

This item amends subsection 4(3C) of the Customs Act to insert a reference to the third column of the table in Schedule 6 of the Tariff Act, which is the table to be inserted by the Thai Tariff Act.

This item will also commence at the same time as Parts 1 and 2 of Schedule to this Bill but assumes that the US Tariff Act has not commenced before, or at the same time as, the Thai Tariff Act as it is only inserting a reference to Schedule 6. This item is merely a contingency to accommodate this fact and will not commence at all if the US Tariff Act commences before, or at the same time as, the Thai Tariff Act.

Item 5 - Subsection 4(3C)

This item amends subsection 4(3C) of the Customs Act to insert a reference to the third column of the table in Schedule 5 of the Tariff Act, which is the table to be inserted by the US Tariff Act.

This item will commence at the same time as item 1 of Schedule 1 to the US Tariff Act, assuming that the US Tariff Act has not commenced before, or at the same time as, the Thai Tariff Act. This item is merely a contingency to accommodate this fact and will not commence at all if the US Tariff Act commences before, or at the same time as, the Thai Tariff Act.

Item 6 - Subsection 4(3D)

This item amends subsection 4(3D) of the Customs Act to insert a reference to the third column of the table in Schedule 5 or 6 of the Tariff Act.

Subsection 4(3D) is also a technical provision which provides that any words and figures set out in third column on Schedule 3 or 4 to the Tariff Act that enable the duty to be worked out in respect of goods are taken to be a rate of duty for the purposes of this Act or any other law of the Commonwealth. Words and figures will also appear in the third column of Schedules 5 and 6 to the Tariff Act.

This item will commence at the same time as Parts 1 and 2 of Schedule to this Bill and assumes that the US Tariff Act commences before, or at the same time as, the Thai Tariff Act.

Item 7 - Subsection 4(3D)

This item amends subsection 4(3D) of the Customs Act to insert a reference to the third column of the table in Schedule 6 of the Tariff Act.

This item will also commence at the same time as Parts 1 and 2 of Schedule to this Bill but assumes that the US Tariff Act has not commenced before, or at the same time as, the Thai Tariff Act as it is only inserting a reference to Schedule 6. This item is merely a contingency to accommodate this fact and will not commence at all if the US Tariff Act commences before, or at the same time as, the Thai Tariff Act.

Item 8 - Subsection 4(3D)

This item amends subsection 4(3D) of the Customs Act to insert a reference to the third column of the table in Schedule 5 of the Tariff Act.

This item will commence at the same time as item 1 of Schedule 1 to the US Tariff Act, assuming that the US Tariff Act has not commenced before, or at the same time as, the Thai Tariff Act. This item is merely a contingency to accommodate this fact and will not commence at all if the US Tariff Act commences before, or at the same time as, the Thai Tariff Act.