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

1. This clause provides for the Bill, when enacted, to be cited as the Customs Amendment (2007 Harmonized System Changes) Act 2006.

Clause 2 Commencement

1. Clause 2 provides that this Act commences on the day on which it receives the Royal Assent. This will mean that the new power to revoke current TCOs and make new TCOs can be exercised as soon as the Act receives the Royal Assent.

Clause 3 Schedule(s)

2. 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.

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

SCHEDULE 1 - Amendments

Customs Act 1901

Item 1 After subsection 269SD(2)

4. This item amends the Customs Act 1901 (the Customs Act) by inserting new subsection 269SD(2A).

5. New subsection 269SD(2A) provides that if, because of an amendment of a Customs Tariff, the CEO is satisfied that the tariff classification that is stated in a TCO to apply to goods the subject of the TCO will not apply to those goods from a particular day, the CEO may:

5.1. make an order revoking the TCO with effect from that day; and

5.2. make a new TCO in respect of the goods with effect from that day.

6. As stated previously, these new powers are required to revoke approximately 700 TCOs that will be affected by amendments to the Customs Tariff Act 1995 (the Customs Tariff) by the Customs Tariff Amendment (2007 Harmonized System Changes) Bill 2006 and replace them with approximately 1200 new TCOs.

7. The amendments to the Customs Tariff by the Customs Tariff Amendment (2007 Harmonized System Changes) Bill 2006 will implement changes resulting from the third review of the Harmonized Commodity Description and Coding System, commonly referred to as the Harmonized System (HS). The HS forms the basis of the Customs Tariff.

8. The HS provides a hierarchical system of headings and subheadings in the form of a numerical classification based on six digits and set out in Chapters to uniquely identify all traded goods and commodities. The Customs Tariff is an eight-digit classification, with the six digit international classification supplemented by two digits for domestic tariff purposes.

9. The HS has been developed and maintained by the World Customs Organization and is subject to periodic review. The third review has focused on deleting those headings and subheadings where there are low levels of international trade, amending the system to reflect changes in industry practices and technological developments and providing new subheadings, to allow signatory parties to separately identify new products such as certain narcotic substances. As a signatory to the International Convention on the Harmonized Commodity Description and Coding System, Australia and other signatory countries are required to implement the changes arising from the present review, from 1 January 2007.

10. As a result of the third review, there are approximately 600 changes at the six-digit level of the HS which translates to some 1200 changes to the Customs Tariff.

11. TCOs are written orders made by the Chief Executive Officer of Customs (the CEO) under the Customs Act that grant a "Free" rate of customs duty on imported goods that are subject to the order. Under section 269P of the Customs Act, a TCO must contain a description of the goods the subject of the order, including a reference to the Customs tariff classification that applies to the goods.

12. As a result of the changes to the Customs Tariff from the third review of the HS outlined above, the tariff classifications in approximately 700 TCOs will no longer be correct. Therefore, it will be necessary to repeal these TCOs and make new TCOS that include the correct Customs tariff classification that applies to the goods the subject of the order.

13. At present, the CEO can only revoke a TCO, and make a replacement TCO, as a result of a tariff classification change after the tariff classification change has taken effect. This means that the CEO could only exercise this power after 1 January 2007. Therefore, in order to ensure the seamless application of TCOs to goods before and after 1 January 2007, and to avoid any uncertainty as to the application of TCOs to goods, it is proposed to amend the Customs Act to give the CEO the power to revoke a TCO, and make a replacement TCO, as a result of a tariff classification change prior to the tariff classification change taking effect. Current TCOs would be revoked with effect from 1 January 2007 and the new TCOs would also take effect from that day.

14. Due to the changes to subheadings of the Customs Tariff, and in particular the creation of new subheadings to separately identify products, approximately 1200 new TCOs will be required to replace the 700 current TCOs that will need to be revoked.

Item 2 Subsection 269SE(2)

15. This item amends the Customs Act by inserting a reference to new subsection 269SD(2A) into subsection 269SE(2).

16. Section 269SE sets out notification requirements for various decisions related to TCOs. By including a reference to new subsection 269SD(2A) in subsection 269SE(2), the CEO will be required inform all interested parties, by notice published in the Gazette, of the decision to make orders under new subsection 269SD(2A).

Item 3 Paragraph 273GA(1)(s)

17. This item amends the Customs Act by inserting a reference to new subsection 269SD(2A) into paragraph 273GA(1)(s).

18. Subsection 273GA(1) sets out those decisions under the Customs Act that are subject to review by the Administrative Appeals Tribunal (the AAT). By including a reference to new subsection 269SD(2A) in paragraph 273GA(1)(s), the jurisdiction of the AAT will extend to the decisions of the CEO under new subsection 269SD(2A).