House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Home Affairs, the Honourable Jason Clare MP)

NOTES ON CLAUSES

Clause 1 - Short title

1.This clause provides for the Bill, when enacted, to be cited as the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Act 2012.

Clause 2 - Commencement

2.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. This subclause also provides that any other statement in column 2 of the table has effect according to its terms.

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

4.Item 2 of the table provides that Schedule 1 either commences on 1 January 2013 or on the day on which the Malaysia-Australia Free Trade Agreement (the Agreement) done at Kuala Lumpur on 22 May 2012 comes into force for Australia, whichever is later. However, Parts 1 and 2 do not commence at all if the event mentioned in paragraph (b) does not occur.

5.Item 3 of the table provides that Item 1 of Schedule 2 commences on the day this Act receives the Royal Assent.

6.Item 4 provides items 2 to 5 of Schedule 2 commence immediately after the time specified in the Customs Amendment ( New Zealand Rules of Origin ) Act 2012 for the commencement of Schedule 1 to that Act.

7.Subclause (2) provides that column 3 of the table contains additional information that is not part of the Act.

Clause 3 - Schedule(s)

8.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.

9.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 - Main Amendments

Part 1 - Malaysian originating goods

Customs Act 1901

Item 1 After Division 1G of Part VIII

10.This item amends the Customs Act 1901 (the Customs Act) by inserting new Division 1H into Part VIII. New Division 1H is titled Malaysian originating goods and sets out the rules for determining whether goods are Malaysian 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 Malaysia-Australia Free Trade Agreement (the Agreement), in particular Chapter 3 of the Agreement.

Subdivision A - Preliminary

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

Section 153ZLA Simplified outline

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

Section 153ZLB Interpretation

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

Agreement which means the Malaysia-Australia Free Trade Agreement done at Kuala Lumpur on 22 May 2012, as amended from time to time. The Note to this definition indicates that in 2012, 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 3.1 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;

Australian originating goods which means goods that are Australian originating goods under a law of Malaysia that implements the Agreement;

Certificate of Origin which means a certificate that is in force and that complies with the requirements of Articles 3.15 and 3.16, and Rule 7 of the Annex to Chapter 3, of the Agreement;

For example, item 3 of Article 3.15 of the Agreement provides that a Certificate of Origin will only remain in force for one year after the date on which it was issued. After this date a Certificate of Origin will not be considered to be 'in force.'

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 2012, the text of the Convention 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;

Declaration of origin which means a declaration that is in force and that complies with the requirements of Article 3.15, and Rule 7 of the Annex to Chapter 3, of the Agreement;

For example, item 3 Article 3.15 of the Agreement provides that a Declaration of Origin will only remain in force for one year after the date on which it was issued. After this date a Declaration of Origin will not be considered to be 'in force. '

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 97 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;

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;

Juridical person which have the meaning given by Article 1.2 of the Agreement.

Article 1.2 defines juridical person as any entity duly constituted or otherwise organised under applicable law, whether for profit or otherwise, and whether privately-owned or government-owned, including any corporation, trust, partnership, joint venture, sole proprietorship or association

Malaysian originating goods which means goods that, under this Division, are Malaysian originating goods;

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

originating materials which means;

a.

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

In some circumstances, in order to determine whether goods that are imported into Australia are Malaysian 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 Malaysian originating goods, which means that in their own right, they satisfy the requirements of new Division 1H. Non-originating materials are goods that are not originating materials because they do not satisfy the requirements of Division 1H in their own right. For example, where frozen crumbed fish fillets are made in Malaysia from fish caught in Malaysia, coated with herbs and spices imported from Thailand, the fish would be originating materials and the herbs and spices would be non-originating materials.

b.

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

If goods used in the production of other goods are Australian originating goods under a law of Malaysia that implements the Agreement, they are also originating materials for the purposes of new Division 1H; or

c.

indirect materials.

person of Malaysia which means a natural person of a Party within the meaning insofar as it relates to Malaysia, of Article 1.2 of the Agreement or a juridical person of Malaysia;

planted which has the meaning given by Article 3.1 of the Agreement, which is the planting, cultivating and harvesting of plantation crops and its related products;

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

territory of Australia which means territory within the meaning, insofar as it relates to Australia, of Article 1.2 of the Agreement. In Article 1.2, territory in relation to Australia includes Australia's territorial sea, contiguous zone and the exclusive economic zone and the continental shelf but does not include Australia's external territories except Norfolk Island, Christmas Island, Cocos (Keeling) Islands, Ashmore and Cartier Islands, Heard Island and McDonald Island and the Coral Sea Islands.

territory of Malaysia which means territory within the meaning, insofar as it relates to Malaysia, of Article 1.2 of the Agreement. In Article 1.2, territory in relation to Malaysia includes Malaysia's land territory, internal waters and territorial sea and any maritime area situated beyond the territorial sea which has been or might in future be designated under its domestic law, in accordance with international law, as an area within which Malaysia may exercise sovereign rights or jurisdiction with regard to the sea, seabed, the subsoil and the natural resources

14.New subsection 153ZLB(2) provides that the regional value content of goods for the purposes of Division 1H 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 153ZLB(3) provides that the value of goods for the purposes of Division 1H 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.153ZLE(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 153ZLB(4) provides that in prescribing tariff classifications for the purposes of Division 1H, 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 153ZLB(5) provides that subsection 4(3A) of the Customs Act does not apply for the purposes of Division 1H. 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 1H.

18.New subsection 153ZLB(6) provides that despite subsection 14(2) of the Legislative Instruments Act 2003 , regulations made for the purposes of Division 1H may apply, adopt or incorporate, with or without modification, any matter contained in an instrument or other writing as in force or existing from time to time.

19.New subsection 153ZLB(6) is included to avoid any criticism on the basis of an inappropriate delegation of legislative power in the situation where an instrument or other writing is applied, adopted or incorporated.

Subdivision B-Goods wholly obtained or produced in Malaysia or in Malaysia and Australia

20.Subdivision B sets out the rules in relation to goods that are wholly obtained or produced in Malaysia or in Malaysia and Australia.

Section 153ZLC Goods wholly obtained or produced in Malaysia or in Malaysia and Australia

21.New subsection 153ZLC(1) provides that goods are Malaysian originating goods:

a)

if they are wholly obtained or produced in Malaysia or in Malaysia and Australia; and

b.

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

22.New subsection 153ZLC(2) provides that goods are wholly obtained or produced in Malaysia or in Malaysia and Australia if, and only if, the goods are:

a.

minerals, or other naturally occurring substances, extracted or taken in the territory of Malaysia; or

b.

plants formed, naturally grown or planted in the territory of Malaysia or in the territory of Malaysia and the territory of Australia, or products obtained in the territory of Malaysia from such plants; or

c.

live animals born and raised in the territory of Malaysia or in the territory of Malaysia and the territory of Australia; or

d.

goods obtained from live animals in the territory of Malaysia; or

e.

goods obtained directly from hunting, trapping, fishing, gathering, capturing or aquaculture conducted in the territory of Malaysia; or

f.

fish, shellfish or plant or other marine life taken from the high seas by ships that are registered in Malaysia and are flying the flag of Malaysia; or

g.

goods obtained or produced from goods referred to in paragraph (f) on board factory ships that are registered in Malaysia and are flying the flag of Malaysia; or

h.

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

i.

the exclusive economic zone of Malaysia; and

ii.

the continental shelf of Malaysia; and

iii.

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 the territory of Malaysia and that is fit only for the recovery of raw materials; or

j.

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

k.

goods obtained or produced entirely in the territory of Malaysia, or in the territory of Malaysia and Australia, 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 Malaysia and cereals and spices harvested in both Australia and Malaysia will be Malaysian originating goods.

Subdivision C - Goods produced in Malaysia, or in Malaysia and Australia, from originating materials

23.Subdivision C sets out the rule in relation to goods that are produced entirely in the territory of Malaysia or entirely in the territory of Malaysia and the territory of Australia from originating materials only. New section 153ZLD provides such goods are Malaysia originating goods if the importer of the goods has, at the time the goods are imported, a Certificate of Origin or a Declaration of Origin, or a copy of one, for the goods.

Subdivision D - Goods produced in Malaysia, or in Malaysia and Australia, from non-originating materials

24.Subdivision D sets out the rules for determining whether goods that are produced entirely in Malaysia, or entirely in Malaysia and Australia, from non-originating materials only, or from non-originating materials and originating materials are Malaysian originating goods.

25.New subsection 153ZLE(1) provides that goods are Malaysian originating goods if:

a.

they are classified to a heading or subheading of the Harmonized System specified in column 1 of the table in Schedule 1 to the Customs ( Malaysian Rules of Origin ) Regulation 2012 (the Malaysian Regulations); and

b.

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

c.

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

d.

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

e.

The table in Schedule 1 to the Malaysian 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 of the Agreement for the purpose of determining whether goods are Malaysian originating goods. Column 1 of this table will set out the tariff classifications, column 2 will set out the description of the goods and column 3 will set out the product specific rules.

26.New subsection 153ZLE(2) refers to the first of the requirements that may be prescribed by Schedule 1 to the Malaysian Regulations. It provides that the regulations may prescribe that each non-originating material used in the production of the goods is required to satisfy a prescribed change in tariff classification.

27.New subsection 153ZLE(3) provides that the regulations may also prescribe when a non-originating material used 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 to give effect to the cumulation provision contained in Article 3.4 of the Agreement, and would apply where the non-originating materials that are used in the production of the good do not satisfy the change in tariff classification.

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

29.For example, frozen fish fillets (HS 0304) are produced from fish caught in Malaysia and combined with herbs and spices from Vietnam (HS 0907 - 0910) to make crumbed fish fillets (HS 1604). The applicable tariff change for crumbed fish is "a change to heading 1604 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 produce of Malaysia and is therefore an originating material and is not required to satisfy the tariff change).

30.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.

31.New subsection 153ZLE(4) 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 of the goods does not exceed 10% of the customs value of the goods.

32.The provisions of subsection 153ZLE(5) incorporate the de minimis provisions that are set out in Article 3.5 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 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

33.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 Malaysian originating goods because the change in tariff classification will be taken to be satisfied.

34.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 Malaysian Regulations.

35.New subsection 153ZLE(6) provides that the regulations may prescribe that the goods are required to have a regional value content of at least a prescribed percentage. The method of calculation to determine the regional value content will be included in the Malaysian Regulations.

36.New subsection 153ZLE(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, tools or instructional or other information materials 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 materials or non-originating materials, as the case may be, for the purposes of working out the regional value content of the goods.

37.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.

38.A 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 Malaysian Regulations.

39.New subsection 153ZLE(8) provides that for the purposes of subsection 153ZLE(7), section 153ZLH is to be disregarded in working out whether the accessories, spare parts, tools or instructional or other information materials are originating materials or non-originating materials.

40.New subsection 153ZLE(9) provides that subsections (2) and (6) do not limit 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.

41.For example, in addition to meeting a tariff change requirement, in respect of some textile articles classified in the headings of Chapter 63 of the Harmonized System where the starting material is fabric, the fabric must be greige fabric that is dyed or printed and finished in Malaysia or in Malaysia and Australia to render it directly usable.

Section 153ZLF Packaging materials and containers

42.New subsection 153ZLF(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 this Subdivision except where the exceptions below apply. For example, this means that the packaging material or container that is a non-originating material does not need to satisfy the change in tariff classification test that might apply to the goods under the Malaysian Regulations.

Exceptions

43.However, subsection 153ZLF(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 an originating material or a non-originating material, as the 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.

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

45.New subsection 153ZLF(3) provides that if the packaging material or container is not customary for the goods, the regulations must require the value of the packaging material or container to be taken into account as non-originating materials for the purposes of working out the regional value content of the goods.

Section 153ZLG Non-qualifying operations

46.New section 153ZLG provides that goods are not Malaysian originating goods under Subdivision D merely because of the following operations:

a.

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

b.

operations to facilitate the shipment or transportation of goods;

c.

disassembly of goods;

d.

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

e.

placing goods in bottles, cases or boxes or other simple packaging operations;

f.

changing of packaging or the breaking up or assembly of packages;

g.

the reclassification of goods without any physical change in the goods;

h.

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

47.Therefore, if any of these operations are the only operations that take place in Malaysia, or in Malaysia and Australia, 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 as roasted nuts from Vietnam are packaged and labeled in Malaysia, this will not confer the status of Malaysian originating goods upon the spices.

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

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

Section 153ZLH Goods that are accessories, spare parts, tools or instructional or other information materials

49.New section 153ZLH provides that goods are Malaysian 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 other goods are Malaysian originating goods; and

d.

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

e.

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

50.Therefore, under the provision, accessories, spare parts, tools or instructional or other information materials will be deemed to be Malaysian 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 subsection 153ZLE(7) in working out whether the accessories, spare parts, tools or instructional or other information materials are originating materials or non-originating materials (see subsection 153ZLE(8)).

Subdivision F - Consignment

51.Subdivision F sets out the consignment requirements that must be satisfied in transporting Malaysian originating goods to Australia, including in relation to production in other countries during transportation to Australia.

Section 153ZLI Consignment

52.New subsection 153ZLI(1) provides that goods are not Malaysian originating goods under Division 1H if:

a.

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

b.

they undergo subsequent production or any other operation in that country or place (other than unloading, reloading, storing, repacking, relabelling, exhibition or any operation that is necessary to preserve them in good condition or to transport them to Australia).

53.New subsection 153ZLI(2) provides that this section applies despite any other provision of Division 1H. This means that even if goods are Malaysian originating goods in accordance with any other provisions of Division 1H, if they do not comply with subsection 153ZLI(1), they will not be Malaysian originating goods.

Part 2-Verification powers

Customs Act 1901

Item 2 After Division 4E of Part VI

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

Section 126ALA Definitions

55.New section 126ALA inserts two new definitions for the purposes of new Division 4F, as follows:

Malaysian customs official which means a person representing the customs administration of Malaysia.

producer which means a person who grows, farms, plants, mines, harvests, farms, raises, breeds, extracts, gathers, collects, captures, fishes, traps, hunts, manufactures, processes or assembles goods.

Section 126ALB Record keeping obligations

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

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

a.

are exported to Malaysia; and

b.

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

58.It is intended that the method of keeping the documents, such as the length of time for which they must be 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 Malaysia and may include, amongst other things, records associated with the classification, origin or value of the materials used to produce the goods.

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

Section 126ALC Power to require records

60.New subsection 126ALC(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 126ALB to produce to the officer such of those records as the officer requires.

61.Under Article 3.20 of the Agreement, Australia or Malaysia 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 126ALC gives effect to this Article in respect of goods exported to Malaysia and that are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Malaysia.

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

a.

as authorised by section 16; or

b.

as required or authorised by any other law; or

c.

in the course of performing the person's duties.

63.Records obtained by an authorised officer under new section 126ALC would be protected information within the meaning of section 16 and therefore cannot be disclosed to Malaysia except as allowed by section 16. By including an express provision in the Customs Act allowing for this information to be disclosed to a Malaysian 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 .

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

Section 126ALD Power to ask questions

65.New subsection 126ALD(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 Malaysia; and

b.

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

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

66.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 126ALC.

67.Subsection 126ALD(2) provides that an authorised officer may disclose any answers to such questions to a Malaysian customs official for the purpose of verifying a claim for a preferential tariff in Malaysia.

68.Answers to questions obtained by an authorised officer under new section 126ALD would also be protected information within the meaning of section 16 of the Customs Administration Act 1985 and therefore cannot not be disclosed to Malaysia except as allowed by section 16. By including an express provision in the Customs Act allowing for this information to be disclosed to a Malaysian 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 .

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

Part 3 - Application provisions

Item 3 Application provisions

70.Item 3(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 3; and

b.

goods imported in Australia before that the commencement of item 3, where the time for working out the rate of import duty on the goods had not occurred before the commencement of item 3. This means that if goods are imported from Malaysia 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.

71.Item 3(2) provides that the amendment made by item 2 (the new verification powers) applies in relation to goods exported to Malaysia on or after the commencement of item 3 (whether the goods were produced before, on or after that commencement).

Schedule 2 - Other Amendments

Customs Act 1901 and Customs Amendment (New Zealand Rules of Origin) Act 2012

Items 1 to 5

72.The items contained in this Schedule correct misdescribed amendments contained in the Customs Amendment ( New Zealand Rules of Origin ) Act 2012 (the NZ Rules of Origin Act).

73.The misdescribed amendments are as a result of delayed passage of the NZ Rules of Origin Act.