House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Immigration and Border Protection the Honourable Scott Morrison MP)

Notes on clauses

Clause 1 - Short title

1. This clause provides for the Bill, when enacted, to be cited as the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Act 2014.

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 December 2014 or on the day on which the Agreement done at Korea on 8 April 2014 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. This item also provides that the Minister for Immigration and Border Protection must announce by notice in the Gazette the day on which the Agreement comes into force for Australia.

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

Clause 3 - Schedule(s)

7. 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.

8. 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

PART 1 - KOREAN ORIGINATING GOODS

Customs Act 1901

Item 1 After Division 1H of Part VIII

9. This item amends the Customs Act by inserting new Division 1J into Part VIII. New Division 1J is headed Korean originating goods and sets out the rules for determining whether goods are Korean originating goods and therefore eligible for a preferential rate of customs duty under the Customs Tariff Act. These rules are being inserted to give effect to the Agreement, in particular Chapter 3 of the Agreement.

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

Subdivision A - Preliminary

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

Section 153ZMA Simplified outline

12. New section 153ZMA sets out a simplified outline of each of the subdivisions B to F of new Division 1J.

New section 153ZMB Interpretation

13. New subsection 153ZMB(1) sets out new definitions for the purposes of Division 1J as follows:

Agreement the Korea-Australia Free Trade Agreement done at Korea on 8 April 2014, as amended from time to time. The Note to this definition indicates that in 2014, the text of the Agreement was accessible through the Australian Treaties Library on the AustLII Internet site.

aquaculture has the meaning given to it in Article 3.30 of the Agreement being 'the farming of aquatic organisms, including fish, molluscs, crustaceans, other aquatic invertebrates and aquatic plants, from seed stock 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 being goods that are Australian originating goods under a law of Korea that implements the Agreement.

Certificate of Origin a certificate that is in force and that complies with the requirements of paragraph 2 of Article 3.15 of the Agreement. Article 3.15 sets out the matters that are to be included in a Certificate of Origin.

Convention 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 2014, 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 valuation methods if this value cannot be ascertained.

enterprise has the meaning given by Article 1.4 of the Agreement meaning 'any entity constituted or organised under applicable law, whether or not for profit, and whether privately or governmentally owned or controlled, including any corporation, trust, partnership, sole proprietorship, joint venture, association, or similar organisation'.

Harmonized System 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 with each chapter being divided into headings, subheadings, and tariff classifications. Under the HS, the chapter, heading (4 digits), and subheading numbers (6 digits) for all good are adopted by countries using the HS. The Australian Customs Tariff uses an additional two digits for national classification to create 8 digit tariff items.

indirect materials 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 or operation of equipment or buildings 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 HS provided for by the Convention.

Korea means the Republic of Korea.

Korean originating goods which means goods that, under this Division, are Korean originating goods.

non-originating materials means goods that are not originating materials.

Non-originating materials are goods that are not originating materials because they do not satisfy the requirements of Division 1J in their own right. For example, where frozen crumbed fish fillets are made in Korea from fish caught in Korea, coated with herbs and spices imported from Thailand, the fish would be originating materials and the herbs and spices would be non-originating materials.

originating materials means Korean originating goods that are used in the production of other goods; or Australian originating goods that are used in the production of other goods; or indirect materials.

In some circumstances, in order to determine whether goods that are imported into Australia are Korean 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).

Originating materials are those goods that are used to produce other goods and that are also Korean originating goods, which means that in their own right they satisfy the requirements of new Division 1J; or are Australian originating goods under a law of Korea that implements the Agreement; or indirect materials as defined above.

person of Korea means a national of Korea as defined in Article 1.4 of the Agreement or an enterprise of Korea.

produce means grow, mine, harvest, fish, breed, raise, trap, hunt, manufacture, process, assemble or disassemble.

territorial sea has the same meaning as in the Seas and Submerged Lands

Act 1973. This definition is taken from Articles 3 and 4 of the United Nations Convention on Laws of the Sea which provides 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.

territory of Australia means territory within the meaning, insofar as it relates to Australia, of Article 1.4 of the Agreement. In Article 1.4, territory in relation to Australia includes Australia's territorial sea, contiguous zone, the exclusive economic zone and the continental shelf but does 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 Korea which means territory within the meaning, insofar as it relates to Korea, of Article 1.4 of the Agreement. In Article 1.4, territory in relation to Korea includes the land, maritime and air space under Korea's sovereignty, and those maritime areas, including the seabed and subsoil adjacent to and beyond the outer limit of the territorial seas over which it may exercise sovereign rights or jurisdiction in accordance with international law and its law.

vegetable goods has the same meaning as it has in the Agreement.

regional value content of the goods for the purposes of this Division is to be worked out in accordance with the regulations. The regulations may prescribe different regional value content rules for different kinds of goods.

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

New subsection 153ZMB(3) provides that the value of goods for the purposes of Division 1J 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 Article 3.6 of the Agreement. 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 153ZMB(4) provides that in specifying tariff classifications for the purposes of Division 1J the regulations may refer to the HS. The product specific rules in Annex 3-A of the Agreement refer to the tariff classifications of the HS.

New subsection 153ZMB(5) provides that subsection 4(3A) of the Customs Act does not apply for the purposes of Division 1J. 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 1J.

New subsection 153ZMB(6) provides that despite subsection 14(2) of the Legislative Instruments Act 2003, regulations made for the purposes of Division 1J may apply, adopt or incorporate, with or without modification, any matter contained in a instrument or other writing as in force or existing from time to time. New subsection 153ZMB(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. This provision will enable the Customs (Korean Rules of Origin) Regulations 2014 to refer to the general accounting principles of Korea for the purposes of the regional value content calculations.

Subdivision B - Goods wholly obtained in Korea or in Korea and Australia

14. Subdivision B sets out the rules in relation to goods that are wholly obtained in Korea or in Korea and Australia.

Section 153ZMC Goods wholly obtained in Korea or in Korea and Australia

15. New subsection 153ZMC(1) provides that goods are Korean originating goods if they are wholly obtained in Korea or in Korea and Australia; and either the importer of the goods has, at the time for working out the rate of import duty on the goods, a Certificate of Origin or a copy of one for the goods; or Australia has waived the requirement for a Certificate of Origin for the goods.

16. New subsection 153ZMC(2) provides that goods are wholly obtained in Korea or in Korea and Australia if, and only if, the goods are:

(a)

minerals, or other natural resources, taken or extracted from the territory of Korea; or

(b)

vegetable goods grown, harvested, picked or gathered in the territory of Korea or in the territory of Korea and the territory of Australia; or

(c)

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

(d)

goods obtained from live animals referred to paragraph (c) above; or

(e)

goods obtained from hunting, trapping, gathering, capturing, aquaculture or fishing conducted in the territory of Korea or the territorial sea of Korea; or

(f)

fish, shellfish or other marine life taken from the sea, seabed, ocean floor or subsoil outside the territorial sea of Korea by ships that are registered or recorded in Korea and are entitled to fly the flag of Korea; or

(g)

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

(h)

goods, other than fish, shellfish or other marine life, taken or extracted from the seabed, ocean floor or subsoil outside the territory of Korea by Korea, or a person of Korea, but only if Korea or the person of Korea, has the right to exploit that part of the seabed, ocean floor or subsoil; or

(i)

goods taken from outer space by Korea, or a person of Korea, and that are not processed in a country other than Korea or Australia; or

(j)

waste and scrap that has been derived either from production in the territory of Korea or from used goods that are collected in the territory of Korea and that are fit only for the recovery of raw materials; or

(k)

goods collected in the territory of Korea, that can no longer perform their original purpose and are fit only for the recovery of raw materials; or

(l)

goods produced entirely in the territory of Korea or entirely in the territory of Korea and the territory of Australia, exclusively from goods referred to in paragraphs (a) to (k) or from their derivatives.

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

17. Subdivision C sets out the rule in relation to goods that are produced entirely in the territory of Korea from originating materials only under section 153ZMD. Such goods are Korean originating goods where the importer of the goods has, at the time for working out the rate of import duty on the goods, a Certificate of Origin, or a copy of one, for the goods; or Australia has waived the requirement for a Certificate of Origin for the goods.

Subdivision D - Goods produced in Korea, or Korea and Australia, from

non-originating materials

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

19. New subsection 153ZME(1) provides that goods are Korean originating goods if:

(a)

they are classified to a heading or subheading of the HS specified in column 1 of the table in Schedule 1 to the Customs (Korean Rules of Origin) Regulations 2014 (the Korean Regulations); and

(b)

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

(c)

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

(d)

either:

(i)

The importer of the goods has, at the time for working out the rate of import duty of the goods, a Certificate of Origin, or a copy of one, for the goods; or

(ii)

Australia has waived the requirement for a Certificate of Origin for the goods.

20. The table in Schedule 1 to the Korean Regulations 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 Korean 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.

Change in tariff classification

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

22. New subsection 153ZME(3) provides that the regulations may also specify 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 accumulation provision contained in Article 3.5 of the Agreement, and 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.

23. The concept of the change in tariff classification only applies to non-originating materials. Goods that have been sourced from outside Korea or Australia and that are used in the production of other goods are non-originating materials. Goods sourced from within Korea or Australia that have not fulfilled the requirements of Division 1J and that are used in the production of other goods are also non-originating materials.

24. All non-originating materials used to produce other goods may not have the same classification under the HS 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 Korea, or Korea and Australia, to justify the claim that the goods originate in Korea.

25. For example, frozen fish fillets (HS 0304) are produced from fish caught in Korea and combined with herbs and spices from Thailand (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 Korea and is therefore an originating material and is not required to change its classification).

26. 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.

27. New subsection 153ZME(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.

28. The provisions of subsection 153ZME(4) incorporate the de minimis provisions that are set out in Article 3.6 of the Agreement. Therefore, 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 Korean originating goods because the change in tariff classification will be taken to be satisfied.

29. 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 Korean Regulations.

30. New subsection 153ZME(5) specifies that subsection (4) does not apply to goods that are classified to a headings or subheadings in the HS as follows:

(a)

headings 0301 to 0303 or 0305 to 0308 of Chapter 3;

(b)

headings 0701 to subheading 0710.10 or heading 0713 to 0714 of Chapter 7;

(c)

headings 0801 to 0810 or subheadings 0813.10 to 0813.40 of Chapter 8.

New subsection 153ZJE(6) provides that if the requirement in subsection (2) applies in relation to the goods and the goods are classified to any of Chapters 50 to 63 of the HS; and one or more of the non-originating materials used in the production of the goods do not satisfy the change in tariff classification; then the requirement referred to in subsection (2) is taken to be satisfied if the total weight of those 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.

Regional value content

New subsection 153ZME(7) provides that the regulations may also specify a regional value content of at least a prescribed percentage.

New subsection 153ZME(8) 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 or tools; and

(c)

the accessories, spare parts or tools 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; and

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

31. The Note to this section indicates that the value of the accessories, spare parts or tools is to be worked out in accordance with the regulations.

No limit on regulations

32. New subsection 153ZME(9) provides that subsections (2) and (7) 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.

33. For example, in addition to meeting a tariff change requirement, in respect of textile articles classified in the headings of Chapter 63 of the HS where the starting material is fabric, the fabric must be raw and fully finished in Korea or in Korea and Australia.

Section 153ZMF Packaging materials and containers

34. New subsection 153ZMF(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 HS provided for by the Convention then the packaging material or container is to be disregarded for the purposes of this Subdivision, except for the purposes of the exception detailed below.

35. 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 Korean Regulations.

Exception

36. However, subsection 153ZMF(2) provides one exception, which applies where the goods are required to have a regional value content of at least a particular percentage. 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 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.

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

Subdivision E - Non-qualifying operations

38. Subdivision E sets out those operations that will be non-qualifying operations, in relation to goods.

Section 153ZMG Non-qualifying operations

39. New subsection 153ZMG(1) provides that goods are not Korean originating good under Division 1J merely because of the following operations or processes:

(a)

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

(b)

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

(c)

washing, cleaning or removal of dust, oxide, oil, paint or other coverings;

(d)

sharpening or simple processes of grinding, crushing or cutting;

(e)

simple placing in bottles, cans, flasks, bags, cases or boxes, fixing on cards or boards or other simple packaging operations;

(f)

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

(g)

disassembly of goods;

(h)

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

(i)

any combination of operations referred to in paragraphs (a) to (h).

40. Therefore, if any of the above operations are the only operations that take place in Korea, or in Korea 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 spices from Japan are packaged into bottles in Korea, this will not confer the status of Korean originating goods on the spices.

Subdivision F - Other matters

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

Section 153ZMH Consignment

42. New subsection 153ZMH(1) provides that goods are not Korean originating goods under Division 1J if they are transported through a country other than Korea or Australia and either or both of the following apply:

(a)

they undergo subsequent production or any other operation in that country or place (other than unloading, reloading, storing, repacking, re-labelling, splitting up of loads for transport or any operation that is necessary to preserve them in good condition or to transport them to Australia);

(b)

they do not remain under customs control at all times while they are in that country.

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

Section 153ZMI Outward processing zones on the Korean Peninsula

44. New subsection 153ZMI specifies that goods are not prevented from being Korean originating goods under Division 1J if they have been exported from Korea and have undergone processing in an area designated as an outward processing zone under Annex 3-B to Chapter 3 of the Agreement and have then been re-imported into Korea.

PART 2 - VERIFICATION POWERS

Customs Act 1901

Item 2 After Division 4F of Part VI

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

New section 126AMA Definitions

46. New section 126AMA inserts three new definitions for the purposes of new Division 4G, as follows:

Korea means the Republic of Korea.

Korean customs official means a person representing the customs administration of Korea.

producer means a person who grows, mines, harvests, fishes, breeds, raises, traps, hunts, manufactures, processes, assembles or disassembles goods.

New section 126AMB Record keeping obligations

47. New section 126AMB inserts record keeping obligations that will apply only in respect of goods that are exported from Australia to Korea and that are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Korea. 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.

48. New subsection 126AMB(1) provides that the regulations may prescribe record keeping obligations that apply in relation to goods that are exported to Korea; and are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Korea.

49. 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 Korea and may include, amongst other things, records associated with the tariff classification of the goods and the origin or value of the materials used to produce the goods.

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

New section 126AMC Power to require records

51. New subsection 126AMC(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 126AMB to produce to the officer such of those records as the officer requires.

52. Under Article 3.23 of the Agreement, Australia or Korea 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 126AMC gives effect to this Article in respect of goods exported to Korea and that are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Korea.

53. New subsection 126AMC(2) provides that an authorised officer may disclose any records so produced to a Korean customs official for the purpose of verifying a claim for a preferential tariff in Korea. Section 16 of the Customs Administration Act 1985 (Customs Administration Act) 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.

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

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

New section 126AMD Power to ask questions

56. New subsection 126AMD(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 Korea; and

(b)

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

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

57. 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 126AMC.

58. Subsection 126AMD(2) provides that an authorised officer may disclose any answers to such questions to a Korean customs official for the purpose of verifying a claim for a preferential tariff in Korea.

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

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

PART 3 - APPLICATION PROVISIONS

Item 3 Application

61. 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 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 Korea 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.

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