House of Representatives

Explanatory Memorandum

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

Notes on Clauses

Preliminary

Clause 1 Short title

1. This clause provides for the Bill, when enacted, to be cited as the Customs Amendment (Singapore-Australia Free Trade Agreement Amendment Implementation) Act 2017.

Clause 2 Commencement

2. This clause sets out, in a table, the date on which provisions of the Bill, when enacted, will commence.

3. Table item 1 provides for clauses 1 to 3, which with the enactment of the Bill will become "Sections", to commence on the day it receives Royal Assent.

4. Table item 2 provides for Schedule 1 of the Bill, when enacted, to commence on the later of the day this Act receives Royal Assent, or the day the Amendment Agreement, done at Canberra on 13 October 2016, enters into force for Australia. However, the provisions in Schedule 1 do not commence at all if the Amendment Agreement does not enter into force for Australia. The Minister must announce the day on which the Amendment Agreement enters into force for Australia by notifiable instrument.

5. Table item 3 provides that Schedule 2 to the Bill, when enacted, will commence on the third anniversary of the day on which the provisions covered by table item 2 commence (the Schedule 1 provisions). The delayed commencement of Schedule 2 is to allow for a transitional period of three years in accordance with amending clause 3 of the Amendment Agreement.

6. Amending clause 3 of the Amendment Agreement provides for the requirements in new Chapter 3 of the amended Agreement to operate as an alternative to the requirements under the previous Chapter 3 (please see the note on clauses for Schedule 2).

Clause 3 Schedules

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formal enabling provision for the Schedule to the Bill, providing that each Act specified in a Schedule is amended or repealed in accordance with the applicable items in the Schedule.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

8. Clause 3 also provides that any 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-Main amendments

Part 1-Singaporean originating goods

Customs Act 1901

Item 1 Subparagraph 105B(3)(b)(ii)

9. Section 105B of the Customs Act 1901 (the Customs Act) sets out circumstances where the liability to pay import duty on excise-equivalent goods is wholly or partly extinguished. "Excise-equivalent goods" is defined in section 9 of the Customs Regulation 2015 to mean the goods prescribed under clause 1 of Schedule 1 to that Regulation.

10. However, under subsection 105B(3) of the Customs Act, those circumstances do not apply to an amount of duty if the excise-equivalent goods are classified to subheading 2207.20.10 (denatured ethanol) or 3826.00.10 (biodiesel) of Schedule 3 to the Customs Tariff Act, or an item in the table in Schedule 5, 6, 7, 8, 9, 10, 11 or 12 to that Act that relates to a subheading mentioned.

11. As part of the implementation of the amended Agreement, a separate Customs Tariff Amendment Bill will in part insert new Schedule 4A into the Customs Tariff Act. New Schedule 4A will provide for excise-equivalent rates of duty on certain alcohol, tobacco, fuel petroleum products in accordance with the amended Agreement, and the related preferential rates of customs duty.

12. This item amends subparagraph 105B(3)(b)(ii) of the Customs Act to insert a reference to Schedule 4A of the Customs Tariff Act.

13. The purpose of this amendment is to ensure the collection of the correct import duties for biofuels and biofuel blends imported under the amended Agreement.

Item 2 Subsection 105B(4) (paragraph (b) of the definition of biofuel blend )

14. Subsection 105B(4) of the Customs Act defines in part "biofuel blend" as goods classified to certain subheadings under Schedule 3 of the Customs Tariff Act or an item in the table in the Schedules relating to originating goods under Free Trade Agreements (FTAs) that relate to the relevant subheadings.

15. This item amends the definition of "biofuel blend" under subsection 105B(4) of the Customs Act to insert a reference to new Schedule 4A of the Customs Tariff Act.

16. For the same purpose as item 1 above, the purpose of this amendment is to ensure the collection of the correct import duties for biofuels and biofuel blends imported under the amended Agreement.

Item 3 After Division 1B of Part VIII

17. This item amends the Customs Act to insert new Division 1BA into Part VIII.

18. The new Division is headed "Singaporean originating goods" and sets out the new rules for determining whether goods are Singaporean originating goods and therefore eligible for a preferential rate of customs duty under the Customs Tariff Act applying to such goods that are imported into Australia. These new rules are being inserted to give effect to the amended Agreement, in particular, new Chapter 3.

19. The new Division contains seven subdivisions (Subdivision A to Subdivision G) which are set out below.

Subdivision A-Preliminary

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

New Section 153XC Simplified outline of this Division

21. New section 153XC sets out a simplified outline of each of the Subdivision B to Subdivision G of new Division 1BA.

New section 153XD Interpretation

22. New subsection 153XD(1) sets out new definitions for the purposes of Division 1BA as follows:

Agreement means the Singapore-Australia Free Trade Agreement done at Singapore on 17 February 2003, as amended from time to time. The note to this definition indicates that in 2017, the text of the amended Agreement will be accessible through Australian Treaties Library on the AustLII internet website.

aquaculture has the meaning given by Article 1 of new Chapter 3 of the amended Agreement. This term is included in the definition of production.

Australian originating goods means goods that are Australian originating goods under a law of Singapore that implements the amended Agreement.

certification of origin means a certificate that is in force and that complies with the requirements of Article 18 of new Chapter 3 of the amended Agreement. Article 18 sets out the matters required, including in new Annex 3-A, to be included in a certification 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 2017, the text of the Convention is accessible through the Australian Treaties Library on the AustLII internet website.

customs value of goods 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 of new Chapter 3 of the amended Agreement. This term is included in the definition of person of Singapore.

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 goods 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)

catalysts and solvents; and

(e)

gloves, glasses, footwear, clothing, safety equipment and supplies; and

(f)

tools, dies and moulds; and

(g)

spare parts and materials; and

(h)

lubricants, greases, compounding materials and other similar goods.

This term together with the definition of "originating material", new Subdivision C and new Subdivision D implements Article 15 of new Chapter 3 of the amended Agreement, which deals with indirect materials.

Interpretation Rules means the General Rules (as in force from time to time) for the Interpretation of the HS provided for by the Convention.

national, for Singapore, has the same meaning as it has in Chapter 3 of the amended Agreement. This meaning provides that a national of Singapore include a person who is a citizen of Singapore within the meaning of its Constitution and its domestic laws, or a permanent resident.

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 1BA in their own right. For example, where frozen crumbed fish fillets processed in Singapore from fish caught in Singapore, coated with herbs and spices that are produced in Thailand, the fish would be originating materials and the herbs and spices would be non-originating materials.

non-Party has the same meaning as it has in new Chapter 3 of the amended Agreement, which is a Party that is not a Party to that Agreement.

This term is relevant for the purposes of new paragraph 153XE(2)(i) and section 153XJ of the Customs Act, which deal with matters relating to certain goods taken outside by a person of Singapore from the seabed or subsoil beneath the seabed outside the territory of Singapore, and consignment, respectively.

originating materials means:

(a)

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

(b)

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

(c)

recovered goods derived in the territory of Australia, or in the territory of Singapore, and used in the production of, and incorporated into, remanufactured goods; or

(d)

indirect materials.

In some circumstances, in order to determine whether goods that are imported into Australia are Singaporean 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 and Subdivision D).

Originating materials include those goods that are used to produce other goods and that are Singaporean originating goods, which means that in their own right they satisfy the requirements of new Division 1BA.

person of Singapore means:

(a)

a national of Singapore; or

(b)

an enterprise of Singapore.

production means growing, cultivating, raising, mining, harvesting, fishing, trapping, hunting, capturing, collecting, breeding, extracting, aquaculture, gathering, manufacturing, processing or assembling.

recovered goods means goods in the form of one or more individual parts that:

(a)

have resulted from the disassembly of used goods; and

(b)

have been cleaned, inspected, tested or processed as necessary for improvement to sound working condition.

This term is included in the definition of "remanufactured goods" to give effect to Article 4 of new Chapter 3 of the amended Agreement.

remanufactured goods means goods that:

(a)

are classified to any of Chapters 84 to 90, or to heading 94.02, of the HS; and

(b)

are entirely or partially composed of recovered goods; and

(c)

have a similar life expectancy to, and perform the same as or similar to, new goods:

i.

that are so classified; and

ii.

that are not composed of any recovered goods; and

(d)

have a factory warranty similar to that applicable to such new goods.

Singaporean originating goods means goods that, under this Division, are Singaporean originating goods.

territory of Australia means territory within the meaning, so far as it relates to Australia, of Article 2 of Chapter 1 of the Agreement. In Article 2 of new Chapter 1 of the amended Agreement, the territory of Australia:

•

excludes all in relation to Australia all external territories other than the Territory of Norfolk Island, the Territory of Christmas Island, the Territory of Cocos (Keeling) Islands, the Territory of Ashmore and Cartier Islands, the Territory of Heard Island and McDonald Islands, and the Coral Sea Islands Territory; and

•

includes the Australia's air space, territorial sea, contiguous zone, exclusive economic zone and continental shelf over which Australia exercises sovereign rights or jurisdiction in accordance with international law.

territory of Singapore means territory within the meaning, so far as it relates to Singapore, of Article 2 of Chapter 1 of the Agreement. In Article 2 of new Chapter 1 of the amended Agreement, the territory of Singapore includes its land territory, internal waters and territorial sea, as well as any maritime area situated beyond the territorial sea which has been or might in the future be designated under its national law, in accordance with international law, as an area within which Singapore may exercise sovereign rights or jurisdiction with regards to the sea, the sea-bed, the subsoil and the natural resources.

23. New subsection 153XD(2) provides that the regional value content of goods for the purposes of Division 1BA is to be worked out in accordance with the regulations. The regulations may prescribe different methods for working out the regional value content of different goods.

24. New subsection 153XD(3) provides that the value of goods for the purposes of Division 1BA 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 10 of new Chapter 3 in the amended 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.

25. New subsection 153XD(4) provides that in prescribing tariff classifications for the purposes of Division 1BA the regulations may refer to the HS. The Product-Specific Rules of Origin in new Annex 2 of the amended Agreement refer to the tariff classifications of the HS.

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

27. New subsection 153XD(6) provides that despite subsection 14(2) of the Legislation Act 2003, regulations made for the purposes of Division 1BA may make provision in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in an instrument or other writing as in force or existing from time to time. The new subsection 153XD(6) is included to ensure there is an appropriate delegation of legislative power should it be necessary in order to implement the amended Agreement by applying, adopting or incorporating an instrument or other writing that is not an Act or disallowable legislative instrument. For example, in implementing other FTAs, this provision has enabled the regulations to refer to the general accounting principles of a country other than Australia for the purposes of the regional value content calculations.

Subdivision B-Goods wholly obtained or produced entirely in Singapore or in Singapore and Australia

28. Subdivision B contains new section 153XE, which sets out the rules in relation to goods that are wholly obtained or produced entirely in Singapore or in Singapore and Australia.

29. New subsection 153XE(1) will provide that goods are Singaporean originating goods if they are wholly obtained or produced entirely in Singapore or in Singapore and Australia, and either the importer of the goods has, at the time the goods are imported, a certification of origin, or a copy of one, for the goods; or Australia has waived the requirement for a certification of origin for the goods.

30. New subsection 153XE(2) provides that goods are wholly obtained or produced entirely in Singapore or in Singapore and Australia if, and only if, the goods are:

(a)

plants, or goods obtained from plants, that are grown, cultivated, harvested, picked or gathered in the territory of Singapore or in the territory of Singapore and the territory of Australia; or

(b)

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

(c)

goods obtained in the territory of Singapore from live animals referred to in paragraph (b) above; or

(d)

animals obtained by hunting, trapping, fishing, gathering or capturing in the territory of Singapore; or

(e)

goods obtained from aquaculture conducted in the territory of Singapore; or

(f)

minerals, or other naturally occurring substances, extracted or taken from the territory of Singapore; or

(g)

fish, shellfish or other marine life taken from the high seas by vessels that are entitled to fly the flag of Singapore; or

(h)

goods produced from goods referred to in paragraph (g) above on board factory ships that are registered, listed or recorded with Singapore and are entitled to fly the flag of Singapore; or

(i)

goods, other than fish, shellfish or other marine life, taken by Singapore, or a person of Singapore, from the seabed, or subsoil beneath the seabed, outside the territory of Singapore, and beyond areas over which non-Parties exercise jurisdiction, but only if Singapore, or the person of Singapore, has the right to exploit that seabed or subsoil in accordance with international law; or

(j)

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

(k)

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

31. The purpose of new section 153XE is to give effect to Articles 2(a), 3, 21 and 22.1 of new Chapter 3 of the amended Agreement sets out the rules for goods wholly obtained or produced.

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

32. Subdivision C contains new section 153XF, which sets out the rule in relation to goods that are produced entirely in the territory of Singapore or entirely in the territory of Singapore and the territory of Australia from originating materials only. Such goods are Singaporean originating goods where the importer of the goods has, at the time the goods are imported, a certification of origin, or a copy of one, for the goods, or Australia has waived the requirement for a certification of origin for the goods.

33. The purpose of new section 153XF is to give effect to Articles 2(b), 21 and 22.1 of new Chapter 3 of the amended Agreement, which sets out the rules for goods produced exclusively from originating material.

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

34. Subdivision D contains new sections 153XG and 153XH, which set out the rules for determining whether goods that are produced entirely in the territory of Singapore, or entirely in the territory of Singapore and the territory of Australia, from non-originating materials only, or from non-originating materials and originating materials, are Singaporean originating goods.

Section 153XG Goods produced in Singapore, or in Singapore and Australia, from non-originating materials

35. New subsection 153XG(1) provides that goods are Singaporean originating goods if

(a)

they are classified to a Chapter, heading or subheading of the HS specified in column 1 of the table in Part 2 of Schedule 1 to the regulations made for the purposes of Subdivision D; and

(b)

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

(c)

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 the goods are imported, a certification of origin, or a copy of one, for the goods; or

(ii)

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

36. The table in Schedule 1 to the regulations made for the purposes of Subdivision D will incorporate the new Product-Specific Rules relating to change in tariff classification, regional value content and other rules for the purpose of determining whether goods are Singaporean 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 new Product-Specific Rules.

Change in tariff classification

37. New subsection 153XG(2) refers to the first of several requirements that may be prescribed in regulations made for the purposes of Subdivision D. 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.

38. New subsection 153XG(3) provides that the regulations made for the purposes of Subdivision D 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 Accumulation provision contained in Article 9 of new Chapter 3 of the amended 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.

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

40. 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 the territory of Singapore, or the territory of Singapore and the territory of Australia, to justify the claim that the goods are Singaporean originating goods.

41. For example, frozen fish fillets (HS 0304) are produced from fish caught in Singapore and combined with herbs and spices produced in Thailand (HS 0907 - 0910) to make crumbed fish fillets (HS 1604 in Chapter 16). The applicable tariff change for crumbed fish is "a change to Chapter 16 from any other chapter or no change in tariff classification is required provided that there is a regional value content (RVC) of at least 40%". 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 Singapore and is therefore an originating material and is not required to change its classification). As the first product-specific rule has been fulfilled, the RVC term does not need to be considered.

42. 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 need to be known.

43. New subsection 153XG(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.

44. The provisions of subsection 153XG(4) incorporate the de minimis provisions that are set out in Article 10 of Chapter 3 of the amended 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 Singaporean originating goods because the change in tariff classification will be taken to be satisfied.

45. New subsection 153XG(5) provides that, if the requirement in subsection 153XG(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 153XG(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.

46. 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 regulations.

Regional value content

47. New subsection 153XG(6) provides that the regulations may also specify a regional value content of at least a prescribed percentage under a prescribed method.

48. New subsection 153XG(7) provides that, if:

(a)

the goods are required to have a regional value content of at least a particular percentage under a particular method; 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 classified with, delivered with and not invoiced separately from the goods; and

(d)

the types, 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.

49. 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.

50. The note to this section 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 regulations.

51. New subsection 153XG(8) provides that section 153XI should be disregarded for the purposes of subsection 153XG(7) when working out whether the accessories, spare parts, tools or instructional or other information materials are originating or non-originating materials.

No limit on regulations

52. New subsection 153XG(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.

53. For example, in addition to meeting a tariff change requirement, in respect of textile articles classified in the headings: 6301, 6302, 6303, 6304 and 6305, where the starting material is fabric, the fabric is raw or unbleached fabric and fully finished in the territory of Singapore.

54. The purpose of new section 153XG is to give effect to Articles 2(c), 5, 10, 12.1, 21, and 22.1 of new Chapter 3, and Annex 2.1 of the amended Agreement, which set out the rules for goods produced from non-originating materials.

New section 153XH Packaging materials and containers

55. New subsection 153XH(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 Subdivision D, except for the purposes of the exception detailed in new subsection 153XH(2) below.

56. 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 regulations.

Exception

57. Subsection 153XH(2) provides one exception to subsection 153XH(1), which applies where the goods are required to have a regional value content of at least a particular percentage under a particular method. 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.

58. 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.

59. The note to this section indicates that the value of packaging materials and containers for the purposes of this section is to be worked out in accordance with the regulations.

60. The purpose of new section 153XH is to give effect to Articles 13 and 14 of new Chapter 3 of the amended Agreement, which provide for related matters.

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

61. Subdivision E contains new section 153XI, which sets out a specific rule that applies to goods that are accessories, spare parts, tools or instructional or other information materials.

62. New section 153XI provides that goods are Singaporean 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 Singaporean originating goods; and

(d)

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

(e)

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

63. Therefore, under this provision, accessories, spare parts, tools or instructional or other information materials will be deemed Singaporean originating goods even if, in fact, they are non-originating goods, 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 153XG(7). The value of the accessories, spare parts, tools or other instructional or information materials that are originating or non-originating materials must be included in that calculation (see subsection 153XG(8)).

64. The purpose of new section 153XI is to give effect to Articles 12.2 and 12.3 of new Chapter 3 of the amended Agreement, which sets out rules for goods that are accessories, spare parts, tools or instructional or other information materials.

Subdivision F-Consignment

65. Subdivision F contains a new section 153XJ, which sets out the consignment requirements that must be satisfied in transporting Singaporean originating goods to Australia, including in relation to operations in non-Parties during transportation to Australia.

66. New subsection 153XJ(1) provides that goods are not Singaporean originating goods under Division 1BA if:

(a)

the goods are transported through the territory of one or more non-Parties; and

(b)

the goods undergo any operation in the territory of a non-Party (other than unloading, reloading, separation from a bulk shipment, storing, labelling or making for the purpose of satisfying the requirements of Australia or another operation that is necessary to preserve the goods in good condition or to transport the goods to the territory of Australia).

67. New subsection 153XJ(2) provides that section 153XJ applies despite any other provision of new Division 1BA.

68. The purpose of new section 153XJ is to give effect to Article 17 of new Chapter 3 of the amended Agreement, which sets out the rules for transit and transhipment.

Subdivision G - Regulations

69. Subdivision G contains new section 153XK, which sets out the head of power for regulations that may provide for, and relate to, determining whether goods are Singaporean originating goods under Division 1BA.

70. The purpose of new section 153XK is to enable Product-Specific Rules relating to change in tariff classification, regional value content and other rules for the purposes of determining whether goods are Singaporean originating goods to be prescribed.

Part 2-Verification powers

Customs Act 1901

Items 4 and 6 to 11

71. Division 4A of Part VI of the Customs Act imposes record keeping obligations on producers, manufactures or exporters of goods where relevant goods are exported to Singapore and are claimed to be the produce or manufacture of Australia for the purpose of obtaining a preferential tariff in Singapore (see section 126AB of the Customs Act).

72. In addition, Division 4A also enables authorised officers to require persons who are subject to record keeping obligations under section 126AB of the Customs Act to produce those records to the officers, and enables authorised officers to disclose any records so produced to an instrumentality or agency of Singapore (see sections 126AC and 126AD of the Customs Act).

73. The term "produce" and "manufacture" are concepts under Division 1B of Part VIII of the Customs Act, and are further defined in section 153UA of that Act. These concepts are distinguished from the concept of "Australian originating goods" under new Division 1BA of Part VIII by item 3 of Schedule 1 to the Bill above.

74. To distinguish the record keeping framework for "produce and manufacture of Australia" from the framework of "Australian originating goods":

(a)

item 4 inserts a new section 126AAA into the Customs Act, containing the term "Singaporean customs official", which is defined to mean a person representing the customs administration of Singapore;

(b)

items 6 and 9 amend paragraphs 126AB(1)(b) and 126AD(1)(b) of the Customs Act to include a reference to "Australian originating goods"; and

(c)

items 7, 8, 10 and 11 amend subsections 126AC(2) and 126AD(2), including their headings, of the Customs Act to enable records to be disclosed to a Singaporean customs official for the purpose of verifying Australian originating goods.

75. In effect, this will maintain the ability for an authorised officer to continue to disclose records for verification to an instrumentality or agency of Singapore in relation to goods that are the produce and manufacture of Australia, while also permitting those officers to disclose records to a Singaporean customs official in relation to Australian originating goods in accordance with Article 25 of new Chapter 3 of the amended Agreement.

Item 5 Section 126AA

76. This item amends section 126AA of the Customs Act to substitute the words "for which a preferential tariff is claimed" with "that are to be claimed to be the produce or manufacture of Australia for the purpose of obtaining a preferential tariff in Singapore".

77. The purpose of the amendment is to clarify to which goods the declarations concerning exports to Singapore apply.

Part 3-Application and Saving provisions

Item 12 Application and saving provisions

78. Item 12(1) sets out application and saving provisions such that the amendments made by Part 1 of Schedule 1 of the Bill apply in relation to goods:

(a)

goods imported into Australia on or after the commencement of that Part; and

(b)

goods imported into Australia before the commencement of that Part, where the time for working out the rate of import duty on the goods had not occurred before the commencement of that Part.

79. Item 12(2) provides that the amendments made by Part 2 of Schedule 1 of the Bill apply in relation to goods exported to Singapore on or after the commencement of that Part (whether the goods were produced before, on or after that commencement).

80. Item 12(3) provides that SAFTA, as in force immediately before the commencement of this item, continues to apply on and after that commencement for the purposes of working out if goods are the produce or manufacture of Singapore under Division 1B of Part VIII of the Customs Act. This is to ensure that Annex 2 as contained in the SAFTA prior to the amendments made by the Amendment Agreement, will continue to be in force for the purpose of Division 1B of Part VIII of the Customs Act.

Schedule 2-Other Amendments

Customs Act 1901

Items 1 to 9

81. Chapter 3 of the SAFTA prior to the amendments made by the Amendment Agreement (the previous Chapter 3) sets out rules to which goods that are the produce and manufacture of Singapore and Australia must satisfy in order to claim a preferential rate of customs duty, and related matters.

82. The amending clause 3 of the Amendment Agreement provides for the previous Chapter 3 to be replaced with a new Chapter 3, which sets out rules for Singaporean originating goods and Australian originating goods. However, for a transitional period of three years, the requirements under the new Chapter 3 will operate as an alternative to the requirements under the previous Chapter 3. That is, for the duration of three years, the amended Agreement will allow importers from both Singapore and Australia to satisfy either the requirements relating to produce and manufacture, or originating goods, to claim a preferential rate of customs duty.

83. After the expiration of the three-year transitional period, the requirements for the previous Chapter 3 as inserted in the Customs Act are repealed, such that from the date of expiration only originating goods can be subject to a preferential rate of customs duty.

84. Items 1 to 9 amend the Customs Act to:

(a)

repeal the note at the end of the definition of "unmanufactured raw products" under subsection 4(1);

(b)

repeal section 126AA;

(c)

amend sections 126AB to 126AD; and

(d)

repeal Division 1B of Part VIII.

85. These items will commence and have effect on the third anniversary of the commencement of the items in Schedule 1 of this Bill.

86. In accordance with amending clause 3 of the Amendment Agreement, the purpose of the above amendments is to repeal and omit, at the expiration of the three-year transitional period, all requirements and references relating to the produce and manufacture under the previous Chapter 3.

Item 10 Application and saving provisions

Items 10(1) and (2)

87. Item 10(1) sets out an application such that the amendments made by items 2 to 8 of Schedule 2 of the Bill apply in relation to goods exported to Singapore on or after the commencement of those items (whether the goods were produced before, on or after that commencement).

88. The purpose of this item is to explain to which goods the amendments apply.

89. Item 10(2) sets out a saving provision such that, despite the amendment made by item 9 of Schedule 2 of the Bill, Division 1B of Part VIII of the Customs Act, as in force immediately before the commencement of this item, continues to apply on and after that commencement in relation to goods imported into Australia before that commencement.

90. The purpose of this item is to allow importers of goods imported into Australia before the repeal of Division 1B, where the time for working out the rate of import duty on the goods had not occurred, to continue to rely on Division 1B after its repeal for working out the preferential rate of customs duty. A similar saving provision is contained in item 142 of the Customs Tariff Amendment Bill to ensure the related preferential rates of customs duty for those goods also continues to have effect.

Item 10(3)

91. Item 10(3) sets out a saving provision such that the regulations in force for the purposes of Division 4A of Part VI of the Customs Act immediately before the commencement of this item continue to apply on and after that commencement in relation to goods exported to Singapore before the commencement of this item.

92. Sections 6 to 9 of the Customs (International Obligations) Regulation 2015 (the International Obligation Regulation) are made for the purposes of sections 126AA and 126AB of the Customs Act, and set out matters concerning declaration by representative of exporters, record keeping for producers, manufacturers and exporters, and the forms in which those records are to be kept.

93. The purpose of item 10(3) is to ensure that sections 6 to 9 of the International Obligation Regulation, as amended by items 1 to 9 continue in force.

94. An example of the continued operation of the regulation is the requirement for a manufacturer, who declared that goods exported were the manufacture of Australia, to retain relevant records for the full duration of 5 years instead of up to the point in time where the related requirements were repealed.