The Australian Customs and Border Protection Service
(Australian Customs) has proposed amendments to the Customs
Act which will make it easier for Australian manufacturers to
object to the making of tariff concessions. Importers and
manufacturers have until 5 November 2014 to comment on the proposed
The laws will affect products from toilet paper to prefabricated
Where a tariff concession order (TCO) applies, the duty payable
on imported goods is reduced (usually from 5% to 0%). A TCO
describes particular goods and applies only to goods classified
under a particular tariff heading. TCOs are made on application by
importers and reflect the policy that customs duty should not be
imposed on goods where there is no local industry to protect.
In line with this policy, a TCO will only be implemented where
the importer can prove that substitutable goods are not produced in
Australia in the ordinary course of business. The "produced in
Australia" requirement currently has two elements:
A minimum of 25% of the factory costs of the goods must
comprise of Australian labour, materials or factory overhead costs
("Local Content Requirement"); and
At least one substantial process in the manufacture of the
goods occurs in Australia ("Substantial Process
Australian Customs has proposed removing the Australian content
requirement that a good will be "produced in Australia"
if a substantial process in the manufacture of the goods occurs in
It is clearly possible for the substantial process requirement
to be met, even if the local content requirement is not met.
However, the track history of Australian Customs is that every time
the substantial process requirement is met, the local content
requirement is also easily met.
While this is normally the case, we are aware of instances where
only the substantial process requirement has been met. It may also
be the case that local manufacturers are self-assessing whether the
local content requirement is met; and in the circumstances where it
is not met, are not opposing tariff concession orders.
ISSUES FOR IMPORTERS
The removal of the local content requirement will make it easier
for local manufacturers to oppose TCOs or seek the revocation of
existing TCOs. In this situation, not only is there one less
factual test that the local manufacturer must satisfy, there is
also significantly less administrative burden for those
manufacturers. Further, local industry will not face providing a
government authority with confidential and detailed financial
information for the sake of opposing a TCO.
The reality is that the removal of the local content requirement
would mean that some manufacturers who are unable to claim
"produced in Australia" status or meet the requirements
of "Australian origin" under Free Trade Agreements, will
now be able to oppose the making of TCOs.
In short, TCOs will be harder to obtain and easier for local
manufacturers to oppose.
ISSUES FOR AUSTRALIAN INDUSTRY
Due to Australia's high labour and rent costs, it is very
hard to produce anything in Australia without Australian labour and
factory overhead costs exceeding 25% of the total costs of the
goods. The proposed removal of the local content requirement
By removing the Local Content Requirement it will be easier and
cheaper for the Australian industry to oppose applications for TCOs
or seek the revocation of existing TCOs.
This will result in less TCOs being available and greater
protection for the Australian industry.
NOW IS THE TIME TO COMMENT
Australian Customs has requested public comment by 5 November
2014. If you believe this proposed change may impact your business
you must quickly consider your position and provide comment.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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