Australia: Five customs topics in five minutes

Last Updated: 3 November 2016
Article by Russell Wiese and Lynne Grant

The second half of 2016 has had its fair share of issues that affect customs brokers. An update on some of the most recent happenings is set out below.

Update to the Singapore FTA – more relaxed certificate of origin requirements

The Australian and Singaporean governments have reached agreement to update and modernise the Singapore Australia FTA. Importantly, traders will now be able to self-certify that their goods meet the origin requirements of the FTA. The self-certified certificate of origin will not have to take a particular form and can be completed by the manufacturer, exporter, importer or their representative. Perhaps importers will request their customs broker (as their representative) to complete a certificate of origin for them?

Also, the rules of origin are being updated to include a schedule of product specific rules. These rules will be more flexible than the existing origin rules and make it much more likely that goods will qualify for preferential treatment under the FTA.

The amendments to the FTA have to be ratified domestically in each country before taking effect. We expect this to occur in the first half of 2017.

Technology agreement duty reductions from 1 January 2017

The WTO hasn't been able to agree on much over the past 20 years! However, its members did agree on duty reductions for a range of information technology goods. The timeframe for duty reduction depends on the particular good. However, it can be said that:

  • Duty reductions for some goods begin on 1 January 2017, however, no duty rate is immediately reduced to 0.
  • Most goods subject to the agreement will be duty free by 1 January 2019.
  • The balance of goods subject to the agreement will be duty free by 1 January 2021.
  • The legislation creates a number of new tariff classifications, primarily as sub-headings that apply when the good is used for an information technology purpose (in a similar way to motor vehicle components).
  • The new classifications are scheduled to commence from 1 January 2017 even if the reduced rates do not commence until a later time.

Customs brokers should ensure that from 1 January 2017 they are using the correct classification and that any TCO or tariff advice applicable to the old classification has been transferred to the new classification. The TCO issue will be particularly important given that many information technology products are not manufactured in Australia and are likely to be subject to TCOs.

Brokers the target of infringement notices

The department has released the October 2016 edition of the Goods Compliance Update. An important statistic contained in the update was that in almost all cases where an infringement notice was issued, the recipient was the customs broker, cargo operator or other service provider and not the importer/exporter of the goods.
Between May and July 2016 there were 12 infringement notices issued for making a false statements to the department resulting in a loss of duty. Of these, only two were issued to importers. For the other 10, the broker/service provider received the infringement notice.
The message is clear. The department will look to customs brokers and not their clients for false statements in import declarations. So, customs brokers need to ensure their terms and conditions are enforceable against clients and contain an obligation on the client to cover the cost of an infringement notice, especially if the error was their fault.

Infringement notices remain too high

Payment of an infringement notice is not compulsory. However, the risk is that if the infringement notice is not paid, the alleged infringing party will be prosecuted. Where the amount of the infringement notice is low, it is an easier decision to pay the fine and avoid the risk of prosecution.
However, we have seen infringement notices that are much higher than any fine we expect a court would impose. On occasion, fines in excess of $8,000 are handed out for minor inadvertent breaches.
A recent court case showed that you may well receive a lesser fine if you do not pay the infringement notice and proceed to court. In The Queen v Chi, the County Court handed down a $22,000 fine to an importer who had lied about the origin of goods for the purpose of avoiding dumping duties. The importer's deception helped him avoid $100,000 in dumping duties.
The judgment shows that courts rarely will impose the maximum applicable penalty. The infringement notice system is based on fines being equal to 75% of the maximum penalty. This is very likely to result in the infringement notice fine that is higher than the penalty that would be imposed by a Court. While we do not advocate that our clients invite court prosecution, there is no justification for infringement notices representing a larger penalty than would be handed out by a court.

Goods containing asbestos

Perhaps the most significant issue has been the Department of Immigration and Border Protection approach to the importation of goods containing asbestos. Our earlier guidance regarding avoiding liability for statements regarding asbestos is here.

The above issues showcase the variety of challenges faced by customs brokers (and we barely mentioned ChAFTA or TCOs!).

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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Russell Wiese
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