The release yesterday of Australian Customs Notice No. 2009/25
("ACN") by the Australian Customs and Border Protection
Service ("Customs") is a clear warning to those in
industry who use the Enhanced Project By-Law Scheme
("EPBS"), that they are to be the subject of close
As many would be aware, the EPBS (administered through Item 71
to Schedule 4 to the Customs Tariff Act 1995) provides for
the duty free entry of eligible capital goods for major investment
projects in a variety of industries, including mining, resource
processing, agriculture, food processing, food packing,
manufacturing, gas supply and power supply.
For goods to be eligible under the EPBS scheme, the goods must
not only satisfy the terms of Item 71 but they must all be
specified in an AusIndustry Determination granted for the relevant
project. According to the current EPBS guidelines, to qualify for
the concession, the relevant project must have a total project
expenditure on capital goods of $10 million or more. Most
importantly, only goods that are not produced in Australia, or are
technically superior to those made in Australia, are eligible for
The ACN sets out the basic elements required to secure the
benefit of the EPBS. Importantly, the ACN also sets out what items
do not satisfy the relevant requirements. Given Australia's
mining boom, there has been significant use of the EPBS for past
imports. There is also likely to be heavy use of the EPBS given the
proposed significant investment in infrastructure projects in
Australia, which will presumably require significant imports of
relevant equipment from overseas.
However, what is potentially most significant is that the ACN
refers to the use of post-clearance audits to determine whether the
EPBS has been properly claimed. The ACN goes on to suggest:
"Importers and customs brokers should review their past
importations under Item 71 to ensure compliance with the terms of
the item and of the relevant Aus-Industry
Increased compliance activities by Customs
These comments and the release of the ACN point to increased
compliance activities by Customs. Importers, customs brokers and
the consultants who regularly advise on the use of the EPBS should
take heed of this warning. Customs brokers and consultants would
also be well served to advise their clients of this development.
The benefits of an early audit and review are self-evident given
than voluntary disclosure of errors in Import Declarations (for
example arising from the misuse of the EPBS scheme) will
significantly reduce the possibility of penalties being payable to
Customs in addition to repayment of any underpaid customs duty.
The apparent concerns regarding the use of the EPBS are not
surprising given the focus of the Federal Government to maximise
revenue recovery and eliminate "leakage", which may arise
from such items as misuse of concessional entry schemes. This
approach is also consistent with the sentiment that Australian
industry should not be disadvantaged by overseas importers
improperly using the EPBS or other means of concessional entry.
Over recent years there has been a series of reviews of the use of
such concessional items, including significant audit activity
relating to the use of the Tradex Scheme, the controversy regarding
the use of the former Item 50A and the current close attention by
Customs to the operation of the Tariff Concession Order system.
The release of the ACN is interesting given that the use of the
EPBS has not been the subject of any of the recent announcements
from Customs as to its current compliance focus.
Finally, the ACN also raises legal issues as to use of the EPBS
and management of any exposure to Customs. As always, we would be
delighted to help as we have with other related issues.
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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