House of Representatives

Customs Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Bill 2018

Explanatory Memorandum

(Circulated by authority of the Minister for Law Enforcement and Cyber Security, the Honourable Angus Taylor MP)

Attachment: Regulatory Burden And Cost Offset Estimate

1. The entry into force of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) is expected to result in a small reduction in ongoing business compliance costs for Australian exporters to TPP-11 Parties. The reduction arises from two sources. First, the ability of exporters to use one set of documentary procedures to export to 10 other markets instead of under eight separate FTAs plus two non-FTA partners. Second, the possibility that some businesses that previously sought and obtained non-preferential certificates of origin (COOs) may now be able to self-certify the origin of their goods for exports to Brunei Darussalam, Canada, New Zealand, Mexico, and Vietnam. Existing agreements allow businesses to self-certify the origin of their goods for exports to Chile, Japan, Malaysia, Peru and Singapore.

2. There is a significant level of uncertainty regarding the number and composition of COOs issued in respect of Australian exports into TPP-11 Parties. Accordingly, the estimates of the compliance costs under the status quo - as well as the likely incremental changes - are largely assumption driven and should be interpreted as such. However, based on the available data, it is possible to gain an appreciation of the order of magnitude of these changes.

Certificates of Origin

3. COOs are issued by industry groups such as the Australian Chamber of Commerce and Industry and the Australian Industry Group. Preferential certificates account for around 10 per cent of all certificates issued. Preferential certificates are generally issued in respect of countries with whom Australia has a free trade agreement, but which do not allow for self-declaration.

4. TPP-11 Parties represent 23.9 per cent of Australia's total goods exports.

Direct Costs

5. Where businesses seek third-party certification from industry groups, the cost of each certificate varies from between $20-70 at an average of $33. The cost of a certificate depends on a range of factors, such as whether an applicant is a member of the issuing body and the level of complexity.

Administrative costs

6. The ongoing administrative costs incurred by a business in preparing the documentation to obtain a COO are likely to be relatively low. The bulk of Australian exports to TPP-11 Parties are 'wholly obtained' goods. Further, while new businesses may expend considerable time applying for certification for their initial consignment, as a matter of practice this information is re-submitted for subsequent certifications. In addition, much of the information required would be collected for other purposes. The administrative time burden for each application is therefore estimated to be modest.

7. Similarly, the records related to a COO are required to be kept for five years by most foreign customs agencies. However, businesses are required under Australian Tax Law to retain these records for seven years. The incremental compliance burden associated with record keeping for COOs is therefore assessed as nil.

Incremental reduction in number of certificates under the TPP-11

8. COOs are required for Australian exports to TPP-11 Parties for a range of purposes in addition to tariff compliance. For example, overseas customs agencies may require COOs for the purpose of calculating import quotas. Alternatively, foreign banks may require COOs in order to provide letters of credit.

9. Therefore, it is possible that of the total number of Australian COOs currently issued in respect of TPP-11 Parties, some of these will no longer be required as a result of the TPP-11. However, each business will have to consider for themselves, as a commercial decision, whether the benefits of obtaining a COO are outweighed by the costs (administrative or otherwise).

10. It is therefore assumed that there will be a modest reduction in the number of COOs issued in respect of Australian exports to TPP-11 Parties as a result of the Agreement. To the extent that this reduction occurs, those businesses will save the direct costs of certification by industry bodies; together with the administrative costs.

Regulatory Burden and Cost Offset (RBCO) Estimate Table

Average Annual Compliance Costs (from business as usual)
Costs ($m) Business Community Organisations Individuals Total Cost
Total by Sector ($143 995.21) $ $ ($143 995.21)
Cost offset ($m) Business Community Organisations Individuals Total by Source
Agency $ $ $ $
Within portfolio $ $ $ $
Outside portfolio $ $ $ $
Total by Sector $ $ $ $
Proposal is cost neutral? [ ]   yes           ¨   no
Proposal is deregulatory [ ]   yes           ¨   no
Balance of cost offsets         $143 995.21

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