House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Minister for Customs, Community Safety and Multicultural Affairs, the Honourable Jason Wood MP)

Notes on Clauses

Preliminary

Clause 1 Short title

1. This clause provides for the 'Customs Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021' (the Bill), when enacted, to be cited as the Customs Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Act 2021.

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 and anything in the Bill not elsewhere covered by the table to commence on the day the Bill receives the Royal Assent.

4. Table item 2 provides for Schedule 1 of the Bill to commence on the later of the day the Bill receives the Royal Assent, and the day the Regional Comprehensive Economic Partnership Agreement (the Agreement), done on 15 November 2020, enters into force for Australia. Table item 2 also provides that the Minister must announce the day on which the Agreement enters into force for Australia by notifiable instrument. Notifiable instruments are governed by the Legislation Act 2003. However, the provisions do not commence at all if the Agreement does not enter into force for Australia.

5. The signatory States to the Agreement are Brunei Darussalam, Cambodia, Indonesia, Lao People's Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet Nam, China, Japan, New Zealand, Republic of Korea and Australia.

6. Of these signatory States, only Brunei Darussalam, Cambodia, Indonesia, Lao People's Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam are members of the Association of Southeast Asian Nations (ASEAN), which was established on 8 August 1967 in Bangkok Thailand.

7. Under paragraph 2 of Article 20.6 of Chapter 20 of the Agreement, the Agreement shall enter into force for those signatory States that have deposited their instrument of ratification, acceptance, or approval, 60 days after the date on which at least six signatory States which are Member States of ASEAN and three signatory States other than Member States of ASEAN have deposited their instrument of ratification, acceptance, or approval with the Depositary.

8. Article 20.5 of Chapter 20 designates the Secretary-General of ASEAN as the Depositary for the Agreement.

9. After the date of entry into force of the Agreement, paragraph 3 of Article 20.6 provides that the Agreement shall enter into force for any other signatory State 60 days after the date on which it has deposited its instrument of ratification, acceptance, or approval with the Depositary. See notes below for new subsection 153ZQB(6), which sets out a requirement for the Minister to announce in the Gazette when the Agreement enters into force for a Party other than Australia.

10. If the Agreement is not in force for a country, new Division 1N of Part VII of the Customs Act will not apply in relation to that country. For example, goods cannot claim to be wholly obtained goods of a Party for which the Agreement has not entered into force.

Clause 3 Schedules

11. This clause enables the Schedule of the Bill, when enacted, to amend or repeal provisions of legislation specified in that Schedule in accordance with the applicable items. The Customs Act 1901 (the Customs Act) is being amended by the Bill.

Schedule 1 - Amendments

Part 1 - Regional Comprehensive Economic Partnership (RCEP) originating goods

Customs Act 1901

Introductory Comments

12. On 15 November 2020, the Hon. Simon Birmingham, former Minister for Trade, Tourism and Investment, and his counterparts from Brunei Darussalam, Cambodia, Indonesia, Lao People's Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet Nam, China, Japan, New Zealand and Republic of Korea signed the Agreement.

13. The Agreement, on entry into force, provides for new rules of origin to determine whether goods imported into Australia are originating goods (referred to as 'RCEP originating goods'). Such goods are subject to preferential rates of customs duty under the proposed amendments to the Customs Tariff Act 1995 (the Customs Tariff Act). 'RCEP originating goods', in accordance with the Agreement, are those goods that satisfy the requirements in new Division 1N of Part VIII of the Customs Act inserted by the Bill.

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

14. Section 105B of the Customs Act sets out circumstances where the liability to pay import duty on excise-equivalent goods is wholly or partly extinguished.

15. 'Excise-equivalent goods' is defined in subsection 4(1) of the Customs Act to mean goods prescribed by the regulations for the purposes of this definition.

16. 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 4A, 5, 6, 6A, 7, 8, 8A, 8B, 9, 9A, 10, 11, 12 or 13 of that Act that relates to a subheading mentioned.

17. As part of the implementation of the Agreement, a separate Customs Tariff Amendment (Regional Comprehensive Economic Partnership Agreement Implementation) Bill 2021 (the Customs Tariff Amendment Bill) will insert new Schedule 14 into the Customs Tariff Act. New Schedule 14 will provide for excise-equivalent rates of duty on certain alcohol, tobacco, fuel petroleum products in accordance with the Agreement, and the related preferential rates of customs duty.

18. This item amends subparagraph 105B(3)(b)(ii) of the Customs Act to insert a reference to Schedule 14 of the Customs Tariff Act.

19. The purpose of this amendment is to ensure the collection of the correct customs duty for biofuels and biofuel blends imported under the Agreement.

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

20. Subsection 105B(4) of the Customs Act defines 'biofuel blend', in part, 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.

21. This item amends the definition of 'biofuel blend' under subsection 105B(4) of the Customs Act to insert a reference to new Schedule 14 of the Customs Tariff Act.

22. As for item 1 of the Bill, the purpose of this amendment is to ensure the collection of the correct customs duty for biofuels and biofuel blends imported under the Agreement.

Item 3 After Division 1M of Part VIII

23. This item amends Part VIII of the Customs Act to insert new Division 1N.

24. New Division 1N is titled 'Regional Comprehensive Economic Partnership (RCEP) originating goods' and sets out the new rules for determining whether goods are RCEP originating goods and therefore eligible for a preferential rate of customs duty under the Customs Tariff Act. These new rules give effect to Chapter 3 of the Agreement.

25. New Division 1N contains six Subdivisions, being Subdivision A to Subdivision F as set out below.

Subdivision A-Preliminary

26. Subdivision A contains a simplified outline of new Division 1N and the interpretation provision for this Division.

New section 153ZQA Simplified outline of this Division

27. New section 153ZQA sets out a simplified outline of Subdivision B to Subdivision F of new Division 1N.

New section 153ZQB Interpretation

28. New subsection 153ZQB(1) sets out the definitions for the purposes of new Division 1N as follows:

Agreement means the Regional Comprehensive Economic Partnership Agreement, done on 15 November 2020, as amended and in force for Australia from time to time. The note to this definition indicates that as at 2021, the text of the Agreement is accessible through the Australian Treaties Library on the AustLII website.

aquaculture has the meaning given by Article 3.1 of Chapter 3 of the Agreement.

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 as at 2021, the text of the Convention is accessible through the Australian Treaties Library on the AustLII website. This term is necessary and is referred to in the definition of 'Harmonized Commodity Description and Coding System'.

customs authority has the meaning given by Article 4.1 of Chapter 4 of the Agreement.

customs value of goods has the meaning given by section 159 of the Customs Act. In most cases, this will be the transaction value but there are other valuation methods of this value cannot be ascertained.

factory ship of a Party has the same meaning as it has in Chapter 3 of the Agreement.

Under the footnote 1 for Article 3.3, 'factory ships of that Party' means factory ships:

(a)

which are registered in that Party; and

(b)

which are entitled to fly the flag of that Party.

Harmonized Commodity Description and Coding System means the Harmonized Commodity Description and Coding System (the HCDC System) that is established by or under the Convention.

The HCDC System is a structure for classifying goods based on internationally agreed descriptors for goods and related six-digit codes administered by the World Customs Organization (the WCO). This six-digit classification uniquely identifies all traded goods and commodities and is uniform across all countries that have adopted the HCDC System. The WCO reviews the system every five years to reflect changes in industry practice, technological developments and evolving international trade patterns.

This term is referred to in the definition of 'Harmonized System', which sets out the HCDC System on which the Agreement, particularly the product-specific rules, is based.

Harmonized System means:

(a)

Harmonized Commodity Description and Coding System as in force immediately before 1 January 2017; or

(b)

if the table in Annex 3A to Chapter 3 of the Agreement is amended or replaced to refer to Chapters, headings and subheadings of a later version of the HCDC System, the later version of the HCDC System.

As per the notes for the definition of HCDC System above, updates to that System are undertaken every 5 years.

While each signatory to the Convention is required to implement and reflect related amendments to the HCDC System in their domestic legislation, simultaneously on the date when the amendments enter into force, the pace at which the amendments are implemented varies from country to country.

By way of example, while Australia has implemented, and currently uses, the latest HCDC System of 2017, many of our established FTAs still utilise other versions of the HCDC System for their product specific rules of origin. In light of this, and to avoid causing any disruption to international trade, Australia, through the Australian Border Force, publishes the changes between each HCDC System update and relevant concordance associated with those updates on its website so that anyone can readily identify the appropriate tariff classification codes for importing goods from other countries into Australia.

The definition of 'Harmonized System' will expressly recognise, in the Customs Act, the version of the HCDC System on which the Agreement was based, and allow subsequent versions of that System to also be recognised when the relevant Annex of the Agreement is formally amended.

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 of buildings or the operation of equipment associated with the production of goods; including:

(c)

fuel (within its ordinary meaning); and

(d)

tools, dies and moulds; and

(e)

spare parts and materials; and

(f)

lubricants, greases, compounding materials and other similar goods; and

(g)

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

(h)

catalysts and solvents.

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

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 new Division 1N in their own right. For example, where frozen crumbed fish fillets processed in a Party to the Agreement from fish caught in that Party, coated with herbs and spices that are produced in the United States of America (which is not a Party to Agreement), 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 Chapter 3 of the Agreement.

This term is referred in new section 153ZQI, which deals with the consignment of RCEP originating goods (see notes below for new section 153ZQI).

originating materials means:

(a)

goods that are originating goods, in accordance with Chapter 3 of the Agreement, and that are used in the production of other goods; or

(b)

indirect materials.

In some circumstances, in order to determine whether goods that are imported into Australia are RCEP 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 the notes for new Subdivision C and Subdivision D).

Party has the meaning given by Article 1.2 of Chapter 1 of the Agreement.

Under Article 1.2 of Chapter 1 of the Agreement, a Party means any State or separate customs territory for which that Agreement is in force.

person of a Party has the same meaning as it has in Chapter 3 of the Agreement.

production has the meaning given by Article 3.1 of Chapter 3 of the Agreement.

In Article 3.1, 'production' is defined as methods of obtaining goods, including growing, mining, harvesting, farming, raising, breeding, extracting, gathering, collecting, capturing, fishing, aquaculture, trapping, hunting, manufacturing, producing, processing, or assembling. This list is non-exhaustive and the term 'production' is capable of capturing any other process that falls within the meaning of 'methods', including any currently existing methods that have not been listed and any new methods, which may arise in the future.

Proof of Origin means a document that is in force and that complies with the requirements of Article 3.16 of Chapter 3 of the Agreement.

Under paragraph 1 of Article 3.16 of Chapter 3, any of the following shall be considered as a Proof of Origin:

(a)

a Certificate of Origin issued by an issuing body in accordance with Article 3.17 (Certificate of Origin);

(b)

a Declaration of Origin by an approved exporter in accordance with subparagraph 1(a) of Article 3.18 (Declaration of Origin); or

(c)

a Declaration of Origin by an exporter or producer in accordance with subparagraph 1(b) of Article 3.18 (Declaration of Origin), and subject to implementation in accordance with that Article,

based on information available that the good is originating.

RCEP originating goods means goods that, under new Division 1N of Part VIII of the Customs Act, are RCEP originating goods.

territorial sea has the same meaning as in the Seas and Submerged Lands Act 1973. This definition is taken from Articles 3 and 4 of United Nations Convention on the Law of the Sea.

vessels of a Party has the same meaning as it has in Chapter 3 of the Agreement.

Under the footnote 1 for Article 3.3, 'vessels of that Party' means vessels:

(a)

which are registered in that Party; and

(b)

which are entitled to fly the flag of that Party.

29. New subsection 153ZQB(2) provides that the value of goods for the purposes of new Division 1N 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 3.7 of Chapter 3 of the 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.

30. New subsection 153ZQB(3) provides that, in specifying tariff classifications for the purposes of new Division 1N, the regulations may refer to the Harmonized System. The product-specific rules of origin in Annex 3A to Chapter 3 of the Agreement refer to the tariff classifications of the Harmonized System.

31. New subsection 153ZQB(4) provides that subsection 4(3A) of the Customs Act does not apply for the purposes of new Division 1N. Subsection 4(3A) provides that reference in the Customs Act to the tariff classification of goods is a reference to Schedule 3 to the Customs Tariff Act, which is not the case in new Division 1N.

32. New subsection 153ZQB(5) provides that, despite subsection 14(2) of the Legislation Act 2003 (the Legislation Act), regulations made for the purposes of Division 1N 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.

33. Subsection 153ZQB(5) will override subsection 14(2) of the Legislation Act should it be necessary in order to implement the Agreement by applying, adopting or incorporating an instrument or other writing that is not an Act or disallowable legislative instrument. Any instrument and other writing so incorporated will be limited to those that are required for the operation of the Agreement and will be accessible through the Department's website, and free of charge, to ensure they are readily available and at no cost to persons concerned.

34. Where such references are made in regulations, the explanatory material will explain the basis on which such references are made and indicate where the material referred to can be located by the public.

Subdivision B-Goods wholly obtained or produced in a Party

35. Subdivision B contains new section 153ZQC, which sets out the rules in relation to goods that are wholly obtained or produced in a Party.

Section 153ZQC Goods wholly obtained or produced in a Party

36. New subsection 153ZQC(1) provides that goods are RCEP originating goods if they are wholly obtained or produced in a Party, and either the importer of the goods has, at the time the goods are imported, a Proof of Origin, or a copy of one, for the goods, or Australia has waived the requirement for a Proof of Origin for the goods.

37. New subsection 153ZQC(2) provides that goods are wholly obtained or produced in a Party if, and only if, the goods are:

(a)

plants, or goods obtained from plants, that are grown and harvested, picked or gathered in that Party (including fruit, flowers, vegetables, trees, seaweed, fungi and live plants); or

(b)

live animals born and raised in that Party; or

(c)

goods obtained from live animals raised in that Party; or

(d)

goods obtained from hunting, trapping, fishing, farming, aquaculture, gathering or capturing conducted in that Party; or

(e)

minerals, or other naturally occurring substances, extracted or taken from the soil, waters, seabed or subsoil beneath the seabed in that Party; or

(f)

goods of sea-fishing or other marine life taken by vessels of that Party, or other goods taken by that Party or a person of that Party, from the waters, seabed or subsoil beneath the seabed outside the territorial sea of the Parties and non-Parties provided that:

(i)

for goods of sea-fishing or other marine life taken by vessels of that Party (the relevant Party) from the exclusive economic zone of any Party or non-Party, the relevant Party has the rights to exploit that exclusive economic zone in accordance with international law; or

(ii)

for other goods taken by that Party or a person of that Party, that Party or person has the rights to exploit the waters, seabed or subsoil beneath the seabed in accordance with international law; or

(g)

goods of sea-fishing or other marine life taken by vessels of that Party from the high seas in accordance with international law; or

(h)

goods processed or made on board a factory ship of that Party, exclusively from goods covered by paragraph (f) or (g); or

(i)

either of the following:

(i)

waste and scrap that has been derived from production or consumption in that Party and that is fit only for disposal, for the recovery of raw materials or for recycling purposes;

(ii)

used goods that are collected in that Party and that are fit only for disposal, for the recovery of raw materials or for recycling purposes; or

(j)

goods obtained or produced in that Party solely from goods referred to in paragraphs (a) to (i) or from their derivatives.

38. New section 153ZQC gives effect to Articles 3.2, 3.3, 3.16 and 3.22 of Chapter 3 of the Agreement in respect of rules of origin for goods wholly obtained or produced in a Party to that Agreement. The purpose of this new section is to enable goods that satisfy relevant requirements to be subject to preferential treatment of customs duty in accordance with the Agreement.

Subdivision C-Goods produced from originating materials

Section 153ZQD Goods produced from originating materials

39. Subdivision C contains new section 153ZQD, which sets out the rules in relation to goods that are produced exclusively from originating materials.

40. Goods that are produced exclusively from originating materials are RCEP originating goods if they are produced entirely in a Party from originating materials only and either the importer of the goods has, at the time the goods are imported, a Proof of Origin, or a copy of one, for the goods, or Australia has waived the requirement for a Proof of Origin for the goods.

41. New section 153ZQD gives effect to Articles 3.2, 3.10, 3.16 and 3.22 of Chapter 3 of the Agreement in respect of rules of origin for goods produced exclusively from originating materials. The purpose of this new section is to enable goods that satisfy relevant requirements to be subject to preferential treatment of customs duty in accordance with the Agreement.

Subdivision D-Goods produced from non-originating materials

42. Subdivision D contains new section 153ZQE, which sets out the rules in relation to goods produced in a Party from non-originating materials.

Section 153ZQE Goods produced from non-originating materials

43. New section 153ZQE gives effect to Articles 3.2, 3.4, 3.5, 3.7, 3.12, 3.16 and 3.22 of Chapter 3 of the Agreement in respect of rules of origin for goods produced from non-originating materials. The purpose of this new section is to specify the requirements that must be satisfied in order for goods to be subject to preferential treatment of customs duty in accordance with the Agreement.

44. New subsection 153ZQE(1) provides that goods are RCEP originating goods if:

(a)

they are classified to a Chapter, heading or subheading of the Harmonized System that is covered by the table in Annex 3A to Chapter 3 of the Agreement; and

(b)

they are produced entirely in a Party from non-originating materials only or from non-originating materials and originating materials; and

(c)

the goods satisfy the requirements applicable to the goods in that Annex; and

(d)

either:

(i)

the importer of the goods has, at the time the goods are imported, a Proof of Origin, or a copy of one, for the goods; or

(ii)

Australia has waived the requirement for a Proof of Origin for the goods.

45. This provision applies the product-specific rules by direct reference to Annex 3A to Chapter 3 of the Agreement. This applies both the product-specific rules and any product specific process rules. The direct application of Annex 3A does not change the operation of these rules as set out in that Annex. Rather, as the Agreement is defined to be the Agreement as amended from time to time, this will ensure that the current Annex in the Agreement will be applied. It will also ensure that any updated version of the Annex that would be contained in the Agreement when the Parties implement later versions of the Harmonized System will be applied as soon as any provisions of the Agreement and any of Australia's domestic treaty-making procedures that pertain to the adoption of an updated Annex are completed.

46. New subsection 153ZQE(2) provides that, without limiting paragraph 153ZQE(1)(c), a requirement may be specified in the table in Annex 3A to Chapter 3 of the Agreement by using an abbreviation that is given a meaning for the purpose of that Annex. For example, the abbreviation of RVC40 in the Annex means a regional value content of at least 40 per cent. Another example of an abbreviation in the Annex is 'CC', which is an abbreviation for Change of Chapter.

Change in tariff classification

47. New subsection 153ZQE(3) refers to the first of several requirements that may be prescribed in regulations made for the purposes of Subdivision D. The subsection provides that, if a requirement that applies in relation to the goods is that all non-originating materials used in the production of the goods must have undergone a particular change in tariff classification, the regulations may prescribe when a non-originating material used in the production of the goods is taken to satisfy the change in tariff classification.

48. The regulations made under this head of power include provisions to give effect to the cumulative rules of origin contained in Article 3.4 of Chapter 3 of the Agreement where the non-originating materials that are used or consumed in the production of the good do not satisfy the change in tariff classification.

49. The concept of the change in tariff classification requirement applies to non-originating materials. Goods that have been sourced outside a Party to the Agreement and that are used in the production of other goods are non-originating materials. Goods sourced from a Party to the Agreement that have not fulfilled the requirements of new Division 1N and that are used in the production of other goods are also non-originating materials.

50. Non-originating materials used to produce other goods may not have the same classification under the Harmonized System as the final good. For example, non-originating materials used to produce a good may be classified to one tariff classification before the production process, and the final good may be classified under a different tariff classification after the production process. To satisfy the requirement of classification change, and therefore satisfy a requirement for the purposes of claiming preferential treatment of customs duty in accordance with the Agreement, the goods concerned must be sufficiently transformed such that they can be classified to a different tariff classification to that of the non-originating materials from which they are produced.

51. For example, frozen fish fillets (classified to tariff heading 0304) are produced from fish caught in Thailand and combined with herbs and spices produced in Peru (which is not a Party to the Agreement) (classified to tariff headings 0907 to 0910) to make crumbed fish fillets (classified to tariff code 1604 in Chapter 16 of the Harmonized System). The applicable tariff change for crumbed fish is 'a change to Chapter 16 from any other chapter'. As the herbs and spices are classified to Chapter 9 of the Harmonized System, these non-originating materials meet the tariff change requirement, considering that the fish concerned is produced by Thailand, and is therefore an originating material and is not required to change its classification.

52. As per the above example, it is necessary for the tariff classification of the final good and each of the goods that are non-originating materials used in the production of the final goods to be known in order to determine the applicable change in tariff classification.

53. New subsection 153ZQE(4) provides that, if:

(a)

a requirement that applies in relation to the goods is that all non-originating materials used in the production of the goods must have undergone a particular change in tariff classification; and

(b)

the goods are classified to any of Chapters 1 to 97 of the Harmonized System; and

(c)

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 is taken to be satisfied if the total value of the non-originating materials covered by paragraph (c) does not exceed 10% of the customs value of the goods.

54. This provision allow for the change in tariff requirement 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 total value of the goods. This provision gives effect to the de minimis rule under paragraph 1(a) of Article 3.7 of the Agreement.

55. The value of non-originating materials for the purposes of subsection 153ZQE(4) is to be worked out in accordance with the method that will be included in the regulations.

56. New subsection 153ZQE(5) provides that, if:

(a)

a requirement that applies in relation to the goods is that all non-originating materials used in the production of the goods must have undergone a particular change in tariff classification; and

(b)

the goods are classified to any of Chapters 50 to 63 of the Harmonized System; and

(c)

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 is taken to be satisfied if the total weight of the non-originating materials covered by paragraph (c) does not exceed 10% of the total weight of the goods.

57. This provision allows for the change in tariff classification requirement to also be satisfied in relation to certain goods if the total weight 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 total weight of the goods. This provision gives effect to the de minimis rule under paragraph 1(b) of Article 3.7 of the Agreement.

Regional value content

58. New subsection 153ZQE(6) provides that, if a requirement that applies in relation to the goods is that the goods must have a regional value content not less than a particular percentage worked out in a particular way:

(a)

the regional value content of the goods is to be worked out in accordance with the Agreement; or

(b)

if the regulations prescribe how to work out the regional value content of the goods, the regional value content of the goods is to be worked out in accordance with the regulations.

59. This provision provides the head of power to prescribe formulae for calculating regional value content and gives effect to Article 3.5 of Chapter 3 of the Agreement.

Section 153ZQF Packaging materials and containers

60. New section 153ZQF gives effect to Article 3.8 of Chapter 3 of the Agreement in relation to packaging materials and containers for retail sale.

61. Subsection 153ZQF(1) gives effect to paragraph 2 of Article 3.8 of Chapter 3 of the Agreement and 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 Interpretation Rules;

then the packaging material or container is to be disregarded for the purposes of this Subdivision.

62. However, in accordance with paragraph 3 of Article 3.8 of Chapter 3 of the Agreement, new subsection 153ZQF(2) provides one exception to subsection 153ZQF(1). This exception applies where the goods are required to have a regional value content worked out in a particular way. In this circumstance, the regulations must provide for 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.

63. Without this provision, the value of packaging materials and containers would normally not form part of the value of materials that are used in the production of the goods.

64. The note to subsection 153ZQF(2) explains that the value of packaging materials and containers for the purposes of this subsection is to be worked out in accordance with the regulations.

Section 153ZQG Accessories, spare parts, tools or instructional or other information materials

65. New section 153ZQG gives effect to Article 3.9 of Chapter 3 of the Agreement in relation to goods that are accessories, spare parts, tools and instructional or other information materials.

66. New subsection 153ZQG(1) ) gives effect to paragraph 1 of Article 3.9 of Chapter 3 of the Agreement provides that, if:

(a)

goods are imported into Australia with accessories, spare parts, tools or instructional or other information materials; and

(b)

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

(c)

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

then the accessories, spare parts, tools or instructional or other information materials are to be disregarded for the purposes of this Subdivision.

67. However, new subsection 153ZQG(2) gives effect to paragraph 2 of Article 3.9 of Chapter 3 of the Agreement and provides that, if a requirement that applies in relation to the goods is that the goods must have a regional value content of not less than a particular percentage worked out in a particular way, the regulations must provide for the following:

(a)

the value of the accessories, spare parts, tools or instructional or other information materials to be taken into account for the purposes of working out the regional value content of the goods;

(b)

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.

68. The note to this subsection indicates that the value of accessories, spare parts, tools or instructional or other information materials is to be worked out in accordance with the regulations.

Section 153ZQH Non-qualifying operations or processes

69. New subsection 153ZQH(1) provides that goods are not RCEP originating goods under this Subdivision merely because of the following operations or processes:

(a)

preserving operations to ensure that the goods remain in good condition for the purpose of transport or storage of the goods;

(b)

packaging or presenting the goods for transportation or sale;

(c)

simple processes, consisting of sifting, screening, sorting, classifying, sharpening, cutting, slitting, grinding, bending, coiling or uncoiling;

(d)

affixing or printing of marks, labels, logos or other like distinguishing signs on the goods or on their packaging;

(e)

mere dilution with water or another substance that does not materially alter the characteristics of the goods;

(f)

disassembly of products into parts;

(g)

slaughtering (within the meaning of Article 3.6 of Chapter 3 of the Agreement) of animals. That is, the mere killing of animals;

(h)

simple painting or polishing operations;

(i)

simple peeling, stoning or shelling;

(j)

simple mixing of goods, whether or not of different kinds;

(k)

any combination of things referred to in paragraphs (a) to (j).

70. New subsection 153ZQH(2) defines the term 'simple' to have the same meaning as it has in Article 3.6 of Chapter 3 of the Agreement. That is, an activity which does not need special skills, or machines, apparatus, or equipment especially produced or installed for carrying out the activity.

71. New section 153ZQH has effect such that, if any of the above operations are the only operations that take place in a Party, in relation to goods (either alone or as a combination), this will not amount confer originating status on the goods. For example, if non-originating goods such as spices from Peru are packaged into bottles in Korea, this will not confer the status of RCEP originating goods on the spices. This section gives effect to Article 3.6 of Chapter 3 of the Agreement.

Subdivision E-Consignment

72. Subdivision F contains new section 153ZQI, which deals with the consignment requirements applicable to RCEP originating goods in accordance with the Agreement.

Section 153ZQI Consignment

73. New subsection 153ZQI(1) provides that goods are not RCEP originating goods under Division 1N if the goods are transported through one or more Parties (other than the Party from which the goods are exported or Australia) or one or more non Parties and either or both of the following apply:

(a)

the goods undergo further processing in those Parties or non-Parties (other than logistics activities such as unloading, reloading, storing or any other operation that is necessary to preserve the goods in good condition or to transport the goods to Australia);

(b)

while the goods are in those Parties or non-Parties, the goods do not remain under the control of the customs authorities of those Parties or non-Parties at all times.

74. This provision will not apply in relation to transport through the exporting Party or the importing Party.

75. New subsection 153ZQI(2) provides that section 153ZQI applies despite any other provision of new Division 1N. This means that even if goods are RCEP originating goods in accordance with any other provisions of Division 1N, if they come within the terms of subsection 153ZQI(1) they will not be RCEP originating goods.

76. The section gives effect to Article 3.15 of Chapter 3 of the Agreement which deals with transport through Parties and non-Parties.

Subdivision F-Regulations

77. Subdivision G contains new section 153ZQJ, which provides a head of power to prescribe regulations to make provisions for and in relation to determining whether goods are RCEP originating goods under new Division 1N.

Part 2-Verification powers

Item 4 After Division 4K of Part VI

78. This item amends Part VI of the Customs Act to insert new Division 4L, which is titled 'Exportation of goods to Parties to the Regional Comprehensive Economic Partnership Agreement'.

79. New Division 4L contains new sections 126AQA, 126AQB, 126AQC and 126AQD. These new sections impose obligations on people who export originating goods to a Party to the Agreement and who wish to obtain preferential treatment of customs duty in respect of those goods in that Party, and on people who produce such goods. These provisions give effect to Article 3.27 of Chapter 3 of the Agreement.

Section 126AQA Definitions

80. New section 126AQA defines the term 'Agreement', 'customs authority', 'Party', 'producer', 'production' and 'RCEP customs official' for the purposes of new Division 4L. With the exception of the terms 'RCEP customs official' and 'producer', the terms have the same meaning as defined in new Division 1N of Part VIII of the Customs Act, inserted by item 3 of Part 1 of the Bill.

81. 'RCEP customs official' is defined under this section to mean a person representing the customs authority of a Party to the Agreement. The term 'customs authority' is defined to have the meaning given by Article 4.1 of Chapter 4 of the Agreement and means any authority that is responsible under the law of each Party for the administration and enforcement of its customs laws and regulations.

Section 126AQB Record keeping obligations

82. New section 126AQB inserts a head of power to prescribe record keeping obligations. These record keeping obligations will apply in respect of goods that are exported from Australia to a Party to the Agreement.

83. New subsection 126AQB(1) enables regulations to prescribe record keeping obligations that apply in relation to goods that are exported to a Party and that are claimed to be originating goods, in accordance with Chapter 3 of the Agreement, for the purpose of obtaining a preferential tariff in the Party.

84. It is intended that the method of keeping the documents, such as the length of time for which they must be kept and the manner in which they must be kept, will be similar to current record keeping obligations under the Customs Act. However, the type of documents that will be required to be kept will be much broader than current requirements. The requirements will extend to all records relating to the origin of the goods for which preferential tariff treatment is claimed and may include, amongst other things, records associated with the tariff classification of the goods and the origin or value of the materials used to produce the goods.

85. New subsection 126AQB(2) provides that the regulations made for the purpose of subsection 126AQB(1) may impose obligations on an exporter or producer of goods.

Section 126AQC Power to require records

86. Under Article 3.24 of Chapter 3 of the Agreement, the importing party may take action to verify the eligibility of goods for preferential treatment, including requesting the supply of information relating to the production or export of the goods. New section 126AQC gives effect to this Article by imposing a requirement on exporters and producers to produce records to authorised officers, and empowering authorised officers to disclose records to RCEP customs officials.

87. Subsection 126AQC(1) provides that an authorised officer (as defined in section 4 of the Customs Act) may require a person who is subject to record keeping obligations under regulations made for the purposes of section 126AQB to produce to the officer such of those records as the officer requires.

88. The note to new subsection 126AQC(1) indicates that, where an authorised officer has requested a person who is subject to record keeping obligations under regulations made for the purposes of section 126AQB, a failure to produce documents or records by that person may be an offence under section 243SB of the Customs Act. The note also indicates that, under section 243SC of the Customs Act, a person does not have to produce a record if doing so would tend to incriminate the person.

89. New subsection 126AQC(2) provides that an authorised officer (as defined in section 4 of the Customs Act) may disclose any records so produced to a RCEP customs official for the purpose of verifying a claim for a preferential tariff in a Party. Records obtained by an authorised officer under new section 126AQC may be 'Immigration and Border Protection information' within the meaning of the Australian Border Force Act 2015 (the ABF Act).

90. Section 42 of the ABF Act prohibits the disclosure of Immigration and Border Protection information except, amongst other things, where the disclosure is authorised by or under a law of the Commonwealth.

91. By including an express provision in the Customs Act to permit the disclosure of information that may be Immigration and Border Protection information to a RCEP customs official, the disclosure of such information is required or authorised by a law of the Commonwealth for the purposes of Part 6 of the ABF Act.

Section 126AQD Power to ask questions

92. New subsection 126AQD(1) provides that an authorised officer (as defined in section 4 of the Customs Act) may require a person who is an exporter or producer of goods that:

(a)

are exported to a Party; and

(b)

are claimed to be originating goods, in accordance with Chapter 3 of the Agreement, for the purpose of obtaining a preferential tariff in the Party;

to answer questions in order to verify the origin of the goods.

93. The power to ask questions in the circumstances set out in this section is considered a necessary adjunct to the power to require records in new section 126AQC.

94. The note to new subsection 126AQD(1) indicates that, where an authorised officer has requested a person to answer questions in order to verify the origin of goods in accordance with this subsection, a failure to answer questions by that person may be an offence under section 243SA of the Customs Act. The note also indicates that, under section 243SC of the Customs Act, a person does not have to produce a record if doing so would tend to incriminate the person.

95. Subsection 126AQD(2) enables an authorised officer (as defined in section 4 of the Customs Act), for the purpose of verifying a claim for a preferential tariff in a Party, to disclose any answers to questions answered in accordance with new subsection 126AQD(1) to a RCEP customs official.

96. The answers to questions obtained by an authorised officer under new section 126AQD may also be 'Immigration and Border Protection information' within the meaning of Part 6 of the ABF Act and therefore cannot be disclosed to a RCEP customs official except as allowed by Part 6. By including an express provision in the Customs Act allowing for this information to be disclosed to a RCEP customs official, the disclosure is required or authorised by a law of the Commonwealth for the purposes of Part 6 of the ABF Act.

Part 3-Application provisions

Item 5 Application provisions

97. This item operates such that amendments made by Part 1 of Schedule 1 to the Bill, when enacted, apply in relation to:

(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.

98. This item also provides that the amendment made by Part 2 of Schedule 1 to the Bill, when enacted, applies in relation to goods exported to the Party on or after the commencement of that Part (whether the goods were produced before, on or after that commencement).