House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Minister for Immigration and Border Protection, the Honourable Alex Hawke MP)

OUTLINE

The purpose of the Customs Amendment (Singapore-Australia Free Trade Agreement Amendment Implementation) Bill 2017 (the Bill) is to amend the Customs Act 1901 (the Customs Act) to give effect to new Chapters in the Singapore-Australia Free Trade Agreement (SAFTA) inserted by the Agreement to Amend the Singapore-Australia Free Trade Agreement (the Amendment Agreement). The first mentioned Agreement as amended is hereon referred as the "amended Agreement".

In particular, the Bill will:

•

introduce new rules of origin for goods that are imported into Australia from Singapore;

•

introduce new procedures to claim preferential tariff treatment for goods that are Singaporean originating goods; and

•

extend the record keeping obligations that apply to goods exported to Singapore that are claimed to be the produce and manufacture of Australia to also apply to Australian originating goods that are exported to Singapore.

To give effect to the preferential entry of goods under the amended Agreement, the amendments contained in the Bill provide new rules for determining whether goods are Singaporean originating goods. These new rules of origin will operate as an alternative to the framework for goods claimed to be the produce or manufacture of Singapore for a transitional period of three years, after which the latter framework is repealed and only goods that are determined to be Singaporean originating goods are subject to a preferential rate of customs duty.

The amendments contained in the Bill will be operative the later of the day on which this Act receives the Royal Assent and the day on which the Amendment Agreement, done at Canberra on 16 June 2017, enters into force for Australia.

A separate complementary Customs Tariff Amendment (Singapore-Australia Free Trade Agreement Amendment Implementation) Bill 2017 (the Customs Tariff Amendment Bill) will amend the Customs Tariff Act 1995 (the Customs Tariff Act) to make complementary amendments to set out the preferential rates of customs duty for Singaporean originating goods.

FINANCIAL IMPACT STATEMENT

Implementing the amended Agreement is expected to have negligible cost to revenue over the forward estimates.

.. Not zero, but rounded to zero.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

A Statement of Compatibility with Human Rights has been completed in relation to the amendments in this Bill and assesses that the amendments are compatible with Australia's human rights obligations. A copy of the Statement of Compatibility with Human Rights is at Attachment A.

REGULATION IMPACT STATEMENT

A regulation impact statement has been completed for the Bill and a copy of it is at Attachment B.

Notes on Clauses

Preliminary

Clause 1 Short title

1. This clause provides for the Bill, when enacted, to be cited as the Customs Amendment (Singapore-Australia Free Trade Agreement Amendment Implementation) Act 2017.

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, which with the enactment of the Bill will become "Sections", to commence on the day it receives Royal Assent.

4. Table item 2 provides for Schedule 1 of the Bill, when enacted, to commence on the later of the day this Act receives Royal Assent, or the day the Amendment Agreement, done at Canberra on 13 October 2016, enters into force for Australia. However, the provisions in Schedule 1 do not commence at all if the Amendment Agreement does not enter into force for Australia. The Minister must announce the day on which the Amendment Agreement enters into force for Australia by notifiable instrument.

5. Table item 3 provides that Schedule 2 to the Bill, when enacted, will commence on the third anniversary of the day on which the provisions covered by table item 2 commence (the Schedule 1 provisions). The delayed commencement of Schedule 2 is to allow for a transitional period of three years in accordance with amending clause 3 of the Amendment Agreement.

6. Amending clause 3 of the Amendment Agreement provides for the requirements in new Chapter 3 of the amended Agreement to operate as an alternative to the requirements under the previous Chapter 3 (please see the note on clauses for Schedule 2).

Clause 3 Schedules

7. This clause is the formal enabling provision for the Schedule to the Bill, providing that each Act specified in a Schedule is amended or repealed in accordance with the applicable items in the Schedule. In the context of the Bill, the Customs Act is being amended.

8. Clause 3 also provides that any other items of the Schedule have effect according to their terms. This is a standard enabling clause for transitional, savings and application items in amending legislation.

Schedule 1-Main amendments

Part 1-Singaporean originating goods

Customs Act 1901

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

9. Section 105B of the Customs Act 1901 (the Customs Act) sets out circumstances where the liability to pay import duty on excise-equivalent goods is wholly or partly extinguished. "Excise-equivalent goods" is defined in section 9 of the Customs Regulation 2015 to mean the goods prescribed under clause 1 of Schedule 1 to that Regulation.

10. 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 5, 6, 7, 8, 9, 10, 11 or 12 to that Act that relates to a subheading mentioned.

11. As part of the implementation of the amended Agreement, a separate Customs Tariff Amendment Bill will in part insert new Schedule 4A into the Customs Tariff Act. New Schedule 4A will provide for excise-equivalent rates of duty on certain alcohol, tobacco, fuel petroleum products in accordance with the amended Agreement, and the related preferential rates of customs duty.

12. This item amends subparagraph 105B(3)(b)(ii) of the Customs Act to insert a reference to Schedule 4A of the Customs Tariff Act.

13. The purpose of this amendment is to ensure the collection of the correct import duties for biofuels and biofuel blends imported under the amended Agreement.

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

14. Subsection 105B(4) of the Customs Act defines in part "biofuel blend" 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.

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

16. For the same purpose as item 1 above, the purpose of this amendment is to ensure the collection of the correct import duties for biofuels and biofuel blends imported under the amended Agreement.

Item 3 After Division 1B of Part VIII

17. This item amends the Customs Act to insert new Division 1BA into Part VIII.

18. The new Division is headed "Singaporean originating goods" and sets out the new rules for determining whether goods are Singaporean originating goods and therefore eligible for a preferential rate of customs duty under the Customs Tariff Act applying to such goods that are imported into Australia. These new rules are being inserted to give effect to the amended Agreement, in particular, new Chapter 3.

19. The new Division contains seven subdivisions (Subdivision A to Subdivision G) which are set out below.

Subdivision A-Preliminary

20. Subdivision A contains a simplified outline of Division 1BA and the interpretation provision for that Division.

New Section 153XC Simplified outline of this Division

21. New section 153XC sets out a simplified outline of each of the Subdivision B to Subdivision G of new Division 1BA.

New section 153XD Interpretation

22. New subsection 153XD(1) sets out new definitions for the purposes of Division 1BA as follows:

Agreement means the Singapore-Australia Free Trade Agreement done at Singapore on 17 February 2003, as amended from time to time. The note to this definition indicates that in 2017, the text of the amended Agreement will be accessible through Australian Treaties Library on the AustLII internet website.

aquaculture has the meaning given by Article 1 of new Chapter 3 of the amended Agreement. This term is included in the definition of production.

Australian originating goods means goods that are Australian originating goods under a law of Singapore that implements the amended Agreement.

certification of origin means a certificate that is in force and that complies with the requirements of Article 18 of new Chapter 3 of the amended Agreement. Article 18 sets out the matters required, including in new Annex 3-A, to be included in a certification of origin.

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 that in 2017, the text of the Convention is accessible through the Australian Treaties Library on the AustLII internet website.

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

enterprise has the meaning given by Article 1 of new Chapter 3 of the amended Agreement. This term is included in the definition of person of Singapore.

Harmonized System means the Harmonized Commodity Description and Coding System (as in force from time to time) that is established by or under the Convention.

The Harmonized System (HS) is the worldwide classification system that has been adopted by all countries that are members of the World Customs Organization. In Australia, the HS has been adopted in the Customs Tariff Act. The HS organises goods according to the degree of manufacture, and assigns classification numbers to all goods. It is arranged into 96 chapters with each chapter being divided into headings, subheadings, and tariff classifications. Under the HS, the chapter, heading (4 digits), and subheading numbers (6 digits) for all goods are adopted by countries using the HS. The Australian Customs Tariff uses an additional two digits for national classification to create 8 digit tariff items.

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

including:

(c)

fuel (within its ordinary meaning); and

(d)

catalysts and solvents; and

(e)

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

(f)

tools, dies and moulds; and

(g)

spare parts and materials; and

(h)

lubricants, greases, compounding materials and other similar goods.

This term together with the definition of "originating material", new Subdivision C and new Subdivision D implements Article 15 of new Chapter 3 of the amended Agreement, which deals with indirect materials.

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

national, for Singapore, has the same meaning as it has in Chapter 3 of the amended Agreement. This meaning provides that a national of Singapore include a person who is a citizen of Singapore within the meaning of its Constitution and its domestic laws, or a permanent resident.

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 Division 1BA in their own right. For example, where frozen crumbed fish fillets processed in Singapore from fish caught in Singapore, coated with herbs and spices that are produced in Thailand, 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 new Chapter 3 of the amended Agreement, which is a Party that is not a Party to that Agreement.

This term is relevant for the purposes of new paragraph 153XE(2)(i) and section 153XJ of the Customs Act, which deal with matters relating to certain goods taken outside by a person of Singapore from the seabed or subsoil beneath the seabed outside the territory of Singapore, and consignment, respectively.

originating materials means:

(a)

Singaporean originating goods that are used in the production of other goods; or

(b)

Australian originating goods that are used in the production of other goods; or

(c)

recovered goods derived in the territory of Australia, or in the territory of Singapore, and used in the production of, and incorporated into, remanufactured goods; or

(d)

indirect materials.

In some circumstances, in order to determine whether goods that are imported into Australia are Singaporean 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 Subdivision C and Subdivision D).

Originating materials include those goods that are used to produce other goods and that are Singaporean originating goods, which means that in their own right they satisfy the requirements of new Division 1BA.

person of Singapore means:

(a)

a national of Singapore; or

(b)

an enterprise of Singapore.

production means growing, cultivating, raising, mining, harvesting, fishing, trapping, hunting, capturing, collecting, breeding, extracting, aquaculture, gathering, manufacturing, processing or assembling.

recovered goods means goods in the form of one or more individual parts that:

(a)

have resulted from the disassembly of used goods; and

(b)

have been cleaned, inspected, tested or processed as necessary for improvement to sound working condition.

This term is included in the definition of "remanufactured goods" to give effect to Article 4 of new Chapter 3 of the amended Agreement.

remanufactured goods means goods that:

(a)

are classified to any of Chapters 84 to 90, or to heading 94.02, of the HS; and

(b)

are entirely or partially composed of recovered goods; and

(c)

have a similar life expectancy to, and perform the same as or similar to, new goods:

i.

that are so classified; and

ii.

that are not composed of any recovered goods; and

(d)

have a factory warranty similar to that applicable to such new goods.

Singaporean originating goods means goods that, under this Division, are Singaporean originating goods.

territory of Australia means territory within the meaning, so far as it relates to Australia, of Article 2 of Chapter 1 of the Agreement. In Article 2 of new Chapter 1 of the amended Agreement, the territory of Australia:

•

excludes all in relation to Australia all external territories other than the Territory of Norfolk Island, the Territory of Christmas Island, the Territory of Cocos (Keeling) Islands, the Territory of Ashmore and Cartier Islands, the Territory of Heard Island and McDonald Islands, and the Coral Sea Islands Territory; and

•

includes the Australia's air space, territorial sea, contiguous zone, exclusive economic zone and continental shelf over which Australia exercises sovereign rights or jurisdiction in accordance with international law.

territory of Singapore means territory within the meaning, so far as it relates to Singapore, of Article 2 of Chapter 1 of the Agreement. In Article 2 of new Chapter 1 of the amended Agreement, the territory of Singapore includes its land territory, internal waters and territorial sea, as well as any maritime area situated beyond the territorial sea which has been or might in the future be designated under its national law, in accordance with international law, as an area within which Singapore may exercise sovereign rights or jurisdiction with regards to the sea, the sea-bed, the subsoil and the natural resources.

23. New subsection 153XD(2) provides that the regional value content of goods for the purposes of Division 1BA is to be worked out in accordance with the regulations. The regulations may prescribe different methods for working out the regional value content of different goods.

24. New subsection 153XD(3) provides that the value of goods for the purposes of Division 1BA 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 10 of new Chapter 3 in the amended 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.

25. New subsection 153XD(4) provides that in prescribing tariff classifications for the purposes of Division 1BA the regulations may refer to the HS. The Product-Specific Rules of Origin in new Annex 2 of the amended Agreement refer to the tariff classifications of the HS.

26. New subsection 153XD(5) provides that subsection 4(3A) of the Customs Act does not apply for the purposes of Division 1BA. Subsection 4(3A) provides that reference in the Customs Act to the tariff classification of goods is a reference to Schedule 3 of the Customs Tariff Act, which is not the case in new Division 1BA.

27. New subsection 153XD(6) provides that despite subsection 14(2) of the Legislation Act 2003, regulations made for the purposes of Division 1BA 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. The new subsection 153XD(6) is included to ensure there is an appropriate delegation of legislative power should it be necessary in order to implement the amended Agreement by applying, adopting or incorporating an instrument or other writing that is not an Act or disallowable legislative instrument. For example, in implementing other FTAs, this provision has enabled the regulations to refer to the general accounting principles of a country other than Australia for the purposes of the regional value content calculations.

Subdivision B-Goods wholly obtained or produced entirely in Singapore or in Singapore and Australia

28. Subdivision B contains new section 153XE, which sets out the rules in relation to goods that are wholly obtained or produced entirely in Singapore or in Singapore and Australia.

29. New subsection 153XE(1) will provide that goods are Singaporean originating goods if they are wholly obtained or produced entirely in Singapore or in Singapore and Australia, and either the importer of the goods has, at the time the goods are imported, a certification of origin, or a copy of one, for the goods; or Australia has waived the requirement for a certification of origin for the goods.

30. New subsection 153XE(2) provides that goods are wholly obtained or produced entirely in Singapore or in Singapore and Australia if, and only if, the goods are:

(a)

plants, or goods obtained from plants, that are grown, cultivated, harvested, picked or gathered in the territory of Singapore or in the territory of Singapore and the territory of Australia; or

(b)

live animals born and raised in the territory of Singapore or in the territory of Singapore and the territory of Australia; or

(c)

goods obtained in the territory of Singapore from live animals referred to in paragraph (b) above; or

(d)

animals obtained by hunting, trapping, fishing, gathering or capturing in the territory of Singapore; or

(e)

goods obtained from aquaculture conducted in the territory of Singapore; or

(f)

minerals, or other naturally occurring substances, extracted or taken from the territory of Singapore; or

(g)

fish, shellfish or other marine life taken from the high seas by vessels that are entitled to fly the flag of Singapore; or

(h)

goods produced from goods referred to in paragraph (g) above on board factory ships that are registered, listed or recorded with Singapore and are entitled to fly the flag of Singapore; or

(i)

goods, other than fish, shellfish or other marine life, taken by Singapore, or a person of Singapore, from the seabed, or subsoil beneath the seabed, outside the territory of Singapore, and beyond areas over which non-Parties exercise jurisdiction, but only if Singapore, or the person of Singapore, has the right to exploit that seabed or subsoil in accordance with international law; or

(j)

waste or scrap that has been derived either from production in the territory of Singapore or from used goods that are collected in the territory of Singapore and that are fit only for the recovery of raw materials; or

(k)

goods produced entirely in the territory of Singapore, or entirely in the territory of Singapore and the territory of Australia, exclusively from goods referred to in paragraphs (a) to (j), above, or from their derivatives.

31. The purpose of new section 153XE is to give effect to Articles 2(a), 3, 21 and 22.1 of new Chapter 3 of the amended Agreement sets out the rules for goods wholly obtained or produced.

Subdivision C-Goods produced in Singapore, or in Singapore and Australia, from originating materials

32. Subdivision C contains new section 153XF, which sets out the rule in relation to goods that are produced entirely in the territory of Singapore or entirely in the territory of Singapore and the territory of Australia from originating materials only. Such goods are Singaporean originating goods where the importer of the goods has, at the time the goods are imported, a certification of origin, or a copy of one, for the goods, or Australia has waived the requirement for a certification of origin for the goods.

33. The purpose of new section 153XF is to give effect to Articles 2(b), 21 and 22.1 of new Chapter 3 of the amended Agreement, which sets out the rules for goods produced exclusively from originating material.

Subdivision D-Goods produced in Singapore, or in Singapore and Australia, from non-originating materials

34. Subdivision D contains new sections 153XG and 153XH, which set out the rules for determining whether goods that are produced entirely in the territory of Singapore, or entirely in the territory of Singapore and the territory of Australia, from non-originating materials only, or from non-originating materials and originating materials, are Singaporean originating goods.

Section 153XG Goods produced in Singapore, or in Singapore and Australia, from non-originating materials

35. New subsection 153XG(1) provides that goods are Singaporean originating goods if

(a)

they are classified to a Chapter, heading or subheading of the HS specified in column 1 of the table in Part 2 of Schedule 1 to the regulations made for the purposes of Subdivision D; and

(b)

they are produced entirely in the territory of Singapore, or entirely in the territory of Singapore and the territory of Australia, from non-originating materials only or from non-originating materials and originating materials; and

(c)

each requirement that is specified in the regulations to apply in relation to the goods is satisfied; and

(d)

either:

(i)

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

(ii)

Australia has waived the requirement for a certification of origin for the goods.

36. The table in Schedule 1 to the regulations made for the purposes of Subdivision D will incorporate the new Product-Specific Rules relating to change in tariff classification, regional value content and other rules for the purpose of determining whether goods are Singaporean originating goods. Column 1 of this table will set out the tariff classifications, column 2 will set out the description of the goods and column 3 will set out the new Product-Specific Rules.

Change in tariff classification

37. New subsection 153XG(2) refers to the first of several requirements that may be prescribed in regulations made for the purposes of Subdivision D. It provides that the regulations may specify that each non-originating material used in the production of the goods is required to satisfy a specified change in tariff classification.

38. New subsection 153XG(3) provides that the regulations made for the purposes of Subdivision D may also prescribe when a non-originating material used in the production of the goods is taken to satisfy the change in tariff classification. Regulations made under these heads of power would include provisions to give effect to the Accumulation provision contained in Article 9 of new Chapter 3 of the amended Agreement, and would apply where the non-originating materials that are used or consumed in the production of the good do not satisfy the change in tariff classification.

39. The concept of the change in tariff classification applies to non-originating materials. Goods that have been sourced from outside Singapore or Australia and that are used in the production of other goods are non-originating materials. Goods sourced from within Singapore or Australia that have not fulfilled the requirements of Division 1BA and that are used in the production of other goods are also non-originating materials.

40. All non-originating materials used to produce other goods may not have the same classification under the HS as the final good into which they are produced. This means that the goods must be classified under one tariff classification before the production process and under a different tariff classification after the production process. This approach ensures that sufficient transformation of materials has occurred within the territory of Singapore, or the territory of Singapore and the territory of Australia, to justify the claim that the goods are Singaporean originating goods.

41. For example, frozen fish fillets (HS 0304) are produced from fish caught in Singapore and combined with herbs and spices produced in Thailand (HS 0907 - 0910) to make crumbed fish fillets (HS 1604 in Chapter 16). The applicable tariff change for crumbed fish is "a change to Chapter 16 from any other chapter or no change in tariff classification is required provided that there is a regional value content (RVC) of at least 40%". As the herbs and spices are classified to Chapter 9, these non-originating materials meet the tariff change requirement (the fish is the produce of Singapore and is therefore an originating material and is not required to change its classification). As the first product-specific rule has been fulfilled, the RVC term does not need to be considered.

42. In order to determine which is the applicable change in tariff classification, the tariff classification of the final goods and each of the goods that are non-originating materials used in the production of the goods need to be known.

43. New subsection 153XG(4) provides that the change in tariff classification is also taken 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 customs value of the goods.

44. The provisions of subsection 153XG(4) incorporate the de minimis provisions that are set out in Article 10 of Chapter 3 of the amended Agreement. Therefore, even if all the non-originating materials used to produce a final good do not satisfy a particular change in tariff classification, the final goods may still be Singaporean originating goods because the change in tariff classification will be taken to be satisfied.

45. New subsection 153XG(5) provides that, if the requirement in subsection 153XG(2) applies in relation to the goods; and the goods are classified to any of Chapters 50 to 63 of the HS; and 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 referred to in subsection 153XG(2) is taken to be satisfied if the total weight of those 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.

46. The value of non-originating materials for the purposes of this section is to be worked out in accordance with the method that will be included in the regulations.

Regional value content

47. New subsection 153XG(6) provides that the regulations may also specify a regional value content of at least a prescribed percentage under a prescribed method.

48. New subsection 153XG(7) provides that, if:

(a)

the goods are required to have a regional value content of at least a particular percentage under a particular method; and

(b)

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

(c)

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

(d)

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

then the regulations must require the value of 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, for the purposes of working out the regional value content of the goods.

49. Without this provision, the value of accessories, spare parts, tools or instructional or other information materials would not normally form part of the value of materials that are used in the production of the underlying goods.

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

51. New subsection 153XG(8) provides that section 153XI should be disregarded for the purposes of subsection 153XG(7) when working out whether the accessories, spare parts, tools or instructional or other information materials are originating or non-originating materials.

No limit on regulations

52. New subsection 153XG(9) provides that subsections (2) and (6) do not limit paragraph (1)(c). It is proposed that the regulations will include other requirements in addition to change in tariff classification and regional value content requirements.

53. For example, in addition to meeting a tariff change requirement, in respect of textile articles classified in the headings: 6301, 6302, 6303, 6304 and 6305, where the starting material is fabric, the fabric is raw or unbleached fabric and fully finished in the territory of Singapore.

54. The purpose of new section 153XG is to give effect to Articles 2(c), 5, 10, 12.1, 21, and 22.1 of new Chapter 3, and Annex 2.1 of the amended Agreement, which set out the rules for goods produced from non-originating materials.

New section 153XH Packaging materials and containers

55. New subsection 153XH(1)) 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 General Rules for the Interpretation of the HS (provided for by the Convention)

then the packaging material or container is to be disregarded for the purposes of Subdivision D, except for the purposes of the exception detailed in new subsection 153XH(2) below.

56. This means that the packaging material or container does not need to satisfy the change in tariff classification test that might apply to the goods under the regulations.

Exception

57. Subsection 153XH(2) provides one exception to subsection 153XH(1), which applies where the goods are required to have a regional value content of at least a particular percentage under a particular method. The regulations must require 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.

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

59. The note to this section indicates that the value of packaging materials and containers for the purposes of this section is to be worked out in accordance with the regulations.

60. The purpose of new section 153XH is to give effect to Articles 13 and 14 of new Chapter 3 of the amended Agreement, which provide for related matters.

Subdivision E-Goods that are accessories, spare parts, tools or instructional or other information materials

61. Subdivision E contains new section 153XI, which sets out a specific rule that applies to goods that are accessories, spare parts, tools or instructional or other information materials.

62. New section 153XI provides that goods are Singaporean originating goods if:

(a)

they are accessories, spare parts, tools or instructional or other information materials in relation to other goods; and

(b)

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

(c)

the other goods are Singaporean originating goods; and

(d)

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

(e)

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

63. Therefore, under this provision, accessories, spare parts, tools or instructional or other information materials will be deemed Singaporean originating goods even if, in fact, they are non-originating goods, provided all of the requirements of this section are satisfied. However, this deeming section is to be disregarded when performing a regional value calculation on goods under subsection 153XG(7). The value of the accessories, spare parts, tools or other instructional or information materials that are originating or non-originating materials must be included in that calculation (see subsection 153XG(8)).

64. The purpose of new section 153XI is to give effect to Articles 12.2 and 12.3 of new Chapter 3 of the amended Agreement, which sets out rules for goods that are accessories, spare parts, tools or instructional or other information materials.

Subdivision F-Consignment

65. Subdivision F contains a new section 153XJ, which sets out the consignment requirements that must be satisfied in transporting Singaporean originating goods to Australia, including in relation to operations in non-Parties during transportation to Australia.

66. New subsection 153XJ(1) provides that goods are not Singaporean originating goods under Division 1BA if:

(a)

the goods are transported through the territory of one or more non-Parties; and

(b)

the goods undergo any operation in the territory of a non-Party (other than unloading, reloading, separation from a bulk shipment, storing, labelling or making for the purpose of satisfying the requirements of Australia or another operation that is necessary to preserve the goods in good condition or to transport the goods to the territory of Australia).

67. New subsection 153XJ(2) provides that section 153XJ applies despite any other provision of new Division 1BA.

68. The purpose of new section 153XJ is to give effect to Article 17 of new Chapter 3 of the amended Agreement, which sets out the rules for transit and transhipment.

Subdivision G - Regulations

69. Subdivision G contains new section 153XK, which sets out the head of power for regulations that may provide for, and relate to, determining whether goods are Singaporean originating goods under Division 1BA.

70. The purpose of new section 153XK is to enable Product-Specific Rules relating to change in tariff classification, regional value content and other rules for the purposes of determining whether goods are Singaporean originating goods to be prescribed.

Part 2-Verification powers

Customs Act 1901

Items 4 and 6 to 11

71. Division 4A of Part VI of the Customs Act imposes record keeping obligations on producers, manufactures or exporters of goods where relevant goods are exported to Singapore and are claimed to be the produce or manufacture of Australia for the purpose of obtaining a preferential tariff in Singapore (see section 126AB of the Customs Act).

72. In addition, Division 4A also enables authorised officers to require persons who are subject to record keeping obligations under section 126AB of the Customs Act to produce those records to the officers, and enables authorised officers to disclose any records so produced to an instrumentality or agency of Singapore (see sections 126AC and 126AD of the Customs Act).

73. The term "produce" and "manufacture" are concepts under Division 1B of Part VIII of the Customs Act, and are further defined in section 153UA of that Act. These concepts are distinguished from the concept of "Australian originating goods" under new Division 1BA of Part VIII by item 3 of Schedule 1 to the Bill above.

74. To distinguish the record keeping framework for "produce and manufacture of Australia" from the framework of "Australian originating goods":

(a)

item 4 inserts a new section 126AAA into the Customs Act, containing the term "Singaporean customs official", which is defined to mean a person representing the customs administration of Singapore;

(b)

items 6 and 9 amend paragraphs 126AB(1)(b) and 126AD(1)(b) of the Customs Act to include a reference to "Australian originating goods"; and

(c)

items 7, 8, 10 and 11 amend subsections 126AC(2) and 126AD(2), including their headings, of the Customs Act to enable records to be disclosed to a Singaporean customs official for the purpose of verifying Australian originating goods.

75. In effect, this will maintain the ability for an authorised officer to continue to disclose records for verification to an instrumentality or agency of Singapore in relation to goods that are the produce and manufacture of Australia, while also permitting those officers to disclose records to a Singaporean customs official in relation to Australian originating goods in accordance with Article 25 of new Chapter 3 of the amended Agreement.

Item 5 Section 126AA

76. This item amends section 126AA of the Customs Act to substitute the words "for which a preferential tariff is claimed" with "that are to be claimed to be the produce or manufacture of Australia for the purpose of obtaining a preferential tariff in Singapore".

77. The purpose of the amendment is to clarify to which goods the declarations concerning exports to Singapore apply.

Part 3-Application and Saving provisions

Item 12 Application and saving provisions

78. Item 12(1) sets out application and saving provisions such that the amendments made by Part 1 of Schedule 1 of the Bill apply in relation to goods:

(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.

79. Item 12(2) provides that the amendments made by Part 2 of Schedule 1 of the Bill apply in relation to goods exported to Singapore on or after the commencement of that Part (whether the goods were produced before, on or after that commencement).

80. Item 12(3) provides that SAFTA, as in force immediately before the commencement of this item, continues to apply on and after that commencement for the purposes of working out if goods are the produce or manufacture of Singapore under Division 1B of Part VIII of the Customs Act. This is to ensure that Annex 2 as contained in the SAFTA prior to the amendments made by the Amendment Agreement, will continue to be in force for the purpose of Division 1B of Part VIII of the Customs Act.

Schedule 2-Other Amendments

Customs Act 1901

Items 1 to 9

81. Chapter 3 of the SAFTA prior to the amendments made by the Amendment Agreement (the previous Chapter 3) sets out rules to which goods that are the produce and manufacture of Singapore and Australia must satisfy in order to claim a preferential rate of customs duty, and related matters.

82. The amending clause 3 of the Amendment Agreement provides for the previous Chapter 3 to be replaced with a new Chapter 3, which sets out rules for Singaporean originating goods and Australian originating goods. However, for a transitional period of three years, the requirements under the new Chapter 3 will operate as an alternative to the requirements under the previous Chapter 3. That is, for the duration of three years, the amended Agreement will allow importers from both Singapore and Australia to satisfy either the requirements relating to produce and manufacture, or originating goods, to claim a preferential rate of customs duty.

83. After the expiration of the three-year transitional period, the requirements for the previous Chapter 3 as inserted in the Customs Act are repealed, such that from the date of expiration only originating goods can be subject to a preferential rate of customs duty.

84. Items 1 to 9 amend the Customs Act to:

(a)

repeal the note at the end of the definition of "unmanufactured raw products" under subsection 4(1);

(b)

repeal section 126AA;

(c)

amend sections 126AB to 126AD; and

(d)

repeal Division 1B of Part VIII.

85. These items will commence and have effect on the third anniversary of the commencement of the items in Schedule 1 of this Bill.

86. In accordance with amending clause 3 of the Amendment Agreement, the purpose of the above amendments is to repeal and omit, at the expiration of the three-year transitional period, all requirements and references relating to the produce and manufacture under the previous Chapter 3.

Item 10 Application and saving provisions

Items 10(1) and (2)

87. Item 10(1) sets out an application such that the amendments made by items 2 to 8 of Schedule 2 of the Bill apply in relation to goods exported to Singapore on or after the commencement of those items (whether the goods were produced before, on or after that commencement).

88. The purpose of this item is to explain to which goods the amendments apply.

89. Item 10(2) sets out a saving provision such that, despite the amendment made by item 9 of Schedule 2 of the Bill, Division 1B of Part VIII of the Customs Act, as in force immediately before the commencement of this item, continues to apply on and after that commencement in relation to goods imported into Australia before that commencement.

90. The purpose of this item is to allow importers of goods imported into Australia before the repeal of Division 1B, where the time for working out the rate of import duty on the goods had not occurred, to continue to rely on Division 1B after its repeal for working out the preferential rate of customs duty. A similar saving provision is contained in item 142 of the Customs Tariff Amendment Bill to ensure the related preferential rates of customs duty for those goods also continues to have effect.

Item 10(3)

91. Item 10(3) sets out a saving provision such that the regulations in force for the purposes of Division 4A of Part VI of the Customs Act immediately before the commencement of this item continue to apply on and after that commencement in relation to goods exported to Singapore before the commencement of this item.

92. Sections 6 to 9 of the Customs (International Obligations) Regulation 2015 (the International Obligation Regulation) are made for the purposes of sections 126AA and 126AB of the Customs Act, and set out matters concerning declaration by representative of exporters, record keeping for producers, manufacturers and exporters, and the forms in which those records are to be kept.

93. The purpose of item 10(3) is to ensure that sections 6 to 9 of the International Obligation Regulation, as amended by items 1 to 9 continue in force.

94. An example of the continued operation of the regulation is the requirement for a manufacturer, who declared that goods exported were the manufacture of Australia, to retain relevant records for the full duration of 5 years instead of up to the point in time where the related requirements were repealed.

Attachment A - Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Customs Amendment (Singapore-Australia Free Trade Agreement Amendment Implementation) Bill 2017

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Bill

The Customs Act 1901 (the Customs Act) sets out a framework for which goods that are claimed to be produce and manufacture of Singapore may claim a preferential rate of customs duty in accordance with the Singapore-Australia Free Trade Agreement (SAFTA) that entered into force in 2003.

On 13 October 2016, in Canberra, the Hon. Steven Ciobo MP, Minister for Trade, Tourism, and Investment and his Singaporean counterpart Mr. Lim Hng Kiang, Minister for Trade and Investment signed an Agreement to Amend the Singapore-Australia Free Trade Agreement (the Amendment Agreement).

The Customs Amendment (Singapore-Australia Free Trade Agreement Amendment Implementation) Bill 2017 (the Bill), when enacted, will amend the Customs Act 1901 (the Customs Act) to give effect to Articles in SAFTA, as amended by the Amendment Agreement (the first mentioned Agreement as amended is hereon referred as the "amended Agreement").

In particular, the Bill will:

•

introduce new rules of origin for goods that are imported into Australia from Singapore;

•

introduce new procedures to claim preferential tariff treatment for goods that are Singaporean originating goods; and

•

extend the record keeping obligations that apply to goods exported to Singapore that are claimed to be the produce and manufacture of Australia to also apply to Australian originating goods that are exported to Singapore.

To give effect to the preferential entry of goods under the amended Agreement, the amendments contained in the Bill provide new rules for determining whether goods are Singaporean originating goods. The new rules of origin will operate as an alternative to the framework for goods claimed to be the produce or manufacture of Singapore for a transitional period of 3 years, after which the latter framework is repealed and only goods determined to be Singaporean originating goods are subject to a preferential rate of customs duty.

The amendments contained in the Bill will be operative the later of the day on which this Act receives the Royal Assent and the day on which the Amendment Agreement done at Canberra on 16 June 2017 enters into force for Australia.

A separate Customs Tariff Amendment (Singapore-Australia Free Trade Agreement Amendment Implementation) Bill 2017 will amend the Customs Tariff Act 1995 to make complementary amendments to set out the preferential rates of customs duty for Singaporean originating goods.

Human rights implications

•

This Bill engages the Right to privacy in Article 17 of the International Covenant on Civil and Political Rights (ICCPR).

The Bill, amongst other things, contains amendments that will broaden sections 126AB, 126AC and 126AD of the Customs Act to apply to goods that are Australian originating goods, not just those goods that are claimed to be the produce and manufacture of Australia.

These amendments will enable regulations to prescribe record keeping obligations that apply in relation to goods exported to Singapore where such goods are claimed to be Australian originating goods, and allow authorised officers to request records from exporters and producers. Sections 126AB, 126AC and 126AD of the Customs Act currently enables such regulations to be prescribed for goods exported to Singapore that are claimed to be produce and manufacture of Australia, and for an authorised officer to request for records and to disclose records for a limited purpose.

These requirements reflect the terms of the Amendment Agreement and will allow Singapore to verify the origin of goods for which preferential tariff treatment is claimed in Singapore. This may include the collection and disclosure of personal information for limited purposes. This information will be disclosed to a Singapore customs official for the purpose of verifying a preferential tariff in Singapore.

To the extent the Bill will allow for the collection and disclosure of personal information, the Bill engages the right to privacy under Article 17 of the ICCPR. Article 17(1) sets out:

No one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour and reputation.

Following the passing of this Bill, the collection and disclosure of personal information in relation to goods claiming to be either produce of manufacture of Australia, or Australian originating goods, will be lawful. Further, the collection and disclosure of personal information is protected under Australian law and the existing protections will not be altered in any way by the Bill.

Verification of the eligibility for preferential treatment is required under the Amendment Agreement and so this measure in the Bill is directed at the legitimate purpose of facilitating and supporting Australia's international obligations under the Singapore-Australia Free Trade Agreement. This collection and disclosure of personal information will only be permitted for the limited purpose of verifying a claim made by a person for preferential tariff treatment making it a reasonable and proportionate response to a legitimate purpose. As such, the collection and disclosure of personal information in these circumstances cannot be said to constitute an unlawful or arbitrary interference with privacy.

Conclusion

The Bill is compatible with human rights because to the extent that it may engage the right to privacy, it cannot be said that the amendment in the Bill could constitute an unlawful or arbitrary interference with privacy.

Attachment B - AGREEMENT TO AMEND SINGAPORE AUSTRALIA FREE TRADE AGREEMENT (SAFTA)

Analysis of Regulatory Impact on Australia

1. Introduction

This Regulation Impact Statement relates to the Agreement to Amend of the Singapore-Australia Free Trade Agreement (SAFTA) as a result of the Third SAFTA Review. The completion of the Third SAFTA Review was announced on 6 May 2016, as part of package of initiatives to advance the Comprehensive Strategic Partnership (CSP) that was first announced by the Prime Ministers of Australia and Singapore in June 2015. This will be the third amendment of SAFTA. A key feature of these amendments is the update of SAFTA to reflect modern trade provisions and outcomes provided to more recent FTA partners by both Australia and Singapore.

2. Policy Problem

2.1. Singapore and Australia are open markets, enjoying a substantial trade and investment relationship. Singapore is Australia's fifth largest trading partner, with two-way trade in 2015 valued at $25.7 billion. Australian exports to Singapore are valued at $1 1 billion and are growing strongly - 7.0 per cent for goods and 7.7 per cent for services (five year trend). Singapore is Australia's 5th largest source of foreign investment (valued at $98.6 billion in 2015), and is Australia's 6th largest destination for investment abroad ($67 billion in 2015).

2.2. Services make up a significant proportion of total Australian exports to Singapore (37 per cent in 2015), and are evolving to reflect our comparative advantage. While transportation and travel exports remain significant (45 per cent of service exports), business services (including engineering and legal services) have grown at almost four times the rate of total services, and now make up 41 per cent of service exports in 2015 (up from 10 per cent in 2000).

2.3. The Singapore-Australia Free Trade Agreement 2003 (SAFTA), which entered into force in 2003, forms the central pillar of Australia's economic relationship with Singapore, and is the legal framework for the trading relationship between the two countries. It is one of Australia's first bilateral free trade agreements, with only the Australia-New Zealand Closer Economic Trade Relations Trade Agreement 1983, being older. All Australian products are able to enter Singapore tariff free. However, Australian exporters, particularly those providing services, face long-standing, complex non-tariff barriers in Singapore's market.

2.4. Impediments for service suppliers include restrictions on temporary entry of staff, professional qualifications recognition, and the lack of certainty regarding access to Singapore's market to provide those services, including for government procurement contracts. Singapore's free trade agreements with other countries, including the United States (US), Japan, and the European Union (EU), have addressed many of these issues. Without an update to SAFTA to address such issues, Australian businesses will not be able to maintain their competitiveness.

2.5. Australia could soon have five trade agreements with Singapore - World Trade Organization (WTO) Agreements, SAFTA, the ASEAN-Australia New Zealand Free Trade Agreement 2007 (AANZFTA), the Trans-Pacific Partnership (TPP) Agreement (yet to be in force), and the Regional Comprehensive Partnership Agreement (RCEP), which is currently under negotiation. The Third SAFTA Review will make it simpler for exporters and investors to capture the benefits from these agreements by ensuring that the best trade agreement outcomes are contained in SAFTA. As a result of the Third Review, SAFTA will be upgraded to incorporate trade rules appropriate for an increasingly global, competitive and connected business environment.

3. Need for Government Action

In June 2015, Australia and Singapore agreed to a Comprehensive Strategic Partnership (CSP), which seeks to strengthen defence ties, and further trade and economic integration. A priority outcome of the CSP, the Third SAFTA Review, aimed to address the key barriers to a Closer Economic Relationship. The substantial conclusion of the Third SAFTA Review was announced on 6 May 2016.

4. Policy Options

Policy Alternatives

4.1. With no action, Australian service suppliers will lose competitiveness in the Singaporean market. An update to SAFTA will lead to reductions in regulatory obstacles, certainty on market access, better integration of financial and capital markets and an increased flow of skilled labour and visitors; without it the Closer Economic Relationship (CER) envisaged under the CSP may not arise.

4.2. Multilateral and plurilateral trade agreements, including through the WTO, could be considered an alternative means of obtaining the outcomes we have achieved in the Third SAFTA Review. However, no such negotiations are currently taking place, or are likely to take place in the near future, that would deliver the same access; particularly as Singapore is not a part of the plurilateral Trade in Services Agreement (TiSA) negotiations.

4.3. Both Australia and Singapore are part of regional trade agreements, including the TPP and RCEP. The Third SAFTA Review was negotiated immediately after the finalisation of the TPP, and sought to include outcomes Singapore did not agree to provide to the broader group of countries in the TPP, nor would it provide in RCEP. Given this, regional approaches would be similarly unable to deliver the outcomes obtained through the Third SAFTA Review.

Third SAFTA Review

4.4. The CSP provided a unique opportunity for further economic integration with Singapore including through the Third SAFTA Review. Australia and Singapore agreed to update SAFTA, to reflect the more modern provisions in recent FTAs and to include the best outcomes of these agreements in SAFTA.

4.5. SAFTA has already delivered duty-free trade in goods between Singapore and Australia. Given this, and the commercial interests of Australian and Singaporean business stakeholders, Singapore and Australia agreed to update the following areas under the Third SAFTA Review:

•

services (including professional and financial services);

•

telecommunications and e-commerce;

•

investment;

•

government procurement;

•

goods (including rules of origin); and

•

movement of business persons.

4.6. In parallel to legally binding (treaty-level) commitments in SAFTA, Australia and Singapore concluded outcomes on: visa facilitation, mutual recognition of academic and professional qualifications; and addressing regulatory burdens faced by Australian universities operating in Singapore.

Services

4.7. SAFTA's services chapters (Chapter 7: Trade in Services, Chapter 9: Financial Services) have been updated to include modern rules which better protect and promote the interests of service suppliers. Singapore and Australia agreed to establish a professional services framework to support mutual recognition of professional qualifications, beginning with those for engineers and accountants, and address concerns regarding the supply of professional services into each other's markets.

4.8. As a result of the Third SAFTA Review, Australia has:

•

commitments from Singapore to allow Australian companies to provide brokerage services, on a cross-border basis, for insurance of maritime, aviation and transport-related risks;

•

commitments to permit financial institutions to transfer information into and out of Singapore for data processing - subject to certain conditions including the protection of privacy and confidentiality; and

•

locked in existing opportunities and future market access in Singapore's legal sector, including the ability to practice Singapore law and to work in international commercial arbitration.

4.9. The Third SAFTA Review will increase opportunities for Australian education exports through increased recognition of Australian qualifications in law, medicine and allied health. As a result of the Third SAFTA Review, James Cook University will now be able to brand itself as the Singapore Campus of James Cook University (rather than JCU Singapore). A process for considering requests by other Australian Universities to use the term "university" in Singapore will be developed. Singapore has also agreed to develop a process to consider feedback on regulatory burdens faced by Australian tertiary education providers operating in Singapore.

4.10. Australian States and Territories have agreed not to impose new restrictions on the provision of services by Singaporean businesses.

Telecommunications and E-Commerce

4.11. Telecommunications (Chapter 10) and E-Commerce (Chapter 14) have been updated in line with technological progress and developments in trade rules in these areas. These outcomes will not prevent the Australian Government from regulating to address public policy objectives, such as privacy and health.

4.12. The Third SAFTA Review recognises that businesses rely on the ability to move information across borders, that they provide content over the internet, and that the source code of software is integral to the value of a product. As a result, under the amended SAFTA, all businesses will be able to transfer information freely across borders, and will not be required to use local data storage or local computing facilities. Nor will software suppliers be required to hand over source code when seeking to import or distribute software in Singapore or Australia. Singapore and Australia have also agreed not to impose customs duties on electronic transmissions or content delivered over the internet by the other Party, and will have the same requirements on digital content (including software and games) irrespective of whether it is produced by Australian or Singaporean firms.

4.13. SAFTA will also address important consumer issues. Australia and Singapore have committed to protect privacy, consumer rights and undertake efforts to combat 'spam' messages. In addition, Australia and Singapore have agreed to promote transparent and reasonable rates for international mobile roaming services.

Investment

4.14. SAFTA's Investment Chapter (Chapter 8) has been revised to incorporate a set of modern rules governing the treatment of investors, and their investments. This includes updating the investor-state dispute settlement (ISDS) mechanism to incorporate robust safeguards to preserve the right of the Government to continue regulating in the public benefit.

4.15. SAFTA will incorporate higher Foreign Investment Review Board thresholds agreed as part of the T PP negotiations. The threshold at which private foreign investments in non-sensitive sectors are considered by the Foreign Investment Review Board will increase from the currently applied threshold of $252 million to $1,094 million, with thresholds of $15 million and $55 million applying to investment in agricultural land and agribusiness respectively.

Government Procurement

4.16. SAFTA's Government Procurement Chapter (Chapter 6) has been revised and updated to reflect both Parties' current procurement frameworks. This includes important Australian policies to promote small and medium enterprises, as well as indigenous business participation in government procurement.

4.17. SAFTA has locked in opportunities to bid for valuable Singaporean government procurement contracts, and from additional Singaporean Government entities. This provides greater certainty for Australian companies seeking to bid for contracts in sectors such freight transport, construction and engineering services.

4.18. Australia has a non-discriminatory procurement framework that currently allows Singapore suppliers to bid for State and Territory government covered procurements.

Movement of Natural Persons

4.19. As part of the review, SAFTA will provide greater certainty to Australian and Singaporean service suppliers seeking to enter and work temporarily in each country's market. SAFTA will also provide new guaranteed access for a range of Australian and Singaporean skilled service providers, investors and business visitors. These temporary entry commitments are the best Singapore has provided in any FTA. Singapore and Australia have provided reciprocal access for citizens and permanent residents for the following categories:

•

intra-corporate transferees up from two years to three years with a new maximum stay period of 15 years, up from 14 years;

•

independent executives/investors up from three months to two years;

•

contractual service suppliers up from three months to two years;

•

installers and servicers for up to three months; and

•

equivalent entry and stay for spouses and dependants of Australians who have been granted entry as intra-corporate transferees, independent executives and contractual service suppliers.

4.20. Both Australia and Singapore have committed not to apply labour market testing to the categories where each country has made specific commitments. Australia and Singapore have also committed to provide pre-departure visa approval for categories where each country has made specific commitments.

4.21. In addition to these amendments to the Movement of Natural Persons Chapter (Chapter 11), a separate Memorandum of Understanding on visa facilitation and transparency will provide for:

•

a bilateral officials-level working group to share information on skilled and temporary business entry frameworks in Australia and Singapore;

•

Singapore to streamline the work pass application process for Australian intra-corporate transferees; and

•

Singapore to establish a dedicated help desk in the Ministry of Manpower to respond to enquiries from Australian business people regarding temporary entry and work in Singapore.

Rules of Origin and Trade in Goods

4.22. The SAFTA Trade in Goods Chapter (Chapter 2) will be updated to incorporate commitments on import and export restrictions, and other non-tariff barriers that may otherwise present hurdles to Australian exports. SAFTA (Chapter 5: Technical Regulations and Sanitary and Phytosanitary Measures) will also include annexes on cosmetics, medical devices and wine and distilled spirits. This will promote common regulatory approaches between Singapore and Australia for these sectors.

4.23. The SAFTA Rules of Origin Chapter (Chapter 3) will be updated to reflect modern approaches to customs administration. The Rules of Origin Chapter will now include a full schedule of Product Specific Rules of Origin, which will provide flexibility to meet the requirements to claim preferential treatment in each other's markets and improve the use of SAFTA by importers and exporters.

5. Trade Impact Statement

5.1. SAFTA, which entered into force in 2003, has already delivered significant benefits for Australian exporters. The Third SAFTA Review focused on addressing non-tariff barriers faced by Australian businesses in Singapore and modernising the agreement to reflect the needs of contemporary Australian exporters. The amended SAFTA will give Australia Singapore's best-FTA treatment in areas of key commercial interest. This will ensure that Australian businesses retain their competitiveness in Singapore. SAFTA's rules and outcomes are consistent (or better) than those contained in other trade agreements between Australia and Singapore. This will make it simpler for Australian businesses to take advantage of preferential trading arrangements with Singapore.

5.2. As tariffs on Australian goods exports have been eliminated under SAFTA, we do not anticipate a significant change in Australian goods exports.

5.3. SAFTA is expected to have a positive impact on service exports. Outcomes which have locked in existing access to Singapore's market (such as recognition of Australian education qualifications, legal services and some areas of government procurement), create greater certainty for businesses considering exporting to Singapore, and ensure those that currently export do not lose their access. In addition, the amended SAFTA provides new opportunities for exports, including by Australian businesses financial service providers. Commitments related to temporary entry by Singapore will also reduce uncertainty and make it simpler for Australian professional to stay and work in Singapore for longer.

5.4. Australian stakeholders which are expected to benefit from SAFTA include:

•

providers of professional services, including in the legal, financial, accounting and engineering sectors;

•

companies in transport and construction sectors;

•

Australian universities; and

•

Australian professionals.

6. Regulatory and Legislative Changes and Impacts

6.1. The following regulatory and legislative changes are required to implement the outcomes of the Third SAFTA Review:

•

changes to the Customs Tariff Act 1995 to reflect changes in the rules of origin for Singaporean goods;

•

a Ministerial determination under the Migration Act 1958 to implement temporary entry commitments; and

•

changes to Foreign Acquisitions and Takeover Regulations 2015 to implement the commitment to increase the threshold for screening by the Foreign Investment Review Board.

6.2. Under the amended SAFTA, businesses will be able to self-certify to claim preferential treatment under SAFTA. The estimated, ongoing, cost reduction for business is $3,828.40 (see Attachment A ).

6.3. The changes to the Foreign Acquisitions and Takeover Regulations 2015 reflect a commitment contained in the TPP. As these changes were considered in a separate regulatory impact statement, they change in regulatory burden has not been calculated for this Regulation Impact Statement.

6.4. Although there has been an expansion of the treaty commitments Australia has offered, existing visa and policy settings already allow for these changes. The Movement of Natural Persons commitments do not alter Australia's visa settings, but lock in a base level of access to the visa programme that Singapore must always be provided irrespective of future visa or policy setting changes.

6.5. This Regulation Impact Statement does not assess the change in the regulatory burden faced by Australian businesses and individuals, which will arise from regulatory and legislative changes made by Singapore.

7. Consultation

7.1. The Department of Foreign Affairs and Trade (DFAT) undertakes consultation on trade agreements through both formal and informal mechanisms. On 9 November 2015, members of the public were invited, through the DFAT website, to submit their views on the Third SAFTA Review. The original closing date for submissions was 15 January 2016, although submissions were accepted after that date. Three formal submissions were received, of which two (Curtin University and University of Tasmania) are available on the DFAT website. No submissions were received from Stakeholders expressing concerns about the potential outcomes of the SAFTA review.

7.2. DFAT sought input from wide range of stakeholders who would be directly affected by the SAFTA amendments, including representatives from the tertiary education, financial services and professional services sectors. This included input from the Australian High Commission in Singapore, based on its ongoing contact with the Australian Chamber of Commerce (Singapore) and the broader Australian expatriate community. This complemented the input provided by stakeholders through consultative processes for other agreements, which included both Australia and Singapore as Parties, namely, the T PP and RCEP. Consultations revealed broad support for addressing barriers to trade with Singapore. DFAT is aware of more than 15 organisations issuing public statements in support of the outcomes. Organisations included: Australian Chamber of Commerce, Singapore Business Circle, Universities Australia, James Cook University, ANZ, National Australia Bank, Engineers Australia, PriceWaterhouseCooper and Law Council of Australia.

7.3. DFAT undertook regular and extensive consultation with relevant Commonwealth Government agencies as well as State and Territory Governments throughout the negotiations. In addition, the Minister for Trade, Tourism and Investment wrote to Premiers and Chief Ministers seeking agreement on relevant SAFTA outcomes.

7.4. Stakeholders will have an additional opportunity to provide their views regarding the outcomes of the Third SAFTA Review through the Joint Standing Committee on Treaties inquiry.

8. Implementing and Evaluating the Chosen Option

8.1. In line with Australia's treaty-making processes, the Agreement to Amend SAFTA will be tabled in Parliament. Following tabling, the Joint Standing Committee on Treaties (JSCOT) will conduct an inquiry into the Agreement and report back to Parliament. Parliament will consider any legislation or amendments to existing legislation that may be necessary to implement the Agreement. Following the exchange of diplomatic notes by Australia and Singapore, advising that domestic processes for implement the Agreement to Amend SAFTA are completed, the amendments to SAFTA will enter into force.

8.2. DFAT and other Government agencies will continue to implement SAFTA using existing resources.

8.3. The operation and effectiveness of SAFTA will be addressed through working groups, Senior Officials Meetings, Ministerial Meetings and through future reviews of SAFTA. In advance of these meetings and any formal review, DFAT would invite submissions from the public, and consult with stakeholders to identify concerns regarding the implementation of SAFTA.

9. Status of Regulation Impact Statement

9.1. The Third Review of SAFTA is one of the priority objectives of the Comprehensive Strategic Partnership (CSP) between Singapore and Australia. Decisions regarding the Comprehensive Strategic Partnership, including identification of priorities and entering into negotiations on SAFTA were made as a single undertaking.

9.2. In light of SAFTA's treaty level status, and the proposed regulatory changes (Section 6), DFAT has prepared a stand-alone Analysis of the Regulatory Impact on Australia on signing the Agreement to Amend SAFTA. The process for undertaking the treaty action is outlined in Section 8.

ATTACHMENT A: REGULATORY BURDEN AND COST OFFSET ESTIMATE

Attachment A to Regulation Impact Statement

The Third SAFTA Review is expected to result in a small reduction in ongoing business compliance costs for Australian exporters to Singapore. These reductions arise from businesses which previously sought and obtained preferential certificates of origin (COOS) and which may now be able to self-certify the origin of their goods when claiming preferential treatment under SAFTA.

There is a significant level of uncertainty regarding the number and composition of COOS issued in respect of Australian exports into Singapore. 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. Based on the available data, however, it is possible to gain an appreciation of the order of magnitude of these changes.

Certificates of Origin

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 currently required to claim preference under SAFTA as the agreement does not allow for self-declaration.

Singapore is Australia's 6th largest goods export destination and represents 3.1 per cent of Australia's total goods exports. Only a small portion of Australia's exports to Singapore are subject to customs duties - beer is the only Australian export on which Singapore levies customs duties (Australia exports around $2 million of beer to Singapore). The majority of Australian exports to Singapore therefore enter duty free, without needing to claim preference under SAFTA; the regulatory savings from exporters being able to self-certify is small.

Direct Costs

Where businesses seek third-party certification from industry groups, the cost of each certificate varies from $20 - $70, with 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

The ongoing administrative costs incurred by a business in preparing the documentation to obtain a COO are likely to be relatively low. 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 burden for each application is therefore estimated to be modest.

Similarly, the records related to a COO are required to be kept for five years by most foreign customs agencies. 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 Third SAFTA Review

As businesses will now be able to self-certify to claim preferential treatment under SAFTA, it is possible that the total number of Australian COOS currently issued in respect of exports to Singapore may decrease as a result of the SAFTA Review. Businesses 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).

It is therefore assumed that there will be a modest reduction in the number of COOS issued in respect of Australian exports to Singapore 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