House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Minister for Citizenship and Multicultural Affairs, the Honourable Julian Hill MP)

GENERAL OUTLINE

The primary purpose of the Customs Amendment (ASEAN-Australia-New Zealand Free Trade Area Second Protocol Implementation and Other Measures) Bill 2024 (the Bill) is to amend the Customs Act 1901 (the Customs Act) to give effect to the customs obligations under the Second Protocol to Amend the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (Second Protocol).

The Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (the Agreement) is a comprehensive trade agreement between ASEAN member states that delivers goods, services, investment, intellectual property, e-commerce, temporary movement of business persons, and economic cooperation. The overarching aim of the agreement is to reduce barriers to trade and investment. The Agreement has resulted in a significant increase in opportunities for Australian industry and investors.

The Agreement was entered into between Australia, Brunei Darussalam, Cambodia, Indonesia, Lao People's Democratic Republic (PDR), Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand and Viet Nam. AANZFTA was signed by all participating countries on 27 February 2009. The Agreement originally entered into force on 1 January 2010 and was subsequently amended by the First Protocol to Amend the ASEAN-Australia-New Zealand Free Trade Area. These amendments entered into force for Australia on 1 October 2015.

On 13 November 2022, the leaders of ASEAN, Australia and New Zealand announced the substantial conclusions of negotiations to upgrade AANZFTA First Protocol. The result of the negotiations led to Assistant Minister Tim Watts, together with ASEAN and New Zealand Ministers, signing of the Second Protocol of AANZFTA (Second Protocol) on 21 August 2023. The amendments are a result of signatories to AANZFTA recognising the need to upgrade the agreement across several areas to ensure that it retains its relevance to business and adds value to developments across other frameworks including the Regional Comprehensive Economic Partnership (RCEP) signed on 15 November 2020.

The Second Protocol, amongst other matters, set out revised customs commitments in the form of new Rules of Origin procedures under Chapter 3. The new Rules of Origin procedures under Chapter 3 include news rules for document requirements (including to whom they apply), new record keeping and verification related requirements. The new product specific rules set out rules that determine whether goods made from parties not covered by the Agreement, as amended by the Second Protocol have transformed sufficiently in accordance with the Agreement to be treated as goods covered by the Agreement.

The Bill amends the Customs Act to implement the new customs commitments under the Second Protocol. Specifically, the Customs Act is amended to:

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insert new record keeping and verification related requirements in Part VI of the Customs Act that apply to the export of goods covered by the Second Protocol;

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amend the definition of "Harmonized System" under Division 1G of Part VIII of the Customs Act to so that Harmonized system used for the Second Protocol and subsequent versions of the System are adopted, in accordance with the Second Protocol. This measure will ensure that the correct preferential tariff treatment in the form of reduced customs duty rate will only apply to goods intended by the Agreement as amended by the Protocol, regardless of changes to the tariff classification of the goods over time;

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insert a new definition of "Product Specific Rules" under Division 1G of Part VIII of the Customs Act such that it refers to the new rules of the same name under the Second Protocol. This ensures that the correct rules are used for determining whether the transformation of goods from a country not covered by the Agreement as amended by the Second Protocol are sufficient for the purpose of treating the transformed goods as goods that are covered by that Agreement; and

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expand on the documents requirements under Division 1G of Part VIII of the Customs Act so that, in additional to a Certificate of Origin document issued by an authorised body, an importer may also use a self-declaration document containing information in accordance with the Second Protocol to make a claim for preferential tariff treatment for goods covered by that Agreement.

The Bill also amends the Customs Act to revise and streamline multiple provisions concerning the Regional Comprehensive Economic Partnership Agreement (the RCEP Agreement), the Pacific Agreement on Closer Economic Relations Plus (PACER Plus) and the Malaysia-Australia Free Trade Agreement (MAFTA). Specifically, the Bill amends the Customs Act to:

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insert new verification related requirements in Division 4L of Part VI of the Customs Act that apply to the export of goods covered by the RCEP Agreement;

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amend the definition of "Harmonized System" under Division 1GA of Part VIII of the Customs Act to so that subsequent versions of the System are adopted in accordance with PACER Plus. This measure will ensure that the correct preferential tariff treatment in the form of reduced customs duty rate will only apply to goods intended by PACER Plus, regardless of changes to the tariff classification of the goods over time;

•

insert a new definition of "Product Specific Rules" under Division 1GA of Part VIII of the Customs Act so it can refer to subsequent version of the rules of the same name under PACER Plus. This ensures that the correct rules are always used for determining whether the transformation of goods from a country not covered by PACER Plus are sufficient for the purpose of treating the transformed goods as goods that are covered by that Agreement;

•

amend the definition of "Harmonized System" under Division 1H of Part VIII of the Customs Act to so that subsequent versions of the System are adopted in accordance with MAFTA. This measure will ensure that the correct preferential tariff treatment in the form of reduced customs duty rate will only apply to goods intended by MAFTA, regardless of changes to the tariff classification of the goods over time;

•

insert a new definition of "Product Specific Rules" under Division 1H of Part VIII of the Customs Act so it can refer to subsequent version of the rules of the same name under MAFTA. This ensures that the correct rules are always used for determining whether the transformation of goods from a country not covered by MAFTA are sufficient for the purpose of treating the transformed goods as goods that are covered by that Agreement;

•

amend the definition of "Harmonized System" under Division 1M of Part VIII of the Customs Act to so that subsequent versions of the System are adopted in accordance with the RCEP Agreement. This measure will ensure that the correct preferential tariff treatment in the form of reduced customs duty rate will only apply to goods intended by the RCEP Agreement, regardless of changes to the tariff classification of the goods over time;

•

insert a new definition of "Product Specific Rules" under Division 1M of Part VIII of the Customs Act so it can refer to subsequent version of the rules of the same name under the RCEP Agreement. This ensures that the correct rules are always used for determining whether the transformation of goods from a country not covered by the RCEP Agreement are sufficient for the purpose of treating the transformed goods as goods that are covered by that Agreement.

The amendments contained in the Bill will commence on the later of the day on which the Bill receives the Royal Assent and the day on which the Second Protocol signed on 21 August 2023 enters into force for Australia.

FINANCIAL IMPACT STATEMENT

The amendments in the Bill have no specific financial obligations.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

The 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.

A statement of compatibility with human rights has been prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, and is at Attachment A.

IMPACT ANALYSIS

An impact analysis (OBPR22-02548) in relation to the regulatory impact of the measures in the Bill is at Attachment B.