Edited version of your written advice

Authorisation Number: 1012923172069

Date of advice: 7 December 2015

Ruling

Subject: GST and inward port charges

Question

Are the fees for loading, handling and associated activities consideration for GST-free supplies of international transport made by the non-resident shipping line under item 5 in subsection 38-355(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The fees paid for loading, handling and associated activities form part of the consideration for a GST-free supply of international transport made by the non-resident shipping line and are therefore GST-free under item 5 in subsection 38-355(1) of the GST Act.

Relevant facts and circumstances

The non-resident shipping line enters into international carriage contracts (either through its Australian agent or independently) with Australian resident and non-resident customers for the international shipping of goods to the indirect tax zone. A document called a bill of lading or ocean bill of lading (or similar) is issued to the relevant parties and this document includes details such as the consignor, consignee and port of discharge.

The shipping line's Australian agent looks after all of the indirect tax zone based aspects of the line's international shipping operations including:

• arranging the docking and unloading of vessels at indirect tax zone ports;

• delivery of the goods (where the place of delivery is in the indirect tax zone);

• preparation of the necessary indirect tax zone import documentation; and

• the inspection of shipping containers returned in the indirect tax zone.

The non-resident shipping line or its Australian agent does not generally hold, or have access to, the relevant sale of goods contract for the cargo it carries. Importation of the cargo is not the responsibility of the shipping line.

The shipping line, through its Australian agent, invoices the customer the cost elements for various supplies that are separate from the cost of the ocean freight including (but not limited to):

• Terminal Handling Charge - the recovery of the charged incurred by the shipping line that incorporates the discharge of the container by the stevedore and storing into the stack for pick-up;

• Port Service Charge - the recovery of charges levied to the shipping line by the port authority, components of which include: wharfage, harbour dues, berth hire, infrastructure levy, fees and port access fee;

• Equipment Handling Charge - the recovery of the lifting costs of the empty container returning to the empty depot;

• Port Licence Fee - the recovery of the license fee imposed by a port operator; and

• Import Documentation Fee - the recovery of the cost incurred by the Australian agent in preparing the necessary import delivery orders prepared by the agent and provided to the Notify Party listed on the Bill of Lading, to inform that party the arrival of goods in the indirect tax zone.

While the above fees for the services are itemised separately, they are invoiced by the Australian agent in accordance with the standard services supplied under the international carriage contract between the customer and the shipping line for the provision of international shipping services. Neither the shipping line nor its agent has any separate agreement with the customer for supplying the services or charging these fees.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-355 and

A New Tax System (Goods and Services Tax) Act 1999 section 195-1.

Reasons for decision

The services charged by the non-resident shipping line (or its Australian agent) to its customer form part of the supply of international transport. The supply of international transport by a shipping line is GST-free under item 5 in the table under subsection 38-355(1) of the GST Act (item 5) up to and including the activities carried out by the shipping line at the port of discharge.

The fees in question are for activities necessarily carried out by the shipping line (or acquired by the shipping line) in transporting the cargo and are included in the standard services supplied by the shipping line under the international carriage contract.

Under item 5, the inbound international transport of goods is GST-free to the place of consignment in the indirect tax zone.

The 'place of consignment' is set out in section 195-1 of the GST Act:

(a) if the goods are posted to a place in the indirect tax zone - the place in the indirect tax zone to which the goods are addressed; or

(aa) if the supplier of the goods is to deliver the goods to a place in the indirect tax zone - the place in the indirect tax zone to which the goods are to be delivered under the contract for the supply of the goods; or

(ab) if:

(i) neither paragraph (a) nor (aa) applies; and

(ii) the goods are to be transported into the indirect tax zone by an entity supplying a transport service to an entity that is to import the goods into the indirect tax zone - the place in the indirect tax zone to which the goods are to be delivered under the contract for the supply of the transport service; or

(b) in any other case - the port or airport of final destination as indicated on the transportation document.

As the non-resident shipping line, or its Australian agent, does not generally hold or have access to the sales contract relevant to the freighted goods, it will not be able to determine the place of consignment under its contractual relationship with the customer. In these circumstances, the ATO allows the shipping line to assume that the place of consignment under paragraphs (a) and (ab) should be at least at the port of discharge specified on the relevant Bill. The ATO accepts that the port of discharge in these circumstances is the 'terminal gate' and therefore activities carried out at the port are within the place of consignment.

This means that services related to the transport and handling of the goods (including issuing or processing associated documentation) made by the shipping line (or its Australian agent) under its international carriage contract will be GST-free if the goods are released to the customer at the port of discharge, as these services are made at, or prior to, the place of consignment.

If the goods are released to the customer after the port of discharge (that is, beyond the terminal gate) then all services after the terminal gate can only be treated as GST-free by the shipping line if it obtains information from the buyer or seller of the goods that the place of consignment of the goods is a place beyond the port of discharge.

Note that item 5 is limited by subsection 38-355(2) of the GST Act under which the transport of goods to and from the indirect tax zone can only be GST-free under item 5 where either:

• the transport was supplied by the same transport supplier that transported the goods from or to the indirect tax zone; or

• the transport is supplied to a recipient that is a non-resident and is not in the indirect tax zone at the time.

In this case, subsection 38-355(2) of the GST Act will not limit item 5 given the transport services within the indirect tax zone are being supplied by the shipping line that transported the goods to the indirect tax zone.

Therefore, all services performed by the shipping line (or its Australian agent) at the port in fulfilling its international transport contract can be included as GST-free international transport with the services having the GST treatment as the international transport.