Source: http://www5.austlii.edu.au/au/legis/cth/num_reg_es/croor2014n161o2014511.html
Timestamp: 2019-12-11 09:02:20
Document Index: 92423320

Matched Legal Cases: ['art 1', 'art 2', 'art 3', 'art 3', 'art 4', 'art 4', 'art 4', 'art 4', 'art 5', 'art 1', 'art 2']

CUSTOMS (KOREAN RULES OF ORIGIN) REGULATION 2014 (SLI NO 161 OF 2014) EXPLANATORY STATEMENT
CUSTOMS (KOREAN RULES OF ORIGIN) REGULATION 2014 (SLI NO 161 OF 2014)
SELECT LEGISLATIVE INSTRUMENT NO. 161, 2014
Customs (Korean Rules of Origin) Regulation 2014
Subsection 270(1) of the Customs Act 1901 (the Act) provides, in part, that the Governor-General may make regulations not inconsistent with the Act prescribing all matters which by the Act are required or permitted to be prescribed or as may be necessary or convenient to be prescribed for giving effect to the Act.
The Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Act 2014 (the KAFTA Act) amends the Act to fulfil Australia's obligations under Chapter 3 of the Korea-Australia Free Trade Agreement (the Agreement), which deals with Rules of Origin. These rules determine whether goods imported into Australia from Korea are Korean originating goods and thereby eligible for preferential rates of customs duty. These rules are contained in new Division 1J (Korean originating goods) of Part VIII of the Act (new Division 1J).
Relevant provisions of the KAFTA which amend the Act are expressed to commence on the later of 1 December 2014 or the day the Korea-Australia Free Trade Agreement enters into force.
The purpose of the regulation is to prescribe matters relating to the rules of origin that are required to be prescribed under new Division 1J. The relevant provisions of new Division 1J are set out in Attachment A.
* sets out the table in Schedule 1 detailing the product-specific requirements relevant to each tariff classification for goods;
* explains the method used to determine the regional value content of goods for the purposes of some of the product-specific requirements set out in Schedule 1;
* specifies the valuation rules for different kinds of goods;
* sets out the record keeping requirements that apply to Australian exporters or producers who export goods to Korea and obtain preferential tariff treatment;
* prescribes other matters that are required to be prescribed under new Division 1J.
The regulation commences on commencement of Schedule 1 to the KAFTA Act which is the later of 1 December 2014 and the day the Agreement enters into force for Australia
No particular consultation was undertaken with regard to this regulation; however, consultation regarding the Korea-Australia Free Trade Agreement was undertaken as part of the Joint Standing Committee on Treaty's consideration of the Agreement.
OPC60729-C
This legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in the definition
of human rights in section 3 of the Human Rights (Parliamentary Scrutiny)
The purpose of the regulation is to prescribe matters relating to the rules of origin
that are required to be prescribed under new Division 1J of Part VIII of the Customs Act 1901.
Details of provisions in new Division 1J of Part VIII of the Customs Act 1901 relevant to the proposed Customs (Korean Rules of Origin) Regulation 2014
The Customs Amendment (Korea-Australia Free Trade Agreement) Act 2014 (the KAFTA Act) will insert new Division 1J of Part VIII into the Customs Act 1901 (the Act). New Division 1J of Part VIII of the Act (new Division 1J) will contain the rules of origin set out in Chapter 3 of the Korea-Australia Free Trade Agreement (the Agreement). These rules determine whether goods imported into Australia from Korea are Korean originating goods and are thereby eligible for preferential rates of customs duty.
Subdivision D of new Division 1J will relate to goods that are produced wholly or partly from non-originating materials (relevant goods).
Under new subsection 153ZMB(1) of the Act, 'non-originating materials' will mean goods that are not originating materials. 'Originating materials' will be further defined to mean:
(a) Korean 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 (Australian originating goods are goods that are Australian originating goods under a law of Korea that implements the Agreement); or
Indirect materials is defined in subsection 153ZMB(1) as:
New section 153ZME(1) of the Act will provide that goods are Korean originating goods if:
(a) they are classified to a heading or subheading of the Harmonized System that is specified in column 1 or 2 of the table in Schedule 1 to the Customs (Korean Rules of Origin) Regulation 2014 (the proposed Regulation); and
(b) they are produced entirely in the territory of Korea, or entirely in the territory of Korea and Australia, from non-originating materials only or from non-originating and originating materials; and
(i) the importer of the goods has, at the time the for working out the rate of import duty on the goods, a Certificate of Origin, or a copy of one, for the goods; or
(ii) Australia has waived the requirement for a Certificate of Origin.
One of the requirements that may be specified in the regulations would be a change in tariff classification requirement. Under new subsections 153ZME(2) and (3) of the Act, the regulations may make it a requirement that each non-originating material used to produce goods must satisfy a particular change in tariff classification and when the material will be taken to satisfy the change. The proposed Regulations would include this requirement and would also specify each particular change in tariff classification for each relevant heading, subheading or split subheading of the Harmonized System.
Another of the requirements that may be specified in the regulations would be a regional value content (RVC) requirement. New subsection 153ZME(7) of the Act will provide that the regulations may make it a requirement that the goods must satisfy an RVC requirement. Under new subsection 153ZMB(2) of the Act, the regulations may prescribe different RVC requirements for different kinds of goods. The proposed Regulation would set out the RVC requirements and would specify two methods of calculating RVC.
For the purposes of new Division 1J, new subsection 153ZMB(3) will provide that the value of goods is to be worked out in accordance with regulations, and the regulations may prescribe different valuation rules for different kinds of goods.
The proposed Regulation would prescribe how the value of materials is to be worked out for the purposes of new Division 1J and the proposed Regulation.
Under new subsection 153ZME(8) of the Act, the regulations must require the value of standard accessories, spare parts or tools imported together with goods to be taken into account as originating or non-originating materials, as the case may be, for the purposes of any RVC requirement applicable to the goods. For the purposes of new subsection 153ZME(8) of the Act, the proposed Regulations would require that the value of such accessories, spare parts or tools be taken into account for the purposes of any RVC requirement applicable to goods, and prescribe how such value is to be worked out and taken into account.
Under new subsection 153ZMF(2) of the Act, the regulations must require the value of certain packaging materials or containers used to package goods for retail sale to be taken into account as originating or non-originating materials, as the case may be, for the purposes of any RVC requirement applicable to the relevant goods. For the purposes of new subsection 153ZMF(2) of the Act, the proposed Regulation would require that the value of such packaging materials or containers be taken into account for the purposes of any RVC requirement applicable to goods, and prescribe how such value is to be worked out and taken into account.
Details of the proposed Customs (Korean Rules of origin) Regulation 2014
Proposed Part 1 - Preliminary
Proposed section 1 Name of Sections
Proposed section 1 would provide that the proposed Sections are the Customs (Korean Rules of Origin) Regulation 2014.
Proposed section 2 Commencement
Proposed section 2 would provide that proposed sections 1-4 commence on the day after the instrument is registered and the remaining proposed sections would commence on the commencement of Schedule 1 to the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Act 2014 (the KAFTA Act). Schedule 1 to the KAFTA Act will commence on the later of 1 December 2014 or the day the Korea-Australia Free Trade Agreement comes into force for Australia.
Proposed section 3 Authority
Proposed section 3 would provide that the authority this instrument is made is under the Customs Act 1901.
Proposed section 4 Definitions
Proposed section 4 would provide that in the proposed Sections:
(e) 'subheading' means the first 6 digits in the tariff classification number under the Harmonized System; and
the following words and expressions have the meanings as in new Division 1J of Part VIII of the Act (new Division 1J):
(f) Agreement;
(g) Australian originating goods;
(h) Certificate of Origin;
(i)Harmonized System;
(j)Korean originating goods;
(k) non-originating materials;
(l)originating materials; and
(m) produce;
New Division 1J will be inserted into the Act by Schedule 1 to the KAFTA Act.
Proposed part 2 - Tariff change requirements
Proposed section 5 Tariff change requirement for non-originating materials
Proposed subsection 5(1) would provide that for subsection 153ZME(2) of the Act, each non-originating material used in the production of the goods is required to satisfy a specified change in tariff classification. The particular change in tariff classification for each relevant heading or subheading of the Harmonized Commodity Description and Coding System (the Harmonized System) would be included in the table in Schedule 1 to the proposed Sections.
Proposed subsection 5(2) would provide that each non-originating material that does not satisfy the change in tariff classification mentioned in proposed subsection 5(1) is taken to satisfy a particular change in tariff classification if:
(a) it was produced entirely in Korea or in Korea and Australia from other non-originating materials; and
Paragraph (b) gives effect to the cumulation provisions contained in Article 3.5 of the Agreement and applies where the non-originating materials that are used to directly produce the final good do not satisfy the change in tariff classification.
In producing a final good, a producer may use goods that are produced in Korea by another producer. The components of these goods may be produced by yet another producer in Korea or imported into Korea. It is possible that the change in tariff classification rule may not be satisfied at each step in the production process from the imported component to the final goods which may mean that the final goods are non-originating.
In such circumstances, it may be possible to examine each step in the production process of each non-originating material that occurs in Korea or Australia in order to determine whether each step satisfies the change in tariff classification rule for the final goods directly from that step to the final goods. If this does occur, the material will be an originating material and the final goods may be originating goods (subject to satisfying all other requirements of new Division 1J of Part VIII of the Act). This is how paragraph 5(2)(b) of the proposed Sections would operate.
Example: The following diagram relates to the production of particular goods that occurred entirely in Korea. The diagram and the accompanying text illustrate the application of paragraph 5(2)(b).
Proposed Part 3 - Regional value content requirement
Proposed section 6 Regional value content
New subsection 153ZME(7) of the Act will provide that the sections may specify that goods are required to have a regional value content of at least a specified percentage. The regional value content for each relevant heading, subheading or split subheading of the Harmonized System would be included in the table in Schedule 1 to the proposed Sections. New subsection 153ZMB(2) of the Act will provide that the sections may prescribe different regional value content requirements for different kinds of goods.
Proposed section 6 would provide that for the purposes of the table in Schedule 1, this Part explains how 'regional value content' is worked out using the build-down method and the build-up method. For Part 3, 'RVC' means regional value content.
Proposed section 7 Build-down method
Proposed section 7 would provide that the build-down method is the formula:
RVC = value - value of non-originating materials x 100
value means the customs value of the goods, as worked out under Division 2 of Part VIII of the Act; and
value of non-originating materials means the value of non-originating materials, including materials of undetermined origin, that are worked out under Part 4 of the proposed Sections that are acquired and used by the producer in the production of the goods.
Proposed subsection 7(2) would provide that RVC is to be expressed as a percentage.
Proposed section 8 Build-up method
Proposed subsection 8(1) would provide that the build-up method is the formula:
RVC = value of originating materials x 100
value means the customs value of the goods, worked out under Division 2 of Part VIII of the Act; and
value of originating materials means the value of originating materials worked out under Part 4 that are acquired, or self-produced, and used, or consumed, by the producer in the production of the goods.
Proposed subsection 8(2) would provide that RVC is to be expressed as a percentage.
Under the build-up method, the RVC calculation determines the percentage of originating materials used in the production of goods.
For example, wooden cabinets are made from originating timbers. Each piece of furniture is sold for $100 and the value of the originating materials used to produce the furniture is $43. Using the build-up method, the RVC is calculated as follows:
RVC = $43 x 100
Therefore, the RVC equals 43%.
Proposed Part 4 - Determination of value
For the purposes of new Division 1J, new subsection 153ZMB(3) will provide that the value of goods is to be worked out in accordance with sections, and the sections may prescribe different valuation rules for different kinds of goods.
Proposed Part 4 would deal with the determination of the value of different kinds of goods that are materials used in the production of the relevant goods for the purposes of new Division 1J and the proposed Sections.
Proposed section 9 Value
Proposed section 9 would, for the purposes of new subsection 153ZMB(3) and the proposed Sections, set out how the value of materials is to be worked out.
Proposed subsection 9(1) would provide that for the purposes of subsection 153ZMB(3) of the Act, section 9 explains how to work out the value of goods that are originating materials or non-originating materials.
Proposed subsection 9(2) would provide that the value of materials is to be worked out as follows:
(a) for a material imported into Korea by the producer of the good-the value of the material worked out under a law of Korea that implements the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994;
(b) for a material acquired in Korea, the earliest ascertainable cost of acquisition of the material;
(c) for a material that is that is produced by the producer of the good and used in the production of that good - the sum of:
(i) the expenses incurred in the production of the material, including general expenses; and
(ii) an amount for profit equivalent to the profit that the producer would make for the materials in the ordinary course of trade.
Proposed subsection 9(3) would provide that for materials that are originating materials, their value may include the costs of the following matters, to the extent that they have not been taken into account under proposed subsection 9(2):
(a) freight, insurance, packing and any other transportation of the materials to the producer:
(i) in Korea; or
(ii) between Australia and Korea;
(b) duties, taxes and customs brokerage fees on the materials that:
(i) have been paid in either or both of Australia and Korea; and
(ii) have not been waived or refunded; and
(iii) are not refundable or otherwise recoverable, including any credit against duties or taxes that have been paid or that are payable;
(c) originating materials that are used or consumed in the production of the non-originating materials in Australia or Korea; and
(d) other costs incurred in Australia or the Korea in the production of the non-originating materials.
Proposed section 10 Value of accessories, spare parts or tools
New subsection 153ZME(8) provides that, when working out if goods are Korean originating goods, if the goods must have a RVC of at least a particular percentage, the sections may require the value of the accessories, spare parts or tools to be taken into account as originating or non-originating materials, as the case may be, for the purposes of working out the RVC requirement.
Proposed section 10 would provide that for subsection 153ZME(8) of the Act, if goods imported in the circumstances mentioned in that subsection are required to have a RVC of at least a particular percentage mentioned in Schedule 1:
(a) in working out the RVC of the goods:
(i) the value of accessories, spare parts or that are imported with the goods and are Korea originating goods must be included in the value of originating materials used in the production of the goods; and
(ii) the value of accessories, spare parts or tools that are imported with the goods and are not Korean originating goods must be included in the value of non-originating materials used in the production of the goods; and
(b) the value of accessories, spare parts, tools or instructional or other information material is to be worked out under proposed section 9 as if the accessories, spare parts, tools or instructional or other information materials were materials used in the production of the goods.
Proposed section 11 Value of packaging material and container
Under new subsection 153ZMF(1) of the Act, if:
then the packaging material or container is to be disregarded for the purposes of new Subdivision D of Division 1J, with one exception.
Under new subsection 153ZMF(2), in working out whether the goods are Korean originating goods, if the goods are required to have a RVC of at least a particular percentage, the sections must require the value of the packaging material or container to be taken into account as originating or non-originating materials, as the case may be, for the purposes of that RVC requirement.
Proposed section 11 would provide that for section 153ZMF of the Act, if goods mentioned in subsection 153ZMF(1) of the Act are required to have a RVC under Subdivision D of Division 1J of Part VIII of the Act:
(i) if the packaging material or container in which the goods are packaged are a Korean originating goods, then the value of the packaging material or container in which the goods are packaged, must be included in the value of originating materials used in the production of the goods; and
(ii) if the packaging material or container in which the goods are packaged are not Korean originating goods, then the value of the packaging material or container in which the goods are packaged must be included in the value of non-originating materials used in the production of the goods; and
(b) the value of the packaging material or container in which the goods are packaged must be worked out under section 9 as if the packaging material or container were a material used in the production of the goods.
Proposed Part 5 - Record keeping obligations
Proposed section 12 Exportation of goods to Korea-record keeping by exporter who is not the producer of the goods
Proposed section 12 would provide that for new section 126AMB of the Act, an exporter of goods mentioned in that subsection, who is not also the producer of the goods, must keep the following records:
(i) a copy of the Certificate of Origin for the goods.
The goods mentioned in subsection 126AMB(1) are goods that are exported to Korea and are claimed to be Australian originating goods for the purpose of obtaining a preferential tariff in Korea.
Proposed subsection 12(2) would provide that the records must be kept for a period of at least 5 years starting on the date the Certificate of Origin for the goods is signed.
Proposed subsection 12(3) sets out the manner in which a record is to be kept. A record may be kept in any place, whether or not in Australia, and the exporter must ensure that:
(a) the record is kept in a form that would enable a determination of whether the goods are Australian originating goods in accordance with the Agreement; and
(b) if the record is not in English - the record is kept in a place and form that would enable an English translation to be readily made; and
Proposed section 13 Exportation of goods to Korea - record keeping by the producer of the goods
Proposed section 13 would provide that for section 126AMB of the Act, the producer of goods mentioned in that subsection, whether or not the producer is the exporter of the goods, must keep the following records:
(l) a copy of the Certificate of Origin for the goods.
Proposed subsection 13(2) would provide that the records must be kept for a period of at least 5 years starting on the date the Certificate of Origin for the goods is signed.
Proposed subsection 13(3) sets out the manner in which a record is to be kept. A record may be kept in any place, whether or not in Australia, and the exporter must ensure that:
Proposed Schedule 1 - Product specific rules of origin
Proposed Schedule 1 would set out the table, which would specify the different product-specific rules of origin applicable to goods for each heading, subheading and split subheading in the Harmonized System. Proposed Schedule 1 would also set out interpretation provisions relevant to the product-specific requirements in the table. Proposed Schedule 1 is based on Annex 3-A to the Agreement.
Proposed Part 1 of Schedule 1 would set out the Interpretation provisions relevant to the product-specific rules of origin specified in the table. Proposed Part 2 of Schedule 1 would set out the table.