Customs Compliance Activity - Cargo Reporting of Assembly or Consolidation Orders

AppId is over the quota
AppId is over the quota
Further to our E-Alerts of 15 March and 19 February 2013, the Australian Jobs Bill 2013recently passed both houses of Parliament and received Royal Assent on 27 June 2013 becoming the Australian Jobs Act 2013 ('the legislation'). The Act will require private and public projects with capital expenditure of $500 million or more to develop an Australian Industry Participation (AIP) Plan intended to ensure that Australian entities have full, fair and reasonable opportunity to supply goods and services to major projects.

Previously, AIP Plans were only required by project proponents seeking to access the Enhanced Project By-law Scheme (EPBS), a voluntary duty reduction scheme that eliminates the five percent tariff on imported eligible goods not produced in Australia for Projects over $10 million in applicable sectors.

The legislation introduces a number of key measures that will have broad implications for project proponents and their Engineering, Procurement and Construction Managers. These include:

Capturing all projects above the capital expenditure threshold that seek to establish a new facility or expand or upgrade an existing facility. The legislation also allows for the grouping of a number of facilities provided the additional facilities are reasonably necessary for operation of the principle site. Requiring a draft AIP Plan to be submitted at least 90 days prior to the prescribed trigger date for the project. The trigger date is defined as the first trigger event for the project during the interim period or the earliest trigger event after the interim period (ending two years after the commencement of the Bill). Trigger events are legislatively defined and generally refer to pre–Front End Engineering Design activities that relate to the usual actions typically undertaken by a project proponent to assess the economic and financial viability of a project, including the commencement of project concept design, the estimation of costs, the preparation of process flows or the engagement of a party to perform an environmental assessment of the project (there are 12 trigger dates prescribed in the legislation).Given that the requirements are targeted at the early design and feasibility stages of a project, existing projects with the trigger dates occurring at any time prior to 90 days of the commencement of the Act will escape the measures, provided that no trigger events occur during the interim period (i.e. all trigger events in respect of the project must have occurred prior to 90 days after the commencement of the Act). The interim period begins from the 91st day that the Act commences and ends 2 years after commencement.Mandatory AIP plans will require project proponents to demonstrate that Australian entities will have full, fair and reasonable opportunity to bid for the supply of goods and services to the project in respect of all work packages worth $1 million or more. The legislation also compels project proponents to take all reasonable steps to ensure that procurement entities associated with the project will satisfy the proponent's AIP Plan objectives. A summary of AIP Plan obligations must also be made available to the public.The legislation also includes anti-avoidance provisions to prevent project proponents from breaking down projects and/or work packages when done for the sole or dominant purpose of avoiding major project status and/or key work package thresholds. Going forward, project proponents will therefore need to ensure there is commercial justification surrounding how the project is defined and how work packages are formulated.Parties that do not comply with AIP requirements may be subject to compliance actions, including the publication of an adverse publicity notice ('name and shame') and/or court ordered injunctions to compel project proponents to engage in activities to ensure compliance with their AIP obligations (or refrain from activities in contravention to those obligations).The new laws also establish an Australian Industry Participation Authority to administer the changes and assigns it significant information gathering powers to ensure that parties are compliant with their AIP obligations.The Australian Industry Participation Authority has also been tasked with assisting businesses to develop capabilities and connections required to capture supply opportunities and supporting the continued work of the Government's Supplier Advocates who assist local firms to raise their competitiveness and connect them with new business opportunities.To have a more detailed discussion about what the above means for you, please contact your usual PwC advisor or any of the contacts to the right of this page. The following provides a summary of key changes to fuel tax credit rates and excise arrangements that will apply in respect of taxable fuel acquired from 1 July 2013. As you may be aware, fuel used in heavy vehicles (>4.5 tonne) is eligible for a full fuel tax credit less the road user charge. The Road user charge is levied by the Australian Government as a means to recover road maintenance costs attributable to heavy vehicle use. The Australian Government recently announced that the road user charge will increase on 1 July 2013 to 26.14 cents per litre. The result is a net fuel tax credit of 12.003 centre per litre being available in respect of petrol and diesel acquired for use in heavy vehicles travelling on public roads.

Taxpayers should be aware that the road user charge does not apply in respect of taxable fuel acquired for use in auxiliary equipment on board vehicles travelling on public roads, such as refrigerated trailers, bin lifts and compactors, street sweepers and vacuum pumps. Further, businesses that have applied the road user charge in respect of fuel used in such equipment may be entitled to a refund going back up to four years.

Carbon charge amounts for liquid and gaseous fuels will increase from 1 July 2013, reducing fuel tax credit rates for fuels and activities other than those excluded from the measures. Specifically, the carbon charge will not apply to liquid and transport gaseous fuels used in heavy vehicle transportation, primary industries (fisheries, forestry and agriculture) and fuel put to a non-combustion use (e.g. as an input to manufacture). The carbon charge will also not apply to taxable fuel acquired by a taxpayer that has entered the Liquid Fuel Opt-in Scheme.

The new rates and fuel tax credits in respect of liquid fuel are outlined below.

Petrol (cents per litre (cpl))Diesel and other liquid fuels (cpl)In the interim, to have a more detailed discussion about what the above means for you, please contact your usual PwC contact or the contacts to the right of this page.

The Australian Customs and Border Protection Service (Customs) recently released Practice Statement B_IND08: Valuation – Transfer Pricing Policy(the Statement), replacing the existing Practice Statement PS2009/21.

The Statement tightens and clarifies the rules surrounding the application for a Valuation Advice (a Customs ruling on technical customs valuation issues) relating to transfer pricing arrangements. In particular, the Statement outlines: the legislation and policy framework relevant to customs valuation and transfer pricing arrangementsthe substantive documentation required to support a Valuation Advice applicationwhen transfer pricing studies will be acceptable evidence in a Valuation Advice applicationthe requirement to support the customs valuation methodology being adopted, not simply relying on Berry Ratio or OECD methodologies to support transactions are at arm’s length. Customs note that these transfer pricing methodologies are not analogous to customs valuation methodologiesthe requirement to demonstrate that the relationship between the purchaser and the vendor has not influenced the price of the goods (via qualitative or quantitative measures) in cases where the transaction value methodology is proposed to be adoptedconsideration of the types of payments which will not be considered to form part of the 'price paid or payable' for imported goods, such as market support paymentsthe obligation to amend the customs value of goods declared on past transactions where a compensating transfer pricing adjustment is made, irrespective of whether the goods are subject to customs duty or not, and the impact compensating adjustments have for Goods and Services Tax (GST) statements made on past import declarations and the obligation an importer has to ensure adjustments are properly accounted for and reported to Customs.An opportunity to develop transfer pricing documentation which supports both transfer pricing and customs valuation pricing, delivering efficiency, consistency and compliance in both disciplines.Increased complexity of demonstrating that transactional product pricing is at arm's length for customs purposes, especially where relying on transfer pricing arrangements utilising a 'profit based' transfer pricing methodology, such as the Transactional Net Margin Method.Greater challenge from Customs on proposed arm's length product prices put forward, as Customs intend to undertake their own research that could include analysing import data (such as the prices of identical or similar goods declared by other importers) to develop 'test values' to possibly assist in determining whether the relationship between the purchaser and vendor under consideration has influenced the price of imported goods.Increased compliance costs associated with reporting and disclosing the customs duty and GST impacts of transfer pricing adjustments.Where renewing a Valuation Advice, the application will need to conform with the new Statements' requirements and previous positions adopted will need to be supported as it will not necessarily be the case that previous decisions will be 'rolled over'.To have a more detailed discussion about what the above means for you, please contact your usual PwC contact or any of the contacts on the right. Recently, the Minister for Industry and Innovation released the draft Australia Jobs Bill 2013 for public comment. The draft Bill forms part of the Government's recently announced A Plan for Australia Jobs Industry and Innovation Statement and seeks to legislate the development of Australian Industry Participation (AIP) arrangements that maximise supply opportunities for Australia firms.

Under the proposed changes, major projects in all sectors of the economy with capital expenditure of $500 million or more will be required to implement AIP Plans outlining how local industry will be given a full, fair and reasonable opportunity to supply goods and services to a project. Currently, AIP Plans are only required by project proponents seeking to access the Enhanced Project By-law Scheme (EPBS), a voluntary scheme that eliminates the five percent tariff on eligible goods not produced in Australia for Projects over $10 million in applicable sectors. The changes would place additional requirements on EPBS projects worth $2 billion or more by requiring dedicated Australian Industry Opportunity Officers to be imbedded within the procurement teams of individual companies.

The exposure draft of the proposed legislation includes a number of additional key measures that will have broad implications for project proponents and Engineering, Procurement and Construction Managers (EPCMs). These include: Capturing all projects above the capital expenditure threshold that seek to establish a new facility or expand or upgrade an existing facility. The draft legislation also allows for the grouping of a number of facilities provided the additional facilities are reasonably necessary for operation of the principle site.Requiring a draft AIP Plan to be submitted at least 90 days prior to the earliest of a number of legislatively defined pre FEED events occurring in relation to the project, including the commencement of project concept design, the estimation of raw materials, the preparation of block diagrams or process flows or the engagement of a party to perform an environmental assessment of the project.Mandatory AIP plans will require project proponents to demonstrate that Australian entities will have a full, fair and reasonable opportunity to bid for the supply goods and services to the project in respect of all work packages worth $1 million or more. The draft legislation also compels project proponents to take all reasonable steps to ensure that procurement entities associated with the project will satisfy the proponent's AIP Plan objectives, such as refraining from requesting bids in respect of packages worth $1 million or more unless their is a clear understanding of the capability and capacity of Australia entities to supply those goods or services.The exposure draft also includes anti-avoidance provisions to prevent project proponents from breaking down projects and/or work packages when done for the sole or dominant purpose of avoiding major project status and/or key work package thresholds. Going forward, project proponents will therefore need to ensure there is commercial justification surrounding how the project is defined and how work packages are formulated.Parties that do not comply with AIP requirements may be subject to compliance actions, including the publication of an adverse publicity notice ('name and shame') and court ordered injunctions to compel project proponents to engage in activities to ensure compliance with their AIP obligations (or refrain from activities in contravention to those obligations).The draft legislation also establishes the new Australian Industry Participation Authority to administer the new legislation and assigns it significant information gathering powers to ensure that parties are compliant with their AIP obligations.The Australian Industry Participation Authority will also be tasked with assisting businesses to develop capabilities and connections required to capture supply opportunities and supporting the continued work of the Government's Supplier Advocates who assist local firms to raise their competitiveness and connect them with new business opportunities.The Prime Minister, Julia Gillard, announced on 17 February 2013 the Government’s Industry and Innovation Statement, "A Plan for Australian Jobs" (the Plan). The Plan aims to increase Australian manufacturing ability, with a view to ensuring Australian business are given early notification of supply opportunities and a fair chance of winning contracts, specifically in major resource, oil and gas, infrastructure projects. The Plan will be funded by cutting $1 billion in Research and Development tax incentives currently provided to companies with an annual turnover of $20 billion or more.

The centre pieces of the Plan include: The establishment of a new Australian Industry Participation Authority to assist businesses to build capabilities and connections to win work on major projects.Introduction of new legislation that will require any projects worth $500m or more to implement an Australian Industry Participation Plan (AIPP) to encourage companies to consider and use Australian businesses in their projects.Requirement for projects worth $2bn or more, that apply for customs duty concessions under the Enhanced Project By-Law Scheme (EPBS), to employ Australian Industry Opportunity officers within their global supply offices. Additionally, these companies will have to report to the Government every six months in regards to their efforts to procure local materials or cease using a duty concession.Reforming the anti-dumping system to afford stronger protection to Australian industry against unfair overseas competition including establishing a new Anti-Dumping Commission to investigate complaints, increase Customs funding for investigations and introduction of stronger remedies against overseas producers who deliberately contravene the legislation.A support package for Australian industry, which includes: an investment of more than $500 million in establishing up to 10 Industry Innovation Precincts to drive business innovation and growth in areas of Australian competitive advantageestablishment of a new Industry Innovation Network to allow businesses in various regions to take part in Precinct activities, including access to knowledge, support, services and partnershipsimplementation of measures that help small and medium Australian businesses win tenders and gain access to financeinvestment of $380m to create Venture Australia to facilitate venture capital investment, andcreating a new $350m round of Innovation Investment Fund.For project proponents, even greater scrutiny and transparency of how you engage and contract with local industry.For new projects, it will now be imperative that a robust AIPP framework be developed to ensure accountability and defence of key decisions and issues such as procurement and contracting, defining and communicating early supply opportunities for local industry, offshore sourcing, workforce and recruitment, external stakeholder liaison and engagement.Potential increased complexity to securing customs duty concessions and access to R&D incentives for major protects. Improvement in access to projects for local suppliers and increased Government support to Australian companies to win major project work.We will keep you briefed of any further developments. In the interim, to have a more detailed discussion about what the above means for you, please contact your usual PwC contact or the contacts on the right. On 3 December 2012, the Government released its interim response to the final report (‘the Report’) of the Low Value Parcel Processing Taskforce (‘the Taskforce’).

The Report responded to the Productivity Commission’s 2011 report into the retail sector, which found that there are in-principle grounds to reform the Low Value Threshold (LVT) if this can be done in a cost efficient manner. Further, the Report found that significant change would be required to improve the efficiency of handling and administrating low value imports.

Broadly, the Government agreed that there is a strong case for lowering the threshold to achieve tax neutrality and that key efficiency-related reforms need to be implemented to allow for this. As the LVT level was not within the terms of reference of the Report, the Government has not commented on this issue in its response.

Key comments in response to the Taskforce’s recommendations included: that electronic data interchange in the international mail stream would be critical to implementing the reforms and that the Government and Australia Post are partaking in ongoing discussions with the Universal Postal Union in this regardthat any reduction in the LVT would be for GST only at first instance, with the threshold for duty remaining at the $1,000 level until systems can be developed for the efficient and effective collection of dutythat the Government will look to introduce legislation to separate GST and duty for LVT purposesthat the Government supports simplified GST assessment arrangementsThe Government will not make any final decision about reforms or about the lowering of the threshold until detailed business cases are prepared and the costs associated with any possible changes have been determined. The Government’s final response will be released in 2013.

To have a more detailed discussion about what the above means for you, please contact your usual PwC contact or the contacts on the right.

In its Mid-Year Economic and Fiscal Outlook (2012-2013), the Government announced its commitment to providing $13.5 million towards enhancing the Australian Customs and Border Protection Service's (Customs) assurance system at the border.

The measures will include the provision of additional staff to undertake compliance activities, with a view to increasing the amount of revenue collected at the border.

In particular, Customs will be provided with additional staff to review Tariff Concession Orders (TCOs) on imported goods. TCOs are used to gain duty-free entry for goods that are not produced in Australia. This targeted review on TCOs will assist in assessing whether TCOs are still currently valid and appropriate in the current market.

We anticipate Customs compliance efforts will align with their 2012/13 Compliance Program which focuses on key economic and revenue related issues, including: undervaluation and incorrect description of imported goodstransfer pricing and valuation of goods in related party transactionstreatment of royalties, commissions and price related costslow value threshold utilisation and issuesuse of duty concessions, such as Free Trade Agreements and TCOs, andimporting companies involved in the textiles, clothing and footwear (TCF), pharmaceutical, chemicals, cosmetics and food and beverage industry sectors.We will keep you briefed on any further developments.

In the interim, to have a more detailed discussion about this matter, please contact your usual PwC contact or the contacts on the right.

On 6 September 2012, the Final Report of the Low Value Parcel Processing Taskforce ('the Taskforce') was released. The Taskforce was asked to investigate more efficient approaches for handling and administrating the increased number of low value imports, including options for collecting GST and duty on these imports.

The Report responded to the Productivity Commission’s (‘the Commission’) report into the retail sector in 2011, which found that the Low Value Threshold (LVT) was not the main factor in the struggle of Australian retailers to compete with international retailers and that there are in-principle grounds to reform the LVT if it can be done in a cost efficient manner.

Whilst the Taskforce was not asked to recommend a new threshold level, the Taskforce highlighted the fact that the proportion of collection costs to GST revenue increases as the threshold falls below $500, indicating that revenue collection would not be cost effective at a threshold level less than $500.

The Taskforce found that improving the efficiency of handling and administrating low value imports would require significant change. The Taskforce devised possible solutions to the efficiency problem and divided these solutions into three principle categories: Prospective solutionsPotential solutions that were not feasible in the short to medium termUnviable solutionsThe table below lists some of the proposed solutions outlined the Final Report (by category). Prospective solutionsLonger term solutionsUnviable solutionsself-assessment of duty and/or GST liability when purchase is madecollection of duty and/or GST by overseas suppliers before dispatch of goodsimproving processes, work practices and removal of duplication when receiving and dealing with packages at gateway and when inspecting and processing packages on arrivaluse of electronic data provision in cargo and mail environments to streamline automated assessment of duty and/or GSTpre-registration for payment of duty and/or GST once liability is assessed at the borderautomation of postal import declaration processes on arrivalrealignment of responsibility for revenue assessment and collection between Customs and Border Protection, Australia Post, express carriers and other freight forwardersthat the border agency fees and charges should apply to goods valued below $1,000 to which GST is appliedthat the Government consider the option of deferring GST payment for all GST registrantsthat the Government consider duty and/or GST collection from financial intermediariesSimplified tariff arrangementsCollection of GST on foreign exchange transactionsReverse charging GST to registered purchasersCollection of duty and/or GST by overseas postal authoritiesDeclaration of duty and/or GST liability through the income tax assessment processThe Government has discussed the report with the Retail Council of Australia and will continue to seek the views of other stakeholders, including retailers, consumers and the States and Territories before formulating a response to the Report.

The impact to business will not be known until the Government formulates its response to the report. In the event that the Government decides to lower the LVT, it would certainly go towards providing the tax neutrality traditional retailers are seeking when competing against imported online purchases.

We will keep you briefed of any further developments.

In the interim, to have a more detailed discussion about what the above means for you, please contact your usual PwC contact or the contacts on the right.

The Government announced on 1 August 2012 the Review of the Legal and Administrative Framework for Excise Equivalent Goods that will consider the further improvements to the efficiency and effectiveness of the excise equivalent goods framework, including opportunities for streamlining arrangements and reducing costs to business.

Excise duty is a tax on locally manufactured petroleum, tobacco and some alcohol products. Equivalent goods imported into Australia are known as Excise Equivalent Goods and are subject to customs duty at rate equal to the corresponding excise duty that would have applied had the goods been domestically produced.

A Better Regulation Ministerial Partnership has been established between the Minister for Finance and Deregulation, the Assistant Treasurer and the Minister for Home Affairs to conduct the review. The Partnership will consider and make recommendations on various matters, including: Transferring excise equivalent goods into the excise regimeReviewing the point at which excise duty is imposed on imported excise equivalent goodsConsolidating the collection and administration of excise and excise equivalent goods within the ATOReviewing the control of duty free stores, providores and catering bonds, whilst maintaining border integrity and the efficiency and effectiveness of current border controlsExamining whether the administration of excise equivalent goods should be consolidated under the one administration andRevising the import declaration requirements for excise equivalent goods intended to be used in domestic excise manufacture.Treasury is currently seeking comment from industry and interested parties should consider lodging a submission prior to the due date of 31 August 2012.As part of the Government's Clean Energy Future package, from 1 July 2012 most business users of liquid fuel will pay an effective carbon price through the fuel tax system by receiving a reduced fuel tax credit or, in the case of aviation fuel, paying an increased excise or excise equivalent customs duty.

However, from 1 July 2013, large users of liquid fuels will be able to opt-in to the carbon pricing mechanism as an alternative to paying an equivalent carbon price through the fuel tax system. The details of the Opt-in scheme will be set out in regulations.

The proposal for the Liquid Fuels Opt-in Scheme has been released on the Department of Climate Change and Energy Efficiency's (DCCEE) website. This consultation paper sets out the proposed details of the Opt-in Scheme that will inform the preparation of the regulations. In addition to providing an overview of the Scheme, the paper proposes the fuels that will be covered, eligibility thresholds to Opt-in and liability under the Opt-in Scheme.

The DCCEE invites interested parties to submit feedback on the proposed detail of the Opt-in Scheme by Friday 20 July 2012. The email and postal address details for lodging a submission are available from the link above.