The Australian Federal Budget for the 2018/2019 year was announced in Parliament on 8 May 2018. Individual summaries for portfolios can be found at the relevant websites for the portfolio agencies.
The following issues were announced which may have an impact for those in the customs and trade industry. I had deferred any commentary until more detail came to light on some of the issues.
Biosecurity Import Levy
As I suggested shortly before the Budget was announced, there is a proposal for a new levy on imports by sea to cover an ‘enhanced biosecurity system’. The levy is estimated to raise $325M over the three financial years from 2019 – 20, an average of $108M each year.
The levy is intended to start from 1 July 2019 and would be:
- introduced on sea containers and non-containerised imports by sea (not on airfreight);
- introduced on port terminal operators for goods that are unloaded and cleared under the Biosecurity Act;
- set at $10.02 per incoming twenty-foot equivalent sea container and $1 per tonne for non-containerised cargo; and
- 1% of the current cost of importing a container.
Of interest is that the levy is being imposed on port terminal operators. Presumably it will be passed on down the supply chain to shipping lines, then to freight forwarders and then to importers. However a real issue arises from the way it will be imposed and whether each party will add an administrative or other charge at each stage.
Also of interest are the revelations that the additional charge is not for cost recovery of existing biosecurity reviews but is a levy apparently to be ‘set aside’. Readers would be aware that existing processing charges on full import declarations already include a portion for biosecurity review. It would appear that the levy is intended to cover contingencies against future events which may require a significant response, such as another prawn ‘white spot’ infestation. Being characterised as a ‘levy’ also means it falls outside of the regime established by the Department of Finance Cost Recovery Guidelines which would require prior consultation with details to be provided. It could also mean that those liable to the levy could recover it against all containers moved, including empty containers or those there for export. Accordingly, we are all keen to hear the additional services to be provided and how this levy will be charged and imposed.
The budget provides for $293.63M allocated over 4 years to strengthen air cargo and international mail security. In addition $121M will be going to increase inbound cargo screening and $122M towards increasing ABF and AFP officers at airports.
On a domestic level, the additional budget allowance will increase security screening at certain regional airports and allow for the installation of new x-ray and personal screening equipment. Police at airports will be granted additional powers, including requiring passengers to prove their identity.
A significant ‘non-budget’ development is confirmation that the ‘piece-level’ scanning procedures adopted for exports to the US are now to be adopted for all goods for export by air. This is to be implemented by 1 March 2019 and poses a challenge for all in the supply chain.
Single Window for Trade
The Budget included a promise of $10.5M to ‘transform and modernise’ the supply chain by completing the business case for a ‘single window’ for international trade documentation. Not the single window itself but merely the business case as to its likely costs and benefits. This was first promised as part of an election commitment in 2016 and is moving very slowly. By comparison, NZ’s ‘Trade Single Window’ (or TSW) commences on 1 July this year!
Australian Trusted Trader Programme (ATTP)
There is a non-specific statement in the Budget to the effect that those in the ATTP would not be required to produce a Country of Origin (COO) document for goods imported under ‘certain’ FTAs. However, those FTAs were not identified nor was the process by which preferential status would be able to be claimed. It could be difficult to implement in FTAs where COOs are compulsory such as ChAFTA, as the FTAs themselves may need amendment. There has since been confirmation that the funding is only for a first step to consider where the arrangements could be implemented. This is in response to industry requests.
SME export hubs and other trade-related matters
The Budget contained some other promises of funding to assist SME operators to more comprehensively engage in trade and take the benefit of FTAs which have been negotiated and which are being negotiated:
- $20M (over four years) towards funding ‘Industry Growth Centres’ for two more years as well as an ‘SME export hubs program’.The details have yet to be provided, but it would appear to be a grant program that will enable a group of SMEs in a region to get funding for activities to benefit them as a group, such as brand development, enhancing supply chains and upskilling.
- $15M to DFAT to boost ‘economic diplomacy’ to include continuing and expanding the FTA outreach program as well as engaging more with business including provision of economic and security insights.
- a small boost for Austrade including $3.2M to develop a new national brand
- investments in freight and rail infrastructure including $400M for a new rail line at Port Botany
- $51.3M over four years to grow agricultural exports
- additional agricultural counsellors in key export markets
Dealing with the illicit tobacco trade remains a high priority for Government especially when research tends to suggest that there has been an increase in the consumption of tobacco but sourced from illegal imports or illegal local production.
As a result, the Budget included the following commitments:
- a new requirement to pay duty once the goods are imported – even if they only go into a ‘bonded’ facility from 1 July 2019
- a new task force aimed at illegal tobacco imports
- from 1 July 2019, commercial imports of tobacco will require a permit
The Government has predicted significant future revenues to arise from the ‘tightening’ of the regime regarding the importation and local sale of tobacco and tobacco products.
Import Processing Charge
There has been ongoing tension between those in the supply chain and relevant agencies on the Import Processing Charge (IPC) levied by Government for processing Full Import Declarations (FIDs). While some of that tension relates to the size of the IPC, there have been concerns that processing of Low Value Transactions (LVT) do not attract an IPC so that they are effectively being cross-subsidised by those paying the IPC on FIDs. Such a cross-subsidisation is not consistent with the ‘user pays’ concept behind the IPC as, after all, the same level of screening for risks must also be undertaken for transactions effecting LVTs, and the use of LVTs has significantly increased.
In recent times, there has been a proposal from the ABF that LVTs should be subject to the payment of the IPC. At that time there was significant concern expressed by industry, most of which was also facing the imposition of GST on certain LVTs from 1 July 2018. Submissions were made and my understanding is that most acknowledged the merits of the concept, but were concerned to ensure transparency and equity in the way in which a new IPC would be imposed. Notwithstanding the engagement by Government, the Budget contained no reference to a possible change to the basis on which the IPC would be charged.
There had also been suggestions that those within the ATTP would receive reductions in the IPC that they charge on the basis that they had already demonstrated the safety and compliance of their supply chain so the risks associated with their imports were lesser.
However, even though the Government predicted it would receive an increased amount from the IPC over the next financial year and beyond:
- no announcement was made on the imposition of a new processing fee on LVTs;
- no announcement was made on any relief from the IPC for those in the ATTP; and
- extra revenue raised is to go towards additional security arrangements at the border.
Looking forward from the Budget
The Budget always represents both a platform to launch new initiatives as well as a basis for estimating future revenues and expenditures. It also reflects the reality of a forthcoming Federal election and the need to deliver outcomes which are seen as both responsible but friendly to the voters. The general response to the Budget has been positive albeit with some doubts around the ability of Government to meet the revenue expectations contained in the Budget. More specifically for the customs and trade industry, there has also been support for the Budget (especially the additional infrastructure spending), although lack of substantial engagement on the proposed new Biosecurity Levy has caused significant controversy. There is also a sense that some initiatives need to be moved forward more quickly including work on the ‘single window’ and confirmation when further benefits of the ATTP will be provided.
As always, if pain persists, consult your friendly neighbourhood trade lawyer.