Even in the current framework of increased engagement between industry and agencies such as the Department of Immigration and Border Protection ("DIBP"), there can still be unexpected legislative surprises. In the absence of a compelling need for urgent action, such surprises are disappointing, especially given the commitment of the Federal Government to a Regulatory Performance Framework which is intended to reduce regulation and ensure that current or new regulation is introduced in a transparent and consultative fashion.

A prime example is the introduction on 16 March 2016 of the new Custom and Other Legislation Amendment Bill 2016 ("Bill").

According to the Explanatory Memorandum, the Bill amends the Customs Act 1901 ("Act"), the Commerce (Trade Descriptions) Act 1905 and the Maritime Powers Act 2013.Again, according to the Explanatory Memorandum ("EM"), the aims of the amendments to the Act are as follows:

  • Allow for the exemption from paying import declaration processing charge;
  • Extend the circumstances in which an application can be made to move, alter or interfere with   goods for export that are subject to customs control;
  • Clarify and simplify the provisions concerning the making of tariff concession orders for made-to-order capital equipment; and
  • Remove unnecessary and outdated provisions.

Potentially, the most significant amendments within the Bill are the amendments to the Tariff Concession Order ("TCO") regime. This includes the following:

  • Removing the "25% local content" requirement on the basis that

"such evidence is unnecessary because manufacturers who can demonstrate a substantial process of manufacture always easily exceed the 25% factory or works costs test. The requirement to produce such evidence therefore places an unnecessary burden on Australian businesses".

Readers may recall that this proposed amendment was raised by the DIBP some time ago, and was subject of extensive consultation with industry. The EM further states that;

"consistent with the Governments' deregulation agenda, the new subsection 269D(1) of the Customs Act simplifies the test under which goods are taken to have been produced in Australia such that goods (other than unmanufactured raw products) are taken to be produced in Australia if they are wholly or partly manufactured in Australia".

  • The Bill also amends subsection 269E(2) of the Customs Act which has been the subject of a number of cases before the AAT and in the Full Federal Court in Vestas. The new subsection 269E(2) of the Act is intended;

"more accurately reflect the policy intention of the provision and clarifies it. The new provision emphasises the capacity of the Australian manufacturer to produce the goods subject to the TCO application with existing facilities and that the substitutable goods that could be produced would be made – to – order capital equipment".

  • Further, the Bill also provides that the consideration of the same labour skills, technology and design expertise as substitutable goods is for five years before the TCO application was lodged (rather than the current period of 2 years) as;

"the period of two years is often insufficient to give a fair capacity to give a fair indication of the producers capabilities in relation to made – to – order capital equipment, especially given the amount of time and labour necessarily involved in producing such equipment. This amendment will benefit local manufacturers".

As readers would be able to determine, a number of related issues are raised by these amendments.

  • The removal of the "25% local content requirement" was the subject of previous consultation with industry, including opposition by many in industry. However, there was no response from the DIBP to that consultation. The amendment contained in the Bill suggests that the consultation and comments were unsuccessful in opposing the amendment. The absence of a response to the consultation is disappointing and appears to be inconsistent to the notion of the Regulatory Performance Framework.
  • The comment that the "25% local content will always be satisfied if there is a substantial process of Australian manufacture" is not entirely accurate. I have conducted litigation in the AAT in which the 25% local content was not, in fact, achieved notwithstanding representations by the Australian industry that it had been which were accepted by the DIBP. It was only after challenge to those conclusions in the AAT that it became clear that the 25% local content requirement had not been satisfied. It has also been the case in many AAT proceedings that Australian manufacturers and the DIBP have experienced significant problems in verifying that the 25% local content requirement has been met. Accordingly, the removal of the 25% local content requirement will make the position of the Australian manufacturer in opposing TCOs or seeking the revocation of TCOs that much easier.
  • Similarly, the change to the "made – to – order" capital equipment provision will undoubtedly assist local industry to the disadvantage of Australian importers and also to the disadvantage of Australian companies which rely upon such TCOs in their inputs to manufacture. It should also be noted that the amendment has been made in response to the decision of the Full Federal Court in Vestas even though that decision is still subject to an application for special leave to appeal to the High Court and the High Court may take a view which is different to that which is described in the Full Federal Court decision.

The former versions of the DIBP had adopted a practice in which it consulted with industry on proposed legislative amendments by way of provision of exposure drafts of legislation together with proposed changes to notices and practice statements. In this case, no such exposure draft of the Bill was provided and there seems to be no compelling urgent reason for the Bill not to have been subject to the release of an exposure draft for comment by parties, especially in light of the fact that it effects changes which were subject to consultation but in relation to which no response to the consultation was provided. Again, this is very disappointing to those affected by the amendments.