The Australian Customs and Border Protection Service ("Customs") published an Australian Customs and Border Protection Notice ("ACN"), ACN 2014/36, on or about 14 August 2014, but dated 31 July 2014, advising of the revocation of ACN 2000/30. ACN 2000/30 represented Customs' view from the year 2000 on the interaction between the relevant Incoterms and liability for customs duty. Specifically, ACN 2000/30 clarified the previous position of Customs as to who the owner of imported goods was for Customs entry purposes, and who the importer was for Goods and Services Tax ("GST") purposes in regards to Delivery Duty Paid ("DDP") and Delivery Duty Unpaid ("DDU") transactions.
In regards to DDP transactions, ACN 2000/30 stated that the overseas supplier is the owner for Customs purposes and the importer for GST purposes. This meant that the overseas supplier was liable to pay duty, duty short-paid or erroneously refunded, any penalty imposed and retain commercial documents.
In regards to DDU transactions, ACN 2000/30 also stated that whichever party was nominated to take responsibility for Customs clearance and acquittal of GST was regarded as the owner for Customs entry purposes and the importer for GST purposes.
Consequences of revocation of ACN 2000/30
While ACN 2000/30 was not legally binding on Customs, it did represent an important statement as to Customs' position. Customs generally adhered to the policy contained in ACN 2000/30. The revocation of ACN 2000/30 suggests that Customs is of the view that the categories of parties who could be liable for duty, GST and penalties have been expanded. This means that Customs could require importers using DDP and DDU transactions to pay duty short-paid, duty erroneously refunded and penalties on past importations.
Under the Customs Act 1901 (Cth) ("the Act"), a duty amount that is due and payable is a debt due to the Commonwealth. Pursuant to the Public Governance, Performance and Accountability Rule 2014, Customs is required to pursue recovery of this debt. It is therefore likely that Customs will target past DDP and DDU importers in respect of transactions where adequate duty was not paid.
In addition, the revocation of ACN 2000/30 raises GST issues.
Reasons for revocation
Customs stated that ACN 2000/30 should be revoked as it pre-dates the following developments in the Customs arena:
- The terms DDU, DES, DEQ and DAF were removed in the 2010 Incoterms review and DAT and DAP were added
- ACN 2000/30 refers to the de-commissioned COMPILE style and Coded Owner Supplier (COS) Codes, which have now been replaced
- Section 243T penalties are no longer limited to owners*
Views on the reasons for revocation
Some of our views on Customs' stated reasons for revocation are detailed as follows:
- ACN 2000/30 represented an important statement on Customs' position and it is surprising that it was revoked suddenly without consultation or discussion with the affected parties. This lack of communication with the affected parties appears to contradict Customs' stated position on engagement on legislative and procedural changes.
- The ACN is dated 31 July 2014 but was only published on or about 14 August 2014. This begs the question as to why it took so long to be published.
- Under the new Incoterms, DDP is not substantively different to the previous version.
- Parties can still elect to apply the 2000 Incoterms in their contracts, provided they make this clear.
- The new Incoterms were implemented 4 years ago, yet the revocation only occurred now.
- The new approach is at odds with the commercial nature of DDP arrangements and creates uncertainty for purchasers who could find themselves liable for customs duty which was already included in the price paid to the vendor of the goods. It creates a disincentive to use DDP or similar Incoterms and creates uncertainty for all involved. In addition, purchasers face the risk of not being able to recover duty and/or penalties that are demanded by Customs.
The outcome of the new ACN is that Customs may be likely to pursue purchasers of goods under DDP or DDU transactions to recover duty or penalties. Accordingly, if you or your client receives a demand from Customs in relation to a DDP or DDU transaction, whether for duty or penalties, we would be pleased to assist.
We will keep you informed of any developments.
*In 2013, Section 243T of the Act was amended by the Customs and AusCheck Legislation Amendment (Organised Crime and Other Measures) Act 2013 (Cth) to extend liability from an 'owner' to any 'person' in regards to the penalty for making a false or misleading statements resulting in loss of duty.