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2019 BUDGET COMMENTARY

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Last night the Morrison Government handed down the Federal Budget which was filled with sweeteners for voters in the upcoming election.  However, it seems that the Coalition is not banking on the customs and trade vote as there was relatively few measures to get excited about in this regard.

Below we set out the customs and trade highlights of the budget.  It is important to remember that the Coalition will not have an opportunity to pass legislation to enact the budget measures prior to the expected May election.  If Labor is brought to power, there may be a range of alternative measures adopted.

Biosecurity Imports Levy

The implementation date of the biosecurity imports levy announced in last year’s budget has been changed from 1 July 2019 to 1 September 2019.  This delay is to allow the Industry Steering Committee (of which Paul Zalai is a member) the opportunity to make recommendations to the Minister.  The existence, amount and method of collection of the biosecurity import levy could well be impacted by a change in Government.

Jump in tobacco customs revenue

The Government is forecasting a 4 billion dollar jump in tobacco customs revenue due to the work of the black market taskforce and the removal from 1 July 2019 of the ability to warehouse import tobacco.  When the size of the customs avoidance benefit is in the billions of dollars, you can expect sophisticated methods to be adopted to illegally avoid duty on tobacco imports.  Customs brokers need to be more vigilant then ever when dealing with new customers or any imports where there is doubt regarding the accuracy of the information they are receiving.

Customs duty collection on passenger motor vehicles to dramatically fall

The budget papers show that customs duty on passenger motor vehicles is expected to fall from $504 million in 2017/18 to only $60 million in 2022/23.  There are 3 possible scenarios under which this could happen – The EU Australia FTA is implemented with a gradual reduction in duty rates on European passenger motor vehicles, the Government has decided to gradually reduce the general rate of customs duty on all imported motor vehicles or Australians stop importing motor vehicles.

The most likely of these options is the expected EU Australia FTA.  The fact that this is being factored into budget predictions hopefully demonstrates that negotiations are progressing well.

Other FTAs

The Budget makes reference to the Indonesia FTA and the Hong Kong FTA, but only forecasts a 10 million per year reduction in customs duty as a result of these FTAs.  Further, there is little new information, and no forecasts of the revenue impact, regarding the conclusions of other FTAs currently being negotiated.

Interestingly, it is noted that in the Budget papers that in 2013, 26% of two way trade was covered by FTAs and now that figure has increased to 70%.

Export growth

The Government is targeting export growth through measures other than FTAs.  There is an extra $20 million per year allocated to funding the export markets development grant.  Non-tariff barriers and technical market access issues affecting agricultural exports will be the subject of a $30 million package.

What we would have liked to have seen

Unfortunately the budget appears to have moved its focus away from trade facilitation measures.  A lot of great work has been done in recent years via the implementation of the Australian Trusted Trader programme and the conclusion of quality free trade agreements.  However, more needs to be done.  Hopefully the Labor Government will raise some of the following issues:

  1. Brown Marmorated Stink Bug – No one expects there to be a line item in the budget with the words “stink bug”.  However, it is very concerning that at a time where Australia is faced with a massive biosecurity risk that severely disrupts trade, there is expected to be a reduction in the Department of Agriculture and Water Resources staff numbers.  There needs to be more resources to address the stink bug crisis.  This is not just in respect of staff to ensure timely inspections, but there needs to be something done about the shortage of Australian treatment facilities.  The Government could fund its own facilities or create tax incentives for private enterprise to set up these facilities.
  2. Single window – Australia is lagging behind the rest of the world when it comes to the number of different departments and system traders need to deal with.  There has been general talk of a single window system of inputting and receiving data from Government.  However, without targeted funding this will not occur.
  3. Expansion of Australian Trusted Trader benefits – 2018/19 saw significant increase in the benefits available to trusted traders including duty deferral and a simplified declaration of origin system for ChAFTA.  The next phase of the Australian Trusted Trader programme needs to provide benefits for accredited service providers.
  4. Reform and greater transparency of cost recovery measures across border and biosecurity activities.  The rate and application of the import processing charge needs to be reviewed.  In a cost recovery environment, the Government should investigate if it can be more sophisticated and transparent in its application of charges which are largely being indiscriminately levied on a per import declaration basis.
  5. Last year the Commonwealth Ombudsman released a report highlighting that examinations of containers were taking too long due to lack of facilities and staff.  This results in importers incurring storage and detention charges as well as slowing supply chains.  There are two ways to fix this – reduce the number of examinations or increase the allocation of resources.  No one expects the Government to compromise on border security.  This leaves increasing funding in this area as the only option.
  6. Greater funding for the Anti-Dumping Commission – Anyone involved with an investigation by the ADC knows how rarely the legislated timeframes are met.  There are simply insufficient resources.  While dumping duties are a killer for importers, the uncertainty associated with a prolonged investigation can have just as negative an impact.

Commentary is courtesy of our legal partners Hunt & Hunt, please contact us if you require and legal assistance or further advice.