Senator IAN MACDONALD (Queensland) (19:16): I chaired the Senate Legal and Constitutional Affairs Committee that looked at the customs and tariff aspects of the Korea-Australia Free Trade Agreement bills. The committee recommended that the bills be passed, but it did raise one recommendation relating to a couple of issues raised by two submitters. The Minister for Immigration and Border Protection, Mr Morrison, has issued a letter responding to that I think satisfying concerns raised by the submitters. It is unusual because Senator Wong has not seen the letter, but I seek leave to incorporate in Hansard the letter from the minister relating to recommendation 3.16. It is an unsigned letter but it does respond to the recommendation of the committee. Leave granted. The document read as follows— The Hon Scott Morrison MP Minister for Immigration and Border Protection Ministerial No: MS14-000409 Ms Sophie Dunstone Committee Secretary Legal and Constitutional Affairs Legislation Committee PO Box 6100 Parliament House Canberra ACT 2600 Dear Chairman, Senator the Hon Ian MacDonald MP Response to the Submissions made by The Export Council of Australia and the Customs Brokers and Forwarders Council of Australia to the Senate Legal and Constitutional Affairs Legislation Committee Inquiry into the Implementation of the Korea-Australia Free Trade Agreement The Australian Customs and Border Protection Service (ACBPS) is writing to address the issues raised by submissions made to the Committee, in respect of the above inquiry, by the Export Council of Australia (ECA) and the Customs Brokers and Forwarders Council of Australia (CBFCA). In addressing these issues I will refer only to the submission made by the ECA as the CBFCA submission is almost identical. I also note that both the CBFCA and the EGA generally welcome the implementation of the Korea-Australia Free Trade Agreement (KAFTA) and its initiatives. Commencement of the KAFTA (paragraph 3.2 of the submission refers) The Government of Australia and Korea have agreed to be in a position for KAFTA to come into force in 2014. At this stage we are looking at a December 2014 commencement. In Australia our legislative process will be complete when the KAFTA Bills have been enacted and when subsidiary Regulations are made, possibly in late October or early November. Communication (paragraph 3.3 (b) and (c) of the submissions refer). As a result of a recent Industry Summit the Trade Branch in ACBPS will continue to work with the Department of Foreign Affairs and Trade, other government agencies and industry to improve access to Free Trade Agreements (FTA) by improving awareness of their scope and the requirements and processes for accessing benefits and, wherever possible, reducing their complexity (e.g. by promoting greater standardisation in plurilateral agreements). ACBPS will be undertaking an education program that will provide industry with information on how to access the benefits of the recently concluded KAFTA by holding seminars in all capital cities except Darwin and Hobart. These seminars will be similar in content to those provided for the implementation of other FTAs. The seminars are aimed at industry, customs brokers, freight forwarders and other professional service providers and will advise on the tariff commitments under KAFTA and on how to use the Rules of Origin including the Product Specific Rules (PSRs). They will be underpinned by Instructions and Guidelines and other instructive material which will be available publically on the ACBPS website before the commencement of KAFTA. Regulations (paragraph 3.6 refers) KAFTA contains rules that will determine whether goods imported into Australia from Korea are originating goods and thereby eligible for preferential rates of duty under the Customs Tariff Act 1995. These rules are set out in Chapter 3 of the KAFTA and will be enacted in the Customs Act 1901 as new Division 1J of Part VIII of that Act and as new regulations. New Division 1J will be inserted by the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014. The Bill was introduced in the Parliament on 4 September 2014. Consistent with the regulations which implement, inter alia, the Australia-US Free Trade Agreement (the Customs (Australia-United Free Trade Agreement) Regulations 2004) and the Malaysia-Australia Free Trade Agreement (Customs (Malaysian Rules of Origin)Regulation 2012), regulations are required to implement part of KAFTA. The KAFTA Regulations will implement and specify the different product-specific rules of origin applicable to goods for each tariff heading and subheading in the harmonized Commodity Description and Coding System for the classification of goods that are contained in Annex 3-A to KAFTA. In line with Parliamentary practice instructions were forwarded to the Office of Parliamentary Counsel for drafting the regulations after the introduction of the KAFTA Bills in the Parliament on 4 September 2014. Under the provisions of the Legislative Instruments Act 2003 the Regulations (when agreed) are required to be registered on the Federal Register of Legislative Instruments and tabled in both Houses of Parliament for scrutiny. Potential Offences (paragraph 3.7 of the submission refer). I note the concerns raised by the ECA that the Customs KAFTA Implementation Bill does not specifically include references to Articles 3.20 to 3.25 in the Agreement. I am advised that the Regulations will make provisions for articles 3.23, 3.24 and 3.25 and that this is consistent with the implementation of previous free trade agreements. However, in relation to Article 3.23 the Regulations will not specify a 30 day period and this will be to the benefit of Australian exporters. I am also advised that Article 3.20 is merely a clarifying provision that does not need to be included in the Act and that the current offence provisions of the Customs Act will apply where a false claim for preferential tariff treatment is made, which gives effect to Article 3.21. I also note that the Customs Regulations 1926 will be amended to provide for refunds of duty where a post-importation claim for preferential tariff treatment is agreed providing that the time for working out the rate of duty on the goods occurs at or after the time KAFTA enters into force. Infringement Notice Scheme (paragraphs 3.12 and 3.13 of the submission refer) An infringement notice is an administrative penalty that the ACBPS may issue in certain circumstances. Infringement notices are a valuable enforcement and regulatory tool as they can provide a timely and cost-efficient outcome for both ACBPS and the entity that is the subject of an investigation. The new Infringement Notice Scheme (INS) which commenced on 1 February 2014 is applicable to specific strict liability offences that are listed in Schedule IABA of the Customs Regulations 1926. A person may be given an infringement notice in relation to any contravention of a provision of the Customs Act 1901 (the Customs Act) that is subject to an infringement notice under this Schedule. In determining whether an infringement notice is an appropriate enforcement response, the ACBPS takes into account a broad range of factors. Circumstances where ACBPS is more likely to give an infringement notice rather than prosecute for an offence may include: • where the alleged offence is isolated or non-systematic • where remedial or risk mitigation action was taken following ACBPS bringing the issues of concern to the person's attention (for example, through a formal warning) • where the facts that led to the alleged offence are straight forward and are not in dispute • where the alleged offence does not pose a significant risk to the border or the collection of revenue or • where ACBPS considers the infringement notice is necessary to form part of a broader industry or sector compliance and enforcement program. The ACBPS has no influence on how its Korean counterparts deal with minor or inadvertent errors associated with compliance with the Rules or Origin clauses of KAFTA. The Guidelines for the new INS are available for reference at: (httn://www.customs.gov.au/webdata/resources/files/INSGuide2014.pdf). I trust that the above information will assist the Committee in its deliberations concerning the implementation of KAFTA and I request that this response be kept in confidence. Yours sincerely The Hon Scott Morrison MP Minister for Immigration and Border Protection Senator IAN MACDONALD: Perhaps the overriding recommendation of the committee was that the matter be dealt with super urgently, particularly on behalf of the cattle industry, the sugar industry and a number of other industries which are important to my constituency in Queensland and indeed they are important to Australia. If we do not get this legislation through in this sitting it will mean that all of our primary producers will be put back a year against competitors in the deal with Korea. It is a tremendous agreement for Australia, particularly for the cattle industry but for a number of other agricultural industries as well. I urge the Senate to pass the bills in the interests of Australian industries.