It’s beginning to look a lot like Christmas… an Aussie Christmas with sunny skies, blistering heat, packed beaches and rapidly depreciating personal bank accounts. But if that’s not enough to get you excited, there is, of course, the recently released Goods Compliance Update (“The Update”) from the Australian Border Force (“ABF”).
The Update aims to highlight pertinent issues identified by the ABF, compliance areas of focus, and provides some statistics on the Compliance Programme results for the 2015/2016 Financial year. I’ll reiterate that second point - the ABF highlight the compliance areas of focus, hence if your activities fall within these areas it is recommended that you assess, and if appropriate address, any risks.
I have summarised some of my key takeaway points for importers/exporters:
- Asbestos – it’s bad… It’s very bad… Do not import it… It is a prohibited import. That’s pretty much the main message. Australia has an absolute ban on asbestos and asbestos containing materials. Importers have a responsibility not to import asbestos or asbestos containing materials. Accordingly, importers need to provide assurances that demonstrate to the ABF that the imported goods do not contain asbestos or asbestos containing materials by implementing sufficient due diligence measures within their supply chains.
- Customs Valuation – this is a big ticket issue. Notably, the price shown on commercial invoices, and certainly those shown as ‘value for customs purposes’, may not be a complete reflection of all elements involved in ascertaining the Customs Value. There are numerous elements that can affect the Customs Value of imported goods, including, but not limited to, royalties, transfer pricing arrangements, commissions, production assist costs, multiple contracts, and the list goes on. Undervaluation may result in short paid duties and/or import GST. In the 2015/2016 financial year, the reported value of revenue understatements was approximately $82,000,000.
- Tariff Concession Orders (“TCO”) – Mitigating duty through TCOs comes with some risks… importers are encouraged to assess the risk and put in place measures to manage/mitigate any potential exposures. Utilising existing TCOs requires both the harmonized tariff classification and the TCO wording to be exhaustively matched to the imported goods. As both classification and applicability of TCO wording is subject to interpretation, and considering some TCOs were written over 10-20 years ago, there is an inherent risk in assuming that existing TCOs will cover contemporary goods imported today.
- Export Compliance - the error rate on sampled export declarations is reported to be 42.4% in the 15/16 financial year. The vast majority of errors detected are with customs valuation and HTS classification. As the figures are quite embarrassing, sooner or later this will become the focus point for ABF. I would encourage all exporters to consider their internal control processes, especially pertaining to export of controlled goods. The first question to ask yourself is how do you monitor the risk of non-compliance?
- Import Compliance - the error rate on sampled import declarations is reported to be 16% in the 15/16 Financial Year. The vast majority of errors detected are with tariff classification, customs valuation elements, and TCO utilisation.
- Penalties – in the 2015/2016 financial year, ABF has issued infringement notices accounting for $2.5 million in fines. A way to mitigate the risk of becoming a part of this statistic is to ensure you have robust internal controls and documented compliance processes.
Hopefully, the above information does not dampen the mood for your holiday festivities, but rather provides you with some insight to compliance activities in Australia.
Tradewin deals with these things every day. If you have any queries or concerns regarding the above, or if you require any assistance with your customs and trade compliance processes, please feel free to contact our team.
From the team here at Tradewin, we wish you all a safe, happy and relaxing holiday season, and a prosperous 2017.