Customs Brokers and Forwarders Council of Australia Inc. Discussion Paper. Australian Customs and Border Protection Service. Refund Process BACKGROUND

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1 Customs Brokers and Forwarders Council of Australia Inc. Discussion Paper Australian Customs and Border Protection Service Refund Process BACKGROUND There is a long standing precedent (and legally supported provisions) that the determination of the correct classification of goods (Customs Tariff Act 1995) and /or the valuation of goods [Customs Act 1901 (the Act)] (on request as to a Ruling or existing public Rulings may change or confirm a classification or value of goods) may lead to a refund of customs duty and/or Goods and Services Tax. However by way of a change in Australian Customs and Border Protection Service (ACBP) practice as to existing arrangements for refunds the ACBP undertakes not only verification as to the veracity of any application for refund(s) but also, in many cases reported to the CBFCA by members, compliance audits of other lines on the import declaration not the subject to the refund application. It is the CBFCA s opinion that the Act does not provide authority for ACBP to undertake an audit on a refund application on lines not specified as a part of the refund application. The CBFCA is of the opinion that should the ACBP wish to review other lines on any full import declaration (FID) after that FID is dealt with in accordance with the authority to deal (ATD) under the Act then the correct procedure is by way of the use of monitoring powers wherein a monitoring audit of all information can be requested and must be provided. In the opinion of the CBFCA the ACBP should follow correct legal process as to any request(s) f o r information by placing the onus for the correctness of the FID back on the importer and original lodging licensed customs broker of that FID, and not the licensed customs broker lodging the refund.

2 LEGISLATION Section 163 of the Act provides for refund of duty with S.163 (1AA) (b) specifying the procedure to be followed by ACBP in dealing with such refund applications, including procedures for requesting further information in relation to issues raised in the refund application. Pursuant to this Section, Regulations 128(1) and 128A govern applications for refunds of duty. The relevant parts of legislation and legislation cited in these Discussion Papers are addendums for ease of reference and were correct as at 15 June 2015 (Attachment 2 and 3). LEGAL PRECEDENT In the AAT case Charles Parsons (Vic) Pty Ltd and Collector of Customs [1995] AATA 171; (1995) 37 ALD 779 (28 June 1995) Charles Parsons claimed that applications for refunds are a type of import entry. The ACBP submission was that section 71A of the Act allows an import entry to be communicated to the ACBP either by document or (except in cases of entry for transshipment) by computer. Sections 71K and 71L set out the manner of communicating by document and computer respectively, and nominate the type of import entry transaction covered. The ACBP submitted that there is no specific mention made in the legislative provisions for refund applications, whereas there is specific mention of import entry and other import entry related transactions (although this case references COMPILE, the principles have not changed). The ACBP further maintained that there was a distinction between the express authorisation for the electronic communication of import entries given in the Act, and refund provisions provided for in Section 163 and Regulations 128(1) and 128A(5), which govern the way in which refund applications on existing FIDs are made. The ACBP pointed out that refund applications are not nominated amongst the specific transactions set out in Section 71L (currently an import entry, a withdrawal of an import entry, a visual examination application, a movement application, a return for the purposes of Subsection 69(8) or 70(7) or S ection 105C a movement permission). The ACBP submitted that this regime, established by the legislation to deal with the type of import entry transaction nominated, was different to that established by Section 163 and Regulation 128(1) to deal with refund applications. The AAT agreed and held at para 13 that: It does not follow from the fact that the compile system allows for the electronic notification of refund applications that such applications are classified either as a sub species of import entry or are considered to be "given" for the purposes of satisfying the requirements of regulation 128(1). The Act and regulations provide different regimes for different types of transaction, and there is no uniform procedure for the processing of the different transactions. The type of import entry transactions nominated under the provisions of section 71L (1) of the Act allows communication for a number of different types of import entry or import entry related applications or returns, but it does not specifically nominate refund applications as part of the category for which the legislature is prepared to allow communication by way of the compile system. In the Tribunal's view, there is a difference in categorisation between documents lodged for purposes of entering goods into Australia, and documents lodged for the purposes of obtaining a refund when duty has already been paid. There is no warrant under the Act or regulations to classify refund applications as a species of import entry application. Consistent with this approach, both brokers and ACBP officers showed by their actions that they understood the processes for lodging of import entry forms and refund application forms to be different.

3 Also a t 14 the Tribunal further commented: If the Tribunal is correct in its finding that import entry applications and refund applications are the subject of different and distinguishable processes under the Act and regulations, then this argument fails for the same reasons and Birch's case is clearly distinguishable. It is therefore suggested in accordance with the decision in Charles Parsons (precedent which has not been overturned by later decisions), a refund declaration stands on its own and that Regulation 128AAA should only relate to refunds lodged in accordance with Section 163 of the Act and its associated regulations. IMPLICATIONS AS TO ENTRY WITHDRAWAL It should be noted that Section 71J states that this making of an application for refund does NOT constitute a withdrawal of the original import declaration: 71J Annotation of import entry by ACBP for certain purposes not to constitute withdrawal Any annotation of an import entry that is made by ACBP as a result of the acceptance by ACBP of an application for a refund or rebate of all or a part of the duty paid, or for a remission of all or part of the duty payable, on goods covered by the entry, is not to be taken to constitute a withdrawal of the entry for the purposes of this Act. The FID still stands and only the lines amended constitute the refund. No ATD is issued following a refund as the goods have already been dealt with in accordance with the ATD on that FID. This is further supported by the ACBP statement as to manual refund applications, which includes the following warning: IMPORTANT! You MUST attach to this application a new declaration on which you have indicated what changes are to be made to your import or warehouse declaration by completing ONLY the fields that have changed. A manual refund application is composed only of the lines upon which the refund claim is made.

4 ATTACHMENT 1 CBFCA Commentary on ACBP statements to applicants as to authority to audit refunds 71DA An officer may seek additional information (1) Without limiting the information that may be required to be included in an import declaration, if an import declaration has been made in respect of goods, authority to deal with the goods may be refused until an officer doing duty in relation to import declarations: Response: The CBFCA position is that this provision cannot be relied upon once goods have been delivered. S.240 and s.240aa ACBP Comment: S240AA of the Customs Act 1901, in conjunction with s240, requires persons to produce documents to ACBPS, and (s240) to keep those documents for 5 years. The powers contemplated under s240aa can be applied as part of any formal or informal audit, and extends to refund applications where an informal audit of all the lines on an import declaration may be conducted to ensure compliance with ACBPS legislation and policies. Response: The CBFCA perceives the problem is not in providing the documents. The problem is in seeking and providing illustrative descriptive material, other material and evidence of money price paid for lines not subject to adjustment. That obligation is not imposed on a licensed customs broker doing amendments on an FID created by another party as per the sections quoted it is the responsibility of the service provider of the original FID. 1 P a g e

5 ACBP POLICY ATTACHMENT 2 NNF 2014/171 Failure in Compliance As to the ACBP comments as to seeking refunds of customs duty on behalf of clients (without the clients knowledge) and in such circumstances refunds obtained being remitted to the owner, the CBFCA agrees that the position adopted by the ACBP is appropriate. However as regards the process of refunds of customs duty where in an electronic age evidence of an authority to pay agent (ATPA) for payment to a third party are only required where the refund is selected for redline processing, the CBFCA sees that the ACBP refund process must have the appropriate compliance overview with an "authority to act" on behalf of the importer of record (or owner) in place. This should apply not only in the refund process but in all interfaces with the ACBP and other regulatory agencies. This has been a long standing CBFCA position for a more effective and efficient compliance overview that has been put to the ACBP over many years unfortunately the ACBP has not recognised the need of such an arrangement. This linking of service provider to client was also expressed by the CBFCA as a process option in the recent ACBP Notice No 2014/52 as it related to identity theft. The CBFCA perspective on such process improvement is that this would mitigate what has been uncovered by the ACBP as regards the issue as to refunds. Suffice to say industry should be acutely aware of the need for appropriate documentation to be held on file for any refund applications made on behalf of clients, and the current policy position of the ACBP in relation to any application for refund. On the aspect of this policy position the following should be noted in the ACBP response to the CBFCA on refund policy and process: "The CBFCA has raised the issue about ACBP's right to request all commercial documentation/information relating to an import declaration/refund application when the broker has claimed a refund against only one or some of the lines on an import declaration. S240AA of the Customs Act 1901, in conjunction with s240, requires persons to produce documents to ACBP, and (s240) to keep those documents for 5 years. The powers contemplated under s240aa can be applied as part of any formal or informal audit, and extends to refund applications where an "informal audit" of all the lines on an import declaration may be conducted to ensure compliance with ACBPS legislation and policies." While the CBFCA does not necessarily agree this position, like a variety of other changes in practice over recent times by the ACBP, is correct at law, members should note the current ACBP policy on refunds.

6 Legislation ATTACHMENT 3 68 Entry of imported goods (1) This section applies to: (a) goods that are imported into Australia; and (b) goods that are intended to be imported into Australia and that are on board a ship or aircraft that has commenced its journey to Australia; and (c) a ship or aircraft that is intended to be imported into Australia and that has commenced its journey to Australia; but does not apply to: (d) goods that are accompanied or unaccompanied personal or household effects of a passenger, or a member of a crew, of a ship or aircraft; and (e) goods, other than prescribed goods: (i) that are included in a consignment consigned through the Post Office by one person to another; and (ii) that have a value not exceeding $1,000 or such other amount as is prescribed; and (f) goods, other than prescribed goods: (i) that are included in a consignment consigned otherwise than by post by one person to another; and (ii) that are all transported to Australia in the same ship or aircraft; and (iii) that have a value not exceeding $250 or such other amount as is prescribed; and (g) containers: (i) that are the property of a person carrying on business in Australia; and (ii) that are imported on a temporary basis to be re exported, whether empty or loaded; and (h) containers: (i) that were manufactured in Australia; and (ii) that are, when imported into Australia, the property of a person carrying on business in Australia; and (iii) that were the property of that person when, and have remained the property of that person since, they were exported or were last exported from Australia; and (i) goods that, under the regulations, are exempted from this section, either absolutely or on such terms and conditions as are specified in the regulations; and (j) goods stated in a cargo report to be goods whose destination is a place outside Australia. (2) The owner of goods to which this section applies may enter the goods for home consumption or for warehousing:

7 (a) for goods carried on board a ship or aircraft at any time before the ship or aircraft first arrives at a port or airport in Australia at which any goods are to be discharged; or (b) for goods that are a ship or aircraft and that are not carried on board a ship or aircraft at any time before the ship or aircraft first arrives at a port or airport in Australia. (3) If the owner of goods to which this section applies does not enter the goods under subsection (2) for home consumption or for warehousing, the owner must enter the goods for home consumption or for warehousing: (a) for goods carried on board a ship or aircraft after the ship or aircraft first arrives at a port or airport in Australia at which any goods are to be discharged; or (b) for goods that are a ship or aircraft and that are not carried on board a ship or aircraft after the ship or aircraft first arrives at a port or airport in Australia. (3A) An entry of goods for home consumption is made by communicating to ACBP an import declaration in respect of the goods. (3B) An entry of goods for warehousing is made by communicating to ACBP a warehouse declaration in respect of the goods. (4) For the purposes of paragraph (1)(d), goods: (a) in quantities exceeding what could reasonably be expected to be required by a passenger or member of the crew of a ship or aircraft for his or her own use; or (b) that are, to the knowledge or belief of a passenger or member of the crew of a ship or aircraft, to be sold, or used in the course of trading, in Australia; are not included in the personal or household effects of a passenger or crew member. (5) For the purposes of paragraphs (1)(e) or (f), the value of goods must be ascertained or determined under Division 2 of Part VIII. 71A Making an import declaration (1) An import declaration is a communication to ACBP in accordance with this section of information about: (i) (j) goods to which section 68 applies; or warehoused goods; that are intended to be entered for home consumption. (2) An import declaration can be communicated by document or electronically. (3) A documentary import declaration must be communicated to ACBP: (a) by giving or sending it to an officer doing duty in relation to import declarations; or (b) by leaving it at a place that has been allocated for lodgment of import declarations in a ACBP Office; at the place at which the goods are to be delivered for home consumption. (5) If the information communicated to ACBP in an import declaration relating to goods adequately identifies any permission (however it is described) that has been given for the importation of those goods, the identification of the permission in that information is taken, for the purposes of any law of the Commonwealth (including this Act), to be the production of the permission to an officer. (6) However, subsection (5) does not affect any power of an officer, under this Act, to require the production of a permission referred to in that subsection.

8 (7) If: (c) an import declaration is, or is taken under section 71L to have been, communicated to ACBP; and (d) before the time when the declaration is, or is so taken to have been, communicated to ACBP, the goods to which the declaration relates: (i) have been imported; or (ii) for goods carried on board a ship or aircraft have been brought to the first port or airport in Australia at which any goods are to be discharged; or (iii) for goods that are a ship or aircraft and that are not carried on board a ship or aircraft have arrived at a port or airport in Australia; the goods are taken to have been entered for home consumption. (8) If: (a) an import declaration is, or is taken under section 71L to have been, communicated to ACBP; and (b) at the time when the declaration is, or is so taken to have been, communicated to ACBP, the goods to which the declaration relates: (i) for goods carried on board a ship or aircraft have not been brought to the first port or airport in Australia at which any goods are to be discharged; or (ii) for goods that are a ship or aircraft and that are not carried on board a ship or aircraft have not arrived at a port or airport in Australia; the goods are taken to be entered for home consumption only when they are brought to that first port or airport in Australia or when they arrive at a port or airport in Australia (as the case requires). 71L Manner and effect of communicating with ACBP electronically (1) An import entry, a withdrawal of an import entry, a visual examination application, a movement application, or a return for the purposes of subsection 69(8) or 70(7) or section 105C that is communicated to ACBP electronically must communicate such information as is set out in an approved statement. (2) The CEO may approve different statements for electronic communications to be made in different circumstances or by different classes of persons. (3) For the purposes of this Act, an import entry, a withdrawal of an import entry or a return for the purposes of subsection 69(8) or 70(7) or section 105C, is taken to have been communicated to ACBP electronically when an import entry advice, or an acknowledgment of the withdrawal or the return, is communicated by ACBP electronically to the person identified in the import entry, withdrawal or return as the person sending it. (4) A movement application that is communicated to ACBP electronically must communicate such information as is set out in an approved statement. (5) For the purposes of this Act, a movement application is taken to have been communicated to ACBP electronically when an acknowledgment of the application is communicated by ACBP electronically to the person identified in the application as the person sending it. (s.71k covers manual entries) 163 Refunds etc. of duty (1) Refunds, rebates and remissions of duty may be made:

9 (a) in respect of goods generally or in respect of the goods included in a class of goods; and (b) in such circumstances, and subject to such conditions and restrictions (if any), as are prescribed, being circumstances, and conditions and restrictions, that relate to goods generally or to the goods included in the class of goods. (1A) The regulations may prescribe the amount, or the means of determining the amount, of any refund, rebate or remission of duty that may be made for the purposes of subsection (1). (1AA) Subject to subsection (1AD), the regulations may prescribe: (a) the manner of making application, either by document or by computer, for such refunds, rebates or remissions; and (b) the procedure to be followed by ACBP in dealing with such applications, including procedures for requesting further information in relation to issues raised in such applications. (1AB) Regulations made for the purposes of subsection (1AA) that provide for the making of an application for a refund, rebate or remission of duty by computer must indicate when that application is to be taken, for the purposes of this Act, to have been communicated to ACBP. (1AC) Regulations made for the purposes of subsection (1AA) that provide for the making of applications for refund, rebate or remission of duty by computer may include contingency arrangements to deal with circumstances where the computer system employed in relation to such applications is down. (1AD) The regulations may identify circumstances where a person is entitled to a refund, rebate or remission of duty: (a) without making an application at all; or (b) on making an application in respect of which a refund application fee is not payable. (1AE) For the avoidance of doubt, if, before or after the commencement of this subsection, a person has: (a) altered an electronic copy of an import entry or a self assessed clearance declaration as a step in making an application for a refund or rebate of duty in respect of goods covered by the entry or declaration; or (b) altered an electronic copy of an import entry or a self assessed clearance declaration as such a step and paid the application fee (if any) associated with the making of such an application; but the person did not or does not, within the time prescribed for making that application, communicate the altered import entry or altered self assessed clearance declaration to ACBP, either manually or, after the commencement of this subsection, by computer, the person s actions in modifying that import entry or self assessed clearance declaration and paying any such application fee are of no effect. (2) For the purposes of this section and of any regulations made for the purposes of this section, duty, in relation to goods that have been, or are proposed to be, imported into Australia under Schedule 3 to the Tariff includes an amount paid to a collector on account of the duty that will become payable on those goods. (3) For the purposes of this section and of any regulations made for the purposes of this section, the amount of duty in respect of which a person may seek a refund, rebate or remission of duty on goods that are imported into Australia under item 41E of Schedule 4 to the Tariff is to be taken to be the sum of:

10 (a) the amount of money (if any) paid as customs duty on the importation of those goods; and (b) to the extent that duty credit issued under the ACIS Administration Act 1999 has been offset against customs duty that would otherwise have been payable in respect of those goods the amount of customs duty offset by the use of the credit. CR 128 Application for refund, rebate or remission of duty (1) For paragraph 163 (1AA) (a) of the Act, an application by document for a refund, a rebate or a remission of duty must: (a) be in an approved form; and (b) include information as required by the form; and (c) be signed as required by the form; and (d) state which circumstance under subregulation 126 (1), 126B (1), 126C (1), 126D (1), 126DA (1) or 126F (1) applies to each of the imported goods; and (e) either: (i) be given or sent to an officer doing duty in relation to refunds; or (ii) be left in a ACBP Office at a place designated for lodgment of applications for refunds, rebates or remissions of duty. (1A) For paragraph 163 (1AA) (a) of the Act, an application by computer for a refund, a rebate or a remission of duty must: (a) include information as required by an approved statement; and (b) state which circumstance under subregulation 126 (1), 126B (1), 126C (1), 126D (1), 126DA (1) or 126F (1) applies to each of the imported goods; and (c) be transmitted, and signed, in a manner that meets the information technology requirements determined under section 126DA of the Act that apply to import declarations, or self assessed clearance declarations, about goods of the kind to which the application relates. (2) The goods for which an application is made must be goods covered by the same: (a) import declaration; or (b) self assessed clearance declaration; or (c) return under subsection 69 (5), 70 (7) or 105C (2) of the Act. (2A) However, subregulation (2) does not apply to an application for goods to which the circumstance in subregulation 126F (1) applies. (3) For paragraphs (1) (e) and (1A) (b), only 1 circumstance may be stated to apply to particular goods mentioned in a line of an application. (3A) An application made under this regulation is taken to have been made to the CEO. (4) In subregulation (3): line, for an application, means the part of the application that describes particular goods that have a single tariff classification to which a duty rate applies (whether or not the application describes other goods that have the same tariff classification or another tariff classification). CR 128A Time for application for refund of duty (1) An application for a refund of duty: (a) in a circumstance specified in paragraph 126 (1) (a), (b) or (c); or

11 (b) where duty has been paid through manifest error of fact, the goods on which duty was paid having been invoiced as part of the contents of packages but not received; may, subject to subregulation (3), be made within 14 days after the delivery from the control of the ACBP of the goods or of the packages in which the goods were originally packed or were assumed to have been packed. Note Subregulation 127 (1) does not apply if the circumstances mentioned in subregulation 128AA (1) or (2) apply: see subregulation 127 (1B). (2) An application for a refund of duty in a circumstance specified in paragraph 126 (1) (d) may, subject to subregulation (3), be made within 14 days after the goods were released from quarantine. (2A) An application for a refund of duty in the circumstance specified in subregulation 126F (1) must be made on or before 30 April (2B) An application for a refund of duty in the circumstance prescribed in paragraph 126(1)(zc) must be made no later than 12 months after the day on which the duty was paid. (3) Where: (a) the information necessary to verify an application of a kind referred to in subregulation (1) had come into possession of the ACBP before the delivery from the control of the ACBP of the goods or of the packages in which the goods were originally packed or were assumed to have been packed; or (b) for some other reason, it is equitable that the period within which an application of a kind referred to in subregulation (1) or (2) may be made should be extended; the application may be made within 4 years after the date on which duty was paid. (4) Subject to subregulation (5), an application for a refund of duty, in relation to: (a) a circumstance specified in: (i) paragraph 126 (1) (da); or (ii) paragraph 126 (1) (e); or (iii) paragraph 126 (1) (eb); or (iv) any of paragraphs 126 (1) (f) to (y); or (v) subregulation 126B (1); or (vi) subregulation 126C (1); or (vii) subregulation 126D (1); or (viii) subregulation 126DA (1); or (b) any circumstance other than a circumstance referred to in the preceding provisions of this regulation or in paragraph 126 (1) (ea); may be made within 4 years after the date on which the duty was paid. (5) If any of the following events occurs more than 3 years after the duty was paid, an application for a refund of duty may be made within 12 months of the occurrence of the event: (a) a reduction of the duty payable on goods entered for home consumption, on which duty has been paid, in consequence of: (ii) a ACBP Tariff, or a ACBP Tariff alteration, proposed in the Parliament; or (iii) the publication in the Gazette of a notice under subsection 273EA (1) of the Act of an intention to propose in the Parliament a ACBP Tariff or a ACBP Tariff alteration; or (iv) in the case of an amendment of the ACBP Tariff Act 1995 the later of:

12 (B) the Royal Assent to the amendment; or (C) the commencement of the amendment; (b) the making of: (iv) a by law under Part XVI of the Act ; or (v) a determination under Part XVI of the Act; the effect of which is that duty is not payable on those goods or duty is payable on those goods at a rate which is less than the rate which was applicable when the goods were entered for home consumption; (c) if duty has been paid on goods that were first entered for home consumption at a time when a TCO, made in respect of those goods under Part XVA of the Act, was in force or was taken to have come into force the latest of the following events: (i) the entry of the particular goods for home consumption; (ii) the gazettal of the TCO under section 269R of the Act; (iii) the gazettal of a decision on an application for reconsideration under section 269SH of the Act; (iv) if, under subsection 269SD (2) of the Act, the TCO is revoked and a new TCO is made in respect of the goods the gazettal of a notice of the decision under that subsection under section 269SE of the Act; (v) a decision of the Administrative Appeals Tribunal on an application under paragraph 273GA (1) (n), (o), (p), (q), (r) or (s) of the Act. Note Paragraphs (5) (a), (b) and (c) relate to circumstances that are specified in subregulation 126 (1): (a) paragraph (5) (a) relates to paragraph 126 (1) (eb); (b) paragraph (5) (b) relates to paragraph 126 (1) (f); (c) paragraph (5) (c) relates to paragraph 126 (1) (r). (6) If an application for refund of duty must be made within a time (the application time) that ends while a notice under section 126E of the Act that an information system has become temporarily inoperative is in force, the application time is taken to be extended until the end of the day after the CEO gives notice that the information system has again become operative. (7) A reference in subregulation (3) or (5) to the date on which duty was paid includes, for duty offset in the way mentioned in subsection 163 (3) of the Act, the date on which the duty was offset. CR 128AAA Procedures for dealing with application for rebate, refund or remission (1) For paragraph 163 (1AA) (b) of the Act, this regulation sets out procedures to be followed by ACBP in dealing with applications for refunds, rebates or remissions. (2) Before considering an application for a refund, rebate or remission of duty, a Collector must: (a) verify particulars in the application; or (b) be satisfied of any other matter that may be relevant to approval of the refund, rebate or remission. (3) If required by a Collector, the applicant must deliver to the Collector: (a) the commercial documents relating to the application that are in the applicant s possession or under the applicant s control; or (b) information, of a kind specified in a notice, about the goods that is within the knowledge of the applicant or that the applicant is reasonably able to obtain.

13 (4) A documentary requirement to deliver documents or information relating to an application must: (a) be given to the person by whom, or for whom, the application was made; and (b) be in an approved form and include the information required by the form. (5) A computer requirement to deliver documents or information relating to an application must: (a) be transmitted electronically to the person who made the application; and (b) include information required by an approved statement. (6) A Collector may ask the applicant or, if another person made the application for the applicant, that other person, questions about the application. (7) A Collector may require the applicant to verify the information in the application by declaration or by the production of documents. (8) An application may be considered only on the information available to a Collector if any of the following requirements are not complied with within 30 days after the requirement is made: (a) a requirement to deliver documents or information; (b) a requirement to answer a question; (c) a requirement to verify information. (9) If a person delivers a commercial document to a Collector, the Collector must deal with the document and then return the document to that person.