Low Value Parcel Processing Taskforce Interim Report … · 1 The Kahala Posts Group (KPG) is an alliance of 10 leading postal services, which includes Australia Post, China Post,

Low Value Parcel Processing Taskforce

INTERIM REPORT MARCH 2012

Table of contents

Executive summary ............................................................................................... 1

Introduction ........................................................................................................... 5

Reform context ......................................................................................................7

Growth in low value imports............................................................................... 7

Current import handling and administration processes ...................................... 8

Tariff classification and duty calculation............................................................. 9

Application of GST........................................................................................... 11

Border and biosecurity fees and charges......................................................... 11

Modes of importing low value goods................................................................ 12

Air and sea cargo ............................................................................................ 12

Process map for the operation of the Integrated Cargo System (ICS).............. 13

International mail ............................................................................................. 14

International travellers ..................................................................................... 18

Taskforce activities to date .................................................................................. 19

Review of existing business and border agency processes ............................. 19

Review of regulatory arrangements ................................................................. 20

Assessment of current and future operating environment ................................ 22

Investigation of alternative approaches operating internationally ..................... 23

Domestic stakeholder consultation .................................................................. 24

International consultation................................................................................. 25

Reform development and assessment............................................................. 27

Assessment Process ....................................................................................... 28

Further work to be undertaken............................................................................. 29

Assessment of potential solutions.................................................................... 29

Detailed assessment of prospective solutions (including costings) .................. 29

Consultation with stakeholders ........................................................................ 30

Development of reform implementation program ............................................. 30

Appendix A: Terms of reference .......................................................................... 31

Appendix B: Biographical details – Taskforce members ...................................... 34

Appendix C: International mail initiatives ............................................................. 35

Appendix D: Regulatory framework ..................................................................... 39

Appendix E: Summary of international low value import schemes ....................... 49

Appendix F: International mail products and categories....................................... 51

Appendix G: International mail and cargo volumes.............................................. 52

LVPPT INTERIM REPORT 1

Executive summary

The purpose of this Interim Report is to provide an update with respect to the progress of work being undertaken by the Low Value Parcel Processing Taskforce (LVPPT), which has been established to investigate new approaches for the handling and administration of low value imports of goods, particularly in the international mail stream, including options for revenue collection. The Interim Report has been prepared in a form to enable public release, while at the same time ensuring that no aspect of Australia’s customs, border security or biosecurity processes has been compromised. The Final Report to be provided to Government will incorporate such relevant details in relation to those matters as are required.

Key activities to date

The key activities that the Taskforce has undertaken to date include:

• reviewing the existing methods used for handling and administering imports of low value goods, including:

o international mail handling processes undertaken by Australia Post;

o air and sea cargo operations undertaken by logistics operators such as express couriers, freight forwarders, licensed customs brokers and cargo terminal operators;

o border security and biosecurity assessment processes for international mail, and both air and sea cargo;

o customs duty and GST assessment processes for international mail, and both air and sea cargo;

• reviewing the arrangements under which existing methods for handling and administering imports of low value goods are regulated, including:

o Commonwealth legislation and regulatory instruments;

o international treaty arrangements, cooperative agreements and ancillary instruments; and

o administrative arrangements between Australia Post and the Australian border agencies;

• assessing the current and potential future environment in which approaches for handling and administering imports for low value goods need to be considered, including:

o current and expected volumes and characteristics of low value goods imported into Australia;

o technological innovations with respect to parcel processing, tracking systems and import processing information management systems;


o international initiatives being undertaken with respect to international mail processing, including those occurring under the auspices of:

� the Kahala Posts Group;1

� the Medici Group;2

� the World Customs Organization (WCO)/Universal Postal Union (UPU) Contact Committee;3

o reviewing international initiatives including:

� ongoing multilateral (e.g. World Trade Organization) and bilateral tariff reform processes;

� the Asia-Pacific Economic Cooperation (APEC) Honolulu Declaration to …‘… establish commercially useful de minimis values in our economies that will exempt low-value shipments from customs duties and streamline entry documentation requirements’;4

• investigating alternative approaches with respect to the handling and administering imports of low value goods operating internationally, including:

o a desktop review of approaches undertaken in seven countries – the United Kingdom, Canada, Singapore, Korea, Japan, the United States and New Zealand; and

o a study trip of Canada, the United Kingdom and Singapore to meet with the designated postal operators and relevant border agencies in those countries to understand the logistics, revenue, reporting, compliance and cost recovery mechanisms in these jurisdictions for the processing of low value imports.

Reform development and assessment

The Taskforce is developing potential solutions to reform the way in which low value import processing may be undertaken in Australia. These potential solutions consider a number of aspects including:

• infrastructure and/or information systems changes to streamline international mail gateway operations (with respect to both Australia Post and Australian border agency activities);

1 The Kahala Posts Group (KPG) is an alliance of 10 leading postal services, which includes Australia Post, China Post, Correos (Spain), Hong Kong Post, Japan Post, Korea Post, La Poste (France), Royal Mail, Singapore Post and the US Postal Service. 2 The Mails Electronic Data Interchange and Customs Integration (Medici) Group are a subset of the 24 members of the International Postal Corporation (IPC). 3 The Universal Postal Union (UPU) is an international organisation that coordinates postal policies among member nations. The WCO/UPU Contact Committee was established in 1965 to deal with issues of common interest between postal services and Customs organisations. 4 19th APEC Economic Leaders' Meeting: 'The Honolulu Declaration - Toward a Seamless Regional

Economy', November 12-13, 2011.


• process changes to streamline international mail gateway operations (as a total process involving Australia Post and Australian border agency activities);

• simplification of duty and/or GST assessment and collection processes; and

• alternate payment methods for duty and/or GST revenue. While potential solutions for reform to import handling and administration processes are being identified and assessed, at this stage detailed costing and associated analysis has not been completed. As such, it is not feasible to advise what recommendations with respect to reform of current arrangements may be contained in the Final Report.

Consultation

In carrying out its activities, the LVPPT has been assisted significantly to date by the consultations that it has undertaken with a number of stakeholders, including:

• Australian Government departments and agencies:

o Australian Bureau of Statistics;

o Australian Customs and Border Protection Service;

o Department of Agriculture, Fisheries and Forestry;

• industry participants:

o Australia Post;

o Australian Federation of International Forwarders (AFIF);

o Conference of Asia-Pacific Express Carriers (CAPEC);

o Customs Brokers and Forwarders Council of Australia Inc. (CBFCA);

o Post Office Agents Association Limited (POAAL); and

• business representatives such as

o Australian Music Association;

o Australian National Retailers Association (ANRA);

o Australian Retailers Association (ARA);

o Bicycle Industries Australia;

o eBay Australia & New Zealand;

o Retail Cycle Traders Australia; and

o Visa Australia. The preparation of the Final Report will require further consultation, including with parties with whom the LVPPT has not yet had the opportunity to engage, such as State and Territory governments.


Reference material

This Interim Report contains a number of appendices that provide relevant background, including material that is being used to inform the LVPPT’s development and assessment of potential reform solutions. These appendices are:

• Appendix A: Terms of Reference

• Appendix B: Biographical details – Taskforce Members

• Appendix C: International mail initiatives

• Appendix D: Regulatory framework

• Appendix E: Summary of international low value import schemes

• Appendix F: International mail products and categories

• Appendix G: International mail and cargo volumes


Introduction

On 9 December 2011, the Government released, and responded to, the Productivity Commission’s final report on the Economic Structure and Performance of the Australian Retail Industry.5 The terms of reference for the inquiry included an examination of the sustainability and appropriateness of the current indirect tax arrangements, and the extent that process reform and technology could reduce the administrative costs of collecting indirect taxes and duty on imported goods. The Commission’s Recommendation 7.1 stated that:

“There are strong in-principle grounds for the low value threshold (LVT) exemption for GST and duty on imported goods to be lowered significantly, to promote tax neutrality with domestic sales. However, the Government should not proceed to lower the LVT unless it can be demonstrated that it is cost effective to do so. The cost of raising the additional revenue should be at least broadly comparable to the cost of raising other taxes, and ideally the efficiency gains from reducing the non-neutrality should outweigh the additional costs of revenue collection.”

The Government response to this recommendation was to note it and state that it would reassess the appropriateness of the low value import threshold when it receives the final report of this Taskforce. Further, the Commission proposed in at Recommendation 7.2 that:

“The Government should establish a taskforce charged with investigating new approaches to the processing of low value imported parcels, particularly those in the international mail stream, and recommending a new process which would deliver significant improvements and efficiencies in handling. The taskforce should comprise independent members, with the Australian Customs and Border Protection Service (Customs), the Australian Quarantine and Inspection Service (AQIS), Australia Post and the Conference of Asia Pacific Express Carriers providing advice. The terms of reference should outline the criteria that any new system must satisfy including: minimising the costs of processing and delivery delays, streamlining the assessment of Customs Duty, user pays, and without compromise to the border protection functions of Customs and AQIS. This review should report to Government in 2012 and propose an expeditious timeframe for its proposed changes.

5 Economic Structure and Performance of the Australian Retail Industry, Productivity Commission Inquiry Report, No. 56, 4 November 2011, Commonwealth of Australia 2011.


Once an improved international parcels process has been designed, the Australian Government should reassess the extent to which the LVT could be lowered while still remaining cost-effective.”

The Government agreed with this recommendation. Consequently, on 9 December 2011 the (then) Assistant Treasurer, the Hon Bill Shorten, with the Minister for Broadband, Communications and the Digital Economy, the (then) Minister for Home Affairs and Justice and the (then) Minister for Small Business jointly announced the establishment of a Taskforce. The key role of the Taskforce is to investigate new approaches for the handling and administration of low value imports of goods, including options for revenue collection. The Terms of Reference set out a range of matters for the taskforce to consider in forming its recommendations. A copy of the Terms of Reference is at Appendix A. The members of the Taskforce are Dr Bruce Cohen (Chair), Professor Caroline Chan and Mr Jim Marshall. Biographical details of Taskforce Members are contained at Appendix B. The Terms of Reference for the Taskforce stated that it should release an interim report in three months from its establishment. This Interim Report is intended as a progress report on the status of the Taskforce’s investigation and does not contain firm recommendations. It is the intention of the Taskforce to submit the Final Report to the Assistant Treasurer, the Hon David Bradbury, in July 2012 in accordance with the Terms of Reference. The Final Report will contain a comprehensive blueprint for reform, with costed alternatives and timeframes for implementation.


Reform context

Growth in low value imports There has been a significant increase in the volume of low value parcels entering into Australia in recent years. Between the financial years 2006/7 to 2010/11, the number of parcels (comprising Express Mail Service (EMS) items, packets of less than 2kg and parcels over 2kg) being delivered through Australia’s international mail gateways has grown from 23.56 million to 48.06 million – an increase of 104.0 per cent. This represents a compound annual growth rate of 19.5 per cent over the four years, although it should be noted that the compound annual growth rate for the last two years was 36.0 per cent. The bulk of the increase in parcels has been packets of less than 2kg, which represents 80.1 per cent of the increased volume. Over the same period, the volume of parcels valued between $0 and $1000 passing through international air cargo operators has increased from approximately 6.3 million to 10.4 million.

AIR CARGO VOLUME OF LOW VALUE GOODS less than or equal to $1000

2006-07 to 2010-11

0

2

4

6

8

10

12

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

VO

LU

ME

mil

lio

ns

of

ite

ms

Source: Australian Customs and Border Protection ICS data. As the Productivity Commission highlighted in its report into Australia’s retail industry, this growth in parcel numbers has been driven largely by the growth in online shopping, The online shopping market has benefited from a variety of factors including an expansion in online shopping offerings, growing consumer familiarity and sense of security with online shopping, and a rising Australian dollar. As numerous submissions provided to the Productivity Commission’s inquiry also highlighted, unlike goods purchased in Australia, goods valued at or


below $1000 that are purchased online from overseas are generally not subject to either customs duty or GST.6 This threshold is considerably higher than those which apply in many other jurisdictions – for example, in the United Kingdom (£15 (A$23) for VAT; £135 (A$205) for duty);7 and Canada (C$20 (A$19) for duty and GST) (see further Appendix E).8 According to the National Retail Association, this growth is anticipated to continue, with online sales projections for the coming period ranging from 7.6 per cent to 20.4 per cent per annum.9 While recognising that these projections relate variously to domestic and international online sales growth, and may also include products such as ticket deliveries, simply assuming an annual parcel growth in line with the mid-point of these estimates (14 per cent per annum), would mean that over the next four years Australia would see an increase in mail parcels passing through the international gateways to around 81 million by 2014/15. Similarly, growth in air cargo may also be expected. It is in this environment that the Taskforce is now investigating new approaches for the handling and administration of low value imports of goods, including options for revenue collection. To illustrate some of the complexities that the Taskforce needs to have regard to in assessing alternative ways forward,10 this Interim Report now sets out some of the key aspects of the current import handling and administration processes for low value goods, and also a brief description of the different attributes of each of the ways in which low value goods are imported into Australia.

Current import handling and administration processes

Under current arrangements, when low value goods arrive in Australia they are required to be assessed both for border security and biosecurity risks, and also for any revenue liability e.g. customs duty and/or GST. Prohibited or restricted goods for border security purposes include such items as drugs and precursors, firearms, weapons and ammunition (including chemical weapons and military goods), laser pointers, pornography and other objectionable material, and certain toys. Biosecurity risks relate to the threat of exotic pests and diseases entering, and establishing, in Australia and the potential that these risks pose to harm the primary production sectors, the environment and human health. Responsibility for Australia’s border security and biosecurity lies predominately with Australia’s border agencies – the Australian Customs and

6 With the exception of alcohol and tobacco products and some other prescribed items. Further, a different threshold applies for goods brought into Australia by international travellers. 7 Customs duty becomes payable if the value of the goods is over £135 but duty is waived if the amount of duty calculated is less than £9. 8 Currency conversions undertaken as at 22 March 2012. 9 See National Retail Association Ltd ‘The threshold question: Economic impact of the low value threshold on the retail industry’ (2012) (prepared by Ernst and Young), Table 6. 10 In addition to those matters outlined, there are also issues relating to the way in which border security activities are undertaken.


Border Protection Service (Customs and Border Protection), and the Department of Agricultural, Fisheries and Forestry Biosecurity (DAFF Biosecurity) respectively. Customs and Border Protection is also responsible for revenue assessment and collection. Both Customs and Border Protection and DAFF Biosecurity utilise risk management tools to determine the exact manner by which any particular good is processed at the border. In part, these risk management tools rely on the information that is available with respect to those goods. In certain instances, particularly with respect to air and sea cargo, much of the required information is available in electronic format prior to the goods arriving in Australia. This information is obtained through both cargo reporting processes and through declarations (see below). In other cases – particularly with respect to goods arriving through international mail – the requisite information is obtained on or subsequent to arrival. While the Taskforce necessarily is having regard to the risk assessment process for border security and biosecurity purposes in determining its recommendations, the exact manner in which this information is utilised is not detailed in this Interim Report so as not to compromise any aspect of Australia’s customs, border security or biosecurity operations. Assessment for revenue liability by Customs and Border Protection is also dependent on specific information with respect to each imported good. Generally, imported goods may be subject to either duty and/or GST. Under current policy settings,11 imported goods which are valued at or below $1000 for the purposes of customs duty are generally not subject to either customs duty and/or GST.12

Tariff classification and duty calculation

The information requirements and administrative processes needed to assess customs duty are considerable. This is because duty assessments need to have regard to a number of factors, including the nature of the product, its value, the country in which it was produced and whether any other concessional treatment applies.13

11 Prior to 2005, goods imported by post had a $1,000 threshold, while goods imported by sea or air cargo had a $250 threshold. In addition, customs duty and GST was collected only if the combined liability exceeded $50. Following a review by the Competitive Neutrality Office of the Productivity Commission, the threshold was standardised in October 2005. Underlying the decision to move to a uniform threshold was that it promoted a significant reduction in ‘red tape’ for a large number of importers and logistic service providers involved in the importation of low value goods. It also meant that low value goods arriving by all modes of transport were treated in a similar manner. 12 While section 42-5 of the A New Tax System (Goods and Services Tax) Act 1999 specifies that goods are non-taxable importation for GST purposes if they are duty free under the Customs by-laws (because, for example, their value is below the threshold), the value upon which GST is assessed is the Value of Taxable Importation, which includes the customs value on which customs duty is assessed, any duty payable, transport and insurance costs, and the Wine Equalisation Tax where applicable. 13 The place where goods are produced and valuation of those goods are primarily determined by the Customs Act 1901, Pt VIII, Division 1A – Rules of origin of preference claim goods and Division 2 –

Valuation of imported goods whereas the classification of the nature of the goods and the dutiable rate


To facilitate international trade, the classification of goods for duty (and statistical) purposes is done in accordance with the Combined Australian Customs Tariff Nomenclature and Statistical Classification, commonly known as the Working Tariff.14 The system encompasses a 10-digit level classification, which is known as the Harmonized Tariff Item Statistical Code (HTISC). The HTISC was last updated on 1 January 2012. The 10-digit level code is based upon a 6-digit hierarchical classification designed by the World Customs Organization (WCO) called the Harmonized Commodity Description and Coding System (HS). This WCO classification system is updated every five years to keep the commodity codes relevant. The international HS provides codes for over 5,000 commodities. However, in some cases further detail is required to enable identification of goods that are of particular interest or importance to Australia. The extensions exist for:

• Customs and Border Protection purposes, to differentiate between imported goods grouped under a single 6-digit HS code. It is generally driven by the need to identify varying import duty rates on similar goods and is achieved by adding two digits to the HS code, making an 8-digit code. The extension is maintained by Customs and Border Protection;

• statistical purposes, to provide a finer level of detail and is achieved by adding two digits to the Customs 8-digit codes (creating a 10-digit code). Statistical codes are maintained by the ABS.

These arrangements are given effect through the Customs Tariff Act 1995. The primary classification system and the relevant tariff rates that apply to those goods runs to some 97 chapters (see Schedule 3, Customs Tariff Act 1995).15 Most goods that are not free of duty are generally subject to a 5 per cent rate of tariff, while clothing, textiles and footwear attract a tariff of 10 per cent. In determining liability for duty on any low value imports, regard must also be had to any tariff concession arrangements, including those to which Australia is a party as a result of multilateral or bilateral agreements. These arrangements mean that the task of classifying goods for the purposes of assessing customs duty is a complex one. As such, the vast majority of importers use the services of a customs broker or agent to expedite the clearance process, as it requires a relatively detailed knowledge of Customs procedures and systems, and knowledge of tariff classification applicable to a variety of goods. Customs brokers must be licensed and an individual

is determined primarily pursuant to the Customs Tariff Act 1995. Tariff concessions are also available under Item 50 of Schedule 4. See also Pt XVA of the Customs Act 1901. 14 For further details, see http://www.customs.gov.au/tariff/tariff.asp. 15 For further details, see ABS Cat No. 5368.0.55.016 - Information Paper: Proposed Changes to Statistical Codes in the HTISC, 2012.


applicant for a broker’s licence must demonstrate that they are a person of integrity and that they possess the requisite skills and knowledge to be a broker (see Pt XI, Customs Act 1901).

Application of GST

Assessment of the GST liability on imported goods requires information on the nature of the goods as certain goods, such as food and medical supplies, are GST exempt. The GST on importation is imposed at a rate of 10 per cent of the sum of the value of the goods, any duty or wine equalisation tax applicable and the cost of transport and insurance of the goods.16 However, incidence of the GST is intended to apply to final consumption and not on business inputs. Therefore a business that is registered for GST, will generally be eligible for an input tax credit (ITC) to offset their import GST liability. The effect is that most business imports will be a ‘wash transaction’ with the GST offset by the ITC, which represents no net gain to revenue.

Border and biosecurity fees and charges

In considering potential changes to low value import handling and administration, it is noted that both Customs and Border Protection and DAFF Biosecurity impose a set of fees and charges associated with the lodgement of import declarations and the inspection and other services that may be required to clear incoming goods. In the case of both Customs and Border Protection and DAFF Biosecurity, charges vary depending on whether declarations are made electronically or manually, and whether they relate to sea, air or post consignments. Declarations with respect to air and sea consignments are generally lodged electronically, while manual processes are more commonly used in the international mail stream. In 2010-11, of 17,318 full import declarations processed through the postal system, 13,007, or 75 per cent, were manually entered. In contrast, of the 1.596 million full import declarations processed through the air cargo system 1,315 or 0.08 per cent were entered manually. For sea cargo the figures are 1.542 million full import declarations of which 1,106, which is 0.7 per cent, were entered manually. Generally, fees and charges are determined in accordance with the Australian Government’s Cost Recovery Guidelines 2005, along with, in the case of DAFF Biosecurity, the Quarantine Services Fees Determination 2005 and in the case of Customs and Border Protection, the Import Processing Charges Act 2001 and ancillary regulations. An issue for the Taskforce is to determine whether alternate arrangements for the collection of fees and charges are

16 GST is liable on both the supply and importation of goods. The tax on supply and the tax on importation are administered independently. Therefore, when the overseas supplier is also the importer of the goods, they may be liable for GST on both the supply and importation of the goods. While the eligibility for an ITC will ensure there is no double taxation, there will be two GST assessments on the same goods in these circumstances.


consistent with these guidelines and whether efficiencies may be achieved in existing processes so as to facilitate a reduction in these fees and charges.

Modes of importing low value goods

Imports of low value goods can enter into Australia in three main ways:

• as air cargo and as sea cargo;

• through the international mail stream;

• by international travellers bringing in goods.

Each of these import streams has quite different attributes – both with respect to the nature of goods being imported, and also with regard to the processes by which the importation occurs. Potential reform to import handling and administration needs to have regard to these attributes.

Air and sea cargo

Low value consignments sent through air cargo by both individuals and business comprise mainly clothing (41 per cent) and electronic goods (19 per cent).17 Other goods included mechanical parts, sporting goods, books and magazines, medical supplies, CDs and DVDs, and food. Appendix G details data on the actual volume of low value threshold imports. In the case of both air and sea cargo, the importation of goods is primarily undertaken by specialist service providers such as express couriers or freight forwarders that have control of goods throughout the importation process. Providers can choose which countries they operate in, to whom they provide their services and the nature of goods that they are willing to transport. Moreover, these providers have put in place integrated business systems by which they manage the importation and logistics process on behalf of their customers. A key aspect of these business systems relates to the information which providers obtain at the time goods enter into their control. This information is generally comprehensive having regard to regulatory requirements, is captured prior to the goods arriving in Australia and is available pre arrival in electronic format – features that enable it to be utilised throughout the importation process. The availability of this electronic information simplifies the importation process for both the provider and border agencies in a variety of ways:

• it provides information which can be utilised by border agencies in assessing goods for border security and biosecurity risks. The cargo destined for Australia is reported into the Integrated Cargo System

17 Centre for International Economics (2011) ‘The GST threshold for low value products: Economic

analysis’, prepared for the Conference of Asia Pacific Express Carriers.


(ICS)18 by authorised reporters in the supply chain. Under current arrangements, this information is presented in both cargo reports and through the import declaration process. Importers of goods either as air or sea cargo are required to make declarations as to the nature of those goods and the level of detail in those declarations varies depending on the value of the goods in question. For goods valued above $1,000 a Full Import Declaration (FID) is required; for goods valued at or below $1,000 a Self-Assessed Clearance is required.19 Generally, the information contained in cargo reports and through declarations enables border agencies to undertake their responsibilities more efficiently;

Process map for the operation of the Integrated Cargo System (ICS)

High level overview of key elements

Source: Australian Customs and Border Protection Service

• it allows goods to be tracked easily through the importation process. This means goods that are identified for particular treatment by border

18 The ICS is a software application that is used for all import and export reporting and processing procedures and is the only method of electronically reporting the legitimate movement of goods across Australia's borders introduced by Customs and Border Protection in October 2005. While there were a number of implementation issues associated with the ICS (see the Commonwealth Auditor-General’s report ‘Customs’ Cargo Management Re-engineering Project’ (2007) and the Booz Allen Hamilton report ‘Review of the Integrated Cargo System’, May 2006) industry participants have indicated that these issues are now resolved and generally report satisfaction with the ICS. The issues that arose with the introduction of the ICS highlight, however, the care that needs to be taken introducing any changes to import handling and administrative processes. 19 As to details required to be included in a FID, see the Customs and Border Protection’s ‘Documentary Import Declaration Comprehensive Guide’. As to information to be included in a SAC – which may be either a Short Format, Long Format or Cargo Report declaration, see http://www.customs.gov.au/site/page4226.asp. There is no equivalent SAC requirement with respect to goods imported through the international mail stream.


agencies can be located and sorted easily through the use of relevant information management systems, tracking systems and physical infrastructure; and

• it provides an information base by which importers and border agencies are able to assess revenue liability. Moreover, as the information is available from the beginning of the importation process, assessments made by importers can be done prior to the goods arriving from Australia, and hence revenue collection can occur without delay where the importer (or their customers) has already provided for the payment of that liability in advance. This is of greater importance with respect to air cargo, where expeditious delivery times are more critical.

It must, however, be recognised that the potential availability of information does not mean that changes to Australia’s current policy settings necessarily would be without cost to air and sea cargo operators. Business systems have been established having regard to existing requirements, such as the number of licensed customs brokers required to classify imported goods and the size and layout of licensed depots. As such, were there for example to be a change to revenue assessment requirements that necessitated greater volumes of goods to be assessed for customs duty, this could be expected to result in increased costs associated with duty assessments as well as other costs such as those associated with storage and delivery delays. Many of these potential costs have been raised through consultation with industry, and previously in submissions to the Productivity Commission’s inquiry into the Australian retail industry.

International mail

In addition to letters and documents, the type of items that typically come in through international mail include clothing and footwear, cosmetics, electronic goods, books, CDs and DVDs, mechanical parts, sporting goods, musical instruments and food. In addition, both tobacco and alcohol are more commonly sent through the mail than as air cargo. The processes involved in the importation of goods through the international mail stream are quite different from those in air and sea cargo, and hence give rise to significantly different issues with respect to potential reforms to import handling and administration. The international mail stream operates under a cooperative rules-based system that is determined through an international treaty arrangement under the UPU Convention. Australia Post is Australia’s designated operator for the international mail stream under the UPU Convention (see also Australian Postal Corporation Act 1989). Under the UPU Convention and ancillary instruments, Australia Post has a range of service obligations with respect to low value goods. Goods may


arrive from any country that is a member of the UPU. Goods may be packaged in a variety of different forms such as packets or small parcels weighing less that 2 kg, as parcels weighing more than 2 kg or as EMS postal items. Under current arrangements, international mail stream parcels arrive with a paper declaration affixed to the exterior of each article. Consequently Australia Post and the border agencies do not have access to any information in regard to those goods until they arrive at the border. There is an international agreement for the format and content of the declaration, which includes details of the sender, the recipient, and the description and value of the goods.20 However, while these common standards exist, the actual information attached to any individual parcel is outside the control of Australia Post at the time it enters into the mail stream. Further, the information that is actually provided on international mail stream parcels is of variable quality, unverified, it is presented in multiple languages, values are specified in many different currencies, and it is not provided in an easily useable electronic form. In many instances, particularly for smaller parcels, much of the required information is absent. Each of these attributes has the capacity to impact on the efficiency with which international mail can be processed. In addition, whilst there is a standard for identifying barcodes to be applied on EMS items and parcels over 2kgs, there is no requirement to apply barcodes on packets of less than 2 kgs, making identification and linking any kind of electronic data to such an item difficult.

Gateway operations

All goods that enter into Australia through the international mail stream are processed at one of four international gateways – these are located in Sydney, Melbourne, Brisbane and Perth. Following the outbreak of Foot and Mouth disease in the UK in 2001 the Government decided to move to 100 per cent screening of all incoming mail, either through x-ray screening or detector dogs. Funding of $49.4 million was provided to Australia Post (through the then Department of Communications, Information Technology and the Arts) to pay for the cost associated with an increased footprint to accommodate this process. The aim was to build new gateways in Melbourne and Sydney. A site was available at Tullamarine airport but no suitable site was available near Mascot Airport in Sydney. A new gateway was built at Tullamarine and a decision was made to refurbish the existing Sydney gateway located at Granville. The gateways became fully operational in mid-2006. Australia Post estimated that the $49.4 million funding covered about 65 per cent of the costs of the infrastructure, leaving a “shortfall” of $26.9 million to be funded by Australia Post. Australia Post was also required to meet its own ongoing operational costs. The introduction of

20 The declaration is also required to be in either English or French.


the 100 per cent screening required additional DAFF Biosecurity staff to be allocated to this activity. This was largely funded by the Government. However, a decision was made to have Australia Post fund a proportion of this cost – approximately $3.2 million per annum.21 In May 2010 this determination was increased to $8.2 million per annum.22 Generally, Australia Post does not contribute to the costs incurred by Customs and Border Protection. The majority of parcels that flow through the international mail stream into Australia are subject to manual, labour intensive processes, the nature of which can vary depending upon the category of postal item being processed. Having regard to the border agencies’ risk assessment processes, these items are screened and certain items removed for secondary assessment, as appropriate. As the designated operator in the international mail stream, Australia Post must ensure that it forwards the mail according to the delivery standards published internationally and the most secure means that it uses for its own [Australian] items.23 A postal item remains the property of the sender until it is delivered to the rightful owner, except where it has been seized in pursuance of the legislation of the country of origin or destination.24 At present, the only way to identify articles for revenue liability is through an intensive physical process that involves the manual checking of each article. This activity is currently undertaken in conjunction with Customs and Border Protection’s assessment of mail articles for the full range of border risks. Where articles are assessed as having a value above the threshold, the intended recipient of the goods is required to lodge a FID with Customs and Border Protection and pay assessed duty, tax and an import processing charge before the goods are released. Currently, this is a cumbersome process that occurs after the goods have arrived, and involves both Customs and Border Protection and Australia Post. Until the requisite declaration is made and the assessed liability paid, those goods are held in storage at the international mail gateway. These arrangements raise issues with respect to the efficiency of the handling and administration processes, their flexibility and useability from a consumer perspective, and present Australia Post with further difficulties in regard to infrastructure constraints, such as storage space and storage management. A further consequence of these processing arrangements is that any consideration of the duty and GST threshold necessarily has to have regard to the balance between the amount of additional revenue that could be collected from a lower threshold relative to the increased parcel processing costs that

21 Quarantine Service Fees (Australia Post) Determination 2005 by the Minister for Agriculture, Fisheries and Forestry. 22 Quarantine Service Fees (Australia Post) Determination 2010 by the Minister for Agriculture, Fisheries and Forestry. 23 Article 4, Universal Postal Convention. 24 Article 5, Universal Postal Convention.


could be expected to arise at the international mail gateways as increased volumes are required to be assessed. In 2010-11, around 39,000 postal items were processed for duty and/or GST liability – of which 17,318 were goods valued at over $1,000, and the remainder related to alcohol and/or tobacco products. This compares with approximately 43,000 items in 2009-10 processed for duty and/or GST liability, of which 19,056 were valued at over $1,000, and the remainder related to alcohol and/or tobacco products. Based on these 2009-10 volumes, the Productivity Commission estimated the additional volumes that would be subject to processing for revenue purposes if the threshold for both GST and duty were lowered. If the threshold had been set at $800, approximately 160,000 parcels would have been subject to revenue assessment; at $500 approximately 1.2 million parcels would have been subject to revenue assessment; and at $100 the number of parcels to be processed for revenue purposes would be around 16 million.25 However, as noted above, the number of parcels entering through the international mail stream, as well as other import streams, is forecast to increase significantly as the on-line market continues to develop. Even without any change to current policy settings, the growth in parcel volumes is putting increasing pressure on the physical capacity, operational efficiency and operational budgets of the international mail gateways. Changes to policy settings would add additional pressure that would need to be managed.

Australia Post revenue

The revenue that Australia Post receives for delivering goods through the international mail stream is determined according to rules established under the UPU Convention, which means they are not set specifically having regard to the costs incurred by Australia Post with respect to fulfilling its service obligations. The revenue received by Australia Post depends on a range of factors including the category of postal item being delivered as well as its performance with respect to delivery times. As Australia Post noted in its 2010-11 Annual Report, for inbound international parcels weighing less than 2 kilograms it operates at a loss because the cost of delivering these items outweighs the reimbursement that they receive. As a consequence, there is financial pressure on Australia Post to seek ongoing improvements in the efficiency of gateway operations. Separate from any issue relating to current policy settings, the UPU revenue arrangements are providing impetus for changes in how Australia Post, Customs and Border Protection, and the DAFF Biosecurity manage the import handling processing and management of goods that arrive through the international mail stream.

25 Source: Economic Structure and Performance of the Australian Retail Industry, Productivity Commission Inquiry Report, No. 56, 4 November 2011, Commonwealth of Australia.


International travellers

Goods imported by international travellers – as the accompanied baggage of an arriving person or purchased by an arriving person at an inwards duty free shop – are generally smaller items for personal use. These typically include alcohol and tobacco products, perfume and cosmetics, and lighter goods such as cameras, computers and MP3 players. In the case of the international travellers, the rules with respect to liability for duty and/or GST apply whether the traveller is returning home or visiting from overseas. Generally, the rules with respect to imports of this nature provide for tax-free allowances for both alcohol and tobacco, and also for general goods brought in by adults ($900) and children ($450). Having regard to the genesis of this Taskforce and its Terms of Reference, the Taskforce does not consider imports of this nature to be central to the scope of issues it has been asked to address. Nevertheless, regard will be given to imports of this nature to the extent relevant.


Taskforce activities to date

The Taskforce’s investigation of new approaches for the handling and administration of low value imports of goods, including options for revenue collection, has encompassed a range of activities to date.

Review of existing business and border agency processes

Potential new approaches with respect to the handling and administration of low value imports of goods need to have regard to the business and border agency processes that currently exist. This is because any recommendations with respect to reform need to have regard not simply to ongoing efficiency of any new arrangements, but also the costs associated with moving from current to new arrangements – for government, for industry participants and ultimately for consumers. To this end, the Taskforce has reviewed:

• the current international mail handling processes that operate in Australia, and the service impacts on businesses and consumers;

• air and sea cargo operations, such as those undertaken by express couriers, freight forwarders, licensed customs brokers and cargo terminal operators;

• border security and biosecurity assessment processes for international mail, and both air and sea cargo;

• customs duty and GST assessment processes for international mail, and both air and sea cargo; and

• ABS statistical reporting requirements.


This review encompasses an examination of the processes that are utilised in each of these areas, including an assessment of current policy settings (and the circumstances in which they have been developed), as well as an initial assessment of current cost structures of Australia’s border agencies. Work is also ongoing to ensure a full understanding of the cost structures of Australia Post and other industry participants. The Taskforce recognises that further work is required to be undertaken in this area, particularly with respect to how any changes that may be proposed would impact upon both Australia Post and participants in the air and sea cargo industry. In examining these issues, the Taskforce has also had regard to previous work undertaken in this area including, but are not limited to:

• the Commonwealth Treasury’s ‘Tax Expenditures Statement 2011’ (January 2012);

• the Commonwealth Auditor-General’s ‘Report on Risk Management in the Processing of Sea and Air Cargo Imports’ (2011);

• the Productivity Commission’s report ‘Economic Structure and Performance of the Australian Retail Industry’ (2011), together with submissions made to that inquiry;

• the Board of Taxation’s ‘Review of the Application of GST to Cross-Border Transactions’ (2010);

• ‘The Independent Review of Australia’s Quarantine and Biosecurity Arrangements Report to the Australian Government’ (the “Beale Report”) (2008);

• the Commonwealth Auditor-General’s report ‘Customs Cargo Management Re-engineering Project’ (2007);

• the Booz Allen Hamilton report ‘Review of the Integrated Cargo System’ (2006);

• the Productivity Commission – Commonwealth Competitive Neutrality Complaints Office ‘Competitive Neutrality Review’ (2000); and

• JCPAA (Joint Committee of Public Accounts and Audit) Internet Commerce — to buy or not to buy?, Report no. 360, Canberra, June (1998).

Review of regulatory arrangements

Reforms which may be recommended with respect to handling and administration of low value imports of goods, including options for revenue collection need to have regard to the regulatory arrangements under which industry participants, border agencies, consumers and other stakeholders operate. For example, reforms that would require changes to international treaty arrangements under which the international mail stream operates need to be assessed having regard to the limited capacity that Australia has – as one of many member jurisdictions – to determine such an outcome. Similarly,


issues with respect to timeframes also need to have regard to the extent that any reforms may require changes to Commonwealth legislation and/or regulation. Relevant instruments that may impact the importation of low value goods include, but are not limited to:

• Acts and Regulations

o A New Tax System (Goods and Services Tax) Act 1999

o Australian Postal Corporation Act 1989

o Australian Postal Corporation Regulations 1996

o Customs Act 1901

o Customs Administration Act 1985

o Customs Regulations 1926

o Customs (Prohibited Imports) Regulations 1956

o Customs Tariff Act 1995

o Quarantine Act 1908

• Free Trade Agreements

o ASEAN-Australia-New Zealand FTA

o Australia-Chile FTA

o Australia-New Zealand Closer Economic Relations

o Australia-United States FTA

o Singapore-Australia FTA

o Thailand-Australia FTA

• International Treaties and other International Cooperative Arrangements

o Universal Postal Union (UPU)

� Universal Postal Convention

� General Regulations of the Universal Postal Union

� Postal Payment Services Agreement

o World Customs Organization (WCO) Conventions (1952-2008), including the International Convention on the simplification and harmonization of Customs procedures (Kyoto Convention) as amended (2006)

o World Trade Organization (WTO)

� WTO Agreement on Valuation (1969)

� WTO Agreement on Rules of Origin

• MoU between the Australian Customs and Border Protection Service, Australian Quarantine and Inspection Service (now known as DAFF Biosecurity) and Australia Post on administrative arrangements at the mail Gateways.


A brief summary of the key elements of these regulatory and administrative arrangements is contained at Appendix D.

Assessment of current and future operating environment

Any new approaches that may be recommended for handling and administering imports for low value goods, including options for revenue collection, need to have regard to the current and future operating environment in which that activity will take place. For example, there may be opportunities to capitalise on developments in electronic data exchange and scanning technology, or to take advantage of actions being undertaken internationally – particularly with respect to the international mail stream. Recommendations also need to have regard to the current and future volumes of the low value import task, the characteristics of those low value goods being imported and the purposes for which they are being imported. To this end, the Taskforce has been assessing:

• the current and expected volumes and attributes of low value imports in Australia;26

• technological innovations with respect to parcel processing, tracking systems and import processing information management systems;

• international initiatives being undertaken with respect to international mail processing, including:

o Kahala Customs Working Group initiatives, which include a phased implementation of data capture protocols to allow for item level data transfer, through UPU recognised protocols. The information contained in the data transfer will allow for access to key data before the goods originating in Kahala member countries have entered Australia. The mail product range is currently limited to the EMS and parcels over 2kg categories and it is expected that this will be fully implemented for both products by the end of 2014 (for more details see Appendix C); and

o WCO/UPU and IPC initiatives, such as the Medici project, with respect to electronic data interchange through the capture and electronically exchange of the data needed for mail to clear customs and for duty/tax to be assessed. The data for each mail item is intended to be exchanged between the participating origin and delivery posts, and shared with the respective customs authorities and other government bodies, as required for export, import and border security (for more details see Appendix C);

26 The Taskforce notes that certain information with respect to the attributes in each import stream is difficult to obtain, and this information gathering exercise is ongoing.


• other international initiatives relating to low value imports including:

o ongoing multilateral (e.g. WTO) and bilateral tariff reform processes which are being negotiated through Free Trade Agreements (FTA) and which may reduce the number of goods subject to duty. Current FTAs under negotiation are:

� Australia-China FTA

� Australia-Gulf Cooperation Council (GCC) FTA

� Australia-India Comprehensive Economic Cooperation Agreement

� Australia-Japan FTA

� Australia-Korea FTA

� Australia-Malaysia FTA

� Indonesia-Australia Comprehensive Economic Partnership Agreement

� Pacific Agreement on Closer Economic Relations (PACER) Plus

� Trans-Pacific Partnership Agreement

o the Asia-Pacific Economic Cooperation (APEC) Honolulu Declaration to ‘establish commercially useful de minimis values in our economies that will exempt low-value shipments from customs duties and streamline entry documentation requirements’.

Investigation of alternative approaches operating internationally

In developing options for reform, the Taskforce believes that it is important to have regard to alternative approaches operating internationally – both because these processes may be inherently more efficient, and also because the use of global standards may enable greater systems integration internationally, which would provide its own opportunities for efficiency improvements. Such investigations also provide the opportunity to have regard to lessons learned elsewhere, and to shed light on possible weaknesses of potential solutions. To this end, the Taskforce has investigated alternative approaches for the handling and administering imports of low value goods operating internationally, including undertaking:

• a desktop review of approaches undertaken in seven countries – the United Kingdom, Canada, Singapore, Korea, Japan, the United States and New Zealand; and

• a study trip of Canada, United Kingdom and Singapore to meet with the designated postal operators and relevant border agencies in those countries to understand the logistics, revenue, reporting,


compliance and cost recovery mechanisms in these jurisdictions for the processing of low value imports.

Brief details of the Taskforce’s desktop review of international regimes with respect to low value imports are set out at Appendix E. While all reasonable care has been taken with respect to preparing this information, the Taskforce notes that due to the timing of this Interim Report, necessary verification processes still need to be undertaken. Further details with respect to international consultation are set out below.

Domestic stakeholder consultation

Stakeholder consultation meetings were commenced as early as possible in the process to ensure that all relevant issues were captured. This process is ongoing. To date, these meetings have provided an opportunity for the Taskforce to be informed by representatives from government and industry, as well as other stakeholders, about key issues and challenges in the low parcel processing environment, both in the international mail stream and the air and sea cargo environment. The information gathered during these sessions is of considerable assistance in informing Taskforce activities and considerations. The Taskforce conducted site visits to the two largest international mail gateways in Australia – Sydney and Melbourne – to gain a better understanding of the environment in which Australia Post is operating and the nature of the interactions between Australia Post and Australia’s border agencies. This has enabled the Taskforce to gain a considerable understanding of the impact any increase in volume would have on these operations, both in terms of physical infrastructure capacity and resourcing. In March, the Taskforce took the opportunity for a site visit to DHL Express Australia’s Sydney gateway site to enable it to make a comparison between the different operating models between the mail and air cargo environments. Below is the list of stakeholders the Taskforce has met with to date. These stakeholders are either directly involved in low value parcel processing, including revenue collection, or impacted by these processes in some way:

• Australia Post;

• Australian Bureau of Statistics;

• Australian Customs and Border Protection Service;

• Australian Federation of International Freight Forwarders (AFIF);

• Australian Music Association;

• Australian National Retailers Association;

• Australian Retailers Association;

• Australian Taxation Office;

• Bicycle Industries Australia;


• Conference of Asia Pacific Express Carriers (CAPEC);

• Customs and Border Protection National Consultative Committee;

• Customs Brokers and Forwarders Council of Australia (CBFCA);

• Department of Agriculture, Fisheries and Forestry (Biosecurity);

• Department of Broadband, Communication and the Digital Economy;

• eBay Australia & New Zealand;

• Post Office Agents Association Limited;

• Productivity Commission;

• Retail Cycle Traders Australia;

• Treasury; and

• Visa. These meetings have focussed on:

• gathering information from these bodies of how the process operates in their respective environments;

• any developments currently in train to improve low value import processing;

• challenges and impacts, both positive and negative, with current processes. Issues raised in this context relate both directly to the efficiency of the current processes, and also to broader issues such as the general impact that the growth of e-commerce is having on Australian retailers, as well as other matters such as the risks associated with goods being imported that fail to meet Australian safety standards and the potential for under-declaration of values in an e-commerce environment;

• seeking views on the impacts, in terms of profitability, resourcing and infrastructure capacity that would associated with the processing of substantially increased volumes of parcels for revenue collection purposes; and

• seeking suggestions and views on where improvements could be made to achieve efficiencies.

International consultation

An important consideration for the Taskforce in undertaking a comprehensive investigation of low value import processing, particularly in the international mail stream, has been how overseas jurisdictions with large volumes of low value goods manage their processes and whether this is done in an efficient and cost-effective way. Consequently, the Taskforce conducted a series of meetings with relevant postal services and government bodies responsible for border protection and revenue collection in Canada, the United Kingdom and Singapore.


As well as representing jurisdictions that manage tax and duty processes associated with low thresholds, Canada and the United Kingdom respectively are at the forefront of the UPU and Kahala electronic postal information transfer initiatives. The potential for these initiatives to provide pre-arrival postal data and the capacity for Australia to integrate in future international developments will factor in the Taskforce’s considerations. To further its understanding, the Taskforce undertook site visits of international mail gateways and express courier operations. The focus of these visits was to gain an insight into the challenges faced by countries where there is a primary focus on revenue collection due, in large part, to the high volume of low value imported goods. Regard was also given to understanding how the different circumstances of each jurisdiction has affected processes and policy settings – including factors such as geography, transport systems, the nature of goods being imported and differing border security and revenue priorities. The Taskforce met with the following agencies:

• Canada – the Canada Border Services Agency, Canada Post and representatives from the Canadian Department of Finance;

• United Kingdom – the UK Border Force, Her Majesty’s Revenue and Customs, Royal Mail and ParcelForce (the parcel arm of the Royal Mail); and

• Singapore – Singapore Customs and Singapore Post. Key elements of the processes operating within these jurisdictions that the Taskforce examined include:

• the physical sorting processes utilised for security and/or revenue purposes, including alternative infrastructure designs and layouts; a range of sorting, tracking and scanning equipment; and a variety of manual handling processes;

• the nature and security of storage areas and facilities required for overflow goods awaiting revenue assessment (and the timeframes in which goods were cleared from these storage areas);

• the software and information management systems utilised for the assessment of revenue liability (and the timeframes in which those assessment were made for duty and VAT/GST purposes);

• the structure and operation of deferred payment schemes that enable goods to be cleared from mail gateways and cargo depots prior to revenue liabilities being paid by end-customers; and

• a range of potential reforms currently being examined by mail and customs authorities that rely upon electronic data provision between postal partners, including enhanced risk assessment processes and streamlined revenue assessments.


In addition, the Taskforce briefly discussed a range of alternative technologies that may be utilised to improve the effectiveness of border security operations, such as ‘intelligent’ scanning software.

Reform development and assessment

The Taskforce has commenced developing solutions to reform the way in which low value parcel processing may be undertaken in Australia. All of these will undergo an initial assessment, with more detailed work to be undertaken on short-listed solutions (see further below). The potential solutions that the Taskforce is developing will have regard to a variety of factors, including but not limited to, consideration of:

• the existing parcel processes being undertaken by air and sea cargo operators, Australia Post and Australia’s government border agencies;

• current regulatory arrangements, including Australian legislation and international treaty obligations;

• alternative parcel processing systems that are operating internationally;

• local and international developments already occurring with respect to parcel processes, including through the WCO/ UPU, the Kahala Group and Medici; and

• the external environment in which this issue is being considered, including but not limited to the growth in international e-commerce and parcel processing generally, and the potential future border security risks.

These potential solutions include, but are not limited to:

• infrastructure and/or information systems changes to streamline international mail gateway operations (with respect to both Australia Post and border agency activities);

• process changes to streamline international mail gateway operations (with respect to both Australia Post and border agency activities);

• simplification of duty and/or GST assessment and collection processes; and

• alternate payment methods for duty and/or GST liability. The Taskforce wishes to note that the potential range of reforms that it is considering focus upon improving the efficiency by which low value imports are handled and processed. It is not within the Taskforce’s Terms of Reference to specifically recommend the application of any particular threshold level. However, recognising the genesis of the Taskforce, the process that the Taskforce is undertaking will have regard to potential efficiency improvements based on expected parcel volumes under both


existing and other potential threshold settings and arrangements for both duty and GST assessment and collection.

Assessment Process

Generally, in considering the range of potential solutions that may be available to improve the efficiency of the handling and administration of low value goods, the Taskforce’s recognises that some reforms rely upon being part of an integrated package, whereas others may be mutually exclusive. Further, there are likely to be material differences in the time frames in which particular reform solutions may be able to be implemented. A key consideration for the Taskforce is therefore to ensure that its recommendations enable coherent implementation over time – and that actions recommended to be undertaken in the short to medium term neither unduly inhibit or prevent desirable future reform, nor result in stranded assets and wasted investment in redundant equipment and technologies. In considering the potential solutions that may fit within such an integrated package of reform, an initial assessment will be undertaken of potential reforms having regard to a set of standard criteria. The criteria are based on the Taskforce’s Terms of Reference, and include: cost, efficiency, implementation, competitive neutrality, risk, revenue and legislative impacts. Having regard to these assessments, and their relationship with other possible reforms, a determination will be made as to which of the potential solutions will be subject to further examination, including detailed costings. The key factors taken into consideration in making this initial assessment will be highlighted in the Taskforce’s Final Report. These factors, together with i) detailed costings of the selected reform solutions, ii) the development of potential reform timelines and iii) a more detailed assessment of potential impacts in consultation with industry participants and stakeholders, will be used in determining the Taskforce’s final recommendations.


Further work to be undertaken

The Taskforce has mapped out the key activities that it will be undertaking over the coming months to enable it to provide the Government with a comprehensive blueprint for reform, with costed alternatives and an expeditious time frame for implementation, by July 2012.

Assessment of potential solutions

The Taskforce will finalise the first stage of its assessment of potential solutions, and in so doing determine which potential reforms will be subject to more detailed examination. As noted previously, in undertaking this first stage of the assessment, the Taskforce recognises that potential reforms may not be mutually exclusively, and in some instances may be able to be undertaken contiguously and/or sequentially. Issues with respect to timing of potential solutions will be considered as the Taskforce develops its recommendations with respect to an implementation program for Government (see further below). In determining the potential solutions to be subject to more detailed assessment (and in determining its final recommendations), the Taskforce will make particular reference to:

• the broad range of issues raised during stakeholder consultations;

• the information that has been provided to the Taskforce by the border agencies; and

• the information that has been provided to the Taskforce with respect to alterative processes adopted internationally.

Detailed assessment of prospective solutions (including costings)

Following the first stage of the assessment, the Taskforce will undertake a detailed examination of the reforms that it considers are most prospective. This will include undertaking detailed costings with respect to the changes that will be required. Potential solutions for reform include changes to administrative processes, information systems changes and new infrastructure. To the extent that any such changes may enable changes to existing threshold arrangements, the Taskforce again notes that any decisions with respect to this issue rest with the Government. To assist in the determination of the functional specifications that may be required under any such reforms, as well as the costs associated with any changes, the Taskforce will engage such technical expertise as is required to ensure that expert knowledge and best practice informs the work of the Taskforce. To the extent feasible in the time frames available, the Taskforce will seek also to undertake cost-benefit analyses of the proposed reform solutions.


Consultation with stakeholders

In undertaking this detailed examination of the selected reform solutions, the Taskforce recognises that reforms may impact on the business processes of industry participants and on their customers. To ensure that any such benefits or costs are well understood prior to the making of any recommendations, the Taskforce will seek the views of key stakeholders with respect to those potential solutions which are being given more detailed consideration. The Taskforce also notes that this ongoing consultation will not be limited to those groups with whom it has already had the opportunity to have initial discussions. For example, to date the Taskforce has not yet consulted with the States and Territories. However, any reforms that may have implications with respect to revenue collection associated with the GST will necessarily involve discussions with them because the States and Territories both receive the revenue collected from the GST, and are responsible for the costs associated with the Australian Tax Office’s (ATO) administration of that revenue base.

Development of reform implementation program

In determining its final recommendations, the Taskforce is required to develop an implementation program to be recommended to Government. This blueprint will encompass a proposed timetable for:

• the Government’s assessment processes of the proposed recommendations;

• legislative and/or regulatory changes that may be required;

• the physical implementation of such reforms as may be proposed, including with respect to such of the following as may be required:

o introduction of new handling and management processes;

o construction of infrastructure;

o development of information systems;

o alignment of industry business systems with new handling and administration processes;

• integration and testing between border agencies, industry participants and other stakeholders;

• education and training; and

• agency, industry and community engagement processes.


Appendix A: Terms of reference

The Low Value Parcel Processing Taskforce (the Taskforce) will undertake a comprehensive investigation of low value import processing, particularly for the international mail stream. The Taskforce should be guided by recommendation 7.1 in the Productivity Commission report Economic Structure and Performance of the Australian Retail Industry that states there are strong in-principle grounds to lower the low value threshold exemption for goods and service tax (GST) and duty on imported goods when it is cost-effective to do so.

1. The Taskforce will investigate new approaches for the handling and administration of low value imports of goods, including options for revenue collection. In particular, any proposed new system should:

1.1 allow for effective and efficient revenue collection processes that promote tax neutrality with other goods for consumption in Australia

1.2 streamline the assessment of customs duty;

1.3 minimise any processing and administration costs, delivery delays and other compliance costs;

1.4 pass appropriate collection costs onto the importer;

1.5 provide administrative and competitive neutrality between different import streams where appropriate;

1.6 not compromise border protection. The new system should support the Australian Customs and Border Protection Service and DAFF-Biosecurity in this role by:

• allowing for risk based assessment;

• minimising administrative touch points outside of the natural supply chain for movement and delivery; and

• facilitating pre-arrival information through electronic data interchange where practical;

1.7 support Australia’s interaction with the digital economy by ensuring the system is user-friendly, imposes no added barrier to trade and allows for the large expected increase in online retailing; and

1.8 have regard to Australia Post’s profitability in the international mail stream including impacts on capacity and technological change, and its universal service obligations.

2. Notwithstanding the requirements in 1, the Taskforce should consider:

2.1 the costs and volumes of goods associated with possible administrative thresholds, including the level at which GST or duty may be payable and the levels at which differing amounts of information are required;


2.2 the role of customs duty;

2.3 compliance measures required to identify and respond to attempts at avoiding or evading customs duty, GST or other tax or charges;

2.4 implications of the new approach for the management of other risks at the border, for example as a result of changed process or from an additional focus on revenue;

2.5 international developments and best practice, covering both policy trends, technological advancements and agreements through organisations such as the Universal Postal Union; and

2.6 alternative arrangements for revenue collection, including the parties responsible for revenue collection and the points in the supply chain at which revenue is collected.

Composition and Consultation

The Taskforce will be led by an independent expert panel made up of a Chair and two members with significant experience in logistics, supply chain management or other related fields. The Taskforce will be supported by a secretariat drawing on the skills of the relevant Government departments and agencies. The Review may also draw on external expertise where necessary. The Taskforce will consult the views of expert stakeholders, including the Australian Customs and Border Protection Service, DAFF-Biosecurity; Australia Post; the Conference of Asia Pacific Express Couriers; and other stakeholders, including small business.

Timing

The Taskforce should release an interim report in three months from its establishment and provide a final report to Government no later than July 2012. The final report should include a comprehensive blueprint for reform, with costed alternatives and an expeditious time frame for implementation.

Productivity Commission Recommendations and Government Response

Appropriateness of current indirect tax arrangements

Recommendation 7.1 – There are strong in-principle grounds for the low value threshold (LVT) exemption for GST and duty on imported goods to be lowered significantly, to promote tax neutrality with domestic sales. However, the Government should not proceed to lower the LVT unless it can be demonstrated that it is cost-effective to do so. The cost of raising the additional revenue should be at least broadly comparable to the cost of raising other taxes, and ideally the efficiency gains from reducing the non-neutrality should outweigh the additional costs of revenue collection.

Response: Noted


The Government will reassess the appropriateness of the low value import threshold when it receives the report of the Low Value Parcel Processing Taskforce (see response to Recommendation 7.2). Recommendation 7.2 – The Government should establish a taskforce charged with investigating new approaches to the processing of low value imported parcels, particularly those in the international mail stream, and recommending a new process which would deliver significant improvements and efficiencies in handling. The taskforce should comprise independent members, with the Australian Customs and Border Protection Service (Customs), the Australian Quarantine and Inspection Service (AQIS), Australia Post and the Conference of Asia Pacific Express Carriers providing advice. The terms of reference should outline the criteria that any new system must satisfy including: minimising the costs of processing and delivery delays, streamlining the assessment of Customs Duty, user pays, and without compromise to the border protection functions of Customs and AQIS. This review should report to Government in 2012 and propose an expeditious timeframe for its proposed changes. Once an improved international parcels process has been designed, the Australian Government should reassess the extent to which the LVT could be lowered while still remaining cost-effective.

Response: Agreed The Government will establish a Low Value Parcel Processing Taskforce to investigate new approaches to the processing of low value parcels, particularly in the international mail stream. The Taskforce will comprise at least three members, including members with logistics and supply chain or other relevant expertise, and will be asked to report to the Government within six months of receiving the Terms of Reference. The Taskforce’s report will provide a comprehensive blueprint for reform of the low value import processing system, with costed alternatives, for the consideration of the Government.


Appendix B: Biographical details – Taskforce members

Bruce Cohen (Chair of Taskforce)

Dr Bruce Cohen is a barrister and a principal in private practice in the area of public policy. He is also an Honorary Research Fellow with the Grattan Institute and currently the Chair of Victorian Rail Track (VicTrack), a Victorian government business with responsibility for the delivery of telecommunications, property development, freight and asset management services in the rail industry. Bruce has previously served on the boards of Melbourne Water, VENCorp and Snowy Hydro Limited, and as a Commissioner with the Victorian Competition and Efficiency Commission for its Inquiry into Reform of Melbourne’s retail water sector. He holds a B. Comm., LLB (Hons) and M. Comm. (Hons) from the University of Melbourne, and a Ph. D. in Public Policy from The Australian National University.

Professor Caroline Chan

Professor Caroline Chan is Head of the School of Business IT and Logistics at RMIT University. Professor Chan undertakes research in eCommerce and Supply Chain Management. She has received numerous services awards include a 2007 GS1 Recognition of Excellence Award for Academic Advancements in Supply Chain Management. Professor Chan holds a PhD in Information Systems (Deakin), MEng in Systems Engineering (RMIT) and an Ir (‘ingenieur’) equivalent to ‘Bachelor of Engineering (Hons)’ in Electronic Engineering (Petra).

Jim Marshall PSM

Jim Marshall previously held the position of the Executive General Manager, Postal Services for Australia Post which includes the mail, parcels and international mail businesses. He was appointed Sai Cheng (a Joint Venture Company established by China Post and Australia Post to provide one stop supply chain services) Board Director in February, 2011. From October 2009 until 1 July 2010, Mr Marshall was the Chief Operating Officer of Australia Post and was previously General Manager of Australia Post’s Mail and Networks Division. He is also a Director of Australian Air Express and Star Track Express, two express freight companies that are joint ventures between Australia Post and Qantas. Mr Marshall has a B.A., B.Ec. and M.B.A. from Adelaide University and more than 25 years’ experience as an executive in Australia Post, focusing on operations strategy and management.


Appendix C: International mail initiatives

C1. Kahala Posts Group

Background

Australia Post and seven other national postal operators established the Kahala Posts Group (Kahala group) in 2003 to jointly explore the development of new integrated business models and commercial opportunities. The group now has 10 members comprising: Australia Post, China Post, Correos, Hong Kong Post, Japan Post, Korea Post, La Poste, Royal Mail, Singapore Post and the US Postal Service. Initially, the Kahala group focused on the need for co-operative business practices that would assure performance standards for premium level services. In recent years, the group has focused on new logistics frameworks that can be applied to the processing of larger parcels (greater than 2 kg) and EMS mail items and which will give full expression to the client promise. The development of this framework has been closely aligned to UPU protocols relating to item level data transfer between postal organisations, and between postal organisations to Customs authorities.

Current focus

In Australia, Australia Post is currently working to implement an integrated phased approach to several key logistic changes to support the Kahala group objectives. In broad terms, Kahala group members are responsible for approximately 70 per cent of items coming into Australia in the mail categories in relation to which work is being undertaken. In regard to the changes that are being considered, potential developments include:

• development of information transfer systems which will align to UPU protocols relating to item level data transfer between postal organisations, and between Australia Post and Customs and Border Protection; and

• development of separate processing lines or processing some types of mail items through separate facilities to the traditional Gateway structure (with the possibility of separate entry facilities being developed to handle these items).

The current Kahala developments include a phased implementation of data capture protocols which will allow for item level data transfers. The information contained in the data transfer will allow for a degree of granularity about the item that will assist with border protection processes which is comparable to the types of information that are available to other commercial express courier operations.


Relationship to the low value parcel processing taskforce

The Taskforce has been actively investigating the options that these developments will present to advance reforms in the international mail handling environment in Australia. It is projected that these will represent a significant change to the way in which parcels over 2kg and EMS items may be received and processed. It is recognized that the scope of this will represent only a portion of the total volume of all parcel types that would be processed in the Gateway in the short term – however, these will incorporate the majority of parcels with relatively higher values. Combined with the application of data transfer to Customs and Border Protection, including responses, in line with UPU recognised protocols, there is potential to advance key elements of process reform. It should be noted that the mail product range is currently limited to the EMS and parcels over 2kg categories and it is expected that this will be fully implemented for both products by the end of 2014.

C2. MEDICI - Mails Electronic Data Interchange and Customs Integration

Background

The Mails Electronic Data Interchange and Customs Integration (Medici) Group is a group of Postal Administrations whose objective is to implement systems and data sharing protocols that will expedite Customs processes in the international mail environment. The systems and protocols are largely in common with the Kahala group, excepting that the Kahala group members have also organised themselves to achieve additional commercial outcomes. As with the proposed system to be used by the Kahala group, the Medici group uses the UPU standard item attributes message to exchange customs information. The Medici group utilises systems that have been created and are administered by the International Post Corporation27 (IPC). It should be noted that not all of the 24 members28 of the IPC are involved in Medici group.

Current focus

The Medici group has recently focussed on developing a framework in which the participating postal operators capture and electronically exchange the data needed for customs processes and for duty and tax to be assessed. There

27 IPC was established in 1989 to provide’ leadership by driving service quality, interoperability and

business-critical intelligence, and gives its members an authoritative, independent and collective

voice’. Source: http://www.ipc.be/en/About/Mission.aspx 28 IPC member countries: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, The Netherlands, United Kingdom and the United States of America. Source: http://www.ipc.be/en/About/Membership/Members.aspx


have recently been trials amongst several member countries of these technologies and there is some progress towards the wider adoption of these processes in a business as usual approach.


The Taskforce is actively considering all developments but notes that Australia Post is not an active member of the Medici group. Nonetheless, the current developments in the Medici group bear close alignment to current activities in the Kahala group, and like Kahala group technologies align to UPU technology protocols and standards. The Taskforce will continue to consider these activities in the development of reform solutions, particularly in light of the review of the Canadian mail processing environment, as Canada is one of the Medici group members. The Taskforce also notes that there is the capacity for the Kahala and the Medici groups to work together on issues of data sharing and expand the scope of application these data sets to further improve processes in the Australian international mail handling environment.

C3. UPU – Universal Postal Union

Background

The UPU was established in 1874, and is the body that is responsible for setting the international framework of co-operation for almost all international postal operators. The scope of the policies and protocols is extensive and all member countries are bound to the service obligations that are set by the UPU.

Current focus

In recent times the UPU, like all large organisations, has recognised the growing importance of technology.29 Although the UPU was established to manage a physical process, that of handing and moving mail, there has been attention given to ensuring that postal operators have access to an agreed framework to build new and improved services. In this regard, the UPU presented a paper in 2009 titled ‘E-Services Strategy and Action Plan’ in which it addressed a strategy for electronic-based postal services, telematic links and enhancing the use of existing UPU products (IPS, IFS, EDI). It is in this context that the UPU has been advancing the adoption of its EDI standards, which Kahala and Medici have largely both adopted.

29 Universal Postal Union: Postal Technology Centre. UPU Customs Declaration System White Paper

(2011).



Through the active consideration of all current international developments, the Taskforce is considering the alignment of potential solutions to broader international frameworks including the processes, standards and obligations that relate to member countries of the UPU, of which Australia is one. For the purposes of this Taskforce’s activities, it is also necessary to note that the UPU EDI Messaging Standards sets out detailed description of the standard EDI messages that have been adopted through the UPU's standards approval process. It is produced and maintained by the Standards Board of the Postal Operations Council. The UPU EDI Messaging Standards include standards for:

• postal item tracking messages;

• postal dispatch pre-advice/response messages;

• postal consignment pre-advice/response messages; and

• carrier consignment pre-advice/response messages.

A complete Logical Data Model has also been developed, giving a structured overview of all information elements that can be exchanged through EDI, including definitions and lists of allowed values for every individual data element.


Appendix D: Regulatory framework

D1. Introduction

The purpose of this Appendix is to highlight key elements of Australia’s regulatory framework by reference to various stages of the import process for both international mail, and air and sea cargo, being:

• the arrival of mail and cargo into Australia;

• border control (security and biosecurity); and

• the application of imposts (GST and customs duty).

These arrangements are determined by an extensive legislative framework which governs the way in which Australia’s border security, biosecurity and revenue assessment processes operate with respect to international mail, air and sea cargo, and goods brought into the country by international travellers. Relevant instruments that impact upon these processes include, but are not limited to:

• Acts and Regulations

o A New Tax System (Goods and Services Tax) Act 1999

o A New Tax System (Luxury Car Tax) Act 1999

o A New Tax System (Wine Equalisation Tax) Act 1999

o Australian Bureau of Statistics Act 1975

o Australian Postal Corporation Act 1989

o Australian Postal Corporation Regulations 1996

o Australian Postal Corporation (Performance Standards) Regulations 1998

o Commerce (Trade Descriptions) Act 1905

o Copyright Act 1968

o Customs Act 1901

o Customs Administration Act 1985

o Customs Regulations 1926

o Customs (Prohibited Imports) Regulations 1956

o Customs Tariff Act 1995

o Customs Tariff Regulations 2004

o Crimes Act 1914

o Financial Transactions Report Act 1988

o Imported Food Control Act 1992

o Import Processing Charges Act 2001

o Motor Vehicle Standards Act 1999

o Quarantine Act 1908

o Quarantine Service Fees Determination 2005


o Therapeutic Goods Act 1989

o Trade Marks Act 1995

o Wildlife Protection (Regulation of Exports and Imports) Act 1982

• Free Trade Agreements

o ASEAN-Australia-New Zealand FTA

o Australia-Chile FTA

o Australia-New Zealand Closer Economic Relations

o Australia-United States FTA

o Singapore-Australia FTA

o Thailand-Australia FTA

• International Treaties and other International Cooperative Arrangements

o Universal Postal Union (UPU)

� Universal Postal Convention

� General Regulations of the Universal Postal Union

� Postal Payment Services Agreement

o World Customs Organization (WCO) Conventions (1952-2008), including the International Convention on the simplification and harmonization of Customs procedures (Kyoto Convention) as amended (2006)

o World Trade Organization (WTO)

� WTO Agreement on Valuation (1969)

� WTO Agreement on Rules of Origin

• MoU between the Australian Customs and Border Protection Service, Australian Quarantine and Inspection Service (now known as DAFF Biosecurity) and Australia Post on administrative arrangements at the mail Gateways.

• MoU between Australian Customs and Border Protection Service and the Australian Taxation Office in relation to the performance of functions that relate to the joint administration of the Goods and Service Tax (GST), Luxury Car Tax (LCT) and Wine Equalisation Tax (WET).

For the purposes of brevity, it is not intended that this Appendix detail every aspect of this regulatory framework. However, in considering its recommendations the Taskforce intends to assess such changes as may be required to these arrangements. It is important to note that cargo is defined to include mail in certain circumstances, and that any differences that arise between the treatment of mail and cargo in those instances relate primarily to the availability of information that is available on individual consignments. All cargo has


information available on each consignment, whereas mail is largely unknown until it reaches the mail gateways. For this reason it is reported and assessed differently to other cargo.

D2. Arrival of mail and cargo into Australia

Regulatory arrangements with respect to the arrival of goods arriving into Australia relate generically to the reporting requirements, and the movement of mail and cargo. Issues relating to prohibitions and restrictions of goods are dealt with separately below.

Inbound reporting requirements for cargo (including mail)

Generally, the arrangements governing the reporting of goods entering into Australia are:

Activity Agency Legislative Basis or Otherwise

All arrivals of cargo (defined to include mail items) into Australia must be reported to Customs and Border Protection.

ACBPS See generally Pt IV Division 3 Customs Act 1901.

For the purposes of the Customs Act 1901, cargo includes “mail”.

ACBPS See section 63A Customs Act 1901– definitions of “cargo” and “mail”.

For cargo arriving by ship or aircraft, reporting requirements may include:

- an impending arrival report;

- a cargo report;

- a cargo list report (for sea cargo);

- an actual arrival report.

Generally these reports are provided electronically through the ICS.

ACBPS Sections 64, 64AA and 64AB Customs Act 1901;

Regs 25-27, 28-29 Customs Regulations 1926.

Air cargo is generally reported at a House Air Waybills (HAWB) level and sea cargo by a bill of lading. These provide details on the contents of individual consignments. However, since 2002 international mail items arriving by aircraft is reported at the Master Air Waybill (MAWB) level based on the data elements available in existing industry documents.

ACBPS As to the general reporting requirements with respect to cargo, see generally section 64AB Customs Act 1901.

It is a Customs and Border Protection Policy Decision generally to only report mail at the MAWB level as mail does not have data available on what it contains.

Dealing and moving cargo and mail upon arrival

The movement of cargo and mail is strictly controlled on entering Australia to ensure clear accountability through border assessment processes. Generally, the arrangements governing the reporting of goods entering into Australia are:



Generally, it is an offence to move cargo (including mail) that is subject to Customs control.

ACBPS Section 33 Customs Act 1901

When unloading cargo (including mail) (the Customs and Border Protection terminology is outturn), an outturn report is required to be communicated to Customs and Border Protection at the level at which it was initially reported (MAWB or otherwise).

ACBPS Sections 64ABAA, 64ABAB of the Customs Act 1901.

It is a Customs and Border Protection policy requirement that mail can be outturned at the MAWB level; other cargo arriving by air is generally required to be outturned at the HAWB level.

Subsequent movements of cargo prior to release (including mail) may only be undertaken when permission has been granted by Customs and Border Protection (noting that the movement of individual mail items between mail gateways after deconsolidation is done on a manual underbond movement with Customs and Border Protection approval).

ACBPS See generally section 71E of the Customs Act 1901.

Generally, declarations are required to be made with respect to cargo other than mail prior to its release. The form of declaration will depend upon the nature of the cargo, and include:

- import and warehouse declarations; ACBPS See Pt IV Division 4 Subdivision B Customs Act 1901; reg 43 Customs Regulations 1926.

- self assessed clearance declarations; ACBPS See Pt IV Division 4 Subdivision AB Customs Act 1901.

- unaccompanied personal effects statement.

ACBPS See Pt IV Division 4 Subdivision AA Customs Act 1901.

Goods may only be taken from designated locations (“Customs places”) once an authority to deal with the goods has been provided by Customs and Border Protection.

ACBPS See, for example, sections 71; 71C (import declarations); 71DE (request for cargo release); 71DJ (warehouse declarations) Customs Act 1901.

As to definition of “Customs place”, see section 183UA Customs Act 1901.

Generally, only mail items with a value of above $1000 are required to have an import declaration prior to them being released.

ACBPS See Pt IV Division 4 Subdivisions AA, AB; reg 41B Customs Regulations 1926.


D3. Border Control (security and biosecurity)

The following section details the high level framework by which Customs and Border Protection Service and DAFF Biosecurity address their obligations in the border control process.

Mail opening

Specific reference is made to mail opening because, in the international mail environment, border processes have been designed having regard to the requirement that, in most circumstances, Australia Post is the only entity authorised to open mail items for inspection by Customs and Border Protection, or DAFF Biosecurity.


Only authorised examiners (Australia Post employees) may open the mail for inspection.

Australia Post

Sections 90M-90X of the Australian Postal Corporation Act 1989.

Articles reasonably believed to contain drugs (or pre-cursor chemicals) may be opened by a Customs officer.

ACBPS Section 90T of the Australian Postal Corporation Act 1989.

Inspection of mail and cargo (and related activities)

A suite of legislative and regulatory arrangements govern both the capacity and manner in which Australia’s border agencies may undertake their responsibilities (for example, inspection, seizure, etc), and more generally the nature of the goods and risks which are the primary subjects of their attention. Activity Agency Legislative Basis or Otherwise

Border security

Generally all goods (including mail) imported into Australia are subject to Customs and Border Protection control until they have been authorised for release.

ACBPS See sections 30, 35 of the Customs Act 1901.

As to powers of Customs Officers generally, see Pt XII Division 1 Customs Act 1901.

A range of goods are prohibited – either absolutely or subject to certain circumstances – from being imported into Australia and generally will not be released. These include, but are not limited to: - firearms; - asbestos; - objectionable goods; and - drugs and precursors.

ACBPS See generally Pt IV Division 1 Customs Act 1901; Customs (Prohibited Imports) Regulation 1956.

In addition to these prohibited goods, there are a number of other legislative instruments that may result in goods being prevented from being imported into Australia. Goods that may be subject to

ACBPS See, for example: Commerce (Trade Descriptions) Act 1905; Motor Vehicle Standards Act 1989; Therapeutic Goods Act 1989 (for


such constraints include goods that are not as described; do not meet Australian standards; are pirated or counterfeit goods, cash, and substances subject to the Therapeutic Goods Act 1989.

example, sections 14B (application of Customs Act 1901); 42E (which includes an offence with respect to the import of counterfeit therapeutic goods); Trade Marks Act 1995 (see generally Pt 13).

In addition to Australian regulatory instruments, the UPU Convention also has a list of items prohibited from being sent in the mail including but not limited to: narcotics; obscene or immoral articles; counterfeit or pirated articles; explosives, radioactive materials or dangerous goods; live animals; insertion of correspondence into parcels; and coins banknotes and other valuable articles. There are exceptions to some of these and in many cases prohibitions may be far wider depending on the laws of the country.

Australia Post (UPU)

Articles 15 and 16 of the UPU Convention.

Border security fees and charges

Border security fees and charges are subject to a range of regulatory instruments that affect their level (and limits).

ACBPS See generally: Customs Depot Licensing Charges Act 1997; Import Processing Charges Act 2001; Customs Act 1901 (e.g. section 85 – fees for warehouse licence), 183CL (fees for licensing of customs brokers); see also Customs Regulations 1926 (regs 50-51 (warehouse licence); 158 (broker’s licence).

Biosecurity DAFF - Biosecurity

Goods entering into Australia – whether as cargo or through the international mail stream – are treated uniformly for the purposes of biosecurity.

As to relevant Acts, see generally Quarantine Act 1908, Export Control Act 1982, Imported Food Control Act 1992.

Generally, the scope of quarantine

arrangements in Australia are wide, and encompass measure: (a) for, or in relation to - (i) the examination, exclusion, detention, observation, segregation, isolation, protection, treatment and regulation of vessels, installations, human beings, animals, plants or other goods or things; or (ii) the seizure and destruction of animals, plants, or other goods or things; or (iii) the destruction of premises comprising buildings or other structures when treatment of these premises is not

See generally section 4 of the Quarantine Act 1908.

As to relevant provisions, see also: section 18(2) Quarantine Act 1908 (goods subject to quarantine) sections 44C and 44D Quarantine Act 1908 (examination of goods); section 48AA Quarantine Act 1908 (treatment and destruction of goods); section 68 Quarantine Act 1908 (effect of unlawful importation); see also: Pt 5 (Importation of goods); Pt 6A (Import Risk Analysis); and Pt 7 Div 3 (Forfeiture and seizure of animals, plants and other goods) Quarantine Regulations 2000.


practicable; and (b) having as their object the prevention or control of the introduction, establishment or spread of diseases or pests that will or could cause significant damage to human beings, animals, plants, and other aspects of the environment or economic activities.

Biosecurity fees and charges

Biosecurity fees and charges are subject to a range of regulatory instruments that affect their level (and limits).

DAFF Biosecurity

See generally: section 86E Quarantine Act; Quarantine Service Fees Declaration 2005; See also Australian Government’s Cost Recovery Guidelines 2005.

D4. Application of imposts

Under current arrangements, goods imported into Australia are subject to the imposition of customs duty and/or GST unless otherwise relieved of that obligation. Of particular relevance for this report is the relief that is granted with respect low value goods. Key provisions relating to the manner in which customs duty and/or GST are applied on import, and the relief provided to low value goods, are: Activity Agency Legislative Basis or Otherwise

Liability for duty and/or GST

Goods consigned through the Post Office by one person to another or goods consigned other than through the Post Office with a value not exceeding $1,000 will not be subject to formal entry.

In addition a duty rate of Free is applied those goods and in such circumstances the goods are also free of liability for GST.

ACBPS Entry

Entry S68(1)(e),(f) of the Customs Act 1901; Regs 31AB and 31AC of the Customs Regulations 1926. GST and Customs Duty Assessment for Low Value Goods A New Tax System (Goods and Services Tax) Act 1999 s42-5

Customs Tariff Act 1995 – Schedule 4 Items 32A and 32B Customs By-laws 0540003 and 0540004.

Customs inspection and determination of Duty and/or GST

Customs Act 1901; see Part VIII (The duties), and section/s 68, 69, 70, 71.

Customs Tariff Act 1995.

Customs inspects the goods and assesses their declared value. If this value does not exceed $1000 then customs duty and GST is not payable except in relation to certain goods. If the goods are wine, other alcoholic beverages, or tobacco products customs duty, GST and WET is applied at all times

ACBPS

A New Tax System (Goods and Services Tax)

Act 1999 Division 7 - 7-1 GST and input tax


credits Division 13 - 13-20 How much GST is payable on taxable importations? Division 38 - Subdivision 38-Q - International mail Division 114 - 114-5 Importations without entry for home consumption Payments of amounts of GST where delivery into home consumption is authorised under section 71 of the Customs Act 1901.

A New Tax System (Wine Equalisation Tax) Act 1999 Division 2 - Overview of the wine tax legislation 2-1 What this Act is about - 2-20 Division 5 - General rules for taxability 5-5 General rules for taxing assessable dealings 5-30 Local entry of imported wine (AD10) Division 23 - Wine tax on customs dealings A New Tax System (Wine Equalisation Tax Imposition - Customs) Act 1999 3 Imposition 4 Rate

regardless of value and is not subject to the threshold – it is not considered in this assessment of imposts. Other prescribed items with a value less than $1000 (e.g. goods that form part of a bulk order) may also be liable to pay customs duty and GST. Are all importations taxable under the GST Legislation? Some goods imported into Australia are not subject to GST. These are: • goods that would have been GST-free

or input taxed if supplied within Australia, such as basic food, certain medical aids and appliances, cars for use by certain people with disabilities, and precious metals, and

• goods that qualify for certain customs duty concessions.

• goods that qualify for certain customs

duty concessions.are also non-taxable for GST purposes and include the following items in Schedule 4 to the Customs Tariff Act 1995.

Customs will assess the value of the good through the inspection process and assess in order:

1. Customs duty 2. GST / WET.

Generally, the overall effect is that ‘the importer’ pays at the same time, at the same place, and in the same manner as for customs duty (if the goods are subject to customs duty).

A New Tax System (Goods and Services Tax) Act 1999 Part 2-2 Supplies and Acquisitions GST free supplies Part 3-2- Non-taxable importations 42-5 Non-taxable importations – Schedule 4 of the Customs Tariff Act 1995 42-10 Goods returned to Australia in an unaltered condition.


D5. Other matters

Return of mail

Australia Post has service standards that it is required to meet in relation to in-bound and out-bound international mail. The Australian Postal Corporation Act 1989 provides that “Subject to subsection (3), if, under a convention, Australia is permitted to return a letter or postal article, Australia Post may return the article in accordance with the convention despite its obligations under this Division.” Under the Universal Postal Convention, “Member countries shall ensure that their designated operators redirect postal items if an addressee has changed his address, and return undeliverable items to the sender. The charges and other conditions are laid down in the Regulations.” The UPU Letter Post Regulations detail what happens to undeliverable items, return to country of origin or to sender and period of retention. In general the period of retention should not exceed one month except in special cases where the designated operator of destination considers it necessary to extend it to two months at most.

Australia Post

Article 4 of the UPU Convention; Sections 28C and 29 of the Australian Postal Corporation Act 1989; Pt 2 of the Australian Postal Corporation (Performance Standards) Regulations 1998. Article 5(3) of the UPU Convention Section 28A(2) of the Australian Postal Corporation Act 1989 UPU Letter Post Regulations, Article RL 147.

Collection of statistical information

The ABS draws on the statistical segment of the complete tariff code to measure types of goods that are being imported in the mail and cargo environments, and relies on information provided to it by Customs and Border Protection for a range of statistical products, including balance of payments and merchandise trade. As most goods under the threshold value are not required to be fully declared, those goods are generally not currently counted for statistical purposes (although estimates may be made based on sampling data).



There is no specific mention of the collection of statistics on international mail in the ABS Act, only a generic section on the functions of the Bureau.

(It should be noted, however, that any new proposal for the collection of statistics must be laid before both Houses of Parliament before implementation unless it is on a voluntary basis.)

ABS See section 6 of the Australian Bureau of Statistics Act 1975.

The World Customs Organization has developed the Harmonized Commodity Description and Coding System, popularly known as the Harmonized System or HS, as a multipurpose goods nomenclature used as the basis for customs tariffs and for the compilation of trade statistics all over the world.

ACBPS See International Convention on the Simplification and Harmonization of Customs Procedures (as amended) (2006).


Appendix E: Summary of international low value import schemes Britain Canada Singapore

Threshold: Tax

VAT/GST £15 (A$22.82) C$20 (A$19.25) S$400 (A$303.84)

Gift £40 (A$60.84)30

C$60 (A$57.73) S$400 (A$303.84)

Duty £135 (A$205.34)31

C$20 (A$19.25) S$400 (A$303.84)

Threshold: Reporting

Simplified ID - C$20 (A$19.25) -

Full ID £2,000 (A$3,040.94) C$1,600 (A$1,539.36) S$400 (A$303.84)32

Processing charges

Processing charge Royal Mail handling charge £8 (A$12.60) (Courier £13.50) (A$20.52).

Canada Post handling charge of C$8.50 (A$8.18)

S$5.00 (A$3.80) Singapore Post handling charge. If Singapore Post is required to assist customers with revenue processing, an additional charge of S$15 is levied.)

Agency responsibility

Government Agency UK Border Force (UKBF) Administers – Border Protection/duty/tax calculation Collects – n/a

Canada Border Services Agency (CBSA) Administers – Border Protection/duty/tax calculation Collects – n/a

Immigration and Checkpoints Authority (ICA) Administers - Border Protection/ and identification of items for revenue processing Collects – n/a

Post Administers – charges and notification Collects – tax/charges/duty

Administers - charges and notification Collects – tax/charges/duty

Administers – duty/tax calculation, charges and notification Collects – tax/charges/duty

Other UKBF is the border agency. It operates on behalf of HMRC in mail gateways in calculating duty/tax liability. Royal Mail pays HMRC VAT.

N/a ICA is the border agency. It acts on behalf of Singapore Customs in gateway in regard to identification of items for revenue purposes.

Other

Kahala group member Yes No Yes

30 Note this is per addressee, ie. if you send to a four addressees on the address label, the threshold is £40 pounds each addressee, ie £160 pounds total. 31 Customs duty becomes payable if the value of the goods is over £135 but duty is waived if the amount of duty calculated is less than £9. 32 Foreign exchange rates as at 22 March 2012


Korea Japan New Zealand USA

Threshold: Tax

VAT/GST US$250 (A$240.40) Zero NZ$400 (A$311.90)33

n/a

Gift ₩150,000 (A$127) As above NZ$110 (A$85.77)34

US$100 (A$96.16)

Duty US$250 (A$240.40) As above NZ$400 (A$311.90) US$200 (A$192.32)

Threshold: Reporting

Simplified ID US$200 (A$192.32)

Full ID US$600 (A$576.95) ¥200,000 (A$2,325.69) NZ$1,000 (A$779.75) US$2,000 (A$1,923.16) (commercial use)

Processing charges

Processing charge ₩1,000 ($A0.85) (Post delivery notification charge)

Japan Post handling charge of ¥200 (A$2.32).

NZ$25.30 (A$19.73) (BS) NZ$12.77 ($9.96)

US$5.35 (A$5.14) (Post) + US$5.50 (A$5.29) (Customs)

Agency responsibility

Border Protection (Customs) Administers – Border Protection/duty/tax/charges Collects – Border Protection/duty/tax

Administers – Border Protection/duty/tax/charges Collects – Border Protection/duty/tax/charges

Administers - Border Protection/duty/tax Collects – n/a

Administers – Border Protection/duty/tax/charges Collects – Border Protection/duty/charges

Post Administers – delivery only Collects – charges

Administers – delivery only Collects – charges

Administers - charges and notification Collects – tax/charges/duty

Administers – charges and notification Collects – charges/duty

Other n/a n/a n/a n/a

Other

Kahala group member Yes Yes No Yes

33 NZ Customs does not collect duty and GST where the total revenue payable on any one importation is less than $60.

34 If the gift is worth more than NZ$110, Customs charges will be payable on the value of the gift that is worth more than NZ$110.


Appendix F: International mail products and categories

Express mail service (EMS)

Express mail service (EMS) is a premium Express courier mail service for letters, documents and merchandise. Generally EMS articles have a maximum weight of 20kg and are unique to other mail in that they afford senders and addressees the ability to track consignments on the internet using a unique tracking number. EMS articles are in two categories – documents and merchandise.

International parcels

International parcels are any articles which are not an Air Mail letter or other mail. Generally these articles weigh between 2kgs and 20kgs and have a size limit of 105cm in length and 140cm in girth/width. International parcels can arrive by air or sea. Like EMS this service also affords senders and addressees the ability to track their consignment on the internet using a unique tracking number.

Registered Post International

Registered Post International provides additional security for letters and documents weighing up to 2 kgs.

Air mail letter

Air mail letters have the following features: • a maximum length of 360mm • a max width of 260mm • a maximum thickness of 20mm • a weight which does not exceed 500 grams.

Air mail letters includes items such as aerogrammes and greeting cards.

Other mail

Other mail includes any articles that do not fit into the air mail letter categories eg items weighing more than 500 grams but less than 2kgs. This class of mail is referred to as Other Articles (OAs) and can be further divided into small packets, large packets and printed matter during sorting.

• Small packets are articles that can weigh up to 500 grams. • Other/large packets are articles which weigh less than 2 kilograms. • Printed matter means newspapers, brochures, books and magazines;

these are normally wrapped and bundled in plastic, but may also come as loose articles.


Appendix G: International mail and cargo volumes

INTERNATIONAL MAIL VOLUMES 2006-07 to 2010-11 (millions)

2006-07 2007-08 2008-09 2009-10 2010-11

Mail items 150.076 162.843 145.146 186.147 172.456

Note: Source - Australia Post Annual Report 2010-11; see also page 7 of this report. TOTAL POST, AIR CARGO & SEA CARGO CONSIGNMENTS 2006-07 TO 2010-11

2006-07 2007-08 2008-09 2009-10 2010-11

Post Full Import Declaration* 22,934 23,434 21,739 19,056 17,318**

Low Value Import Declaration 628 571 432 262 233

Short Self Assessed Clearance - - - - -

Cargo Report Clearance - - - - -

Air Cargo Full Import Declaration* 1,445,639 1,529,759 1,453,677 1,508,979 1,596,476

Low Value Import Declaration 103,403 122,741 109,396 131,394 155,553

Short Self Assessed Clearance 179,809 147,239 121,655 119,299 137,849

Cargo Report Clearance 5,977,131 6,731,434 6,534,604 7,699,649 10,116,252

Sea Cargo Full Import Declaration* 1,370,582 1,459,050 1,355,177 1,450,112 1,542,325

Low Value Import Declaration 14,751 16,052 12,635 16,707 19,234

Short Self Assessed Clearance 11,674 11,996 10,154 10,663 10,574

Cargo Report Clearance 437 442 537 576 733

*Full Import Declaration figures represent amounts over $1000

Source - Australian Customs and Border Protection Service ICS data

** In addition, 21,682 alcohol and tobacco products were processed for duty/and or GST by Customs and Border

Protection using the DutyCalc system.

Documents

Low Value Parcel Processing Taskforce Interim Report … · 1 The Kahala Posts Group (KPG) is an alliance of 10 leading postal services, which includes Australia Post, China Post,