Imported undenatured ethyl alcohol that is imported with an alcohol by volume (ABV) content of 80% or greater, and that is for use in manufacturing hand sanitiser in Australia, is subject to customs duty, when imported , of 5% plus $86.90 per litre of alcohol. While a Free Trade Agreement may remove the 5% substantive rate, it does not remove the $86.90/LAL EEG (excise equivalent good) rate. There is no applicable TCO for the goods as imported and little chance of obtaining one as the good is manufactured in Australia. As you may be aware, a Tariff Concession Order (TCO) cannot specify end-use, but bylaws are able to do so. Freight and Trade Alliance (FTA) therefore approached the Australian Border Force (ABF) to request consideration that a new bylaw be made providing that goods could be imported duty free for use during the Covid-19 pandemic (or such other emergencies as might be decreed) and an Item 57 4th Schedule bylaw was subsequently made. However, while it covers goods such as personal protective equipment (PPE) and ventilators for use in the pandemic, it does not cover undenatured ethyl alcohol because of the significant quantities now being manufactured in Australia in response to the need for it.
The suggestion that FTA has been providing to the many members that have reached out to us for assistance and advice is for the importer to consider warehousing the goods in a dual licensed facility administered by the Australian Taxation Office (ATO) on behalf of the ABF. If the warehouse has an excise manufacturer licence to produce or distil spirits the warehouse can, without additional approvals, produce hand sanitiser and then report it by using the duty free-rate tariff item on their Excise return. The imported spirit will then be treated as locally manufactured, and subject to the concessional excise rate administered by the ATO.
The procedure which has been confirmed by the ATO, is as follows:
As imported the goods are classified under the Customs Tariff, and subject to customs duty. The comparable excise duty rate would be 3.2% and a duty of $86.90 per litres of alcohol. Until such time as they are used in the manufacture of an excisable product, they are subject to customs duty. To make them subject to excise you need to manufacture them (i.e. reduce or blend with an Australian manufactured spirit). This excisable alcohol can then be used as a concessional spirit to make hand sanitiser.
A Nature 20 is lodged to enter the goods into a bond licensed by both the ABF and ATO.
A Nature 30 is then lodged quoting treatment code 444. This takes it out of the customs system and puts it in the excise system.
In the bond the undenatured alcohol is further manufactured and then manufactured into hand sanitiser, provided the bond holds manufacturing in bond approval for alcohol from the ATO. This process must involve further manufacture of the undenatured ethyl alcohol and may involve a reduction in strength giving the LAL of the undenatured product coming in is much higher (>80%) than the minimum approx. 60% recommended for hand sanitiser. (The ATO advise (as we know) that making hand sanitiser by itself is not considered to be excise manufacture as the sanitiser is not an excisable product. You cannot therefore go from an imported undenatured ethyl alcohol straight into making sanitiser. There needs to be excise manufacture in-between hence the excise manufacturer licence requirement. Blending and/or reduction is therefore first required and then the resultant product can be used to make hand sanitiser.)
The manufacturing bond writes off the quantity used at the end of its settlement period on its excise return. If the excise licenced manufacturing bond uses alcohol, which has been blended or reduced to make it excisable, to then make hand sanitiser they would report the alcohol under excise tariff item 3.7, which has a free rate of duty. .
Please note that procedures other than as above may be subject to permits granted by the ATO for an operator to receive and use duty free rate products.
If the spirit is imported and then intended for use in making hand sanitiser, and this will be undertaken by licensed third parties (for example, imported into a licensed warehouse and subsequently manufactured into hand sanitiser/cleaner at that dual licensed premise as above), then the importer does not need licences or permissions from the ATO.
If the importer intends to undertake this activity at their own facility, and they are not already a licensed operator, they must apply to the ATO for these licences. Applications are available on the ATO website, but note that fees apply both for warehouse licences and applications:
Other licensed entities (for example, breweries) can also apply for permission to manufacture or obtain spirit for the purposes of producing hand sanitiser. ATO has advised that they will fast-track these applications and aim to process them within 1–2 days. Once approved, the goods are reported using the free-rate tariff item on the Excise return.
Other non-licensed entities, such as hospitals, pharmacists, health care practitioners, education institutions, and government institutions can all receive an unrestricted amount of concessional spirits to meet their manufacturing, scientific or medical needs. This does not require a permit.