This article was written and originally published on 3 Jan 2021
On 22 Dec 2020 , Assistant Minister to the Prime Minister and Cabinet, Ben Morton announced new priority tasks for the Deregulation Taskforce, one of which was a review of Australia’s excise and excise-equivalent goods (EEGs) customs duty regime to identify unnecessarily cumbersome and duplicative processes.
This review will not examine the base or rates of taxation and is focused only on enhancing the administrative efficiency of Australia’s excise and excise-equivalent customs duty regimes as well as cutting regulatory overheads for business. Feedback from industry participants has indicated these regimes often impose unnecessary red tape and costs on businesses, and time imposts on officers of the Australian Taxation Office (ATO) and Australian Border Force (ABF).
Freight and Trade Alliance (FTA) congratulates government on this initiative and suggests a review of the process and requirements for importing alcohol to be further manufactured in bond be included. The complexity of this process was highlighted early in the Covid-19 pandemic by the often painful and very costly experiences of importers of undenatured ethyl alcohol with an alcohol by volume (ABV) content of 80% or greater, that was for use in manufacturing hand sanitiser in Australia.
Undenatured ethyl alcohol with an ABV of at least 80% is subject to customs duty, when imported , of 5% plus $86.90 per litre of alcohol. As neither TCOs nor FTAs were available, FTA approached the ABF to request consideration that a new bylaw be made providing that this and other specified goods could be imported duty free for use during the Covid-19 pandemic. A 4th Schedule bylaw was subsequently approved, but while it covered goods such as personal protective equipment and ventilators, it did not cover undenatured ethyl alcohol because of the significant quantities being manufactured in Australia in response to the need for it.
The suggestion that FTA then provided to the many members that reached out to us for assistance and advice was for the importer to consider warehousing the goods in a dual licensed facility administered by the ATO on behalf of the ABF. If the warehouse had an excise manufacturer licence to produce or distil spirits the warehouse could, 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 would then be treated as locally manufactured, and subject to a free rate of excise rate.
The summarised procedure is as follows:
• As imported and until such time as they are used in the manufacture of an excisable product, the goods are subject to customs duty of 5% plus $86.90 per litre of alcohol.
You cannot go from an imported undenatured ethyl alcohol straight into making sanitiser or significant customs duty is payable. There needs to be excise manufacture in-between, hence the excise manufacturer licence requirement. Blending and/or reduction is first required and then the resultant excisable alcohol can 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 such approval from the ATO.
• 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.
Not only were the costs in this process significant, but the ABF also considered the names and addresses of licensed bonds of all types to be subject to privacy legislation and refused to provide them to industry. Our experience was that as a consequence some importers and customs brokers were unable to locate a dual licensed facility in a timely manner. FTA would suggest therefore that the process review include the necessity for this confidentiality, and whether publishing the names of such facilities would be detrimental where those facilities have provided written agreement to that publication.