Wednesday 21st Nov, 2018

INDUSTRY OPINION: Cost recovery reform opens the door for trusted traders

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THE Department of Home Affairs and the Department of Agriculture and Water Resources are seeking feedback on a proposed cost recovery collection model that includes the introduction of a new levy on low value consignments.

In a joint discussion paper produced by the two government departments, the rationale for the reform is to redistribute existing cost-recovery arrangements for cargo and trade border activities and those for managing Australia’s biosecurity system, to include imports of low value consignments. This approach is consistent with the Australian Government Cost Recovery Guidelines (AGCRGs).

Both departments currently apply cost recovery levies to imports valued over $1000. The discussion paper identifies “high value” consignments as representing just ten per cent of all cargo imports by volume and as low value consignment volumes increase, so too does cross subsidisation, where importers of high value consignments pay the costs of border activities for both low value consignments and their own.

In a changing environment driven by internet trade, the number of low value consignments imported into Australia was 38.7m in 2016-17, an increase of 22% on 2015-16. In contrast, over the same period imports of high value consignments has only grown by 3% to 3.7m. Furthermore, the number of low value consignments entering Australia is expected to increase further by 31% over the next four years, compared with only 10% growth expected in high value consignments.

It is difficult to argue against the logic of introducing a levy on low value goods. Attention therefore turns to the best method of collection with the discussion paper suggesting the levy be imposed on entities who make more than 1000 Self Assessment Clearances (SAC declarations for goods valued under A$1000) in a financial year. Entities that make fewer than 1000 SAC declarations would be exempt from the proposed levy. Once an entity makes 1000 SAC declarations it would receive an initial invoice and would continue to receive periodic invoices as it continues to make SAC declarations throughout the financial year.

The levy would be calculated by multiplying the number of SAC declarations by a flat fee. The quantum of the flat fee is yet to be determined however the discussion paper makes a clear reference to the need for a level playing field noting that a proposed comparable model will also be introduced for the postal environment.

Member feedback to date justifiably questions whether this opens the door for further reforms.

The much publicised Australian Trusted Trader programme creates an environment of establishing low risk industry participants allowing Home Affairs to focus resources on targeting higher risk entities and associated import consignments.

Those importers that have received this accreditation argue that they should receive a differential cost recovery rate as this too aligns with the AGCRGs principles to move away from cross-subsidisation.

To date this concept was difficult to digest as non-trusted traders would have been required to have a further inflated cost recovery rate to maintain net cost recovery.

It is now a realistic outcome that we could see an import cost recovery model whereby high volume / low value consignments attract a transactional levy (as proposed in the discussion paper) and high value consignments  subject to a two-tier levy, a lower fee for trusted traders and another for non-trusted traders?

This could be achieved without increasing existing cost recovery levies on high risk entities yet still delivering a saving to Trusted Traders.

If this concept has legs, those importers that were looking for an extra incentive to join the Australian Trusted Trader programme may well be queuing up to be direct financial beneficiaries of this innovative reform.

An opportunity exists to send a submission direct to the departments at TradeModernisation@homeaffairs.gov.au by 2 March 2018.

For further information and to view the discussion paper, please refer to the FTA web site at http://www.ftalliance.com.au/reports-and-submissions

Paul Zalai is director at Freight & Trade Alliance (FTA) and an advocate of the freight and trade sectors.
www.FTAlliance.com.au



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