Crossing the border – regulating imported goods

New Zealand’s market for goods is perceived as essentially duty-free and also free of many regulatory controls.

Jeff Blackburn

Customs duties have reduced considerably in the past 25 years, as a result of a gradual phasing programme, as well as the introduction of trade agreements with various trading partners. Despite this, there are still myriad issues at the border which confront imported goods. The New Zealand Customs Service (Customs) has considerable statutory and regulatory powers to control the border, and to collect large amounts of revenue from importers. In the year ended 30 June 2018, Customs collected $14.4, billion, as well as an additional $367 million on behalf of other agencies. This represented approximately 18% of the Crown’s total core tax revenue.

In addition, further regulatory controls are imposed by other government agencies such as the Ministry of Primary Industries (MPI), the Ministry of Health (MOH) and the Ministry of Business, Innovation and Employment (MBIE). Importers of goods (and their advisers) should be aware of the potential areas of exposure if those goods do not comply with New Zealand law.

Customs and Excise Act 2018

In March 2015, the New Zealand Customs Service (Customs) published a Discussion Paper reviewing the Customs and Excise Act 1996. Following a lengthy consultation process, the Customs and Excise Act 2018 (the Act) came into force on 1 October 2018. Key changes for business can be summarised as follows:

  • Importers will be able to include a provisional Customs value in certain circumstances. Duty can be refunded where the final Customs value is lower than the provisional value.
  • A definition of “sold for export to New Zealand” is introduced which clarifies that, when there are multiple sales in a supply chain, the sale that determines the value of goods is the sale prior to the importation of goods into New Zealand.
  • Importers will be able to request a binding Customs ruling for valuation.
  • An alternative review process is introduced. Any decision of the Chief Executive of Customs to amend an assessment can be reviewed using a new administrative review option (or appeal to the Customs Appeal Authority as was previously the case).
  • A person may apply to the chief executive to store records at a place outside New Zealand, including the Cloud. The chief executive may authorise such an application subject to any terms, conditions or restrictions.
  • It is made explicit that goods can be temporarily imported and conditionally relieved of duty, for manufacture, processing or repair and subsequently exported in an altered state.
  • Goods exported for repair or refurbishment, and then reimported in substantially the same condition (except for the repair or refurbishment), may be readmitted at the amount of duty payable on the cost of the repair or refurbishment.
  • Customs can publish a ruling if the chief executive considers it is in the public interest. Also, Customs must publish a ruling if required under an international agreement to which New Zealand is a party.
  • A new provision extends administrative penalties to cover exports. It also includes a definition of a “materially incorrect” error or omission for an excise entry and an export entry.
  • A significant rewrite of administrative penalties is contained in Part 5, subpart 3 of the Act (sections 284-294).
  • There are changes to the provisions which authorise the import, manufacture and movement of excisable goods within New Zealand.

A sizeable percentage of Customs’ revenue is excise duty on alcohol, fuel and tobacco. As well as applying the appropriate duties at the border, Customs is also responsible for collecting excise on these products when they are manufactured locally. Advisers to these industry sectors should be aware of the resources Customs directs to the correct calculation and payment of these duties.

Importers, exporters, sectors affected by excise duty, and customs brokers and agents will all be affected in some way by the changes. Consequently, advisers to these parties need to become familiar with the amended provisions.

Free trade agreements

New Zealand has partnered with several countries either bilaterally or multilaterally, in various trade agreements. Colloquially referred to as “free trade agreements”, they are in fact “preferential” trade agreements. They give all parties to the agreement preferred access to each other’s markets over other trading nations that are not parties to the agreement. These agreements are detailed and complex, and need to be considered when determining whether imported goods are compliant at the border.

Trade remedies

As a member of the World Trade Organisation, New Zealand has a suite of trade remedies legislation comprising the Trade (Anti-Dumping and Countervailing Duties) Act 1988 and the Trade (Safeguard Measures) Act 2014. These statutes are based on the relevant WTO Agreements and regulate the importation of unfairly traded (dumped and/or subsidised) goods into the New Zealand market where there is injury to a local manufacturer.

Judicial activity

Typically, Customs and trade disputes in New Zealand are handled by the administrative arm of government rather than through the judicial process. In addition, the Customs Appeal Authority (established in 1999) operates as a tribunal to hear appeals from decisions made by Customs. A reasonable body of precedent has been developed by the Authority, some of which has been appealed to higher authorities.

Conclusion

The importation of goods into New Zealand is subject to a wide range of regulatory controls under various statutes and operated by numerous government agencies. Because Customs operates a risk management process, non-compliant goods can be passed for entry and subsequently distributed into the New Zealand economy. Postaudit investigation will often reveal non-compliant activities with the outcome being the imposition of retrospective duties and penalties. Proactive and well-considered advice will eliminate or mitigate many of these risks.

To assist lawyers advise their clients on customs-related matters, Jeff Blackburn will present a webinar on Wednesday 20 February 2019. See adls.org.nz/cpd for more details.

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