Measures Introduced by Customs
Due to the implications of COVID-19, the New Zealand Customs Service has introduced measures to support New Zealand business which interact with Customs. The following initiatives have been put in place:
Not penalising businesses if they are unable to pay Customs duty on time, due to the reduced cashflows as a result of COVID-19.
Delaying introduction of a new fee regime for importers and exporters which was due to come into effect on 1 June 2020. This has been put on hold for at least 12 months.
Businesses will no longer need to provide Customs with a $5,000 security when they have requested detention of goods that might infringe their intellectual property rights.
Post COVID-19 Activity by Government Departments
During the period of the COVID-19 lockdown, virtually all resources of Customs, MBIE and MFAT (the Government departments overseeing trade and Customs issues in New Zealand) have been diverted to the COVID-19 response. As the country begins to operate under less restrictions, I would expect to see an increasing amount of those resources being redirected to “business as usual”.
This means that Customs activity around audits, examinations of consignments, issuing of Customs Rulings, processing of refund and remission applications etc will be resumed. Similarly, MBIE activity in the trade remedies area (which has been occurring throughout Lockdown with officials working from home) and general tariff and industry policy work, will start to revert to previous levels.
MFAT Free Trade Agreement negotiations will probably continue to function on a remote basis, and it is likely to be many months before in person negotiating rounds will recommence. How this will affect the progress of negotiations remains to be seen.
IMPLEMENTATION OF THE PACER PLUS AGREEMENT
The PACER Agreement on Closer Economic Relations (PACER Plus) is a trade and economic integration agreement that aims to create jobs, raise standards of living and encourage sustainable economic development in the Pacific Region. It builds on existing trade agreements – the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) and the original PACER Agreement (2001).
Whereas SPARTECA is a non-reciprocal Agreement (there is no requirement for the PICs to make concessions, tariff reductions etc to Australia and New Zealand) PACER Plus will involve concessions being made on each side. The negotiations cover sanitary and phytosanitary measures, technical barriers to trade, Customs procedures, Rules of Origin, trade in goods, trade in services, investment, economic and development cooperation and labour mobility.
In addition to Australia and New Zealand, the Agreement has been signed by the following parties:
Cook Islands
Federated States of Micronesia (FSM)
Kiribati
Nauru
Niue
Palau
Republic of Marshall Islands (RMI)
Samoa
Solomon Islands
The joint A$7.7 million Readiness Package made available to signatories between signature and entry into force, including Customs, revenue, legislative and communications support to address policy and administrative implications of PACER Plus commitments during the ratification process has, we understand, been exhausted.
Australia, New Zealand, Samoa, Kiribati and Tonga have ratified the Agreement. For the Agreement to come into force, at least eight countries must ratify. Work has commenced on establishing an Implementation Unit, the location of which is still to be determined. As a result of the disruption caused by COVID-19 much of the work on PACER Plus has been deferred. It means there is uncertainty around entry into force of the Agreement.
FTA NEGOTIATIONS RECENTLY COMPLETED BY NEW ZEALAND
New Zealand and Singapore upgraded the NZ-Singapore CEP on 1 January with a focus on more flexible rules of origin, shorter customs release times and new chapters on e-commerce and regulatory cooperation. The FTA was Singapore’s first bilateral FTA when signed in 2001.
New Zealand visitors to Singapore will gain visa-free entry for three months – up from the current one month – and companies with offices in Singapore will be able to send employees to work there for up to eight years, up from five years.
In November 2019 New Zealand and China concluded negotiations to upgrade the New Zealand-China FTA.
The existing 2008 Agreement will continue to remain in force, and the upgraded FTA will sit alongside these original commitments. The upgraded FTA will add new provisions to the existing Agreement and in areas where the existing Agreement’s provisions have been amended these will be replaced by the upgraded FTA.
Key outcomes of the China FTA upgrade include improvements relating to the following:
Rules of Origin and operational procedures.
Customs procedures and trade facilitation.
Technical barriers to trade.
Trade in goods.
Investment.
Trade in the services.
Movement on natural persons.
Electronic commerce.
Competition.
Government procurement.
Environment and trade.
Agricultural cooperation.
The outcome is the result of nearly three years of negotiations. Next steps include legal verification of the draft text, with the signing and release of the text expected this year. China is New Zealand’s largest trading partner, with two-way trade recently exceeding $32bn.
FTA NEGOTIATIONS IN PROGRESS
New Zealand officials continue to negotiate the following agreements:
AANZFTA Upgrade
India FTA
Regional Comprehensive Economic Partnership (RCEP)
NZ-EU FTA
These negotiations have been conducted remotely during the COVID-19 lockdown, and are likely to continue in this format until international travel resumes. In addition, initial negotiations have commenced on the Agreement on Climate Change, Trade and Sustainability (ACCTS) which involves Costa Rica, Fiji, Iceland and Norway.
JUDICIAL REVIEWS OF RECENT TRADE REMEDIES DECISIONS OF MBIE
Recent Judicial Review proceedings taken against the decisions of the Minister (effectively the Ministry of Business, Innovation and Employment) in separate dumping and subsidy investigations have been successful. MBIE has been ordered by the High Court in two separate investigations to undertake a reconsideration of specific issues arising out of both investigations.
This is the first time since the introduction of the Dumping and Countervailing Duties Act 1988 that successful Judicial Review proceedings have been taken against the Minister. We understand that some of the decisions are being appealed to the Court of Appeal.
REPORT OF THE TRADE FOR ALL ADVISORY BOARD
The Trade for All Advisory Board presented its report to Minister Parker at the end of November 2019. Following public submissions, it was intended to release the policy agenda by the end of March 2020. This has been delayed by COVID-19. A number of key findings and recommendations are included in the report which can be accessed at www.tradeforalladvisoryboard.org.nz
It is interesting to note that the main finding of the report is that “trade policy needs to be fit for the future; public confidence and trust in the government’s approach to trade negotiations and agreements is important and needs to be improved”. This statement reflects what, in our view, has been a significant reduction in the level of stakeholder consultation and engagement in recent years.
CUSTOMS AND EXCISE REGULATIONS
Officials had hoped to implement new Customs and Excise Regulations at the same time as, or shortly after, the Act came into force in 2018. Those Regulations needed to support the implementation of the Customs and Excise Act have been affected, but as yet no timing has been set for a rewrite of the Regulations.
ASSESSMENT OF CUSTOMS DUTY WHEN THERE IS A FRAUDULENT THIRD PARTY
In Chief Executive of the New Zealand Customs Service v P&W Hutchinson Traders [2019] NZH3 HC 3174 the High Court dismissed an appeal by Customs from a decision of the Customs Appeal Authority ([2019] NZCAA 02) which directed Customs to reconsider whether to assess the importers for outstanding duty and GST owed, or a fraudulent third party. It was accepted that a valid entry of goods was deemed to be an assessment by the importer under s88(1) of the Act but in the circumstances there had been no valid entry. The entry contained false declarations as to the value of the import. Both parties accepted that the entry was invalid, being fraudulent and without authority.
Section 89(1) contemplated amending an entry to ensure the correctness of the amount of the assessment. The section did not contemplate amending an entry that, by reason of forgery or fraud, was invalid. Because the entry was fraudulent, there was no “entry” for the purposes of that section. The deeming provision in s88(1) therefore had no application. It followed that there had been no assessment and the initial assessment under s88(2) was required.
This decision has been appealed to the Court of Appeal by Customs.