LOW VALUE PARCEL PROCESSING TASKFORCE
INTERIM REPORT
MARCH 2012
Table of contents
Executive summary ............................................................................................... 1
Introduction ........................................................................................................... 5
Reform context ......................................................................................................7
Growth in low value imports............................................................................... 7
Current import handling and administration processes ...................................... 8
Tariff classification and duty calculation ............................................................. 9
Application of GST ........................................................................................... 11
Border and biosecurity fees and charges ......................................................... 11
Modes of importing low value goods ................................................................ 12
Air and sea cargo ............................................................................................ 12
Process map for the operation of the Integrated Cargo System (ICS).............. 13
International mail ............................................................................................. 14
International travellers ..................................................................................... 18
Taskforce activities to date .................................................................................. 19
Review of existing business and border agency processes ............................. 19
Review of regulatory arrangements ................................................................. 20
Assessment of current and future operating environment ................................ 22
Investigation of alternative approaches operating internationally ..................... 23
Domestic stakeholder consultation .................................................................. 24
International consultation ................................................................................. 25
Reform development and assessment ............................................................. 27
Assessment Process ....................................................................................... 28
Further work to be undertaken............................................................................. 29
Assessment of potential solutions .................................................................... 29
Detailed assessment of prospective solutions (including costings) .................. 29
Consultation with stakeholders ........................................................................ 30
Development of reform implementation program ............................................. 30
Appendix A: Terms of reference .......................................................................... 31
Appendix B: Biographical details – Taskforce members ...................................... 34
Appendix C: International mail initiatives ............................................................. 35
Appendix D: Regulatory framework ..................................................................... 39
Appendix E: Summary of international low value import schemes ....................... 49
Appendix F: International mail products and categories ....................................... 51
Appendix G: International mail and cargo volumes .............................................. 52
Executive summary
The purpose of this Interim Report is to provide an update with respect to the
progress of work being undertaken by the Low Value Parcel Processing
Taskforce (LVPPT), which has been established to investigate new
approaches for the handling and administration of low value imports of goods,
particularly in the international mail stream, including options for revenue
collection.
The Interim Report has been prepared in a form to enable public release,
while at the same time ensuring that no aspect of Australia’s customs, border
security or biosecurity processes has been compromised. The Final Report to
be provided to Government will incorporate such relevant details in relation to
those matters as are required.
Key activities to date
The key activities that the Taskforce has undertaken to date include:

reviewing the existing methods used for handling and administering
imports of low value goods, including:
o international mail handling processes undertaken by Australia Post;
o air and sea cargo operations undertaken by logistics operators such
as express couriers, freight forwarders, licensed customs brokers
and cargo terminal operators;
o border security and biosecurity assessment processes for
international mail, and both air and sea cargo;
o customs duty and GST assessment processes for international mail,
and both air and sea cargo;

reviewing the arrangements under which existing methods for handling
and administering imports of low value goods are regulated, including:
o Commonwealth legislation and regulatory instruments;
o international treaty arrangements, cooperative agreements and
ancillary instruments; and
o administrative arrangements between Australia Post and the
Australian border agencies;

assessing the current and potential future environment in which
approaches for handling and administering imports for low value goods
need to be considered, including:
o current and expected volumes and characteristics of low value goods
imported into Australia;
o technological innovations with respect to parcel processing, tracking
systems and import processing information management systems;
LVPPT INTERIM REPORT
1
o international initiatives being undertaken with respect to international
mail processing, including those occurring under the auspices of:
 the Kahala Posts Group;1
 the Medici Group;2
 the World Customs Organization (WCO)/Universal Postal Union
(UPU) Contact Committee;3
o reviewing international initiatives including:
 ongoing multilateral (e.g. World Trade Organization) and
bilateral tariff reform processes;
 the Asia-Pacific Economic Cooperation (APEC) Honolulu
Declaration to …‘… establish commercially useful de minimis
values in our economies that will exempt low-value shipments
from customs duties and streamline entry documentation
requirements’;4

investigating alternative approaches with respect to the handling and
administering imports of low value goods operating internationally,
including:
o a desktop review of approaches undertaken in seven countries – the
United Kingdom, Canada, Singapore, Korea, Japan, the United
States and New Zealand; and
o a study trip of Canada, the United Kingdom and Singapore to meet
with the designated postal operators and relevant border agencies in
those countries to understand the logistics, revenue, reporting,
compliance and cost recovery mechanisms in these jurisdictions for
the processing of low value imports.
Reform development and assessment
The Taskforce is developing potential solutions to reform the way in which low
value import processing may be undertaken in Australia. These potential
solutions consider a number of aspects including:

infrastructure and/or information systems changes to streamline
international mail gateway operations (with respect to both Australia
Post and Australian border agency activities);
1
The Kahala Posts Group (KPG) is an alliance of 10 leading postal services, which includes Australia
Post, China Post, Correos (Spain), Hong Kong Post, Japan Post, Korea Post, La Poste (France), Royal
Mail, Singapore Post and the US Postal Service.
2
The Mails Electronic Data Interchange and Customs Integration (Medici) Group are a subset of the 24
members of the International Postal Corporation (IPC).
3
The Universal Postal Union (UPU) is an international organisation that coordinates postal policies
among member nations. The WCO/UPU Contact Committee was established in 1965 to deal with
issues of common interest between postal services and Customs organisations.
4
19th APEC Economic Leaders' Meeting: 'The Honolulu Declaration - Toward a Seamless Regional
Economy', November 12-13, 2011.
LVPPT INTERIM REPORT
2

process changes to streamline international mail gateway operations
(as a total process involving Australia Post and Australian border
agency activities);

simplification of duty and/or GST assessment and collection processes;
and

alternate payment methods for duty and/or GST revenue.
While potential solutions for reform to import handling and administration
processes are being identified and assessed, at this stage detailed costing
and associated analysis has not been completed. As such, it is not feasible to
advise what recommendations with respect to reform of current arrangements
may be contained in the Final Report.
Consultation
In carrying out its activities, the LVPPT has been assisted significantly to date
by the consultations that it has undertaken with a number of stakeholders,
including:
 Australian Government departments and agencies:
o Australian Bureau of Statistics;
o Australian Customs and Border Protection Service;
o Department of Agriculture, Fisheries and Forestry;
 industry participants:
o Australia Post;
o Australian Federation of International Forwarders (AFIF);
o Conference of Asia-Pacific Express Carriers (CAPEC);
o Customs Brokers and Forwarders Council of Australia Inc.
(CBFCA);
o Post Office Agents Association Limited (POAAL); and
 business representatives such as
o Australian Music Association;
o Australian National Retailers Association (ANRA);
o Australian Retailers Association (ARA);
o Bicycle Industries Australia;
o eBay Australia & New Zealand;
o Retail Cycle Traders Australia; and
o Visa Australia.
The preparation of the Final Report will require further consultation, including
with parties with whom the LVPPT has not yet had the opportunity to engage,
such as State and Territory governments.
LVPPT INTERIM REPORT
3
Reference material
This Interim Report contains a number of appendices that provide relevant
background, including material that is being used to inform the LVPPT’s
development and assessment of potential reform solutions. These
appendices are:
 Appendix A: Terms of Reference
 Appendix B: Biographical details – Taskforce Members
 Appendix C: International mail initiatives
 Appendix D: Regulatory framework
 Appendix E: Summary of international low value import schemes
 Appendix F: International mail products and categories
 Appendix G: International mail and cargo volumes
LVPPT INTERIM REPORT
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Introduction
On 9 December 2011, the Government released, and responded to, the
Productivity Commission’s final report on the Economic Structure and
Performance of the Australian Retail Industry.5 The terms of reference for the
inquiry included an examination of the sustainability and appropriateness of
the current indirect tax arrangements, and the extent that process reform and
technology could reduce the administrative costs of collecting indirect taxes
and duty on imported goods.
The Commission’s Recommendation 7.1 stated that:
“There are strong in-principle grounds for the low value threshold (LVT)
exemption for GST and duty on imported goods to be lowered
significantly, to promote tax neutrality with domestic sales. However,
the Government should not proceed to lower the LVT unless it can be
demonstrated that it is cost effective to do so. The cost of raising the
additional revenue should be at least broadly comparable to the cost of
raising other taxes, and ideally the efficiency gains from reducing the
non-neutrality should outweigh the additional costs of revenue
collection.”
The Government response to this recommendation was to note it and state
that it would reassess the appropriateness of the low value import threshold
when it receives the final report of this Taskforce.
Further, the Commission proposed in at Recommendation 7.2 that:
“The Government should establish a taskforce charged with
investigating new approaches to the processing of low value imported
parcels, particularly those in the international mail stream, and
recommending a new process which would deliver significant
improvements and efficiencies in handling. The taskforce should
comprise independent members, with the Australian Customs and
Border Protection Service (Customs), the Australian Quarantine and
Inspection Service (AQIS), Australia Post and the Conference of Asia
Pacific Express Carriers providing advice. The terms of reference
should outline the criteria that any new system must satisfy including:
minimising the costs of processing and delivery delays, streamlining
the assessment of Customs Duty, user pays, and without compromise
to the border protection functions of Customs and AQIS. This review
should report to Government in 2012 and propose an expeditious
timeframe for its proposed changes.
5
Economic Structure and Performance of the Australian Retail Industry, Productivity Commission
Inquiry Report, No. 56, 4 November 2011, Commonwealth of Australia 2011.
LVPPT INTERIM REPORT
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Once an improved international parcels process has been designed,
the Australian Government should reassess the extent to which the
LVT could be lowered while still remaining cost-effective.”
The Government agreed with this recommendation.
Consequently, on 9 December 2011 the (then) Assistant Treasurer, the Hon
Bill Shorten, with the Minister for Broadband, Communications and the Digital
Economy, the (then) Minister for Home Affairs and Justice and the (then)
Minister for Small Business jointly announced the establishment of a
Taskforce.
The key role of the Taskforce is to investigate new approaches for the
handling and administration of low value imports of goods, including options
for revenue collection. The Terms of Reference set out a range of matters for
the taskforce to consider in forming its recommendations. A copy of the
Terms of Reference is at Appendix A.
The members of the Taskforce are Dr Bruce Cohen (Chair), Professor
Caroline Chan and Mr Jim Marshall. Biographical details of Taskforce
Members are contained at Appendix B.
The Terms of Reference for the Taskforce stated that it should release an
interim report in three months from its establishment. This Interim Report is
intended as a progress report on the status of the Taskforce’s investigation
and does not contain firm recommendations. It is the intention of the
Taskforce to submit the Final Report to the Assistant Treasurer, the Hon
David Bradbury, in July 2012 in accordance with the Terms of Reference. The
Final Report will contain a comprehensive blueprint for reform, with costed
alternatives and timeframes for implementation.
LVPPT INTERIM REPORT
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Reform context
Growth in low value imports
There has been a significant increase in the volume of low value parcels
entering into Australia in recent years. Between the financial years 2006/7 to
2010/11, the number of parcels (comprising Express Mail Service (EMS)
items, packets of less than 2kg and parcels over 2kg) being delivered through
Australia’s international mail gateways has grown from 23.56 million to
48.06 million – an increase of 104.0 per cent. This represents a compound
annual growth rate of 19.5 per cent over the four years, although it should be
noted that the compound annual growth rate for the last two years was
36.0 per cent. The bulk of the increase in parcels has been packets of less
than 2kg, which represents 80.1 per cent of the increased volume. Over the
same period, the volume of parcels valued between $0 and $1000 passing
through international air cargo operators has increased from approximately
6.3 million to 10.4 million.
AIR CARGO VOLUME OF LOW VALUE GOODS less than or equal to $1000
2006-07 to 2010-11
12
VOLUME millions of items
10
8
6
4
2
0
2006-07
2007-08
2008-09
2009-10
2010-11
YEAR
Source: Australian Customs and Border Protection ICS data.
As the Productivity Commission highlighted in its report into Australia’s retail
industry, this growth in parcel numbers has been driven largely by the growth
in online shopping, The online shopping market has benefited from a variety
of factors including an expansion in online shopping offerings, growing
consumer familiarity and sense of security with online shopping, and a rising
Australian dollar.
As numerous submissions provided to the Productivity Commission’s inquiry
also highlighted, unlike goods purchased in Australia, goods valued at or
LVPPT INTERIM REPORT
7
below $1000 that are purchased online from overseas are generally not
subject to either customs duty or GST.6 This threshold is considerably higher
than those which apply in many other jurisdictions – for example, in the United
Kingdom (£15 (A$23) for VAT; £135 (A$205) for duty);7 and Canada (C$20
(A$19) for duty and GST) (see further Appendix E).8
According to the National Retail Association, this growth is anticipated to
continue, with online sales projections for the coming period ranging from
7.6 per cent to 20.4 per cent per annum.9 While recognising that these
projections relate variously to domestic and international online sales growth,
and may also include products such as ticket deliveries, simply assuming an
annual parcel growth in line with the mid-point of these estimates (14 per cent
per annum), would mean that over the next four years Australia would see an
increase in mail parcels passing through the international gateways to around
81 million by 2014/15. Similarly, growth in air cargo may also be expected.
It is in this environment that the Taskforce is now investigating new
approaches for the handling and administration of low value imports of goods,
including options for revenue collection. To illustrate some of the complexities
that the Taskforce needs to have regard to in assessing alternative ways
forward,10 this Interim Report now sets out some of the key aspects of the
current import handling and administration processes for low value goods, and
also a brief description of the different attributes of each of the ways in which
low value goods are imported into Australia.
Current import handling and administration processes
Under current arrangements, when low value goods arrive in Australia they
are required to be assessed both for border security and biosecurity risks, and
also for any revenue liability e.g. customs duty and/or GST. Prohibited or
restricted goods for border security purposes include such items as drugs and
precursors, firearms, weapons and ammunition (including chemical weapons
and military goods), laser pointers, pornography and other objectionable
material, and certain toys. Biosecurity risks relate to the threat of exotic pests
and diseases entering, and establishing, in Australia and the potential that
these risks pose to harm the primary production sectors, the environment and
human health.
Responsibility for Australia’s border security and biosecurity lies
predominately with Australia’s border agencies – the Australian Customs and
6
With the exception of alcohol and tobacco products and some other prescribed items. Further, a
different threshold applies for goods brought into Australia by international travellers.
7
Customs duty becomes payable if the value of the goods is over £135 but duty is waived if the amount
of duty calculated is less than £9.
8
Currency conversions undertaken as at 22 March 2012.
9
See National Retail Association Ltd ‘The threshold question: Economic impact of the low value
threshold on the retail industry’ (2012) (prepared by Ernst and Young), Table 6.
10
In addition to those matters outlined, there are also issues relating to the way in which border security
activities are undertaken.
LVPPT INTERIM REPORT
8
Border Protection Service (Customs and Border Protection), and the
Department of Agricultural, Fisheries and Forestry Biosecurity (DAFF
Biosecurity) respectively. Customs and Border Protection is also responsible
for revenue assessment and collection.
Both Customs and Border Protection and DAFF Biosecurity utilise risk
management tools to determine the exact manner by which any particular
good is processed at the border. In part, these risk management tools rely on
the information that is available with respect to those goods. In certain
instances, particularly with respect to air and sea cargo, much of the required
information is available in electronic format prior to the goods arriving in
Australia. This information is obtained through both cargo reporting
processes and through declarations (see below). In other cases – particularly
with respect to goods arriving through international mail – the requisite
information is obtained on or subsequent to arrival. While the Taskforce
necessarily is having regard to the risk assessment process for border
security and biosecurity purposes in determining its recommendations, the
exact manner in which this information is utilised is not detailed in this Interim
Report so as not to compromise any aspect of Australia’s customs, border
security or biosecurity operations.
Assessment for revenue liability by Customs and Border Protection is also
dependent on specific information with respect to each imported good.
Generally, imported goods may be subject to either duty and/or GST. Under
current policy settings,11 imported goods which are valued at or below $1000
for the purposes of customs duty are generally not subject to either customs
duty and/or GST.12
Tariff classification and duty calculation
The information requirements and administrative processes needed to assess
customs duty are considerable. This is because duty assessments need to
have regard to a number of factors, including the nature of the product, its
value, the country in which it was produced and whether any other
concessional treatment applies.13
11
Prior to 2005, goods imported by post had a $1,000 threshold, while goods imported by sea or air
cargo had a $250 threshold. In addition, customs duty and GST was collected only if the combined
liability exceeded $50. Following a review by the Competitive Neutrality Office of the Productivity
Commission, the threshold was standardised in October 2005. Underlying the decision to move to a
uniform threshold was that it promoted a significant reduction in ‘red tape’ for a large number of
importers and logistic service providers involved in the importation of low value goods. It also meant
that low value goods arriving by all modes of transport were treated in a similar manner.
12
While section 42-5 of the A New Tax System (Goods and Services Tax) Act 1999 specifies that goods
are non-taxable importation for GST purposes if they are duty free under the Customs by-laws
(because, for example, their value is below the threshold), the value upon which GST is assessed is the
Value of Taxable Importation, which includes the customs value on which customs duty is assessed,
any duty payable, transport and insurance costs, and the Wine Equalisation Tax where applicable.
13
The place where goods are produced and valuation of those goods are primarily determined by the
Customs Act 1901, Pt VIII, Division 1A – Rules of origin of preference claim goods and Division 2 –
Valuation of imported goods whereas the classification of the nature of the goods and the dutiable rate
LVPPT INTERIM REPORT
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To facilitate international trade, the classification of goods for duty (and
statistical) purposes is done in accordance with the Combined Australian
Customs Tariff Nomenclature and Statistical Classification, commonly known
as the Working Tariff.14
The system encompasses a 10-digit level classification, which is known as the
Harmonized Tariff Item Statistical Code (HTISC). The HTISC was last
updated on 1 January 2012. The 10-digit level code is based upon a 6-digit
hierarchical classification designed by the World Customs Organization
(WCO) called the Harmonized Commodity Description and Coding System
(HS). This WCO classification system is updated every five years to keep the
commodity codes relevant. The international HS provides codes for over
5,000 commodities. However, in some cases further detail is required to
enable identification of goods that are of particular interest or importance to
Australia. The extensions exist for:

Customs and Border Protection purposes, to differentiate between
imported goods grouped under a single 6-digit HS code. It is generally
driven by the need to identify varying import duty rates on similar goods
and is achieved by adding two digits to the HS code, making an 8-digit
code. The extension is maintained by Customs and Border Protection;

statistical purposes, to provide a finer level of detail and is achieved by
adding two digits to the Customs 8-digit codes (creating a 10-digit
code). Statistical codes are maintained by the ABS.
These arrangements are given effect through the Customs Tariff Act 1995.
The primary classification system and the relevant tariff rates that apply to
those goods runs to some 97 chapters (see Schedule 3, Customs Tariff Act
1995).15
Most goods that are not free of duty are generally subject to a 5 per cent rate
of tariff, while clothing, textiles and footwear attract a tariff of 10 per cent. In
determining liability for duty on any low value imports, regard must also be
had to any tariff concession arrangements, including those to which Australia
is a party as a result of multilateral or bilateral agreements.
These arrangements mean that the task of classifying goods for the purposes
of assessing customs duty is a complex one. As such, the vast majority of
importers use the services of a customs broker or agent to expedite the
clearance process, as it requires a relatively detailed knowledge of Customs
procedures and systems, and knowledge of tariff classification applicable to a
variety of goods. Customs brokers must be licensed and an individual
is determined primarily pursuant to the Customs Tariff Act 1995. Tariff concessions are also available
under Item 50 of Schedule 4. See also Pt XVA of the Customs Act 1901.
14
For further details, see http://www.customs.gov.au/tariff/tariff.asp.
15
For further details, see ABS Cat No. 5368.0.55.016 - Information Paper: Proposed Changes to
Statistical Codes in the HTISC, 2012.
LVPPT INTERIM REPORT
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applicant for a broker’s licence must demonstrate that they are a person of
integrity and that they possess the requisite skills and knowledge to be a
broker (see Pt XI, Customs Act 1901).
Application of GST
Assessment of the GST liability on imported goods requires information on the
nature of the goods as certain goods, such as food and medical supplies, are
GST exempt. The GST on importation is imposed at a rate of 10 per cent of
the sum of the value of the goods, any duty or wine equalisation tax applicable
and the cost of transport and insurance of the goods.16 However, incidence of
the GST is intended to apply to final consumption and not on business inputs.
Therefore a business that is registered for GST, will generally be eligible for
an input tax credit (ITC) to offset their import GST liability. The effect is that
most business imports will be a ‘wash transaction’ with the GST offset by the
ITC, which represents no net gain to revenue.
Border and biosecurity fees and charges
In considering potential changes to low value import handling and
administration, it is noted that both Customs and Border Protection and DAFF
Biosecurity impose a set of fees and charges associated with the lodgement
of import declarations and the inspection and other services that may be
required to clear incoming goods.
In the case of both Customs and Border Protection and DAFF Biosecurity,
charges vary depending on whether declarations are made electronically or
manually, and whether they relate to sea, air or post consignments.
Declarations with respect to air and sea consignments are generally lodged
electronically, while manual processes are more commonly used in the
international mail stream. In 2010-11, of 17,318 full import declarations
processed through the postal system, 13,007, or 75 per cent, were manually
entered. In contrast, of the 1.596 million full import declarations processed
through the air cargo system 1,315 or 0.08 per cent were entered manually.
For sea cargo the figures are 1.542 million full import declarations of which
1,106, which is 0.7 per cent, were entered manually.
Generally, fees and charges are determined in accordance with the Australian
Government’s Cost Recovery Guidelines 2005, along with, in the case of
DAFF Biosecurity, the Quarantine Services Fees Determination 2005 and in
the case of Customs and Border Protection, the Import Processing Charges
Act 2001 and ancillary regulations. An issue for the Taskforce is to determine
whether alternate arrangements for the collection of fees and charges are
16
GST is liable on both the supply and importation of goods. The tax on supply and the tax on
importation are administered independently. Therefore, when the overseas supplier is also the importer
of the goods, they may be liable for GST on both the supply and importation of the goods. While the
eligibility for an ITC will ensure there is no double taxation, there will be two GST assessments on the
same goods in these circumstances.
LVPPT INTERIM REPORT
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consistent with these guidelines and whether efficiencies may be achieved in
existing processes so as to facilitate a reduction in these fees and charges.
Modes of importing low value goods
Imports of low value goods can enter into Australia in three main ways:

as air cargo and as sea cargo;

through the international mail stream;

by international travellers bringing in goods.
Each of these import streams has quite different attributes – both with respect
to the nature of goods being imported, and also with regard to the processes
by which the importation occurs. Potential reform to import handling and
administration needs to have regard to these attributes.
Air and sea cargo
Low value consignments sent through air cargo by both individuals and
business comprise mainly clothing (41 per cent) and electronic goods (19 per
cent).17 Other goods included mechanical parts, sporting goods, books and
magazines, medical supplies, CDs and DVDs, and food. Appendix G details
data on the actual volume of low value threshold imports.
In the case of both air and sea cargo, the importation of goods is primarily
undertaken by specialist service providers such as express couriers or freight
forwarders that have control of goods throughout the importation process.
Providers can choose which countries they operate in, to whom they provide
their services and the nature of goods that they are willing to transport.
Moreover, these providers have put in place integrated business systems by
which they manage the importation and logistics process on behalf of their
customers.
A key aspect of these business systems relates to the information which
providers obtain at the time goods enter into their control. This information is
generally comprehensive having regard to regulatory requirements, is
captured prior to the goods arriving in Australia and is available pre arrival in
electronic format – features that enable it to be utilised throughout the
importation process.
The availability of this electronic information simplifies the importation process
for both the provider and border agencies in a variety of ways:

it provides information which can be utilised by border agencies in
assessing goods for border security and biosecurity risks. The cargo
destined for Australia is reported into the Integrated Cargo System
Centre for International Economics (2011) ‘The GST threshold for low value products: Economic
analysis’, prepared for the Conference of Asia Pacific Express Carriers.
17
LVPPT INTERIM REPORT
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(ICS)18 by authorised reporters in the supply chain. Under current
arrangements, this information is presented in both cargo reports and
through the import declaration process. Importers of goods either as
air or sea cargo are required to make declarations as to the nature of
those goods and the level of detail in those declarations varies
depending on the value of the goods in question. For goods valued
above $1,000 a Full Import Declaration (FID) is required; for goods
valued at or below $1,000 a Self-Assessed Clearance is required.19
Generally, the information contained in cargo reports and through
declarations enables border agencies to undertake their responsibilities
more efficiently;
Process map for the operation of the Integrated Cargo System (ICS)
Low Value Parcel Processing Taskforce
ICS APPLICATIONS
BRAM
High level overview of key elements
Licensing
Exams
Electronic
Data Interchange
(EDI) and Customs
Interactive
Tariff and Precendents
Information Network
(TAPIN)
Client
Tariff Concession
system
(TARCON)
Cargo risk
assessment
Exports
Integrated
External Users
CCF
Reference
data
Import
cargo
reporting
Import
declarations
Output
Delivery
System
ATO
DAFF
Biosecurity
ICS reports
System
Customs
Interactive
Internal Users and
other Government
Agencies
Cargo
Department of Industry,
Tourism and Resources
Financial
Management
System
(QSP)
ABS
Source: Australian Customs and Border Protection Service

it allows goods to be tracked easily through the importation process.
This means goods that are identified for particular treatment by border
18
The ICS is a software application that is used for all import and export reporting and processing
procedures and is the only method of electronically reporting the legitimate movement of goods across
Australia's borders introduced by Customs and Border Protection in October 2005. While there were a
number of implementation issues associated with the ICS (see the Commonwealth Auditor-General’s
report ‘Customs’ Cargo Management Re-engineering Project’ (2007) and the Booz Allen Hamilton
report ‘Review of the Integrated Cargo System’, May 2006) industry participants have indicated that
these issues are now resolved and generally report satisfaction with the ICS. The issues that arose with
the introduction of the ICS highlight, however, the care that needs to be taken introducing any changes
to import handling and administrative processes.
19
As to details required to be included in a FID, see the Customs and Border Protection’s
‘Documentary Import Declaration Comprehensive Guide’. As to information to be included in a SAC
– which may be either a Short Format, Long Format or Cargo Report declaration, see
http://www.customs.gov.au/site/page4226.asp. There is no equivalent SAC requirement with respect to
goods imported through the international mail stream.
LVPPT INTERIM REPORT
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agencies can be located and sorted easily through the use of relevant
information management systems, tracking systems and physical
infrastructure; and

it provides an information base by which importers and border agencies
are able to assess revenue liability. Moreover, as the information is
available from the beginning of the importation process, assessments
made by importers can be done prior to the goods arriving from
Australia, and hence revenue collection can occur without delay where
the importer (or their customers) has already provided for the payment
of that liability in advance. This is of greater importance with respect to
air cargo, where expeditious delivery times are more critical.
It must, however, be recognised that the potential availability of information
does not mean that changes to Australia’s current policy settings necessarily
would be without cost to air and sea cargo operators. Business systems have
been established having regard to existing requirements, such as the number
of licensed customs brokers required to classify imported goods and the size
and layout of licensed depots. As such, were there for example to be a
change to revenue assessment requirements that necessitated greater
volumes of goods to be assessed for customs duty, this could be expected to
result in increased costs associated with duty assessments as well as other
costs such as those associated with storage and delivery delays.
Many of these potential costs have been raised through consultation with
industry, and previously in submissions to the Productivity Commission’s
inquiry into the Australian retail industry.
International mail
In addition to letters and documents, the type of items that typically come in
through international mail include clothing and footwear, cosmetics, electronic
goods, books, CDs and DVDs, mechanical parts, sporting goods, musical
instruments and food. In addition, both tobacco and alcohol are more
commonly sent through the mail than as air cargo.
The processes involved in the importation of goods through the international
mail stream are quite different from those in air and sea cargo, and hence give
rise to significantly different issues with respect to potential reforms to import
handling and administration.
The international mail stream operates under a cooperative rules-based
system that is determined through an international treaty arrangement under
the UPU Convention. Australia Post is Australia’s designated operator for the
international mail stream under the UPU Convention (see also Australian
Postal Corporation Act 1989).
Under the UPU Convention and ancillary instruments, Australia Post has a
range of service obligations with respect to low value goods. Goods may
LVPPT INTERIM REPORT
14
arrive from any country that is a member of the UPU. Goods may be
packaged in a variety of different forms such as packets or small parcels
weighing less that 2 kg, as parcels weighing more than 2 kg or as EMS postal
items.
Under current arrangements, international mail stream parcels arrive with a
paper declaration affixed to the exterior of each article. Consequently
Australia Post and the border agencies do not have access to any information
in regard to those goods until they arrive at the border. There is an
international agreement for the format and content of the declaration, which
includes details of the sender, the recipient, and the description and value of
the goods.20 However, while these common standards exist, the actual
information attached to any individual parcel is outside the control of Australia
Post at the time it enters into the mail stream. Further, the information that is
actually provided on international mail stream parcels is of variable quality,
unverified, it is presented in multiple languages, values are specified in many
different currencies, and it is not provided in an easily useable electronic form.
In many instances, particularly for smaller parcels, much of the required
information is absent. Each of these attributes has the capacity to impact on
the efficiency with which international mail can be processed.
In addition, whilst there is a standard for identifying barcodes to be applied on
EMS items and parcels over 2kgs, there is no requirement to apply barcodes
on packets of less than 2 kgs, making identification and linking any kind of
electronic data to such an item difficult.
Gateway operations
All goods that enter into Australia through the international mail stream are
processed at one of four international gateways – these are located in
Sydney, Melbourne, Brisbane and Perth.
Following the outbreak of Foot and Mouth disease in the UK in 2001 the
Government decided to move to 100 per cent screening of all incoming mail,
either through x-ray screening or detector dogs. Funding of $49.4 million was
provided to Australia Post (through the then Department of Communications,
Information Technology and the Arts) to pay for the cost associated with an
increased footprint to accommodate this process. The aim was to build new
gateways in Melbourne and Sydney. A site was available at Tullamarine
airport but no suitable site was available near Mascot Airport in Sydney. A
new gateway was built at Tullamarine and a decision was made to refurbish
the existing Sydney gateway located at Granville. The gateways became fully
operational in mid-2006. Australia Post estimated that the $49.4 million
funding covered about 65 per cent of the costs of the infrastructure, leaving a
“shortfall” of $26.9 million to be funded by Australia Post. Australia Post was
also required to meet its own ongoing operational costs. The introduction of
20
The declaration is also required to be in either English or French.
LVPPT INTERIM REPORT
15
the 100 per cent screening required additional DAFF Biosecurity staff to be
allocated to this activity. This was largely funded by the Government.
However, a decision was made to have Australia Post fund a proportion of this
cost – approximately $3.2 million per annum.21 In May 2010 this
determination was increased to $8.2 million per annum.22 Generally, Australia
Post does not contribute to the costs incurred by Customs and Border
Protection.
The majority of parcels that flow through the international mail stream into
Australia are subject to manual, labour intensive processes, the nature of
which can vary depending upon the category of postal item being processed.
Having regard to the border agencies’ risk assessment processes, these
items are screened and certain items removed for secondary assessment, as
appropriate. As the designated operator in the international mail stream,
Australia Post must ensure that it forwards the mail according to the delivery
standards published internationally and the most secure means that it uses for
its own [Australian] items.23 A postal item remains the property of the sender
until it is delivered to the rightful owner, except where it has been seized in
pursuance of the legislation of the country of origin or destination.24
At present, the only way to identify articles for revenue liability is through an
intensive physical process that involves the manual checking of each article.
This activity is currently undertaken in conjunction with Customs and Border
Protection’s assessment of mail articles for the full range of border risks.
Where articles are assessed as having a value above the threshold, the
intended recipient of the goods is required to lodge a FID with Customs and
Border Protection and pay assessed duty, tax and an import processing
charge before the goods are released. Currently, this is a cumbersome
process that occurs after the goods have arrived, and involves both Customs
and Border Protection and Australia Post. Until the requisite declaration is
made and the assessed liability paid, those goods are held in storage at the
international mail gateway.
These arrangements raise issues with respect to the efficiency of the handling
and administration processes, their flexibility and useability from a consumer
perspective, and present Australia Post with further difficulties in regard to
infrastructure constraints, such as storage space and storage management.
A further consequence of these processing arrangements is that any
consideration of the duty and GST threshold necessarily has to have regard to
the balance between the amount of additional revenue that could be collected
from a lower threshold relative to the increased parcel processing costs that
21
Quarantine Service Fees (Australia Post) Determination 2005 by the Minister for Agriculture,
Fisheries and Forestry.
22
Quarantine Service Fees (Australia Post) Determination 2010 by the Minister for Agriculture,
Fisheries and Forestry.
23
Article 4, Universal Postal Convention.
24
Article 5, Universal Postal Convention.
LVPPT INTERIM REPORT
16
could be expected to arise at the international mail gateways as increased
volumes are required to be assessed.
In 2010-11, around 39,000 postal items were processed for duty and/or GST
liability – of which 17,318 were goods valued at over $1,000, and the
remainder related to alcohol and/or tobacco products. This compares with
approximately 43,000 items in 2009-10 processed for duty and/or GST
liability, of which 19,056 were valued at over $1,000, and the remainder
related to alcohol and/or tobacco products. Based on these 2009-10 volumes,
the Productivity Commission estimated the additional volumes that would be
subject to processing for revenue purposes if the threshold for both GST and
duty were lowered. If the threshold had been set at $800, approximately
160,000 parcels would have been subject to revenue assessment; at $500
approximately 1.2 million parcels would have been subject to revenue
assessment; and at $100 the number of parcels to be processed for revenue
purposes would be around 16 million.25
However, as noted above, the number of parcels entering through the
international mail stream, as well as other import streams, is forecast to
increase significantly as the on-line market continues to develop. Even
without any change to current policy settings, the growth in parcel volumes is
putting increasing pressure on the physical capacity, operational efficiency
and operational budgets of the international mail gateways. Changes to policy
settings would add additional pressure that would need to be managed.
Australia Post revenue
The revenue that Australia Post receives for delivering goods through the
international mail stream is determined according to rules established under
the UPU Convention, which means they are not set specifically having regard
to the costs incurred by Australia Post with respect to fulfilling its service
obligations. The revenue received by Australia Post depends on a range of
factors including the category of postal item being delivered as well as its
performance with respect to delivery times.
As Australia Post noted in its 2010-11 Annual Report, for inbound international
parcels weighing less than 2 kilograms it operates at a loss because the cost
of delivering these items outweighs the reimbursement that they receive. As a
consequence, there is financial pressure on Australia Post to seek ongoing
improvements in the efficiency of gateway operations. Separate from any
issue relating to current policy settings, the UPU revenue arrangements are
providing impetus for changes in how Australia Post, Customs and Border
Protection, and the DAFF Biosecurity manage the import handling processing
and management of goods that arrive through the international mail stream.
25
Source: Economic Structure and Performance of the Australian Retail Industry, Productivity
Commission Inquiry Report, No. 56, 4 November 2011, Commonwealth of Australia.
LVPPT INTERIM REPORT
17
International travellers
Goods imported by international travellers – as the accompanied baggage of
an arriving person or purchased by an arriving person at an inwards duty free
shop – are generally smaller items for personal use. These typically include
alcohol and tobacco products, perfume and cosmetics, and lighter goods such
as cameras, computers and MP3 players.
In the case of the international travellers, the rules with respect to liability for
duty and/or GST apply whether the traveller is returning home or visiting from
overseas. Generally, the rules with respect to imports of this nature provide for
tax-free allowances for both alcohol and tobacco, and also for general goods
brought in by adults ($900) and children ($450). Having regard to the genesis
of this Taskforce and its Terms of Reference, the Taskforce does not consider
imports of this nature to be central to the scope of issues it has been asked to
address. Nevertheless, regard will be given to imports of this nature to the
extent relevant.
LVPPT INTERIM REPORT
18
Taskforce activities to date
The Taskforce’s investigation of new approaches for the handling and
administration of low value imports of goods, including options for revenue
collection, has encompassed a range of activities to date.
April 2012 - June 2012
Assess phase
December 2011 - January 2012January 2012 - March 2012
Initiate phase
Scope phase
Initiate
Taskforce
Review of business processes
Assessment of reform solutions
Review of international systems
Stakeholder consultation
Scope Terms
of Reference
Stakeholder consultation
Costing
Scoping of reform solutions
Review outcomes
Scope key
activiies
Taskforce
Establishment
December 2011
Interim
Report
March 2012
July 2012 - July 2012
Report phase
Final
assessment
Develop final
report
Final
Report
July 2012
Review of existing business and border agency processes
Potential new approaches with respect to the handling and administration of
low value imports of goods need to have regard to the business and border
agency processes that currently exist. This is because any recommendations
with respect to reform need to have regard not simply to ongoing efficiency of
any new arrangements, but also the costs associated with moving from
current to new arrangements – for government, for industry participants and
ultimately for consumers. To this end, the Taskforce has reviewed:

the current international mail handling processes that operate in
Australia, and the service impacts on businesses and consumers;

air and sea cargo operations, such as those undertaken by express
couriers, freight forwarders, licensed customs brokers and cargo
terminal operators;

border security and biosecurity assessment processes for international
mail, and both air and sea cargo;

customs duty and GST assessment processes for international mail,
and both air and sea cargo; and

ABS statistical reporting requirements.
LVPPT INTERIM REPORT
19
This review encompasses an examination of the processes that are utilised in
each of these areas, including an assessment of current policy settings (and
the circumstances in which they have been developed), as well as an initial
assessment of current cost structures of Australia’s border agencies. Work is
also ongoing to ensure a full understanding of the cost structures of Australia
Post and other industry participants. The Taskforce recognises that further
work is required to be undertaken in this area, particularly with respect to how
any changes that may be proposed would impact upon both Australia Post
and participants in the air and sea cargo industry.
In examining these issues, the Taskforce has also had regard to previous
work undertaken in this area including, but are not limited to:

the Commonwealth Treasury’s ‘Tax Expenditures Statement 2011’
(January 2012);

the Commonwealth Auditor-General’s ‘Report on Risk Management in
the Processing of Sea and Air Cargo Imports’ (2011);

the Productivity Commission’s report ‘Economic Structure and
Performance of the Australian Retail Industry’ (2011), together with
submissions made to that inquiry;

the Board of Taxation’s ‘Review of the Application of GST to CrossBorder Transactions’ (2010);

‘The Independent Review of Australia’s Quarantine and Biosecurity
Arrangements Report to the Australian Government’ (the “Beale
Report”) (2008);

the Commonwealth Auditor-General’s report ‘Customs Cargo
Management Re-engineering Project’ (2007);

the Booz Allen Hamilton report ‘Review of the Integrated Cargo
System’ (2006);

the Productivity Commission – Commonwealth Competitive Neutrality
Complaints Office ‘Competitive Neutrality Review’ (2000); and

JCPAA (Joint Committee of Public Accounts and Audit) Internet
Commerce — to buy or not to buy?, Report no. 360, Canberra, June
(1998).
Review of regulatory arrangements
Reforms which may be recommended with respect to handling and
administration of low value imports of goods, including options for revenue
collection need to have regard to the regulatory arrangements under which
industry participants, border agencies, consumers and other stakeholders
operate. For example, reforms that would require changes to international
treaty arrangements under which the international mail stream operates need
to be assessed having regard to the limited capacity that Australia has – as
one of many member jurisdictions – to determine such an outcome. Similarly,
LVPPT INTERIM REPORT
20
issues with respect to timeframes also need to have regard to the extent that
any reforms may require changes to Commonwealth legislation and/or
regulation.
Relevant instruments that may impact the importation of low value goods
include, but are not limited to:

Acts and Regulations
o
o
o
o
o
o
o
o
o

Free Trade Agreements
o
o
o
o
o
o

A New Tax System (Goods and Services Tax) Act 1999
Australian Postal Corporation Act 1989
Australian Postal Corporation Regulations 1996
Customs Act 1901
Customs Administration Act 1985
Customs Regulations 1926
Customs (Prohibited Imports) Regulations 1956
Customs Tariff Act 1995
Quarantine Act 1908
ASEAN-Australia-New Zealand FTA
Australia-Chile FTA
Australia-New Zealand Closer Economic Relations
Australia-United States FTA
Singapore-Australia FTA
Thailand-Australia FTA
International Treaties and other International Cooperative
Arrangements
o Universal Postal Union (UPU)
 Universal Postal Convention
 General Regulations of the Universal Postal Union
 Postal Payment Services Agreement
o World Customs Organization (WCO) Conventions (1952-2008),
including the International Convention on the simplification and
harmonization of Customs procedures (Kyoto Convention) as
amended (2006)
o World Trade Organization (WTO)
 WTO Agreement on Valuation (1969)
 WTO Agreement on Rules of Origin

MoU between the Australian Customs and Border Protection Service,
Australian Quarantine and Inspection Service (now known as DAFF
Biosecurity) and Australia Post on administrative arrangements at the
mail Gateways.
LVPPT INTERIM REPORT
21
A brief summary of the key elements of these regulatory and administrative
arrangements is contained at Appendix D.
Assessment of current and future operating environment
Any new approaches that may be recommended for handling and
administering imports for low value goods, including options for revenue
collection, need to have regard to the current and future operating
environment in which that activity will take place. For example, there may be
opportunities to capitalise on developments in electronic data exchange and
scanning technology, or to take advantage of actions being undertaken
internationally – particularly with respect to the international mail stream.
Recommendations also need to have regard to the current and future volumes
of the low value import task, the characteristics of those low value goods
being imported and the purposes for which they are being imported.
To this end, the Taskforce has been assessing:

the current and expected volumes and attributes of low value imports in
Australia;26

technological innovations with respect to parcel processing, tracking
systems and import processing information management systems;

international initiatives being undertaken with respect to international
mail processing, including:
o Kahala Customs Working Group initiatives, which include a phased
implementation of data capture protocols to allow for item level data
transfer, through UPU recognised protocols. The information
contained in the data transfer will allow for access to key data
before the goods originating in Kahala member countries have
entered Australia. The mail product range is currently limited to the
EMS and parcels over 2kg categories and it is expected that this will
be fully implemented for both products by the end of 2014 (for more
details see Appendix C); and
o WCO/UPU and IPC initiatives, such as the Medici project, with
respect to electronic data interchange through the capture and
electronically exchange of the data needed for mail to clear customs
and for duty/tax to be assessed. The data for each mail item is
intended to be exchanged between the participating origin and
delivery posts, and shared with the respective customs authorities
and other government bodies, as required for export, import and
border security (for more details see Appendix C);
26
The Taskforce notes that certain information with respect to the attributes in each import stream is
difficult to obtain, and this information gathering exercise is ongoing.
LVPPT INTERIM REPORT
22

other international initiatives relating to low value imports including:
o ongoing multilateral (e.g. WTO) and bilateral tariff reform processes
which are being negotiated through Free Trade Agreements (FTA)
and which may reduce the number of goods subject to duty. Current
FTAs under negotiation are:

Australia-China FTA

Australia-Gulf Cooperation Council (GCC) FTA

Australia-India Comprehensive Economic Cooperation
Agreement

Australia-Japan FTA

Australia-Korea FTA

Australia-Malaysia FTA

Indonesia-Australia Comprehensive Economic Partnership
Agreement

Pacific Agreement on Closer Economic Relations (PACER)
Plus

Trans-Pacific Partnership Agreement
o the Asia-Pacific Economic Cooperation (APEC) Honolulu
Declaration to ‘establish commercially useful de minimis values in
our economies that will exempt low-value shipments from customs
duties and streamline entry documentation requirements’.
Investigation of alternative approaches operating internationally
In developing options for reform, the Taskforce believes that it is important to
have regard to alternative approaches operating internationally – both
because these processes may be inherently more efficient, and also because
the use of global standards may enable greater systems integration
internationally, which would provide its own opportunities for efficiency
improvements. Such investigations also provide the opportunity to have
regard to lessons learned elsewhere, and to shed light on possible
weaknesses of potential solutions.
To this end, the Taskforce has investigated alternative approaches for the
handling and administering imports of low value goods operating
internationally, including undertaking:

a desktop review of approaches undertaken in seven countries –
the United Kingdom, Canada, Singapore, Korea, Japan, the United
States and New Zealand; and

a study trip of Canada, United Kingdom and Singapore to meet with
the designated postal operators and relevant border agencies in
those countries to understand the logistics, revenue, reporting,
LVPPT INTERIM REPORT
23
compliance and cost recovery mechanisms in these jurisdictions for
the processing of low value imports.
Brief details of the Taskforce’s desktop review of international regimes with
respect to low value imports are set out at Appendix E. While all reasonable
care has been taken with respect to preparing this information, the Taskforce
notes that due to the timing of this Interim Report, necessary verification
processes still need to be undertaken. Further details with respect to
international consultation are set out below.
Domestic stakeholder consultation
Stakeholder consultation meetings were commenced as early as possible in
the process to ensure that all relevant issues were captured. This process is
ongoing. To date, these meetings have provided an opportunity for the
Taskforce to be informed by representatives from government and industry,
as well as other stakeholders, about key issues and challenges in the low
parcel processing environment, both in the international mail stream and the
air and sea cargo environment. The information gathered during these
sessions is of considerable assistance in informing Taskforce activities and
considerations.
The Taskforce conducted site visits to the two largest international mail
gateways in Australia – Sydney and Melbourne – to gain a better
understanding of the environment in which Australia Post is operating and the
nature of the interactions between Australia Post and Australia’s border
agencies. This has enabled the Taskforce to gain a considerable
understanding of the impact any increase in volume would have on these
operations, both in terms of physical infrastructure capacity and resourcing. In
March, the Taskforce took the opportunity for a site visit to DHL Express
Australia’s Sydney gateway site to enable it to make a comparison between
the different operating models between the mail and air cargo environments.
Below is the list of stakeholders the Taskforce has met with to date. These
stakeholders are either directly involved in low value parcel processing,
including revenue collection, or impacted by these processes in some way:









Australia Post;
Australian Bureau of Statistics;
Australian Customs and Border Protection Service;
Australian Federation of International Freight Forwarders (AFIF);
Australian Music Association;
Australian National Retailers Association;
Australian Retailers Association;
Australian Taxation Office;
Bicycle Industries Australia;
LVPPT INTERIM REPORT
24











Conference of Asia Pacific Express Carriers (CAPEC);
Customs and Border Protection National Consultative Committee;
Customs Brokers and Forwarders Council of Australia (CBFCA);
Department of Agriculture, Fisheries and Forestry (Biosecurity);
Department of Broadband, Communication and the Digital Economy;
eBay Australia & New Zealand;
Post Office Agents Association Limited;
Productivity Commission;
Retail Cycle Traders Australia;
Treasury; and
Visa.
These meetings have focussed on:





gathering information from these bodies of how the process operates in
their respective environments;
any developments currently in train to improve low value import
processing;
challenges and impacts, both positive and negative, with current
processes. Issues raised in this context relate both directly to the
efficiency of the current processes, and also to broader issues such as
the general impact that the growth of e-commerce is having on
Australian retailers, as well as other matters such as the risks
associated with goods being imported that fail to meet Australian safety
standards and the potential for under-declaration of values in an ecommerce environment;
seeking views on the impacts, in terms of profitability, resourcing and
infrastructure capacity that would associated with the processing of
substantially increased volumes of parcels for revenue collection
purposes; and
seeking suggestions and views on where improvements could be made
to achieve efficiencies.
International consultation
An important consideration for the Taskforce in undertaking a comprehensive
investigation of low value import processing, particularly in the international
mail stream, has been how overseas jurisdictions with large volumes of low
value goods manage their processes and whether this is done in an efficient
and cost-effective way. Consequently, the Taskforce conducted a series of
meetings with relevant postal services and government bodies responsible for
border protection and revenue collection in Canada, the United Kingdom and
Singapore.
LVPPT INTERIM REPORT
25
As well as representing jurisdictions that manage tax and duty processes
associated with low thresholds, Canada and the United Kingdom respectively
are at the forefront of the UPU and Kahala electronic postal information
transfer initiatives. The potential for these initiatives to provide pre-arrival
postal data and the capacity for Australia to integrate in future international
developments will factor in the Taskforce’s considerations.
To further its understanding, the Taskforce undertook site visits of
international mail gateways and express courier operations.
The focus of these visits was to gain an insight into the challenges faced by
countries where there is a primary focus on revenue collection due, in large
part, to the high volume of low value imported goods. Regard was also given
to understanding how the different circumstances of each jurisdiction has
affected processes and policy settings – including factors such as geography,
transport systems, the nature of goods being imported and differing border
security and revenue priorities.
The Taskforce met with the following agencies:

Canada – the Canada Border Services Agency, Canada Post and
representatives from the Canadian Department of Finance;

United Kingdom – the UK Border Force, Her Majesty’s Revenue and
Customs, Royal Mail and ParcelForce (the parcel arm of the Royal
Mail); and

Singapore – Singapore Customs and Singapore Post.
Key elements of the processes operating within these jurisdictions that the
Taskforce examined include:
 the physical sorting processes utilised for security and/or revenue
purposes, including alternative infrastructure designs and layouts; a
range of sorting, tracking and scanning equipment; and a variety of
manual handling processes;
 the nature and security of storage areas and facilities required for
overflow goods awaiting revenue assessment (and the timeframes in
which goods were cleared from these storage areas);
 the software and information management systems utilised for the
assessment of revenue liability (and the timeframes in which those
assessment were made for duty and VAT/GST purposes);
 the structure and operation of deferred payment schemes that enable
goods to be cleared from mail gateways and cargo depots prior to
revenue liabilities being paid by end-customers; and
 a range of potential reforms currently being examined by mail and
customs authorities that rely upon electronic data provision between
postal partners, including enhanced risk assessment processes and
streamlined revenue assessments.
LVPPT INTERIM REPORT
26
In addition, the Taskforce briefly discussed a range of alternative technologies
that may be utilised to improve the effectiveness of border security operations,
such as ‘intelligent’ scanning software.
Reform development and assessment
The Taskforce has commenced developing solutions to reform the way in
which low value parcel processing may be undertaken in Australia. All of
these will undergo an initial assessment, with more detailed work to be
undertaken on short-listed solutions (see further below).
The potential solutions that the Taskforce is developing will have regard to a
variety of factors, including but not limited to, consideration of:

the existing parcel processes being undertaken by air and sea cargo
operators, Australia Post and Australia’s government border agencies;

current regulatory arrangements, including Australian legislation and
international treaty obligations;

alternative parcel processing systems that are operating internationally;

local and international developments already occurring with respect to
parcel processes, including through the WCO/ UPU, the Kahala Group
and Medici; and

the external environment in which this issue is being considered,
including but not limited to the growth in international e-commerce and
parcel processing generally, and the potential future border security
risks.
These potential solutions include, but are not limited to:

infrastructure and/or information systems changes to streamline
international mail gateway operations (with respect to both Australia
Post and border agency activities);

process changes to streamline international mail gateway operations
(with respect to both Australia Post and border agency activities);

simplification of duty and/or GST assessment and collection processes;
and

alternate payment methods for duty and/or GST liability.
The Taskforce wishes to note that the potential range of reforms that it is
considering focus upon improving the efficiency by which low value imports
are handled and processed. It is not within the Taskforce’s Terms of
Reference to specifically recommend the application of any particular
threshold level. However, recognising the genesis of the Taskforce, the
process that the Taskforce is undertaking will have regard to potential
efficiency improvements based on expected parcel volumes under both
LVPPT INTERIM REPORT
27
existing and other potential threshold settings and arrangements for both duty
and GST assessment and collection.
Assessment Process
Generally, in considering the range of potential solutions that may be available
to improve the efficiency of the handling and administration of low value
goods, the Taskforce’s recognises that some reforms rely upon being part of
an integrated package, whereas others may be mutually exclusive. Further,
there are likely to be material differences in the time frames in which particular
reform solutions may be able to be implemented. A key consideration for the
Taskforce is therefore to ensure that its recommendations enable coherent
implementation over time – and that actions recommended to be undertaken
in the short to medium term neither unduly inhibit or prevent desirable future
reform, nor result in stranded assets and wasted investment in redundant
equipment and technologies.
In considering the potential solutions that may fit within such an integrated
package of reform, an initial assessment will be undertaken of potential
reforms having regard to a set of standard criteria. The criteria are based on
the Taskforce’s Terms of Reference, and include: cost, efficiency,
implementation, competitive neutrality, risk, revenue and legislative impacts.
Having regard to these assessments, and their relationship with other possible
reforms, a determination will be made as to which of the potential solutions
will be subject to further examination, including detailed costings. The key
factors taken into consideration in making this initial assessment will be
highlighted in the Taskforce’s Final Report.
These factors, together with i) detailed costings of the selected reform
solutions, ii) the development of potential reform timelines and iii) a more
detailed assessment of potential impacts in consultation with industry
participants and stakeholders, will be used in determining the Taskforce’s final
recommendations.
LVPPT INTERIM REPORT
28
Further work to be undertaken
The Taskforce has mapped out the key activities that it will be undertaking
over the coming months to enable it to provide the Government with a
comprehensive blueprint for reform, with costed alternatives and an
expeditious time frame for implementation, by July 2012.
Assessment of potential solutions
The Taskforce will finalise the first stage of its assessment of potential
solutions, and in so doing determine which potential reforms will be subject to
more detailed examination.
As noted previously, in undertaking this first stage of the assessment, the
Taskforce recognises that potential reforms may not be mutually exclusively,
and in some instances may be able to be undertaken contiguously and/or
sequentially. Issues with respect to timing of potential solutions will be
considered as the Taskforce develops its recommendations with respect to an
implementation program for Government (see further below).
In determining the potential solutions to be subject to more detailed
assessment (and in determining its final recommendations), the Taskforce will
make particular reference to:

the broad range of issues raised during stakeholder consultations;

the information that has been provided to the Taskforce by the border
agencies; and

the information that has been provided to the Taskforce with respect to
alterative processes adopted internationally.
Detailed assessment of prospective solutions (including costings)
Following the first stage of the assessment, the Taskforce will undertake a
detailed examination of the reforms that it considers are most prospective.
This will include undertaking detailed costings with respect to the changes that
will be required.
Potential solutions for reform include changes to administrative processes,
information systems changes and new infrastructure. To the extent that any
such changes may enable changes to existing threshold arrangements, the
Taskforce again notes that any decisions with respect to this issue rest with
the Government.
To assist in the determination of the functional specifications that may be
required under any such reforms, as well as the costs associated with any
changes, the Taskforce will engage such technical expertise as is required to
ensure that expert knowledge and best practice informs the work of the
Taskforce. To the extent feasible in the time frames available, the Taskforce
will seek also to undertake cost-benefit analyses of the proposed reform
solutions.
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Consultation with stakeholders
In undertaking this detailed examination of the selected reform solutions, the
Taskforce recognises that reforms may impact on the business processes of
industry participants and on their customers. To ensure that any such
benefits or costs are well understood prior to the making of any
recommendations, the Taskforce will seek the views of key stakeholders with
respect to those potential solutions which are being given more detailed
consideration.
The Taskforce also notes that this ongoing consultation will not be limited to
those groups with whom it has already had the opportunity to have initial
discussions. For example, to date the Taskforce has not yet consulted with
the States and Territories. However, any reforms that may have implications
with respect to revenue collection associated with the GST will necessarily
involve discussions with them because the States and Territories both receive
the revenue collected from the GST, and are responsible for the costs
associated with the Australian Tax Office’s (ATO) administration of that
revenue base.
Development of reform implementation program
In determining its final recommendations, the Taskforce is required to develop
an implementation program to be recommended to Government. This
blueprint will encompass a proposed timetable for:

the Government’s assessment processes of the proposed
recommendations;

legislative and/or regulatory changes that may be required;

the physical implementation of such reforms as may be proposed,
including with respect to such of the following as may be required:
o introduction of new handling and management processes;
o construction of infrastructure;
o development of information systems;
o alignment of industry business systems with new handling and
administration processes;

integration and testing between border agencies, industry participants
and other stakeholders;

education and training; and

agency, industry and community engagement processes.
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Appendix A: Terms of reference
The Low Value Parcel Processing Taskforce (the Taskforce) will undertake a
comprehensive investigation of low value import processing, particularly for
the international mail stream.
The Taskforce should be guided by recommendation 7.1 in the Productivity
Commission report Economic Structure and Performance of the Australian
Retail Industry that states there are strong in-principle grounds to lower the
low value threshold exemption for goods and service tax (GST) and duty on
imported goods when it is cost-effective to do so.
1. The Taskforce will investigate new approaches for the handling and
administration of low value imports of goods, including options for revenue
collection. In particular, any proposed new system should:
1.1 allow for effective and efficient revenue collection processes that
promote tax neutrality with other goods for consumption in Australia
1.2 streamline the assessment of customs duty;
1.3 minimise any processing and administration costs, delivery delays and
other compliance costs;
1.4 pass appropriate collection costs onto the importer;
1.5 provide administrative and competitive neutrality between different
import streams where appropriate;
1.6 not compromise border protection. The new system should support
the Australian Customs and Border Protection Service and DAFFBiosecurity in this role by:
•
allowing for risk based assessment;
•
minimising administrative touch points outside of the natural
supply chain for movement and delivery; and
•
facilitating pre-arrival information through electronic data
interchange where practical;
1.7 support Australia’s interaction with the digital economy by ensuring the
system is user-friendly, imposes no added barrier to trade and allows
for the large expected increase in online retailing; and
1.8 have regard to Australia Post’s profitability in the international mail
stream including impacts on capacity and technological change, and
its universal service obligations.
2. Notwithstanding the requirements in 1, the Taskforce should consider:
2.1 the costs and volumes of goods associated with possible
administrative thresholds, including the level at which GST or duty
may be payable and the levels at which differing amounts of
information are required;
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2.2 the role of customs duty;
2.3 compliance measures required to identify and respond to attempts at
avoiding or evading customs duty, GST or other tax or charges;
2.4 implications of the new approach for the management of other risks at
the border, for example as a result of changed process or from an
additional focus on revenue;
2.5 international developments and best practice, covering both policy
trends, technological advancements and agreements through
organisations such as the Universal Postal Union; and
2.6 alternative arrangements for revenue collection, including the parties
responsible for revenue collection and the points in the supply chain at
which revenue is collected.
Composition and Consultation
The Taskforce will be led by an independent expert panel made up of a Chair
and two members with significant experience in logistics, supply chain
management or other related fields. The Taskforce will be supported by a
secretariat drawing on the skills of the relevant Government departments and
agencies. The Review may also draw on external expertise where necessary.
The Taskforce will consult the views of expert stakeholders, including the
Australian Customs and Border Protection Service, DAFF-Biosecurity;
Australia Post; the Conference of Asia Pacific Express Couriers; and other
stakeholders, including small business.
Timing
The Taskforce should release an interim report in three months from its
establishment and provide a final report to Government no later than July
2012. The final report should include a comprehensive blueprint for reform,
with costed alternatives and an expeditious time frame for implementation.
Productivity Commission Recommendations and Government Response
Appropriateness of current indirect tax arrangements
Recommendation 7.1 – There are strong in-principle grounds for the low value
threshold (LVT) exemption for GST and duty on imported goods to be lowered
significantly, to promote tax neutrality with domestic sales. However, the
Government should not proceed to lower the LVT unless it can be
demonstrated that it is cost-effective to do so. The cost of raising the
additional revenue should be at least broadly comparable to the cost of raising
other taxes, and ideally the efficiency gains from reducing the non-neutrality
should outweigh the additional costs of revenue collection.
Response: Noted
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The Government will reassess the appropriateness of the low value import
threshold when it receives the report of the Low Value Parcel Processing
Taskforce (see response to Recommendation 7.2).
Recommendation 7.2 – The Government should establish a taskforce charged
with investigating new approaches to the processing of low value imported
parcels, particularly those in the international mail stream, and recommending
a new process which would deliver significant improvements and efficiencies
in handling. The taskforce should comprise independent members, with the
Australian Customs and Border Protection Service (Customs), the Australian
Quarantine and Inspection Service (AQIS), Australia Post and the Conference
of Asia Pacific Express Carriers providing advice. The terms of reference
should outline the criteria that any new system must satisfy including:
minimising the costs of processing and delivery delays, streamlining the
assessment of Customs Duty, user pays, and without compromise to the
border protection functions of Customs and AQIS. This review should report to
Government in 2012 and propose an expeditious timeframe for its proposed
changes.
Once an improved international parcels process has been designed, the
Australian Government should reassess the extent to which the LVT could be
lowered while still remaining cost-effective.
Response: Agreed
The Government will establish a Low Value Parcel Processing Taskforce to
investigate new approaches to the processing of low value parcels,
particularly in the international mail stream. The Taskforce will comprise at
least three members, including members with logistics and supply chain or
other relevant expertise, and will be asked to report to the Government within
six months of receiving the Terms of Reference.
The Taskforce’s report will provide a comprehensive blueprint for reform of the
low value import processing system, with costed alternatives, for the
consideration of the Government.
LVPPT INTERIM REPORT
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Appendix B: Biographical details – Taskforce members
Bruce Cohen (Chair of Taskforce)
Dr Bruce Cohen is a barrister and a principal in private practice in the area of
public policy. He is also an Honorary Research Fellow with the Grattan
Institute and currently the Chair of Victorian Rail Track (VicTrack), a Victorian
government business with responsibility for the delivery of
telecommunications, property development, freight and asset management
services in the rail industry.
Bruce has previously served on the boards of Melbourne Water, VENCorp
and Snowy Hydro Limited, and as a Commissioner with the Victorian
Competition and Efficiency Commission for its Inquiry into Reform of
Melbourne’s retail water sector. He holds a B. Comm., LLB (Hons) and M.
Comm. (Hons) from the University of Melbourne, and a Ph. D. in Public Policy
from The Australian National University.
Professor Caroline Chan
Professor Caroline Chan is Head of the School of Business IT and Logistics at
RMIT University. Professor Chan undertakes research in eCommerce and
Supply Chain Management. She has received numerous services awards
include a 2007 GS1 Recognition of Excellence Award for Academic
Advancements in Supply Chain Management.
Professor Chan holds a PhD in Information Systems (Deakin), MEng in
Systems Engineering (RMIT) and an Ir (‘ingenieur’) equivalent to ‘Bachelor of
Engineering (Hons)’ in Electronic Engineering (Petra).
Jim Marshall PSM
Jim Marshall previously held the position of the Executive General Manager,
Postal Services for Australia Post which includes the mail, parcels and
international mail businesses. He was appointed Sai Cheng (a Joint Venture
Company established by China Post and Australia Post to provide one stop
supply chain services) Board Director in February, 2011. From October 2009
until 1 July 2010, Mr Marshall was the Chief Operating Officer of Australia
Post and was previously General Manager of Australia Post’s Mail and
Networks Division.
He is also a Director of Australian Air Express and Star Track Express, two
express freight companies that are joint ventures between Australia Post and
Qantas. Mr Marshall has a B.A., B.Ec. and M.B.A. from Adelaide University
and more than 25 years’ experience as an executive in Australia Post,
focusing on operations strategy and management.
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Appendix C: International mail initiatives
C1. Kahala Posts Group
Background
Australia Post and seven other national postal operators established the
Kahala Posts Group (Kahala group) in 2003 to jointly explore the development
of new integrated business models and commercial opportunities. The group
now has 10 members comprising: Australia Post, China Post, Correos, Hong
Kong Post, Japan Post, Korea Post, La Poste, Royal Mail, Singapore Post
and the US Postal Service.
Initially, the Kahala group focused on the need for co-operative business
practices that would assure performance standards for premium level
services. In recent years, the group has focused on new logistics frameworks
that can be applied to the processing of larger parcels (greater than 2 kg) and
EMS mail items and which will give full expression to the client promise. The
development of this framework has been closely aligned to UPU protocols
relating to item level data transfer between postal organisations, and between
postal organisations to Customs authorities.
Current focus
In Australia, Australia Post is currently working to implement an integrated
phased approach to several key logistic changes to support the Kahala group
objectives. In broad terms, Kahala group members are responsible for
approximately 70 per cent of items coming into Australia in the mail categories
in relation to which work is being undertaken. In regard to the changes that
are being considered, potential developments include:

development of information transfer systems which will align to UPU
protocols relating to item level data transfer between postal
organisations, and between Australia Post and Customs and Border
Protection; and

development of separate processing lines or processing some types of
mail items through separate facilities to the traditional Gateway
structure (with the possibility of separate entry facilities being
developed to handle these items).
The current Kahala developments include a phased implementation of data
capture protocols which will allow for item level data transfers. The
information contained in the data transfer will allow for a degree of granularity
about the item that will assist with border protection processes which is
comparable to the types of information that are available to other commercial
express courier operations.
LVPPT INTERIM REPORT
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Relationship to the low value parcel processing taskforce
The Taskforce has been actively investigating the options that these
developments will present to advance reforms in the international mail
handling environment in Australia. It is projected that these will represent a
significant change to the way in which parcels over 2kg and EMS items may
be received and processed. It is recognized that the scope of this will
represent only a portion of the total volume of all parcel types that would be
processed in the Gateway in the short term – however, these will incorporate
the majority of parcels with relatively higher values.
Combined with the application of data transfer to Customs and Border
Protection, including responses, in line with UPU recognised protocols, there
is potential to advance key elements of process reform. It should be noted that
the mail product range is currently limited to the EMS and parcels over 2kg
categories and it is expected that this will be fully implemented for both
products by the end of 2014.
C2. MEDICI - Mails Electronic Data Interchange and Customs Integration
Background
The Mails Electronic Data Interchange and Customs Integration (Medici)
Group is a group of Postal Administrations whose objective is to implement
systems and data sharing protocols that will expedite Customs processes in
the international mail environment. The systems and protocols are largely in
common with the Kahala group, excepting that the Kahala group members
have also organised themselves to achieve additional commercial outcomes.
As with the proposed system to be used by the Kahala group, the Medici
group uses the UPU standard item attributes message to exchange customs
information.
The Medici group utilises systems that have been created and are
administered by the International Post Corporation27 (IPC). It should be noted
that not all of the 24 members28 of the IPC are involved in Medici group.
Current focus
The Medici group has recently focussed on developing a framework in which
the participating postal operators capture and electronically exchange the data
needed for customs processes and for duty and tax to be assessed. There
27
IPC was established in 1989 to provide’ leadership by driving service quality, interoperability and
business-critical intelligence, and gives its members an authoritative, independent and collective
voice’. Source: http://www.ipc.be/en/About/Mission.aspx
28
IPC member countries: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France,
Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, New Zealand, Norway, Portugal,
Spain, Sweden, Switzerland, The Netherlands, United Kingdom and the United States of America.
Source: http://www.ipc.be/en/About/Membership/Members.aspx
LVPPT INTERIM REPORT
36
have recently been trials amongst several member countries of these
technologies and there is some progress towards the wider adoption of these
processes in a business as usual approach.
Relationship to the low value parcel processing taskforce
The Taskforce is actively considering all developments but notes that
Australia Post is not an active member of the Medici group. Nonetheless, the
current developments in the Medici group bear close alignment to current
activities in the Kahala group, and like Kahala group technologies align to
UPU technology protocols and standards.
The Taskforce will continue to consider these activities in the development of
reform solutions, particularly in light of the review of the Canadian mail
processing environment, as Canada is one of the Medici group members. The
Taskforce also notes that there is the capacity for the Kahala and the Medici
groups to work together on issues of data sharing and expand the scope of
application these data sets to further improve processes in the Australian
international mail handling environment.
C3. UPU – Universal Postal Union
Background
The UPU was established in 1874, and is the body that is responsible for
setting the international framework of co-operation for almost all international
postal operators. The scope of the policies and protocols is extensive and all
member countries are bound to the service obligations that are set by the
UPU.
Current focus
In recent times the UPU, like all large organisations, has recognised the
growing importance of technology.29 Although the UPU was established to
manage a physical process, that of handing and moving mail, there has been
attention given to ensuring that postal operators have access to an agreed
framework to build new and improved services.
In this regard, the UPU presented a paper in 2009 titled ‘E-Services Strategy
and Action Plan’ in which it addressed a strategy for electronic-based postal
services, telematic links and enhancing the use of existing UPU products
(IPS, IFS, EDI). It is in this context that the UPU has been advancing the
adoption of its EDI standards, which Kahala and Medici have largely both
adopted.
29
Universal Postal Union: Postal Technology Centre. UPU Customs Declaration System White Paper
(2011).
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Relationship to the low value parcel processing taskforce
Through the active consideration of all current international developments, the
Taskforce is considering the alignment of potential solutions to broader
international frameworks including the processes, standards and obligations
that relate to member countries of the UPU, of which Australia is one.
For the purposes of this Taskforce’s activities, it is also necessary to note that
the UPU EDI Messaging Standards sets out detailed description of the
standard EDI messages that have been adopted through the UPU's standards
approval process. It is produced and maintained by the Standards Board of
the Postal Operations Council. The UPU EDI Messaging Standards include
standards for:
 postal item tracking messages;
 postal dispatch pre-advice/response messages;
 postal consignment pre-advice/response messages; and
 carrier consignment pre-advice/response messages.
A complete Logical Data Model has also been developed, giving a structured
overview of all information elements that can be exchanged through EDI,
including definitions and lists of allowed values for every individual data
element.
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Appendix D: Regulatory framework
D1.
Introduction
The purpose of this Appendix is to highlight key elements of Australia’s
regulatory framework by reference to various stages of the import process for
both international mail, and air and sea cargo, being:
 the arrival of mail and cargo into Australia;
 border control (security and biosecurity); and
 the application of imposts (GST and customs duty).
These arrangements are determined by an extensive legislative framework
which governs the way in which Australia’s border security, biosecurity and
revenue assessment processes operate with respect to international mail, air
and sea cargo, and goods brought into the country by international travellers.
Relevant instruments that impact upon these processes include, but are not
limited to:

Acts and Regulations
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
A New Tax System (Goods and Services Tax) Act 1999
A New Tax System (Luxury Car Tax) Act 1999
A New Tax System (Wine Equalisation Tax) Act 1999
Australian Bureau of Statistics Act 1975
Australian Postal Corporation Act 1989
Australian Postal Corporation Regulations 1996
Australian Postal Corporation (Performance Standards)
Regulations 1998
Commerce (Trade Descriptions) Act 1905
Copyright Act 1968
Customs Act 1901
Customs Administration Act 1985
Customs Regulations 1926
Customs (Prohibited Imports) Regulations 1956
Customs Tariff Act 1995
Customs Tariff Regulations 2004
Crimes Act 1914
Financial Transactions Report Act 1988
Imported Food Control Act 1992
Import Processing Charges Act 2001
Motor Vehicle Standards Act 1999
Quarantine Act 1908
Quarantine Service Fees Determination 2005
LVPPT INTERIM REPORT
39
o Therapeutic Goods Act 1989
o Trade Marks Act 1995
o Wildlife Protection (Regulation of Exports and Imports) Act 1982

Free Trade Agreements
o
o
o
o
o
o

ASEAN-Australia-New Zealand FTA
Australia-Chile FTA
Australia-New Zealand Closer Economic Relations
Australia-United States FTA
Singapore-Australia FTA
Thailand-Australia FTA
International Treaties and other International Cooperative
Arrangements
o Universal Postal Union (UPU)
 Universal Postal Convention
 General Regulations of the Universal Postal Union
 Postal Payment Services Agreement
o World Customs Organization (WCO) Conventions (1952-2008),
including the International Convention on the simplification and
harmonization of Customs procedures (Kyoto Convention) as
amended (2006)
o World Trade Organization (WTO)
 WTO Agreement on Valuation (1969)
 WTO Agreement on Rules of Origin

MoU between the Australian Customs and Border Protection Service,
Australian Quarantine and Inspection Service (now known as DAFF
Biosecurity) and Australia Post on administrative arrangements at the
mail Gateways.

MoU between Australian Customs and Border Protection Service and
the Australian Taxation Office in relation to the performance of
functions that relate to the joint administration of the Goods and
Service Tax (GST), Luxury Car Tax (LCT) and Wine Equalisation Tax
(WET).
For the purposes of brevity, it is not intended that this Appendix detail every
aspect of this regulatory framework. However, in considering its
recommendations the Taskforce intends to assess such changes as may be
required to these arrangements.
It is important to note that cargo is defined to include mail in certain
circumstances, and that any differences that arise between the treatment of
mail and cargo in those instances relate primarily to the availability of
information that is available on individual consignments. All cargo has
LVPPT INTERIM REPORT
40
information available on each consignment, whereas mail is largely unknown
until it reaches the mail gateways. For this reason it is reported and assessed
differently to other cargo.
D2. Arrival of mail and cargo into Australia
Regulatory arrangements with respect to the arrival of goods arriving into
Australia relate generically to the reporting requirements, and the movement
of mail and cargo. Issues relating to prohibitions and restrictions of goods are
dealt with separately below.
Inbound reporting requirements for cargo (including mail)
Generally, the arrangements governing the reporting of goods entering into
Australia are:
Activity
Agency
Legislative Basis or Otherwise
All arrivals of cargo (defined to include
mail items) into Australia must be
reported to Customs and Border
Protection.
ACBPS
See generally Pt IV Division 3 Customs
Act 1901.
For the purposes of the Customs Act
1901, cargo includes “mail”.
ACBPS
See section 63A Customs Act 1901–
definitions of “cargo” and “mail”.
For cargo arriving by ship or aircraft,
reporting requirements may include:
ACBPS
Sections 64, 64AA and 64AB Customs
Act 1901;
Regs 25-27, 28-29 Customs
Regulations 1926.
- an impending arrival report;
- a cargo report;
- a cargo list report (for sea cargo);
- an actual arrival report.
Generally these reports are provided
electronically through the ICS.
Air cargo is generally reported at a House
Air Waybills (HAWB) level and sea cargo
by a bill of lading. These provide details
on the contents of individual
consignments. However, since 2002
international mail items arriving by aircraft
is reported at the Master Air Waybill
(MAWB) level based on the data
elements available in existing industry
documents.
ACBPS
As to the general reporting
requirements with respect to cargo, see
generally section 64AB Customs Act
1901.
It is a Customs and Border Protection
Policy Decision generally to only report
mail at the MAWB level as mail does
not have data available on what it
contains.
Dealing and moving cargo and mail upon arrival
The movement of cargo and mail is strictly controlled on entering Australia to
ensure clear accountability through border assessment processes. Generally,
the arrangements governing the reporting of goods entering into Australia are:
LVPPT INTERIM REPORT
41
Activity
Agency
Legislative Basis or Otherwise
Generally, it is an offence to move cargo
(including mail) that is subject to Customs
control.
ACBPS
Section 33 Customs Act 1901
When unloading cargo (including mail)
(the Customs and Border Protection
terminology is outturn), an outturn report
is required to be communicated to
Customs and Border Protection at the
level at which it was initially reported
(MAWB or otherwise).
ACBPS
Sections 64ABAA, 64ABAB of the
Customs Act 1901.
Subsequent movements of cargo prior to
release (including mail) may only be
undertaken when permission has been
granted by Customs and Border
Protection (noting that the movement of
individual mail items between mail
gateways after deconsolidation is done
on a manual underbond movement with
Customs and Border Protection
approval).
ACBPS
See generally section 71E of the
Customs Act 1901.
Generally, declarations are required to be
made with respect to cargo other than
mail prior to its release. The form of
declaration will depend upon the nature
of the cargo, and include:
- import and warehouse declarations;
ACBPS
- self assessed clearance declarations;
ACBPS
- unaccompanied personal effects
statement.
ACBPS
See Pt IV Division 4 Subdivision B
Customs Act 1901; reg 43 Customs
Regulations 1926.
See Pt IV Division 4 Subdivision AB
Customs Act 1901.
See Pt IV Division 4 Subdivision AA
Customs Act 1901.
Goods may only be taken from
designated locations (“Customs places”)
once an authority to deal with the goods
has been provided by Customs and
Border Protection.
ACBPS
Generally, only mail items with a value of
above $1000 are required to have an
import declaration prior to them being
released.
ACBPS
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It is a Customs and Border Protection
policy requirement that mail can be
outturned at the MAWB level; other
cargo arriving by air is generally
required to be outturned at the HAWB
level.
See, for example, sections 71; 71C
(import declarations); 71DE (request for
cargo release); 71DJ (warehouse
declarations) Customs Act 1901.
As to definition of “Customs place”, see
section 183UA Customs Act 1901.
See Pt IV Division 4 Subdivisions AA,
AB; reg 41B Customs Regulations
1926.
42
D3. Border Control (security and biosecurity)
The following section details the high level framework by which Customs and
Border Protection Service and DAFF Biosecurity address their obligations in
the border control process.
Mail opening
Specific reference is made to mail opening because, in the international mail
environment, border processes have been designed having regard to the
requirement that, in most circumstances, Australia Post is the only entity
authorised to open mail items for inspection by Customs and Border
Protection, or DAFF Biosecurity.
Activity
Agency
Legislative Basis or Otherwise
Only authorised examiners (Australia
Post employees) may open the mail for
inspection.
Australia
Post
Sections 90M-90X of the Australian
Postal Corporation Act 1989.
Articles reasonably believed to contain
drugs (or pre-cursor chemicals) may be
opened by a Customs officer.
ACBPS
Section 90T of the Australian Postal
Corporation Act 1989.
Inspection of mail and cargo (and related activities)
A suite of legislative and regulatory arrangements govern both the capacity
and manner in which Australia’s border agencies may undertake their
responsibilities (for example, inspection, seizure, etc), and more generally the
nature of the goods and risks which are the primary subjects of their attention.
Activity
Border security
Agency
Legislative Basis or Otherwise
Generally all goods (including mail)
imported into Australia are subject to
Customs and Border Protection control
until they have been authorised for
release.
ACBPS
See sections 30, 35 of the Customs
Act 1901.
A range of goods are prohibited – either
absolutely or subject to certain
circumstances – from being imported into
Australia and generally will not be
released. These include, but are not
limited to:
- firearms;
- asbestos;
- objectionable goods; and
- drugs and precursors.
ACBPS
See generally Pt IV Division 1
Customs Act 1901; Customs
(Prohibited Imports) Regulation
1956.
In addition to these prohibited goods,
there are a number of other legislative
instruments that may result in goods
being prevented from being imported into
Australia. Goods that may be subject to
ACBPS
See, for example:
Commerce (Trade Descriptions) Act
1905;
Motor Vehicle Standards Act 1989;
Therapeutic Goods Act 1989 (for
LVPPT INTERIM REPORT
As to powers of Customs Officers
generally, see Pt XII Division 1
Customs Act 1901.
43
such constraints include goods that are
not as described; do not meet Australian
standards; are pirated or counterfeit
goods, cash, and substances subject to
the Therapeutic Goods Act 1989.
example, sections 14B (application
of Customs Act 1901); 42E (which
includes an offence with respect to
the import of counterfeit therapeutic
goods);
Trade Marks Act 1995 (see generally
Pt 13).
In addition to Australian regulatory
instruments, the UPU Convention also
has a list of items prohibited from being
sent in the mail including but not limited
to: narcotics; obscene or immoral
articles; counterfeit or pirated articles;
explosives, radioactive materials or
dangerous goods; live animals; insertion
of correspondence into parcels; and
coins banknotes and other valuable
articles. There are exceptions to some of
these and in many cases prohibitions
may be far wider depending on the laws
of the country.
Australia
Post
(UPU)
Articles 15 and 16 of the UPU
Convention.
Border security fees and charges
ACBPS
See generally:
Customs Depot Licensing Charges
Act 1997;
Import Processing Charges Act
2001;
Customs Act 1901 (e.g. section 85 –
fees for warehouse licence), 183CL
(fees for licensing of customs
brokers); see also Customs
Regulations 1926 (regs 50-51
(warehouse licence); 158 (broker’s
licence).
Border security fees and charges are
subject to a range of regulatory
instruments that affect their level (and
limits).
Biosecurity
DAFF Biosecurity
Goods entering into Australia – whether
as cargo or through the international mail
stream – are treated uniformly for the
purposes of biosecurity.
As to relevant Acts, see generally
Quarantine Act 1908, Export Control
Act 1982, Imported Food Control Act
1992.
Generally, the scope of quarantine
arrangements in Australia are wide, and
encompass measure:
(a) for, or in relation to (i) the examination, exclusion, detention,
observation, segregation, isolation,
protection, treatment and regulation of
vessels, installations, human beings,
animals, plants or other goods or things;
or
(ii) the seizure and destruction of
animals, plants, or other goods or things;
or
(iii) the destruction of premises
comprising buildings or other structures
when treatment of these premises is not
See generally section 4 of the
Quarantine Act 1908.
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As to relevant provisions, see also:
section 18(2) Quarantine Act 1908
(goods subject to quarantine)
sections 44C and 44D Quarantine
Act 1908 (examination of goods);
section 48AA Quarantine Act 1908
(treatment and destruction of goods);
section 68 Quarantine Act 1908
(effect of unlawful importation);
see also: Pt 5 (Importation of goods);
Pt 6A (Import Risk Analysis); and
Pt 7 Div 3 (Forfeiture and seizure of
animals, plants and other goods)
Quarantine Regulations 2000.
44
practicable; and
(b) having as their object the prevention
or control of the introduction,
establishment or spread of diseases or
pests that will or could cause significant
damage to human beings, animals,
plants, and other aspects of the
environment or economic activities.
Biosecurity fees and charges
Biosecurity fees and charges are subject
to a range of regulatory instruments that
affect their level (and limits).
DAFF
Biosecurity
See generally:
section 86E Quarantine Act;
Quarantine Service Fees Declaration
2005;
See also Australian Government’s
Cost Recovery Guidelines 2005.
D4. Application of imposts
Under current arrangements, goods imported into Australia are subject to the
imposition of customs duty and/or GST unless otherwise relieved of that
obligation. Of particular relevance for this report is the relief that is granted
with respect low value goods.
Key provisions relating to the manner in which customs duty and/or GST are
applied on import, and the relief provided to low value goods, are:
Activity
Agency
Legislative Basis or Otherwise
Liability for duty and/or GST
Goods consigned through the Post Office
by one person to another or goods
consigned other than through the Post
Office with a value not exceeding $1,000
will not be subject to formal entry.
ACBPS
Entry
Entry
S68(1)(e),(f) of the Customs Act 1901;
Regs 31AB and 31AC of the Customs
Regulations 1926.
In addition a duty rate of Free is applied
those goods and in such circumstances
the goods are also free of liability for
GST.
GST and Customs Duty Assessment
for Low Value Goods
A New Tax System (Goods and
Services Tax)
Act 1999 s42-5
Customs Tariff Act 1995 – Schedule 4
Items 32A and 32B Customs By-laws
0540003 and 0540004.
Customs inspection and determination
of Duty and/or GST
Customs inspects the goods and
assesses their declared value. If this
value does not exceed $1000 then
customs duty and GST is not payable
except in relation to certain goods.
If the goods are wine, other alcoholic
beverages, or tobacco products customs
duty, GST and WET is applied at all times
LVPPT INTERIM REPORT
ACBPS
Customs Act 1901; see Part VIII (The
duties), and section/s 68, 69, 70, 71.
Customs Tariff Act 1995.
A New Tax System (Goods and
Services Tax)
Act 1999
Division 7 - 7-1 GST and input tax
45
regardless of value and is not subject to
the threshold – it is not considered in this
assessment of imposts.
Other prescribed items with a value less
than $1000 (e.g. goods that form part of a
bulk order) may also be liable to pay
customs duty and GST.
Are all importations taxable under the
GST Legislation?
Some goods imported into Australia are
not subject to GST.
These are:
 goods that would have been GST-free
or input taxed if supplied within
Australia, such as basic food, certain
medical aids and appliances, cars for
use by certain people with disabilities,
and precious metals, and
 goods that qualify for certain customs
duty concessions.

goods that qualify for certain customs
duty concessions.are also nontaxable for GST purposes and include
the following items in Schedule 4 to
the Customs Tariff Act 1995.
Customs will assess the value of the
good through the inspection process and
assess in order:
1. Customs duty
2. GST / WET.
Generally, the overall effect is that ‘the
importer’ pays at the same time, at the
same place, and in the same manner as
for customs duty (if the goods are subject
to customs duty).
LVPPT INTERIM REPORT
credits
Division 13 - 13-20 How much GST is
payable on taxable importations?
Division 38 - Subdivision 38-Q International mail
Division 114 - 114-5 Importations
without entry for home consumption
Payments of amounts of GST where
delivery into home consumption is
authorised under section 71 of the
Customs Act 1901.
A New Tax System (Wine Equalisation
Tax) Act 1999
Division 2 - Overview of the wine tax
legislation
2-1 What this Act is about - 2-20
Division 5 - General rules for taxability
5-5 General rules for taxing assessable
dealings
5-30 Local entry of imported wine
(AD10)
Division 23 - Wine tax on customs
dealings
A New Tax System (Wine Equalisation
Tax Imposition - Customs) Act 1999
3 Imposition
4 Rate
A New Tax System (Goods and
Services Tax)
Act 1999
Part 2-2 Supplies and Acquisitions
GST free supplies
Part 3-2- Non-taxable importations
42-5 Non-taxable importations –
Schedule 4 of the Customs Tariff Act
1995
42-10 Goods returned to Australia in an
unaltered condition.
46
D5. Other matters
Return of mail
Australia Post has service standards that
it is required to meet in relation to inbound and out-bound international mail.
The Australian Postal Corporation Act
1989 provides that “Subject to subsection
(3), if, under a convention, Australia is
permitted to return a letter or postal
article, Australia Post may return the
article in accordance with the convention
despite its obligations under this
Division.”
Australia
Post
Article 4 of the UPU Convention;
Sections 28C and 29 of the Australian
Postal Corporation Act 1989;
Pt 2 of the Australian Postal
Corporation (Performance Standards)
Regulations 1998.
Article 5(3) of the UPU Convention
Section 28A(2) of the Australian Postal
Corporation Act 1989
UPU Letter Post Regulations, Article
RL 147.
Under the Universal Postal Convention,
“Member countries shall ensure that their
designated operators redirect postal
items if an addressee has changed his
address, and return undeliverable items
to the sender. The charges and other
conditions are laid down in the
Regulations.”
The UPU Letter Post Regulations detail
what happens to undeliverable items,
return to country of origin or to sender
and period of retention. In general the
period of retention should not exceed one
month except in special cases where the
designated operator of destination
considers it necessary to extend it to two
months at most.
Collection of statistical information
The ABS draws on the statistical segment of the complete tariff code to
measure types of goods that are being imported in the mail and cargo
environments, and relies on information provided to it by Customs and Border
Protection for a range of statistical products, including balance of payments
and merchandise trade. As most goods under the threshold value are not
required to be fully declared, those goods are generally not currently counted
for statistical purposes (although estimates may be made based on sampling
data).
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47
Activity
Agency
Legislative Basis or Otherwise
There is no specific mention of the
collection of statistics on international
mail in the ABS Act, only a generic
section on the functions of the Bureau.
ABS
See section 6 of the Australian
Bureau of Statistics Act 1975.
ACBPS
See International Convention on the
Simplification and Harmonization of
Customs Procedures (as amended)
(2006).
(It should be noted, however, that any
new proposal for the collection of
statistics must be laid before both Houses
of Parliament before implementation
unless it is on a voluntary basis.)
The World Customs Organization has
developed the Harmonized Commodity
Description and Coding System,
popularly known as the Harmonized
System or HS, as a multipurpose goods
nomenclature used as the basis for
customs tariffs and for the compilation of
trade statistics all over the world.
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48
Appendix E: Summary of international low value import schemes
Threshold: Tax
VAT/GST
Gift
Duty
Threshold: Reporting
Simplified ID
Full ID
Processing charges
Processing charge
Agency responsibility
Government Agency
Britain
Canada
Singapore
£15 (A$22.82)
£40 (A$60.84)30
£135 (A$205.34)31
C$20 (A$19.25)
C$60 (A$57.73)
C$20 (A$19.25)
S$400 (A$303.84)
S$400 (A$303.84)
S$400 (A$303.84)
£2,000 (A$3,040.94)
C$20 (A$19.25)
C$1,600 (A$1,539.36)
S$400 (A$303.84)32
Royal Mail handling charge £8
(A$12.60) (Courier £13.50) (A$20.52).
Canada Post handling charge
of C$8.50 (A$8.18)
S$5.00 (A$3.80) Singapore Post
handling charge. If Singapore Post is
required to assist customers with
revenue processing, an additional
charge of S$15 is levied.)
UK Border Force (UKBF) Administers
– Border Protection/duty/tax
calculation
Collects – n/a
Canada Border Services
Agency (CBSA) Administers –
Border Protection/duty/tax
calculation
Collects – n/a
Administers - charges and
notification
Collects – tax/charges/duty
N/a
Immigration and Checkpoints
Authority (ICA) Administers - Border
Protection/ and identification of items
for revenue processing
Collects – n/a
Administers – duty/tax calculation,
charges and notification
Collects – tax/charges/duty
ICA is the border agency. It acts on
behalf of Singapore Customs in
gateway in regard to identification of
items for revenue purposes.
No
Yes
Post
Administers – charges and notification
Collects – tax/charges/duty
Other
UKBF is the border agency. It
operates on behalf of HMRC in mail
gateways in calculating duty/tax
liability. Royal Mail pays HMRC VAT.
Other
Kahala group member
Yes
30
Note this is per addressee, ie. if you send to a four addressees on the address label, the threshold is £40 pounds each addressee, ie £160 pounds total.
Customs duty becomes payable if the value of the goods is over £135 but duty is waived if the amount of duty calculated is less than £9.
32 Foreign exchange rates as at 22 March 2012
31
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49
Threshold: Tax
VAT/GST
Gift
Duty
Threshold: Reporting
Simplified ID
Full ID
Processing charges
Processing charge
Agency responsibility
Border Protection (Customs)
Post
Other
Other
Kahala group member
Korea
Japan
New Zealand
USA
US$250 (A$240.40)
₩150,000 (A$127)
US$250 (A$240.40)
Zero
As above
As above
NZ$400 (A$311.90)33
NZ$110 (A$85.77)34
NZ$400 (A$311.90)
n/a
US$100 (A$96.16)
US$200 (A$192.32)
US$600 (A$576.95)
¥200,000 (A$2,325.69)
NZ$1,000 (A$779.75)
US$200 (A$192.32)
US$2,000 (A$1,923.16)
(commercial use)
₩1,000 ($A0.85) (Post
delivery notification charge)
Japan Post handling charge
of ¥200 (A$2.32).
NZ$25.30 (A$19.73)
(BS) NZ$12.77 ($9.96)
US$5.35 (A$5.14) (Post) +
US$5.50 (A$5.29) (Customs)
Administers – Border
Protection/duty/tax/charges
Collects – Border
Protection/duty/tax
Administers – delivery only
Collects – charges
Administers – Border
Protection/duty/tax/charges
Collects – Border
Protection/duty/tax/charges
Administers – delivery only
Collects – charges
Administers - Border
Protection/duty/tax
Collects – n/a
n/a
n/a
Administers - charges and
notification
Collects – tax/charges/duty
n/a
Administers – Border
Protection/duty/tax/charges
Collects – Border
Protection/duty/charges
Administers – charges and
notification
Collects – charges/duty
n/a
Yes
Yes
No
Yes
33 NZ Customs does not collect duty and GST where the total revenue payable on any one importation is less than $60.
34 If the gift is worth more than NZ$110, Customs charges will be payable on the value of the gift that is worth more than NZ$110.
LVPPT INTERIM REPORT
50
Appendix F: International mail products and categories
Express mail service (EMS)
Express mail service (EMS) is a premium Express courier mail service for
letters, documents and merchandise. Generally EMS articles have a
maximum weight of 20kg and are unique to other mail in that they afford
senders and addressees the ability to track consignments on the internet
using a unique tracking number.
EMS articles are in two categories – documents and merchandise.
International parcels
International parcels are any articles which are not an Air Mail letter or other
mail. Generally these articles weigh between 2kgs and 20kgs and have a size
limit of 105cm in length and 140cm in girth/width. International parcels can
arrive by air or sea.
Like EMS this service also affords senders and addressees the ability to track
their consignment on the internet using a unique tracking number.
Registered Post International
Registered Post International provides additional security for letters and
documents weighing up to 2 kgs.
Air mail letter
Air mail letters have the following features:
 a maximum length of 360mm
 a max width of 260mm
 a maximum thickness of 20mm
 a weight which does not exceed 500 grams.
Air mail letters includes items such as aerogrammes and greeting cards.
Other mail
Other mail includes any articles that do not fit into the air mail letter categories
eg items weighing more than 500 grams but less than 2kgs. This class of mail
is referred to as Other Articles (OAs) and can be further divided into small
packets, large packets and printed matter during sorting.
 Small packets are articles that can weigh up to 500 grams.
 Other/large packets are articles which weigh less than 2 kilograms.
 Printed matter means newspapers, brochures, books and magazines;
these are normally wrapped and bundled in plastic, but may also come
as loose articles.
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51
Appendix G: International mail and cargo volumes
INTERNATIONAL MAIL VOLUMES 2006-07 to 2010-11 (millions)
Mail items
2006-07
2007-08
2008-09
2009-10
2010-11
150.076
162.843
145.146
186.147
172.456
Note: Source - Australia Post Annual Report 2010-11; see also page 7 of this report.
TOTAL POST, AIR CARGO & SEA CARGO CONSIGNMENTS 2006-07 TO 2010-11
Post
Full Import Declaration*
Low Value Import Declaration
Short Self Assessed Clearance
Cargo Report Clearance
Air Cargo Full Import Declaration*
Low Value Import Declaration
Short Self Assessed Clearance
Cargo Report Clearance
Sea Cargo Full Import Declaration*
Low Value Import Declaration
Short Self Assessed Clearance
Cargo Report Clearance
2006-07
2007-08
2008-09
2009-10
2010-11
22,934
23,434
21,739
19,056
17,318**
628
571
432
262
233
1,445,639
1,529,759
1,453,677
1,508,979
1,596,476
103,403
122,741
109,396
131,394
155,553
179,809
147,239
121,655
119,299
137,849
5,977,131
6,731,434
6,534,604
7,699,649 10,116,252
1,370,582
1,459,050
1,355,177
1,450,112
1,542,325
14,751
16,052
12,635
16,707
19,234
11,674
11,996
10,154
10,663
10,574
437
442
537
576
733
*Full Import Declaration figures represent amounts over $1000
** In addition, 21,682 alcohol and tobacco products were processed for duty/and or GST by Customs and Border
Protection using the DutyCalc system.
Source - Australian Customs and Border Protection Service ICS data
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52