Customs Import Processing Charges To Increase By More Than 200% From 1 January, 2014

Tucked away in the Australian Government’s 2013 Budget papers is a small section advising that the Import Processing Charge (“IPC”) levied by the Australian Customs and Border Protection Service (“Customs”) for the “processing” of import declarations for consignments arriving by sea will increase by AU$ 102.60 per consignment. The current IPC is AU$ 50.00, so the new charge will bring this to AU$ 152.60. For consignments arriving by air the IPC will increase by AU$ 81.90. The current IPC is AU$ 40.20, so the new charge will bring this to AU$ 122.10 per consignment.

It should be noted that this increase will only be applied to consignments valued over AU$ 10,000.00. Consignments valued between AU$ 1,000.00 and AU$ 10,000.00 will remain at their current levels, and shipments with a value of less than AU$ 1,000.00 will continue to remain free of any IPC.

The rationale behind such significant increases is the Government’s desire to fully recover all the costs of import related cargo and trade functions undertaken by Customs. Currently only a portion of these functions is cost recovered. The increase to the IPC will result in additional revenue of $674.3 million over four years and will be implemented in accordance with the Australian Government’s cost recovery policy.

It is quite obvious the Government have taken the easy path in respect to this dramatic increase by choosing to impose the burden on those who can do nothing about it – the importing community. If the IPC isn’t paid then an import consignment isn’t released. To be fair, the IPC hasn’t changed for some years so it’s overdue for a review. Furthermore, there are many import related and trade functions where there is no fee currently levied by Customs to access those services, such as applying for a Tariff Advice, or a Valuation Advice, or applying for a Tariff Concession Order.

Is it fair, however, to place the increased burden of cost recovery for these services broadly across the entire importing community when a significant number of them never need to make use of those services? Would it not be a fairer proposition to apply a properly costed processing charge to each service on a user pays basis? No, that would be far too hard (or perhaps the costs for some services would be so high they would be untenable?), so let’s just take the simple option because it can be quickly and very easily instituted with a minimal cost. After all, it’s just a relatively simple re-write of the part of the computer program that calculates the IPC.

Another area where the Government should be looking is the current system for import shipments with a value of less than AU$ 1,000.00. To the best of my knowledge, Australia is the only country that allows such a generous concession. Currently there are some 9 million such consignments flowing into Australia annually, and this is increasing rapidly as consumers become more comfortable with online purchasing. To put it in a nutshell, if you could purchase something and have it delivered to your door within 10 days for, say, AU$ 800.00 whereas going to a local store and paying considerably more (because the price includes import duty and GST) for the same item where the only benefit is delivery within 3 days, why wouldn’t you consider the online purchase?

If the Government took steps to reduce this concession (and there is actually a review underway at the moment) to a more sensible level then they would be have more import declarations against which to levy the IPC. For such low value consignments a concessional IPC could be levied, say AU$ 30.00 per consignment. If the concessional value level was reduced to, say, AU$ 250.00 per consignment (which is on par with many other countries) and that resulted in an additional, say, 8 million IPC charges, the government would receive AU$ 240 million in IPC revenue, plus the bonus of additional import duty and GST currently being foregone.

© Lighthouse Agencies Pty Ltd. All rights reserved.