Avoid paying import duties by getting a tariff concession

Avoid paying import duties by getting a tariff concession

While New Zealand has a relatively open economy, the Government still charges import duties of up to 10% on many products as they enter the country. A 5% or 10% duty may not sound like much, but it can increase the price of importing a $10m boat by $500,000, or the price of importing a $1m consignment of shoes by $100,000!

The good news for importers is that they can apply to Customs for a tariff concession, which removes the duty that would otherwise be payable under certain circumstances. For example, a concession will usually be granted where 'suitable alternative goods' are not produced or manufactured in New Zealand.

This publication provides insights on New Zealand's tariff concession system, including practical tips on how to prepare (or challenge) a compelling tariff concession application.

Tariffs in New Zealand

New Zealand currently has an average weighted tariff rate of around 2.2%. But it has tariff peaks of up to 5% or 10% on imports of certain sensitive products, which are identified in the table below.

Tariff Concession Applications

A tariff concession (Concession) removes the duty that would otherwise be payable for certain imports. Concessions that are already available for use by all importers are set out in the Consolidated List of Approvals, which is a mere 310 pages long.

Applications for new Concessions must be made on the prescribed form and sent to Customs, together with supporting information and the application fee of $398.67 (GST inclusive). In our experience, applicants should:

• carefully consider which category of concession to apply for. The most common type of concession is a General Approval, but concessions for Inputs to Manufacturing, Shortfalls, and Capital Equipment are easier to obtain and/or harder to contest in certain circumstances;
• express the category of goods to be covered by the Concession in very precise terms, so as to distinguish those goods (in both form and function) from broader groups of goods that are produced or manufactured in New Zealand. Imprecise wording slows Concession applications down and is a leading cause of Concession-related disputes;
• note that price and quality are not normally taken into consideration when deciding on whether 'suitable alternative goods' are produced or manufactured in New Zealand. However, leading case law confirms that issues such as price, warranties, performance guarantees, advanced technology, efficiency, productivity characteristics, and production lead times may be taken into account when considering applications for Capital Equipment Concessions; and
• when applying for Capital Equipment Concessions, ensure that serious efforts are made to seek out local producers and involve them in the tender process (e.g. call for expressions of interest, distribute itemised procurement schedules, provide tender opportunities, etc). Also ensure that those efforts are well documented. The onus of proof is on the applicant to satisfy Customs that that local manufacturers were not capable of producing the product required.

Customs' decision making process

If Customs is aware of a local producer or manufacturer of 'suitable alternative goods', it will automatically decline the application. If not, Customs will publish the proposed Concession wording in a Notice in the Customs Gazette, which is published on a weekly basis.

A New Zealand producer or manufacturer of 'suitable alternative goods' (or a person acting on their behalf) can lodge objections against an advertised Notice within three weeks of it being published. An objection to a Concession application must evidence the availability of (or potential ability to manufacture) suitable alternative goods. Applicants must be given an opportunity to respond to any objections lodged.

Customs exercises broad delegated Ministerial discretion as to whether or not to grant a concession. The only constraints on that discretion are set out in Part II of the Tariff. It is expected that Customs will give due consideration to its own policy guidelines, and act in a fair, consistent and reasonable manner. Approved applications are published in the Customs Gazette and incorporated into the Consolidated List at two monthly intervals.

In our experience, Customs will usually decline applications that:

• concern goods that have been produced locally in the recent past (within three years), or are of a type where production is inherently seasonal or sporadic in nature and an objector has a history of producing the same or similar goods;
• concern goods that are sensitive, including some food products, tobacco, paints and wood, unless there are very special circumstances;
• are based on alleged technical or performance deficiencies in the locally produced or manufactured goods, unless the application is for a Capital Equipment Concession or Inputs to Manufacturing Concession; or
• propose Concession wording that includes brand names, where the goods can be described in another way, or specifies a particular end-use of the imported goods, as end-use is not capable of enforcement at the border.

An applicant who is dissatisfied with a Customs' decision not to approve a Concession may, within 20 working days after receiving notice of that decision, request that the decision be reconsidered and a Customs Ruling issued. An applicant who is dissatisfied with a Customs Ruling, can appeal that decision to the Customs Appeal Authority, and then the High Court, as appropriate.

Further Information

Russell McVeagh has advised clients on tariff concession applications for imports of various goods, including rechargeable lithium-ion battery packs, airport rescue fire-fighting equipment, boysenberries, hexabromocyclododecane, leather, spark plugs, tinted paper, and micronic filters. We represent our clients before various bodies, including Customs, the CAA, and all levels of the New Zealand Courts system.

For further information please get in touch with one of our contacts below.