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Duty to be Assessed on Alternative Fuels as of 1 December 2011

If your company imports or uses LPG, LNG or CNG in operations, take note. Customs duties (or the equivalent rate of excise tax on domestically produced alternative fuels) will soon be assessed on these fuels.

The Customs Tariff Amendment (Taxation of Alternative Fuels) Act 2011 will impose customs duties on LNG, LPG and CNG as of 1 December 2011. The Act will also create new subheadings in the Customs Tariff for blends of ethanol with either gasoline or diesel.

In brief, the Australian Government’s plan to phase in duties and excise on LPG, LNG and CNG looks like this from 1 December 2011:

Goods Liquefied Natural Goods Liquefied Natural Goods Liquefied Natural Goods Liquefied Natural
Tariff   Classification 2711.11.00/13 2711.12.10/012711.13.10/03 2711.21.10/05
From   1 Dec 2011 $0.0522/kg $0.025/L $0.0522/kg
From   1 July 2012 $0.1045/kg $0.05/L $0.1045/kg
From   1 July 2013 $0.1567/kg $0.075/L $0.1567/kg
From   1 July 2014 $0.209/kg $0.10/L $0.209/kg
From   1 July 2015 $0.2613/kg $0.125/L $0.2613/kg

Below is a summary of what importers need to know about each alternative fuel:

Definitions

There will be new definitions for LPG and CNG:

Additional Note 2 to Chapter 27 will provide the following definition of LPG:

For the purposes of 2711.12.10 and 2711.13.10, LPG means:

(a) liquid propane; or

(b) a liquid mixture of propane and butane; or

(c) a liquid mixture of propane and other hydrocarbons that consists mainly of

propane; or

(d) a liquid mixture of propane, butane and other hydrocarbons that consists mainly

of propane and butane.

Additional Note 5 to Chapter 27 provides the following definition of CNG:

For the purposes of 2711.21.10, CNG means natural gas compressed for use as fuel for a motor vehicle other than:

(a) a motor vehicle that is designed merely to move goods with a forklift and is for

use primarily off public roads; and

(b) a motor vehicle that is of a kind prescribed by the regulations for the purposes of

this paragraph.

CNG that falls outside this definition is classified in subheading 2711.21.90, with a rate of Free.

LNG will continue to be classified in subheading 2711.11.00, and there will be no change to the definition.

Conversion

There will be new conversion rates outlined in the Customs Regulations 1926 (subregulation 126E) for LPG and CNG:

  • LPG may be converted to litres at the rate of 1 kilogram of LPG to 1.885 litres of LPG.
  • CNG may be converted to kilograms at the rate of  1 magajoule of CNG to 0.01893 kilograms of CNG.

LNG will continue to have a unit quantity of kilograms.

Automatic Remission

LPG and LNG will have an automatic remission provision where duties are immediately refundable if these fuels are ‘not intended for use in an internal combustion engine of either a motor vehicle or vessel’. CNG that is ‘not intended for use in an internal combustion engine of either a motor vehicle or vessel’ will simply be classified as such in subheading 2711.21.90. Subregulation 126(1) of the Customs Regulations 1926 will have further details.

Another round of changes will take place on 1 January 2012, as changes to the classification codes in the Customs Tariff are set to take effect on that date.  A number of subheadings created on 1 December 2011 under the Customs Tariff Amendment (Taxation of Alternative Fuels) Act 2011 will changes again on 1 January 2012. In particular, the following will occur:

  • A new subheading 2710.20.00 will be created for certain biodiesel blends
  • Subheading 2710.11 (light oils and preparations) will be renumbered to 2710.12
  • A new heading, 3826, will be created for biodiesel and other biodiesel blends.

For more information, please refer to Attachments A and B of Customs Notice 2011/47.

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