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3.27 The majority of international merchandise trade transactions are straightforward and follow simple and clear industry procedures designed to maximise efficiency. However natural or artificial factors may create conceptual or statistical problems not previously encountered. While clarification and advice on unusual or difficult cases is sometimes sought internationally, solutions often have to be determined based on what information is available at the time.
3.42 The ABS identifies the goods involved in submarine cable projects in the course of editing large value entries and other entries lodged with Customs. Additional information is obtained from the agents and companies involved. Both the import and subsequent re-export of foreign made components are recorded as merchandise trade. This acknowledges that components will be incorporated into the submarine cable system, even though the system may not be completely physically assembled and installed until after departure from Australia.
3.43 Due to the difficulties involved, no attempts are made to determine the time elapsed between the foreign made components' arrival in Australia and its subsequent departure from Australia, or to classify relevant items (those in Australia for a short period) to temporary trade. Australian produced goods used in these projects are treated as exports, as they subtract from the stock of Australia's material resources.
3.44 For practical reasons, exports of submarine cable laid en route between two countries are attributed to the 'country' receiving the predominant share of the cable, unless the share is nearly equal. For example, a submarine cable laid between Australia and the USA would be assigned to 'International Waters', as the majority of the cable would be laid outside the territories of all countries along the route. No re-allocation is made for the small portion of the cable laid in either Australia's or the USA's territory.
3.45 While not relevant for international merchandise trade statistics, the proportion of resident / non-resident ownership of large projects such as submarine cable systems is required for the balance of payments, as they usually involve multinational companies and a services component. This enables appropriate adjustments to be made before incorporation in the balance of payments statistics.
Banknotes and coins
3.46 As indicated earlier, issued banknotes and coins in circulation are considered financial items and are excluded from international merchandise trade statistics. Unissued banknotes, and coins not in circulation, are classified as imports or exports of printed products (HS Chapter 49) and coin (HS Chapter 71). This treatment reflects Australia's experience that the great majority of coins traded internationally are not for use as a medium of exchange, but rather for their value as collectors' pieces or for the value of their precious metal content.
3.47 The HS Explanatory notes direct the classification of plastics printed with motifs, characters or pictorial representations, which are not merely incidental to the primary use of the goods, to Chapter 49. Heading No. 49.07 specifically refers to banknotes, where, on being officially issued, they have a fiduciary value in excess of their intrinsic value. Unissued banknotes, and coins not in circulation (e.g. when these are manufactured in Australia for use in other countries), are valued at the transaction value of the printed paper (or polymer) or stamped metal, rather than at their face value.
3.48 Coins, both legal tender and those that are no longer legal tender (including such coins put up for general sale in presentation cases), are classified to Heading No. 71.18 unless they are separate pieces of significant value clearly intended for a particular collection. In these circumstances coins are recorded under Heading No. 97.05 which includes collections and collectors' pieces of numismatic interest.
3.49 ABS investigates significant export and import entries to determine whether the transactions involving coins are of a financial or mercantile nature. Transactions of a financial nature are removed and additional work is undertaken on mercantile transactions to separate ordinary coins from collectors items. Ordinary coins are recorded in international merchandise trade statistics at the value of their metal content, while collectors items are listed at the value paid for or at which items were sold.
Aircraft engines and parts
3.50 There are difficulties in consistently treating exports and imports of aircraft engines and parts, due to the sometimes limited information supplied about these transactions and the different circumstances under which they cross the Customs frontier. These include:
3.51 Customs does not require any documentation to be lodged where Australian-owned aircraft return from being repaired overseas. Any parts shipped from Australia to assist with these repairs should be recorded as international non-merchandise trade.
3.52 Customs entries relating to aircraft engines and parts are identified by ABS with tailored edits. Some of these automatically reclassify exports and imports to international merchandise trade or international non-merchandise trade depending on the identity of the exporter or importer. Customs agents and airline staff are also contacted to confirm entry details and obtain additional information useful for correctly classifying the goods.
3.53 Values vary substantially depending on the nature of the parts and the aircraft in which they are used. Shipments occur reasonably frequently and sometimes contribute significantly to international merchandise trade statistics. The ABS, therefore, attempts to consistently treat individual large value shipments and overall exports and imports of aircraft engines and parts.
Vessel repairs and upgrades
3.54 When a vessel crosses the Customs frontier for repair purposes, the movements into and out of the country should be recorded as international non-merchandise trade. Any parts exported from the country of the vessel's owner to assist with the repair are also recorded as international non-merchandise trade. However, if substantial improvements are made to the vessel, resulting in a significant increase in its value, the type and value of the improvements should be recorded as international merchandise trade.
3.55 Where a substantial transformation occurs, with the effect that the vessel will move from one statistical code to another, both the import and export transactions should be recorded as international merchandise trade. Although the nature of the vessel has changed, the transformation is not considered to be merely repairs or 'goods for processing'.
3.56 Australian components exported for incorporation into a new vessel, to be subsequently imported to Australia, should be recorded as international merchandise trade. Their value upon return to Australia will be included in the overall value of the vessel.
Timor Gap Zone of Cooperation
3.57 The Timor Gap covers an area of approximately 68,000 square kilometres located in the Timor Sea, between northern Australia and East Timor, between longitudes 126E and 128E. It is of considerable interest for oil and gas exploration and development.
3.58 The Indonesian and Australian governments negotiated a treaty in 1989 (Treaty between Australia and the Republic of Indonesia on the Zone of Cooperation in an Area between the Indonesian province of East Timor and northern Australia - "the Treaty") which split the area into three zones (A, B & C) (See map 3.1). The Treaty took effect from 9 February 1991. The Petroleum (Australia-Indonesia Zone of Cooperation) Act 1990 allows Australia to fulfil its obligations under the Treaty.
3.1 EXISTING MARITIME BOUNDARY ARRANGEMENTS BETWEEN AUSTRALIA AND INDONESIA
Source: Australian Surveying & Land Information Group (AUSLIG) Commonwealth Department of Industry Science and Resources. MAP 96/523.21.1.
Existing maritime boundary arrangements between Australia and Indonesia. The Treaty between the Government of Australia and the Government of the Republic of Indonesia establishing an Exclusive Economic Zone Boundary and Certain Seabed Boundaries (Australia - Indonesia Maritime Delimitation Treaty) Perth 14 March 1997 was signed but not ratified by each country. It is to be amended to take into account that Indonesia no longer exercises sovereignty over East Timor.
3.59 The Timor Gap Treaty (Transitional Arrangements) Bill 2000 assented to on 3 April 2000 amended the Petroleum (Australia-Indonesia Zone of Cooperation) Act 1990 and other Commonwealth legislation, including the Customs Act 1901. This reflected the fact that, on 25 October 1999, the United Nations Transitional Administration in East Timor (UNTAET) replaced Indonesia as Australia's partner in implementing the terms of the Treaty. From that date, Indonesia ceased to have sovereign rights in the area covered by the Treaty.
3.60 The agreement between the UNTAET (acting on behalf of East Timor) and Australia, provides practical arrangements for continuity of the terms of the Treaty, until a new treaty is negotiated and implemented when East Timor achieves full independence.
3.61 At the time of writing, the changed administrative arrangements in East Timor resulted in minor changes to Customs procedures for dealing with activity in the Timor Gap Zone of Cooperation. ABS international merchandise trade statistics will continue to treat East Timor as if it were part of Indonesia until the province achieves full independence.
3.62 Customs requires that appropriate entries be lodged for all goods crossing the Customs frontier between Australia and Zone A of the Timor Gap Zone of Cooperation. These transactions are included in Australia's international merchandise trade statistics e.g. petroleum shipped from Zone A to Australia is recorded as an import, while movements of provisions from Australia for use in Zone A exploration and production activities are treated as exports.
3.63 Zone B of the Zone of Cooperation lies to the south of Zone A and is controlled by Australian authorities. Zone B is divided into two areas, with Western Australia (WA) and the Northern Territory (NT) having state control over one area each. The ABS classifies offshore oil and gas activity to the state or territory that administers the tenements. Exports from the western component of Zone B to foreign countries should be recorded as originating from WA in Australia's international merchandise trade statistics, while exports from the eastern component of Zone B should be recorded as originating from NT.
3.64 Zone C lies to the north of Zone A and is controlled by the UNTAET on East Timor's behalf. Any movement of goods from Australia to Zone C should be recorded as exports, while any receipt of goods from Zone C should be recorded as imports.
3.65 Current oil and gas exploration and development activity within the Timor Gap is mostly centred on Zone A. In recent years production has commenced from significant new oil fields located in Australian territorial waters in the Timor Sea, adjacent to, but not included within, the Timor Gap Zone of Cooperation. This has led to a substantial increase in the volume (and value) of Australia's exports of crude oil.
3.66 The recording of international merchandise exports and imports of computer software for statistical purposes is complicated by the fact that computer software often consists of a good (to be included) and a service component (to be excluded) that are difficult to quantify separately. Accordingly, in the IMTS, Rev.2, the UN makes two recommendations with respect to the treatment of computer software in international merchandise trade statistics.
3.67 Packaged sets containing diskettes or CD-ROMs with computer software developed for general use (not to order), with or without a users' manual, and audio and video tapes recorded for general or commercial purposes, are to be included in international merchandise trade statistics at their full transaction value (the value of both carrier medium and software), rather than just the value of the empty diskettes or CD-ROMs, paper or other materials.
3.68 Diskettes or CD-ROMs with stored computer software developed to order (customised computer software), audio and video tapes containing original recordings, and customised blueprints etc are excluded from international merchandise trade statistics. The value of such 'originals' is included as part of trade in services. This is also consistent with the recommended treatment in Balance of Payments Manual, Fifth edition (BPM5), whereby software implementation (including the design, development and programming of customised systems) is recorded under computer and information services.
3.69 Although the value of customised software includes the cost of the software medium (i.e. the diskette, CD-ROM, cassette or paper), the predominant portion of value is usually a service component (design, modification, development and programming services; maintenance and repair services; licence fees, distribution fees, copyright, patent fees and trademarks).
3.70 The ABS investigates Australia's international computer software transactions and attempts to separate general use (not to order) from customised (non-standard) software, as this distinction is not made by Customs. While both exports and imports are investigated, greater activity occurs with imports due to their greater relative volume. Tailored edits, contact with the customs agent, exporter or importer, and other stored information are used. The nature of business undertaken, the per unit value of software, and other goods involved in the transaction, provide further information about the type of software.
Sydney 2000 Olympic and Paralympic Games
3.71 Significant import and subsequent re-export of goods used in staging these events generated a need for separate identification of the goods by Customs. Customs legislation and procedures were amended and some new Customs Tariff and AHECC codes were created. These goods included large items such as motor vehicles and broadcast equipment, athletes' sporting equipment, and small items such as give-aways, hospitality samples and consumables. The value of some items was significant.
3.72 Of concern to the ABS was the need to accurately measure international merchandise trade and international non-merchandise trade related to these events. Consistent treatment of goods, in particular valuable items, is important. Reconciliation of imports and exports was facilitated by their separate identification, ensuring that most goods could be tracked to determine whether those temporarily imported were actually exported afterwards.
International gas pipelines
3.73 At the time of writing, construction of two separate international gas pipelines involving Australia has been proposed. These are:
3.74 Australia's international merchandise trade statistics are likely to be affected, if either project proceeds, as a result of construction activity, ongoing maintenance and actual gas flows. Specialised materials and equipment not available in Australia may be imported to allow project work and maintenance to be undertaken. Required Australian goods are also likely to increase exports. Exports and imports would most likely include both temporary and permanent items, impacting on both international merchandise trade and international non-merchandise trade statistics.
3.75 If the pipelines become operational, the flow of natural gas into Australia will cross the Customs' frontier and will therefore be within the scope of international merchandise trade statistics. Customs entries would be expected for gas piped from Zones A and C to Australia, as these zones are not part of Australia's economic or statistical territory. Information about these flows would be included if the details are provided to Customs.