In this special feature story, Andrew Willcocks outlines what the recently finalised China Australia Free Trade Agreement means for SMEs that export their products and services.
The formal conclusion of the China Australia Free Trade Agreement in late 2014 will bring substantial new opportunities for exporters. Although the text of the China Australia Free Trade Agreement (ChAFTA) has not been revealed at the time of writing, it is already clear from Government releases that ChAFTA promises improved trading conditions for many areas of the Australian economy, including agriculture, resources, manufacturing, energy and services.
China is Australia’s largest export market, and the implementation of ChAFTA in the coming years means that 95 per cent of Australian goods exported to China will become tariff free. When the agreement first comes into force, 85 per cent of Australian goods exports will be tariff free. Some notable benefits occur on the day the agreement enters into force, when tariffs on coking coal and barley are to be immediately removed.
Within two years, tariffs on all resource and energy products will be removed. Within four years, tariffs on Australian wine ranging between 14 to 30 per cent alcohol/volume will be removed, as will all tariffs on live animal exports. Within four to 10 years of the commencement of the agreement, all tariffs on dairy products will be removed. Business mobility and a wide range of Australian services will also gain increasing access to the Chinese market throughout this time.
HOW TO ACCESS TARIFF BENEFITS
What is often less clear when an Australian preferential trade agreement is signed is the question of how these tariff benefits are to be accessed by Australian business owners as the agreement takes effect. The benefits for imports and exports under a trade agreement usually take the form of tariff concessions for complying goods, which are negotiated by countries party to the agreement prior to its entry into force.
Where normally an Australian good entering the trading partner would have a certain tariff applied, the trade agreement will mean that the usual tariff is either not as high, or removed altogether by the trading partner under the terms of that agreement, provided that the goods comply with the requirements of the “Rules of Origin” and procedures for customs assessment of the claim for preferential treatment.
Many in the broader Australian public believe that benefits from preferential trade agreements flow to our economy automatically from the time of entry into force. But the reality is that automatic benefit is not the case for the vast bulk of goods entering the trading partner.
Instead, businesses must make an application to foreign Customs for each shipment to qualify for the benefit. This application must be presented to foreign Customs at the time of import, at the point that the goods cross the border into the foreign economy. Needless to say, an Australian SMEs request for a concession is usually scrutinised very carefully by foreign Customs before the benefit is granted for the goods.
APPLYING FOR TARIFF CONCESSIONS
Australian exporters may apply for tariff concessions under an agreement such as ChAFTA by making their claim on a Certificate of Origin backed by an Australian Government authority. In Australia, these documents are issued by an authorised body such as the Australian Chamber of Commerce and Industry (ACCI), which delegates this role to its state and territory chambers. Many Australian exporters also choose to fill out their claim electronically, via several electronic providers working with Chambers. This means that a Certificate of Origin may be filled in by the exporter online and returned following Certification by a chamber in under 30 minutes, from anywhere in the country.
Chambers of commerce in each Australian state and territory have many decades of experience issuing Certificates of Origin for Australian businesses under the ACCI authority. This experience includes issuing Certificates under the ASEAN-Australia New Zealand Free Trade Agreement, the Thailand-Australia Free Trade Agreement, the Korea-Australia Free Trade Agreement, the Chile-Australia Free Trade Agreement, and many more.
In assisting exporters and importers with accessing the agreements, the Chamber movement ensures the benefits of preferential trade agreements reach the Australian economy. It’s worth noting that the upcoming Japan-Australia Economic Partnership Agreement will also require Certificates of Origin, and the ACCI can also help business owners access that agreement in future months.
The issue of the costs of compliance for exporters and the need for a common system for all PTAs has been a key theme championed by ACCI. A quick, knowable, enforceable and internationally harmonised means for Australian business to access trade agreements such as ChAFTA is the difference between a trade agreement that brings the benefits promised by the Australian Government to the Australian economy, and a trade agreement that looks great on paper but nobody can use.
The Australian Chamber of Commerce and Industry has been promoting this harmonisation and consistency message to Australian trade negotiators for many years. We believe firmly that while it is great for our economy to have vertically constructed trade agreements negotiated with a wide range of countries, it is also just as important to have horizontal consistency in how business is to access those benefits. Divergent means of accessing each agreement means headaches for Australian businesses and adds to the red tape pile, which is why the standard Certificate of Origin approach used around the world for decades is the standard we expect.
It is no surprise that in the China-Australia Free Trade Agreement, China has elected to use the international standard Certificate of Origin as the means for Australian businesses to apply for the benefits of the agreement. We look forward to assisting Aussie SME business owners to access new benefits with Australia’s largest trading partner as the agreement is gradually rolled out in the coming months.
Andrew Willcocks is Certficates of Origin Compliance Officer at the Australian Chamber of Commerce and Industry (ACCI).
This feature was originally published in the February 2015 print issue of My Business. To read more in-depth features for SME business owners immediately upon publication, subscribe to My Business magazine now.