WHAT FREE TRADE AGREEMENTS ARE AVAILABLE WHEN EXPORTING TO AUSTRALIA
Australia imposes customs duty on many goods such as clothing and textiles, industrial goods and agricultural goods. While the customs duty is often only 5%, if that customs duty can be avoided, the importer’s profit margin may be doubled. Understandably, exporters to Australia will be keen to know what free trade agreements apply.
Free trade agreements can be between only two countries (bilateral) or between multiple countries (multilateral). As of 1 January 2021, Australia currently has bilateral free trade agreements in place with:
· New Zealand
· Hong Kong
Australia has entered into the following multilateral agreements:
· Comprehensive and Progressive Agreement for the Trans-Pacific Partnership - this includes 11 countries including Mexico, Canada, Japan and Vietnam
· ASEAN-Australian-New Zealand – which includes 11 countries including the Indonesia, Singapore, Philippines, Laos, Cambodia and Myanmar
· Pacific Agreement on Closer Economic Relations – New Zealand and 9 Pacific Island counties.
As of 1 January 2021 Australia had finalised negotiations for the Regional Comprehensive Economic Partnership, but had not yet ratified the agreement. This means that it is not in force. Australia was also negotiating free trade agreements with the European Union, the United Kingdom, India and the Gulf Cooperation Council.
The free trade agreements in force potentially cover the majority of Australia’s trade. However, it is important for exporters to know that free trade agreements do not apply automatically. It is the exporter that has the role of ensuring that goods actually qualify for the free trade agreement. If the goods do qualify, it is the exporter that generally has the role of obtaining or producing the required documents (certificate of origin or declaration of origin).
Important consideration for exporters include:
· Do multiple agreements apply? For instance, multiple agreements potentially apply to exports from Japan, Singapore, Malaysia, New Zealand, Thailand, Indonesia and Peru.
· Will the goods be duty free even without using the free trade agreement? If so, are you incurring costs that will not benefit the importer?
· If multiple free trade agreements apply, do they all produce the same duty rate?
· If multiple free trade agreements apply, does one have easier or harder documentation requirements than the others? For instance, some free trade agreements permit a mere invoice as an origin document, while others require a document issued by an authorised body.
· If audited in years to come, will you be able to prove that the good satisfied the origin requirements of the free trade agreement?
Free trade agreements are great at reducing the importer’s costs of trade and make exporter’s products more competitive. However, the requirements of free trade agreements need to be taken seriously by exporters. Taking care at the time of first using the free trade agreement will increase the chances that the free trade agreement can be used confidently by the importer. If you have any concerns regarding the use of a free trade agreement it is best to seek advice at the time of first using the concession, rather than when the importer is audited by the Australian Border Force.