Australia’s System of Preferences What we need to know

AIMS OF THIS SESSION The topic is about Tariff Treatment of goods from certain countries Re-aquaint you with preference terms provisions types Recent developments SAFTA LDC Answering Exam questions What to look for

The Terms Origin Preference Rules Produce Manufacture Allowable Factory Cost Qualifying Area Total Factory Cost

Origin & Preference Origin –A matter of fact –Where did it originate from? “the act or fact of something coming into existence” Preference –A matter of determination –According to the rules

The Rules Produce or Manufacture of; - a particular country not being Australia - a Developing Country not being a particular Developing Country Not produce or manufacture unless in accordance with the rules

The Rules See Section 153D(1) 153D(6) 153D(6A) 153E(2) 153J - 153Q Determination of qualification parameters

Produce or Manufacture Produce: Unmanufactured Raw Products - Section 153H Waste & Scrap - Section 153D(7) Manufacture: Having regard to their Final Process of Manufacture and Allowable Factory Costs in their Qualifying Area

Section 153B New Zealand Canada Papua New Guinea Forum Island Country particular Developing Country (inc. LDC) DC but not a particular DC Singapore not a preference country

Concept of:Total Factory Cost Allowable Factory Cost Section 153B, Total Factory Cost = sum of: Total Expenditure on materials (S153C) - received at factory Allowable factory expenditure on labour(S153D) Allowable factory expenditure on overheads (S153F) Allowable factory cost = sum of: Allowable factory expenditure on materials (153D, E) Allowable factory expenditure on labour Allowable factory expenditure on overheads

Allowable Expenditure - Factory Materials Section 153D(1) - the cost of materials as received at factory - adjusted/disregarded as necessary (S153E) - except for “partly manufactured from materials imported from outside the qualifying area” (2) - inland freight rule - PNG & FI(3) - “intervening manufacture”(4) - “intervening export of contributing materials”(5) - NZ, special rule - total expenditure(6) AFC of “particular materials” >50% of TFC on “particular materials” - PNG & FI, special rule - total expenditure(6A) AFC of “particular materials” >50% of TFC on “particular materials” - Transhipment- disregarded re country of export (8)

Allowable Expenditure - Factory Labour Incurred by the manufacturer of the goods Relates to the manufacture of the goods Can be allocated to manufacture of the goods Refer Reg. 107A

Allowable Expenditure - Factory Overheads Incurred by the manufacturer of the goods Relates to the manufacture of the goods Can be allocated to manufacture of the goods refer Reg 107B

Rules for individual countries S153JNew Zealand (1)Wholly manufactured (2) Partially manufactured (a) final process of manufacture (b) AFC =/> specified % of TFC (4)Specified % = 50% or less if CEO determines may be 48% (153K) (non-recurring circumstances) S153LPNG & FI (1)Wholly manufactured (2) Partially manufactured (a) final process of manufacture (b) AFC =/> specified % of TFC (4)Specified % = 50% or less if CEO determines may be 48% (153LA) (non-recurring circumstances)

Rules for individual countries S153PCanada (1)Shipped direct to Australia not transhipped if transhipped, original destination Australia (2)Wholly manufactured, from; unmanufactured raw products materials wholly mfd in Aust and/or Canada determined manufactured raw materials (3) Partially manufactured (a) final process of manufacture (b) AFC =/> specified % of TFC (4)Specified % = 75% of commercially available goods Specified % = 25% of not comm. available goods

Singapore-Australia Free Trade Agreement Rule 1 - Wholly obtained goods Rule 2 - Wholly manufactured goods Rule 3 - Partly manufactured goods –accumulation Rule 4 - Partly manufactured goods –no accumulation New Section 153UA inserted

Rule 1 Wholly obtained goods –unmanufactured raw products –waste & scrap

Wholly manufactured goods Made from –unmanufactured raw products –waste & scrap –material wholly manufactured in Singapore or Australia –“determined manufactured raw materials” new term - DMRM not necessarily of Singapore origin

Rule 3 Partly manufactured goods - no accumulation Final Process of manufacture in Singapore AFC => 30% TFC for Annex 2D goods –Annex 2D (i) specifies certain Tariff references –Annex 2D(ii) covers goods under current TCO AFC => 50% TFC for other goods Introduces “by or on behalf of the manufacturer” Covers partially processed outside Singapore

Rule 4 Partly manufactured goods - accumulation Applies to goods other than Annex 2C One/more process of manufacture in Singapore A process in Singapore immed. before export A manufacturer identified as “principal manufacturer

Transport Rules Transported directly, or Transported through another country only if: –Undergone minor operations to preserve them –Not traded or used in that country Transported from another country where minimal operations performed immediately after importation from Singapore

Evidence of Origin Certificate of Origin –Issued by Singapore Customs –Specifies the Rule number and conditions e.g. Rule 3, Annex 2D(ii) TCO covered goods –must specify TCO number –invalid if TCO number has changed Exporter Declaration –for each shipment –declares goods covered by Origin Certificate

Areas most commonly examined Difference between Preference & Origin Calculation of component criteria –TFC –AFC “qualifying area”, –value inputs from different countries –intervening manufacture expenditure on factory labour and materials –determined manufactured raw materials

Be aware of: Special Rules - NZ, PNG, Forum Islands –inc. “manufactured” - 48% may be read as 50% definition of “produce” “Particular Developing Country” “But not in a Particular Developing Country” “Less Developed Countries” SAFTA

QUESTIONS?