China Australia Free Trade Agreement – Update

China Australia Free Trade Agreement – Update

EES are proud members of the Customs Brokers and Forwarders Council of Australia (CBFCA) and as such we wish to pass on this detailed message to all importers from China into Australia that has recently been issued by the CBFCA:

Notwithstanding the commentary provided in NNF 2016/001, the need to be mindful as to issues relating to Certificates of Origin or classification under ChAFTA and in terms of resolution of any certification/classification issues, the only source for such resolution is the Department of Immigration and Border Protection (DIBP) (details being provided in the NNF). On this issue, your industry Association was addressing, on average, 15 calls a day on ChAFTA since the commencement of the Agreement on 20 December and referred these issues to the DIBP for their information and commentary.

Issues with the certification and/or classification are now to the fore with the ChAFTA (as they had been in the past with Korea and Malaysia) where supposedly highly respected regulatory agencies or independent third parties who certify Certificates of Origin apparently are deficient in classification skills or verification of classification under the World Customs Organisation Harmonised System (HS) and who also appear to have little understanding of certification aspects as to manufacture or local/regional content. This is clearly highlighted by ChAFTA Certificates of Origin, particularly those related to Wholly Obtained goods as well as classification to the HS (6 figure) which appear questionable.

The CBFCA would expect however, that with the close working relationship and memoranda signed between the DIBP and respective regulatory agencies and Government departments, in those economies with which Australia has concluded trade agreements (and these entities would be seen by service providers in Australia as to being appropriately competent and skilled in that certification) this would resolve these issues and notwithstanding the due diligence Australian service providers exercise, they should be able to rely on those competent authority(ies) as to those certificates meeting Australia’s regulatory requirements.

However, this is not the case as service providers are bound by the requirements of the Customs Tariff Act 1995 and the Customs Act 1901, and while it may be acceptable for the DIBP on a one-to-one basis to advise that a minor difference in classification within a HS subheading level is acceptable, no public policy on this minor difference has been articulated, and the minor difference question may need to be addressed some four (4) years later during any DIBP compliance audit!

As to certification by approved authority, it is assumed China would be no different as to the competency of certification bodies, in Australia or elsewhere, agreeing classification of goods as exported and the manufacturing criteria where the certification body does not actually sight the goods or necessarily any illustrative descriptive literature to confirm classification and/or manufacturing details and relies solely on that data as provided by the party requesting the certification.

The CBFCA understand that at this time, the DIBP has been inundated with requests for clarification on many ChAFTA certification and classification issues, and that a DIBP email is being generated to industry as to ChAFTA requests that the DIBP will respond in “due course”. What this appears to signify is that the DIBP failed to understand the complexities that would be faced by industry in relation to ChAFTA, even though such issues had been noted in the past with other trade agreements where certification and classification issues arose. Simply put, the DIBP needed(s) to resource the interface for ChAFTA more robustly as most service providers do not have the luxury of early receipt of documentation from their respective clients (who seek the benefits of ChAFTA, but they and their suppliers don’t fully understand Certificate of Origin and classification issues to achieve the lower rates of customs duty) and service providers are seeking timely advise when they are entering or preparing to enter cargo for home consumption. So, for these requests, there is a need for a timely response as to acceptance or otherwise of certificates and/or classification and not in “due course”. If there is a rejection, then the importer of record needs to be advised that the ChAFTA customs duty rate cannot be accessed and an amended certificate required should a refund of customs duty be required. Similarly, should no response be received from the DIBP in “due course”, than the goods would need to be added at the non-ChAFTA rate and a refund made accordingly (if appropriate) with all which that brings with such applications.

All of this being additional work and cost for industry.

While it may be suggested that many of the ChAFTA issues referenced could have been satisfied by the Frequently Asked Questions on the DIBP Website, one would have thought that the DIBP would have had early discussions with industry as to what may be some of the challenges from the ChAFTA process implementation.

Perhaps what should have been (and should be) put was (is) a moratorium or safe harbour for perhaps ninety (90) days after the commencement of ChAFTA to address anomalies, as industry has had experiences in the past with certification issues from China as will be remembered by members with the China Quarantine Certificates where a significant number were inaccurate, inappropriate or in many cases, forged.

As a final comment on this Act 2 of the ChAFTA, the following from the Commissioner DIBP address at the CBFCA National Conference in October 2015 may be of interest:

”…our officers need to be cognisant of changing environments, and the complexity that is currently coming in to an already complex environment, with the very nascence free trade agreement coming into play. I am absolutely certain that there will be a significant degree of non-compliance over the next few years as the dust settles on this architecture, and we need to have tolerance for that. I think an approach where we just take the stick every single time there’s non-compliance would be counter-productive to the partnership philosophy I was just spousing in my comments.”

The CBFCA continues to press for early DIBP process improvement and a policy position on identified ChAFTA anomalies.

 

Phil Gray, EES Customs Manager, has been keeping in close contact with the CBFCA on all issues relating to the ChAFTA.  If you wish to discuss anything relating to the ChAFTA (China-Australia Free Trade Agreement) please kindly contact Phil directly via email or call on 9414 7711.

 

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