Australia’s System of Preferences

What we need to know

AIMS OF THIS SESSIONThe topic is about Tariff Treatment of goods

from certain countries

Re-aquaint you with preference terms

provisions

types

Recent developmentsSAFTALDC

Answering Exam questionsWhat to look for

The TermsOrigin

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

Qualifying AreaSection 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 CostAllowable 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 S153J New 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)

S153L PNG & 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 S153P Canada (1) Shipped direct to Australia

not transhippedif transhipped, original destination Australia

(2) Wholly manufactured, from;unmanufactured raw productsmaterials wholly mfd in Aust and/or Canadadetermined manufactured raw materials

(3) Partially manufactured(a) final process of manufacture(b) AFC =/> specified % of TFC

(4) Specified % = 75% of commercially available goodsSpecified % = 25% of not comm. available goods

Singapore-AustraliaFree 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?QUESTIONS?