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?