As the China-Australia Free Trade Act (ChAFTA) launches, many Australian businesses are looking with excitement at the vast new Chinese markets it opens to them. China and Australia share a unique partnership; Australia was one of the first countries to engage with China when it opened its first “Special Economic Zone” in 1979. Since then the ties between the countries have gotten stronger, and ChAFTA represents the extent of the mutually beneficial relationship they now share. For importers and exporters who plan to access ChAFTA’s expanding new business opportunities, there are new shipping factors that you should know before you ship your next cargo.
New Rules, New Strategies:
Not surprisingly, implementation of ChAFTA requires revising existing transport and registration rules that apply to both imports from and exports to China. ChAFTA includes a new “Integrated Cargo System” which offers preferential tariff rates for goods shipping under its terms. That “claiming preference” has codes to be used to describe ChAFTA-eligible goods in order to assess the lower tariff.
Understanding and implementing the new system before shipping your next allotment will avoid higher tariff rates. However, although the system appears fairly simple on its face, remember that not just importers/exporters are switching over; all the international ports and transportation entities are also making the changes, so delays are almost guaranteed.
Take These Four Steps:
1. Classify your goods:
There are tariff codes for specific types of goods. ChAFTA goods are identified by their Harmonized Commodity Description and Coding System number (or “harmonized system” – HS). This list comprises 5200 six-digit product categories. Additionally, both China and Australia use eight-digit tariff codes for customs duties. The tariff codes are different for importing into Australia and exporting to China.
2. Establish How Your Goods Will Be Treated:
The purpose behind ChAFTA is to gradually reduce the duty rates on goods moving between the countries, and these reductions will take place gradually over time. Accordingly, the h tariff codes are time-sensitive, and will change each year until the ChAFTA is fully implemented. ChAFTA-eligible goods are assessed tariff rates that are different from non-ChAFTA goods, and there are codes to establish the type of treatment your ChAFTA-eligible goods should receive. If your goods are not ChAFTA-eligible, the general Most Favoured Nation tariff will still apply. Be sure that your shipment is coded with the ChAFTA code;
3. Establish the Origination Location of your Goods:
Identification of the origin of your goods is critical and is the foundation for ChAFTA in general. Only goods that “originate” in Australia or China are eligible for ChAFTA tariff rates. The “Rules of Origin” (ROO) are designed to prevent non-Chinese or Australian merchants from accessing ChAFTA rates by simply shipping their goods through either country to the other.
In general, products “originate” in Australia or China when:
a. they are wholly obtained or produced within either country; or
b. they are produced entirely in either country from materials classified as “original” under the ROO standards; or
c. they are manufactured in either country using inputs from other countries, while also meeting the j Product-Specific Rule that applies to that product.
Also not surprisingly, the ROO’s pose the most complexity and challenge for all merchants seeking to gain the ChAFTA tariffs for their products.
4. Certify that Your Goods are Eligible for ChAFTA Tariff Rates:
There are official templates for the “Certificate of Origin” (COO) that declares your products to be in compliance with ChAFTA rules. They are available through authorised bodies. In Australia, those are the Australian Chamber of Commerce and Industry; the Australian Industry Group, and the Australian Grape and Wine Authority. Each COO applies to a single shipment that can contain no more than twenty separate items (more than one of each item, of course) and is valid for one year.
Clearly, ChAFA is a game-changer for Australian business. In my 17+ years in and around China’s import/export sectors and services industries, I’ve never seen such an exciting opportunity before. I’d be happy to assist you to ensure that your goods are ChAFTA eligible the first shipment out, and every shipment after that.
You might also want to read some of my other blogs. A sample of recent blogs can be found here:
ChAFTA Opens China’s Services Sectors to Australian Providers:
China’s Down and Up 2015 Economic Year
Chinese Supply Chain Risks Are Affected by Global Environmental Decisions
China’s Environmental Challenges – Part II
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