Now that the Federal Opposition Leader Bill Shorten says he has reached a compromise with the Government and will now support the Chinese Free Trade Agreement it is worth going over a few of the key points as we see them.
A COUPLE OF KEY POINTS AS WE SEE THEM:
Hong Kong is not part of China Hong Kong is classified as a different customs territory to mainland China and is a Freeport. For the purpose of ChAFTA goods shipped via Hong Kong will not retain their status as Chinese originating goods unless the goods remain under customs control at all times (this was also the case for the China-NZ FTA).
The implications of this are profound for the many organisations that operate distribution centres and warehouses (that are not bonded warehouses) in Hong Kong as the goods entering Hong Kong will lose their China Preferential status.
Phasing of Duty At present for items originating in China that have a duty rates of 5%. It should not be assumed that from implementation of the FTA the duty rate will simply drop to 0%. Although it is the aim to reduce all items to 0%, this will be phased in for some items over a period of some years (up to 5 years in some circumstances). Clothing is one of these items where under the first year of the CHAFTA operation the duty rate will not be changed at all.
WHAT YOU CAN DO:
Whilst the agreement has been signed and now has bipartisan support in the Parliament, there is still a lot of detail to be finalised in order to provide greater certainty to industry. This process has already taken some time and is expected take a couple more months before implementation (we are expecting Dec 2015 or early 2016). If you have any questions about how the ChAFTA will impact your imports please get in touch with Magellan 1300 651 888 or by email.