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As of 1 January 2019, duty rates for all tariff categories covered under the ChAFTA agreement will be duty free.

As no doubt you know, 2016 was one of the toughest years for global fashion and retail.  From political and economic instability to ever more demanding consumers and new technologies, it’s no wonder sales growth slowed to between 2–3 percent at the end of the year and profit margins had all but stagnated. According to McKinsey, the outlook for 2017 looks better, but who doesn’t want to kick off the new year with some good news.

The nature of retailing is continually changing.  If it’s not the recent growth of online retail and rapidly changing consumer preferences that is keeping you on your toes; then it will be the need to stay on top of distribution chain productivity improvements to remain competitive that’s keeping you up at night.

As we work through some of the new processes associated with ChAFTA we are experiencing a spate of late Certificates of Origin.  Our focus is always on avoiding delays at customs and not receiving these certificates in a timely manner has knock-on effects for our clients that include avoidable delays to customs clearance and in some instances paying duty unnecessarily and incurring professional services fees for refund processing once the certificate is received.

We are doing everything in our control to minimise or avoid delays completely and we would like to alert you to some steps you can take to facilitate the receipt of the Certificate of Origin in a timely manner.

1). Remind your supplier not to delay applying for the Certificate of Origin on the basis of unknown means of transport or routing;
2) Changes to vessel or flight details will not affect the eligibility of the consignment to obtain reduced duty rates provided the goods are still destined for direct shipment to Australia;
3). Advise your supplier to forward the certificate ASAP. There is no need to forward the original certificate as copies are acceptable.

A couple of refresher points that will also help with avoiding customs delays by ensuring certificates are issued as quickly as possible and are valid for use:

• Ensure that only authorised bodies are used to issue the certificates. The only two authorised bodies are the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), and The China Council for the Promotion of International Trade
• Certificate’s must be completed in English
• Certificates can include multiple goods but must not exceed 20 individual classifications
• Can only be used for a single shipment of goods
• They are valid for one year
• Ensure that the invoice number(s) and the marks and numbers listed on the Certificate of Origin match the documentation used for customs clearance.

Origin criteria

The origin criterion listed on the certificate indicates how the goods listed on the certificate comply with the regulations of the ChAFTA.  The criteria indicate how much of the raw materials or manufactured goods was obtained or manufactured within Australia and or China.  Some goods will be ineligible to use some origin criterion due to their nature, for example manufactured goods would be unlikely to qualify for reduced duty rates under ChAFTA via the Wholly Obtained criterion as this is intended for use for raw materials such as minerals.

Whereas, manufactured goods which are entirely produced from components made within Australia or China or a combination of both would more than likely qualify via the Wholly Produced (WP) criterion; and manufactured goods that are made in China from components made within Australia and or China and other countries would more than likely qualify via the Product Specific Rule (PSR).

• WO (Wholly Obtained) – for goods such as minerals, agricultural products and animals born in China. Would not apply to products that are further manufactured.
• WP (Wholly Produced) – for goods that are produced entirely from Australian or Chinese originating materials.
• PSR (Product Specific Rules) – for goods produced from Australian and/or Chinese goods and goods that have been manufactured in other countries and satisfy the applicable product specific rules relating to the classification of the good to be exported.

Should you need clarification on this or another freight movement or customs clearance question please contact me via email or on 1300 651 888; or your usual Magellan Customer Service Rep.

After much speculation, we have received confirmation originating from the office of The Hon Andrew Robb AO MP – Minister for Trade and Investment, that final notes were being exchanged yesterday (9 December 2015) and ChAFTA is set to enter into force on 20 December 2015.

A couple of key points to note include:

Certificates of Origin

The following Chinese Authorities will be the only powers able to issue Certificates of Origin [COO]:

– AQSIQ (General Administration of Quality Supervision, Inspection and Quarantine)

– CCPIT (China Council for the Promotion of International Trade: (China Council for the Promotion of International Trade).

Please note: COOs will not be issued prior to the commencement date of CHAFTA.

Duty free or 5%?

For further information regarding the change in duty rates and confirmation of whether your duty rates will or will not change on this date please feel free to call on 1300 651 888 or email me daniel@maglog.com.au

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.

The China–Australia Free Trade Agreement (ChAFTA) is a bilateral Free Trade Agreement (FTA) between the governments of Australia and China. Since the announcement of a joint feasibility study in early 2005, 21 negotiating rounds have been completed and the announcement of the conclusion of negotiations was made by Australia’s Prime Minister Tony Abbott and Chinese President Xi Jinping on 17^th November 2014.

The long-awaited agreement was signed by Trade Minister Andrew Robb and Chinese Commerce Minister Gao Hucheng last Wednesday in Canberra.  The agreement is expected to open the vast Chinese market for Australian investment, primary products and services.

The agreement will ensure 85 per cent of all Australian exports will enter China tariff-free, rising to 93 per cent within four years and 95 per cent when it is in full force.

China is Australia’s largest trading partner, with the two-way flow of goods and services exceeding $160 billion last year.

Now that both sides have completed the legal review and translation of the text of the Agreement the signature of the Agreement;

What happens next…

• The text of the Agreement, accompanied by a National Interest Analysis, will then be tabled in the Australian Parliament for 20 joint sitting days;
• Following tabling, the Joint Standing Committee on Treaties (JSCOT) will conduct an inquiry into the Agreement and will report back to Parliament;
• Legislation will be introduced to make any necessary amendments to existing legislation and will be considered by the Parliament;
• Relevant Regulations would also be amended in due course;
• During this time, the Chinese Government will undertake its own domestic treaty-making processes;
• When Australia and China have completed their domestic processes, both countries will exchange diplomatic notes to certify that they are ready for the Agreement to enter into force;
• 30 days after this exchange or on a date otherwise agreed, ChAFTA will enter into force.

Because it is expected that the above processes will take some time, the agreement is not anticipated to take effect until sometime in early 2016.
If you’d like some more information in this topic, please get in touch with Magellan on 1300 651 888.