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BE CERTAIN YOUR CARGO IS ASBESTOS FREE

Asbestos declarations may not seem like an urgent concern to those of you who don’t import building or industrial materials.  Nevertheless, we urge you to spare a couple of minutes and read on.  ABF’s recent changes to ensuring asbestos free cargo have already affected importers of textiles, fashion and other retail products. Much to their surprise!

The incidence of community protection questions by Australian Border Force regarding goods containing asbestos has increased significantly. This is due to a recent, high profile and serious breach and in response to a review of procedure.

Under a stricter application of existing regulations, customs brokers will be required to confirm there is no asbestos content in any import declaration line.  To do this they must have confirmation from the cargo owner that the owner is certain that the goods are free of any asbestos.

ABF advised that before importing goods into Australia, importers should ensure their supply chain security by confirming with their overseas suppliers that their manufactured goods do not contain asbestos.

Due Diligence

Importers are encouraged to investigate, and where appropriate implement:

  • contractual obligations with their suppliers that specify nil asbestos content;
  • sampling and testing for asbestos content prior to shipping the goods to Australia; and
  • regular risk assessment and quality assurance processes.

Certification

While there is presently no requirement to provide evidence of certification to gain clearance, ABF has confirmed that in order for owners to be certain their goods are asbestos free they must have acceptable certification. The ABF will only accept certification from NATA approved testing bodies or equivalent authorities as satisfactory evidence of asbestos free certainty.

If undertaking testing outside Australia, certification must be provided by a NATA accredited testing laboratory or a recognised equivalent authority.  International bodies that NATA has a Mutual Recognition Agreement (MRA) with are:

  • Asia Pacific Laboratory Accreditation Cooperation (APLAC) MRA, a regional arrangement with participation by upwards of 20 economies including all of Australia’s major trading partners in the Asia Pacific region. aplac.org
  • International Laboratory Accreditation Cooperation (ILAC) MRA, a global arrangement covering all regions. ilac.org

Both organisations provide a list of accreditation bodies and their MRA status on their websites.

Delays and Penalties

You should also note that for any cargo inspected or redlined by ABF the owner will be required to provide evidence of certification.  In the absence of certification, the owner could be required to arrange sampling, testing and certification.  The importer of any goods into Australia found to contain unauthorised asbestos may be liable to penalties or prosecution.

We are currently experiencing delays in processing Redline documents due to the increase in profiling of commodities for asbestos.

You can read the Asbestos Importation Review by KGH Border Services here.  And download the hotly anticipated Border Force factsheet here.

We understand that navigating the complexities and regulations of customs clearance can at times seem a little overwhelming and frustrating.  But we also know that gaining clearance in a timely and cost effective manner is critical to your business success.

Magellan Logistics has your back on this and any other customs or freight forwarding topic.  If you would like to discuss the asbestos matter with me further please get in touch on 1300 651 888 or via alex@maglog.com.au.

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Your obligations when importing timber products into Australia from China

All imported timber, wooden articles, bamboo and related products (whether for commercial or personal use) must comply with the Department of Agriculture and Water Resources Biosecurity Import Conditions system (BICON).  It should be noted that this includes timber packaging and pallets. The types of timber, wooden articles, bamboo, and related products page has definitions and links to the applicable import conditions in BICON for different types of timber, wooden articles, bamboo and related products.

In order to ensure a smooth importation process, importers of timber products from China that require fumigation prior to entry, must provide a Chinese Fumigation Certificate to Magellan Logistics on customs@maglog.com.au or your customs broker.

We have prepared a useful guide to outline the types of timber products and treatments required with links to the relevant information on the Government’s site as well as the process around the application for and provision of Chinese Fumigation Certificates.

If you would like some more information on importing timber products from China and Chinese Fumigation Certificates, please contact me or a member of our customs team at Magellan on 1300 651 888 or via email alex@maglog.com.au

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Air Cargo Prohibition Notice

<< An investigation on behalf of several clients impacted by the Bangladesh air cargo prohibition has enabled us to develop a few alternative solutions that work.  Please get in touch with us on 1300651 888 if we can help you too. >>

AFIF has received the following advice from the Office of Transport Security division of the Department of Infrastructure & Regional Development:

The Australian Government has imposed restrictions on the carriage of air cargo that has originated from, or transited through, Syria, Egypt, Bangladesh, Yemen and Somalia. The restrictions will be implemented through legislative instruments made by the Hon Warren Truss MP, Deputy Prime Minister and Minister for Infrastructure and Regional Development, under Section 65B(2)(b) of the Aviation Transport Security Act 2004. The instruments will come into force on Saturday 19 December 2015, and will remain in-force until the instrument is revoked.

The air cargo prohibition will prohibit airlines from carrying any air cargo that has originated from, or transited through, Syria; Yemen; or Somalia.  These new restrictions supersede previous arrangements relating to the carriage of air cargo from Yemen and Somalia.

Air cargo that has originated from, or transited through, Egypt; or Bangladesh will be prohibited, except for items that are currently exempt from screening under the Aviation Transport Security Regulations 2005, such as diplomatic bags and smaller items of international mail. These restrictions apply equally to air cargo carried on passenger and freighter aircraft.

Aircraft operators will not be required to revise their Transport Security Programs (TSPs) to give effect to this instrument; however, are encouraged to consider the current measures in TSPs and be satisfied they are adequate to respond to any changes in the security environment.

Please note that the restrictions are a preventive security measure, based on the Government’s understanding of the threat and risk environment in these countries. There is no information to suggest that there is any specific threat for flights to or from Australia. The restrictions are commensurate with measures already imposed by some international airlines and like-minded regulators internationally.

Failure to comply with the instruments

Non-compliance with the instrument [or restrictions set out in the instruments] is an offence of strict liability under the Aviation Transport Security Act 2004.

Review of the prohibition

The Australian Government, through the Office of Transport Security, will continue to monitor aviation security developments, in cooperation with our international partners.  OTS will provide advice to the Government on adjustments to our air cargo security measures as necessary.

Permitted items – Bangladesh and Egypt only

The instrument allows airlines to uplift air cargo from Egypt; or Bangladesh that is currently exempt from screening under Australian regulations.

The permitted items are

The Government will allow the following items as part of a risk-based strategy that will ensure an appropriate security outcome.

  • Mail items under 500 grams.
  • Cargo under 250 grams and shorter than 5mm.
  • Live animals; human remains; biological tissues.
  • Legitimately prepared dangerous goods.
  • Commonwealth Government articles.
  • Diplomatic bags.

 

Please refer to the Government Prohibition Document.

Any enquiries related to the restrictions should be directed to aircargosecurity@infrastructure.gov.au.  Otherwise, you can get in touch with me at Magellan on 1300 651 888 or via email.

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Supply & Demand – Influences that shape your supply chain solution

Supply & Demand:  In the Supply 101 section of the latest issue of RagTrader Jeff Kershaw and Joe Carbone advise on the importance of understanding both the drivers and impacters of supply chain decision making in the pursuit of a bespoke and efficient solution that achieves both business and brand goals while at the same time meeting customer needs.

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HOW TO: Choose a freight forwarder

How to choose a freight forwarder?  On the face of it, it would seem pretty simple.  But in my experience, those who embark on the process of buying product from overseas can find it a bit of a challenge to select the right freight forwarder and customs broker for their business.  In many instances the intricacies of the logistics and supply chain process is not a core skill.

In general, as an importer you will – rightly – devote most of your attention to sourcing the right product, negotiating with overseas suppliers, obtaining product samples by international courier and/or visiting the overseas supplier abroad to meet with product managers, visit and inspect their site, quality control and obtaining an understanding of their manufacturing process.

When the overseas supplier assures you that they have their own forwarding agent with whom they regularly ship on a CFR (Cost of Goods and Freight) basis the challenge of the supply chain process and selecting a forwarding agent may seem to be alleviated.

So, job done – right?  Couldn’t be simpler to have the supplier handle the exporting too.  While this might seem like a big relief and a streamlining of a seemingly cumbersome process, there are often services and deals to be had by working with an Australian based freight forwarder and customs agent for two main reasons:

  1. The overseas supplier will book with their preferred agent, usually not to meet the needs of the importer, but to suit their own,
  2. CFR (Cost of Goods and Freight) is not the end of the story and often by the time the importers receive the invoice from the local receiving agent in Australia, a lot of unnecessary cost has been incurred which is often be due to the supplier’s handling of the negotiation. This is especially prevalent with LCL (Less than Container Load) cargo where, a whole system of rebates between the load port forwarding agent and the destination port forwarding agent are available.

How to choose a freight forwarder checklist:

  • Find your own freight forwarder and import on an FOB (Free on Board) basis to ensure control of costs, visibility and flexibility.
  • Understand and extrapolate what it is you really want and what your logistics needs are now and in the future. Ask the appropriate questions to qualify your freight forwarder candidate.
  • Select a forwarder who specialises in the market or industry you participate in. For instance, if you are importing clothing or footwear, find a forwarder that specialises in this.  There are a number of players in the marketplace that specialise in apparel logistics – large, medium and boutique.  It can be a good idea to match your business size relative to your industry to that of your forwarder.  For example, if you are a medium sized or boutique business you will have specific needs and may require a bespoke service to meet them.  Forwarders that serve a niche market tend to be more agile, flexible and adapt quickly to sudden changes to your freight requirements.
  • Pricing is important and it is imperative to not leave your money on the table, it is also important to find a forwarder that has good systems and processes and a good reputation amongst your peers. Your industry networks and social media can help you find a reputable company.
  • Ensure you understand what you will pay for your consignment and beware of extra or hidden costs.
  • Seek full transparency and integrity from your forwarder.
  • Choose a forwarder with an appropriate reporting or tracking system for visibility.
  • And finally, many forwarders in Australia have a wealth of knowledge about your origin country and markets and in many instances can provide you with the benefit of this to save you time, money and anxiety at all stages of the importing process.

 

If you would like a confidential discussion about your  importing and freight forwarding needs please call Edi Lenkic on 1300 651 888,  or if you’re in New Zealand call Paul Knight (09) 974 4818.  Alternatively visit www.magellanlogistics.com.au for more information.

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PROTECTING YOUR SUPPLY BASE

Most companies do not regard their supply base as intellectual property but they do so at their peril. Protecting your intellectual property is essential in this day and age as it provides a company or individual with a competitive advantage over other players in the industry.  Exposing your supply base to your customers can have dramatic consequences – the worst of which is the danger of your customer going directly to your supplier.

Australian retailers are well placed to deal directly with offshore manufacturers and indeed most of them have some direct supply in their product offerings. If you are currently supplying the larger retail chains with product you source from overseas you will have noticed an increased pressure to provide that product on an FOB basis rather than the traditional free into store approach. One of the dangers of agreeing to provide product on an FOB basis is the potential exposure of your supplier information to your customer – who could then quite realistically become your competitor.

Normally, when shipping goods from, say, China to Australia a bill of lading is cut with the consignor and consignee details listed on the bill. In normal circumstances the consignor would be the offshore manufacturer and the consignee would be the name of the entity that is to take delivery of the product. In the above FOB scenario the consignor would be your supplier and the consignee would be your customer. So it is easy to see that in this case your supply base is exposed. However, Magellan Logistics can help you with protecting your supplier information by manipulating the documentation to provide you with comfort that your valuable IP is being hidden.

The export documentation will be produced as normal and used for clearing the goods through the offshore Customs authority. However, once export formalities have been completed Magellan Logistics will raise a separate house bill of lading to indicate that you are the consignor and your customer is the consignee. Further, the invoice accompanying the shipment will be the FOB invoice raised by you on your customer. This documentation will be used to clear the goods through Customs in Australia. In this way, your supplier information is hidden from your customer and should go some way towards providing you with peace of mind.

As this is an extremely commercially sensitive area of concern we suggest that a Standard Operating Procedure (SOP) should be developed to ensure that all stake holders are fully aware of their obligations at each step of the way.

If you would like to discuss this issue further please contact Jeff Kershaw on 0418 543 994 or at jeff@maglog.com.au

AS ALWAYS – MAGELLAN LOGISTICS IS HERE TO HELP

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Chinese May Day Holidays

Chinese May Day Holidays are one of the major holiday periods across China. Most businesses and Government agencies will close during the period 1st May thru 3rd May inclusive (excluding Hong Kong).

Magellan’s China offices will be either closed or on skeleton staff during this time.

Please note the following when planning shipments.

SHANGHAI

Holidays from 1st May, returning  4th May.

AIR Cut off 30th April  (for both freight and documents).

SEA Cut off as follows:

ETD: 1st May , Cut-off: 27th April 18:00

ETD: 6th May , Cut-off: 29th April 18:00

Most other China offices will also be closed in line with Shanghai.

QINGDAO

Holidays from 1st May, returning 4th May.

AIR Cut off 30th April  (for both freight and documents).

SEA no change,  schedules remain unchanged.

HONG KONG

Holidays 1st May only.

AIR Cut off 30th April (for both freight and documents).

SEA no change, schedules remain unchanged.

Should you need clarification, or options available for freight movement around this holiday period, please contact the Magellan Customer Service team on 1300 651 888 or info@maglog.com.au

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Quality Control – Eliminate claims for non-compliant product

Traditionally, fashion companies have used buying agents or sourced resident teams to undertake quality control procedures at the manufacturer’s premises – either in-line or final quality control (Q/C).

However, this process has not always proved to be totally effective and product is often determined to be out of specification once it has arrived in Australia. Australian importers then need to engage in lengthy and costly discussions with their suppliers about who pays for what.

THERE IS A BETTER WAY AND MAGELLAN CAN HELP

Magellan can provide quality control facilities in its offshore warehouses that allow for detection of issues BEFORE the goods are exported. In the event of any non-compliance the goods are returned to the supplier for correction and re-delivery. This approach eliminates claims and the onus is put squarely on the supplier to get the product right BEFORE it leaves the country of manufacture.

Experience has shown that suppliers learn very quickly that if they deliver non-compliant product this will disadvantage them economically. It follows that self regulation becomes an imperative for them.

EXAMPLES OF QUALITY CONTROL PROCEDURES INCLUDE:

  • Needle detection
  • Button and stud testing
  • Swing Tag confirmation
  • Labelling confirmation
  • Thread snipping
  • Re-ticketing
  • Technical Q/C – (provided by client)

 

So, if you want to eliminate claims for non-compliant product in the future contact Jeff Kershaw at jeff@maglog.com.au or call on 0418 543 994.

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PRODUCTION ASSIST COSTS (“Assists”) Explained

What are Production Assist Costs?

Production Assist Costs relate to tangible and intangible assistance provided to a foreign supplier by an Australian buyer of imported goods. If this assistance is provided free of charge or at a reduced cost then the cost of this assistance (to the extent it is not already included in the price) needs to be included in the value declared to Customs upon importation. The production assist costs that fall within this description are commonly referred to as “Assists”.

Categories of Assists

a) materials, components or other goods that form part of the imported goods;

b) materials consumed in the production of the imported goods;

c) tools, dies, moulds or other machinery or equipment utilised in the production of the imported goods;

d) art work, design work, development work and engineering work (including models, plans and sketches) – the design of which has been undertaken outside Australia;

e) inputs in the production of the goods referred to in (a) to (d) above;

f) overseas transportation and packing costs relating to (a) to (e) above;

g) foreign customs duties, sales tax, or other duties or taxes on production tooling, work goods or subsidiary goods;

h) repairs or modifications to the materials, components, subsidiary goods, tools, dies, moulds, and other goods referred to above.

An example of a transaction involving “Assists” would be an Australian white goods wholesaler providing Australian standard electrical cords and plugs to a Chinese manufacturer for incorporation into Australian imported white goods. If the cords and plugs are provided free of charge to the manufacturer then the value of the cords and plugs would need to be added to the suppliers invoice price to arrive at an acceptable Customs Value.

It should be noted that it is irrelevant whether duty is being paid on the imported product as the importer has an obligation to report accurately to Customs and, as such, any under-valuation would fall within the ambit of the Infringement Notice Scheme.

As always, Magellan Logistics stands ready to assist with determining whether your business is exposed due to non-compliance with the above requirements. If you would like more information on this subject or simply wish to clarify any of the foregoing detail please contact Jeff Kershaw at jeff@maglog.com.au or by telephone on 0418 543 994.

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TRANSFER PRICING explained……

Have you done the due diligence required to ensure compliance?

 

Transfer pricing is the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise. For example, if a subsidiary company sells goods to a parent company, the price set for those goods is the transfer price. Transfer pricing does not apply to importers and exporters that deal with unrelated buyers and sellers.

It is a fact of life that multinational companies, from all sectors and in every part of the world, face difficulties with respect to the valuation of goods. These difficulties arise because transactions between related parties are subject to both customs and fiscal examinations and are thereby bound by differing rules and contradictory interests.

There are two reasons for this problem:

Firstly, tax and customs administrations, even within one country and sometimes within the same government department, have different approaches: tax administration focuses on intra-group sales’ prices that may be perceived as higher than they should be; whereas customs authorities control imported goods for which prices may be perceived as lower than the market price. While both administrations seek to achieve the same goal (which is arm’s length pricing) revenue interests in the transaction still remain at odds with each other. An arm’s length transaction is one in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm’s length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party.

Secondly, tax and customs administrations often set rules independently for the same transaction/good. Tax authorities seek conformity with the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines which have been largely codified in many countries. This set of rules provides guidance on the application of the arm’s length principle for the valuation of cross-border transactions between associated enterprises, whereas customs authorities conform to Article VII of the General Agreement on Tariffs and Trade (GATT) Valuation Code – currently the World Trade Organization (WTO) Valuation Agreement.

This dichotomy, present in both developed and developing countries, creates a climate of uncertainty and complexity compounded by economic globalisation. It also leads to increases in compliance and implementation costs, absence of flexibility in the conduct of business operations, and creates a significant risk of penalties. Indeed, even when a company complies with both the OECD guidelines/principles and the World Trade Organization (WTO) Valuation Agreement, there is no guarantee that there will not be a dispute between two countries or two administrations in the same country on the determination of the arm’s length price. This means that valuation conflicts can arise not only prior to but also after an audit.

Given that intercompany transactions account for more than 60% of global trade in terms of value, the divergence of customs and transfer pricing valuation presents an obstacle to the liberalisation of trade and inhibits international development for companies of all sizes.

Magellan Logistics can provide advice on this complex subject. So if you are involved in cross-border trade with a related company and have reservations about the legality of your arrangements you should contact Jeff Kershaw at Jeff@maglog.com.au or by telephone on 0418 543 994.

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