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Australia’s System of Preferences

Australia’s System of Preferences. What we need to know. AIMS OF THIS SESSION. The topic is about Tariff Treatment of goods from certain countries Re-aquaint you with preference terms provisions types Recent developments SAFTA LDC Answering Exam questions What to look for.

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Australia’s System of Preferences

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  1. Australia’s System of Preferences What we need to know

  2. AIMS OF THIS SESSION • The topic is about Tariff Treatment of goods from certain countries • Re-aquaint you with preference • terms • provisions • types • Recent developments • SAFTA • LDC • Answering Exam questions • What to look for

  3. The Terms Origin Preference Rules Produce Manufacture Allowable Factory Cost Qualifying Area Total Factory Cost

  4. 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

  5. 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

  6. The Rules See Section 153D(1) 153D(6) 153D(6A) 153E(2) 153J - 153Q Determination of qualification parameters

  7. 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

  8. Qualifying Area Section 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

  9. Concept of: Total Factory Cost Allowable 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

  10. 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)

  11. 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

  12. 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

  13. 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)

  14. Rules for individual countries S153P Canada (1) Shipped direct to Australia not transhipped if transhipped, original destination Australia (2) Wholly manufactured, from; unmanufactured raw products materials wholly mfd in Aust and/or Canada determined manufactured raw materials (3) Partially manufactured (a) final process of manufacture (b) AFC =/> specified % of TFC (4) Specified % = 75% of commercially available goods Specified % = 25% of not comm. available goods

  15. 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

  16. Rule 1 • Wholly obtained goods • unmanufactured raw products • waste & scrap

  17. 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

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

  23. 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

  24. QUESTIONS?

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