ChAFTA Documentation – Need to exercise caution

There have been reports of Chinese exporters not being able to obtain certificates of origin under the China Australia Free Trade Agreement.  Initially COVID-19 related reasons were given.  Now traders are concerned that the reasons may relate to simmering trade tensions between China and Australia.

Whatever the reason given, customs brokers only have one option where there is no COO or declaration of origin – you cannot claim preferential entry under ChAFTA.  A COO or DOO is a mandatory requirement.  If you are being pressured by a client to claim the preference without a COO, it is important that they be made aware that infringement notices equal to 75% of the underpaid duty could apply.  As members would also be aware, the customs broker is also exposed to penalties and other disciplinary action.

There are solutions which should be discussed with the client, such as:

·         are any tariff concession orders or by-laws available to reduce duty to zero;

·         in the longer term, could the exporter take the steps necessary to qualify to use declarations of origin (obtaining a valuation ruling from Chinese authorities); or

·         can the duty be paid and a refund obtained when the COO is obtained.

In terms of refunds, it is important to be aware of the strict timelines in the Australian regulations.  If a COO was not held at the time of entry and a retrospective COO is used, the refund timeframe is 12 months from the date of export.  The ABF does not have a ability to extend this timeframe.

COOs under FTAs can be burdensome.  The Government should be encouraged to look for solutions that that remove the need for Government issued COOs but do not materially compromise the integrity of FTA claims.  We have traded with the US for over 10 years without the need for COOs.  It would be interesting for the ABF to share the level of non-compliance under the Australia US FTA.  There is no reason to believe that Chinese manufacturers are less able to assess compliance with rules of origin than US suppliers.

Putting the onus on suppliers, rather than Government Authorities to assess origin may actually result in greater compliance with the rules of origin.  Few Australian importers would seek to look behind a Government issued COO.  However, it is much more likely that questions will be asked if origin claims are made only by suppliers.

Another option is to extend the Trusted Trader origin waiver benefit to ChAFTA.  ChAFTA provides that a COO is not required where the required is waived under Australia's laws and regulations.  Passing regulations to implement this Trusted Trader benefit would not be onerous and would send a positive message to China.  At the moment, China must be wondering why a Trusted Trader can import goods without a COO from Chile, Japan, Korea, Malaysia, Singapore, Thailand and Indonesia, but not China.

Please let Freight and Trade Alliance know if you are experiencing a problem with obtaining ChAFTA COO.  Freight and Trade Alliance can then provide this feedback to DFAT who can hopefully work at an international level to resolve the issue.

If you have any concerns about free trade agreement compliance, please contact Russell Wiese at Hunt & Hunt Lawyers (03 8602 9231 or rwiese@huntvic.com.au)