Few topics have generated as much interest from the international trade community as the China Australia Free Trade Agreement (ChAFTA). This was demonstrated by the large number of customs professionals (over 170) who attended last week's webinar presented by Hunt & Hunt Lawyers on ChAFTA.
There were a number of questions from the webinar and below are the Hunt & Hunt responses.
Tariff advices
Hunt & Hunt mentioned that under ChAFTA, each Government has committed to providing tariff rulings. It was also agreed that such rulings should, where possible, be published. Additionally, it was also agreed that the rulings should apply to all goods covered by ruling, regardless of the importer or exporter where the material facts are the same. This is clearly wider than the current rulings regime which largest just provides certainty and guidance to applicant.
Question: So are tariff advices actually precedent under ChAFTA?
H&H Answer: Effectively this is what Australia has agreed to. However, the only party that could enforce this would be China. If the tariff advice system continues as usual, arguably Australia has breached the ChAFTA. However, this will not create rights for individuals. Our view is that industry should use the ChAFTA commitment to lobby for a more transparent tariff advice system.
Question: When will the public tariff advices come into effect?
H&H Answer: This will be up to the Department of Immigration and Border Protection. Often countries agree to procedural type issues in FTAs that are not implemented. However, there is no reason why industry should not hold the Department to account.
Origin Documentation
Hunt & Hunt discussed that either a certificate of origin or a declaration of origin must be provided with each consignment in order to claim the preferential rate under ChAFTA.
Question: What is the difference between a certificate or origin and declaration of origin?
H&H Answer: A certificate of origin is issued by an authorised third party body usually based on information provided by the manufacturer. A declaration of origin is usually prepared by the manufacturer or supplier itself. It is effectively a form a self-certification. Be careful though, some FTAs refer to self-certified documents as a certificate of origin or something similar.
Question: If you have an origin declaration on the supplier's invoice, do we still need a certificate of origin?
H&H Answer: An origin declaration on the suppliers invoice is a form of self-certification. The only form of self-certification permitted under ChAFTA is a declaration of origin. A declaration should not merely be in the form of an invoice. It must be in a format based on the template set out in the ChAFTA (Annex 3-B). A declaration of origin can only be used in the place of a Certificate of Origin if an origin ruling has been issued in respect of the goods by the Customs authority of the country of import.
Question: If the certificate of origin (CoO) is supposed to be consignment specific, how can we use it multiple times? Does this only refer to CoO for consignments that go into DC's? If so how do they match it up with the shipment into Australia?
H&H Answer: The rules under the ChAFTA state that a CoO shall be applicable to one or more goods under one consignment. It is a difficult issue as to whether that means one consignment from the Chinese supplier, or one consignment of goods (provided by multiple suppliers) from China to Australia. Given the CoO is issued on a supplier/manufacturer basis, there is no way in reality a mixed consignment could be covered by the one CoO. Our view is that importers should obtain a CoO for each consignment from the supplier. If in a DC that consignment is split and contained in multiple shipments to Australia, the CoO is applicable to the goods in each of their multiple shipments. On this view the one CoO could be used for multiple shipments to Australia, provided that it is only in respect of the one original consignment from the Chinese supplier. It would also mean that the one consolidated shipment from China to Australia could be covered by multiple CoOs issued in respect of goods supplied by multiple suppliers.
The alternate view, and the current view of the Department, is that each consignment to Australia must have an individual COO. Therefore, if a supply from China will arrive in Australia on different shipments or be split between different ports, multiple certificates of origin will be required.
This is a difficult issue in practice.
There are a number of ways the provision could be viewed and we recommend obtaining an origin ruling.
Indirect shipments
Hunt & Hunt discussed the consignment provisions and how they may apply to shipments via Hong Kong. Hong Kong is classified as a different customs territory to mainland China and is a Freeport. This creates the problem that goods shipped via Hong Kong will not retain their status as Chinese originating goods unless the goods remain under customs control at all times, however, Hong Kong does not have the same system of customs control as Australia and mainland China. This will clearly be a problem when goods are warehoused in Hong Kong (as such warehouses will not generally be bonded warehouses). The situation is less clear when the goods do not leave the vessel or the port.
Questions: If the goods leave China and go to Hong Kong for whatever reason for a short period of time (still under customs control), they lose their China origin? Was that correct?
H&H Answer: If the goods remain under customs control in Hong Kong the goods will retain their origin status (provided the usual rules regarding consignments are met). The issue is that Hong Kong has a very different concept of customs control than Australia. Hong Kong is a free port and doesn't generally use bonded facilities etc. The concern is that it may not be possible for goods to be transhipped via Hong Kong and remain under customs control at all times. The position is clear when they are warehoused. It is less clear when they are merely transhipped and never leave the port.
This is an area where the Department of Immigration and Border Protection needs to provide greater certainty to industry. We were asked to advise on a number of very specific scenarios and it is clear this issue is causing a lot of concern within industry. A fact sheet outlining the various likely scenarios and the view of the Department would be welcomed by industry.