Hunt & Hunt - EOFY - what are the customs and trade issues?

Wednesday, June 29, 2016

End of financial year customs and trade issues

29 June 2016

EOFY - what are the customs and trade issues?

Forward

Customs duty is levied on individual imports, so it may seem surprising that there could be end of financial year issues. However, July 1 2016 is shaping as a busy time for trade professions with a number of significant changes occurring on top of the usual list of items keeping customs brokers up at night.

ATT Programme commences on 1 July 2016

The Australian Trusted Trader (ATT) Programme moves beyond the pilot phase and opens to all involved in international trade on 1 July 2016. The AAT Programme offers participants trade facilitation benefits in exchange for high levels of self-compliance. The benefits are still being developed, but the ability to defer customs duty has been confirmed. Other benefits the programme hopes to deliver are the ability to use free trade agreements (FTAs) without certificates of origin and moving from import by import reporting to consolidated reporting.
For those familiar to the programme, recent updates include a streamlined assessment process with the removal of both accreditation tiers and interim status plus the use of a less intensive user friendly self-assessment questionnaire. The bottom line is that the AAT assessment process was too burdensome and it is now more streamlined.

Exporters - weighing of containers

It has always been a requirement that shippers correctly declare the weight of their containers and their contents. It makes sense as ship loads need to be balanced. To make exporters take this requirement seriously, the International Maritime Organisation (IMO) has amended the Safety of Life at Sea convention to prohibit a ship operator from accepting a container that does not have a verified gross mass (VGM).
The shipper on the bill of lading will be responsible for providing the VGM and port terminal operators simply will not load a non-complying container. The Australian Maritime Safety Authority (AMSA) will be regulating this area. We have recently taken part in panel discussions with various AMSA members, and while the threat of fines has not been strong, it is clear that compliance is expected.
While fines for non-compliance is an option for AMSA, the real stick is the commercial impact of goods not being loaded. Exporters need to be speaking to their forwarders about weighing procedures required for their goods.

New financial year cost cutting goals - are FTAs the solution?

Cutting costs is still the only realistic option for many businesses to increase profits. With the low hanging fruit having already been picked, finding further significant savings will be difficult. An area unlikely to have been fully explored are cost savings under FTAs. Many have heard of FTAs in the context of more competitive exports, but they can also be used to reduce the cost of imports.
Duty of 5% is payable on many imports and FTAs can be used to reduce that duty to zero. With FTAs with China, Japan, Korea, US, NZ and the ASEAN countries, almost all importers will have the opportunity to use FTAs to reduce the landed costs of goods. Both studies and anecdotal experience shows that even mature FTAs (such as the US FTA) are not heavily utilised.
While there are many consultants looking to mine customs data for duty refunds, long term and sustainable FTA use will only come from businesses taking internal ownership of FTAs. Companies looking to reduce costs through using FTAs need to start with the question, who in my organisation is responsible for monitoring FTA use?

Transfer pricing adjustments - don't forget the customs implications

An issue that has bipartisan support is that legislative and regulatory action needs to be taken to address profit shifting by multinationals. This increased focused on multinationals will primarily have an income tax impact. However, if the response by multinationals is to increase or decrease the cost of goods sold to Australian-related parties, there will also be a customs impact.
This impact flows from any adjustment to the cost of goods altering the customs value of goods, being the value on which customs duty is calculated. If those goods attract duty, the outcome is a duty refund opportunity or the obligation to pay increased duty.
If your transfer pricing adjustments occur at the end of the Australian financial year, now is the time to consider the customs impact.
Hunt & Hunt has a committed Customs and Global Trade team that is experienced in all of the above issues. Please feel free to contact Russell Wiese or Lynne Grant if you have any questions.

RUSSELL WIESE

Russell is a Partner at Hunt & Hunt Lawyers and a customs and global trade specialist with a strong focus on helping clients proactively manage customs risks and opportunities. Over the past 10 years Russell has advised on various indirect taxes including customs duty, GST, excise and fuel tax credits. These roles have given Russell the opportunity to work with internal government stakeholders, multinationals, individual customs brokers and forwarders and small-medium businesses.

LYNNE GRANT

Lynne is a Special Counsel with more than ten years experience including customs and global trade related work such as valuation and classification of imported goods and anti-dumping investigations. Lynne also brings to the team a broad range of corporate and commercial experience, including complex contractual negotiation and drafting and domestic / international mergers and acquisitions.

The information contained in this update is not advice and should not be relied upon as legal advice. Hunt & Hunt recommends that if you have a matter that is legal, or has legal implications, you consult with your legal advisor.

Hunt & Hunt (Vic)

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385 Bourke Street

MELBOURNE, VIC 3000

Australia

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