Free Trade – what’s in it for me?
Understanding the benefits of Free Trade Agreements can help local marine businesses to be more competitive in international markets.
Free Trade Agreements between Australia and trading partners such as China and South Korea have been in the news in recent months, but what do they mean for SMEs operating in the marine industry?
Earlier this year industry association AIMEX teamed up with law firm Hunt and Hunt to present a series of seminars around the country to explain what an FTA can deliver to marine-related businesses in Australia.
Principal lawyer of Hunt and Hunt, Russell Weise, delivered case study-based information about the perceived complexity, pitfalls and barriers to accessing the FTAs, as well as how these mechanisms can be of benefit to Australian marine business trading with China and Korea.
FTAs offer benefits to the marine industry with possible tariff reductions on imported components and also on the export of products and services to these countries. This will give Australian companies a competitive advantage including reduced cost of production and price reductions. Early adopters of the benefits of FTAs will see advantages against their global competitors as the rest of the world lags in negotiating these agreements with partner countries.
A key conclusion of the information sessions was that the benefits under FTAs do not apply automatically. The importer needs to claim the benefit when importing the goods. Generally, in order to do this, the exporter will need to have provided the importing customer with a certificate or declaration of origin.
Another key to accessing the benefits of FTAs is the reality that a freight forwarder will not do it automatically.
“It will usually be the customs broker of the importer that will complete the documentation where the FTA preference will be claimed. As an exporter, you can expect your freight forwarder to ask if you have a certificate of origin, ” said Russell Weise. “However, you do not need to wait to be asked. Contact your customer and discuss whether they will claim the benefit under the FTA.”
AIMEX and Superyacht Australia CEO MaryAnne Edwards said: “This tailored training has helped businesses understand how FTAs can increase the competitiveness of Australian marine companies. They have great opportunities in the Chinese and Korean markets, and the benefits of the FTAs need to be accessed by as many companies as possible who are trading with these markets.
“Whilst many see it as a bit too hard it is important that businesses understand how they can to improve the bottom line and their competitiveness.”
AIMEX was successful in applying for funding for the training under the Australian Government’s 2016 Free Trade Agreement Training Provider Grant Program, one of only 14 organisations to gain funding in the first round of grants. This funding meant that the cost of the training to Australian SMEs in the marine industry was reduced by 90% for those companies participating.
The FAQ about FTA
Can consignment stay under bond?
Shipments are permitted via a third country. However, to maintain the status as a qualifying good of a particular country, the goods generally must stay under bond. That is, the goods must not enter into the commerce of a third country.
What if I put an imported motor into my boat – is it enough to qualify?
Where the origin rule focuses on the value of Australian content, the change may be sufficient. Where the rule of origin focuses on change in tariff classification it will depend on whether the addition of a motor causes a sufficient change in the tariff classification of the imported boat when compared to the exported boat. This will depend on what type of boat was imported and the terms of the relevant FTA.
Can a Certificate Of Origin be obtained retrospectively?
There are provisions allowing for the retrospective issuing of certificates of origin. Generally there needs to be a reason beyond your control explaining why the certificate of origin could not be provided at the time of export.
Is profit taken into account when calculating the value of Australian materials?
Yes. When determining whether a good has the minimum level of Australian content, an amount is to be included for the profit added in the usual course of trade. This profit is counted as Australian originating material.
Do you require a Certificate of Origin for each consignment?
Under most FTAs a certificate of origin is requirement of each consignment. Under the Korean FTA, one certificate of origin can be used for multiple consignments over two years.
This article was first published in the December-January 2017 issue of Marine Business magazine.