Amid all the press and media hype what does a free trade agreement (FTA) actually mean for Australian importers and exporters?
Australia’s general customs duty rate is 5 percent - other countries, particularly in Asia, have much higher customs duty rates. An FTA reduces these duty rates, often to zero. However, just because you import from or export to countries with which we have an FTA does not automatically mean you are entitled to the customs duty benefit. Each of Australia’s FTAs has a complex suite of 'rules of origin' that are required to be met prior to being able to gain the customs duty benefit.
Rules of origin or ROOs (not the hopping type) are different for every Australian FTA and often include requirements to substantially transform manufactured goods, have regional value content, ship directly in many instances and have certificates of origin or manufacturer statements outlining the ROOs used to determine customs duty preference treatment.
Sounds complex and it is. However, failure to assess the legislated ROOs and take full advantage of the FTAs Australia has in place puts your business at a competitive disadvantage to those businesses that do.
Embrace Australia’s FTAs and ask your business when was the last time it:
- assessed its supplier’s compliance with FTAs?
- reviewed its procurement practices to take advantage of FTAs?
- reviewed its export market strategies?
After all, it’s all about free trade. So why pay 5 percent or more when it could be free?