Audit | Tax | Advisory | Financial Advice This activity has received funding from Austrade as part of the Free Trade Agreement Training Provider Grant Program. The views expressed within the activities are not necessarily the views of the Commonwealth of Australia, and the Commonwealth does not accept responsibility for any information or advice contained herein.
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Audit | Tax | Advisory | Financial Advice
This activity has received funding from Austrade as part of the
Free Trade Agreement Training Provider Grant Program.
The views expressed within the activities are not necessarily the
views of the Commonwealth of Australia, and the
Commonwealth does not accept responsibility for any
information or advice contained herein.
Audit | Tax | Advisory | Financial Advice
China-Australia Free Trade Agreement (ChAFTA)
Crowe Horwath Australia 25 September 2017
Audit | Tax | Advisory | Financial Advice
Agenda
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Overview of Free Trade Agreements (FTAs)
Overview of China-Australia Free Trade Agreement (ChAFTA)
Steps to Utilizing ChAFTA
Tariff Classification Identification
Treatment of Goods
Rules of Origin
Preparation of Origin Documentation
Government Schemes
Tax Structuring
Tax Matters
Audit | Tax | Advisory | Financial Advice
Overview of Free Trade Agreements (FTAs)
4
FTAs can cover:
Entire regions with multiple participants
Just two economies
FTAs are international treaties that remove
barriers to trade
Increased economic integration between
participating countries
Audit | Tax | Advisory | Financial Advice
How businesses can use FTAs
Increase goods exports to a market;
Commence new goods exports to a market;
Demonstrate that goods are eligible for FTA benefits;
Deepen engagement in global value chains;
Achieve efficiencies through cheaper imported inputs;
Harness new or more secure access to services markets;
Better the mobility of business travel;
Invest with enhanced protections and certainty;
Access government procurement markets; and
Address 'behind the border' barriers to trade.
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Audit | Tax | Advisory | Financial Advice
China-Australia FTA (ChAFTA)
China is Australia's largest agriculture, forestry and fisheries export market
Worth circa $10B in 2015-16, up from $5 billion in 2010-11
China predicted to account for 43% of global growth in agricultural demand by 2050.
Prior to ChAFTA Australian producers and exporters faced significant tariffs on agricultural
products, placing them at a competitive disadvantage to countries with established FTA ties to
China.
An example of how ChAFTA will benefit exporters:
All tariffs on agricultural products will be progressively eliminated
Elimination of the 11 to 30% tariff on oranges, mandarins, lemons and all other citrus fruits by
1 January 2023
Elimination of the 10 to 30% tariff on all other fruit by 1 January 2019
Elimination of the 10 to 13% tariff on all fresh vegetables by 1 January 2019.
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Audit | Tax | Advisory | Financial Advice
Steps to Utilizing ChAFTA
WHAT
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Nature of the goods are being
imported/exported
Identify the correct customs tariff code 1.
2.
3.
4.
Treatment of the goods under ChAFTA
Identify the lower (preferential) duty rate for the goods HOW
‘Origin’ of goods – are the goods
‘produced’ in Australia or China WHERE
Type of documentation required to certify origin of
goods
Certificate of Origin (COO)
Declaration of Origin (DOO)
DOCUMENT
Audit | Tax | Advisory | Financial Advice
Tariff Classification Identification
Classification
Treatment of a particular good depends on the correct Harmonized System (HS)
tariff identification
Access to tariff schedules:
Importers into Australia – Schedule 3 of the Customs Tariff Act 1995
Exporters to China – tariff schedule of the Chinese Customs Service
Advance rulings
Importers
Exporters
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Audit | Tax | Advisory | Financial Advice
Treatment of Goods Under ChAFTA
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Both China and Australia have set out their commitments to reduce duty rates on goods in lists,
called tariff schedules.
Both countries’ tariff schedules can be found in ChAFTA Chapter Two, Trade in Goods: Annex I
– Schedule in Relation to Article 2.4 (Elimination of Customs Duties).
Exporters
There are also two special categories relating to tariffs which will be eliminated over 10 or 12
equal annual stages, but where a special agricultural safeguard may apply.
Category D
Quota of Australia wool exports
Importers
Vital to check Australia’s tariff schedule
Audit | Tax | Advisory | Financial Advice
Rules of Origin Requirements
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Rules prevent goods from a
third party being transhipped
through either China or
Australia to take advantage of
the FTA.
Goods will be considered
as ‘originating’
if...
They meet Product Specific Rules
(PSRs)
They are Wholly
Produced Goods
They are Wholly
Obtained (WO) Goods
Audit | Tax | Advisory | Financial Advice
Rules of Origin – Transit Through a Third Party
A good will be considered ‘originating’, despite being transported through a third
country, if the goods meet a range of conditions including:
Not having undergone any operation other than
Unloading, reloading, storing, repacking, re-labelling, splitting up for transport reasons
Or any operation necessary to preserve the goods in good condition to be transported on to
China or Australia.
The goods are not stored temporarily in a transport hub for longer than 12
months
The goods remain under Customs control
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Audit | Tax | Advisory | Financial Advice
Other Important Rules of Origin
Imports into Australia:
For goods transhipped through a third party into Australia, including Singapore
and Hong Kong, Australia will not require any specific additional documentation,
other than the commercial documentation ordinarily required.
Exports into China:
Articles 14 and 15 of China’s Customs Decree 228
Hong Kong Customs and Excise Department has established a China Free Trade
Agreement Transhipment Facilitation Scheme to assist implementation of China’s
transhipment arrangements under FTAs.
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Audit | Tax | Advisory | Financial Advice
Preparation of Origin Documentation – COO
Certificates of Origin (COO)
Applies to a single shipment
Must not exceed 20 items per shipment
Valid for one year
Must be issued by an authorized body
Exporters to China – Australian authorized bodies:
The Australian Chamber of Commerce and Industry (ACCI);
The Australian Industry Group (AIG); and,
The Australian Grape and Wine Authority (AGWA) (for wine and wine-related products).
Importers into Australia – Chinese authorized bodies:
General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ)
The China Council for the Promotion of International Trade
These authorized bodies have COO templates
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Audit | Tax | Advisory | Financial Advice
Preparation of Origin Documentation – DOO
Declarations of Origin (DOO):
May be accepted in place of a COO for goods covered by an advance ruling on ChAFTA
origin
Completed by the exporter of a good
No need for DOOs to be approved by an authorized body
Applies to a single shipment only
May cover up to 20 items per shipment
Valid for one year
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Audit | Tax | Advisory | Financial Advice
Other Documentation
Record Keeping:
Exporters or producers must maintain all records necessary to demonstrate a goods’ origin
for three years after signing a COO, or longer.
Exporters or importers into Australia should note that records must be retained for five years
and can be retained in hard copy or electronic format.
Waiver of Certification:
For certain goods, Australia and China have waived requirements for COOs and DOOs
where total customs value is below AUD 1,000 or RMB 6,000
Verification
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Audit | Tax | Advisory | Financial Advice
Government Schemes – Exporters
Government grants and trade initiative schemes
In order to overcome non-tariff barrier challenges of international trade, or to assist with
entrance into new markets, the government has a number of trade-related initiatives
which further complement FTAs and assist with companies competitiveness in existing
and new Export markets, such as:
The Australian Trusted Trader Program (ATTP)
Export Market Development Grants (EMDG)
Efic Small Business Export Loan
State based – eg Export Skills Development QLD
Research & Development incentives
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Audit | Tax | Advisory | Financial Advice
Tax structuring – the starting point
What do you want to do/achieve?
Commercial/business considerations must be the starting point
Where is your product/service is on the business life cycle
What is needed to make sales in China
How much is it going to cost to set up and operate
Legal requirements both for the business and in China
What is the medium-longer term goal – keep or exit
Other considerations
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Audit | Tax | Advisory | Financial Advice
Tax structuring – the starting point
What do you want to do/achieve? cont
But don’t forget about the tax issues
Expect any foreign tax paid to be a “cost”
Different structures have different tax implications
Must understand Chinese local tax laws and obligations
Double tax agreements – note Australia/China DTA does not extend to Hong Kong
Do you need a full blown presence from day one?
Different structures have different set up and operating costs
No “one size fits all” – so recommend specialist advice before proceeding
Caution – changing structures is likely to have tax implications
How the business is to be funded – eg equity and/or debt, local or foreign …
“The Tax Advisory group’s Customs and International Trade experts aim to reduce the incidence of customs duty in a client’s business, producing instant
cash savings and real margin improvement for the future of the business.”
Richard brings to his clients his extensive prior experience working as an Industrial Engineer and Customs Broker for FedEx in organising supply chain &
logistics industry in various countries including Australia, New Zealand, Ireland and United Kingdom, and more recently at Crowe Horwath as a consultant
specialising in Customs & International Trade.
Clients and Expertise
Richard has experience of working with Australian and New Zealand regulatory bodies (Customs and Quarantine) as well as working with clients within
automotive, perfume & cosmetics, electronics and retail industry. Using his experience as an Industrial Engineer and Customs Broker, he is able to add
significant value to Department of Immigration and Border Protection (DIBP) industry advisory groups relating to trade facilitation initiatives. His industry
experience and commercial skills has also enabled him to achieve outstanding outcomes for his clients, most significantly helping reduce costs and risk
within the supply chain operations via operational improvements or reducing amount of customs duty paid on imported goods.
Key Areas of Expertise
Customs Duty Reduction via:
Unbundling of Customs Value
Recall and Warranty parts re-engineering to ensure compliance with bylaws that enables Duty Free Imports
Tariff Concession Order Scheme
Transfer Pricing in relation to Customs Valuation
Customs Compliance – via our Global Trade Optimiser (GTO) service offering
Trusted Trader Program – Government backed initiative aimed to improve trade facilitation
Operational Planning and Labour Resource Management
Process Improvements within Customs Clearance or Warehouse and Supply Chain Operation
Design, Development, Implementation including EDI interfacing of software with Customs in Australia, New Zealand and Asia