Trusted Trader

Australian Trusted Trader – Free trade agreement benefits

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Australian importers have new reasons to become accredited Trusted Traders with the Australian Border Force (ABF) announcing that Trusted Traders can enjoy the benefits of certain free trade agreements (FTA) without requiring a certificate of origin or declaration of origin. This will ease the administrative burden of using FTAs for Trusted Traders. However, the Trusted Traders must still take steps to ensure the goods qualify for the FTA.

What is the Trusted Trader programme?

The Australian Border Force acknowledges that it cannot inspect all trade and that it needs to encourage greater levels of self-compliance. To this end, the Trusted Trader programme was established giving certain trade facilitation benefits to importers and exporters that demonstrate high levels of customs compliance and supply chain security. In addition to the newly announced waiver of origin documents for certain FTAs, other benefits include customs duty deferral, consolidated cargo clearance, priority treatment of goods at the border and mutual recognition under similar programmes offered by other countries.

To become an accredited Trusted Trader, an online application needs to be completed providing details of your business, your customs compliance and supply chain security record and systems. This application will be assessed by the ABF and will include and an on-site review. If offered accreditation, the Trusted Trader enters into a formal agreement with the ABF.

Origin documentation waiver benefit

Under the newly announced benefit, Trusted Traders that are importers will be able to claim the benefit of the Japan, Korea, Thailand, Singapore, Malaysia and Chile FTAs without needing to produce a certificate of origin or declaration of origin.

These documents are usually required for each import and obtaining them can be an administrative burden on the supplier and in some cases represent a small cost. Sometimes obtaining certificates of origin can slow supply chains or they may not be provided due to administrative oversight. Origin documentation can also be complex where multiple consignments are sent from a distribution centre to multiple Australian ports.

Limits of the origin waiver benefit

The benefit does not apply to all FTAs, notably, the China or ASEAN FTAs. These FTAs are heavily used and there is a requirement to produce certificate of origin. While the benefit also does not apply to the US FTA or NZ FTA or the Trans-Pacific Partnership, documentation requirements under these FTAs are light and do not warrant an exemption.

It is also important to note that origin documentation requirements under the Korea, Japan and Singapore FTAs can already be satisfied by way of exporter declarations of origin. This is not particularly onerous and does not involve a third party needing to issue the document.

Further, the benefit does not apply to exporters. Exporters will have to examine whether there are any equivalent benefits under any mutual recognition agreements.

Compliance with rules of origin

Most importantly, the origin documentation waiver benefit does not remove the requirement that the goods must still satisfy the rules of origin to qualify for the FTA. Trusted Traders will be required to maintain evidence that the goods comply with the relevant rules of origin. Assessing rules of origin can be very complex, particularly for manufactured goods where key components are imported.

The ABF suggests that Trusted Traders hold commercial documentation, contracts and statements in relation to the manufacture of the goods from the manufacturers. Importantly, the ABF states the information will need to be sufficient to prove the origin of the goods for the purpose of a FTA.

For some products this will be simple. For example, a manufacturer will easily be able to provide a written assurance that frozen berries imported from Chile were grown in Chile and satisfy the rules of origin under that FTA. However, what about a scooter importer from Malaysia. The frame, wheels, brake and handle bars may all come from different countries. The origin and value of these components may change over time. Will the supplier be aware of the impact of any change in origin of components on whether the goods qualify for the Malaysian Australian FTA?

As an Australian importer, how could you prove that the goods qualify for the FTA? For manufactured goods, origin could be proven by the supplier providing proof of the origin of inputs, the cost of inputs and evidencing what manufacturing process is undertaken in Malaysia. While the ABF suggests contractual documentation will be relevant to origin, all a contract will prove is that a party promised certain things. It does not prove what actually happened.

To be a Trusted Trader, the importer must demonstrate a desire to comply with customs laws. This should translate into the importer exercising due diligence regarding the manufacturer’s origin claims and putting in place systems to verify origin. What those systems are should be dictated by the complexity of assessing origin (for example, 100% originating timbered, versus a good manufactured from 100% imported components) and the level of revenue risk. A one off small import will warrant a less detailed system than imports valued in the millions.

Steps to take

If you are not currently a Trusted Trader you need to assess the merits of applying versus the costs. The application process is now much simpler and the online form is estimated to take 5-10 hours to complete. While the costs are decreasing, the benefits are increasing. In a world of increasing trade protection, most businesses will see the benefit of qualifying for a programme offering trade liberalisation benefits.

If you are a Trusted Trader and want to use the origin waiver benefit, the first question to ask is – why is it currently hard to obtain a certificate of origin? If the supplier finds it difficult to assess or satisfy the rules of origin, extreme caution should be exercised. This benefit is not a relaxation of the rules, only of the paperwork required.

If you wish to use the benefit, you need to ensure you obtain sufficient information to prove origin in the event of an audit (which could happen any time over the next four years). This involves a level of due diligence and it will be important to assess the cost of carrying out that due diligence against the benefit of not having to produce origin documentation. You should also consider whether any contractual amendments are required to give you the right to carry out the due diligence and/or compel the supplier to provide you with certain documents.

How we can help

We have a dedicated Customs and Global Trade team that regularly advises importers, exporter and customs brokers on using free trade agreements and the Trusted Trader Programme. We can help your business decide whether to apply to become a Trusted Trader or, if you are a Trusted Trader, how to manage the risks of using the origin documentation waiver benefit. Please contact Russell Wiese for assistance with the Trusted Trader process.

Australian Border Force 2018 Customs Compliance Priorities

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The Australian Border Force has released a statement setting out its compliance priorities for 2018. While each importer and exporter will have its own unique risk areas, the statement by ABF highlights the areas that should be given closest attention.

In relation to revenue related claims, the following are the areas that will be given careful attention by the ABF:

  • misclassification 
  • undervaluation 
  • non-declaration of goods 
  • false claims for GST exemption 
  • improper use of free trade agreements and concessions 
  • incorrect claims for duty refund.

Importantly, the ABF has made clear that the focus will be trade that does not involve a Trusted Trader (Australia’s AEO program). Where a trusted trader is not involved the ABF treats the trade as posing an unknown risk. As the number of trusted traders increases, the group of non-accredited traders becomes smaller and more likely to be the subject of regular ABF attention.

ABF focus areas – key considerations

Misclassification

General duty rates are either 0 or 5% in Australia, so classification may not seem as important as for other higher duty countries. However, in Australia classification can determine whether a particular tariff concession will apply or whether the ABF considers the goods are subject to dumping duties. We have seen many cases where compliance action has centred around whether a product is a basic good and subject to dumping duties, or has been further worked and should be identified as a something more than the good described in the dumping notice.  

Incorrect classification can also impact of the use of free trade agreements.

Undervaluation

With low duty rates valuation issues do not have the same level of attention in Australia as in other jurisdiction. Areas to watch out for include whether the customs value includes any commissions paid to overseas agents, royalties paid to import the good or the value of materials provided to the manufacturer free of charge. 

Non-declaration of goods

Deliberate smuggling of goods can result in significant fines. With low duty rates, there really should be little motivation to adopt this tactic. Always be cautious if a supplier wishes to produce a customs invoice or packing list that does not reflect the commercial transaction.

False claims for GST exemption

GST only has a real impact on importers that cannot claim a corresponding credit. This will mainly be domestic consumers. Businesses aggressively claiming a GST concession on imported goods need to question why they are taking the risk. 

From 1 July 2018, this issue will become more important as currently exempt low-value goods (below $1,000) will become subject to GST.

Improper use of FTAs

This is an area that will continue to grow as more Australia trade is potentially eligible for lower duty rates under FTAs. It is important to check that an origin document meets the strict requirements of the FTA. Classification inconsistencies should not be ignored, but rather, resolved upfront with the ABF. Also, pay attention to situations where one origin document is used for multiple shipments or deliveries to multiple ports.

Incorrect claims for duty refunds

Nothing seems to invite an audit like lodging an application for a duty refund. Refund applications should be treated as seriously as claiming a concession at the time of import. You should not ‘test’ eligibility for a concession by lodging a refund and seeing if it is automatically processed.  

No doubt new issues will arise in 2018, but as a starting point, we recommend focusing your compliance program on the areas the ABF has identified as important.  

5 Recent Customs Developments Including Trusted Trader, Dumping Duty Refunds and AAT Decisions

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September has highlighted the wide variety of issues that customs professionals must consider in the areas of classification, the Trusted Trader Programme, anti-dumping duties, the process for appealing decisions by the Department of Immigration and Border Protection and broker licensing. Our update considers each of this issues and the impact for customs professionals.

1. Trusted Trader Rules – another piece of the puzzle falls into place

The Trusted Trader Rules have been introduced and provide some of the missing detail in respect of the Trusted Trader Programme.  The rules are important as unlike the previously enacted legislation, the rules provide the detail of the programme. A perfect example of this is the core requirement that a Trusted Trader demonstrate low levels of international supply chain risk.  This is a wide overarching requirement, but it takes the detail in the rules to understand what this means.

An example is looking at the preliminary issue of when the international supply chain starts and ends.  Under the rules, the international supply chain for an importer who is a Trusted Trader could cover all activities from the first significant process in the production of the import until the time the Trusted Trader receives the goods in Australia. Entities that want to be involved in the Trusted Trader Programme will need to consider how they manage the various supply chain risks that arise from the moment of first production of the goods until they arrive in their Australian distribution centre.

This includes taking reasonable measures to ensure that any person doing anything for the purpose of an activity that forms part of the entity’s international supply chain manages general security risks together with specific risks associated with interference with the goods, security of containers, movement of goods and physical security of the relevant premises.

The steps to be taken depend on what is adequate to address the relevant risk. Another important element of Trusted Trader accreditation is trade compliance.  What is satisfactory compliance?  Well it depends on factors such as:

  1. What action is taken to ensure compliance
  2. What activities you perform
  3. The extent of any non-compliance
  4. Any disclosure of non-compliance
  5. Whether any non-compliance was beyond the entity’s reasonable control
  6. Where there has been non-compliance, what action has been taken to ensure future compliance.

Importantly, there is no set criteria as to what is appropriate action to ensure trade compliance.  For instance, there is no prescribed annual internal audit or data analytic review.  Each entity will be different.  A single entity purely importing motor vehicles duty free under the Japan FTA will need to focus more on its origin rule procedures, while tariff classification and tariff concession order (TCO) use may be a bigger issue for a broker handling chemical imports from 100 different suppliers.  In both cases, a qualitative review is more likely to ensure compliance, or identify non-compliance, than exception testing data review.

Many importers, exporters and service providers already achieve very high standards of trade compliance.  Meeting the criteria set out in the rules may not involve adopting new procedures, but rather articulating and documenting the existing processes that are resulting in high levels of compliance.

2. Dumping duty refunds – aluminium road wheels

The motor industry was impacted in 2012 by the imposition of significant dumping duties on certain aluminium road wheels exported from China. Hunt & Hunt assisted GM Holden with a Federal Court review partly in relation to a decision by the Anti-Dumping Commission to treat 112 exporters as “selected non-cooperating exporters” (which effectively resulted in a penalty level dumping margin).  Following the Federal Court review, 111 of the exporters were required to be treated as “residual exporters” with a much lower dumping margin.

The end result is that the dumping margin retrospectively falls from 29.3% to 9.13%, with similar falls for the interim dumping margins.  This represents a potential refund opportunity equal to approximately 20% of the FOB value of the goods.  The opportunity applies to exports from June 2012 onwards but does not impact exports by YHI Manufacturing Co., Ltd and exporters that received an individual interim or final dumping margin.  The decision does not impact the rate of countervailing duty.

3. Beaten by a technicality

An archaic feature of our Customs Act is that the only way to obtain an Administrative Appeals Tribunal (AAT) review of classification, applicability of concession or a valuation decision is by making a payment of duty under protest and seeking a review of the decisions leading up to that payment.  This carries with it technical requirements as to how payments under protest should be made, the timeframe for review and the scope of the review.

It would be much easier if there was simply a right to review of decision as to the classification, valuation or application of any concession, regardless of whether there was a payment under protest.

The difficulty with the payment under protest system was highlighted in a recent AAT case concerning the classification of solar panel kits.  The importer sought to classify the goods under a heading that would not attract dumping duty.  However, following an audit, Customs (as they then were) sought to classify the goods to a heading that would attract dumping duty.  Both classifications had a 5% general customs duty rate.

Changing the classification of goods that had already been imported had a significant dumping duty impact, but did not result in a demand for any extra customs duty payment.  As the payment under protest system does not apply to dumping duties, there was no payment under protest that could form the basis of an AAT appeal.

A payment under protest was made in respect of a future import, but the importer sought to use that payment to enliven the AAT’s jurisdiction to review the earlier audit decision.  The AAT held that the audit decision sought to be reviewed and the payment under protest were not sufficiently connected to allow the appeal. Issues that arise from this case:

  • The payment under protest provisions are complicated and specialist legal advice should be sought to ensure the importer has a right to AAT review.
  • The AAT review system would benefit from amendment and simplification.  Classification can have an impact even where the customs duty outcome is neutral.  For instance, classification may determine dumping or countervailing duties, rule of origin under an FTA and restrictions applying to the import or export of the good.
  • The AAT would have been prepared to review the payment under protest for which an application was made – the problem was that the applicant had not technically linked the original classification decision to the later payment – this can be done with careful drafting of the AAT application.

In an era of few pre-clearance interventions, the payment under protest system plays too big a role in our AAT review process.  We have previously, via Freight & Trade Alliance, submitted to the National Trade Facilitation Committee that the right to review should exist independently of a payment under protest.  This recent case demonstrates why reform in this area is necessary.

Pending legislative change, this case is a reminder that legal advice is critical when reviewing decisions through the AAT.

4. Sheets of plastic classified as a textile

In the recent AAT decision, Fletcher Insulation Pty Ltd and CEO of Customs, the Tribunal had to consider whether a product that was essentially plastic sheeting on rolls should be classified as a plastic or a textile.  The product was described by the Tribunal as a bonded article made up of two integral pieces of material (polyethylene film), with the bonded layers arranged at right angles to each other.

If classified as a plastic, a TCO potentially applied.

Customs argued that the goods fell within the textiles section either as a woven fabric of synthetic filament yarn or a nonwoven.  The importer argued the goods fell within a broad plastics heading that covered sheets and film or plastic.  If both the plastics and the textiles headings were available, the plastics chapter notes provided that the textiles heading applied.

The Tribunal rejected the argument by Customs that the product could be treated as woven as there were no fibres, strands or yarns used in its production.  However, the Tribunal did find that the product was a nonwoven fabric.  This was despite the fact that the product was entirely made of plastic!  Further, the Tribunal dismissed the fact that the section notes provided that nonwovens that were impregnated, coated or covered with plastics were to be classified as a plastic.

The importer also argued that classification as a nonwoven was inappropriate as the product was not a textile.  The Tribunal responded that whether or not the product was a textile was irrelevant.  Although the section heading refers to textiles, section headings are not a factor to be considered when classifying the good.

Important points from this case are:

  • The classification of a TCO has no relevance to the classification of the goods potentially covered by that TCO – even where a TCO is very specific.  TCOs are not tariff advices
  • Section headings are irrelevant to the classification of goods
  • Given that it is possible for an item that is 2 bonded sheets of plastic to be classified as a textile, importers should always be advised to seek a tariff advice.

5. Broker licensing – some interesting insights into the licensing process

A recent AAT case considered whether a refusal of an application for a nominee broker’s license was reasonable.  The decision itself is non-contentious as the required level of experience was not shown.  However, in reaching its decision the Tribunal gave the following interesting insights into the accreditation process.

  • The completion of a national examination or assessment is not a necessary step to proving acquired experience, nor is it determinative – it is simply a factor to be considered
  • The Committee did not contact the applicant’s referees.  It seems the item of most importance was the applicant’s performance in the interview
  • The Committee noted that it is rare that there are any issues as to whether a person is a fit and proper person
  • In 2014, 53 applications for a nominee customs broker license were referred to NCBLAC.  Of those, only 2 were granted a license without the need for an interview
  • Of the 48 interviews conducted in 2014, 26 applicants were granted a license and 22 were not
  • Generally most people who are not granted a license on first application will be on the second, after having gained further relevant experience
  • The AAT held that the decision to interview the applicant was correct, particularly as the applicant’s referees had not elaborated on the depth and extent of the applicant’s experience
  • The focus of the NCBLAC interview will be on the applicant being able to identify relevant issues, rather than precise provisions of the customs legislation.

Above all, the case demonstrates that almost all applicants will be interviewed and that this will be the crucial factor in obtaining a license.  For referees, the case also demonstrates the importance of setting out in detail the relevant experience of the applicant.  Don’t merely list areas of work of the applicant, but give real examples of the work undertaken.  Also, don’t assume the committee will contact you for further information.

Official Australian Trusted Trader Programme Questionnaire Registered

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A key element of the Australian Trusted Trader Programme will be satisfactory completion of a self-assessment questionnaire. This is the first major step towards obtaining full Australian Trusted Trader accreditation.

The questionnaire has been officially registered. While the information required from each applicant will differ, the content of the questionnaire is the best guide as to what is required to be accredited as a Trusted Trader.

For brokers, freight forwarders and traders looking to become involved in the Australian Trusted Trader Programme, reviewing the questionnaire will focus your attention on potential areas of weakness that should be addressed prior to the programme being fully implemented in 2016.

What is the Australian Trusted Trader Programme and how does the questionnaire fit in?

The Australian Trusted Trader Programme will provide its participants with trade facilitation benefits in exchange for demonstrated commitments to trade compliance and supply chain security. It is open to importers and exporters, as well as services providers such as brokers and freight forwarders.

Inclusion in the programme is neither compulsory nor automatic. Initial assessment of eligibility will be  via review of the self-assessment questionnaire; which covers all areas of the business’ international trade activities and procedures used to control compliance and supply chain security risk. Satisfactory completion of the self-assessment questionnaire will lead to the provisional status of trusted trader, pending a physical review by the Trusted Trader Branch.

Accessing the questionnaire

The self-assessment questionnaire is a legislative instrument and needed official approval under the Customs Act.  The official approved document can be accessed here. It is expected that a further version of the questionnaire with explanatory notes will be made available in due course.

Key considerations

The self-assessment questionnaire covers a range of topics and it is important to note that it is not intended that all questions will be applicable to all applicants. For instance, if you are a customs broker that does not physically handle goods, questions relating to the physical security of your premises will not be relevant.

The questionnaire contains 39 questions, many of which have 3-4 sub-questions. To highlight the need to review the questionnaire, we have set out below examples of some key questions with our commentary for consideration around potential “issues”.

Question Number

Question

Issues
Internal controls 17(a) Does your business have internal controls in place for the management of trade compliance and supply chain security? Y/N. If yes, briefly describe how your business’ internal controls for the management of trade compliance and supply chain security are implemented and managed. It is crucial that you have some internal review process in place that is compliance focused. This should be a process that is systematic/periodic and not merely reactive to issues raised by the Australian Border Force. While many brokers will have an advisory team reviewing past entries for refund opportunities, many will not have formal procedures in place to identify compliance risks.
Information relating to goods moving in the international supply chain 22(a) Does your business have procedures (documented or otherwise) in place to ensure that any communication made to your business from another party about goods moving through the international supply chain is complete, accurate and traceable? Y/N. If yes, briefly describe these procedures. Customs brokers are very reliant on the accuracy of information provided to them by importers. Information as to the identity of parties in the supply chain and the goods themselves can be easily falsified for a security or trade advantage. While it is difficult for brokers to verify client information, procedures can be developed around identity and the provision of supporting documentation such as licences and permits. It is also reasonable to insert contractual terms allowing brokers to request additional documents to support the value of goods or their classification.
Business partner security 35(b) & (c) Does your business have procedures (documented or otherwise) for identification and selection of business partners in your international supply chain? Y/N. If yes, briefly describe these procedures.

Does your business have procedures for international supply chain business partners to ensure that their procedures are consistent with the supply chain security standards of the ATT? Y/N If yes, briefly describe these procedures.

 Very few businesses are able to provide all services required to move, clear and store goods. It is likely you will contract or subcontract with international carriers, stevedores, warehouse operators and domestic transport companies. Each one of these companies represents a potential risk in the supply chain which you have limited opportunities to control. As a minimum, we recommend considering what are the key factors that are important to you in choosing a business partner and document these factors in a formal policy. All service providers can ask their business partners for copies of their own policies aimed at increasing supply chain security. Where you have significant negotiating power, you can insist on the development of such policies and obtain rights to ensure compliance with those policies.
Personnel training and personnel security 37(a) and 38(a) Does your business provide training for employees in roles relating to international supply chain security or trade compliance activities? Y/N. If yes, briefly describe the training.

Does your business have procedures (documented or otherwise) in place to screen prospective employees and to periodically check current employees? Y/N If yes, briefly describe these procedures.

 The level of pre-employment screening and periodic review of current employees required will depend on their role and the sensitivity of information they have access to or control. For any party that has a role in undertaking the duties of a customs broker police checks and verified references are likely to be a minimum. Employment contracts should also be reviewed to ensure that the employer has the right to undertake integrity checks periodically throughout the employment. Ongoing training is also crucial. This training should not just go to the performance of the individuals role but also as to the business’ values and ethics, identifying non-compliance and procedures for reporting security risks.

While the questions differ in topic, very often the risk assessment follows this pattern:

  1. Is there an internal procedure in place to control the risk
  2. Is that  procedure documented
  3. How is compliance with that procedure reviewed and
  4. What is the maturity level of the internal control and monitoring environment?

Service providers who are asking these questions now about their own areas of trade compliance and supply chain security risk will be best placed to obtain the competitive edge that Australian Trusted Trader accreditation will bring.

Australian Trusted Trader Programme Launched

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The Department of Immigration and Border Protection launched The Australian Trusted Trader Programme yesterday in Melbourne, marking another important step on the path to a new trade environment.

Australian Trusted Trader is a programme under which importers, exporters and service providers who can demonstrate that they are low risk will be given various trade facilitation benefits.  Ultimately, the programme provides for differentiated treatment of low risk participants in international trade, allowing those entities flexibility in their supply chain and providing international trade opportunities. Our guide on the Australian Trusted Trader programme and what to do now to prepare can be accessed here.

Key messages from the launch

The launch was marked by speeches from:

  • Roman Quaedvileg, inaugural Commissioner of the Australian Border Force
  • Senator, the Hon Michaelia Cash, the Assistant Minister for Immigration and Border Protection
  • Teresa Conolan, the head of the Australian Trusted Trader Branch
  • Russell Wiese, Partner, Hunt & Hunt.

The overall theme of the speeches was “opportunity”, and there is no doubt that the programme represents opportunities for the newly formed Australian Border Force, the Government, importers/exporters and service providers.

Australian Border Force

The Commissioner noted that over the past 20 years the pendulum has swung between enforcement and trade facilitation.  However, he does not believe that these concepts are mutually exclusive.  This is represented by the Australian Trusted Trader Programme which focuses on both compliance and trade facilitation.

The Commissioner noted that now is the right time for the commencement of the programme, particularly given the ability to leverage the proliferation of free trade agreements, AEO programmes in other countries and other trade facilitation initiatives.  Further, with increasing trade volumes, the border authority needs to take a different approach to compliance if it is to successfully manage risk.

Ultimately, the Commissioner set the goal of 80% of trade being covered by the Trusted Trader Programme within 5 years.  In this environment, the Australian Border Force will focus its tactical intelligence and other compliance strategies on the 20% of trade that falls outside of the programme.

While security will always be paramount, the Commissioner noted that the relationship between the border authority and the trade community is now moving from one of control, to trust.

Department of Immigration and Border Protection

The Assistant Minister emphasised that Australian Trusted Trader represents an opportunity for Australia to achieve enhanced economic growth and maximise global potential.  Her Government is committed to assisting Australian traders by reducing red tape and facilitate, not frustrate, trade.

Senator Cash noted that given our global competitors enjoy the benefits of similar programmes, we cannot afford to delay implementing a trusted trader programme. The Senator emphasised that while security will always be a key requirement, through Trusted Trader the Government is looking to move from a system of only punishing non-compliance to one of also rewarding compliance.

Trusted Trader branch

Ms Conolan emphasised that the Australian Trusted Trader Programme is designed for industry and made a request for continued feedback from the trade community. She noted that an early goal in the development of the programme will be the negotiation of mutual recognition agreements with our key trading partners.

Ms Conolan also announced the four inaugural pilot partners being:

  • Boeing Aerostructures Australia
  • Devondale Murray Goulburn
  • Techwool Trading and
  • Mondelez Australia.

Ms Conolan hoped that the number of pilot partners would increase to 40 over the course of the 12-month pilot.

Supply chain opportunities

There are opportunities for all areas of the supply chain presented by the Trusted Trader Programme.  These opportunities include:

  • For exporters – Faster clearance of goods into foreign markets through mutual recognition
  • For importers – More efficient supply chains and utilising mutual recognition to further facilitate integration into global value chains
  • For brokers/freight forwarders – The ability for those adopting best practices to use Australian Trusted Trader accreditation to differentiate themselves from less compliant competitors

As the programme is in a development stage, there is an opportunity for importers/exporters to identify what the pressure points are in the supply chain and investigate whether the Australian Trusted Trader Programme is the solution to those issues.

What now?

The Australian Trusted Trader Programme has commenced its pilot phase.  Whether you want to be part of the pilot, or an early adopter once the programme is fully implemented, now is the time to assess whether the programme is right for your business.  This involves weighing the benefits of accreditation against the costs of meeting the accreditation standards.

While the programme is voluntary, and it is acknowledged that Australia currently has a very good reputation when it comes to facilitating trade, it is important to note that security is still the paramount concern.  It is clear that in the future, the primary compliance actions of the Australian Border Force will be directed to those outside of the Australian Trusted Trader Programme.

6 Important Customs and Trade Developments You Should Know

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The China Free Trade Agreement (FTA) is the customs and trade topic dominating headlines at the moment, and it makes sense given China is our biggest trading partner. However, there are a number of other recent and important customs and trade developments that impact importers and exporters, which we have set out below.

1. So long Customs, hello Australian Border Force

The Australian Customs and Border Protection Service ceased to exist on 30 June 2015 and was replaced by the Department of Immigration and Border Protection (Department).  The majority of previous Customs compliance functions are now being carried out by the Australian Border Force (ABF), an agency within the Department, and the Department will handle policy, regulatory and corporate functions.

The merging of Immigration and Customs is designed to result in some efficiencies and operational cost savings.  So far as it relates to trade, we expect the day to day impact of the merger will be minimal.  However, from a compliance perspective, we believe that the name Australian Border “Force” does send a stronger message than Australian Customs “Service”.  It appeared that in the lead up to the name change there was a marked increase in customs compliance action being undertaken.

While a name change on its own does not change the character of a Government Department, the stronger compliance approach by Customs in its final year was more reflective of the stance you associate with the name “Border Force”.

A quick review of the new website for the Department and the ABF suggests that there is new customs related content and we suggest spending some time becoming familiar with the website.

2. China Free Trade Agreement – proving origin

We couldn’t release a customs update without mentioning the China FTA.  One of the surprising outcomes under the FTA is that a declaration of origin could only be used if an origin ruling has been obtained from the Customs Authority of the importing country.  This means Australian exporters will require a ruling from Chinese Customs as to the origin of Australian products in order to use a declaration of origin.  There is hope that this is only an interim measure, as the FTA contains a clause that specifically states that the declarations of origin provisions will be reviewed in 3 years.  Until then, we expect most traders will use certificates of origin.

This outcome is especially disappointing given the flexible outcomes regarding origin in the Korea and Japan FTAs.  If nothing else, we are sure traders would have appreciated greater consistency across the recent FTAs.  No doubt the Department of Foreign Affairs and Trade will be very keen to see some relation of the declaration of origin requirements when the issue is revisited in 3 years’ time.  Further, given that Customs was already struggling to meet timeframes on providing rulings, we are sure that the new Department will also be hoping that the ruling requirement is removed.

3. Customs duty refunds – would you like an audit with that refund?

It has been commonly reported to us that if a refund application is made by way of amending an import declaration, the refunds department may review the entire declaration, not only the line you are amending.  In the recent edition of Border News, it was made clear that lodgement of a refund application alters the previous version of the import declaration.  As such, the ABF may seek additional information relating to any goods the subject of the declaration before a decision is made to approve or reject the refund application. 

This will have an impact on those in the industry who provide a service of identifying refunds in respect of import declarations lodged by other brokers.  Importers seeking refunds will now need to be confident about not only the right to a refund, but also the tariff classification and concessions claimed in respect of any other goods covered by the same import declaration.

In order to facilitate trade, our view is that the Refunds Centre should limit their review to the refund being claimed and not use a refund application as a prompt to audit the balance of the entry.  The ABF has wide rights to audit past entries and does not need to link this power to the seeking of a refund.

4. Australian Trusted Trader Program

There is now budgetary funding, allocated staff, a launch date and enabling legislation.  The Australian Trusted Trader Program is happening and now is the time to decide whether you would like to be involved.  The potential benefits under the program have been well published (duty deferral, streamlined reporting, mutual recognition, less intervention).  However, the enabling legislation potentially allows for the relaxation of almost all requirements relating to the import and export of goods.

This means that the Trusted Trader Branch has the ability to grant a wider range of benefits than the main benefits currently foreshadowed.  Every supply chain and customs profile is different and traders should be asking – what is my customs problem to which the Trusted Trader Program is potentially the answer.

Trusted Trader is not one size fits all and the legislation clearly allows for bespoke benefits.  In our view, the best chance of obtaining those benefits is to be an early participant in the program.  Early participation means that you are involved while the parameters of the program are still being shaped.

The pilot of the program will be conducted in the 2015/16 financial year.  Importers and exporters interested in being part of the pilot should contact us and we will assist with passing on their interest to the Trusted Trader Branch.

5. TCOs – Federal Court considers the approach to interpretation

Becker Vale Pty Ltd v CEO of Customs is a Federal Court case primarily concerning the classification of goods.  However, the last nine paragraphs of this 65 paragraph case deal with the application of tariff concession orders (TCOs).  In those 9 paragraphs, the Federal Court referred to the past Administrative Appeals Tribunal (AAT) cases that held that in order for a TCO to apply to goods, those goods must completely and precisely meet the requirements of that TCO.   The Federal Court appeared to adopt this reasoning and interpreted the requirements of the TCO by reference to the requirement that the TCO application contain a precise description of the goods.

This is an important development as the current strict interpretation of TCOs had previously been restricted to AAT decisions and had not been fully tested before the Federal Court.   It is hoped that the ABF does not take this ruling as a strong endorsement of the strict approach to TCO interpretation, as it was clear that the matter was not fully argued before the Court.

The meaning of TCOs, and the breadth of goods covered by a TCO, is a very hot topic at the moment.  It is an issue that is causing great uncertainty in the importing community.  Given this, it is unfortunate that the Federal Court did not fully consider this issue in Becket Vale and instead chose to simply adopt previous AAT decisions.

6. FTA tool

The Export Council of Australia (ECA) has recognised a need for exporters to be better informed about FTAs and how to access the benefits under those FTAs.  Hunt & Hunt has worked with the ECA and ANZ bank to develop the website.  The website allows exporters to search by general good description or country and see the duty rates that apply under the various FTAs.  In most cases, exporters are provided with a comparison between the general rate and the FTA rate allowing a clear demonstration of the benefits of the applicable FTA.

It is hoped that the FTA tool will help increase the utilisation of FTAs by both increasing awareness of FTA benefits and the steps that must be taken to qualify for those benefit.  We anticipate that once the benefits of FTAs are known, exporters will more regularly take FTAs into account when designing their supply chain and deciding which foreign markets to pursue.