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APEC RULES OF ORIGIN - AUSTRALIA

2.1.1 AUSTRALIA: PREFERENTIAL RULES OF ORIGIN

2.1.1.1 BASIS OF SUBSTANTIAL TRANSFORMATION CRITERIA

Determination of substantial transformation is on a value-added basis expressed as a percentage of factory cost. Origin is achieved when a threshold of 50 percent or more of factory cost is attributable to materials and/or processing of the country or area concerned.

2.1.1.2 BACKGROUND TO PREFERENTIAL RATES OF DUTY Trade Initiatives

Preferential rates of duty flow from the following trade initiatives:

Variations in Rules of Origin

Except for a few minor differences, Australia's value based schemes are essentially the same. The only differences between the schemes are:

• Each preference recipient group has its own "qualifying area" in which the minimum value- added threshold necessary to confer origin is to be achieved.
  
• Forum Island countries and Papua New Guinea may count the costs of cartage from the port/airport to store on foreign material inputs in the minimum value-added threshold.
  
• Materials partly manufactured in New Zealand, a Forum Island country or Papua New Guinea may, if substantially transformed in those countries or Australia, be treated as materials of those countries.
  
• A two percentage point tolerance may, in certain restrictive circumstances, be applied to the minimum value-added threshold applicable to Forum Island countries, Papua New Guinea and New Zealand.
  
• The minimum value-added threshold may be varied in the case of exports from New Zealand Forum Island countries and Papua New Guinea.
  
• A special category of wholly manufactured goods applies in the case of Papua New Guinea andNew Zealand.
  
• A common minimum value-added threshold of 50 percent applies to all countries except Canada.
  
• Direct shipment is not required except for goods made in Canada.
  

Australia's Tariff

Australia's Tariff has preferential rates specified throughout the schedule for particular preference countries. The tariff authorises preferential rates of duty for goods sourced from preference countries that are the "produce or manufacture" of that country. The term "produce or manufacture" is interpreted in accordance with the rules of origin described below.

It is important to note that origin in this case is for preference purposes only. Thus, where goods are imported from a particular country and are not entitled to preference, their origin will not change but they will pay the general (or MFN) rate of duty.

2.1.1.3 LEGISLATION AND OTHER RULES/DOCUMENTS Legislation

Australia's preferential rules of origin are embodied in the following legislation:

Customs Act 1901 Section 4 (definition of "unmanufactured raw products") Division 1A of Part VIII Customs Regulations Regulations 107A and 107B.

More detailed information on Australia's preferential rules of origin, is set out in Division 9 of Volume 8 of the Australian Customs Service Manual for the benefit of interested parties and Customs Officers.
Simple explanatory booklets on rules and procedures governing the entry and substantiation of entitlement to preferential rates of duty are available for the benefit of parties involved in trade emanating from New Zealand and Fiji. These are:

• ANZCERTA 'Trans-Tasman Textile, Clothing & Footwear Rules of Origin Enquiries Protocol on Customs Procedures',

• ANZCERTA 'Rules Governing Entitlement to Preferential Rates of Duty for trans-Tasman Trade,
  
• SPARTECA 'Protocol on Customs Procedures for Rules of Origin Under SPARTECA Joint Australia Fiji Booklet",

• SPARTECA 'A Reference Handbook for Forum Island Country Exporters'.

A booklet explaining the Procedures in respect of Determined Manufactured Raw Materials (DMRM) in regard to trade between Australia and New Zealand has also been developed.

Australia's system of self-assessment for entry clearance places responsibility for correct clearance of goods through Customs on the importer. Customs' compliance monitoring usually takes place after clearance of the goods. In satisfying their obligations under this system, importers will be expected to make reasonable enquiries about preference entitlement with the exporter concerned if they are to avoid the application of penalties.

Nevertheless, importers will, in ordinary circumstances, be entitled to rely for immunity from the application of penalties, on a declaration placed by the exporter to support entitlements when preference is claimed.

Failure to substantiate a preference entitlement claimed, will mean that the normal or General rate of duty will apply to shipments of the particular goods entered in the immediately preceding 12 months.

2.1.1.5 RULES OF ORIGIN

Goods originating in a preference country may be divided into three categories:

1. Goods wholly the produce of the country (known as unmanufactured raw products');
   
2. Goods wholly manufactured in the country from one or more of the following:

   (a) unmanufactured raw products;

   (b) materials wholly manufactured in Australia or the preference country;

   (c) materials determined to be raw materials of the country; and

3. Goods partly manufactured in the country.
   

Goods Wholly the Produce of a Country (except for Canada where direct shipment is a condition)

These goods consist of unmanufactured raw products of a preference country as defined in Section 4 of the Customs Act. They are entitled, without further conditions except direct shipment from Canada, to preferential rates of duty when imported from a preference country.

This concession allows imported materials to be deemed to be materials of the preference country. Goods in this category are entitled to preferential rates of duty without further conditions. In certain circumstances in relation to New Zealand, Canada and Papua New Guinea goods traded between the countries may be regarded as "wholly manufactured" even though the goods contain raw materials imported from third countries. The special conditions are known as the Determined Manufactured Raw Materials (DMRM) provisions and certain specified criteria must be met before the traded goods are eligible for preferential rates.

There are two conditions to preference entitlement for goods partly manufactured in the preference country/area and partly outside it. These are:

1. The last process of manufacture must be performed by the manufacturer in the preference country; and
   
2. Not less that 50 percent (25 percent or 75 percent in the case of Canada) of the defined factory cost must be made up of defined qualifying expenditure.

Minimum Value-added Formula

Qualifying expenditure on materials + qualifying labour + qualifying overhead x 100

Total expenditure on materials + qualifying labour + qualifying overhead

Total Expenditure on Materials

This cost includes all directly attributable costs of acquisition of material inputs into the manufacturer's store but excludes certain duties and taxes levied within the qualifying area.

Qualifying Expenditure on Materials

Qualifying expenditure is total expenditure in all instances except:

• Where the last process of manufacture on materials occurs outside the qualifying area, there is no qualifying expenditure except the cost of cartage from wharf to store in the case of Forum Island manufactures; and

• Where materials are processed within the qualifying area from imported raw materials last processed outside that area, the total cost of those materials to the final manufacturer in the preference country is reduced by the cost of such imported raw materials consumed in the processing.

Note: Where the qualifying area is Australia/New Zealand or Australia/Forum Island country or Australia/Papua New Guinea and the qualifying expenditure equals or exceeds 50 percent of total expenditure on the processed materials by the factory performing the last process of manufacture, qualifying expenditure may become total expenditure.

Qualifying Expenditure on Labour and Overhead

Further constraints apply to prescribed costs in that they may be included in qualifying expenditure only to the extent that they:

(a) are incurred by the manufacturer of the goods;

(b) relate directly or indirectly to the production of the goods;

(c) can reasonably be allocated to the production of the goods;

(d) are not specifically excluded; and

(e) are not included elsewhere.

2.1.1.6 DIRECT SHIPMENT PROVISIONS

Direct shipment is not required except for preferential imports from Canada.

2.1.1.7 OTHER CONDITIONS OR REQUIREMENTS

There are no other conditions or requirements.

2.1.1.8 REVIEW PROCEDURES

The Australian Customs Service maintains internal review procedures. Any party may request an internal review of a decision denying entitlement to preferential rates of duty.

Where a decision is taken to require the payment of full duty on shipments presented for clearance through Customs, such payments may be made "under protest" by importers. This procedure will give rise to a right to challenge the decision to require full duty allowing an application for review to be made to the Administrative Appeals Tribunal.

The Administrative Appeals Tribunal is an independent body that is empowered to subject the decision to a full merit review. The finding of the Tribunal will be binding on Customs unless successfully appealed to the Federal Court.

2.1.1.9 CONTACTS

National Manager
Tariff & Valuation
Customs House
5 Constitution Avenue Canberra ACT 2600
AUSTRALIA

Tel: 61-6-275-6462
Fax: 61-6-275-6377

2.1.2 AUSTRALIA: NON-PREFERENTIAL RULES OF ORIGIN

2.1.2.1 In regard to goods imported into Australia Non-preferential Rules of Origin (ROO) are used to determine the origin of goods originating in a country that is not a preference country. Non-preferential rules of origin may be used to cover requirements for, inter alia:

• application of anti-dumping measures
• application of countervailing measures
• trade statistics
• labelling of goods
  

2.1.2.2 BASIS OF SUBSTANTIAL TRANSFORMATION CRITERIA

Determination of substantial transformation is on a value-added basis expressed as a percentage of factory cost. There are no supplementary rules for non-preferential ROO.

2.1.2.3 LEGISLATION AND OTHER RULES/DOCUMENTS Legislation

Australia's non-preferential ROO are embodied in the following legislation:

Customs Act 1901 Section 4 (definition of "unmanufactured raw products") Section 153Q-Division 1A of part VIII

In addition there are references to the origin of goods in the following specific instances:

• Dumped & Subsidised Goods

Section 269 of the Customs Act contains the procedural matters for the conduct of inquiries and imposition of anti-dumping and countervailing duties. Section 269T and 269TAC contain specific provisions for the establishment of origin.

• Trade Statistics

Section 71K and 71L of the Customs Act require that importers or their agents provide certain information when lodging Customs import entries for Trade Statistics. The provision of the correct origin is one of these requirements.

• Marking of Goods

The Commerce (Trade Descriptions) Act and Commerce (Imports) Regulation 8(c)(i) provide that certain goods should be marked in a particular manner. As a general rule, the country of origin is the country where operations give the product its essential qualities and character. The relevant guidelines state that it is what the words "Made in......" are likely to mean to a typical consumer of the product that matters, not a technical or cost analysis of the product's content.

• Responsible Authority

The Australian Customs Service is responsible for introducing and revising the instruments providing the non-preferential rules of origin for each non-preferential rules of origin scheme.

• Documents

There are currently no other publicly available documents in respect to non-preferential ROO. The ACS, however, distributes administrative guidelines and directions in regard to a number of issues in Australian Customs Service Manuals.

2.1.2.4 RESPONSIBILITY FOR CORRECT DETERMINATION OF ORIGIN

It is the responsibility of the beneficial owner of goods, or his/her agent, to correctly enter goods for Customs purposes. Customs may examine cargo against documents at the time of entry or undertake investigations at a later stage to determine whether the origin has been correctly declared. The Australian Customs Service determines the country/area of origin of a good for each non-preferential rules of origin scheme.

Generally the origin of goods is determined when an entry for home consumption is lodged by the owner/agent and it is accepted by Customs. The ACS reserves the right to audit such entries and after examination reassess them. In addition decisions can be made prior to the lodgement of an entry or before shipment of goods has been made if application is made to the ACS. In respect of goods subject to anti-dumping or countervailing inquiry the origin of the exported goods is determined during the course of the investigation.

The beneficial owner of goods, or his/her agent, is required to show the correct country of origin on a Customs entry which is usually based on information contained in commercial invoices or way-bills. The owners or agent may be required at some later date to produce documentary evidence to support the claimed origin.

2.1.2.5 RULES OF ORIGIN

Goods originating in a non-preference country may be divided into three categories:

1. Goods wholly the produce of the country (known as 'unmanufactured raw products');
   
2. Goods wholly manufactured in the country from one or more of the following:

   (i) unmanufactured raw products;

   (ii) materials wholly manufactured in Australia or the non-preference country, or Australia and the non-preference country;

   (iii) materials determined to be raw materials of the country; and

3. Goods partly manufactured in the country.

There are two conditions for goods partly manufactured in a country. These are:

1. The last process of manufacture must be performed by the manufacturer in the non-preference country, and
   
2. Their allowable factory cost is not less than the specified percentage of their total factory cost.
   

This specified percentage is:

75 percent where the goods are of a kind commercially manufactured in Australia (50percent for Christmas Island, Cocos Island and Norfolk Island); or 25 percent if the goods are of a kind not commercially manufactured in Australia.

2.1.2.6 OTHER CONDITIONS OR REQUIREMENTS

There are no other conditions or requirements necessary for establishing origin.

2.1.2.7 REVIEW PROCEDURES

While there are no formal review procedures prescribed in the Customs Act an internal review of a decision may be made where an objector can supply further information to Customs. An objector may at any time appeal to the Federal Court under the Administrative Decisions Judicial Review Act for review of a decision.

2.1.2.8 CONTACTS

National Manager
Tariff & Valuation
Australian Customs Service
5 Constitution Avenue
Canberra ACT 2600
AUSTRALIA

Tel: 61-6-275-6462
Fax: 61-6-275-6377