IMPORTS AND IMPORT CLEARANCES

COUNTRY OF ORIGIN

6.5 The country of origin of a good (for imports) is determined by Rules of Origin (ROO) established by each country. In Australia, the ROO are established in the Customs Tariff, Customs Tariff Act 1995, Customs Act 1901 and Customs (International Obligations) Regulation 2015. These rules, in addition to determining the country of origin of a good, also determine the base level of duty applicable on imported goods.

6.6 There are two common types of ROO depending upon application, the non-preferential and preferential ROO. Section 153Q of the Customs Act 1901 makes provision for non-preference ROO. For goods imported from a non-preference country, the country of origin is determined by whether the goods:

• are wholly manufactured in the country, or
• if partly manufactured, the last process in the manufacture of the goods was performed in the country and the allowable factory cost (materials, labour and overheads) is not less than the specified percentage of their total cost. The specified percentage depends on whether the goods are of a kind commercially manufactured in Australia.

6.7 In relation to preferential ROO, Australia has entered into a number of Free Trade Agreements (FTAs) with other countries. These agreements provide preferential rates of duty (often free) for goods traded between these countries and Australia. When goods are imported, the importer may be eligible to claim a preferential rate of duty under a particular trade or preference agreement. The importer is responsible for making the initial ROO self-assessment and the DIBP will only review this application if specific intelligence indicates that the ROO has been applied incorrectly.

6.8 In Australia, ROO exist for all FTAs and preference schemes in order to distinguish eligible 'originating goods' of preference countries from the ineligible produce of that country and goods from other countries. Entitlement to preference is determined in accordance with Part VIII Division 1A - 1K of the Customs Act 1901 which provides the criteria for determining the origin of goods based on 'produce or manufacture of' a country. There are various ROO used in Australia's FTAs and preference schemes. The most common rules are:

• Wholly obtained - this is common to all agreements. If a product is a naturally occurring product of the country, or is made entirely in that country out of materials from that country, the good is considered to have originated in that country.
• Change in Tariff Classification - this refers to the HS used in the Customs Tariff Act 1995. The HS categorises all goods and assigns them a code so that goods can be consistently identified internationally. This ROO requires that the HS classification of the final good imported from the preference country is different from the HS classification(s) of the materials imported into that country that were used to make the good. The ROO may require a small shift from a different Tariff Subheading or Heading, to a large shift from a different Tariff Chapter. If the necessary change in Tariff classification shift is met, then the goods meet the ROO.
• Regional Value Content (RVC) - this rule requires that a threshold amount of the final value of the good is attributable to production costs within the country. RVC rules can be calculated in various ways and these are specified in each agreement that uses them. RVC is a form of Value-Added rule and is sometimes referred to as such.
• Process Rule - this requires the final good to have undertaken a particular manufacturing or processing operation in the preference country.
• Final process of manufacture – this rule requires goods to have undergone their final process of manufacture in the preference country prior to importation into Australia.
• Consignment – these provisions allow for the transport, and certain minimal procedures, of final goods through other countries on their way to Australia so that the final process of manufacture rule is not breached.
• De minimis – this rule allows for a specific amount of foreign/non-originating material. The amount is defined in the relevant legislative provisions for each FTA or preference scheme.

6.9 While the DIBP's objective in applying different types of ROO is to limit preferential rates of duty to goods which meet their origin criteria, from a statistical perspective the rules ensure the country of origin is accurately recorded for goods subject to import duty.

6.10 The application of ROO may differ between countries as the concepts and definitions are generally not symmetrical. Where the rules are different it may lead to discrepancies in country attribution when imports recorded by one country are reconciled with the corresponding exports of a trading partner. For this reason, international guidelines on the criteria for establishing ROO are included in the Revised Kyoto Convention (RKC) which can be accessed from the UN Trade Statistics website.

6.11 The DIBP have accepted and abide by the rules of the RKC but they have not adopted Annex K. This is because Annex K has a single set of rules governing the origin of goods while Australia's FTAs and preference schemes contain more specific rules. Nevertheless Australia's ROO follow the principles defined in the RKC. More detailed information is available in the Preferential Rules of Origin Publication and the official Free Trade Agreement documents, both available on the DIBP website.


OVERSEAS PORT OF LOADING AND COUNTRY OF CONSIGNMENT

6.12 Country of consignment is not part of the ABS merchandise trade dataset. However, it is an important international partner country attribution, alongside country of origin, a concept worth understanding and how it relates to ABS port information. 'The country of consignment (in the case of imports) is the country from which goods were dispatched to the importing country, without any commercial transactions or other operations that change the legal status of the goods taking place in any intermediate country. If, before arriving in the importing country, goods enter one or more further countries and are subject to such transactions or operations, that last intermediate country where such transactions or operations took place should be taken as the country of consignment' (footnote 1).

6.13 In some cases country of consignment may be the same as the country reported in the overseas port of loading field, which is the place where the goods are loaded onto an aircraft or ship for the purpose of being transported to Australia. Depending on the circumstances (the transportation details that are known by the importer and the accuracy of reporting), different information may be provided to the DIBP. The overseas port of loading reported to the DIBP is usually determined by the information contained in the bill of lading. Three possibilities are described below.

6.14 Goods wholly manufactured in China are exported to Australia. The goods are shipped direct from a Chinese port to an Australian port. In Australia's import statistics the country of origin should be recorded as China, the overseas port of loading should be a Chinese port and country of consignment (were it required by the DIBP) should be China.

6.15 Goods wholly manufactured in China are exported to Australia but repackaged and consolidated in Singapore. In Australia's import statistics the country of origin should be recorded as China, the overseas port of loading should be Singapore and the country of consignment (were it required by the DIBP) should be Singapore (as the repackaging and consolidation would be considered a commercial transaction that changes the legal status of the goods).

6.16 Goods wholly manufactured in China are exported to Australia but in Singapore the goods are unloaded and re-loaded onto a different carrier. In Australia's import statistics the country of origin should be recorded as China, the overseas port of loading should be Singapore (but could be reported on the import declaration as a Chinese port) and the country of consignment (were it required by the DIBP) should be China (as the loading and re-loading of goods for export is not on its own a commercial transaction that changes the legal status of the goods).


FOOTNOTE:
1 United Nations 2011, International Merchandise Trade Statistics: Concepts and Definitions 2010, Series M No. 52, New York, paragraph 6.4. http://unstats.un.org/unsd/trade/EG-IMTS/IMTS%202010%20(English).pdf <back