CHINA / AUSTRALIA FREE TRADE AGREEMENT – CHAFTA

CHINA / AUSTRALIA FREE TRADE AGREEMENT – CHAFTA

The documents have been signed and both countries are now involved in their own process of considering the agreement through the process of the Joint Standing Committee on Treaties (JSCOT) and relevant domestic treaty making processes in China.After the reports are presented and any amendments considered both countries will then exchange diplomatic notes and confirm they are ready to put the FTA – Free Trade Agreement into force. The FTA will be in force 30 days after this or on another date agreed upon.

Once ChAFTA is in force and with relevant supporting documentation, most goods imported from China to Australia will be import duty free. Since the import GST is calculated on the VOTI – value of taxable importation and includes the duty amount, the import GST liability will be reduced. This will provide a great advantage for cash flow for those importers who are not import GST deferred.

The ChAFTA is not only beneficial for importers but also for exporters, as Australian products imported to China will also enjoy the zero or reduced rates of import duty. While the FTA agreement is Bilateral, the duty rates will not be same for each country. For example China will adopt more phasing rates of duty than Australia will under the agreement. What this means is that duty rates will reduce over a period of time eventually to zero but not immediately zero ( when the agreement is in force ) on certain goods.

Currently the duty rates are 5% or 0% on goods from China, when the agreement comes into force it will effectively lower the cost of imported goods. Importers may wish to pass the 5% savings on to end consumers or to keep the 5% margin as increased profit. While the reduction in import duty will lower the landed cost of the goods, we may not necessarily see a reduction on the price of goods when purchased in Australia.

Over the years the cost of consumer items has decreased markedly. I have seen on the internet, sofa manufacturers and suppliers in China selling 3 seater upholstered sofas that look very comfortable for $300 USD! When I calculate the freight costs on about 2.3 cbm from China to Australia and all associated local port fees, duty and customs clearance fees, I can have a new 3 seater sofa in my house for under $900.

The increased trade with China has provided Australians with so many affordable goods to purchase at stores and online at very reasonable prices.

With every new FTA- Free trade agreement – that comes into force, this means more legislation for the customs broker to become familiar with when assessing and processing import documents for importers. Some customs brokers may never have the necessity to “put into action” the SAFTA – Singapore/Australia free trade agreement – for example if their importers don’t import goods from Singapore.

However a customs broker may become an expert very quickly with the AUSFTA – USA/Australia free trade agreement for example if most goods they process are from USA and the FTA applies.

The differing rules that may apply to some imported goods, as well as the value of them, and the responsibility that lies on customs brokers to determine their value is a very important issue and will be discussed.

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