By way of exchange of media releases and correspondence on 21 October, it appeared that the Government and the Opposition had resolved their differences on the migration and labour provisions of the ChAFTA, clearing a path for its implementation in Australia.

Of course it is a misnomer to suggest that the deal needed to be "approved" by our Parliament which is not the case.  However what does need to pass through our Parliament is the legislation which enables the implementation of ChAFTA while the migration and labour provisions will be effected by Regulation.  The enabling legislation is normally confined to Bills to amend the Customs Act and the Customs Tariff Act to incorporate the "Customs" aspects of ChAFTA.  Those Bills have already been introduced into Parliament and are subject to review by a Senate Committee which is in addition to the review of the ChAFTA by other Parliamentary Committees.  In the absence of those Customs Bills being passed it would have been almost impossible to implement the ChAFTA.

While a positive outcome, yesterday's developments are not all that needs to happen. 

Why the rush?

The aim would be to have Australia and China confirm domestic implementation of ChAFTA by the end of this year as that would allow an immediate tariff reduction at that point making 2015 as "Year 1" of the ChAFTA with another tariff reduction on 1 January 2016 as "Year 2".  That could also have an effect on successive changes to Chinese quotas.  A similar exercise took place late in 2014 for KAFTA.

So, it's just the Customs Bills?

Not quite.  There's quite a lot to do including:  

  • Release and consideration of the reports by the Parliamentary Committees considering the whole ChAFTA (and whether it is in the National Interest).  
  • Consideration of the Customs Bills by the Senate Inquiry.  
  • Passage of the Customs Bills by the Parliament.  
  • Development and adoption of all necessary ancillary Regulation.  
  • Confirmation that China has completed its domestic implementation of ChAFTA.  
  • Exchange of "Diplomatic Notes" confirming all steps have been taken as required by ChAFTA and agreement on a commencement date.  

In my ECA and FBIA capacities I had raised a number of issues associated with the ChAFTA and its implementation for consideration by the various Parliamentary Inquiries. I had also raised them with DFAT and the DIBP directly and in my CPD presentations to the CBFCA and its members.  We are still waiting for substantive responses along with the necessary explanatory information and guides which are needed from the DIBP.

Use of ChAFTA for goods

There's a mass of information which we now need urgently from the DIBP to clarify many of the procedures required to use ChAFTA for imports and exports, including but not limited to the Regulations required for the Rules of Origin.

Some of the pressing information we have been promised but which is yet to be forthcoming includes the following:  

  • Provision of information on Certificates of Origin including to whom to apply in Australia, the process to seek them and the cost, along with details of which agency is to issue them in China and who will be the issuing persons (along with signature/seal details as contemplated by the ChAFTA).  
  • Provision of information on Advance Rulings required for Declarations of Origin including to whom to apply for Rulings (in Australia for goods being imported to Australia and in China for goods being imported into China).  That should include details on process and cost.  
  • Information/clarification of the issue of transhipment through HK (and which other ports can provide transhipment with customs control areas).  As I have mentioned, shipment through HK may cause a loss of preferential status under ChAFTA as it does not have "customs control" premises or procedures.  
  • The approach which the DIBP will adopt where the importer named on a CoO or DoO is not the importer named on the Import Declaration (for example where the original “importer” buys the goods to on – sell to the ultimate importer).  If the goods have not been changed/shipped in a way which would disqualify the original origin status then ideally the importer on the Import Declaration should also be able to secure preferential status as the ChAFTA does not require details of the importer as a mandatory field on a CoO or DoO.  
  • Where will the DIBP include direction to importers/LCB/DIBP officers that when considering compliance for ChAFTA purposes the DIBP will act in the manner directed by Article 2.10.2 of the ChAFTA (in other words, not to seek penalties for inadvertent non – compliance).  
  • What approach will the DIBP take if there are small discrepancies between tariff classifications for goods on CoO and DoO issued in China when compared to our tariff classifications at the point of import into Australia?  There are usually small divergences and the ChAFTA suggests that such divergences should not disqualify preferential status under ChAFTA.  However we need confirmation on "tolerances" from the DIBP given our strict liability penalty regime and the associated Infringement Notice Scheme.  
  • When will the DIBP issue its usual guides and notices which it issues with other FTAs on implementation and conduct its usual information sessions.  Of course I have already run sessions on ChAFTA for the CBFCA and my Member Forum sessions for November will address these implementation issues.

ChAFTA for services and the SFTZ

The ChAFTA is not all about goods.  In fact, many of the most significant initiatives relate to the liberalisation of the Chinese services market to Australian companies.  Pursuant to the ChAFTA, China's commitments to Australian service providers are the broadest in any of its FTAs or other agreements (except in its deals with HK and Macau).

Importantly though, most of those commitments operate in the China (Shanghai) Pilot Free Trade Zone (SFTZ) which has its own regulations and limitations.  To this end the ECA, in conjunction with partner organizations, has undertaken extensive research and issued a Summary Report on the SFTZ and Australia ahead of a full Report which can be purchased and downloaded in the near future.  The links in the article will provide access to the Summary Report and an associated App and provides a means to order the full Report. This information may assist Australian services exporters.

Prepare now for commencement

As you will see there is much to do in a short time to secure benefits from the start of implementation.  I would recommend early attention to what will be required, especially for those trading in goods which will benefit from ChAFTA