Government Slashes the Red Tape on Exports to New Zealand

The Australian and New Zealand governments will further liberalise trade across the Tasman, in an agreement that will greatly benefit Australian manufacturers.

The Deputy Prime Minister of Australia, Mark Vaile, and the Australian Minister for Industry, Tourism and Resources, Ian Macfarlane, announced the new agreement today. It will simplify the rules of origin that apply to exports between Australia and New Zealand.

“Australia and New Zealand have one of the world’s most successful free trade agreements, the Closer Economic Relations (CER) agreement. It has dramatically increased the amount of trade and investment between our two countries, and we’re going making it work even better. It’s great news for Australian manufacturers and exporters,” Mr Vaile said.

Under the CER agreement, Australian companies can export their products to New Zealand without paying customs duty, as long as those products meet specific rules of origin. The rules of origin are important, because they ensure that the products actually come from Australia or New Zealand and not somewhere else.

Mr Macfarlane said the existing rules were based on what was known as the factory cost method.

“At the moment, a product is covered by the CER agreement as long as the last process involved in manufacturing it took place in Australia or New Zealand, and as long as that process incurred at least 50 per cent of the product’s factory cost,” Mr Macfarlane said.

“The factory cost method is complex and involves too much red tape, because companies have to make sure they don’t accidentally break the 50 per cent rule.

“Australia and New Zealand have now agreed to adopt new rules of origin, based on the tariff classification system. Under the new rules, a product will generally be covered by the CER agreement as long as the manufacturing process in Australia or New Zealand involves a specified change in its classification under the tariff system.

“The agreement will slash red tape for Australian exporters and will increase the number of companies that can import their products into New Zealand without paying customs duty,” he said.

It is anticipated that the new rules will come into effect on 1 January 2007. An example of how they will benefit exporters is attached.

Media contacts: Richard Forbes (02) 6277 7420 - Kirsty Boazman (02) 6277 7580

The New Rules of Origin in Action: Fire Trucks

Fire trucks are a specialty vehicle that are classified under tariff heading 8705. Their production requires special chassis and parts. Some of those parts, such as engines and transmission trains, are not made in Australia or New Zealand.

In the past, Australian companies have had difficulty meeting the requirements of the old CER rules of origin due to the high cost of the imported parts. The parts ended up costing more than half the factory cost of the vehicle.

Under the new CER rules of origin, a fire truck is covered by the agreement if the manufacturing process in Australia or New Zealand results in: A change to tariff heading 8705 from any other heading.

Engines, transmissions and other parts such as water pumps are classified under other headings. The process of building a fire truck, however, results in it being classified under heading 8705, so it will meet the new rules of origin.

As a result, Australian manufacturers will now be able to export fire trucks to New Zealand under the CER agreement and will not have to pay customs duty.