Hon Phil Goff
Minister of Trade
Hon Lianne Dalziel
Minister of Commerce
Media statement
Manufacturers to benefit from new CER rules of origin
New rules that further liberalise trans-Tasman trade, support competitiveness and reduce compliance costs for exporters
have been agreed with Australia, Trade Minister Phil Goff and Commerce Minister Lianne Dalziel announced today.
"The new Rules of Origin (ROO) agreement under CER is the result of nearly a year of negotiation between Australia and
New Zealand. They will enter into effect on 1 January, 2007," Phil Goff said.
“The agreement provides significantly more liberal rules for New Zealand producers and exporters to qualify for
preferential entry into the Australian market under CER and will benefit many New Zealand businesses.
"Rules of Origin determine whether or not a good qualifies for preferential entry under CER. If traded goods meet the
criteria, they can enter duty-free."
Lianne Dalziel said the new rules were largely based on satisfying a ‘change in tariff classification’, or CTC, rather
than the current 50 percent ‘regional value content’ threshold.
"New Zealand manufacturers have sought this change for the last decade.
"The new CTC approach means that for the majority of tariff lines, an exporter need simply satisfy the condition that
there has been a change in tariff classification between any imported inputs from third countries and the completed good
that are being exported to Australia/New Zealand.
"By shifting the focus from the origin of inputs, manufacturers will have a greater choice of materials. This will help
increase efficiency and competitiveness, and significantly reduce the need to keep financial records to support ROO
claims.
"One area is not subject to the change. Our aim was to obtain liberalisation for all sectors, and we are very
disappointed that this was not wholly achieved in men’s and boys’ apparel," Lianne Dalziel said.
Under the agreement, exporters have the option of using existing rules until 2012.
Note: Technical information attached. Draft schedules specifying tariff line rules and the amended CER Article 3, will
be available later this month.
ENDS
Key elements of the Rules of Origin reform package
Article 3
Article 3 of CER contains the basic rules of origin framework for goods traded between Australia and New Zealand. The
new Article 3 provides the amendment to permit the shift to the new change of tariff classification (CTC) approach, and:
The basis for calculations of regional value content (RVC) in cases where a supplementary regional value content rule,
or a specific exception, is required, for example where a minimal process could achieve a change in tariff
classification;
In such cases the RVC calculation will generally be done on the basis of a more liberal Free on Board (FOB) calculation
rather than the current ex-factory cost calculation. This new approach will allow for the first time domestic value to
include manufacturers’ profit and domestic transport;
For the first time manufacturers in New Zealand will be able, where RVC rules still apply, to take account of self
produced inputs as origin qualifying;
Transitional provisions which will allow exporters to continue to use the existing regional value content (RVC) rules in
preference to the new rules for five years after implementation (until January 2012), thereby avoiding any possibility
that an exporter might inadvertently be disadvantaged by the new rules of origin;
A commitment to undertake a review of the new regime within three years of entry into force, before the end of 2009;
A general consultation provision that will allow either side to raise any issue at any time with a view to seeking
changes.
The Schedule
Article 3 will include an annexed schedule of the product specific rules covering all goods on a line-by-line basis.
These rules set out for all goods the CTC requirement and, as negotiated for particular products, the RVC requirements
or other conditions to qualify for origin.
Agricultural products: In general a rule based on simple change in tariff classification between inputs and the final
product, will confer origin. Processing will be recognised as origin conferring. In some cases, an alternative RVC rule
is required, when processing in Australia or New Zealand does not alter the tariff classification of a good. New Zealand
processed food manufacturers will welcome these rules as liberalising.
Chemical products: The rules will provide for a choice between a simple CTC rule or a process rule such as chemical
reaction. The latter is a strongly liberalising feature since it is a simple and easy alternative test where a change in
tariff classification cannot be achieved. There are no supplementary RVC requirements in this sector. The rules will
benefit all New Zealand industry groups and manufacturers.
Textiles: The rules for products in this sector will be a mixed CTC/RVC requirement. The RVC requirement will generally
be a 45 per cent threshold calculated on a liberal FOB basis. This RVC requirement is significantly more liberal that
the 50 per cent threshold calculated on an ex-factory cost basis under the current rules. In rough terms, 45 percent FOB
is equivalent to 35 percent ex-factory cost. One chapter under this sector covering products such as outdoor fabrics and
bed linen will have a higher 55 percent FOB threshold (equivalent to about 45 per cent ex factory cost). Textiles
exporters in general will accordingly be significantly better off than they are today under these rules.
General Manufacturing: The general CTC rule will recognise almost all assembly from imported parts without a
supplementary RVC requirement. Where there is an RVC it will represent no more than the FOB equivalent of 35 per cent
ex-factory cost, considerably more liberal than the current 50 per cent requirement. General manufacturing firms, for
example white-ware manufacturers, should strongly welcome this outcome.
Men’s and Boys’ apparel: It is a matter of regret that Australia would not agree to any equivalent liberalisation in
this sector. The rule for structured apparel (including suits and trousers) will essentially remain unchanged in the
medium term. It will be based on a change in tariff classification plus a 50 per cent RVC calculation on the basis of
ex-factory cost until 2010. At that time the area content requirement will reduce to 45 per cent calculated on the same
basis. The rule for unstructured clothing (for example shirts, pyjamas) will be either 45 per cent based on ex-factory
cost or 45 per cent based on new FOB on implementation. For unisex garments, babies’ clothing, and clothing accessories
(ties etc) the RVC will be 45 per cent based on FOB.
Women’s and Girls’ Clothing: This sector will enjoy particularly liberal rules based on a simple change in tariff
classification with no supplementary RVC requirement. This will be universally welcomed as very liberalising by the New
Zealand women’s fashion industry. Under these rules there will no longer be a limit on their ability to use high quality
expensive European fabrics, as the rules are simple and process based.