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Duty Mitigation: Tariff Concession System in Australia and New Zealand

Posted by Marko Vuksanovic

1/18/15 9:30 AM

blog-austnz-011615Often when I ask importers about their duty liability the response I receive is, “Yes… but its only 5%.”  Well if I had 5% of the 5% for every time I ask…. you get the picture.  Whilst the duty paid on individual importations may not amount to a substantial cost, over time the “only 5%” can add up to significant sums.  If you are still not convinced, consider what’s more challenging: expanding your sales to increase net profit by 5%, or reducing the cost of the imported product through duty mitigation?

I suspect many of you have continued reading, so allow me to introduce a valuable duty mitigation method: the Tariff Concession System. In Australia the Tariff Concession System was designed to help industry become more competitive in the international markets by allowing duty-free importation of certain products that are eligible for a Tariff Concession Order (TCO).  Upon application, a TCO is made in respect of goods if substitutable goods are not produced in Australia, in the ordinary course of business.  In this context, substitutable goods are Australian produced goods which have a use corresponding to a use of the imported goods. A number of goods are excluded from TCO eligibility, such as clothing, foodstuffs and some passenger motor vehicles.

TCOs are a public, commodity based instrument. Accordingly your product(s) may be eligible for existing TCOs that historically have not been applied to your importations which could expose your company to retrospective duty refund opportunities!  Confirmation of eligibility with existing TCOs can be sought through an administrative ruling with the Australian Customs and Border Protection Services (ACBPS). Alternatively where there are no existing concessions, an application for a TCO to be made can be submitted to the ACBPS.

Crossing the ditch, the Tariff Concession System is quite similar in New Zealand. The core criteria for granting a concession slightly varies, as does the application process.  In essence however both systems offer assistance in reducing costs for certain imported goods.

Increasingly, I am asked about the relevance of the Tariff Concession System considering the introduction of a number of prominent Free Trade Agreements (FTA).  So are TCOs relevant?  Absolutely they are!!!  It’s important to note that an FTA between two (or more) countries does not mean unconditional duty free importations between the parties.  It follows that eligibility criteria for some FTAs, such as the noteworthy direct shipment rule, may exclude goods from FTA preference.  Additionally for supply chains that rely on alternating or multiple sources of supply, TCOs may be preferred over FTAs for consistent duty mitigation of a particular product, irrespective of its origin.  

The Tariff Concession Systems in Australian and New Zealand can be a valuable duty mitigation strategy for your supply chain.  For more information on how to take advantage of duty mitigation opportunities, Tradewin's team down under can help. 

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Topics: Best Practices

Written by Marko Vuksanovic

Prior to joining Tradewin, Marko worked in several capacities in the logistics industry including managing freight forwarding and customs operations. As Principal of Tradewin in the South Pacific region, Marko has a natural talent for adding value to supply chains through various duty mitigation methods, involving Tariff Classification, Tariff Concession Orders, Valuation, Duty Drawback, Free Trade Agreements, and industry assistance schemes. Marko also assists clients in understanding the complexities of customs and trade compliance, and implementing programs to mitigate and manage associated risks. Marko is a licensed Customs Broker in Australia and is fully accredited by the Department of Agriculture, Fisheries and Forestry. Marko holds a Bachelor of International Business from the University of South Australia, and is currently completing a Masters degree in the same discipline at the Queensland University of Technology.