House Of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Immigration and Border Protection the Honourable Peter Dutton MP)

Attachment: regulatory burden and cost offset estimate

Certificates of origin

1. Australian goods exporters must satisfy the importing requirements of the destination country. This is a prerequisite for participating in international markets and represents business-as-usual practice. In the absence of ChAFTA, Australian exporters pay third party industry groups to certify origin in order to satisfy Chinese import requirements for a range of products.

2. Should an exporter elect to access preferential tariff arrangements under ChAFTA, increasing the cost competitiveness of the good in China, the exporter would continue to need to meet the certificate of origin requirements of China. An exporter who, for any reason, did not wish to obtain the certificate of origin, which would lead to preferential tariff treatment, would retain access to business-as-usual arrangements and receive China's most-favoured-nation (MFN) tariffs. Any requirement to obtain a non-preferential certificate of origin to satisfy Chinese import requirements would continue.

3. The rules of origin operational procedures under ChAFTA offer the option of self-certification of origin where the exporter has an advance ruling from the customs adinistration of the importing party. It is difficult to estimate the uptake of this option by exporters.

4. Exporters will, except in the circumstances outlined in paragraph 3 above, not be able to avoid the business-as-usual practice of paying third-party industry groups to produce certificates of origin in order to satisfy Chinese import requirements for a range of goods, and will retain access to existing MFN import arrangements when the FTA is in place.

5. For new exporters to China seeking preferential tariff arrangements under ChAFTA, the regulatory cost impact of obtaining a certificate of origin will depend on a range of factors, such as whether there are tariffs against their export good (71 per cent of current trade is tariff-free), at which stage during phased tariff reductions they may choose to enter the market, whether they choose to self-certify, whether the preferential certificate of origin can be substituted for the non-preferential certificate, and a range of other factors.

6. Taking the above factors into account, based on an estimated annual average incremental increase in certificates of origin of 1735, an internal cost of $19.83 per certificate and an average $33.00 cost of purchasing the certificate, the total average increase in regulatory burden for business is estimated to be $91,650 per annum over 10 years.

Foreign investment screening

7. The changes to foreign investment screening for Chinese private investors in non-sensitive sectors (primarily business investment and real estate) is described in paragraphs 147 and 150 above. The increase in Foreign Investment Review Board monetary thresholds will have a deregulatory effect as fewer investment proposals will need to be prepared by or on behalf of those investors. Based on an estimated average cost of preparing investment proposals, multiplied by the estimated change in the number of proposals as a result of ChAFTA, the total average decrease in regulatory burden for business is estimated to be $93,000 per annum over 10 years.