CUSTOMS AMENDMENT (JAPAN-AUSTRALIA ECONOMIC PARTNERSHIP AGREEMENT IMPLEMENTATION) BILL 2014 Explanatory Memorandum
CUSTOMS AMENDMENT (JAPAN-AUSTRALIA ECONOMIC PARTNERSHIP AGREEMENT IMPLEMENTATION) BILL 2014
2013-2014
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CUSTOMS AMENDMENT (JAPAN-AUSTRALIA ECONOMIC PARTNERSHIP
AGREEMENT IMPLEMENTATION) BILL 2014
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Immigration and Border Protection
the Honourable Scott Morrison MP)
CUSTOMS AMENDMENT (JAPAN-AUSTRALIA ECONOMIC PARTNERSHIP
AGREEMENT IMPLEMENTATION) BILL 2014
OUTLINE
The purpose of this Bill is to amend the Customs Act 1901 (the Customs Act) to introduce
new rules of origin for goods that are imported into Australia from Japan to give effect to
the Japan-Australia Economic Partnership Agreement (the Agreement). The Customs Act
amendments will enable goods that satisfy the rules of origin to enter Australia at
preferential rates of customs duty.
Complementary amendments will also be made to the Customs Tariff Act 1995 (the
Customs Tariff Act) by the Customs Tariff Amendment (Japan-Australia Economic
Partnership Agreement Implementation) Bill 2014 to give effect to the Agreement.
The Agreement is a comprehensive and wide-ranging agreement that provides Japan and
Australia with more liberal access to each others goods, services and investments
markets.
Formal talks between the Governments of Australia and Japan to establish an Economic
Partnership Agreement between the two countries began in 2007. These negotiations
concluded on 7 April 2014.
Following finalisation of the text the Agreement was signed at Canberra, Australia on
8 July 2014. The Agreement was tabled in Parliament on 14 July 2014. The Agreement is
expected to come into force in early 2015, subject to Australias treaty process being
completed and the exchange of diplomatic letters.
To give effect to the preferential entry of goods under the Agreement, the amendments
contained in this Bill provide rules for determining whether goods are Japanese originating
goods. The amendments to the Customs Tariff Act will provide for the preferential entry
of goods that meet those rules.
The amendments contained in this Bill also impose obligations on exporters of Australian
goods to Japan and for which a preferential rate of duty will be claimed, and on people
who produce such goods.
The amendments contained in this Bill will be operative from the later of the day this Act
receives the Royal Assent and the day the Agreement, done at Canberra on 8 July 2014,
comes into force for Australia.
FINANCIAL IMPACT STATEMENT
Underlying cash impact ($millions)
2014-15 2015-16 2016-17 2017-18 Total
-110.0 -445.0 -495.0 -540.0 -1590.0
Page 2 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
REGULATION IMPACT STATEMENT
The following regulation impact statement was tabled in the Joint Standing Committee on
Treaties on 14 July 2014:
INTRODUCTION
1. This Regulation Impact Statement (RIS) relates to the Australia-Japan Economic
Partnership Agreement (JAEPA). Negotiations on an economic partnership agreement
(EPA) with Japan commenced in April 2007 following the conclusion of a joint government
study on the feasibility of a bilateral trade agreement between Australia and Japan. The
Prime Minister and Trade and Investment Minister jointly announced conclusion of
negotiations on 7 April 2014.
PROBLEM IDENTIFICATION
2. Japan is a vital, longstanding and highly complementary economic partner for
Australia. In 2013, two-way goods and services trade reached $70.8 billion, making Japan
Australias second-largest trading partner, with a surplus to Australia of $28.3 billion. The
latest merchandise trade figures (for 2013) show Japan was Australias second-largest
goods export destination (15.5 per cent of total exports) and third-largest source of imports
(6.5 per cent). At the end of 2013, Japanese investment in Australia was valued at
$131.0 billion and Australian investment in Japan reached $50.2 billion.
3. Despite the strong and mutually beneficial trade and investment relationship between
Australia and Japan over a sustained period, the absence of a bilateral trade agreement:
constrains Australian producers and exporters ability to further build trade in the
context of high tariffs;
maintains inefficient barriers to Australias trade which limits profitability,
does not provide protection for Australian exporters against preferential agreements
Japan has concluded, or is negotiating, with key competitors;
maintains higher costs for Australian consumers and businesses for key Japanese
imports; and
maintains barriers to investment in trade and services.
4. JAEPA also provides an opportunity to take the bilateral relationship to the next level
and further build the framework underpinning a key economic partnership for Australia.
High tariffs limit trade opportunities for Australia, particularly in agriculture
5. Australian exporters face very high tariffs into Japan, with customs duties levied on
6.5 per cent of Australian goods exported to Japan. While Japans simple average applied
Most Favoured Nation (MFN) tariff in 2012 was 4.6 per cent1, this figure does not convey
the extremely high tariff peaks applied to products of export interest to Australia.
6. Japans tariff barriers are particularly high in agriculture, a vital area of trade for
Australia, with an average applied MFN tariff of 16.6 per cent. Japan is Australias
second-largest agricultural market, with an estimated total value of $4.0 billion (or ten per
cent of Australias agricultural exports) in 2013. It is Australias largest market for beef,
cheese, animal feed and offal, and an important destination for sugar, vegetable oils,
seafood and fruit and nuts.
7. Japan imposes high tariffs on a range of agricultural goods, particularly on key
products of interest for Australia, including beef, dairy, wheat, sugar, barley, vegetable oils,
tuna and rice. For example, Japan imposes tariffs of 38.5 per cent on beef (which under
certain circumstances can be increased up to 50 per cent) and up to 40 per cent on
1
WTO, World Tariff Profiles 2013
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 3
cheese. In addition to tariff peaks many agricultural exports confront a complex and
opaque regulatory framework that includes tariff rate quotas, state trading and special
safeguard and emergency tariffs.
8. In the absence of an EPA with Japan, Australian agricultural producers will continue to
face these very high tariffs and complex barriers on major products.
9. Japan is also Australias second-largest market for non-agricultural goods: with
Australian exports worth over $42 billion in 2013. It is Australias largest destination for
coal and liquefied natural gas, second-largest destination for iron ore and a major market
for petroleum, and aluminium. Many of Australias major resource and mineral exports
(including coal, iron ore, liquefied natural gas, copper ore and aluminium), constituting over
80 per cent of Australias merchandise exports to Japan, enter Japan tariff free. However,
with tariffs of up to 11.7 per cent on a range of other resource products, including coke and
semi-coke of coal and non-crude petroleum, there is scope to improve market access for
Australias non-agricultural goods. Japan also applies tariffs of up to 30 per cent on some
manufactured products of interest to Australia, including textiles, forestry products, and
hides and skins.
Japanese tariffs reduce the efficiency and profitability of Australian exports
10. Japans imposition of high tariffs does not just constrain trade, it also reduces the
efficiency and profitability on traded items by adding additional costs and reducing
margins.
11. Indeed, on some key exports Japanese tariffs clearly may not limit the volume of
trade. For example, Australia exports $124 million worth of southern bluefin tuna to Japan,
representing 98 per cent of Australias total southern bluefin tuna exports despite Japans
3.5 per cent tariff. Similarly, Australia exports $89 million of coke and semi-coke of coal,
despite Japans 3.2 per cent tariff. These tariffs nevertheless add costs to exporters,
importers and consumers.
Australian producers and exporters face increasing competition in the Japanese
market, and Japan is negotiating preferential trade deals with key competitors
12. Japan has long been a vital market for Australia. But Australias ongoing competitive
position is not guaranteed.
13. Japan is in the process of negotiating trade agreements with Australias key
competitors including bilaterally with the European Union and Canada and multilaterally
with the United States (US) and New Zealand through the Trans-Pacific Partnership
(TPP). Japan already has in place trade agreements with the Association of Southeast
Asian Nations (ASEAN), Chile, India, Mexico and Peru. An EPA will not only deliver
earlier tariff elimination and reductions for Australia, it will also position Australia well in
TPP negotiations, including through strong renegotiation provisions should Japan provide
better access for competitors.
14. While Japan has not previously concluded an EPA with other significant agricultural
exporters, in some sectors Australia is already losing market share to Japans other EPA
partners. This is particularly clear for wine, in which Chile enjoys a tariff advantage
through its EPA with Japan. Since the Japan-Chile EPA entered into force, Japans import
of Chilean wines have more than doubled to $178 million in 2013, while imports from
Australia have decreased slightly, to $46 million. JAEPA will help level the playing field.
15. Irrespective of progress on Japans other trade agreements, Australian agricultural
exporters are already facing growing pressure from competitors in the Japanese market.
The starkest example is beef. Australian beef producers have been losing market share to
competitors from the US as Japan has progressively eased Bovine Spongiform
Encephalopathy (BSE) related health restrictions against US beef. (Before the discovery
Page 4 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
of BSE in US beef in 2003, US beef dominated the Japanese market.) An EPA can
provide Australian exporters a competitive advantage.
Australian consumers and businesses do not have access to cheaper Japanese
goods because of Australia's existing tariffs
16. For most goods subject to tariffs, the general duty rate imposed by Australia is five per
cent. Of particular significance, a five per cent duty is imposed on Japanese motor vehicle
imports, worth $8.2 billion in 2013. JAEPA will provide Australian consumers with cheaper
cars, and for small businesses, cheaper goods motor vehicles. Australian manufacturing
businesses that use goods and materials produced in Japan will also enjoy lower input
costs as tariffs are eliminated or phased down. Tariffs will also be eliminated on all
Japanese-made consumer goods, including on electrical and white goods (worth $501.7
million in 2013).
Further opportunities for investment and trade in services
17. There are opportunities to expand bilateral services trade and investment to the
benefit of both countries.
18. Japans commitments in the World Trade Organization (WTO) on trade in services are
limited. Through JAEPA, Japan will bind its regulatory regime in a much wider range of
service sectors, providing greater certainty of treatment for Australian service providers
and investors. A bilateral EPA with Japan would improve protections and certainty for
Japanese investors, making Australia a more attractive destination for Japanese
investment. Japan is Australias third largest source of foreign investment, behind the
United States and the United Kingdom. Japan is ranked as the sixth-largest destination for
Australian investment, but only a small proportion of this is direct investment.
Further building the Australia-Japan partnership
19. The Australia-Japan relationship is extremely strong and is supported by significant
bilateral architecture. Economically, the 1957 Commerce Agreement was a landmark
agreement setting the agenda for increased bilateral trade and investment and closer
economic integration. This has served Australia and Japan well, but JAEPA would take
the economic and bilateral relationship into a new phase. Not only would JAEPA provide
improved market access and facilitation of trade and investment for both Australia and
Japan, it would also underline the strength of the bilateral relationship.
OBJECTIVES OF GOVERNMENT ACTION
20. The Governments decision was to conclude a high-quality bilateral trade agreement
that would secure and improve Australias competitiveness in a key market, and to do so
as soon as practicable. This included the following outcomes, which were achieved:
improved goods market access, including through the elimination or reduction of
Japanese tariffs on key Australian agricultural, resources, energy and manufacturing
goods over the shortest possible timeframe;
improved competitiveness for Australias agricultural and services exports, including
through renegotiation clauses should competitors secure better access with Japan;
better access for Australian service suppliers in the Japanese market, including by
eliminating or reducing restrictions on commercial presence, cross-border supply
and foreign equity holdings;
greater clarity and certainty of Japans regulations for Australian service providers
and investors through a binding of Japans existing regime and commitment to bind
future changes to Japans regulation;
industry-based cooperative initiatives to enhance trade opportunities in the legal and
education services sectors;
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 5
improved and more impartial administration of regulations through commitments on
transparency of regulation;
secure access to Japans government procurement market;
commitments to ensure rights of Australian intellectual property holders are
protected effectively and enforced by Japans intellectual property regime;
commitments to enhance the use of electronic commerce in goods and services,
including by ensuring that customs duties will not be introduced on electronic
transmissions;
commitments to ensure that the benefits of JAEPA are not undermined by
anticompetitive practices; and
a framework for settling disputes under JAEPA.
OPTIONS THAT MAY ACHIEVE THESE OBJECTIVES
21. As outlined in the ,,Problem identification section of this RIS, Japan maintains trade
barriers on goods and services of interest to Australia. Without an arrangement to reduce
these restrictions, Australian exporters will remain constrained in their ability to capitalise
fully on the opportunities presented by Japans large and affluent market. Furthermore, it
is in Australias interest to secure an early advantage in the Japanese market over
Australias competitors, many of which are already negotiating trade agreements with
Japan.
22. The only realistic option available to the Government to achieve these objectives is
the negotiation of a bilateral trade agreement with Japan. The following discusses other
options available to the Government.
No action
23. The absence of a new trade arrangement would leave Australia with, at best, the
status quo, but more likely losing competitiveness in the Japanese market. With no action,
high tariffs would continue to constrain Australian exporters from fully capitalising on one
of the worlds most valuable markets. Taking no action would also deny Australian
exporters a competitive advantage over suppliers from Japans other trading partners.
Moreover, some of Australias competitors in agriculture, including Canada and the
European Union, are also negotiating bilateral preferential EPAs with Japan. Failure to
enter a bilateral preferential EPA ahead of these countries would place Australian
producers at a disadvantage.
24. Taking no action would also maintain any applicable Australian tariffs on imports from
Japan (which were dominated by passenger motor vehicles, refined petroleum and goods
vehicles), depriving Australian consumers and businesses of cheaper imports.
Regional trade negotiations only
25. Australia and Japan both participate in two ongoing regional trade agreement
negotiations: the Regional Comprehensive Economic Partnership (RCEP) and the TPP.
26. These negotiations should not be seen as an alternative to JAEPA - the Government
is pursuing them in tandem with JAEPA, and JAEPA outcomes can support further
progress in these regional efforts while providing early gains and protection for Australia.
27. TPP negotiations potentially allow for the conclusion of a high quality agreement
between the 12 TPP negotiating countries, including Australia and Japan. When
concluded, the TPP could provide benefits for Australia, including additional agricultural
market access in Japan over that agreed in JAEPA. The Government has consistently
stated that JAEPA would provide a floor for market access into Japan, and Australia would
seek further market access outcomes through the TPP. The TPP offers the chance for
further improvements to market access given the leverage that is provided in negotiating in
Page 6 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
a plurilateral form, particularly given the engagement by the United States. However, TPP
negotiations have not yet concluded and it is likely to take several years before an
agreement enters into force. JAEPA would deliver high-quality outcomes for Australian
exporters significantly earlier than TPP. JAEPA also provides strong renegotiation
provisions should Japan provide better access for competitors.
28. RCEP negotiations include all ten ASEAN Member States and ASEANs six FTA
partners - Australia, China, India, Japan, Korea and New Zealand. While the guiding
principles for RCEP potentially allow for negotiation of a high quality, comprehensive
agreement, there is no certainty that the full range of Australias specific outcomes of
interest in Japan could be achieved. RCEP negotiations are at an early stage, with key
decisions still to be taken on the scope and level of goods and services market access. As
RCEP negotiations are not scheduled to conclude before the end of 2015, JAEPA would
deliver the objectives and specific outcomes sought in a more certain and timely manner.
Multilateral trade negotiations
29. The WTO Doha Round of trade negotiations was launched in 2001 and is a trade
policy priority for the Government. However, a wide divergence of views between WTO
members makes conclusion of the Doha Round unlikely in the short term. In addition,
while securing outcomes through the Doha Round would advance Australias trade
interests with Japan, there is no certainty that the Doha Round would deliver outcomes
that address Australias priority interests with Japan as extensively, or in as timely a way,
as is possible under JAEPA.
Bilateral trade negotiations
30. A high-quality, WTO-consistent bilateral EPA with Japan is, therefore, the only realistic
option to achieve the Governments objectives.
IMPACT ANALYSIS
Key market access outcomes of bilateral negotiations for Australia
31. JAEPA will deliver significant market access improvement and tariff liberalisation for
Australias merchandise exports to Japan. Japans tariffs will be set at zero on 92.8 per
cent of its current imports (by value) from Australia immediately on entry into force, with
most other tariffs phased out quickly. On full implementation of JAEPA, 97.5 per cent of
the value of Japanese imports from Australia will benefit from preferential tariff treatment
(including tariff reductions and quota arrangements). Table 1 summarises the agreed tariff
elimination schedule that will apply to Australias goods exports to Japan. Tables 2 and 3
outline the key market access outcomes for Australia for agriculture and industrial
products.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 7
Table 1: Elimination schedule for Japanese tariffs on imports of Australian goods
Japan's imports from Australia,
Tariff lines
2013
% of Cumulative % of Cumulative
Staging category* No. $'000
total (%) total (%)
A: zero tariff on 49,048,6
7,146 76.3 76.3 92.8 92.8
entry into force 79
B3: 3-year
25 0.3 76.6 511 0.0 92.8
phasing
B4: 4-year
453 4.8 81.5 1,509 0.0 92.8
phasing
B5: 5-year
120 1.3 82.7 70,542 0.1 93.0
phasing
B7: 7-year
221 2.4 85.1 195,333 0.4 93.3
phasing
B10: 10-year
310 3.3 88.4 192,735 0.4 93.7
phasing
B15: 15-year
24 0.3 88.7 4,834 0.0 93.7
phasing
1,473,26
Tariff reduction 62 0.7 89.3 2.8 96.5
2
Quota** 111 1.2 90.5 515,615 1.0 97.5
Renegotiation 204 2.2 92.7 707,237 1.3 98.8
Excluded 684 7.3 100.0 629,582 1.2 100.0
52,839,8
Total 9,360 100.0 100.0 100.0 100.0
39
* Tariff phasings will occur in equal annual stages, i.e. duties on originating goods classified under
the tariff lines indicated with `B5' shall be eliminated from the base rate to free over five years in six
equal annual instalments beginning on the date of entry into force of JAEPA. These goods will be
duty free, effective on 1 April of the fifth year. ** Quotas include duty-free access and some tariff
reductions.
Source: JAEPA, Global Trade Information Service; DFAT STARS database, based on ABS cat.no.
5368.0, January 2014 data
Page 8 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
Table 2: Key agricultural market access outcomes for Australia
Australian
exports to
Japan's MFN JAEPA outcome
Product Japan
tariff
($ million,
2013)
Tariffs reduced to 19.5 per
cent for frozen beef and 23.5
per cent for fresh and chilled
beef over 18 and 15 years
with a safeguard set above
current trade levels
Significant frontloading of tariff
cuts to provide earlier benefits
Beef - 6 and 8 percentage points
1,433 38.5
off fresh and frozen beef
respectively on entry into
force
Australia to never face
,,snapback tariff of 50 per cent
Renegotiate after five years
and if a competitor gets better
access
Tariff elimination on casein,
lactose, albumen, and milk-
based proteins on entry into
force
Immediate duty free quotas
for
o natural cheese for
processing (Australias
largest dairy export) growing
from 4,000 tonnes to 20,000
0 - 40 tonnes over 20 years
o cheese for shredding
Dairy
452 specific tariffs up growing from 1,000 to 5,000
to ¥1,199/kg tonnes over ten years
($12.62/kg)2 Tariff reductions on
o grated / powdered cheese
for a quota growing to 1,000
tonnes over ten years
o processed cheese for a
quota growing to 100 tonnes
o blue veined cheese (no
volume restrictions)
Tariff reductions on ice-cream
and yoghurt under growing
quotas
2
All currency conversions in this RIS imply ¥95.02 per Australian dollar (as at 2 May 2014; source:
Reserve Bank of Australia)
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 9
Australian
exports to
Japan's MFN JAEPA outcome
Product Japan
tariff
($ million,
2013)
Renegotiate after five years
and if a competitor gets better
access
Tariff elimination on wheat for
feed on entry into force and
for wheat gluten over ten
years
0 - 21.3
Wheat and Streamlined export processes
its milling
356 specific tariffs up Immediate tariff elimination on
products
to ¥50/kg dextrin under a quota of
($0.53/kg) 14,000 tonnes
Renegotiate after five years
and if a competitor gets better
access
Tariff elimination on barley
(for feed) on entry into force
Streamlined export processes
for barley
Malt and
malting 0 - ¥39/kg Renegotiate after five years
362*
barley ($0.41/kg) and if a competitor gets better
access
Large duty-free quota for
unroasted malt on entry into
force
Tariff elimination and on high
polarity raw sugar on entry
into force
35.3 - up to Reduction in the levy on high
Sugar
235** ¥106.2/kg polarity raw sugar
($1.12/kg)
Renegotiate after five years
and if a competitor gets better
access
Tariff elimination on entry into
force for crustaceans,
shellfish and some fish
Seafood
200 0 - 15 Tariff elimination over ten
years for southern bluefin
tuna, swordfish, marlin and
salmon
Beef offal, Tariff reductions under a
prepared 178 12.8 - 50 growing quota for beef offal
and Tariff reductions under a
Page 10 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
Australian
exports to
Japan's MFN JAEPA outcome
Product Japan
tariff
($ million,
2013)
preserved growing quota for prepared
beef meat and preserved beef meat
Renegotiate after five years
and if a competitor gets better
access
Tariffs eliminated on bottled
15 - 23 wine and sparkling wine (over
Wine and seven years), bulk wine (on
beer 49* specific tariffs up entry into force and over ten
to ¥182/litre years) and fortified wine and
($1.92/litre) cider (over five years)
Tariffs on beer bound at zero
Citrus 16 - 32 Elimination of in-season tariff
39 over ten years
(seasonal)
Tariffs on grape, grapefruit
mixed vegetable and carrot
5 - 29.8
juice eliminated over five to
Juices ten years
30 Specific duties
up to ¥23/kg New quotas with tariff
($0.24/kg) reductions for orange and
apple juice
Condiments Tariff elimination on jam,
and soups 29 7.2 - 21.3 peanut butter, sauces and
soups over five to ten years
Immediate elimination of
0-15
tariffs on asparagus and many
Vegetables other fresh vegetables
29 Specific duties
up to ¥354/kg Tariffs on canned tomatoes
($3.73/kg) eliminated over five years
A growing duty-free quota for
0 - 29.8 chocolate slabs
Chocolate Tariff reductions on a range of
24 Specific tariffs other chocolate products,
up to ¥679/kg from entry into force up to ten
($7.15/kg) years
Tariff reduction of 20 per cent
Specific tariffs of
on entry into force
¥38,250/head
Live cattle 20 ($403/head) and Renegotiate after five years
¥63,750/head and if a competitor gets better
($671/head) access
Tariff elimination on
Nuts macadamia nuts, almonds,
16.5 0 - 12
pecans and hazelnuts on
entry into force
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 11
Australian
exports to
Japan's MFN JAEPA outcome
Product Japan
tariff
($ million,
2013)
Elimination over five years for
walnuts and ten years for
chestnuts
Tariffs on canola oil,
cottonseed oil, mixed oils,
safflower oil, sunflower oil,
Vegetable Specific tariffs
sesame oil, linseed oil
oils 8 up to ¥13.2/kg
eliminated over five to ten
($0.14/kg)
years
Olive oil tariff bound at zero
Forestry Tariffs on all currently traded
products forestry products eliminated
10 0-10
(excluding on entry into force.
wood chips)
Wool Tariff elimination on entry into
grease 4.4 1.2 force
(lanolin)
Specific tariff of Tariff halved over seven years
Racehorses
2 ¥3.4 million/head for up to 30 animals each year
($35,782/head)
Tariffs eliminated on
mangoes, cherries,
strawberries, apples, table
grapes and stonefruit from
Other fruit entry into force and up to ten
2 0 - 25
years
Tariffs eliminated on canned
peaches and pears over
seven years
Pork meat, Tariff reductions under a
offal and 0 - 20 growing quota for pork meat,
prepared or offal and prepared or
preserved 2 Specific tariffs preserved meat products
pork meat up to ¥482/kg
Exemption from Japans price
products ($5.07/kg)
safeguard
Honey Tariff eliminated over ten
1 25.5 years under a growing quota
Poultry
meat, offal Tariff reductions under a
and growing quota for poultry
prepared or meat, offal and prepared or
0 8.5 - 21.3
preserved preserved poultry meat
poultry products
meat
products
Page 12 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
Australian
exports to
Japan's MFN JAEPA outcome
Product Japan
tariff
($ million,
2013)
*
Japanese import data (A$ million, 2013); **DFAT estimate
Source: Australian Bureau of Statistics, WTO, Global Trade Information Service
32. Table 2 does not reflect significant areas of agricultural trade in which Australian
products already enter duty-free. These products include fodder (worth $289 million in
2013), oilseeds ($139 million), pet food ($87 million), sheep and goat meat ($84 million),
cotton ($31 million) and wool ($20 million) and woodchips3.
Table 3: Key resources, energy and industrial market access outcomes for Australia
Australian
JAEPA outcome
Exports to Japan's MFN
Product (years until tariff
Japan tariff
elimination)
($ million, 2013)
11.7 per cent or
Unwrought nickel ¥44/kg
98* 7
(unalloyed) ($0.46/kg),
whichever is less
Coke and semi coke of
89 3.2 per cent 0
coal
Non-crude petroleum ranging up to
74 0
oils 7.9 per cent
Aluminium hydroxide 73 3.3 per cent 0
Ferro manganese 37* 6.3 per cent 7
Titanium dioxide 14 3.2 per cent 0
ranging up to
Hides and skins 4.5 10
30 per cent
Shaving preparations 0.4 4.8 per cent 0
Articles of natural or
0.06 5.2 per cent 0
cultured pearls
*
Japanese import data (A$ million, 2013)
Source: Australian Bureau of Statistics, WTO, Global Trade Information Service
33. Table 3 does not include mineral and energy exports that already enter Japan duty
free, including coal (worth $13.7 billion in 2013), iron ore ($9.6 billion), and liquefied natural
gas (estimated at $14.4 billion).
34. Benefits from tariff elimination and reductions in Australia and Japan and preferential
quota access for Australian exports to Japan via country-specific quotas based on
volumes of trade will be distributed across the economy. Consumers can benefit from
cheaper goods, businesses through cheaper inputs, exporters can benefit through
increased competitiveness of their goods and greater exports, or through increased
margins due to more efficient trade. Importers can also benefit through more efficient and
increased trade.
35. A limited number of products identified by Japan as most sensitive, including rice,
fresh milk and certain fur skin products, will receive no tariff concessions. These sensitive
lines accounted for 2.5 per cent of Japans imports from Australia in 2013. Japan has
excluded all of these sensitive products from their previous EPAs, meaning Australian
3
A confidential item in Australian export data; the Japanese import figure for 2013 was $512 million.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 13
exporters will not be disadvantaged in relation to their competitors by the exclusion of
these products from JAEPA. Australian rice producers will retain access to a WTO
country-specific quota. Japanese imports of Australian rice were worth $43.0 million4 in
2013.
Key market access outcomes for Japan
36. Tables 4 and 5 summarise the market access outcomes that Australia will grant Japan
under JAEPA. Consistent with Australias other EPAs, Australia will remove its remaining
tariffs on Japanese goods. Tariffs on 82.7 per cent of Australias merchandise imports
from Japan will be eliminated on entry into force of JAEPA, with the remaining tariffs on
Australias sensitive products phased out within eight years. An important exception exists
for used motor vehicle imports from Japan, for which the specific duty of $12,000 per
vehicle will be retained.
Table 4: Elimination schedule for Australian tariffs on imports of Japanese goods
Tariff lines Australia's imports from Japan,
2013
Staging category No. % of Cumulativ $'000 % of Cumulativ
total e (%) total e (%)
A: duty-free 2,945 47.6 47.6 6,300,543 33.8 33.8
treatment to
continue from EIF
B: EIF elimination 2,658 43.0 90.6 9,096,864 48.9 82.7
C: 3-stage phasing 77 1.2 91.8 2,256,141 12.1 94.8
C1: 3-stage phasing 8 0.1 91.9 32,526 0.2 95.0
of ad valorem
duties, but the
specific duty of
$12,000 per vehicle
shall remain.
D: 5% duties 231 3.7 95.7 921,853 5.0 100.0
removed in 5
stages
E: 10% duties 212 3.4 99.1 2,281 0.0 100.0
removed in 5
stages
F: 5% duties 41 0.7 99.8 6,323 0.0 100.0
removed in 5
stages, beginning
in year 4
G: 10% duties 14 0.2 100.0 561 0.0 100.0
removed in 5
stages, beginning
in year 4
Total 6,186
100. 100.0 18,617,092 100.0 100.0
0
Source: JAEPA, Australian Bureau of Statistics
4
Japanese import data are quoted due to confidentiality restrictions in Australian export data.
Page 14 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
Table 5: Key goods market access outcomes for Japan
Product Australia's Australia's MFN Years until tariff
imports from applied tariff elimination
Japan ($ million, (per cent)
2013)
Passenger motor vehicles 6,819 5 0, 3
Goods vehicles 1,241 5 0, 3
Automotive parts 1,220 5 3, 5
Dumpers and medium-large 737.3 5 0
goods vehicles
Tubes and pipes of iron or 601.3 5 5
steel
Bull dozers, angle dozers and 497.1 0, 5 0
other earth moving machines
Aerials and cameras (incl. 136.5 0, 5 0
television, digital, video)
Fork lift trucks 105.7 5 0
Water heaters and heat 89.2 5 0
exchange units
Certain industrial machinery 86.9 5 0
Photographic goods 63.5 0, 5 0
Electrical transformers, static 58.6 0, 5 0
converters and inductors
Flat-rolled steel products 52.2 5 0
Certain machinery parts 49.1 0, 5 0
Printing ink 43.8 5 0
Paper and paperboard 43.6 0, 5 0
Cranes and lifting frames 41.9 5 0
Hand tools 40.7 0, 5 0
Ball or roller bearings* 36.4 5 0
Valves* 34.9 0, 5 0
Electric generating sets and 33.1 0, 5 0
rotary converters
Liquids pumps* 27.3 0, 5 0
Electrical switches, fuses, 26.3 0, 5 0
plugs, etc.
Centrifuges and 23.8 5 0
filtering/purifying machinery*
Air or vacuum pumps* 21.8 0, 5 0
Refrigerators, freezers and 17.2 5 0
heat pumps
*
Excludes parts relating to automotives
Source: Australian Bureau of Statistics, WTO
37. Given these outcomes will make Japanese goods more competitive than goods from
countries that do not have free trade agreements with Australia, it can reasonably be
expected that Japanese exports to Australia will increase. This will benefit both Australian
consumers and Australian businesses that rely on Japanese imports. The potential
reduction in price from tariff elimination will be particularly relevant in the two largest
product import categories from Japan: motor vehicles and automotive parts. At
32 per cent, Japan already holds the largest share of new car sales in Australia.5 It will
also benefit consumers through cheaper electric and white goods.
5
March quarter 2014; source: VFACTS Report
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 15
Benefits to the Australian economy
38. Increased and more efficient bilateral trade with Japan will benefit the Australian
economy. Improved market access for Australian exports and lower import prices are
likely to increase Australias terms of trade, increase capital accumulation, raise
productivity and improve utilisation of resources.
39. The reduction or elimination of tariffs on Australian exports to Japan under JAEPA is
expected to increase demand in Japan for goods produced in Australia. Australian
industries response to increased demand will differ across sectors and enterprises, based
on commercial decisions, including developments in other markets, and any capacity
issues.
Impacts on Australian's major agricultural exporters
Beef
40. JAEPA delivers Australian beef producers and exporters an unprecedented
competitive advantage in their most important market.
41. Japan is Australias largest export market for beef, with exports totalling $1.4 billion in
2013. Prior to the discovery of BSE in North America in 2003, the United States was
Japans largest supplier, holding almost half of the market (by volume). Australia is
currently Japans largest supplier but, since 2006 when Japan eased BSE restrictions on
beef from the US, Australias market share has fallen. Indeed, since 2010, beef exports
from the United States to Japan have doubled, while Australian exports have fallen by
19 per cent. This trend is predicted to continue without an improvement in Australias
market access.
42. Australias beef exports to Japan currently face a high tariff of 38.5 per cent. The tariff
jumps to 50 per cent if Japans imports of beef increase rapidly, via the ,,snapback
mechanism. This mechanism is designed to ensure minimum Japanese production and is
driven by concerns regarding domestic food security. The ,,snapback has been activated
three times since its inception in 1995, including
2003-04, when beef imports recovered following a loss of consumer confidence owing to
the discovery of BSE in United States beef in 2003.
43. Fresh and frozen beef: Australian beef exports to Japan, worth $1.4 billion in 2013,
are currently subject to a 38.5 per cent tariff and a global safeguard with a ,,snapback tariff
of 50 per cent.
44. The tariff on frozen beef will be cut to 19.5 per cent over 18 years. However, there will
be significant front-end loading, with an eight percentage point cut in the first year, two in
the second year and one in the third year, providing a considerable immediate advantage
over the United States.
45. The tariff on fresh beef will be cut to 23.5 per cent over 15 years. These cuts will also
be frontloaded. The tariff will be cut by six percentage points in the first year, followed by
two annual one percentage point cuts.
46. Significantly, Japan has agreed that Australian beef will never again be subjected to
the 50 per cent global snapback tariff. Australian beef will be subject to an agricultural
safeguard where if the volume of Australian beef exceeds a given trigger level in any given
year the tariff will revert to a maximum of the current tariff of 38.5 per cent. There are
different safeguard volume levels for fresh and frozen beef. Both safeguard volume levels
are set above current trade and include annual growth for ten years before they are
subject to automatic renegotiation, including explicit consideration of the complete removal
of the safeguards. The safeguard trigger for frozen beef starts at 195,000 tonnes (14.5 per
cent above 2013 imports of Australian fresh beef of approximately 170,000 tonnes) and
grows to 210,000 tonnes over ten years, and the safeguard trigger for fresh beef starts at
Page 16 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
130,000 (12 per cent above 2013 imports of Australian frozen beef of approximately
116,000 tonnes) and grows to 145,000 tonnes over ten years.
47. Japan has also agreed to review and renegotiate the outcome on beef providing a
framework for further liberalisation. This includes: a review triggered immediately if Japan
provides another country a better deal on beef, aimed at providing Australia equivalent
treatment; and an automatic review aimed at improving access five years after entry into
force. The safeguard mechanisms are to be reviewed after ten years to consider
abolishing the safeguard or increasing the safeguard trigger levels.
48. Beef offal / preserved and prepared beef meat: Japan is also a vital market for
Australian beef offal, with exports of $167 million in 2013. Offal faces high tariffs of
between 12.8 per cent and 50 per cent. Australia exported over $11 million of preserved
or prepared beef (including sausages) to Japan in 2013.
49. Japan has agreed to reduce tariffs immediately by 40 per cent for beef offal under a
growing quota starting at 17,000 tonnes and growing to 21,000 tonnes over ten years.
Australia exported approximately 24,000 tonnes of beef offal to Japan in 2013 so almost
all Australian offal exports would enjoy this preferential treatment immediately on entry into
force.
50. Japan will also reduce tariffs immediately by between 20 per cent and 40 per cent on
prepared and preserved beef meat, under a quota of 5,300 tonnes (above current trade)
growing over ten years to 8,300 tonnes. The tariff on Australias most heavily traded item
will fall from 21.3 per cent to 17 per cent immediately on entry into force.
51. JAEPA allows for automatic renegotiation of market access for beef offal and
preserved and prepared beef meat five years after entry into force, with a view to
improving access. If Japan provides another country a better deal, a review will be
automatically triggered with the aim of providing Australia the same treatment.
52. Live cattle: Australia exported more than 13,000 head of live cattle to Japan in 2013,
worth $20 million. Live cattle face a tariff of ¥38,250 ($403) per head for stock less than
300 kilograms and ¥63,750 ($671) per head for stock above 300 kilograms.
53. Japan has agreed to immediately reduce the tariffs by 20 per cent, with no volume
restrictions. This means for cattle weighing less than 300 kilograms the tariff will fall to
¥30,600 ($322) each, and for cattle weighing over 300 kilograms the tariff will fall to
¥51,000 ($537) each.
54. The Australian beef industry has strongly supported the agreement. Meat and
Livestock Australia, has modelled lower tariffs and increased demand under JAEPA to
result in increased production, exports and margins, with increased sales of $5.5 billion
over a 20-year period.
Dairy
55. Australian dairy exports to Japan were valued at $452 million in 2013. Japans dairy
industry is heavily regulated, with a complex network of WTO commitments and domestic
laws and quotas controlling all aspects of production, from industry inputs to end use
requirements. Outside of very limited concessions on specialty cheese (for Switzerland)
and ice cream (for the Philippines and Thailand), Japan has effectively excluded all dairy
products from its existing EPAs.
56. Under JAEPA, Australia will receive significant preferential access, particularly on key
dairy export, cheese, as well as on ice cream and yoghurt. Australia will also receive
immediate duty-free access for increasingly important exports of lactose, casein, milk
albumen and milk protein concentrates.
57. This access will allow the Australian dairy industry to build on its already very strong
position in Japan, particularly given the advantage Australia will enjoy over New Zealand
and the United States.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 17
58. Cheese: Australia exported $372 million of cheese to Japan in 2013, making Japan
our largest cheese market. Around 30 per cent of Australias cheese exports currently
enter duty free under Japans global quota system. Under JAEPA, around half of
Australias cheese exports will enter Japan duty-free, with Australia-only quotas (including
a quota of 4,000 tonnes on entry into force growing to 20,000 tonnes with front-loading for
cheese for processing) available to exporters for major cheese lines. In addition, tariffs will
be permanently reduced on some cheese lines with no quota restrictions.
59. As with beef, cheese is subject to the same automatic review five years after entry into
force, with a view to improving access, as well as an automatic review if Japan provides
another country a better deal.
60. Other dairy products: Australias exports of milk-based casein, lactose, milk albumen
and milk protein concentrates to Japan were valued at $53 million in 2013 and are subject
to tariffs of up to 5.4 per cent. Under JAEPA, tariffs on casein (5.4 per cent), lactose (8.5
per cent), milk albumen (2.9 per cent) and milk protein concentrates (5.1 per cent) will be
immediately eliminated on entry into force. Australian producers dairy producers also
stand to gain from improved access for some cocoa preparations.
61. Australias exports of ice-cream to Japan were worth around $2.8 million in 2013,
despite high tariffs of up to 21 per cent. There is currently limited trade in yoghurt, with
exports worth only $129,000 in 2013, with very high tariffs of up to 29.8 per cent.
62. JAEPA outcomes include:
a 50 per cent reduction in the ice-cream tariff to between 14.9 per cent and
10.7 per cent over ten years under a quota growing from 180 tonnes to
2,000 tonnes; and
a 50 per cent reduction in the frozen yoghurt tariff to 14.9 per cent over ten years
under a quota growing from 100 tonnes to 200 tonnes.
63. Consistent with Japans other EPAs, JAEPA does not provide for specific preferential
access for Japans most sensitive dairy products (fresh milk, milk powders, butter and
dairy spreads). Under JAEPA, market access for milk powders, butter and dairy spreads
will be automatically reviewed five years after entry into force, with a view to improving
access; and if Japan provides another country a better deal, a review will be automatically
triggered with the aim of providing Australia equivalent treatment. Australian milk powder,
butter and dairy spread exporters will continue to have access to Japans WTO duty-free
quotas, under which Japan currently does the bulk of its trade in these products.
64. Despite the additional access secured under JAEPA, including on Australias major
dairy export to Japan, cheese, the Australian dairy industry has expressed disappointment
with the outcome. Japans complicated regulatory structure on dairy limited opportunities
for broader liberalisation, and Australia instead focussed on improving access for
Australias main export cheese, and gains in growing markets such as lactose, casein and
milk protein concentrates.
Sugar
65. Japan is estimated to be Australias third-largest market for sugar (using 2013 trade
data). Australias exports were worth an estimated $235 million in 2013. Australia
accounts for just under one third of Japans sugar imports and is Japans second-largest
supplier. Most export markets trade in high polarity raw sugar, which is a high quality
product and the international standard for raw sugar. However, Japan imposes a range of
tariffs and levies on high polarity raw sugar, making imports prohibitively costly. This
effectively pushes exporters to sell lower quality (low polarity) raw sugar in Japan,
requiring sugar to be processed specifically for the Japanese market, at a higher
production cost.
Page 18 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
66. Under JAEPA, Australia alone will receive preferential access for high polarity raw
sugar, meaning Australia producers will be able to sell the same standard of raw sugar to
Japan as it exports to other markets, providing greater flexibility for Australian producers.
Australian sugar will be more attractive to Japans refineries, and more cost effective for
Australia to produce and refine.
67. In public statements, the Australian sugar industry has expressed disappointment that
low polarity raw sugar was excluded from JAEPA. The sugar industry had pushed for
improvements in access for high polarity raw sugar.
Grains
68. Grains such as wheat, barley, sorghum, and their milling products, are one of
Australias biggest agricultural exports to Japan, worth over $770 million in 2013. Despite
relatively low tariffs, Japans grain trade is highly regulated, and includes WTO quotas,
duties and other mark-ups, as well as complicated tendering arrangements.
69. Wheat: Australias exports of wheat to Japan were worth $356 million in 2013, making
Japan our fourth largest wheat market. The bulk of Australias wheat exports currently
enter duty-free under Japans WTO quota system. However, wheat exporters must
participate in a tendering process, which adds inefficiencies and distorts market signals.
Under JAEPA, Australia has secured access to the more efficient ,,simultaneous buy and
sell process for some wheat varieties: Australian Hard and Australian Prime White.
70. Outside the quota system wheat (for food) and wheat (for feed) faces prohibitive tariffs
of ¥55 ($0.58) per kilogram meaning hardly any wheat enters outside the quotas.
Australia has been able to secure immediate elimination of the ¥55 ($0.58) per kilogram
tariff on out-of-quota wheat (for feed), meaning Australia will be the only country that can
export wheat (for feed) duty-free outside of the existing complicated quota system giving
the opportunity for increased exports and streamlined export processes.
71. Japan imported $20 million worth of wheat gluten from Australia in 2013 despite facing
a high tariff of 21.3 per cent. This tariff will be eliminated over ten years.
72. Barley and Malt: Japans imports of Australian barley were worth $309 million in 2013,
comprising $236 million of barley (for feed) and $74 million of barley (for food). Japan also
imported $52 million of malt from Australia in 2013. As with wheat, the bulk of Australias
barley and malt exports to Japan enter duty-free under the WTO quota system. Australia
has secured immediate out-of-quota tariff elimination for barley (for feed), meaning
Australia will be the only country that can export duty free to Japan without using the
complex quota system. We will also receive a large Australia-only duty free quota for
unroasted malt, creating opportunities for growth.
73. Corn: Australias exports to Japan of corn (maize) were worth $18 million in 2013 and
its imports of worked maize for the production of cornflakes were worth $802,000. The bulk
of Australias corn (maize) exports to Japan already enter duty-free under its domestic
quota system. Under JAEPA, tariffs of up to 21.3 per cent on milled corn products
(including for the production of corn flakes) will be eliminated over periods between five
and 10 years.
74. Sorghum: Australias exports of sorghum to Japan were worth $4 million in 2013.
Under JAEPA, the three per cent sorghum tariff will be eliminated immediately on entry
into force.
75. Oats / buckwheat / pulses: Australia is Japans second-largest supplier of rolled oats,
with exports of over $2 million in 2013. Under JAEPA, the 12 per cent tariff on oats will be
eliminated over seven years. Japan will also eliminate its nine per cent tariff on buckwheat
over 10 years. Australian buckwheat exports to Japan were worth $45,000 in 2013.
Japan will eliminate, on entry into force, its 8.5 per cent tariff on lentils and chickpeas.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 19
Wine
76. Australia exported over $42 million worth of wine to Japan in 2013. Australian wine
has been losing market share in Japan to Chile, which enjoys phased tariff reductions on
bottled, sparkling and bulk wine over 12 years under the Japan-Chile EPA, albeit with a
range of restrictions, particularly on cheaper wine. JAEPA will provide improved access
for bottled, sparkling and bulk wine, with faster tariff elimination than Chile secured, to help
level the playing field with Chile and provide an immediate advantage over other key
competitors, including France, Italy, the United States and Spain.
77. The 15 per cent or ¥125 per litre ($1.32/litre) tariff on bottled wine will be eliminated
over seven years (current exports worth $29 million); the ¥45 per litre ($0.47/litre) per litre
tariff on bulk wine will be eliminated on entry into force; and the ¥182/litre ($1.92/litre) tariff
on sparkling wine over seven years (current exports worth $9 million). Tariffs on other
alcohol products such as fortified wine, grape must, vermouth and cider, perry and mead
will be eliminated immediately or over periods up to ten years.
78. Imports of Australian beer were worth $2.7 million in 2013. JAEPA will bind beer
tariffs at zero, providing certainty for Australian exporters.
79. The wine industry has strongly welcomed the outcomes.
80. Horticulture: Japan is an important horticultural market for Australia, with exports of
fruit and nuts worth $57 million, vegetables worth over $24 million and juices worth
$30 million in 2013. JAEPA will provide a very liberalising outcome across horticulture. It
will result in quick tariff elimination on the vast majority of Australian horticultural exports.
In some cases, to take advantage of counter-seasonal production, JAEPA allows better
access for Australian produce during Australias exporting season.
81. JAEPA will also cut red tape and costs for Australian producers, particularly
horticultural exporters. Australian exporters will be able to receive preferential tariff
treatment with either self-certification or a certificate of declaration that the product is
Australian.
82. The horticulture industry has strongly supported the JAEPA outcomes, particularly the
Australian Nut Industry Council, the Australian Macadamia Society, AUSVEG, Citrus
Australia and the Australian Asparagus Council.
83. Fruit: Citrus dominates Australias fruit exports to Japan, with orange exports worth
$34 million and mandarins worth $4 million in 2013. Citrus faces high tariffs: 16 per cent in
season (between June and September) for oranges (32 per cent off-season) and 17 per
cent for mandarins. Japan is an important market for Tasmanian cherries, exports were
worth $238,000 in 2013, and has previously been a market for Tasmanian apples,
although there has been no recent trade. Japan is also an important market for dried
grapes with exports worth $851,000 in 2013.
84. JAEPA provides better outcomes than any other of Japans EPAs and will enable
Australian fruit producers to significantly expand exports. It will also provide new
opportunities, particularly for products such as table grapes, which have just received
quarantine market access into Japan.
85. Key JAEPA outcomes for fruit include:
immediate tariff elimination on entry into force for: mangoes (three per cent tariff),
dried grapes (1.2 per cent), raspberries (six per cent), blueberries (six per cent),
cranberries (six per cent), and pawpaw (two per cent);
immediate elimination of the seasonal tariff on cherries (8.5 per cent between
November and February);
elimination over three years for strawberries (six per cent);
Page 20 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
elimination over five years for: grapefruit (10 per cent), pears (4.8 per cent), apricots
(six per cent), peaches (six per cent), plums (six per cent), and kiwifruit (6.4 per
cent);
elimination of seasonal tariff on table grapes (7.8 per cent in-season tariff over seven
years; 17 per cent off-season tariff over 10 years), with agreement of biosecurity
protocols in February 2014 will significantly improve market access for table grapes;
and
elimination over 10 years for apples (17.5 per cent) and oranges (16 per cent in
season).
86. Fruit juice and canned fruit: Key JAEPA outcomes for fruit juice and canned fruit
include:
grape juice: 19.1 per cent tariff eliminated over five years (exports worth over $3.9
million);
canned peaches and pears: eight per cent and 10.8 per cent tariffs eliminated over
seven years (exports $2.4 million);
grapefruit juice: 23 per cent tariff eliminated over 10 years (exports worth $756,000);
orange juice: Australia-only quota of 1,300 tonnes (greater than current trade), under
which Australian juice will pay half the tariff of other countries (existing tariffs ranging
up to 29.8 per cent) (exports worth around $1.7 million in 2013); and
apple juice: Australia-only quota of 1,600 tonnes, with tariffs of up to 29.8 per cent
eliminated over ten years (exports worth over $1.1 million).
87. Nuts: Australia exported over $16.5 million worth of nuts to Japan in 2013. The vast
majority of these exports were macadamia nuts ($16.2 million) with some exports of
almonds (and traditionally pecans), but with significant production of Australian almonds
and walnuts expected to come on-line soon. JAEPA provides opportunities for
considerable growth. Japans total imported nut market is worth over $550 million.
88. Key JAEPA outcomes for nuts include:
macadamia nuts: immediate elimination of the five per cent tariff;
almonds: immediate elimination of the 2.4 per cent tariff for both shelled and un-
shelled almonds;
pecans: immediate elimination of the 4.5 per cent tariff;
hazelnuts: immediate elimination of the six per cent tariff;
walnuts: 10 per cent tariff eliminated over five years for both shelled and un-shelled
walnuts; and
chestnuts: 9.6 per cent tariff eliminated over ten years.
89. Vegetables: Japan is Australias largest market for asparagus, with exports worth $14
million in 2013; our second largest market for onions and shallots, with exports worth over
$3 million, and an important market for carrots and turnips, with exports of almost $1
million.
90. Under JAEPA, tariffs on vegetables and vegetable juices (ranging up to 12.8 per cent)
will be eliminated quickly, most on entry into force of the agreement. This result is far
superior to any of Japans other EPAs. Key JAEPA outcomes for vegetables include:
asparagus: immediate elimination of the three per cent tariff on entry into force
(Australias largest vegetable export to Japan);
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 21
carrots, potatoes, leeks, garlic, tomatoes, shallots, cauliflower, broccoli, brussels
sprouts, cabbage, truffles, spinach, capsicum, pumpkins, artichokes, mushrooms
(except shiitake): immediate elimination of the three per cent tariff on entry into force;
olives (preserved): immediate elimination of the nine per cent tariff on entry into
force;
canned tomatoes: nine per cent tariff eliminated over five years (exports from
Australia worth $4.0 million in 2013);
onions: 8.5 per cent tariff eliminated over five years;
mixed vegetable juice: 5.4 per cent tariff eliminated over five years (exports worth
$9.5 million);
carrot juice: seven per cent tariff eliminated over seven years; and
broad beans: elimination over 10 years of the 10 per cent in-quota tariff.
91. Japan has excluded only a very few horticulture products from tariff elimination,
namely: shiitake mushrooms, pineapples, bananas, azuki beans and pegin beans.
Australia does not export these products to Japan.
Seafood
92. Australias seafood trade with Japan is significant, with exports worth almost $200
million in 2013, making Japan Australias third-largest seafood market. Much of the trade
comprises southern bluefin tuna, which currently faces a tariff of 3.5 per cent. Japan
accounted for 98 per cent of Australias exports of southern bluefin tuna in 2013.
Australian exports of crustaceans to Japan have more than halved since 2008, now worth
only around $37 million, with exports growing significantly to other Asian markets with
lower or no tariffs. Other key exports are shrimps and prawns, rock lobsters and abalone.
JAEPA will provide fast tariff elimination to grant Australian exporters preferential access in
this lucrative market.
93. At Japans request, some tariff eliminations in JAEPA, including for southern bluefin
tuna start a few years after entry into force to assist adjustment for its domestic fisheries
industry following the 2011 earthquake and tsunami.
94. Key outcomes for seafood include:
tariffs up to 9.6 per cent on shrimps and prawns, rock lobsters, abalone (fresh or
preserved), oysters, crabs, yellowfin tuna, toothfish, sea urchins and fish oils will be
eliminated immediately on entry into force
tariff of 3.5 per cent on southern bluefin tuna will be eliminated over ten years, with
reductions starting in year three after entry into force
tariffs of 3.5 per cent on swordfish, marlin and salmon will be eliminated over 10
years, with reductions starting in year six after entry into force.
Oilseeds and vegetable oil
95. Australias exports to Japan of oilseeds and vegetable oils in 2013 were almost $148
million. Most oilseeds currently enter Japan duty-free but tariffs remain on most vegetable
oils (exports worth $8.3 million in 2013). JAEPA outcomes provide elimination of Japans
remaining tariffs on key vegetable oils that will assist Australian exporters increase exports
to the Japanese market. Key JAEPA outcomes include:
canola oil: ¥13.2 ($0.14) per kilogram tariff eliminated over ten years (exports worth
$6.8 million in 2013)
cottonseed oil: ¥8.5 ($0.09) per kilogram tariff eliminated over ten years
Page 22 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
olive oil: tariff will be bound at zero (exports worth almost $1 million)
mixtures of oils: ¥13.2 ($0.14) per kilogram tariff eliminated over ten years
safflower oil: ¥8.5 ($0.09) per kilogram tariff eliminated over five years
sunflower and sesame oils: ¥10.4 ($0.11) per kilogram and ¥8.5 ($0.09) per kilogram
tariffs eliminated over seven years (exports worth $251,000)
linseed oil: ¥8.5 ($0.09) per kilogram tariff eliminated over ten years (exports worth
$17,000)
immediate elimination on entry into force for: coconut oil (4.5 per cent tariff), palm
kernel oil (four per cent), palm oil (3.5 per cent), castor oil (4.5 per cent).
Other meats
96. Sheep and goatmeat: Australian sheepmeat (valued at $83 million in 2013) and
goatmeat ($1 million) exports currently enter Japan duty-free.
97. Pork: Australian pork exports to Japan were only 279 tonnes, worth around $1.5
million in 2013. Pork meat, offal (fresh, chilled or frozen) and processed pork exports to
Japan face significant tariffs (up to ¥482 ($5.07) per kilogram) or variable duties that raise
import prices to a standard level. These tariffs and duties make exporting to Japan an
unattractive option for many Australian exporters. Japan also operates a complex ,,gate
price differential tariff system for pork, whereby the tariff is determined by the relationship
between the price of the exported product and Japanese farm gate price. In addition, a
global safeguard mechanism, known as the ,,gate price safeguard, operates to allow
Japan to raise the ,,gate price if global imports increase significantly.
98. Australia will gain preferential access for a large volume of product (more than ten
times current trade and around 40 per cent of Australias total pork exports to all countries)
via an Australia-only quota covering pork meat (frozen, fresh and chilled), offal and
prepared and preserved pork meat products. Within the quota, the ad-valorem tariff rate
will be halved immediately on entry into force, and Australian product will also be exempt
from Japans global ,,gate price safeguard. The JAEPA outcome is more comprehensive,
applying to a greater range of products than any of Japans bilateral EPAs and has the
potential to create a major new market, particularly for premium Australian pork. The pork
industry, while acknowledging the significant quota for Australian pork, has highlighted
Japans continuing high surcharges.
Forestry
99. The vast majority of Australias forestry industry trade to Japan is chips - which
already enter Japan duty-free. But tariffs on all other forestry items Australia currently
exports, including medium density fibreboard, particle board, and structural laminated
timber, will be eliminated upon entry into force of the agreement. Japanese imports of
Australian forestry products were worth over $520 million in 2013.
Prepared foodstuffs
100. Australias exports of prepared foodstuffs to Japan were worth over $170 million
in 2013. JAEPA delivers a growing quota for honey, with the in-quota tariff eliminated over
ten years. Tariffs on jams, peanut butter, sauces and condiments and soups and broths
range up to ten per cent but will be eliminated over periods up to ten years. JAEPA also
creates a new quota for Australian chocolate exports, with in-quota tariffs reduced or
eliminated and tariffs on chocolate products reduced such that 95 per cent of Australias
exports can enter Japan duty free or at a reduced rate.
101. The Australian Food and Grocery Council has welcomed JAEPA, describing it as
a great example of Australia playing to its strengths in international trade to secure
maximum value for high value-add exports as well as commodities.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 23
Wool and wool grease (lanolin)
102. Australia exported almost $20 million worth of wool to Japan in 2013. Tariffs on
wool are already set at zero. The 1.2 per cent tariff on wool grease, with exports worth
$4.4 million in 2013, will be eliminated on entry into force.
Impacts on Australian industrials exports
Minerals and fuels resources
103. In 2013, Australias minerals and fuels resources exports to Japan were worth
over $42billion, accounting for over 80 per cent of total merchandise exports. While many
Australian mineral and energy exports, including coal, iron ore and liquefied natural gas,
already enter Japan duty free, Japan applies tariffs of up to 7.9 per cent on other
resources of commercial interest to Australia. Japan has agreed to immediately eliminate
most of these tariffs under JAEPA, including on coke and semi coke of coal, worth $89
million, and non-crude petroleum oils, worth $74 million. These outcomes will improve the
price competitiveness of Australian products. Additionally, Japan will provide certainty to
traders by binding tariffs at zero for certain petroleum oil products. These products are
currently ,,unbound in the WTO, meaning there is no ceiling to the possible tariff levels
Japan could apply.
104. The Minerals Council of Australia has welcomed JAEPA, noting reductions in
tariffs on coking coal, as well as aluminium hydroxide, titanium dioxide, unalloyed nickel
and ferro manganese, would provide ,,a significant boost to Australias minerals exporters.6
The Business Council of Australia also welcomed the Agreement, labelling it ,,a major
milestone for one of Australias most important bilateral relationships.7
105. Unwrought nickel (unalloyed): Japans tariff on unwrought nickel (unalloyed) (11.7
per cent or ¥44 ($0.46) per kilogram), whichever is less) will be phased out over seven
years. Australia is Japans largest supplier of unalloyed nickel, with trade worth $98 million
in 2013.
106. Aluminium hydroxide: Australian aluminium hydroxide exporters will have Japans
3.3 per cent tariff eliminated immediately on entry into force. Australias exports of
aluminium hydroxide to Japan were worth $73 million in 2013.
107. Ferro manganese: Japans 6.3 per cent tariff on ferro-manganese will be phased
out over seven years. Japan imported $37 million of ferro-manganese from Australia in
2013. Australia is Japans second-largest supplier.
108. Titanium dioxide: Australian titanium dioxide exporters will benefit from immediate
elimination of Japans 3.2 per cent tariff. Australias exports to Japan were worth nearly
$15 million in 2013. This outcome will help improve Australian titanium dioxide exporters
competiveness against US exporters (currently Japans largest source of imports).
Manufactured products
109. Japan currently applies tariffs of up to 30 per cent on some manufactured
products. Under JAEPA, tariffs on $218 million worth of Australian manufactured exports
to Japan will be eliminated immediately on entry into force, while 100 per cent of
Australias industrials exports will benefit from duty free entry on full implementation of the
Agreement. Japanese tariffs on motor vehicles, automotive parts and most
pharmaceuticals are already zero. With the exception of a small number of leather and
footwear tariff lines of limited commercial interest to Australia, all Japanese tariffs will be
eliminated over a transition period of up to ten years for the most sensitive items.
6
Minerals Council of Australia, media release: ,,MCA welcomes Australia-Japan Free Trade
Agreement, 8 April 2014
7
Business Council of Australia, media release: ,,Conclusion of Free Trade Agreement Negotiations with
Japan, 8 April 2014
Page 24 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
110. Textile products: In addition to the phased elimination of tariffs of up to
10.9 per cent on 20 of Australias priority textile exports, Japan has agreed to a single
transformation origin rule. This is the first time Japan has agreed to such a liberal
approach on textiles in an EPA. Australia exported around $1.1 million worth of these
products to Japan in 2013.
111. Hides and skins: Japans high tariffs of up to 30 per cent on hides and skins will
be eliminated within ten years. Australia exported $4.5 million worth of hides and skins to
Japan in 2013.
112. Sandalwood products: Japan will immediately eliminate tariffs of up to
3.8 per cent on Australian sandalwood products. This outcome will provide scope for
future trade as Australian producers expand their capacity and seek new markets.
113. Articles of natural or cultured pearls: Australian pearl exporters will benefit from
immediate elimination of Japans 5.2 per cent tariff on entry into force. In 2013 Japan
imported $13.9 million of Australian pearls in 2013.
114. Exclusions: A limited number of products, of which the manufacturing process has
cultural sensitivity for Japan, are excluded. These products include chamois and patent
leather, certain fur skin products and leather footwear. These products are excluded in all
of Japans EPAs. Australias exports to Japan of these products are small (worth less than
$200,000 in 2013).
Impact on domestic manufacturing
115. The implications of JAEPA on domestic manufacturing will be mixed. Australian
manufacturing businesses that use goods and materials produced in Japan will enjoy
lower input costs as tariffs are eliminated or phased down, while industries that compete
with products produced in Japan will face additional pressure.
116. The elimination of Australias five per cent tariff on new motor vehicles and
automotive products will increase competitive pressure on the domestic Australian
automotive industry, although major manufacturers have already announced the cessation
of vehicle manufacturing in Australia by 2017. The impact of tariff elimination on
Australias competitiveness is smaller than other factors facing the Australian
manufacturing sector generally. Both GM Holden and Toyota mentioned a range of
factors, including high production costs, low economies of scale and a strong Australian
dollar, influencing their decisions to end manufacturing operations in Australia.
117. Other manufacturing sectors, including the steel, copper, plastics, chemicals,
textiles, clothing and footwear industries, may also face increased competition from
Japanese imports following the elimination of Australian tariffs. To mitigate any negative
impact, and consistent with suggestions from relevant stakeholders, tariffs on some of
Australias most sensitive products will be phased out over periods of up to eight years.
118. While JAEPA will increase competitive pressure for some Australian
manufacturers, the elimination of Japans tariffs of up to 30 per cent on Australian
industrial exports will create opportunities for Australian manufacturers. Current levels of
manufacturing exports to Japan are relatively small but can be expected to grow after
JAEPAs entry into force. In particular, there are improved export opportunities for
chemicals, certain base metals, including unwrought nickel and ferro-alloys, articles of
natural pearls and personal hygiene products, sandalwood products, titanium dioxide and
processed foods. Australia is regarded as a competitive and high-quality manufacturer in
these specialised product categories. Tariff elimination will make Australian products even
more competitive in the Japanese market.
Impact on retail/servicing networks
119. The elimination of tariffs on Japanese made new motor vehicles is likely to have a
positive impact on automotive retailers and service networks, to the extent that importers
and suppliers pass on the price benefit of tariff elimination further down the supply chain.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 25
Vehicle retailers are likely to benefit from an improved ability to market and merchandise
more competitively priced or a broader range of goods while automotive service providers
would be able to access more competitively priced parts.
Rules of origin: implications for exporters
120. JAEPA benefits Australian businesses trading with Japan by removing or
reducing regulatory burdens such as import tariffs. Taking advantage of such benefits
may require some changes to existing business processes, but such changes are not
expected to impose additional costs.
121. With the objective of minimising cost and red tape, JAEPA allows traders to self-
declare origin, but the option of obtaining a certificate of origin (COO) through a third-party
issuing authority is also available.
122. The Product Specific Rules (PSRs) in JAEPA assist exporters in determining
whether their goods meet origin requirements and therefore qualify for preferential tariff
treatment. The PSRs are based primarily on change in tariff classification (CTC), a simple
means of determining whether goods have undergone substantial transformation in the
production process in the partner country, and therefore meet origin requirements for the
purposes of preferential tariff treatment. Industry supports CTC rules because they do not
require burdensome cost calculations or extensive records. CTC rules are already in use
under Australias FTAs and trade agreements with the United States, Thailand, Chile and
New Zealand and are included in the recently-signed agreement with Korea. The CTC
rules in JAEPA are supplemented for certain items by regional value content rules (which
require a certain percentage of production to be undertaken in the territory of an EPA
Party).
Impact on Australian service providers8
123. Under JAEPA, Japan will bind its existing regime for the regulation of service
providers and provide Australia with better treatment in trade in services, including
financial services, education services, legal and other professional services than is
currently available under Japans existing WTO commitments. JAEPA provides greater
clarity and certainty for Australian service suppliers by binding existing market access and
committing Japan to bind any future improvements to its regulatory regime. It also
provides avenues to address behind-the-border barriers through greater commitments
from Japan on transparency of regulation and a number of cooperative initiatives to
enhance dialogue with Japan.
124. Australia will provide Japan with treatment in trade in services which is
substantively equivalent to commitments made under Australias existing trade
agreements with the United States and Korea. JAEPA encourages mutual recognition of
professional qualifications. These commitments are made without prejudice to our
immigration regime. All immigration related requirements are dealt with exclusively
through the Movement of Natural Persons Chapter (see relevant section below).
Legal services
125. Australian lawyers operating in Japan are restricted to the practice of their home
jurisdictions law upon registration as a foreign lawyer with the Japan Federation of Bar
Associations (JFBA). The approvals process is opaque and time-consuming, and
registration imposes residency requirements. Until recently, Australian law firms could
only access the Japanese market in particular legal forms, being restricted to partnerships
8
Current statistical data on services trade between Australia and Japan are not as comprehensive as
goods trade data, and is likely to (in some cases significantly) understate actual value and volume of
services trade. This is for two reasons: difficulties in measurement, particularly in relation to mode 3
(commercial presence, as defined under the WTO General Agreement on Trade in Services), which is
not picked up in current services trade data methodology, and because of confidentiality restrictions
impacting on the level of detail of data available.
Page 26 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
with Japanese firms, and more recently the formation of legal professional corporations. In
addition to binding the existing regime, including a commitment to allow Australian law
firms to form legal professional corporations - this goes beyond Japans current
commitments under the WTOs General Agreement on Trade in Services (GATS) - Japan
has confirmed expedited registration procedures will be available for Australian lawyers
under JAEPA. Japan has also committed to dialogue between the JFBA and the Law
Council of Australia (LCA) to improve movement and recognition of lawyers between our
legal systems. Stakeholders, most notably the LCA, are highly supportive of improved
access to the Japanese legal services market through the EPA.
Education services
126. In JAEPA, Japan has committed to market access for Australian adult education
providers. Lack of recognition of qualifications outside of the formal education sector is an
impediment to Australian university and adult education service providers in Japan. Japan
has committed to allow Japanese students to study at all Australian higher education
providers, including vocational education providers, such as TAFEs, under Japanese
Government scholarships. Formerly, Japanese students could only apply for scholarships
to study at Australian universities. Australia and Japan will cooperate bilaterally to
promote the recognition of each others education qualifications, improve access to
graduate studies and strengthen student mobility between the two countries. These
commitments meet a number of key requests of Australias education industry.
Telecommunications services
127. JAEPA binds and clarifies WTO-plus outcomes on access to key services
(facilities, interconnection, submarine cable systems, leased circuit services, resale
services, number portability and dialling parity) necessary to connect to existing Japanese
infrastructure and operate effectively in Japan. Japan has committed not to introduce new
requirements for investments in telecommunications and internet-based services, insuring
more liberal market access in these areas over time. The Telecommunications Chapter
also contains improved transparency obligations, including for licensing processes and
regulatory decisions, and ensures the availability of dispute resolution procedures and the
independence and impartiality of telecommunications regulatory bodies.
Financial services
128. Japan has one of the largest financial services markets in the world. In particular,
it has the second largest pool of pension funds globally, after the United States. Australian
firms have a relatively small presence in the Japanese financial services sector, despite
Australias sophisticated regulatory regime and comprehensive range of products. JAEPA
supports Australian firms with a presence in Japan by binding current regulatory
arrangements, locking in existing access for Australian services providers and ensuring
that barriers cannot be put in place which would impede future opportunities. Japan also
has committed to ensure access equivalent to Japanese firms for Australias innovative
financial sector in emerging financial services.
129. Japan has also made commitments in JAEPA on transparency of financial sector
regulation. In preliminary briefings, stakeholders, such as the Financial Services Council,
were supportive of the outcomes. Australia has similarly made commitments to Japan,
binding our existing regulatory arrangements, while retaining adequate protections for
interests such as prudential requirements.
130. The Financial Services Chapter contains additional obligations to the Trade in
Services Chapter and the Investment Chapter that reflect the importance of regulation of
the financial sector and which ensure the integrity and stability of the financial system.
Japan has provided commitments guaranteeing cross-border access for Australian
financial services suppliers. Most notably, it has for the first time locked in cross-border
access for Australian fund managers to supply portfolio management and advisory
services to the Japanese institutional market from their Australian-based operations.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 27
Japan has also committed to provide for off-shore processing of financial information and
data. The Chapter contains strong disciplines on transparency of licencing and regulatory
decision-making.
Impact on Australian investors in Japan
131. Australian total investment in Japan was worth $50.2 billion at the end of 2013,
with direct investment accounting for less than one per cent of this amount.
132. The key obligations of the Investment Chapter - which operate on a reciprocal
basis - include non-discrimination and most favoured nation treatment. The chapter also
includes disciplines on performance requirements and on the regulation of senior
management and boards of directors.
133. Under JAEPA, investments of all forms are protected and Australian investors,
unless specifically exempted, are to be treated no less favourably that Japanese investors
in the establishment, expansion, or acquisition, operation and sale of their investments in
Japan. JAEPA also provides enhanced protections for Australian investors in Japan, with
measures to ensure transparency, equitable treatment and security for investments.
JAEPA protects Australian investors from discriminatory or arbitrary expropriation and
nationalisation. These outcomes will improve certainty for investors and have the potential
to increase Australian investment in Japan. The extent of any increase is, however,
difficult to quantify given the range of economic and commercial factors which influence
investment decisions.
Impact on Japanese investors in Australia
134. Japans total investment in Australia was worth $131.0 billion at the end of 2013.
The provisions and protections in the investment chapter (outlined above) apply equally to
Japanese investors in Australia.
135. JAEPA will promote an increase in the flow of Japanese investment into Australia
and affirm Australias attractiveness to Japanese investors. Australia will raise the
monetary threshold at which private investments from Japan in non-sensitive sectors are
considered by the Foreign Investment Review Board from $248 million to $1,078 million,
consistent with the threshold provided to the US, New Zealand and Korea. This
undertaking will facilitate Japanese investment into Australia and create greater certainty
for Japanese investors. This has the potential to increase Japanese investment in
Australia. The extent of any increase is, however, difficult to quantify given the range of
economic and commercial factors which influence investment decisions.
136. The Australian Government has retained the ability to screen at lower levels for
sensitive sectors, including media, telecommunications and defence related industries,
and has also reserved policy space to introduce its policy on screening proposals for
foreign investment in agricultural land at $15 million and in agribusinesses at $53 million.
Implications of investor-state dispute settlement provisions
137. JAEPA does not include an investor-state dispute settlement (ISDS) mechanism.
The Investment Chapter contains a commitment to review the Chapter in the fifth year
following entry into force of JAEPA, including consideration of the need to establish an
ISDS mechanism. Such a review would also be triggered if, after entry into force of
JAEPA, Australia entered into any other international agreement that provided ISDS.
Movement of natural persons
138. The Movement of Natural Persons Chapter provides for coverage of temporary
entry of service suppliers and investors. Australia has made a commitment not to apply
numerical quotas to the number of visas granted. As this chapter locks in existing
arrangements, no significant change is expected in the number of skilled workers entering
Australia.
Page 28 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
Government procurement
139. Australian and Japanese procuring entities (at both the central and regional levels
of government) are required to afford the suppliers, goods and services of the other
country the same treatment that applies to domestic suppliers, goods and services.
140. This non-discrimination obligation secures market access opportunities for
Australian companies in Japans government procurement market. The market access
Australia has granted to Japan goes no further than our existing international obligations.
The Government Procurement Chapter sets out rules and procedures which are consistent
with existing Australian government procurement frameworks, requiring no domestic
change.
Intellectual property
141. JAEPA reinforces Australia and Japans existing rights and obligations on
intellectual property (IP) under the WTO Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS). The IP Chapter in JAEPA builds on TRIPS with
provisions for the protection and enforcement of IP which reflect Australias already high
standards.
142. The IP Chapter contains provisions for streamlining procedural matters, improving
the transparency of the intellectual property protection system, and cooperation to
enhance the use of the patents system. It also clarifies the scope of Trade Mark
protection, addresses the protection of geographical indications, new varieties of plants,
copyright and related rights, the protection of undisclosed information, utility models, and
internet service providers. In relation to the digital environment the chapter contains
measures concerning collective management organisations and the protection of internet
service providers where they take action to prevent access to infringing materials.
143. The chapter also contains measures for the enforcement of IP rights, with specific
provisions on civil remedies and criminal procedures and penalties. The chapter provides
for border measures to ensure Customs or the relevant authorities are able to deal
appropriately with suspected infringing goods and can intercept counterfeit and infringing
goods at the border either on notice from the right holder or ex officio. Apart from the
issue raised in paragraph 179, there is no change to Australian law or to patent or
copyright terms. The provisions in the chapter are consistent with existing Australian
policy settings and legislation and would not result additional compliance costs for
business.
Competition policy
144. JAEPA includes commitments that ensure the trade and investment liberalisation
achieved across the FTA is not undermined by anti-competitive practices. Australia and
Japan have committed to:
take measures to promote competition, including by addressing anticompetitive
activities under their respective laws and regulations; and
ensure that measures taken to promote competition are consistent with the principles
of transparency, non-discrimination and procedural fairness.
Electronic commerce
145. The Electronic Commerce Chapter in JAEPA will contribute to a secure and
liberalised environment for the growth of electronic commerce between Australia and
Japan. This will aid Australian business in harnessing the efficiencies of electronic
commerce, while ensuring the protection of online consumers.
146. Australia and Japan have also committed to provide non-discriminatory treatment
to digital products of the other Party. These commitments go no further than similar
provisions on non-discrimination of digital products in previous agreements, such as that
with the United States.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 29
Impacts on small business
147. The overall impact of JAEPA on Australian small business will be positive. In
addition to gaining better access into the lucrative Japanese market, Australian small
businesses are also likely to benefit from more competitively priced inputs imported from
Japan and would be better placed to source and offer an increased choice of goods
resulting from a reduction in trade and investment barriers.
Australian consumers
148. The elimination of Australian tariffs currently imposed on Japanese imports,
particularly on passenger motor vehicles, electronics, white goods and car parts, may have
a positive impact on Australian consumers, through lower prices or greater availability of
Japanese products, or both. Consumer benefit in particular product categories would
depend on suppliers and importers commercial decisions to pass on tariff reductions
through lower prices or through improvements in quality or product offerings.
Impact on government revenue
149. The removal of tariffs on merchandise imports will lead to reductions in tariff
revenue, and thereby affect the governments fiscal position. Treasury estimates that tariff
revenue would decline by an additional cumulative amount of $1,590 million over the
forward estimates. This figure does not include the unmodelled, second-round effects on
government revenue from increased economic activity, which are expected to be positive.
State and Territory Governments
150. During negotiations, State and Territory Governments raised issues of interest to
industries residing in their respective jurisdictions, their regulatory responsibilities and the
administrative implications of JAEPA. There are no additional impacts on State and
Territory Governments beyond those discussed in other sections of this impact statement.
Australian trade regulations
151. JAEPA maintains the integrity of our system of trade remedies and is consistent
with our WTO rights and obligations.
152. The chapters on Sanitary and Phytosanitary Measures and Technical Barriers to
Trade reaffirm Australia and Japans commitment to relevant WTO agreements and
improve consultation arrangements. JAEPA does not change Australias system in this
area.
Dispute settlement
153. JAEPA includes a binding state-to-state dispute settlement mechanism modelled
on previous free trade agreements and the WTO system. Most of Australias substantive
obligations in JAEPA will be subject to this mechanism, except those found in the chapters
concerning technical regulations, standards and conformity assessment procedures;
sanitary and phytosanitary measures; competition policy; and some aspects of movement
of natural persons.
TRADE IMPACT ASSESSMENT
154. JAEPA will strengthen and deepen Australias significant and highly
complementary economic relationship with Japan. Improved market access in both Japan
and Australia will increase the price competitiveness of each others products, leading to
greater trade. New guarantees on access for Australian service providers will encourage
more services exports from Australia, particularly in financial, education,
telecommunications and legal services. Enhanced protections and certainty for bilateral
investments will attract additional Japanese investment to Australia, as well as Australian
investment to Japan, in a more diverse range of sectors.
155. Japan is Australias second-largest export market and trading partner. Australian
and Japanese two-way trade in goods and services was $69.3 billion in 2012-13,
Page 30 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
accounting for 11 per cent of Australias total trade. Australian exports to Japan were
valued at $48.6 billion, or over 16 per cent of all Australian exports. Total goods exports
were valued at $46.5 billion, with liquefied natural gas and coal (both over $13.0 billion)
being the two largest goods export categories. Total services exports were $2.1 billion,
comprising mostly recreational travel services ($828 million) and transport services ($596
million).
156. Australia imported $20.6 billion from Japan in 2012-13. Of this, goods imports
accounted for $18.3 billion and were dominated by imports of passenger motor vehicles
($6.7 billion), refined petroleum ($3.4 billion) and goods vehicles ($1.2 billion). Services
imports were valued at $2.3 billion, including transport services of $1.0 billion.
157. Japan is Australia's third-largest source of foreign investment, with an investment
stock of $131.0 billion at the end of 2013. Direct investment, mostly in iron ore, coal and
motor vehicles, accounts for 48 per cent of Japans total investment in Australia. At the
end of 2013, Australia's stock of investment in Japan was $50.2 billion. Japan is
Australia's sixth-largest destination for foreign investment.
158. Reduced or eliminated tariffs under JAEPA are expected to increase the volume
and value of Australias bilateral trade with Japan, particularly in product categories that
will be most liberalised. Improved market access for Australian agricultural products will
likely result in increased Australian exports of these products. Likewise, elimination of
Australian tariffs on imported passenger motor vehicles from Japan will increase the
competitiveness of Japanese-made vehicles, potentially leading to greater import volumes
of these goods from Japan.
159. In addition to the benefits associated with increased bilateral trade, the
preferential access for Australian products under JAEPA will give Australian producers a
competitive advantage against producers from Japans other trading partners, particularly
in agriculture.
160. The main affected stakeholders in Australia are:
producers and exporters, particularly in agriculture, whose products will become
more competitive in the Japanese market as import restrictions are reduced or
eliminated;
consumers, who will have access to cheaper imports and broader choice of
Japanese-made products under JAEPA;
importers, who will have improved access to cheaper inputs from Japan and will be
able to source and offer an increased choice of goods;
manufacturers, who will face increased competition from Japanese-made goods,
service providers, who will gain more certain access to the significant and well-
developed Japanese market in key areas of commercial interest including financial,
education, telecommunications and legal services; and
the business community, which will benefit from attracting greater Japanese
investment for projects and ventures in Australia.
161. JAEPA is consistent with Australias trade policy objectives as it is a high-quality
trade agreement that substantially liberalises Australias trade with a major economy and it
complements multilateral and regional trade liberalisation. JAEPA is consistent with
Australias existing international commitments, including those under the WTO Agreement.
CONSULTATION
Business, industry and civil society
162. Stakeholder views were actively sought and considered throughout negotiations
for JAEPA. The Department of Foreign Affairs and Trade (DFAT) commenced stakeholder
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 31
consultations in December 2006, with a call for public submissions as part of a feasibility
study into the benefits and disadvantages of a bilateral trade agreement between Australia
and Japan. DFAT made another call for submissions following the launch of negotiations
in April 2007. DFAT encouraged and considered submissions from individuals and
stakeholder groups throughout negotiations.
163. In addition to seeking submissions from interested parties, DFAT, in conjunction
with relevant Commonwealth agencies, conducted an extensive program of direct
consultations and discussions with over 450 stakeholders to ensure their views informed
the Governments negotiating strategy. Consultation with industry was substantial and
ongoing, with officials holding individual meetings with businesses and industry groups,
with the addition of industry roundtable meetings with peak organisations, professional
bodies and other interested groups. These consultations helped identify commercially
significant opportunities for closer economic engagement, as well as the impediments to
increasing Australias exports to, and investment in, Japan.
164. Consultations revealed broad support for a bilateral trade agreement with Japan.
Most businesses and industry groups, as well as State and Territory governments, argued
a trade agreement would help achieve better access to the Japanese market for Australia.
Some industries, particularly in agriculture and finance and investment, viewed a trade
agreement as an important element in securing Australias competitiveness in the
Japanese market. They expressed a strong desire that a bilateral trade agreement create
new export opportunities and enhance existing trade. Some stakeholder groups identified
defensive interests, most notably the automotive sector and those with an interest in ISDS
and labour and environment provisions.
165. Australian agricultural stakeholders were consulted extensively throughout the
course of the negotiations, including close communication with peak industry bodies
particularly in the closing stages of the negotiations. Agricultural stakeholders reinforced
the need for an agreement that would enable them to take full advantage of the substantial
Japanese market. Australian Government officials engaged frequently with, among
others, the National Farmers Federation, Meat and Livestock Australia, the Office of
Horticultural Market Access, Dairy Australia, Citrus Australia, the Grains Market Access
Committee, Grain Growers, Australian Sugar Industry Alliance, Ricegrowers Association
of Australia, Canegrowers, Australian Pork Limited, the Nut Industry Council, Australian
Horticulture Exporters Association, the Australian Wine and Brandy Association, the
Australian Food and Grocery Council, as well as individual producers. Many exporters
have expressed their support for JAEPA, including Meat and Livestock Australia, the
Horticultural Market Access Committee, the Nut Industry Council, Citrus Australia,
AUSVEG and Wine Australia.
166. Some industry bodies and companies have expressed disappointment with the
outcome, particularly where their products have been excluded or the concessions in tariff
reductions and quotas have been less than they were seeking, particularly on rice
(Ricegrowers Association of Australia), sugar (Canegrowers and Australian Sugar
Industry Alliance) and dairy products (Australian Dairy Industry Council and United
Dairyfarmers). Criticisms have pointed to the high levels of Japans trade protection on
those items and the difficulty in persuading Japan to remove its protection for local
industries. While Australia negotiated on every product, Japan did not agree to all
Australias negotiating requests to open these markets further.
167. The resources sector expressed strong support for an EPA with Japan. The
Minerals Council of Australia and the NSW Minerals Council considered that an EPA
would strengthen economic ties by adding a new and formal dimension to the bilateral and
strategic relationship and provide greater certainty of security of supply and market
access.
Page 32 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
168. Prior to the announcement by Toyota, Ford and Holden to end manufacturing in
Australia, automotive companies were mainly concerned that the EPA not undermine the
ongoing viability of the Australian passenger motor vehicle industry. JAEPA addresses
these concerns by providing for staged elimination of Australias tariffs on certain motor
vehicles and automotive parts over three to five years. Significantly, concerns relating to
the importation of used Japanese motor vehicles have been addressed by retaining the
specific duty of $12,000 per vehicle. This outcome was broadly welcomed by the
Australian automotive sector.
169. The Federation of Automotive Products Manufacturers said the EPA with Japan
would offer greater opportunities to auto component importers and manufacturers of high-
value components, but that the mature Japanese market would make entry by Australian
commodity level components difficult.
170. Submissions were received from a range of services industry bodies, including
the Australian Nursing Federation, Architects Accreditation Council of Australia, The Royal
Australian Institute of Architects, Law Council of Australia, Association of Consulting
Engineers of Australia, Australian Nursing and Midwifery Council Inc., Australian Vice
Chancellors Committee, Law Institute of Victoria, Engineers Australia, Services industries
were supportive of an EPA. A number of Australian peak professional services bodies
(accountants, architects, engineers, lawyers, information technology workers) expressed
interest in facilitating recognition of professional services qualifications. Educational
providers, including Australias largest university, Monash University, said they believed
the EPA would improve Japanese student mobility to study in Australia. Some
submissions warned that an EPA should not undermine the ability of the Australian
Government to regulate on public health and welfare issues.
State and Territory governments
171. State and Territory governments were consulted through the Ministerial Council
on International Trade and Commonwealth-States Standing Committee on Treaties
meetings and visits by JAEPA negotiators to State and Territory capitals. The
governments of Victoria, South Australia and Queensland lodged submissions, all of which
were supportive of a bilateral trade agreement with Japan.
Commonwealth Government agencies
172. In accordance with a whole-of-government approach, DFAT ensured relevant
Commonwealth Government agencies were regularly and extensively consulted
throughout JAEPA negotiations. Agencies were consulted through regular inter-
departmental committee meetings and through participation by relevant agencies in the
Australian delegation to negotiating sessions. DFATs website was also regularly updated
after JAEPA negotiating sessions, facilitating wide dissemination of information to
government stakeholders.
CONCLUSION
173. It is in Australias interests to enter into an EPA with Japan, given JAEPA is
expected to:
deliver commercially meaningful market access gains that will benefit Australian
agricultural producers, as well as energy and mineral resources exporters, service
providers, consumers and investors;
secure a competitive advantage for Australian exporters in the Japanese market
against producers from Japans other trading partners, particularly in agriculture, and
ahead of possible other trade deals Japan is seeking to conclude with Australias
competitors;
deliver faster and deeper market access gains than those possible through
multilateral WTO or regional negotiations;
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 33
be consistent with WTO requirements for free trade agreements; and
complement Australias efforts to seek additional trade liberalisation from Japan
through the WTO and regional mechanisms.
It should be noted that:
the removal of tariffs on merchandise imports will lead to reductions in tariff revenue
although this would be offset over time by the second-round effects of increased
economic activity; and
Japan will maintain protection on a small number of sensitive sectors including rice,
fresh milk and milk powders and certain furskin products. However, these products
represent about 2.5 per cent of Australian exports to Japan and Australia would not
be disadvantaged in relation to trade competitors from other countries in the
Japanese market for these goods.
IMPLEMENTATION AND REVIEW
174. Following the conclusion of negotiations in April 2014, the text of JAEPA will be
translated and undergo legal verification before it is signed. Both English and Japanese
versions will be official versions of the agreement. Following Cabinet and Executive
Council approval, the finalised EPA text will be signed by representatives of the Australian
and Japanese governments. The full text of the EPA will be released publicly once the
agreement is signed. Following signature, the text will also be tabled in Parliament and
examined by the Joint Standing Committee on Treaties.
175. Implementation of JAEPA will require changes to: the Customs Act 1901; the
Customs Tariff Act 1995 and associated regulations; the Foreign Acquisitions and
Takeovers Regulations 1989; and the Life Insurance Regulations 1995.
176. Once domestic processes are completed, including amendments to relevant
legislation and regulatory changes, Australia and Japan will exchange diplomatic notes
advising that the ratification process has been completed by both Parties. Both Parties are
aiming for entry into force in the first half of 2015.
177. The provisions of JAEPA set a range of reviews, including on specific market
access issues. These reviews occur at set time frames (for example after five years for
the treatment of beef, sugar, wheat and dairy, and after ten years for beef safeguard
levels) and have additional triggers, such as if another country receives better treatment
than Australia. The Investment Chapter in JAEPA includes a review clause which
provides for future consideration of an ISDS mechanism. There is also a general review of
JAEPA set for the sixth year after entry into force. JAEPA provides mechanisms for
unilateral termination by either Party and review through the joint EPA institutional
provisions.
Page 34 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
ATTACHMENT: REGULATORY BURDEN AND COST OFFSET ESTIMATE
1. The entry into force of JAEPA is expected to result in a small reduction in ongoing
business compliance costs for Australian exporters to Japan. The reduction arises from
the possibility that some businesses that previously sought and obtained non-preferential
certificates of origin (COOs) may now be able to self-certify the origin of their goods.
2. In 2013 there were 64,447 Australian export declarations for goods destined for Japan
which were indicated to be of Australian origin. However, origin requirements for non-
preferential purposes differ to origin requirements under preferential trade agreements.
Therefore, the estimates of the compliance costs under the status quo - as well as the
likely incremental changes - are largely assumption driven and should be interpreted as
such. However, based on the available data, it is possible to gain an appreciation of the
order of magnitude of these changes.
Certificates of Origin
3. COOs are issued by industry groups such as the Australian Chamber of Commerce
and Industry and the Australian Industry Group.
4. Preferential certificates account for around 10 per cent of all certificates issued.
Preferential certificates are generally issued in respect of countries with which Australia
has an EPA, but which do not allow for self-declaration.
5. Japan is Australias second largest export destination, with 18 per cent of Australian
merchandise exports going to Japan in 2013.
Direct Costs
7. Where businesses seek third-party certification from industry groups, the cost of each
certificate varies from between $20-70 at an average of $33. The cost of a certificate
depends on a range of factors, such as whether an applicant is a member of the issuing
body.
Administrative costs
8. The ongoing administrative costs incurred by a business in preparing the
documentation to obtain a COO are likely to be relatively low. The bulk of Australian
exports to Japan are ,,wholly obtained goods such as agriculture and resource
commodities, which, unlike more complex manufactured products such as motor vehicles,
require relatively minimal administration to ensure compliance with origin requirements.
Further, while new businesses may expend considerable time applying for certification for
their initial consignment, as a matter of practice this information is re-submitted for
subsequent certifications. In addition, much of the information required would be collected
for other purposes. The administrative time burden for each application is therefore
estimated to be modest.
9. Similarly, the records related to certificate of origin are required to be kept for five
years for most foreign customs agencies. However, businesses are required under
Australian Tax Law to retain these records for seven years. The incremental compliance
burden associated with record keeping for COOs is therefore assessed as nil.
Incremental reduction in number of certificates under JAEPA
10. Non-preferential COOs are obtained by Australian exporters for goods destined to
such places as Japan for a range of reasons. For example, importers may insist on the
provision of a non-preferential COO because of a business practice, or overseas customs
agencies may require COOs for the purpose of administrating import tariff quotas.
11. Therefore, it is possible that of the total number of Australian COOs currently issued in
respect of Japan, some will no longer be required as a result of the JAEPA because of the
self-declaration option. However, each business will have to consider for themselves as a
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 35
commercial decision whether the benefits of obtaining a COO is outweighed by the costs
(administrative and otherwise).
12. It is therefore assumed that there will be a modest reduction in the number of COOs
issued in respect of Australian exports to Japan as a result of the JAEPA. To the extent
that this reduction occurs, businesses will save the direct costs of certification by industry
bodies, together with the administrative costs.
Page 36 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act
2011
CUSTOMS AMENDMENT (JAPAN-AUSTRALIA ECONOMIC PARTNERSHIP
AGREEMENT IMPLEMENTATION) BILL 2014
This Bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Overview of the Bill
The Bill amends the Customs Act to introduce new rules of origin for goods that are
imported into Australia from Japan to give effect to the Agreement. The Customs Act
amendments will enable goods that satisfy the rules of origin to enter Australia at
preferential rates of customs duty.
Human rights implication
Right to privacy
The Bill will impose record keeping obligations on exporters of goods to Japan who claim
the goods are Australian originating for the purpose of obtaining a preferential tariff
treatment in Japan. This will include a requirement for that person to produce those
records when asked by an authorised officer. An authorised officer may disclose these
records to a Japanese customs official for the purpose of verifying a preferential tariff in
Japan.
The record keeping requirements reflect the terms of the Agreement and will allow
Australia to verify the origin of goods for which preferential tariff treatment is claimed in
Japan. This may include the collection and disclosure of personal information for limited
purposes.
Although the Bill will engage the right to privacy where it involves the collection and
disclosure of personal information, this collection and disclosure is for the limited purpose
of verifying a claim made by a person for preferential tariff treatment. Verification of the
eligibility for preferential treatment is required under the Agreement and the possible
collection and disclosure of personal information here is justified and reasonable.
Further, the collection and disclosure of personal information is protected under Australian
law and the existing protections will not be altered in any way by the Bill.
Conclusion
The Bill is compatible with human rights.
MINISTER FOR IMMIGRATION AND BORDER PROTECTION,
THE HONOURABLE SCOTT MORRISON MP
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 37
CUSTOMS AMENDMENT (JAPAN-AUSTRALIA ECONOMIC PARTNERSHIP
AGREEMENT IMPLEMENTATION) BILL 2014
NOTES ON CLAUSES
Clause 1 - Short title
1. This clause provides for the Bill, when enacted, to be cited as the Customs
Amendment (Japan-Australia Economic Partnership Agreement Implementation) Act
2014.
Clause 2 - Commencement
2. Subclause (1) provides that each provision of this Act specified in column 1 of the
table in that subclause commences, or is taken to have commenced, on the day or at
the time specified in column 2 of the table. This subclause also provides that any
other statement in column 2 of the table has effect according to its terms.
3. Item 1 of the table provides that sections 1 to 3 and anything in this Act not
elsewhere covered by the table will commence on the day on which the Act receives
the Royal Assent.
4. Item 2 of the table provides that Schedule 1 either commences on the day this Act
receive the Royal Assent or on the day on which the Agreement done at Canberra
on 8 July 2014 comes into force for Australia, whichever is later. However, Parts
1 and 2 do not commence at all if the event mentioned in paragraph (b) does not
occur.
5. This item also provides that the Minister for Immigration and Border Protection must
announce by notice in the Gazette the day on which the Agreement comes into force
for Australia.
6. Subclause (2) provides that column 3 of the table contains additional information that
is not part of the Act.
Clause 3 - Schedule(s)
7. This clause is the formal enabling provision for the Schedule to the Bill, providing
that each Act specified in a Schedule is amended in accordance with the applicable
items of the Schedule. In this Bill, the Customs Act is being amended.
8. The clause also provides that the other items of the Schedule have effect according
to their terms. This is a standard enabling clause for transitional, savings and
application items in amending legislation.
Page 38 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
SCHEDULE 1 - AMENDMENTS
Part 1 - Japanese originating goods
Customs Act 1901
Item 1 After Division 1J of Part VIII
9. This item amends the Customs Act by inserting new Division 1K into Part VIII. New
Division 1K is headed Japanese originating goods and sets out the rules for
determining whether goods are Japanese originating goods and therefore eligible for
a preferential rate of customs duty under the Customs Tariff Act. These rules are
being inserted to give effect to the Agreement, in particular Chapter 3 of the
Agreement.
10. New Division 1K contains five subdivisions which are set out below.
Subdivision A - Preliminary
11. Subdivision A contains a simplified outline of Division 1K and contains the
interpretation provision for that Division.
Section 153ZNA Simplified outline
12. New section 153ZNA sets out a simplified outline of each of the subdivisions B to E
of new Division 1K.
New section 153ZNB Interpretation
13. New subsection 153ZNB(1) sets out new definitions for the purposes of Division 1K
as follows:
Agreement is the Japan-Australia Economic Partnership Agreement done at
Canberra on 8 July 2014, as amended from time to time. The Note to this definition
indicates that in 2014, the text of the Agreement was accessible through the
Australian Treaties Library on the AustLII Internet site.
Area of Japan means Area within the meaning, so far as it relates to Japan, of
Article 1.2 of the Agreement. In Article 1.2, Area in relation to Japan includes the
territory of Japan, and all the area beyond its territorial sea, including the sea-bed
and subsoil thereof, over which Japan exercises sovereign rights or jurisdiction in
accordance with international law and its laws and regulations.
Australian originating goods means goods that are Australian originating goods
under a law of Japan that implements the Agreement.
Certificate of Origin is a certificate that is in force and that complies with the
requirements of Article 3.15 of the Agreement. Article 3.15 sets out the matters that
are to be included in a Certificate of Origin.
Convention means the International Convention on the Harmonized Commodity
Description and Coding System done at Brussels on 14 June 1983, as in force from
time to time. The Note to this definition indicates that in 2014, the text of the
Agreement was accessible through the Australian Treaties Library on the AustLII
Internet site.
customs value of goods, which has the meaning given by section 159. In most
cases it will be the transaction value but there are other valuation methods if this
value cannot be ascertained.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 39
enterprise has the meaning given by Article 1.2 of the Agreement. In Article 1.2
,,enterprise means ,,any corporation, company, association, partnership, trust, joint
venture, sole-proprietorship or other entity constituted or organised under applicable
law, whether for profit or otherwise, and whether privately-owned or controlled or
governmentally owned or controlled.
Factory ships of Japan mean factory ships of the Party within the meaning, so far
as it relates to Japan, of Article 3.1 of the Agreement. Article 3.1 specifies that
factory ships must be registered in Japan, sail under the flag of Japan and meet one
of the following conditions:
(A) they are at least 50 per cent owned by the nationals of Japan;
(B) they are owned by a juridical person which has its head office and its
principal place of business in Japan; or
(C) they are authorised by the Government of Japan to operate under a bare
boat charter contract only in the Area of Japan;
Harmonized System means the Harmonized Commodity Description and Coding
System (as in force from time to time) that is established by or under the Convention.
The Harmonized System (HS) is the worldwide classification system that has been
adopted by all countries that are members of the World Customs Organization. In
Australia, the HS has been adopted in the Customs Tariff Act. The HS organises
goods according to the degree of manufacture, and assigns classification numbers to
all goods. It is arranged into 96 chapters with each chapter being divided into
headings, subheadings, and tariff classifications. Under the HS, the chapter,
heading (4 digits), and subheading numbers (6 digits) for all good are adopted by
countries using the HS. The Australian Customs Tariff uses an additional two digits
for national classification to create 8 digit tariff items.
indirect materials means:
(a) goods or energy used in the production, testing or inspection of goods, but
not physically incorporated in the goods; or
(b) goods or energy used in the maintenance or operation of equipment or
buildings associated with the production of goods;
including:
(c) fuel (within its ordinary meaning); and
(d) tools, dies and moulds; and
(e) spare parts and materials; and
(f) lubricants, greases, compounding materials and other similar goods; and
(g) gloves, glasses, footwear, clothing, safety equipment and supplies; and
(h) catalysts and solvents.
Interpretation Rules which means the General Rules (as in force from time to time)
for the Interpretation of the HS provided for by the Convention.
Japanese originating goods means goods that, under this Division, are Japanese
originating goods.
Page 40 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
non-originating materials means goods that are not originating materials.
Non-originating materials are goods that are not originating materials because they
do not satisfy the requirements of Division 1K in their own right. For example, where
frozen crumbed fish fillets are made in Japan from fish caught in Japan, coated with
herbs and spices imported from Thailand, the fish would be originating materials and
the herbs and spices would be non-originating materials.
originating materials means Japanese originating goods that are used in the
production of other goods; or Australian originating goods that are used in the
production of other goods; or indirect materials.
In some circumstances, in order to determine whether goods that are imported into
Australia are Japanese originating goods, and therefore eligible for a preferential rate
of customs duty, it may be necessary to have regard to the goods from which the
final goods are produced (see Subdivisions C and D).
Originating materials are those goods that are used to produce other goods and that
are also Japanese originating goods, which means that in their own right they satisfy
the requirements of new Division 1K; or are Australian originating goods under a law
of Japan that implements the Agreement; or indirect materials as defined above.
origin certification document means a document that is in force and that complies
with the requirement of Article 3.16 of the Agreement. Article 3.16 sets out the
matters that are to be included in an origin certification document.
person of Japan means a natural person of Japan as defined in Article 1.2 of the
Agreement or an enterprise of Japan.
produce means manufacture, assemble, process, raise, grow, breed, mine, extract,
harvest, fish, trap, gather, collect, hunt or capture.
sea-fishing has the same meaning as it has in the Agreement.
territorial sea has the same meaning as in the Seas and Submerged Lands
Act 1973. This definition is taken from Articles 3 and 4 of the United Nations
Convention on Laws of the Sea which provides as follows:
Every State has the right to establish the breadth of its territorial sea up to a limit not
exceeding 12 nautical miles, measured from baselines determined in accordance with this
Convention.
The outer limit of the territorial sea is the line every point of which is at a distance from the
nearest point of the baseline equal to the breadth of the territorial sea.
vessels of Japan means vessels of the Party within the meaning, so far as it relates
to Japan, of Article 3.1 of the Agreement. The eligibility criteria are the same as the
criteria for ,,factory ships of Japan see the definition of ,,factory ships of Japan.
regional value content of the goods for the purposes of this Division is to be
worked out in accordance with the regulations. The regulations may prescribe
different regional value content rules for different kinds of goods. Regional value
content means the ,,qualifying value content as set out in Article 3.5 of the
Agreement.
New subsection 153ZNB(2) provides that the regional value content of goods for the
purposes of Division 1K is to be worked out in accordance with the regulations. The
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 41
regulations may prescribe different regional value content rules for different kinds of
goods.
New subsection 153ZNB(3) provides that the value of goods for the purposes of
Division 1K is to be worked out in accordance with the regulations and that the
regulations may prescribe different valuation rules for different kinds of goods. The
value of goods is relevant, for example, in determining whether goods satisfy the de
minimis requirement in Article 3.4 of the Agreement. The value of goods is to be
distinguished from the customs value of goods which is to be worked out under
section 159 of the Customs Act.
New subsection 153ZNB(4) provides that in specifying tariff classifications for the
purposes of Division 1K the regulations may refer to the HS. The product specific
rules in Annex 2 of the Agreement refer to the tariff classifications of the HS.
New subsection 153ZNB(5) provides that subsection 4(3A) of the Customs Act does
not apply for the purposes of Division 1K. Subsection 4(3A) provides that reference
in the Customs Act to the tariff classification of goods is a reference to Schedule 3 of
the Customs Tariff Act, which is not the case in new Division 1K.
New subsection 153ZNB(6) provides that despite subsection 14(2) of the Legislative
Instruments Act 2003, regulations made for the purposes of Division 1K may apply,
adopt or incorporate, with or without modification, any matter contained in an
instrument or other writing as in force or existing from time to time. This provision
will enable the Customs (Japanese Rules of Origin) Regulations 2014 to refer to the
general accounting principles of Japan for the purposes of the regional value content
calculations. These general accounting principles of Japan may be updated in the
future and new subsection 153ZNB(6) will enable the law to remain up to date by
enabling the documents to be incorporated ,,as in force or existing from time to time.
Subdivision B - Goods wholly obtained in Japan
14. Subdivision B sets out the rules in relation to goods that are wholly obtained in
Japan.
Section 153ZNC Goods wholly obtained in Japan
15. New subsection 153ZNC(1) provides that goods are Japanese originating goods if
they are wholly obtained in Japan; and either the importer of the goods has, at the
time for working out the rate of import duty on the goods, a Certificate of Origin or an
origin certification document, or a copy of one for the goods; or Australia has waived
the requirement for a Certificate of Origin for the goods or an origin certification
document for the goods.
16. New subsection 153ZNC(2) provides that goods are wholly obtained in Japan if,
and only if, the goods are:
(a) live animals born and raised in the Area of Japan, other than the sea outside
the territorial sea of Japan; or
(b) animals obtained from hunting, trapping, fishing, gathering or capturing in the
Area of Japan, other than the sea outside the territorial sea of Japan; or
(c) goods obtained from live animals in the Area of Japan; or
(d) plants, fungi or algae harvested, picked or gathered in the Area of Japan; or
Page 42 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
(e) minerals, or other naturally occurring resources, taken or extracted from the
Area of Japan, other than the seabed, or subsoil beneath the seabed, outside
the territorial sea of Japan; or
(f) goods of sea-fishing, or other goods, taken by vessels of Japan from the sea
outside the territorial sea of Japan and the territorial sea of Australia; or
(g) goods produced on board factory ships of Japan from goods referred to in
paragraph (f); or
(h) goods taken by Japan, or a person of Japan, from the seabed, or subsoil
beneath the seabed, outside the territorial sea of Japan, but only if Japan has
rights to exploit that part of the seabed or subsoil in accordance with
international law; or
(i) goods that are collected in Japan, that can no longer perform their original
purpose, that are not capable of being restored or repaired and that are fit
only for disposal or for the recovery of raw materials; or
(j) waste and scrap that has been derived from production or consumption in
Japan and that is fit only for disposal or for the recovery of raw materials; or
(k) raw materials recovered in Japan from goods that can no longer perform their
original purpose and that are not capable of being restored or repaired; or
(l) goods produced in the Area of Japan, exclusively from goods referred to in
paragraphs (a) to (k).
Subdivision C - Goods produced in Japan, from originating materials
17. Subdivision C sets out the rule in relation to goods that are produced entirely in
Japan from originating materials only under section 153ZND. Such goods are
Japanese originating goods where the importer of the goods has, at the time for
working out the rate of import duty on the goods, a Certificate of Origin, or an origin
certification document or a copy of one, for the goods; or Australia has waived the
requirement for a Certificate of Origin or an origin certification document for the
goods.
Subdivision D - Goods produced in Japan, or Japan and Australia, from
non-originating materials
18. Subdivision D sets out the rules for determining whether goods that are produced
entirely in Japan, or entirely in Japan and Australia, from non-originating materials
only, or from non-originating materials and originating materials are Japanese
originating goods.
19. New subsection 153ZNE(1) provides that goods are Japanese originating goods if:
(a) they are classified to a heading or subheading of the HS specified in
column 1 of the table in Schedule 1 to the Customs (Japanese Rules of
Origin) Regulations 2014 (the Japanese Regulations); and
(b) they are produced entirely in Japan, or entirely in Japan and Australia, from
non-originating materials only or from non-originating materials and
originating materials; and
(c) each requirement that is prescribed in the regulations to apply in relation to
the goods is satisfied; and
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 43
(d) either:
(i) The importer of the goods has, at the time for working out the rate of
import duty of the goods, a Certificate of Origin, or an origin certification
document, or a copy of one, for the goods; or
(ii) Australia has waived the requirement for a Certificate of Origin or an origin
certification document for the goods.
20. The table in Schedule 1 to the Japanese Regulations will incorporate the product
specific rules relating to change in tariff classification, regional value content and
other rules for the purpose of determining whether goods are Japanese originating
goods. Column 1 of this table will set out the tariff classifications, column 2 will set
out the description of the goods and column 3 will set out the product specific rules.
Change in tariff classification
21. New subsection 153ZNE(2) refers to the first of the requirements that may be
specified in Schedule 1 to the Japanese Regulations. It provides that the regulations
may specify that each non-originating material used in the production of the goods is
required to satisfy a prescribed change in tariff classification.
22. New subsection 153ZNE(3) provides that the regulations may also prescribe when a
non-originating material used in the production of the goods is taken to satisfy the
change in tariff classification. Regulations made under these heads of power would
include provisions to give effect to the accumulation provision contained in Article
3.6 of the Agreement, and would apply where the non-originating materials that are
used or consumed in the production of the good do not satisfy the change in tariff
classification.
23. The concept of the change in tariff classification only applies to non-originating
materials. Goods that have been sourced from outside Japan or Australia and that
are used in the production of other goods are non-originating materials. Goods
sourced from within Japan or Australia that have not fulfilled the requirements of
Division 1K and that are used in the production of other goods are also
non-originating materials.
24. All non-originating materials used to produce other goods may not have the same
classification under the HS as the final good into which they are produced. This
means that the goods must be classified under one tariff classification before the
production process and under a different tariff classification after the production
process. This approach ensures that sufficient transformation of materials has
occurred within Japan, or Japan and Australia, to justify the claim that the goods
originate in Japan.
25. For example, frozen fish fillets (HS 0304) are produced from fish caught in Japan
and combined with herbs and spices from Thailand (HS 0907 - 0910) to make
crumbed fish fillets (HS 1604). The applicable tariff change for crumbed fish is "a
change to heading 1604 from any other chapter except from chapter 3". As the
herbs and spices are classified to Chapter 9, these non-originating materials meet
the tariff change requirement (the fish is the produce of Japan and is therefore an
originating material and is not required to change its classification).
Page 44 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
26. In order to determine which is the applicable change in tariff classification, the tariff
classification of the final goods and each of the goods that are non-originating
materials used in the production of the goods needs to be known.
27. New subsection 153ZNE(4) provides that the change in tariff classification is also
taken to be satisfied if the total value of all of the non-originating materials used in
the production of the goods that do not satisfy the particular change in tariff
classification of the goods does not exceed 10% of the customs value of the goods.
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 45
28. The provisions of subsection 153ZNE(4) incorporate the de minimis provisions that
are set out in Article 3.4 of the Agreement. Therefore, even if all the non-originating
materials used to produce a final good do not satisfy a particular change in tariff
classification, the final goods may still be Japanese originating goods because the
change in tariff classification will be taken to be satisfied if the total value of the non-
originating materials does not exceed 10% of the customs value of the goods. The
value of non-originating materials for the purposes of this section is to be worked out
in accordance with the method that will be included in the Japanese Regulations.
29. New subsection 153ZNE(5) provides that if the requirement in subsection (2) applies
in relation to the goods and the goods are classified to any of Chapters 50 to 63 of
the HS; and one or more of the non-originating materials used in the production of
the goods do not satisfy the change in tariff classification; then the requirement
referred to in subsection (2) is taken to be satisfied if the total weight of those non-
originating materials used in the production of the goods that do not satisfy the
particular change in tariff classification of the goods does not exceed 10% of the total
weight of the goods.
Regional value content
30. New subsection 153ZNE(6) provides that the regulations may also specify a regional
value content of at least a prescribed percentage.
31. New subsection 153ZNE(7) provides that if:
(a) the goods are required to have a regional value content of at least a particular
percentage; and
(b) the goods are imported into Australia with accessories, spare parts or tools;
and
(c) the accessories, spare parts or tools are not invoiced separately from the
goods; and
(d) the quantities and value of the accessories, spare parts or tools are
customary for the goods;
then the regulations must require the value of the accessories, spare parts or tools to
be taken into account as originating materials or non-originating materials, as the
case may be, for the purposes of working out the regional value content of the
goods. Without this provision, the value of accessories, spare parts or tools would
not normally form part of the value of materials that are used in the production of the
underlying goods.
32. The Note to this section indicates that the value of the accessories, spare parts or
tools is to be worked out in accordance with the regulations.
No limit on regulations
33. New subsection 153ZNE(8) provides that subsections (2) and (6) do not limit
paragraph (1)(c). It is proposed that the regulations will include other requirements
in addition to change in tariff classification and regional value content requirements.
34. For example, in addition to meeting a tariff change requirement, in respect of textile
articles classified in subheading 6301.20 of the HS, where the starting material is
Page 46 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
fabric, the fabric must be dyed or printed and fully finished from greige fabric in
Japan or in Japan and Australia.
Section 153ZNF Packaging materials and containers
35. New subsection 153ZNF(1) provides that if:
(a) goods are packaged for retail sale in packaging material or a container; and
(b) the packaging material or container is classified with the goods in accordance
with Rule 5 of the General Rules for the Interpretation of the HS provided for
by the Convention then the packaging material or container is to be
disregarded for the purposes of this Subdivision, except for the purposes of
the exception detailed below.
36. For example, this means that the packaging material or container does not need to
satisfy the change in tariff classification test that might apply to the goods under the
Japanese Regulations.
Exception
37. However, subsection 153ZNF(2) provides one exception, which applies where the
goods are required to have a regional value content of at least a particular
percentage. The regulations must require the value of the packaging material or
container to be taken into account as originating materials or non-originating
materials, as the case may be, for the purposes of working out the regional value
content of the goods. Without this provision, the value of packaging materials and
containers would not normally form part of the value of materials that are used in the
production of the goods.
38. The value of packaging materials and containers for the purposes of this section is to
be worked out in accordance with the method that will be included in the Japanese
Regulations.
Section 153ZNG Non-qualifying operations
39. New subsection 153ZNG(1) provides that goods are not Japanese originating good
under this Subdivision merely because of the following operations or processes:
(a) operations to preserve goods in good condition for the purpose of transport or
storage of the goods (such as drying, freezing and keeping goods in brine);
(b) changing of packaging or the breaking up or assembly of packages;
(c) disassembly of goods
(d) placing in bottles, cases or boxes or other simple packaging operations;
(e) collecting of parts or components for unassembled goods (where the
unassembled goods would be classified to a heading of the Harmonized
System in accordance with Rule 2(a) of the Interpretation Rules);
(f) making-up of sets of goods;
(g) the reclassification of goods without any physical change in the goods; and
(h) any combination of things referred to in paragraphs (a) to (g).
40. Therefore, if any of the above operations are the only operations that take place in
Japan, or in Japan and Australia, in relation to goods (either alone or as a
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 47
combination), this will not amount to production in relation to the goods. For
example, if non-originating goods such as spices from Thailand are packaged into
bottles in Japan, this will not confer the status of Japanese originating goods on the
spices.
Subdivision E - Consignment
41. Subdivision E sets out the consignment requirements that must be satisfied in
transporting Japanese originating goods to Australia, including production in other
countries during transportation to Australia.
Section 153ZNH Consignment
42. New subsection 153ZNH provides that goods are not Japanese originating goods
under Division 1K if they are transported through a country other than Japan or
Australia and either or both of the following apply:
(a) they undergo subsequent production or any other operation in that country or
place (other than unloading, reloading, storing, repacking, re-labelling,
splitting up of the goods or any operation that is necessary to preserve them
in good condition or to transport them to Australia);
(b) they do not remain under customs control at all times while they are in that
country.
43. Subsection 153ZNH(2) provides that this section applies despite any other provision
of Division 1K. This means that even if goods are Japanese originating goods in
accordance with any other provisions of Division 1K, if they do not comply with
section 153ZNH(1) they will not be Japanese originating goods.
Part 2 - Verification powers
Customs Act 1901
Item 2 After Division 4G of Part VI
44. This item amends the Customs Act by inserting new Division 4H into Part VI. New
Division 4H is headed "Exportation of goods to Japan" and will impose obligations on
people who export goods to Japan and who wish to obtain preferential treatment in
respect of those goods in Japan, and on people who produce such goods.
New section 126ANA Definitions
45. New section 126ANA inserts two new definitions for the purposes of new Division
4H, as follows:
Japanese customs official means a person representing the customs
administration of Japan.
producer means a person who manufactures, assembles, processes, raises, grows,
breeds, mines, extracts, harvests, fishes, traps, gathers, collects, hunts or captures
goods.
New section 126ANB Record keeping obligations
46. New section 126ANB inserts record keeping obligations that will apply only in
respect of goods that are exported from Australia to Japan and that are claimed to
Page 48 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014
be Australian originating goods for the purpose of obtaining a preferential tariff in
Japan. While there are record keeping obligations in the Customs Act at present,
these are not broad enough to cover the record keeping obligations under the
Agreement.
47. New subsection 126ANB(1) provides that the regulations may prescribe record
keeping obligations that apply in relation to goods that are exported to Japan; and
are claimed to be Australian originating goods for the purpose of obtaining a
preferential tariff in Japan.
48. It is intended that the method of keeping the documents, such as the length of time
for which they must be kept and the manner in which they must be kept, will be
similar to current record keeping obligations. However, the type of documents that
will be required to be kept will be much broader than current requirements. The
requirements will extend to all records relating to the origin of the goods for which
preferential tariff treatment is claimed in Japan and may include, amongst other
things, records associated with the tariff classification of the goods and the origin or
value of the materials used to produce the goods.
49. New subsection 126ANB(2) provides that the obligations under subsection (1) may
be imposed on an exporter or producer of goods.
New section 126ANC Power to require records
50. New subsection 126ANC(1) provides that an authorised officer (which is defined in
Section 4 of the Customs Act) may require a person who is subject to record keeping
obligations under regulations made for the purposes of section 126ANB to produce
to the officer such of those records as the officer requires.
51. Under Article 3.21 of the Agreement, Australia or Japan may take action to verify the
eligibility of goods for preferential treatment, including requesting the supply of
records relating to the production or export of the goods. New section 126ANC gives
effect to this Article in respect of goods exported to Japan and that are claimed to be
Australian originating goods for the purpose of obtaining a preferential tariff in Japan.
52. New subsection 126ANC(2) provides that an authorised officer may disclose any
records so produced to a Japanese customs official for the purpose of verifying a
claim for a preferential tariff in Japan. Section 16 of the Customs Administration Act
1985 (Customs Administration Act) prohibits the disclosure of protected information
except:
(a) as authorised by section 16; or
(b) as required or authorised by any other law; or
(c) in the course of performing the person's duties.
53. Records obtained by an authorised officer under new section 126ANC would be
protected information within the meaning of section 16 and therefore cannot be
disclosed to Japan except as allowed by section 16. By including an express
provision in the Customs Act allowing for this information to be disclosed to a
Japanese customs official, the disclosure is required or authorised by any other law
for the purposes of paragraph 16(2)(d) of the Customs Administration Act.
54. Under existing section 243SB of the Customs Act, it may be an offence to fail to
produce a record in accordance with new section 126ANC. However, under existing
Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 Page 49
section 243SC of the Customs Act, a person does not have to produce a record if
doing so would tend to incriminate the person.
New section 126AND Power to ask questions
55. New subsection 126AND(1) provides that an authorised officer (which is defined in
section 4 of the Customs Act) may require a person who is an exporter or producer
of goods that:
(a) are exported to Japan; and
(b) are claimed to be Australian originating goods for the purpose of obtaining a
preferential tariff in Japan;
to answer questions in order to verify the origin of the goods.
56. It is considered that the power to ask questions in the circumstances set out in this
section is a necessary adjunct to the power to require records in new section
126ANC.
57. New subsection 126AND(2) provides that an authorised officer may disclose any
answers to such questions to a Japanese customs official for the purpose of verifying
a claim for a preferential tariff in Japan.
58. Answers to questions obtained by an authorised officer under new section 126AND
would also be protected information within the meaning of section 16 of the Customs
Administration Act and therefore cannot not be disclosed to Japan except as allowed
by section 16. By including an express provision in the Customs Act allowing for this
information to be disclosed to a Japanese customs official, the disclosure is required
or authorised by any other law for the purposes of paragraph 16(2)(d) of the
Customs Administration Act.
59. Under existing section 243SA of the Customs Act, it may be an offence to fail to
answer a question in accordance with new section 126AND. However, under
existing section 243SC of the Customs Act, a person does not have to produce a
record if doing so would tend to incriminate the person.
Part 3 - Application provisions
Item 3 Application
60. Item 3(1) provides that the amendment made by item 1 applies in relation to:
(a) goods imported into Australia on or after the commencement of item 3; and
(b) goods imported in Australia before the commencement of item 3, where the
time for working out the rate of import duty on the goods had not occurred
before the commencement of item 3. This means that if goods are imported
from Japan before the commencement date and are still in a warehouse on
that date, the new rules set out in item 1 will also apply to them.
61. Item 3(2) provides that the amendment made by Part 2 (the new verification powers)
applies in relation to goods exported to Japan on or after the commencement of
Part 2 (whether the goods were produced before, on or after that commencement).
Page 50 Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014