Understanding Certificates of Origin (CoO) and the Role of the Australian Border Force (ABF)
Certificates of Origin (CoO): A Vital Ingredient to Free Trade
As a customs broker with twenty-seven (27) years of industry experience and a business celebrating its quarter-century anniversary this year, assessing Certificates of Origin (CoO) has become second nature. These documents are fundamental to international free trade; at the time of writing, Australia is currently committed to eighteen (18) Free Trade Agreements (FTA’s), and there are another five (5) FTA’s in negotiation or under consideration. The importance of CoO’s cannot be overstated.
Certificates of Origin assist in determining whether the goods will enjoy zero import duty in Australia. However, the requirements vary. Some FTA’s dictate that an overseas government authority must issue the CoO, while other FTA’s will accept a self-certified statement from the exporter or producer.
The Australian Border Force and CoO Challenges
When it comes to guidance on CoO’s, the Australian Border Force (ABF) leaves much to be desired. Currently, the ABF does not provide substantial, clear-cut advice to customs brokers on the requirements in complying with Australia’s numerous FTA’s. While the ABF does offer advanced rulings for CoO’s, the reality is that importing and commerce move far too quickly for this to be a practical solution in the majority of cases.
The Customs Act 1901, Section 71DA allows the ABF to audit the import declaration before the goods are released from ABF control. The Customs Act 1901, Section 240 allows an import declaration to be audited for the next five years from the date of communication. Section 243T, Section 243U and Section 243X are concerned with if an error has occurred and the penalty that is to be applied.
It would be dysfunctional of the ABF to posture Section 243T, Section 243U and Section 243X, when the ABF does not actively provide or promote concise ABF manuals, best practice statements or examples of acceptable and unacceptable scenarios.
The ABF does not provide substantive reference material. If I am to reflect on the early years of being a customs broker, I remember the various Australian Customs Service manuals for say Valuation, Import Cargo Reporting, Export Cargo Reporting and Origin, which would provide clear instructions and expectations while also providing examples of what would be and what wouldn’t be acceptable to the Australian Customs Service.
Now that international trade and customs clearance compliance is much more complex, these manuals, practice statements and guidance ‘tools’ have disappeared and it has now become a situation where the customs broker does not have enough tools nor standard operating procedures from the ABF to be able to do their work to the unwritten standard that the ABF now expects.
New recruits to our industry and those who wish to become customs brokers learn from senior customs brokers but more learning resources need to be provided to our industry from the ABF.
Shipments often have tight timelines between manufacturing and arrival into Australia. Customs brokers, therefore, cannot rely on advance rulings for say one off shipments. This lack of accessible guidance creates challenges, especially when customs brokers encounter resistance from overseas suppliers regarding CoO compliance.
The Problem with Consistency
A key issue lies in the information provided in a CoO, particularly with how it matches accompanying documents. For example, if we look at the China Australia Free Trade Agreement (ChAFTA); China is Australia’s largest trading partner and the majority of imports that arrive into Australia are from China. In in order to claim Free Trade, the importer must be in possession of a CoO from either (1) the General Administration of Customs of the People’s Republic of China (GACC) or (2) the China Council for the Promotion of International Trade (CPPIT)
Box 1 on both the GACC and CPPIT CoO asks for the exporter’s name.
Box 2 on both the GACC and CPPIT CoO asks for the producer’s name.
However, on so many occasions, the name on the commercial invoice is not listed in either box 1 or box 2. The name on the commercial invoice must be listed in either box 1 or box 2 of the CoO. However, there are many frequent cases where a third party’s name appears in box 1 or box 2. As customs brokers, we reject CoO’s that do not link to the commercial invoice; the automatic and dismissive response that we receive from Chinese suppliers is “We sent a shipment to Australia last month, and there was no issue.” Obviously we do not know what happened with last month’s shipment, but if it is true that a shipment went through last month with no issue, then more than likely (1) the other customs broker did not reject the erroneous CoO and (2) the ABF did not do a compliance audit to reject that CoO.
This CoO acceptance inconsistency hampers current and ongoing compliance and raises questions about the standards being applied by (1) other customs brokers and (2) the ABF.
Recently we were presented with an import shipment, we were asked to claim ChAFTA Free Trade, a CoO was presented. The CoO had not been verified with the Chinese Government. We advised the importer that we could not assist. The importer went to another customs brokerage, this next customs broker accepted the CoO.
This customs broker had the audacity to ask us why we didn’t accept the CoO; we advised this customs broker that the CoO could not be verified at https://origin.customs.gov.cn
What Needs to Change?
To address these recurring CoO problems, the Australian Border Force should take proactive steps by providing the industry with concise, definitive and clear procedures with examples of what is to be accepted and what is to be rejected. Customs brokers would then be able to show both their clients and Chinese suppliers that the CoO that they are presenting does not pass the test. Here are two specific recommendations to improve the situation:
Create Concise and Comprehensive Manuals:
The ABF should develop ABF practice manuals that offer clear, procedural guidance on CoO requirements for each country that Australia has a FTA with, commencing with the largest trading partners. A manual titled Australian Border Force – China-Australia Free Trade Agreement – Procedures and Compliance Manual (ChAFTA) would clarify what is acceptable and what is not.
Increase ABF CoO Compliance:
The ABF should regularly audit and assess more shipments which are claiming ChAFTA and educate industry via regular updates to a future procedures and compliance manual, as to what is / what is not acceptable. Having concise ABF CoO compliance checks would ensure that the name on the commercial invoice is listed in either box 1 or box 2 of any CoO.
Learning from Other Customs Administrations
The lack of educational materials provided to Australian customs brokers is concerning. When I assess other countries’ customs administrations like the Canadian Border Services Agency (CBSA), it is evident that the CBSA creates a strong educational and compliance framework; the CBSA has in excess of 22 reference manuals available for the customs brokering and freight forwarding industry. These manuals greatly assist both customs brokers and importers in being able to understand the rules and expectations, making compliance straightforward.
By comparison, the Australian Border Force lacks transparency. Industry professionals are left in the dark without substantive guidelines or practice statements. Expecting new recruits to this profession to master compliance without concrete resources which is akin to blaming a student for failing a test on the material that they have never been taught.
A Call for Change
At Platinum®, we have operations in four countries and over two decades of customs clearance experience, so we see the challenges that customs brokers face daily. The gaps in resources provided by the Australian Border Force are glaring and must be addressed. Manuals, practice guidelines, and consistent oversight would simplify compliance and create a level playing field for professionals across the trade industry.
Ultimately, the ABF has the resources, the ABF themselves rely upon internal practice statements (this is how they justify the errors that they are finding); now, this knowledge must be shared with industry to streamline operations and improve trade compliance standards.
If you’re navigating the intricacies of Certificates of Origin or Free Trade Agreements, Platinum® is here to help. With over 25 years of customs brokerage experience, we are happy to guide you through the process. Reach out to us for assistance!