Free trade agreement

Commencement of Australia’s free trade deals with the United Kingdom and India comes closer

22 November 2022

It has been a busy few weeks in the Australian Federal Parliament. The Joint Standing Committee on Treaties (JSCOT) issued its reports on proposed treaty action for the Free Trade Agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (AUKFTA) on 16 November 2022, and for proposed treaty action for the Australia–India Economic Cooperation and Trade Agreement (AI–ECTA) on 18 November 2022.

A version of this article was first published by The DCN in November 2022.

The AI-ECTA is not a comprehensive agreement as is the AUKFTA and is widely described as an ‘early harvest’ agreement on non–contentious issues ahead of completing negotiations on a more comprehensive agreement with India in 2023.

Background to the JSCOT reports

In Australia’s parliamentary process, a new or revised free trade agreement (FTA) is considered a ‘treaty’. While there is no parliamentary vote on the FTA itself, they are reviewed by JSCOT which then makes a recommendation on whether ‘binding treaty action’ should be taken. There can also be other recommendations or reservations expressed by JSCOT. On the basis that binding treaty action is recommended without significant reservation, standard practice is to pass any required enabling legislation which, in most cases, will be amendments to:

  • Customs Act 1901 (to incorporate procedural practices for the claim of preference under the FTA); and
  • Customs Tariff Act 1995 (to include new Tariff Schedules in accordance with the reduced rates negotiated for ‘originating goods’ under the FTA).

There may also be new regulations under the Customs (International Obligations) Regulation 2015 or other instruments created.

Once the relevant legislation has passed through Parliament and the regulations duly created, Australia will issue a ‘Diplomatic Note’ confirming that all necessary Australian ratification steps have been taken. Once the other party (or parties) to the relevant FTAs have gone through their domestic ratification process, a Diplomatic Note to that effect is sent to Australia. Generally, FTAs commence 30 days after the exchange of Diplomatic Notes. It is possible for shorter terms to be agreed upon, usually to ensure that preferential rates for year one start before the end of the year and the preferential rates for year two can follow quickly at the beginning of the next year.

JSCOT’s reports on the AUKFTA and the AI-ECTA

Typically, JSCOT considers FTAs for a period of 20 parliamentary sitting days during which it considers written submissions, and it may convene hearings with interested parties. However, in the cases of both AUKFTA and AI-ECTA, the Minister for Foreign Affairs requested JSCOT to provide its reports within 13 parliamentary sitting days.

For both AUKFTA and AI-ECTA, JSCOT recommended binding treaty action be taken. This recommendation is expected to lead to:

  • passage of the Bills already introduced into Parliament to amend the Customs Act 1901 and the Customs Tariff Act 1995 for both the AUKFTA and the AI-ECTA;
  • completion of necessary amendments to regulations; and
  • creation of any other needed instruments.

Both JSCOT reports also included recommendations that the Australian Government implement the recommendation of JSCOT Report 193: Strengthening the Trade Agreement and Treaty–Making Process in Australia. Those recommendations would include more (and earlier) disclosure and engagement on proposed FTA negotiations through JSCOT and the use of non–disclosure agreements with key stakeholders to allow for improved consultation in certain areas of trade agreement negotiation, in a manner like that adopted in the United States and by the European Union.

There is significant and regular engagement with stakeholders in the current Australian practice. Customs & Trade Partner, Andrew Hudson, has been extensively involved in that engagement. However, even though that falls short of consideration of the whole of the draft texts of the FTAs as they are being negotiated, Andrew does not feel that the process is compromised in any way. Another practical consideration is that stakeholders may not have the resources to consider ongoing drafts of the FTAs. Even so, some earlier engagement on technical issues with selected stakeholders under a ‘trusted adviser’ model could be useful.

For both AUKFTA and AI-ECTA, JSCOT also recommended the adoption of a process in which independent modelling and analysis of an FTA is provided to JSCOT together with the National Interest Analysis to enhance assessment of the FTA, increase public confidence in the benefits of FTAs, and assist with the assessment of the FTAs.

Enabling legislation has now passed through Parliament

The Bills amending the Customs Act 1901 and the Customs Tariff Act 1995 for both the AUKFTA and the AI-ECTA passed through Parliament on 22 November 2022.  The Acts will come into effect on the day which is the latter of the day of Royal Assent and the day that notification is given that these FTAs have come into effect (requiring the United Kingdom and India to also have completed their domestic ratification processes). However, the Acts also provide that if the FTAs never come into effect, the Acts will never come into effect.

Commencement dates

The likely commencement dates have yet to be confirmed as Australia awaits confirmation from the United Kingdom and India respectively that they have completed their domestic ratification processes. Following this, all parties will exchange Diplomatic Notes and agree on a commencement date which may be less than 30 days after the Notes are exchanged. During this time, Australia will also complete any necessary amendments to regulations and ensure that all relevant information is loaded into the Integrated Cargo System (ICS) by the Australian Border Force to enable the use of the FTAs.

The current sense is that both agreements will commence on 1 January 2023 which would mean another quiet New Year’s Eve for licensed customs brokers and freight forwarders to check that their revised software is updated and working. No doubt that industry software for use in conjunction with the ICS will also be ready for use.

Andrew Hudson and the rest of Rigby Cooke Lawyers’ Customs & Trade team are looking forward to working with the industry (including licensed customs brokers and freight forwarders for Australian importers and exporters) to provide education on the ‘customs procedures’ provisions of the new FTAs and help them prepare to take advantage of the AUKFTA and the AI-ECTA as soon as they are ‘open for business’.

For advice on how to prepare your business for AUKFTA and AI-ECTA, contact a member of our Customs & Trade team.

Disclaimer: This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.

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