Commencement of the first stage of the free trade agreement with India now confirmed

The Australian and Indian governments have confirmed that they have completed all necessary domestic ratification processes and that the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) will enter into force on 29 December 2022.

What does this mean for importers and exporters?

While most tariff reductions will commence on entry into force of the AI-ECTA, there will be
‘Year 1’ tariff reductions on that date (29 December 2022) with ‘Year 2’ tariff reductions starting on 1 January 2023. The AI-ECTA has been described as a harvest of ‘low-hanging fruit’ between the countries but there is still significance in the commencement of this part of the trade deal with India. The agreement also helps to advance negotiations towards the full deal between the countries in the Australia-India Comprehensive Economic Cooperation Agreement (AI-CECA) which is hoped to be completed in 2023.

Those wishing to take advantage of AI-ECTA should now work with their freight forwarders and licensed customs brokers to ensure that advantage can commence on 29 December 2022. In assisting the International Freight Forwarders and Customs Brokers Association of Australia (IFCBAA), Rigby Cooke Lawyers’ Customs & Trade Partner, Andrew Hudson, will be undertaking continuing professional development sessions.

Annexes and side letters

It is important to remember that many free trade agreements (FTAs) also have additional provisions known as ‘annexes’ and ‘side letters’. The side letters represent ‘agreements to agree’ between the parties for work to be undertaken in the future on items of mutual interest which do not properly fit into the terms of the FTA. The AI-ECTA has 14 side letters, which include commitments to undertake further work, amongst which are interesting commitments to providing most favoured nation status for a range of alcoholic beverages produced in each country.

Restrictions on whisky trade are still to be reconsidered

Even more interesting are the side letters on whisky and ‘other alcoholic beverages’ which also oblige Australia to work on ‘maturation requirements’ for those beverages. This commitment arises out of the terms of section 105A of the Customs Act 1901 which states that imported whisky, rum and brandy must have been matured by storage in wood for a minimum of two years before it can be released from customs control for entry into home consumption. The Australian Border Force (ABF) has been reviewing this provision as there is a demand for alcohol like whisky, rum or brandy made overseas, however many of these products do not meet the maturation requirements and can’t be released from customs control.

There is general agreement that this is an impediment to trade, and the Rigby Cooke Lawyers Customs & Trade team has been in consultation with several parties who had been unable to import Indian whisky products for retail or restaurant sale as they did not meet the maturation requirements. To support his clients who had been restricted by these requirements, and facilitate a more streamlined customs and trade industry, Andrew Hudson has been involved in the ABF’s review of this Act. Australia has promised to work on the ‘maturation requirement’ relating to whisky (and other alcoholic beverages) from India to facilitate its retail sale even if the current maturation obligations are not met.

Conclusion

Reading the whole of the FTA, including the side letters, reveals issues which may be of real interest to those involved in trade on certain items. Particularly those who have lobbied their governments to include such commitments in the FTA for future work which does not fit into the FTA framework.

For advice on preparing your business to take advantage of AI-ECTA, or assistance addressing any current trade restrictions your business is facing, please contact our Customs & Trade team.