India Australia Trade Agreement

Commencement of the first stage of the free trade agreement with India now confirmed. Rigby Cooke’s Andrew Hudson, Partner – Customs & Trade, Rigby Cooke Lawyers, takes Australian importers and exporters through some processes to consider.

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) entered into force on 29 December 2022.

What does this mean for importers and exporters?

While most tariff reductions commenced on entry into force of the AI-ECTA, there are

‘Year 1’ tariff reductions on from 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 have started working with their freight forwarders and licensed customs brokers to ensure they can take full advantage of the changes.

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.

What other FTAs can Australia expect?

The Joint Standing Committee on Treaties (JSCOT) in the Australia Federal Parliament issued its reports into 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. AUKFTA is a considerably more comprehensive agreement than AI-ECTA.

How do FTAs get approved in Australia?

In Australia’s parliamentary process, a new or revised 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, 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.

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 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 date

The likely commencement date has yet to be confirmed as Australia awaits confirmation from the United Kingdom that they have completed their domestic ratification processes. Following this, 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 use of the FTAs.

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’.

Rigby Cooke Lawyers is AMTIL’s exclusive legal services partner. We are currently offering exclusively to AMTIL members a fixed price document suite including terms and conditions, supplier terms and conditions and a privacy policy. For an obligation-free chat, please contact Andrew Hudson, Partner in Rigby Cooke’s Customs and Trade practice.

Ph: 03 9321 7851 ahudson@rigbycooke.com.au