Thailand Law Journal 2009 Fall Issue 2 Volume 12

The important aspect of Thailand-Australia free trade agreement

Thailand -Australia free trade agreement (TAFTA) which has been in force on 1 January 2005 contains some interesting obligation which can affect the rules governing the cross boarder trade and business between both countries.

Trade in goods

In chapter 2 of TAFTA presents the trade in goods and Article 203 set out the elimination of custom duties. The tariff and customs of trade between both countries will be removed to effort their trade between both parties (Thailand and Australia).

1. The provisions of this Chapter concerning the elimination of customs duties on imports shall apply to goods originating in the territory of the Parties.

2. A Party shall not increase an existing customs duty or introduce a new customs duty on imports of an originating good.

3. Except as otherwise provided in this Agreement, each Party shall progressively eliminate its customs duties on originating goods of the other Party in accordance with its Tariff Schedule at Annex 2. The base rate and the interim rate of customs duty at each stage of reduction for an item are indicated for the item in each Party?s Schedule. Reductions shall occur upon entry into force of the Agreement and thereafter on 1 January of each year, as provided for in each Party?s Schedule.

Article 203(1) provides that the removing of customs duties has to be applied in goods which were originated in the territory of both parties. This relates to Chapter 4 (Rule of Origin) of the agreement which will be presented below.  Article 203(2) obligates both countries to not raise their customs duty or use new customs duty on imports of good which is verified and certified as originating in their territory. Article 203(3) presented the process of tariff elimination that has been stated in the tariff schedule of the agreement. Both parties have to use the decreased rate of tariff that is indicated in Schedule on January, 1 each year. Further more, to increase the reduction of custom duty, Article 204(4) sets out that Party can unilaterally reduce their tariff on imported good of other party but the party shall inform other party as soon as possible before the new tariff rate will be in use. Although this agreement contains the obligation of elimination of custom duties it states the component of protection in case of dumping market and agricultural subsidies. In article 206 (1) Thailand and Australia reaffirms commitment under the provisions of the WTO Agreement on Implementation of Article VI of GATT 1994⁴¹ and  both parties shall observe the act of dumping market on the request of exporter of parties by using the framework of time for determining the volume of dumped import.⁴² The agricultural subsidies are also concerned in this agreement. The agreement requires that both countries have not to maintain or introduce export subsidies agricultural goods traded between their countries.⁴³  Moreover, TAFTA include the Article 502 that allow domestic industry in both countries to adjust new trading environments that the increase of imports which accelerated by TAFA may be the cause of serious damage for domestic industry.⁴⁴    It can be seemed that Chapter Trade in goods of TAFTA is the important implement that propels the elimination of customary barrier in foreign trade of both parties with the rule that control fair trade.

Rule of Origin

The Rule of Origin( ROO) is established to solve the problem that the flow of good in importation of good through the low tariff member and trans- shipment to higher tariff members of Free Trade Agreement or Free Trade Area.⁴⁵ TAFTA also set out the ROO and procedure to determine good in the preferential treatment of importing country.⁴⁶ Article 4 of TAFTA presents its ROO and annex 4.I set out its specific requirement for particular goods. Whether goods will be recognized as originated in both countries can identify by

Where the goods are not ?wholly obtained ?goods, they can regard as preferential goods by tariff classification of harmonized goods in Annex 4I.⁵⁰ The Annex indicates the tariff items in specific set of rules that applies to a particular heading (4-digit code), subheading (6-digit code) or split subheading (ex. 6-digit code) of tariff item and presents the particular rules to harmonised goods.⁵¹ In most case the rules require that the manufacturing or producing process carried out in territory of Thailand and/or Australia is sufficient to cause a change in tariff classification but there is the difference in degree of change from the chapter level down to sub heading.⁵² For example, Keys presented separately of Sub heading 830170 will be qualified if change to subheading 830170 from any other chapter. Hat-racks, hat-pegs, brackets and similar fixtures, however, will be preference if change to subheading 830260 from any other subheading. In some case, there is a requirement for regional value content in particular percentage. For in stance, motor vehicles for the transport of ten or more persons, including the driver classified to heading 8702 will be qualified for preference if the process of  their manufacturing  undertake in originating country causes the change to heading 8702 from any other heading provided there is a regional value content of not less than 40 percent. It seem that there are various criteria using for qualifying preferential goods as depicted above that the process of manufacturing process can satisfy the requirements of classification of originating goods.

This article is published with the kind permission of Pornchai Wisuttisak, current PhD candidate, School of Business Law and Taxation, ASB, University of New South Wales, Master of Commercial Law, Macquarie University, BA, Political Science, Thammasat University, Thailand. This article originally appeared in the Thailand and Australia Free trade agreement (TAFTA): The advantage pace of foreign investment of both countries.