An example of the application of this rule is provided below: [FN18]

A producer sells a good for $ 100 in an arm's length sale. The value of relevant non-originating materials used in the good is $ 30. Using the Build-Down method the producer calculates the RVC as follows:

 
FOB - VNM                

----------  x  100  =  RVC

   FOB                   

Therefore:

 
$ 100 - $ 30               

 ----------   x  100  =  70%

   $ 100                    

 
Therefore, using the Build-Down method, the RVC of the good is 70%.

Article 403 provides for adjustment to the VNM where Annex 4.1 may specify that the value of non-originating materials produced in developing countries and places may contribute towards the RVC for particular goods of Chapters 50-64 of the Harmonised Classification System. [FN19]

Counsel must ensure that client understands that where the RVC rules applies, it is additional to the transformation test and therefore both the classification change and the RVC requirements need to be satisfied for the goods to qualify. Counsel must additionally ensure the client understands that the RVC rule requires to demonstrate that at least the specified percentage of the goods' value originated in either Australia or Thailand.

Some goods attract specific process rules, that is, a particular process must be performed in either Australia or Thailand. Such a process may be a 'chemical reaction' and this is specified in the Headnotes to Annex 4.1. This rule may be applied to any goods classified in Chapters 28-40. Counsel advising client should point out that if the goods meet the chemical reaction rule, they are qualifying goods and other alternative rules that would apply can be disregarded.

To assist Australian exporters and importers, the Australian Customs Service  ('ACS') has implemented a policy that allows for the provision of advice on the origin of goods, even though TAFTA does not require the provision of such advice, although Article 307 does provide for advance rulings in regards to the tariff classification of goods to be imported into Australia or Thailand. [FN20] A specific form has been introduced as a result of this policy implementation. This is the 'Application for Origin Ruling Thailand-Australia Free Trade Agreement'. The Origin Advice ('OA') is not legally binding on the ACS, however the ACS will honour such advice, unless the advice was obtained through improper means by the applicant. [FN21]

Once traders can substantiate that goods qualify under the Rules of Origin, preferential treatment may be available, as long as steps three and four outlined in section 3 above are satisfied. In the Australian context, exporters are required to be currently registered and have CO available at the time of import clearance into Thailand. These steps will be considered in the next section.

5 TAFTA FOR TRADERS

There is a CO requirement under TAFTA that is common to both exporters and importers. From the Australian perspective the processes used for CO differ between exports and imports and each is respectively discussed in the following sections.

5.1 REGISTRATION OF EXPORTERS IN AUSTRALIA

Exporters wishing to reap any of the benefits of TAFTA must follow prescribed processes, as outlined in the agreement. Of particular importance is the requirement of Article 407 for exporters of either country to be registered with an authorised body as an exporter of a particular product. In Thailand, registration is through the Department of Foreign Affairs, Ministry of Commerce. In Australia registration is through either AIG or the Australian Chamber of Commerce and Industry ('ACCI').

Counsel should be aware that a client wishing to export to Thailand, under TAFTA's preferential treatment provisions, must be a registered exporter, as per Article 407. The registration process is reasonably simple. The exporter is required to sign a Deed of Declaration: Exporter Registration -- Thailand ('Deed') and lodge same with an authorised body (ACCI or AIG). Part of the Deed requires the exporter to provide details of the originating items in the Schedule (GOODS). The required product details include the tariff classification under the internationally accepted Harmonised System ('HS'), the Origin Criterion (wholly obtained or product specific) and the Description of Goods. The Deed makes the exporter responsible to immediately notify the authorised body, in writing, in the event that:

       • any statement made on the Deed becomes inaccurate, incorrect or incomplete;
       • there is any material change to the basis of the exporter's registration in relation to the goods  referred to in the Schedule (GOODS); and
       • any of the authorised representatives of the exporter as listed in the attachment marked ' Signatories' ceases to be authorised by the exporter for the purposes of this Deed or there are any additions or deletions to the attachment.

Article 409 provides for exporter sanctions to be applied where a CO has been obtained by improper means/actions. Such penalties may include deregistration or refusal to consider an application for registration as an exporter for a specified period of time. Given the potentially high level of sanctions that might apply, Counsel should advise client of the importance of prompt and full notification and disclosure to avoid such costly penalties.

Once the exporter has been registered with an authorised body in Australia, a CO may be applied for. ACCI provides the following information to assist would-be CO applicants: [FN22]

[FN18]. supra at 10, p. 54.

[FN19]. supra at 10, p. 53.

[FN20]. supra at 13, p. 42.

[FN21]. supra at 13, p. 44.

[FN22]. Australian Chamber of Commerce and Industry (2004), Completing Certificates of Origin for Thailand.