A GUIDE TO NAVIGATING THE AUSFTA TARIFF SCHEDULES AND RULES OF ORIGIN ANNEXES

WHAT US PREFERENTIAL TARIFF RATE AND PHASING WILL APPLY TO MY PRODUCT?

The preferential tariff rate and phasing that will apply to your product can be determined by reference to the US Schedule to Annex 2-B Tariff Elimination.  Reading from left to right the U.S. Schedule is divided into four columns:

Column 1 is the product HS code or number eg 01011100 (See box below for an explanation of the HS code)

Column 2 is the product description corresponding to the HS number e.g. Live purebred breeding horses and asses of 01011100

Column 3 is the base rate i.e. the rate of duty currently applied to the importation of the product 

Column 4 is the Staging category i.e. the time-frames for the elimination of duties.  There are a number of categories and these have been spelt out in two places on the website.  Most of the U.S. categories are explained in General Notes of the United States under Annex 2-B Tariff Elimination (available on the DFAT website).

Other categories (namely A to E) have been explained in the introduction to Annex 2-B, which can be found under the sub-heading Common General Notes to Annex 2-B (DFAT website).

The following is a summary guide of categories A to E and other references:

Category A refers to goods where the duty will be eliminated on the date the Agreement comes into force

Category B refers to goods where the duties will be removed in equal annual stages beginning on the date the Agreement comes into force and where the goods will be duty free effective 1 January of year four;

Category C refers to goods where the duties will be eliminated in equal annual stages beginning on the date the Agreement enters into force and where the goods will be duty free effective 1 January of year eight;

Category D refers to goods where the duties will be eliminated in equal annual stages beginning on the date the Agreement comes into force and where the goods will be duty free effective 1 January of year ten; and 

Category E refers to goods which are already duty free and will continue to receive duty free treatment.

The T1, T2, T3 and TX categories relate to textiles and apparel products.  The wording for this category may appear complex.  However, US arrangements are closely related to how Australia will treat US product.  In essence the US rate for Australia will never be higher than Australia’s preferential rate for US goods of the same description.  And, where the US standard rate is already below the preferential rate we will apply to US goods, the US will reduce its rate — either by one tenth or down to zero. 

In Column 4 the reader may also be referred to further notes contained in the Annexes of the General Notes to the US Tariff Schedule.  For the most part these refer to tariff rate quota administration arrangements for agricultural products.  For example the staging category for 02011050 Bovine carcases and halves, fresh or chilled etc is “See Annex 1, note 3”.   Annex 1 note 3 explains the arrangements for beef entered under the FTA preferential tariff-rate quota.

Australia’s Schedule

Australia’s Schedule for goods imported from the United States is in the same format as that used by the U.S. and should be read in the same way.  The staging categories are all explained in the General Note to Australia’s Schedule.

WILL MY PRODUCT QUALIFY FOR US PREFERENTIAL TARIFF TREATMENT?

To qualify as an originating good, and thereby be eligible for preferential tariff treatment under the AUSFTA, your product must be:

≠	Wholly obtained or produced entirely in Australia, such as minerals extracted here, vegetables harvested here or live animals born and raised here; or

≠	Produced in Australia wholly from other originating materials from either Australia or the United States; or

≠	Produced in Australia partly from non-originating materials, but such non-originating materials are able to meet the requirements of the origin rules in Annex 4-A to the Textiles and Apparel Chapter and for other goods, Annex 5-A General Notes and Product Specific Rules. These Annexes define a level of area content and/or the sort of physical transformation required in the production process for the good to qualify it as originating.

The Annex 4-A or 5-A rule of origin for a good should also be read in conjunction with the provisions of Chapter 5 because that chapter sets down the basis for any formula calculations and sets out associated requirements such as record keeping and verification procedures.  

There are also de minimis allowances set out in Chapter 4 (for textiles and clothing) and Chapter 5 (other goods).  The de minimis allowances can assist in getting a product over the line if it fails the basic rule for a product by a small margin.  However, the de-minimis allowances do not have universal coverage and the textile allowance is a very limited allowance by weight of non-qualifying content.

The change of tariff classification concept used in the Annexes mean that inputs sourced from outside either Australia or the United States may not come from the same HS code as the good in question, nor from a defined set of related HS codes.  This ensures that sufficient transformation has occurred within Australia to justify the claim that the good is a legitimate product of Australia.

More information on Rules of Origin requirements can be found in the Guide to the Australia-United States Free Trade Agreement, available on the DFAT website. 

Understanding The Harmonised System of Classification:

Members of the World Trade Organisation (WTO) use the Harmonised System (HS) for tariff classification.  Tariff lines are accorded a HS code or number by the World Customs Organization (WCO) and a product description.  The following is a summary example of the hierarchy used:
•	“Chapter” means the two digit Chapter headings (for example 01 is the chapter dealing with Live Animals)
•	“Heading” means the first four digits in a tariff classification representing a product heading or a group of products covered by a chapter (for example 0101 is the heading dealing with live horses, asses, mules and hinnies, whereas 0102 is the heading dealing with live bovine animals).
•	“Subheading” means the first six digits in a tariff classification. The more disaggregated six digit level represents a specific product under a broader heading (for example 0101.10 specifically refers to the subheading Pure bred breeding animals of the kind captured by 0101 whereas, 0102.10 represents Pure bred breeding animals of the kind captured by 0102)

Note:  All Members of the WTO are harmonised up to the six digit level.  That is to say that the product code or number and product descriptions used are the same for all Members.  The only difference between Members at the six digit level is the tariff which is applied.

•	The Schedules of Members do, however, vary at the more disaggregated 8 or 10 digit level.  Sometimes the product code or number used can vary as can the description.  That said, they still follow the same architecture used by the WCO.  For example in the US Schedule, code 01059900 specifically refers to “live ducks, geese, turkeys and guineas weighing over 185 grams”.  In Australia’s Schedule the same 8 digit code reads “other”. In Australia’s case “other is a broader catch-all description used for products not specified elsewhere. 

For a user-friendly search engine to interpret or find HS codes, refer to the ITC website (linked from the AUSFTA website).  Please note, however, that this site lists the US tariff and the sub- classifications at the eight digit level and lower are specific to the US tariff.  Also, the rates quoted are the standard US rate not the AUSFTA preferential tariff rate.