Relief for exporters in sight

By BRIAN FALLOW economics editor

Most New Zealand exporters to Australia will be able to forget about complying with rules of origin requirements if the recommendations of a study by Australia's Productivity Commission are adopted.

Almost all New Zealand exports, around 97 per cent, enter Australia duty-free either because tariffs have already been scrapped altogether or because they qualify for preferential treatment under Closer Economic Relations.

But in the latter case, amounting to half of the trade, there are compliance costs involved in satisfying authorities that the goods involved meet CER's rules of origin requirements.

The requirements are that the "last process of manufacture" is performed in New Zealand or Australia and that no less than 50 per cent of the "factory cost" (including labour, materials and overheads) associated with that process is incurred in New Zealand or Australia.

Particularly for smaller firms - and around 1000 companies exporting to Australia employ fewer than five staff - proving compliance can be onerous.

The Productivity Commission report is part of a review of the regime instigated by the two countries' trade ministers, Jim Sutton and Mark Vaile, last August.

The commission concluded that a waiver should be introduced allowing automatic duty-free entry for all goods manufactured in Australia or NZ when the difference between the two countries' relevant tariff rates is 5 percentage points or less.

With both countries engaged in a process of reducing their remaining tariffs, the commission found that by 2010 all tariffs in New Zealand and Australia were likely to be within 5 percentage points of each other.

"Indeed after the scheduled 2005 tariff reductions the waiver would cover almost all transtasman trade,"it said.

Peter Crawford of Business New Zealand said: "We were pleased with the commission's approach. One of the reasons the rules of origin issue has been a lot more important for New Zealand than Australia is that Australia has a lot more of these 5 per cent tariffs remaining.

"Fifty per cent of our trade into Australia is potentially hit with a 5 per cent tariff if they don't meet the requirements. Although it is not a big hurdle, no one wants 5 per cent added on to their costs - and then there are the compliance costs."