Korea-Australia Free Trade Agreement Operational

Wednesday 14 January 2015 @ 9.53 a.m. | Legal Research | Taxation | Trade & Commerce

The Korea-Australia Free Trade Agreement (KAFTA) was signed by the Minister for Trade and Investment, Mr Andrew Robb and his South Korean counterpart, the Minister for Trade, Industry and Energy, Mr Yoon Sang-jick, on 8 April 2014 in Seoul, South Korea. In the last month of 2014, the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Act 2014 (No. 113 of 2014) came into force (on 11 December 2014), the commencement of this Act being one of the last enactments required to implement KAFTA.

Background to KAFTA

Formal talks between the governments of Australia and Korea to establish a Free Trade Agreement between the two countries began in 2009 and by early December 2013 negotiations had been concluded. On finalisation of its text, the KAFTA Agreement was signed at Seoul, South Korea on 8 April 2014 and was tabled in the Australian Parliament on 13 May 2014. All amendments to KAFTA were expected to come into force by mid December 2014, subject to Australia's treaty process and the exchange of diplomatic letters.

KAFTA is a comprehensive and wide-ranging agreement said by the government to:

". . . provide Korea and Australia with more liberal access to each other's goods, services and investments markets creating significant new commercial opportunities for Australian businesses".

As South Korea is Australia's fourth largest trading partner, the implementation of KAFTA, it is believed by the government, will significantly boost Australia's position in the major market that KAFTA covers where competitors like the USA, the EU and the ASEAN are already benefiting from preferential access.

The government papers accompanying the legislation indicate that:

"Goods liberalisation alone is estimated to be worth nearly $5 billion in additional GDP to Australia between 2015 and 2030."

Further, once KAFTA is in force, 84 percent of Australia's exports (by value) to South Korea will enter duty free, rising to 99.8 percent on full implementation of the agreement.

Purpose of the Implementation Act

The purpose of the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Act 2014 (the Implementation Act) is to amend the Customs Act 1901 (the Customs Act) to introduce new rules of origin for goods that are imported into Australia from Korea to give effect to KAFTA. The amendments to the Customs Act enable goods that satisfy the "rules of origin" to enter Australia at preferential rates of customs duty.

To give effect to the preferential entry of goods under KAFTA, the amendments contained in the Implementation Act provide for rules to determine whether goods are Korean originating goods and provide for the preferential entry of goods that meet those rules.

The Implementation Act also makes amendments to impose obligations on exporters of Australian goods to Korea for which a preferential rate of duty will be claimed, and on people who produce such goods.

Further, the Implementation Act makes amendments to confer relevant powers on authorised officers to examine records and ask questions of exporters or producers of goods exported to Korea in order to verify the origin of such goods.

Part of Widening Trade in Asia

KAFTA is part of a concerted effort with respect to bilateral trade agreements by the current government. It walks very much hand in hand with the recent Japan-Australia Economic Partnership Agreement (JAEPA) which it is reported by the Department of Foreign Affairs and Trade will have many positives, some of which are:

  • permit more than 97 percent of Australia's exports to Japan to enter duty-free or receive preferential access;
  • cut prohibitive agricultural tariffs on a wide range of products to Australia's second-largest agricultural export market;
  • eliminate tariffs on all of Australia's current minerals, energy and manufacturing exports;
  • guarantees Australian service providers outcomes equal to or better than the best commitments Japan has made in any of its other trade agreements;
  • allow both governments to support work towards enhanced mutual recognition of professional qualifications;
  • promote Japanese investment in Australia by raising the screening threshold at which private Japanese investment in non-sensitive sectors is considered by the Foreign Investment Review Board; and
  • grants Australian innovators levels of protection for their intellectual property in Japan broadly equivalent to protections provided in Australia.

The government expects similar benefits from KAFTA which it says ". . . reflects Australia's close bilateral economic relationship with South Korea".

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