Component 1: Rules of Origin and Other Aspects of Implementation of Tariff Commitments

Key objective:

Facilitate effective utilisation of the PACER Plus commitments through efficient and transparent administration of Rules of Origin (ROO) requirements and other aspects of implementation of tariff commitments.

Objectives:

• Ready availability to business of the substantive ROO requirements and procedures under PACER Plus
• Full transposition of tariff schedules from HS 2012 (or other classification) to HS 2022 for all Participants

Tariffs

Overview

PACER Plus' fundamental aim is to reduces barriers to business activities and growth whilst taking into account the significant differences in the sizes and level of development between country partners and the Pacific Island nations.

Reductions in tariffs is critical to this goal with Australia and New Zealand committing to immediately reduce tariffs to zero when doing business with partnering states.

Pacific Island nations also have a commitment to this goal over a 25-year period, with each nation varying its levels of reductions dependent on their circumstance.

Most-Favoured Nation (MFN)

PACER Plus requires Parties to extend, immediately and unconditionally the same treatment provided to all non-parties. MFN tariff treatment provides a guarantee of non-discrimination when an Free Trade Agreement (FTA) partner excludes some goods from liberalisation or has yet to complete its scheduled liberalisation and negotiates an FTA with a third country with liberalisation commitments or faster liberalisation in relation to those goods.

This means that any improvement on deals within party member states will then be benefited throughout all participating members. Should one nation negotiate a free trade agreement, it will then have the accessible benefits for all other member states.

Flexibility

PACER Plus provides flexibility to members on when they undertake the scheduled tariff reductions and a variety of safeguards. This is based on each countries varying level of resources, geographical isolation and vulnerability to natural disasters. Ways in which flexibility is shown:

Nations can negotiate their commitments through provisions for compensated modification or withdrawal of tariff concessions if they are experiencing difficulties implementing them.
Pacific island countries can apply a transitional safeguard if a sudden influx of imports causes or threatens serious injury when tariffs are reduced.

Pacific island nations can pause their tariffs and even temporarily raise them for the purpose of meeting industry development.

Rules of Origin

Overview

Origin is the ‘economic’ nationality of goods traded in commerce. It is the origin that determines the duties and taxes apply to a product when exported abroad.

PACER Plus follows a general approach to Rules of Origin (RoO) similar to other trade agreements in Pacific.

Preferences are only available to products where it can be demonstrated that they are “originating goods” of one or more Parties of PACER Plus. In broad terms, the approach requires that the products are wholly produced in PACER Plus Party or where non-originating goods are concerned these are substantially transformed within the Party (or Parties,) under the cumulation provisions.

Flexibility

The ROO Chapter of the PACER Plus sets out the conditions on which goods will be treated as “originating” within the PACER Plus region. PACER Plus ROO allow a high degree of flexibility in determining the origin of goods for export.

One way by which a good is eligible for preferential treatment under PACER Plus is if it satisfies all applicable requirements of Annex 3-B, as a result of processes performed entirely in the territory of one or more of the Parties by one or more producer.

The Product Specific Rule Schedule in PACER Plus sets out three alternative rules to determine if an imported good originates from a Party. Any one of these must be met to qualify for a preference:

a.      Change of Tariff Classification (CTC): a good has undergone a significant production process that changes its tariff classification. The degree of change required to confer origin is specified for each product in the PSR Schedule,

b.     Regional Value Content: at least 40 per cent of value-adding has taken place within the PACER Plus membership, is an option for some but not all products, and

c.      Process Rules: a good has undergone a specific process that fundamentally changes its nature. For example, a substance that undergoes a chemical reaction that transforms it but does not necessarily change its tariff classification or changes it sufficiently to apply the CTC rule. This is available for some products.

Exporters under PACER Plus are not required to obtain independent certification that their goods are originating just to provide Declaration of Origin which can be the invoice of the goods or a separate document with company letterhead. This reduces compliance costs for the exporters.

Benefits

The Agreement gives Pacific Island nations the ability to source inputs from a various range of countries whilst still qualifying for duty-free entry to Australia and New Zealand. Australia and New Zealand will also assist Pacific Island countries upgrade their sanitary and phytosanitary capabilities to meet a greater quality of standards.

From this increased quality standards, it will provide Pacific Island nations the capabilities to reach regional and global markets for products.

Attempts at modernizing customs procedures through the PACER Plus will further facilitate trade by reducing border costs. Consumers will have access to higher quality goods at a more affordable price, with producers and manufacturers having more access to cheaper inputs enhancing competitiveness.