Free Trade Agreement between Australia and the U.S.
Last Published: 10/21/2016
The U.S.-Australia Free Trade Agreement was largely modeled upon the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico. Thus, those familiar with NAFTA will recognize some aspects of the Rules of Origin section of the U.S.-Australia FTA. There are, however, some important differences, which require the close attention of the U.S. exporter. The rules of origin may be found in the final text of the U.S.-Australia FTA (Chapter 5 and Annex to Chapter 5).  Occasionally, a particular rule of origin may be revised.  Therefore, for the most up to date version of the US-Australia ROOs consult International Trade Commission’s website,  the Harmonized Tariff Schedule of the United States, General Notes-- General Note 28. 

How to Read the Rules of Origin 
Rules of origin are written in terms of the Harmonized System (HS) of Tariff Classification. The HS classification system uses six to ten digit codes to identify goods. The first six digits of an HS number are harmonized among the majority of the world's countries. The last four digits are unique to each country. The vast majority of the product-specific rules of origin under the U.S.-Australia FTA use an HS classification number.  The United States uses Schedule B numbers to classify exported products from the United States and these numbers are based on the international HS system. Therefore, the first step in interpreting the "rules" is to obtain the appropriate Schedule B code and convert it into an HS code for the good in question.  You can locate your product’s schedule B code in the Schedule B search engine   To find out more about the schedule B and the HS codes visit Census website.
 
Note:  You will only need to identify appropriate rule of origin for your product if it is made from inputs that are sourced from outside of the U.S. or Australia, or include some unknown origin inputs.
 
A rule of origin may consist of:
  1. A change in tariff classification (change in tariff classification rule);
  2. A regional value-content requirement (rvc-based rule);
  3. Both a change in tariff classification and a regional value content requirement (combination rule).
Note: It is necessary to refer to the rule associated with the product being exported. Regional value content can only be applied when it is allowed under a product-specific rule, and only a minority of product-specific rules of origin allow for regional value content calculations.

Examples
  1. An example of a rule that employs a simple tariff shift rule:
An exporter is looking to qualify bread for shipment to Australia:
The HS code for the goods: HS 1905.90 -- Breads, pastries, cakes, biscuits (HS 1905.90)
The product contains one non-U.S. or Australian input: Flour (classified in HS chapter 11), imported from Europe.
The Rule of Origin for Bread reads: "A change to heading 1902 through 1905 from any other chapter."

Note: To understand how to read the rules of origin, note the commonly used words such as chapter, heading or subheading of an HS code.  In the above example, the HS code for bread, HS 1905.90 can be broken into chapter 19 (the first two digits of the HS code); a heading 1905 (the first four digits of the code) and subheading 1905.90 (the first six digits).
 
Explanation of the rule:  Bread (made in the U.S.), classified under heading 1905, can receive duty free treatment in Australia only if its non-U.S. or non-Australian input (flour sourced from France) is classified under an HS code that falls under any chapter except for chapter 19 (the rule requires a change to heading 1905, i.e., chapter 19, from any other chapter).  In this case, the bread qualifies for duty free treatment (preferential tariff) because the non-originating good (flour from France) is classified under chapter 11.  Chapter 11 falls outside of HS chapter 19. Or to put it differently, the ROO requirement was met as the non-FTA input (flower) was changed to heading 1905 (chapter 19) from other chapter (chapter 11).  Chapter 11 is different than chapter 19).  There was “A change to heading 1902 through 1905 from any other chapter."
 
However, if the same bread would include some non-originating mixes, then these products would not qualify because mixes are also classified in HS chapter 19, the same chapter as baked goods (did not undergo the required change in tariff classification).

Note: you do not need to apply the rule to any US- or Australia-originating inputs.
2) An example of a rule of origin that employs both the "tariff shift" and "regional value content" (combination rule):

Rule of Origin:
"A change to subheading 9403.10 through 9403.80 from any other heading; or
A change to subheading 9403.10 through 9403.80 from any other subheading, provided there is a regional value content of not less than
(a) 35 percent based on the build-up method, or
(b) 45 percent based on the build-down method."
Product: Wooden Furniture (HS # 9403.50)
Non U.S. or Australian input: Parts of furniture (classified in 9403.90), imported from Asia.
Explanation: Wooden furniture can qualify for preferential tariff treatment in two different ways - through a tariff shift, or a combination of a tariff shift and regional value content requirement.

Because the non-U.S. or Australian input is classified in the same heading (9403) as the final product in this case, the good does not meet the simple "tariff shift" requirement the first rule. Moving down to the second rule though, the good can meet the tariff shift because the non-originating component is from a different subheading than the final product. For the good to qualify as originating, however, it must also pass the regional value content test.
 
Regional Value Content
To view necessary information about calculating the Regional Value Content, click here.

To view examples of how to calculate the Regional Value Content, click here.

This FTA requires the following percentages be met:

Build-Down Method: 45%
Build-Up Method: 35%

Other Factors 
In addition to the rules of origin, it is sometimes appropriate to consider other factors found in Chapter 5 of the U.S.-Australia FTA when determining the origin of a product.

De Minimis
Even if a good does not meet the rule of origin requirement, if foreign components do not exceed ten percent of the adjusted value of the good, i.e., a de minimis amount, and the good meets all other applicable criteria set forth in Chapter 5 for qualifying, then the good will be considered originating.

For textiles and apparel the de minimis rule requires all non-originating fibers and yarns make up less than seven percent of the total weight of the product.

There are some cases where the de minimis rule does not apply. To review these exceptions, go to Article 5.2 of the Agreement. For textiles and apparel refer to Article 4.2 of the Agreement.

Accumulation
Goods that are produced in either the United States or Australia, or both, qualify as originating in this Agreement. Thus, inputs from Australia are included in determining whether a good exported from the United States qualifies for FTA treatment.

Fungible Goods
To simplify origin claims, the U.S.-Australia FTA allows exporters to consolidate fungible inputs that originate from various foreign countries and use normal accounting rules to determine their origin. Fungible goods or materials refers to goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical. Their origin may be decided based upon any of the inventory methods generally recognized in the exporting country, such as averaging, last-in first-out, or first-in first-out. Physical separation of the goods is not necessary.

Prepared by the International Trade Administration. With its network of 108 offices across the United States and in more than 75 countries, the International Trade Administration of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Australia US Australia Free Trade Agreement