A commitment to make trade simpler was the key theme announced last night in the 20/21 budget. The simplification measures are aimed to assist our agricultural exporters and continue the development of the much anticipated single window trade system. Also of key importance were COVID-19 assistance measures such as the extension of the International Freight Assistance Mechanism (IFAM). Below we summarise the key developments.
Trade outlook – Traders, carriers, forwarders and customs brokers can expect steady volumes over the next year. While exports and imports are expected to each fall by 9%, these decreases are caused by large falls in the import and exports of services (such as education and tourism). Goods trade should be steady. However, its largely guesswork as there has probably never been a harder time to predict the future economic performance of our key trading partners.
International Freight Assistance Mechanism – This vital support mechanism has been extended to 30 June 2021. As members will know, the collapse of passenger flights has left a huge hole in air freight availability. Freight & Trade Alliance (FTA) has been, and will continue to, strongly advocate for this program to be extended until the end of 2021.
Duties on certain medical and hygiene products – An immediate COVID-19 measure taken by the Government was to waive customs duties on certain hygiene and medical products. As expected, this duty waiver has been extended to 31 December 2020 at a cost of $7.2 million. The duty free products include face masks and gloves but excludes hand sanitiser.
Implementation of Waste Export Ban – The Government has provided funding to support the ban of certain types waste from 1 January 2021. The Department of Agriculture, Water and Environment (DOA) will be responsible for administering a licensing and declaration scheme to enable the export of waste material where it can be demonstrated that sufficient processing has occurred prior to export to prevent harm to the environment or human health overseas.
Diversifying trade – The Government has previously hinted at a need to be less reliant on Chinese trade and has committed $6.6 million to "expanding and diversifying trade". How this will occur has not been stated, but the Government has not been subtle in linking the measure with the free trade negotiations with the EU and the UK. Related to this, the budget estimates continue to make provision for a Free Trade Agreement with India and the conclusion of the Regional Comprehensive Economic Partnership.
For those waiting for a duty free European car, 2022-23 could be the year, with duty on passenger motor vehicles expected to fall from $340 million on 21/22 to $100 in 22/23.
Simplified Trade System – A number of measures were announced to produce a less complex trade system including:
· $7.8 million to reduce compliance complexity for Australian business
· $12.8 million over two years from 2020-21 to develop a new border intervention model for sea and air cargo
· an extension of the Trusted Trader Scheme for a further 3 years. The Government has forecasts that this measure will reduce revenue by $7.5 million over 3 years. It is not immediately clear why deferring duty should result in a reduction of, and not simply a deferral, of revenue.
The Government said "Setting the foundations for a Trade Single Window is an important part of this work and will build on reforms of trade regulations and processes to make it easier for businesses to integrate into global supply chains." It is noted that currently, 28 agencies regulate trade at the border, applying more than 120 pieces of Commonwealth regulation. For most traders, it would be enough if the Australian Border Force and the DOA streamlined their border activities.
Updated Agricultural export trade ICT systems – The Government will invest $222 million over four years in modern agricultural export trade ICT systems. The Government hopes that the funding will reduce the impact to trade from system outages and reduce the regulatory burden on exporters. There will also be $106 million over four years into targeted regulation of exported goods. Much of the funding will be to take into the digital age an export approval system that is still in many instances paper based.
Let's not forget – The budget does not talk about bad ideas from previous budgets that were scrapped. But it is important to remember that this year's budget did not include a revenue line for the Biosecurity Import Levy. Through industry body lobbying, importers avoided being taxed an extra $100 million a year to import goods on scheme with no direct correlation to biosecurity risk.
Overall, there was less information than usual provided on budget night an we will look to provide further updates as more detail about the above policies comes to hand.
Please contact Russell Wiese (03 8602 9231, rwiese@huntvic.com.au) if you would like to discuss how the 20-21 budget impacts your business.