ON 30 July 2018, Freight & Trade Alliance participated in a hearing for the inquiry into small and medium enterprises (SMEs) accessing the benefits of free-trade agreements. The Australian Parliament’s Joint Standing Committee on Foreign Affairs, Defence and Trade held this hearing in Melbourne.
The hearing followed a PWC free-trade agreement utilisation study released in February 2018. The study identified the critical role of intermediaries – customs brokers and freight forwarders – in improving the use of free-trade agreements by Australian goods exporters.
The PWC report found that “60% of respondents stated that they obtain information and advice on FTAs from customs brokers or freight forwarders, the second most popular source of information among respondents”. Of those, “half of respondents (51%) indicated that customs brokers and freight forwarders are a useful source of information in assisting their business to make decisions with regard to FTAs”.
While the research is unsurprising, it tells a compelling story that trade policymakers in Australia need to recognise.
A growing role
We estimate that approximately 70% of inbound containerised trade, and approximately 40% of outbound containerised trade, is facilitated by freight forwarders and customs brokers. While smaller importers and exporters are more likely to rely on forwarders to access preferential freight rates with carriers and to guide them on regulatory compliance, a growing number of large shippers are also using freight forwarders, particularly for their documentation requirements.
We identified the biggest problem for SMEs and free-trade agreement utilisation is that to apply a free-trade agreement you must understand tariff classification.
This is because you need to know the tariff class to assess the general rate, the rate under the free-trade agreement, find any product specific rule of origin and apply the change in tariff class rule.
Customs brokers are the professionals that understand tariff classification. The quality of their service is assured with a rigorous licensing system overseen by the Department of Home Affairs and the National Customs Broker Licensing Advisory Committee (NCBLAC) which is a statutory body under the Customs Act 1901.
Free-trade agreement utilisation will only be improved by increasing the access of small businesses to customs professionals.
We have recommended:
- Funding free-trade agreement export sessions by SMEs with customs brokers;
- Subsidising customs broker services for certain eligible SMEs; and
- Creating more awareness of the role of customs brokers among SMEs.
The role of freight forwarders
Freight forwarders and international trade services providers are often the ﬁrst port of call for SME importers and exporters. These professionals are responsible for advice and guidance in areas including documentation requirements at origin and destination, non-tariff barriers to trade, tariff regimes and accessing free-trade agreements.
Any initiative aimed at increasing free-trade agreement utilisation must acknowledge the role this industry plays in our export performance.
While services providers are generally ﬂuent in inbound trade compliance requirements (as training is mandatory in this area), gaps have been identified in export training. These gaps include an understanding of export restrictions, import quotas with trading partners, rules of origin and certiﬁcate of origin requirements, distribution hub issues, packaging and product standards, import licenses, as well as day-to-day issues relating to import tariffs.
Free-trade agreement utilisation can be improved by increasing professional development opportunities for freight forwarders and logistics services providers; they will in turn provide better guidance to their SME clients.
We have recommended:
- Funding ongoing professional development opportunities for freight forwarders with a focus on export compliance and free-trade agreements;
- Increasing awareness of the role of freight forwarders among SMEs;
- Providing grants for export strategy planning assistance; and
- Supporting the freight forwarding community in fostering SME export opportunities.
With the ever-evolving landscape of free-trade agreements and the prospect of changes to tariff regimes, more funding is needed to ensure all service providers have access to regular and ongoing professional development in this area.
* Travis Brooks-Garrett secretariat, Australian Peak Shippers Association and director, Freight & Trade Alliance
This article appeared in the August edition of DCN Magazine