Double whammy for Australian retailers?

This article was prepared by Freight & Trade Alliance and does not reflect the opinion of the Export Council of Australia (ECA). The ECA understands that these are difficult and complex issues and concerned parties should seek specific advice for their circumstances.

The Australian public has widely embraced Internet trade … and why wouldn’t they?

The dollar has been strong, consumers have a global reach for product selection, the express logistics sector deliver an amazingly efficient service and low value items (under $1000 in value) are free of any government imposed Import Processing Charges, GST or duty.

It is no wonder that traditional retailers have been affected by this.

Retail associations have responded by lobbying for a “level playing field” and forcing the federal government to re-examine the quantum of the threshold and associated implications of such a reform.

Whilst a reduction in the threshold may not be a vote winning move, it would certainly be a more equitable arrangement for the trading sector and would also return considerable GST revenue to state governments.

As well as lobbying the threshold issue, it is a credit to Australian retailers that they have also looked to modernise their practices to remain competitive. One business model adopted has been to centralise overseas distribution centres.

In effect, this has built on an existing and legitimate commercial practice commonly referred to as “assembly order” where multiple suppliers bring cargo to a DC for “pick and pack” to Australia.

As outlined in recent notices to Freight & Trade Alliance (FTA) subscribers, the Australian Customs and Border Protection Service (ACBPS) are now flexing their compliance muscle wanting these consignments to be “split” with a separate cargo report for each supplier.

The reason for forcing this practice is that their Integrated Cargo System (ICS) cannot adequately deal with this scenario of allowing multiple suppliers on a cargo report. This has been a known problem since mid-2005 prior to the system going “live”. Rather than fixing the system over the ensuing 8 year period, the solution now being mandated by Customs is for industry to change their commercial practices.  

Freight forwarders will now have to cut multiple house bills of lading / air way bills (or use some other form of approved document to complete this mandatory data field) and customs brokers will be required to complete multiple import declarations. This gets really exciting when you keep in mind that the already high Import Processing Charges are likely to further increase from 1 January 2014. 

On one hand, ACBPS is leading the way by announcing their “Blueprint for Reform 2013 – 2018” on the other they are still hamstrung by flaws in the ICS.  

The result is that Australian retailers are facing a “double whammy” of competing against Internet trade and are now also facing limitations to legitimate contemporary global supply chain practices.

FTA and the Australian Federation of International Forwarders (AFIF) have provided a formal submission to ACBPS making two key recommendations:

1. Enhancement to the ICS would have the benefits of:

• providing transparency to ACBPS of suppliers’ details;
• avoiding the complexity of dealing with piece counts of packaged consignments;
• negating the need for industry to dismantle existing business models; and
• minimising any increase in supply chain costs.

2. A compliance moratorium is desirable and appropriate until further industry engagement has been completed and ICS functionality is enhanced. We recommended that ACBPS follow this approach with an “informed compliance” campaign to ensure that (a) industry is fully aware of requirements and (b) are operating on a “level playing field”.

It is important to note that despite the ongoing efforts of both FTA and AFIF, currently no moratorium applies.

The ACBPS has received support from other industry representatives who have publicly stated a view that a moratorium is unnecessary and would create further uncertainty for industry. A collaborative approach between these parties has also resulted in the development of a fact sheet in an attempt to address industry’s concerns and to form the foundation for a compliance framework.

Both FTA and AFIF were subsequently asked for our responses to the final draft of the fact sheet and have provided commentary. The final release of the fact sheet provides 10 models which do not include all scenarios or operational issues which FTA and AFIF brought to the attention of ACBPS - the final fact sheet has been released and is available via the FTA Feature Artile at www.FTAlliance.com.au

For further information / clarification, ACBPS have noted that industry should contact the Customs Information and Support Centre on phone 1300 558 099 or email: cargosupport@customs.gov.au

COMMENTARY

The fact sheet, whilst providing some clarity of ACBPS compliance expectations, does not address all operational issues. FTA and AFIF remain committed to reforms in line with its formal submissions.

The scenario of assembly order / multiple supplier import practices highlights an opportunity to enhance ACBPS systems’ capabilities and to integrate reforms with other global initiatives whilst facilitating contemporary logistics practices.

FTA and AFIF will continue to liaise with trade groups and ACBPS to use this issue as a catalyst to give the ACBPS Blueprint for Reform 2013 – 2018  some early momentum and the opportunity to evolve towards a longer term outcome of having in place world leading cargo management systems and strategies.

Paul Zalai – Director FTA

Freight & Trade Alliance (FTA) Pty Ltd
(ph +61 2 9975 1878|È mob +61 408 280 123
Ê www.FTAlliance.com.au |* pzalai@FTAlliance.com.au

 

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