Australia - United States Free Trade

Australia-United States Free Trade Agreement - Guide to the Agreement

2. National Treatment and Market Access for Goods (including Pharmaceutical Benefits Scheme)

1. Purpose and structure

The Chapter applies to trade in all goods between the Parties, and commits both sides to non-discriminatory treatment in trade in goods. To this end, only those goods substantially made or transformed in the US or Australia, which qualify under the Rules of Origin Chapter (see Chapter 5), are to benefit from the commitments in this Chapter on Goods.

The Chapter consists of 13 Articles; 3 Annexes; and an exchange of letters on (i) Pharmaceuticals, (ii) recognition of Bourbon and Tennessee whiskey, (iii) Import without Bond and (iv) Waiver of Customs duties.

2. National Treatment (Article 2.2)

The Parties have agreed to abide by their WTO commitments to each other to provide what is known as National Treatment. This means that Australia and the United States will provide the same treatment to imported goods from each other as they do to domestically produced goods.

3. Elimination of Duties (Article 2.3)

The Parties have agreed to eliminate customs duties (tariffs) on originating goods of the other Party according to their respective schedules. The schedules specify whether the particular category of good will be duty free when the Agreement comes into force, or be subject to removal over a specified period.

A large proportion of Australias exports of non-agricultural goods to the US will be duty free from day one of the Agreement. Apart from agricultural goods, tariffs on a range of textiles and clothing, some footwear, and a small number of other items, will be phased out with all trade in goods free of duty by 2015.

Australias tariffs will be phased out on much the same textile, clothing and footwear items, on finished passenger motor vehicles and on one agrochemical item.

Further, the Parties will not increase an existing customs duty or introduce a new duty unless expressly provided for by the Agreement.

4. Customs Value (Article 2.4)

The Parties will ensure that, when determining the value of goods, they base the valuation on the transaction value and not minimum import prices. This is in accordance with our WTO obligations on customs valuation.

5. Temporary Admission (Article 2.5)

The Parties have agreed to specific arrangements for goods which enter the country temporarily, and to allow such goods to enter free of duty. For example professional equipment which is necessary for a person to carry out certain business activities, and goods intended for use in displays or demonstrations at exhibitions, will enter duty free. The goods must, however, be exported on, or before, the departure of the person using the goods, or within a reasonable period of time related to the purpose of the admission.

6. Goods Re-entered After Repair or Alteration (Article 2.6)

The Parties have agreed to allow goods re-entered after repair or alteration to enter duty free provided the repairs or alterations do not destroy the essential characteristics of the goods or change them into different commercial items.

7. Commercial Samples of Negligible Value and Printed Advertising Material (Article 2.7)

The Parties have agreed to allow commercial samples of negligible value, or printed advertising material, to enter duty free. The samples are to be used only to solicit orders. The printed advertising material must be limited to one copy per packet and not be part of a larger consignment.

8. Waiver of Customs Duties (Article 2.8)

The Parties agreed not to adopt any new waiver of customs duties, or to expand any waiver program where the waiver is available only if the recipient fulfills a certain type of performance requirement. The prohibited performance requirements include export outcomes, import substitution, or domestic preferences (including local content thresholds).

9. Import and Export Restrictions (Article 2.9)

The Parties have agreed that, unless in accordance with our WTO rights and obligations, or specifically provided for in this Agreement, (refer Annex 2-A), there will be no restrictions on the importation or exportation of goods.

10. Administrative Fees and Formalities (Article 2.10)

The Parties have agreed to ensure that any administrative fees and formalities charged in connection with traded goods reflect the cost of the service provided, and do not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes.

11. Export Taxes (Article 2.11)

The Parties have agreed not to adopt, or maintain, any duty, tax or other charge on the export of any good to the territory of the other Party, unless the same is applied on any such goods destined for domestic consumption.

12. Merchandise Processing Fee (Article 2.12)

In order to reinforce the obligation that fees and charges must only reflect the cost of the service provided (refer Article 2.10), this article stipulates that customs import or export processing fees will not be calculated on an ad-valorem basis i.e. a fee based on the value of the goods to be imported or exported.

13. Committee on Trade in Goods (Article 2.13)

A Committee on Trade in Goods will be established to give both Parties the opportunity to raise issues of concern in relation to tariffs, non-tariff measures, rules of origin and customs administration.

14. Application of Chapter (Annex 2-A)

Both countries have retained the right to regulate the import and export of certain items. For Australia this includes forest products, second hand vehicles, and our ability to retain marketing arrangements for wheat, barley, rice, sugar and export arrangements for horticulture and livestock.

The United States has retained the right to maintain controls on the export of all logs of all species and to retain restrictions on the importation of foreign vessels and other measures under the so called Jones Act.

15. Tariff Elimination (Annex 2-B)

Annex 2-B contains the notes explaining the different categories of goods and the time-frames for the removal of tariffs. They should be read in conjunction with the Schedules.

Pharmaceuticals (Annex 2-C)

Summary

The relevant text consists of an Annex (Annex 2-C Pharmaceuticals) to Chapter 2 (National Treatment and Market Access for Goods) of the Agreement that reflects some joint obligations and common principles. There is also an exchange of letters (side letters) on pharmaceuticals that sets out some specific commitments that Australia has made in relation to the processes by which new products are added to the list of medicines subsidised under the PBS. These are described below.

1.1 Agreed Principles (2-C (1))

Paragraph 1 sets out some agreed principles that Australia and the United States have agreed are important in facilitating high quality healthcare.

1.2 Transparency (2-C (2))

This paragraph reflects certain general undertakings in relation to transparency and process that will apply to both countries in managing their respective pharmaceutical programs at federal level.

The implications of this paragraph for Australia are that we shall:

The Government has also committed to making detailed information about the outcomes of the process available to the public.

The text also provides for the establishment of a review mechanism where PBAC recommends that a drug not be added to the PBS (see Para 2.2)..

A footnote to this paragraph states that where federal healthcare programs purchase, rather than reimburse the cost of medicines, those programs will be subject to another Chapter in the Agreement that covers Government Procurement arrangements. This footnote does not affect the PBS.

1.3 Medicines Working Group (2-C (3))

Australia and the United States have agreed to establish a Medicines Working Group to enable further discussion of the issues covered by the Annex. It will be similar to other Working Groups that will be set up to discuss other aspects of the Agreement. The Working Group will comprise appropriate government officials.

The details of how the Working Group will operate and the frequency of meetings are yet to be decided.

1.4 Regulatory Cooperation (2-C (4))

This paragraph contains a provision for promoting closer cooperation between the Therapeutic Goods Administration (TGA) and the US Food and Drug Administration (FDA). This will strengthen the existing relationship between these two organisations. It does not mean that the TGA will be required to accept products that the FDA approves, or vice versa.

1.5 Dissemination of Information (2-C (5))

The paragraph contains a statement about the sort of information pharmaceutical companies are permitted to place on their internet websites about the medicines that they manufacture and sell. The text accommodates different legal frameworks in Australia and the US covering the advertising of medicines. The current arrangements in Australia and the US in relation to advertising of medicines will therefore continue.

Exchange of Letters

(i) Pharmaceuticals

2.1 Transparency and Process Improvements (Paragraph 1)

This paragraph reflects commitments that Australia has agreed to make to enhance transparency and accountability in the processes of selecting, listing, and pricing medicines on the PBS, by providing:

In addition, Australia has agreed to provide applicants with an opportunity for a hearing before the PBAC while it is considering applications. Currently the PBAC considers applications on the basis of an exchange of papers only.

2.2 Review Process (Paragraph 2)

In the interests of greater transparency and accountability, Australia has agreed to establish a review mechanism that will be made available to companies when an application to have a drug added to the PBS has been rejected by the PBAC.

The details of how the review process will operate will be worked out in the context of Australias legal and administrative framework.

2.3 Expediting Access to New Medicines (Paragraph 3)

In this paragraph Australia has agreed to streamline some of the administrative steps that are required before a drug is added to the PBS - this will make new drugs more quickly available to the public by:

Australia will also continue to provide a simplified process for applications to PBAC that do not require a full evaluation.

2.4 Price Review (Paragraph 4)

The text reflects Australias commitment to continue to make available opportunities for companies to seek a review of the PBS price of a drug through applications to the Pharmaceutical Benefits Pricing Authority.

(ii) Recognition of Bourbon and Tennessee whiskey

In this letter, both Parties agree that the Australia New Zealand Standards Code allows for the recognition of Bourbon and Tennessee whiskey as products of the United States and therefore no change is required to our Code. Accordingly, Australia will not permit the sale of Bourbon and Tennessee whiskey in Australia unless it has been maunufactured in the United States according to the laws governing the manufacture of such products and complies with all applicable US regulations for the consumption, sale or export as Bourbon and Tennessee whiskey.

(iii) Import Without Bond

In this letter, Australia commits to allow duty free temporary entry of goods without requiring a security or bond provided that an undertaking is given by the importer. That said, in cases where Australian authorities consider the risk of non-compliance is high the right to require a security is retained.

(iv) Waiver of Customs Duties

In this letter the United States affirms its understanding that Australias Automotive Competitiveness Investment Scheme (ACIS) does not contain any performance requirement as defined in this Chapter (refer Article 2.8)

March 6, 2004

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