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

16. Electronic Commerce

1. Purpose and structure

The e-commerce Chapter sets out a number of provisions designed to ensure
that trade conducted electronically between Australia and the United States
remains free. The Chapter also establishes useful precedents for developing
a liberal trading environment for electronic commerce in the region and globally.

The Chapter consists of nine articles dealing with the electronic supply
of services, customs duties, non-discriminatory treatment of digital products,
authentication and digital certificates, online consumer protection, paperless
trading and definitions of terms.

2. Key Provisions

2.1 General

The underlying rationale for the E-commerce Chapter is reflected in the
text of Article 16.1: 'The Parties recognise the economic growth and opportunity
that electronic commerce provides, the importance of avoiding barriers to
its use and development, and the applicability of WTO rules to electronic

2.2 Electronic Supply of services

As part of this generalized commitment, both Parties have affirmed in Article
16.2 that services delivered electronically remain just that - services. The
purpose is to emphasise that if a service - such as an architectural consultancy
or a university degree by coursework - is delivered electronically (such
as by email, or online), it should not be treated any differently than if
it was delivered by post or in person.

2.3 Digital products

The core trade obligations for each of the Parties relate to customs duties
(Article 16.3) and non-discriminatory treatment (Article 16.4) for digital

Digital products are defined (see Article 16.8) as "the digitised form,
or encoding of, computer programs, text, video, images, sound recordings,
and other products, regardless of whether they are fixed on a carrier medium
or transmitted electronically".

A footnote to this definition clarifies that digital products can be a component
of a good, be used in the supply of a service, or exist separately. For
example, the software embedded in a PC, or the online elements of an online
educational course, are digital products, but the PC and the educational
course are not. Similarly, a digital version of a sound recording,
whether it is available on a CD or online is a digital product, but the CD
itself is not.

2.4 Customs Duties (Article 16.3)

Article 16.3 commits both Parties not to impose customs duties on digital
products, delivered either online or on carrier medium (such as a CD). In
Australia's case, there are no duties levied on carrier medium, so the issue
of separating customs treatment of carrier medium (such as CDs) from their
content (the sound recording) does not arise.

2.5 Non-discriminatory treatment (Article 16.4)

The provisions on non-discriminatory treatment of digital products (Article
16.4) mean that both countries agree not to distinguish amongst or between "like" digital
products, regardless of their origin. In other words, Australia agrees
that digital products from outside Australia will be treated the same as
like digital products from Australia. Likewise, the United States
will treat digital products from outside the United States - including Australia
- no differently from like US digital products.

The commitment means that Australia and the United States may not discriminate
on the basis that a digital product is created, produced, published, stored,
transmitted, contracted for, commissioned or first made available outside
its territory. This same protection extends to the author, performer,
producer, developer and distributors of digital products.

A practical example is that of a digital sound track by a recording artist. Neither
Australia nor the United States may treat that sound track differently (such
as a different tax, or the non-payment of a royalty) on the basis that the
sound track, or its artist, is not Australian, or not American.

Importantly, Article 16.4 enables the Parties to implement public policies
that would otherwise be in breach of the provisions. Article 16.4.3
specifically states that the provisions do not apply to "non-conforming
measures" set out elsewhere in the Agreement.

Article 16.4.3 clarifies that where there are inconsistencies with the intellectual
property Chapter, that Chapter shall overrule the e-commerce Chapter, and
also states further exceptions, such as subsidies and grants, and "services
supplied in the exercise of governmental authority".

Article 16.4.3 clarifies that the reservation Australia has taken on audio-visual
and broadcasting services prevails over the obligation for non-discriminatory
treatment of digital products. An example is the local content rules
in Australia that guarantee a minimum level of Australian programming on
our digital media. A further example would be Australian or US grants,
subsidies or tax offsets for digitised film production.

2.6 Authentication and digital certificates (Article 16.5)

Paragraph 1 of Article 16.5 obligates both Parties to domestic legislation
governing electronic transactions that encourages competition, regulates
industry only to the extent required, and gives parties to electronic transactions
full standing before the courts.

Australia and the United States have agreed in paragraph 2 to negotiate
an agreement whereby central government agencies will recognise the digital
certificates issued by the other Party. This will make it much easier,
for example, for an Australian firm to deal electronically with US government
agencies in bidding for, or fulfilling, procurement contracts.

2.7 Online Consumer Protection (Article 16.6)

In Article 16.6, Australia and the United States have recognised that consumers
who participate in electronic commerce should be afforded transparent and
effective consumer protection under their respective laws.

2.8 Paperless Trading (Article 16.7)

In Article 16.7, Australia and the United States have said they will endeavour
to make publicly available, in electronic form, all trade administration
documents. Furthermore, both sides will endeavour to accept the same
documents transmitted electronically.

An Australian firm wishing to export to, or import from, the United States
should soon be able to download and send the appropriate forms to Australian
or US Customs authorities online, rather than rely on postage, facsimile
and other services to complete their paperwork.

2.9 Definitions (Article 16.8)

Article 16.8 defines four key terms in the e-commerce Chapter, namely carrier
medium, digital products, electronic transmission or transmitted electronically,
and trade administration documents.

March 6, 2004

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Last Updated: 31 December 2012
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