So often over the last few months we have heard stories of failing retailers operating in Australia, particularly some well-known clothing brands. Increased competition from large internationals and online retailers, unfavourable leases and falling prices are common themes in each case.

These are all significant issues that retailers generally are grappling with. But there might be a hidden and fairly easily accessible cost saving available to clothing retailers in Australia, which will immediately impact the bottom line in a positive way. Clothing and apparel is one of the last areas to consistently attract customs duty. However, there are a number of ways Australian importers can decrease this cost.

China Australia Free Trade Agreement

When the China Australia FTA first commenced, a lot of clothing imports did not enjoy a reduced duty rate. However, we are now in year 3 of the agreement and duty rates are beginning to fall. So while using the FTA might not have made sense on day one, it is likely to offer savings now. Don't worry if your experience with other FTAs is that it is difficult for clothing to qualify. Under the China FTA clothing can qualify even if the underlying materials are imported into China.

Reducing the customs value

As a general rule, you only need to pay customs duty on the amounts you pay for the goods. If your purchase price includes other payments such as royalties, marketing costs, finance or head office support you may be able to restructure your transactions and reduce the duty you pay. This is a complex area but Australia is more generous than most countries and if you are importing significant volumes, it's worth looking into this.

Tariff concession orders

Australia has thousands of concessions applying to individual goods which any importer can use. Unfortunately, almost none of these concessions apply to clothing and footwear. What you might find though are concessions for all the accessories you import. The great news is that if the concession was in place at the time of import but you missed it, there is the potential to obtain 4 years' worth of duty refunds.

Drawback

Not every fashion trend works out and no doubt there will be imports that sit in your warehouse and are later exported to another unsuspecting market. In many cases there is a good chance you are entitled to a refund of the duty on export.

Transfer Pricing

Tough times often mean low profits. And for international businesses operating in many countries, low profits can mean transfer pricing adjustments. A transfer pricing adjustment to increase Australian income tax, reduces the customs value of goods. A decreasing customs value creates customs duty refund opportunities. Sounds simple. It's not, but if the dollars add up the refunds make it worth the effort.

The good news

Unlike some areas of the business where it is hard to determine whether there is a cost saving opportunity, all the data regarding your imports and payment of duty is sitting with Australian Customs. By making a simple application, they will happily provide it to you for less than $100. There is no risk or disadvantage in asking Australian Customs to give you this data. We can help you get this information, if you're not sure where to start. Once you have it, we or your customs broker or trade professional will be able to tell you within a short time how much duty you have paid, where the opportunities lie and how to take advantage of those opportunities.

Hunt & Hunt has a dedicated Customs & Global Trade group that works with large and small businesses, customs brokers and freight forwarders around customs duty management and trade compliance issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.