Market Overview

• Total merchandize trade in 2007 – US$27.8 billion (7% increase over 2006).
• U.S. Exports to Australia in 2007 – US$19.2 billion (8% increase over 2006).
•          Total trade in goods and services was $32.2 billion in the first three quarters of 2007, an increase of 9.8% over the first three quarters of 2006.
•          U.S. goods and services exports to Australia were $21.2 billion in the first three quarters of 2007, an increase of 8% over the first three quarters of 2006.
• Australia’s rank as a U.S. export market in 2007 – 15^th largest.
• Principal U.S. exports to Australia in 2006: non-electronic machinery (24%); vehicles (12%); aircraft (9%); electrical machinery (8%); optic/photo/medical instruments (8%).
• Australia-U.S. Free Trade Agreement (AUSFTA) elimination of tariffs provides new sales opportunities for U.S. companies.
• Australia has enjoyed annual economic growth without interruption for nearly two decades.  Strong growth of about 4% continued in 2007 and most economic forecasts expect annual growth of between 3.0-3.4 percent in 2008.
• Australia is a sophisticated and modern economy that is a major exporter of primary resources (such as mineral and agricultural commodities).  Asian demand for minerals, metals, and energy resources has been an engine for growth nationally and in specific regions of the country.  While creating wealth that ripples through the economy, the resource boom has revealed Australia’s existing infrastructure to be inadequate to keep pace with the needs of exporters. 
• As a consequence, investment in public and private infrastructure will continue to increase capacity, remove bottlenecks, and allow Australian exports to meet foreign demand.  
• In addition to capacity constraints, economists cited the persistent drought across much of Australia over the past four years as shaving nearly a percentage point from GDP growth.  Better rains in 2007 and 2008 could lead to an upturn in the agricultural sector that will reduce this effect.  Other drags on growth, such as high oil prices and consumer debt loads, are familiar to American businesses, and will have similar effects on domestic sales volumes.
• These challenges provide opportunities for American exporters across multiple industry sectors.  The need to increase productivity, reduce costs, and add new production capacity fuels both private and public purchases as well as investments. 
• We advise American firms examining the Australian markets to pay attention to macro measures of opportunity, noting Australia’s high, per-capita income, rising terms of trade, and a strong currency, which give it substantial purchasing power.  Along with the Free Trade Agreement, the case for entering or expanding in the Australian market is stronger than the population of 21 million might suggest.
• Australia’s appeal is still compelling: few barriers to entry, a familiar legal and corporate framework, sophisticated consumer and industrial demand, and a straightforward, English-speaking, business culture. The Australia-U.S. Free Trade Agreement enhances the long and successful trading relationship by eliminating tariffs on almost all manufactured and agricultural goods.
• We believe 2008 will be an excellent time for American companies with innovative products and technologies to develop an entry strategy for the Australian market, or to re-examine previous business plans for this market.  The remainder of this report will be helpful in either case, and we invite you to contact us to help you execute those plans. 

Market Challenges

• Competitive Market:  Australia’s history, distance from the rest of the world, large land area and relatively small population led to market dominance by a few large firms in certain sectors.
•  Australia is fully integrated into the world economy and has become a commercial and financial center for the region.  American companies will find that Australian and third-country competitors in Australia enjoy the advantages of long-established brands, strong reputations, and existing supplier relationships. 
•  Australia has ready access to Asian and other, low-cost producers. American firms must therefore demonstrate sufficient added value to overcome the costs of getting the product to market, and to compete against lower-cost producers in the region.
• We stand ready to help American firms investigate the market thoroughly.

Market Opportunities

• AUSFTA’s elimination of tariffs provides new sales opportunities for U.S. manufacturers across the board.
• Mining, oil and gas, renewable energy, environmental technologies, and the medical device sector are growing market sectors.  These sectors, however, have well-established competitors and supplier relationships.
• Infrastructure projects, both public and private, are likely to offer opportunities to American companies ranging across engineering, building products, construction machinery and a host of ancillary industries.
• Services such as franchising, consulting, IT, software, engineering.

Market Entry Strategy

• Successful market entry strategies for Australia have three common elements:  understanding the market, selecting the optimal partner, and providing ongoing support to that partner in the market.
• A common language and familiar business framework may lead Americans to overlook Australia’s cultural and market differences.   It is vital to first gain an understanding of the Australian context for a product or service, its competitors, standards, regulations, sales channels, and applications. 
• Success in the Australian market requires establishing a local sales presence.  For many American exporters this means appointing an agent or distributor.  The bounds of that appointment are negotiated, and may include only certain states of Australia, the entire country, or New Zealand as well.  An increasing number of businesses and investors see Australia as a secure platform from which to serve third markets in Asia. 
• The distance from many of their trading partners and the sheer size of the Australian continent - comparable to the continental U.S. - causes Australian firms to stress the importance of local support and service.  American companies should visit Australia both to meet prospective partners and demonstrate ongoing support, as this is the common practice of their competitors.  
• Most of the criteria American firms use to select agents or distributors are applicable to Australia, with expectations adjusted to the scale of the market.  Performing due diligence is just as important as in the United States, and we offer numerous resources to assist in that work.

Quarantine

The Australian Quarantine and Inspection Service (AQIS) is the federal body responsible for enforcing Australia’s quarantine regulations, including the issuing of permits and inspection of shipments. The AQIS website: http://www.aqis.gov.au, offers substantial useful information.

Despite Australia being a signatory to the WTO “Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures” (April 15, 1994), complying with Australia’s quarantine requirements for imports can still pose significant difficulties for U.S. exporters. Aside from issues relating to the importation of foodstuffs and animals, quarantine measures extend to include a number of other imported products including farm, mining and construction machinery, some packaging types and any other product that may pose a contamination risk to Australia’s agricultural industry or natural environment.

The Australian government takes quarantine very seriously, and there is often little that can be done once a shipment has arrived in Australia.

Machinery imports require a number of compliance measures including:

• All imported machinery may require a permit to import issued by AQIS
• It is a condition of the permit that machinery arrives in a clean state – where clean refers to “clean as new”

U.S. exporters should contact AQIS to determine if an import permit is required. Note: “The classification of machinery as 'new' and 'agricultural' is at AQIS's discretion. For quarantine purposes, new field-tested or factory trialed is classified as ‘used machinery’, and will require an Import Permit” (http://www.aqis.gov.au). AQIS has the power to re-export contaminated machinery – and has done so on numerous occasions when the machinery landed in Australia in an unclean state.

Packaging of imported goods presents a challenge to U.S. exporters particularly where the packing materials may comprise wood or other natural products. Detailed information on the compliance requirements can be found at -
http://www.affa.gov.au/corporate_docs/publications/word/quarantine/border/2005/cargo.doc

For other products that may need to comply with Australia quarantine regulations, we recommend U.S. exporters check the requirements on the AQIS import condition (ICON) database at http://www.aqis.gov.au/icon. Click on ICON Search and enter the commodity name and end use and conduct a "pattern match" search.

Chemical Import Requirements

There are several bodies that deal with importing chemicals to Australia depending upon the proposed end use of those chemicals or compounds. The primary agency that looks after chemical imports is the National Industrial Chemicals Notification and Assessment Scheme (NICNAS) - http://www.nicnas.gov.au

Other agencies involved in the regulation of chemical imports include:

Australian Pesticides & Veterinary Medicines Authority (ASPVMA) –
http://www.apvma.gov.au
Therapeutic Goods Administration (TGA) – http://www.tga.gov.au
Food Standards Australia New Zealand (FSANZ) - http://www.foodstandards.gov.au

The relevant agency and regulations that will apply to a particular chemical import depend upon the end use of the product. NICNAS has a good site illustrating the scope of the various agencies -
http://www.nicnas.gov.au/australia/arca.asp

The responsibility for notification of chemical import lies with the importer of the chemical who is introducing it to Australia. This in most cases would be the local subsidiary, an Australian agent or the Australian company directly purchasing the product. Any paperwork that is required will need to be completed by this party.

The importation of chemicals into Australia can be complicated given the level of regulation. It is therefore very helpful to U.S. companies interested in the Australian market to find Australian agents or importers familiar with the requirements. NICNAS provides some guidance on the regulations in this brochure - http://www.nicnas.gov.au/obligations/compliance/pdf/compliance-YourObligationsUnderNICNAS.pdf

You may also need to ensure that your product complies with the Australian Dangerous Goods Code requirements, which are based upon international dangerous goods codes. These are state based legislation in Australia. Details of the particular state health and safety authority can be found at the following link - http://www.emplan.com.au/dangerous-goods/dangerous-goods.htm

Legislation may differ among the various Australian states so we recommend checking with the appropriate state authority.

The federal body that looks after dangerous goods is the National Occupational Health and Safety Commission (NOHSC). Details regarding labeling, handling and local requirements regarding Material Safety Data Sheets (MSDS) can be found here. It should be noted that local MSDS requirements can be different from those in the U.S.
http://www.nohsc.gov.au/applications/hsis/
http://www.nohsc.gov.au/OHSLegalObligations/HazSubstancesAndDngGoods/FinalRISMSDSCodeDec.pdf