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Goods Manufactured Offshore

A difficult issue under the Export Grant Scheme is where a company may undertake all research and development work in Australia, but manufacture the physical good offshore to achieve labour savings available in many countries in the Asian market.

In general terms Austrade will not accept applications from these companies, even if the finished goods are returned to Australia and shipped from Australia overseas. This is based on Austrade's view that the good is a non qualifying good and does not satisfy the necessary Australian content required to be a successful grant application. There are pending applications to Austrade, seeking a ruling from Austrade based on the net benefit to Australia discretion, that Austrade have. This is a discretion that Austrade has to allow export grant applications from companies who manufacture offshore, provided that it can be established that the company's export activities create a net benefit to Australia. At this stage Austrade are exercising this discretion in a limited way. Advice should be sought regarding your company's affairs, if your intellectual property forms a significant part of the ultimate good being sold.

Where the intellectual property, which forms part of the good, is Australian, then that part of your company's transaction will be eligible. However if you intend to lodge an export grant, your transaction should reflect the intellectual property component in the good ultimately being sold. This is a similar analogy to record companies who manufacture CD's offshore, but receive grants based on the export of the intellectual property to their foreign buyers.

It should be noted that an export grant is not available to promote a royalty flow for the disposal of intellectual property to a subsidiary company in overseas markets, irrespective of whether that foreign subsidiary is controlled by the Australian exporter or not.