Holmes Institute HI5015: Legal Aspects of International Trade Report

This report examines the legal and regulatory framework impacting Samsung Electronics Australia Pty Ltd, the Australian arm of the South Korean multinational. It explores the effects of Australia's corporate tax rate, international double-tax arrangements, and the legislative framework on the company's operations. The report highlights the compliance requirements for product standards, including those set by ACMA, EESS, and ERAC, concerning electromagnetic compatibility, electrical safety, and energy efficiency. It also identifies relevant treaties and agreements influencing Samsung's products and services, providing insights into the challenges and compliance measures for international trade in Australia. The report analyzes the impact of these regulations on Samsung's financial performance and operational strategies, demonstrating the importance of adhering to the legal requirements for consumer electronics sales in the Australian market.

Legal Aspects of International Trade and
Enterprise

Executive Summary:
The assignment investigates the business of the Australian arm of the South Korean electrical
giant that is affected by the different legislations of Australia and different international treaties.
The report reveals that international double-tax arrangements are affecting the business of the
chosen multinational organization with respect to the corporate taxation. The assignment also
describes the different regulatory framework related to the standardizations of the products with
which the business has to comply with for selling their consumer electronics product in the
chosen country Australia.

Table of Contents
Description of the multinational company with key data................................................................3
Legislative regulatory framework that is affecting the MNC..........................................................3
Identification of treaties, conventions or agreements that have impacted on the products or
services the chosen MNC provides in Australia..............................................................................5
References........................................................................................................................................9

Description of the multinational company with key data
Samsung Electronics Co., Ltd is a multinational company and the company is one of the leading
players of the global electronic industry. The company is a South Korean multinational company
whose head quarter is in Suwon, South Korea (Samsung Electronics America, 2019).
The organization is globally employing around 320,671 employees and the organization is
operating in the name of Samsung Electronics Australia Pty Ltd in Australia. The Samsung
Electronics Australia has ranked 69th among the 2000 companies of Australia. In 2017 the
company [Samsung Electronics Australia Pty Ltd] earned $2,497,396,000 and the company is
employing around 302 employees in Australia (Ibisworld.com.au, 2017).
The organization operates with the motivation of developing strategic products on a continuous
basis for the segment of consumer electronics division so that the business can maintain their
position as the industry leader of the global consumer electronics market.
The businesses of Samsung Electronics Australia Pty Ltd are divided into Mobile division, TV,
Audio and Video division, Home Appliances division, Printing division and memory and storage
division (Jung et al.,2014).
Legislative regulatory framework that is affecting the MNC
The Samsung Electronics Australia Pty Ltd is the Australian ARM of the global electronic
giant Samsung Electronics Co., Ltd and like the local companies of Australia the Australian arm
of this multinational organization has to comply with the local corporate tax rate of 30% even if
the company has registered a pre tax loss.
By December 2017 the business Samsung Electronics Australia Pty Ltd registered a loss of
$57.95 million after paying the corporate taxation. The registered pre-tax loss of the organization
by the end of 2017 was lower by $3.49 million than that of December; 2016.Thus the decline in
pre-tax profit is indicating a fall in the performance of the organization by the end of 2017
compared to that of December 2016.According to the Australia’s corporate regulator’s report
being published on 28th May, 2018 the company has posted a pre tax loss of $40.23 million by
the end of 2017 and this loss amount is less by $13.19 million compared to the profit before tax

of the company by December,2016.Though by the end of December,2017 the company has
registered a substantially big amount of pre-tax loss but still the revenue earnings of the company
has increased to $2.49 billion which was higher tan that of $2.35 billion by the end of
December,2016.On the basis of this registered pre-tax loss the corporate tax amount of the
business by the end of 2017 became $(12.07) million charged at the rate of 30%(ARN, 2018).
Though some of the multinational companies find that it is not suitable to treat the multinationals
just like the local companies so far as the imposition of the corporate taxation is concerned in
Australia as the multinationals are mostly large companies and are capable to earn more revenue
for the country compared to the local companies and that is why some lower tax rate should be
imposed over the profitability of the multinational companies. But The Australian taxation
authority imposes the same corporate taxation burden over local as well as multinational
companies as the authority do not want to differentiate between the local and the big
multinational companies and the Australian taxation office is determined to maintain a healthy
competitive environment among the business organizations of the different industrial divisions of
the world.
But most of the global companies consider Australia as the most important destination for doing
business as the corporate tax rate of 30% that is being applicable for all the businesses is
considered as a competitive tax rate as the corporate tax rate that is applicable in the
multinational companies for destinations or countries like China, United States, Germany, Japan,
France is higher than 30%
The corporate tax rate of 30% will be applicable to a foreign business entity that is doing
business in Australia provided the foreign business entity has originated from a country which is
a participant member of international double-tax arrangements of which the country Australia is
also a party or member. In the present scenario the chosen organization Samsung Electronics
Australia Pty Ltd is the Australians arm of the south Korean electronic multinational Samsung
Electronics Co., Ltd and the country of Origin of the company “Korea” is also a party to the
international double-tax arrangements and therefore Samsung Electronics Australia Pty Ltd is
liable to pay corporate taxation at the rate of 30% in Australia.

However it should be taken into account that Samsung Electronics Australia Pty Ltd is not
being incorporated in Australia and neither the central management nor the control of the
company are not being regulated from Australia and the shareholders who are having the voting
rights are not all Australian residents and that is why the organization Samsung Electronics
Australia Pty Ltd is not an Australian resident company and that is why the corporate tax rate
of 30% is only applicable over the profit or loss that the business has earned only in Australia.
In the present scenario it can be seen that the Samsung Electronics Australia Pty Ltd has
registered a pre tax loss of $40.23 million on which the business is supposed to pay a negative
taxation amount $(12.07) million at the corporate tax rate of 30% that has been added back for
reaching to the post tax loss amount of $57.95 million by the end of December, 2017.Thus
another important benefit of the Australian corporate taxation laws that can be identified is that if
a company is making loss then the government of that company will lose smaller amount as
taxation as the tax rate charged for corporate taxation is moderate.
However it should be mentioned that Australian resident companies are supposed to pay capital
gains taxation at the rate of corporate taxation of 30% over capital gains being earned by the
company. Thus the chosen organization Samsung Electronics Australia Pty Ltd is not liable to
pay capital gains taxation as it is not an Australian resident company (Dixon and Nassios, 2016).
Finally the organizing Samsung Electronics Australia Pty Ltd has to report the nature and
volume of the cross border transactions involving a dealings of more than $2 million to the ATO
or the Australian Taxation Office under the rules of the International Dealings Schedule (IDS) so
that ATO can refer those transactions for reviewing them for the purpose of transfer pricing that
applies for companies partnerships and trusts organizations (Pwc.de, 2014).
Identification of treaties, conventions or agreements that have impacted
on the products or services the chosen MNC provides in Australia
Samsung Electronics Australia Pty Ltd the Australian arm of the global South Korean
electronics giant Samsung Electronics Co and Samsung Electronics Australia Pty Ltd offers
products and services with respect to the segments of Mobile, TV, Audio and Video, Home

Appliances division, Printing division and memory and storage division. The products of the
companies are being so programmed and optimised so that the products can fulfil the strict
regulatory requirements of the country that are being laid down especially for the Household
and consumer electronics segments.
The Samsung Electronics Australia Pty Ltd has to comply with the ACMA technical standards
where the fulfillment of the regulatory requirements needs that the suppliers of the electronic
goods must visualize that the features of the products have complied with the required technical
standards that are being set by the respective industries. The ACMA technical standards with
which the company has to comply with possibly includes those standards that are being set by
the Standards Australia or by the different international standard bodies or the standards being
set by the “Communication Alliance Australia” (Acma.gov.au, 2016).
The mobile manufacturing segment of Samsung Electronics Australia Pty Ltd must comply
with the Telecommunications standards being set by ACMA following 376 sections of the
telecommunications Act 1997.As per the standard, the telecommunication customer equipments
manufactures must address issues that are related to the maintenance of personal health, safety
and integrity of the persons engaged in manufacturing the products. The standard also requires
that the manufacturers of the telecom products must comply with the full industry standards that
require full followance of all types of relevant substantive requirements and test methodologies
that are being described as mandatory as per the developed standard (Acma.gov.au, 2013).
So far as legislations with respect to the safety of the electrical equipments are concerned the
manufacturer of consumer electronics like Samsung Electronics Australia Pty Ltd has to
comply with the legislations being set by the different State and Territory of Australia. The
Samsung Electronics Australia Pty Ltd has to comply with the safety standard issued under
“Electrical Equipment Safety System (EESS)” laws by the National Equipment Certification
Database System of Australia. The certificates offered to the manufacturers of the consumer
Electronics manufactures who have complied with all the requirements being set by the “EESS
Law” (Erac.gov.au, 2019)
The consumer goods electronic industry of Australia is being regulated by the three major
compliance regime of the country; namely “Electromagnetic compatibility (EMC)”, “Electrical

safety” and “Electrical efficiency”. The requirements that are to be complied with respect to the
Electromagnetic compatibility regime are being set by the “Australian Communications and
Media Authority (ACMA)”.The regime of electrical safety being regulated by the different state
and territory authorities of Australia. The electrical safety related issues are being regulated by
the Energy Safe Victoria for the state of Victoria.
The “Electrical Regulatory Authorities Council (ERAC)” is focused on generating a level playing
field with respect to the regulatory legislations related to the safety of the electrical equipments
that are present both In Australia as well as Newland and therefore the legislations being set by
ERAC has to be complied with by the manufactures so f consumer electronic goods like
Samsung Electronics Australia Pty Ltd
As per the Electrical Regulatory Authorities Council the manufacturer of consumer electronics
goods of Australia must comply with the Minimum Energy Performance Standards (MEPS) and
Labelling Program, Australia which requires that the manufacturers of electronic products must
specify the energy efficiency rating or they should mention the fact that the electronic product is
complying with the minimum energy standards through a label made on the product. The
labeling of those information related to the energy efficiency of the product before sales is an
essential requirement that must be complied with by the manufacturers of the electronic
equipments(Energy Safe Victoria, 2019)
The Australian Communications and Media Authority (ACMA) also requires that the
manufactures of electronics equipments of Australia must chose a particular electromagnetic
compatibility (EMC) standard for each category of product being manufactured from a list of
EMC standards being set by ACMA. This standard is mandatory requirement to be fulfilled as
per the section 162 of the Radiocommunications Act 1992 (Acma.gov.au, 2018).
Thus these are some of the agreements or legislations with which the foreign manufactures of the
consumer electronics products have to comply with. If any foreign organization that is engaged
in manufacturing of the consumer electronic appliance and fails to maintain the guidelines set by
the above discusses legislations related to the areas of “Electromagnetic compatibility (EMC)”,
“Electrical safety” and “Electrical efficiency” then the organizations like Samsung Electronics
Australia Pty Ltd will not be able to sell their products even after manufacturing as the

government of Australia will not consider those products as the standard products that can be
used by the citizens of Australia with the required safety and efficiency. The machines
manufactured must be electrically efficient, otherwise the use of those electronics products that
are not fulfilling the efficiency standard as set by the Australian authority will lead to mass
wastage of resources. Thus in case of failure in fulfilling any of the standard related agreements
the Samsung Electronics Australia Pty Ltd will not be able to sell their product and may incur
business loss.

References:
Acma.gov.au. (2013). Telecommunications standards | ACMA. [online] Available at:
https://www.acma.gov.au/Industry/Suppliers/Regulatory-arrangements/Telecommunications-customer-
equipment-and-cabling/telecommunications-standards-list [Accessed 2 May 2019].
Acma.gov.au. (2016). Household and consumer electronics | ACMA. [online] Available at:
https://www.acma.gov.au/Industry/Suppliers/Product-supply-and-compliance/Commonly-supplied-
equipment/household-and-consumer-electronics-1 [Accessed 2 May 2019].
Acma.gov.au. (2018). EMC standards | ACMA. [online] Available at:
https://www.acma.gov.au/Industry/Suppliers/Regulatory-arrangements/EMC-Electromagnetic-
compatibility/emc-standards-list [Accessed 2 May 2019].
ARN. (2018). Samsung Australia made a $58M after-tax loss last year. [online] Available at:
https://www.arnnet.com.au/article/641678/samsung-australia-made-58m-after-tax-loss-last-year/
[Accessed 2 May 2019].
Dixon, J.M. and Nassios, J., 2016. Modelling the impacts of a cut to company tax in Australia. Centre for
Policy Studies, Victoria University.
Energy Safe Victoria. (2019). Regulating the electricity industry in Australia. [online] Available at:
https://www.esv.vic.gov.au/about-esv/legislation-and-regulations/regulating-the-electricity-industry-in-
australia/ [Accessed 2 May 2019].
Erac.gov.au. (2019). ERAC - News. [online] Available at: http://www.erac.gov.au/ [Accessed 2 May
2019].
Ibisworld.com.au. (2017). Samsung Electronics Australia Pty Ltd. [online] Available at:
https://www.ibisworld.com.au/australian-company-research-reports/wholesale-trade/samsung-electronics-
australia-pty-ltd-company.html [Accessed 2 May 2019].
Jung, J.B., Hong, S.H. and Lee, M.H., Samsung Electronics Co Ltd, 2014. Electronic device. U.S. Patent
Application 29/426,496.
Pwc.de. (2014). [online] Available at: https://www.pwc.de/de/internationale-maerkte/assets/doing-
business-in-australia.pdf [Accessed 2 May 2019].
Samsung Electronics America. (2019). About Us | Samsung US. [online] Available at:
https://www.samsung.com/us/aboutsamsung/home/ [Accessed 2 May 2019].