Sourcing knitwear from Nepal for Australian brands: the 50% rule, GST and lead times

Our page for Australian buyers gives the headline: Australia charges a 5% general rate on cotton knitwear, and goods from least developed countries (LDCs) such as Nepal enter at a Free rate if they meet a rule of origin based on factory cost. This guide is the working version for a buyer about to order: how the test is calculated, where imported fabric trips it up, what your customs broker needs, what GST and care labels add, and how to time a southern-hemisphere season. It is general information, not legal or customs advice; confirm your entries with your broker.

Two tests, not one

Under section 153NA of the Customs Act 1901, goods are the manufacture of an LDC when two things are true: the last process of manufacture happened there, and allowable factory cost is at least 50% of total factory cost. Nepal is listed as a Least Developed Country in Schedule 1 of the Customs Tariff Regulations 2004, and the working tariff shows the LDC rate as Free on T-shirts (6109.10.00), polos (6105.10.00) and sweatshirts and hoodies (6110.20.00).

Cutting and sewing in Gaindakot meets the first test for every garment we make. The second is where styles differ, because Australia’s rule is arithmetic rather than a process test like the EU’s (our guide to single and double transformation covers those).

How the 50% test is worked out

The Australian Border Force (ABF) guide to preferential rules of origin sets out the formula. Total factory cost is everything the factory spends on materials plus its allowable labour and overheads. Allowable factory cost is the same, except that materials count only if they come from the “qualifying area”, which for an LDC is the developing countries, the Forum Island countries and Australia. Then comes the cap: materials made in developing countries that are not LDCs, such as China, India or Vietnam, count only up to 25% of total factory cost. Materials from outside the qualifying area count for nothing.

Three details catch buyers out:

• Materials are judged in the form the factory receives them. Fabric knitted in China is a Chinese material, whatever the origin of its yarn.
• A material’s cost includes getting it to the factory: overseas and inland freight, insurance, port and clearance charges. Imported fabric therefore weighs more in the calculation than its mill price suggests.
• Factory cost is not your invoice price. The ABF notes that total factory cost will not necessarily equal the customs value; items such as the exporter’s profit and outbound freight sit outside it.

The cap turns the rule into a simpler question. Once capped materials pass a quarter of total factory cost, a style qualifies only if Nepali labour and overheads, plus any materials from Nepal, other LDCs or Australia, reach at least 25% of total factory cost. Two illustrative styles, with invented round numbers rather than our costs:

This is why we check every style, not every order. We source fabric to your spec from established mills, and you choose: our regular mills, OEKO-TEX-certified fabric, or a mill you nominate. We confirm the mill and its country before you order, which is also when we can tell you whether that choice keeps the style inside the rule.

What your broker needs from us

• A manufacturer’s declaration on the commercial invoice. It names the person signing, their position and the company, describes the goods, and refers to the relevant provision of Division 1A of Part VIII of the Customs Act. There is no prescribed form and no official certification (a GSP Form A with the invoice is an acceptable alternative), so no chamber-stamped certificate is needed. We add the declaration for styles that qualify.
• Cost records, kept by us. The cost breakdown does not go on the invoice. We keep the records behind each calculation and provide them if the ABF asks.
• Your side of the claim. You must hold the declaration when you enter the goods and keep it, with the rest of the import records, for five years. If you later learn a claim was wrong, amend the import declaration and pay the shortfall as soon as practicable; the ABF may then treat it as a voluntary disclosure.

Two practical points. A declaration is not required when the customs value of the originating goods is AUD 1,000 or less, which can cover sample shipments (splitting a larger shipment to stay under it is not allowed). And before a large programme, an importer, exporter or producer can ask the ABF for an origin advice ruling on the goods.

Landed cost: duty is one line of several

GST is charged at 10% on the value of the taxable importation: the customs value, plus any duty, plus transport and insurance to Australia. A qualifying style therefore saves the 5% duty and the GST charged on that duty. Some importers can defer import GST to their Business Activity Statement; your broker or accountant will know whether you can.

Be clear-eyed about competitors: Australia’s free trade agreements give Free rates on these lines to goods originating in China, India and Vietnam, if their own origin rules are met. For Australian buyers Nepal offers duty parity, not a duty advantage, so the case rests on minimums, service and how the garments are made. Our duty comparison chart sets the origins side by side.

Care labels

Clothing sold in Australia falls under the Consumer Goods (Care Labelling) Information Standard 2023, which applies to suppliers and importers. Care instructions can be written in English, shown with the five internationally recognised care symbols, or both. Send us the wording or symbols you have approved and we attach them with your woven labels and hangtags as part of your private-label finishing. For other markets, see our care label guide.

Timing an Australian season

Seasons are reversed, so fleece for an Australian winter has to be ordered while northern-hemisphere buyers are thinking about summer. Count backwards from your warehouse date:

• Sample: 7–14 days after we review your tech pack, then your approval rounds.
• Bulk: 40–50 days after sample approval.
• Sea: trucked from Gaindakot to Kolkata/Haldia or Visakhapatnam, then by container, usually via a transhipment hub such as Singapore or Colombo, to Sydney, Melbourne or Brisbane; allow roughly 6–8 weeks from ex-factory.
• Air: via Kathmandu, typically about a week, for top-ups and launches that cannot wait.

Add those up and a sea-freight style needs about four months from tech pack to warehouse, more if fit approvals take several rounds. We quote EXW Gaindakot, FOB Kolkata by sea or FCA Kathmandu by air; our buying calendar guide and shipping page go further.

After November 2026

Nepal is scheduled to graduate from LDC status on 24 November 2026 and has asked the UN for more time. We have not found a published Australian transition, so for goods entering after that date treat the LDC rate as to be confirmed and budget for 5%. Our LDC graduation guide tracks every market.

Working with us

We are a cut-and-sew knitwear factory in Gaindakot: 150+ machines, 26,000–30,000 pieces a month, a minimum of 1,000 pieces per style and colour, Optitex CAD patterns, QR bundle tracking and AQL 2.5 inspection. About 80% of our team are women, all paid above Nepal’s minimum wage.

Send us your tech pack and we will quote with the 50% check for each style, or start with a sample kit: three finished garments, fabric swatches and a duty sheet for your market, by express courier.