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1. How to use
Free Trade Agreements to stay competitive
ASEAN AFTA
2. What is FTA?
• A legally binding agreement between 2 or
more countries:
-
Reduce barriers to trade (tariff and non-tariff)
Facilitate cross border movement of products
and services between the signatories’
territories
3. Key Benefits of FTAs
Help
businesses streng Reduced/Zero
then cross-border Tariff Rates
trade
Make export
Tariff Savings more price-
competitive
4. In essence,
Without FTAs: E.g. Import
Tax=10%
Tariff Savings:
7%
Reduced
With FTAs: Import Tax
reduced by7% Making your product
moreprice-competitive and
attractive to potential
buyers
7. Brief of AFTA
• Launched in 1992 to eliminate tariff barriers
among the Member States of ASEAN, namely
Brunei Darussalam, Cambodia, Indonesia, Lao
PDR, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Viet Nam.
• Aim to integrate economies into a single
production base and creating a regional
market of 500 million people
8. Brief of AFTA
Known as ASEAN 6: For ASEAN-
6, about 99% of tariff lines covered
by the AFTA are at 0-5% and more
than 60% of these items are already
duty-free.
Known as CLMV: about 88% of the
products traded in the region are
being liberalized under the AFTA.
9. How to qualify your products for
AFTA?
Product deemed to originatefrom ASEAN countries
Meeting with requirements of Ruleof Origin
Validated through the provision of a Preferential
Certificate of Origin
10. Meeting Requirements of Rules of Origin
Regional Value Content (RVC) requirement of
40 %
OR
Rule of Change in tariff classification
Origin
OR
Specific manufacturing or processing
operations
11. RVC requirement of 40 %
Regional Value Content
(RVC)requirement of 40 %
Wholly obtained or produced in a Partially obtained produced in a
Member State Member State
Accumulation Rule Partial-accumulation Rule
13. Regional Value Content
RVC requirement of 40 % Rule of
(RVC) requirement of 40 %
OR
Change in tariff
Origin classification
OR
Specific manufacturing or
processing operations
Regional Value Content
(RVC)requirement of 40 %
Wholly obtained or produced in a Partially obtained produced in a
Member State Member State
Accumulation Rule Partial-accumulation Rule
14. Regional Value Content
(RVC) requirement of 40 %
OR
Rule of Change in tariff
Origin classification
Accumulation Rule OR
Specific manufacturing or
processing operations
• Goods are often produced in different stages, and
not necessarily by one manufacturer or in a single
country.
• Accumulation allows the different stages of
production of a good, which can take place in
several Member States, to be aggregated
15. Case Study of Accumulation
Rule
Regional Value Content
(RVC) requirement of 40 %
OR
Rule of Change in tariff
Origin classification
OR
Specific manufacturing or
processing operations
16. RVC requirement of 40 %
Regional Value Content
(RVC)requirement of 40 %
Wholly obtained or produced in a Partially obtained produced in a
Member State Member State
Accumulation Rule Partial-accumulation Rule
17. Partial Accumulation Rule
• Partial cumulation allows the originating portion of a material of
“partial” origin, i.e. the material does not meet the origin criterion
of “RVC of not less than 40%”, to be accumulated as part of the RVC
of a finished good. A material can contribute towards the aggregate
RVC of the finished good, as long as the material itself has a RVC of
20% or more=> example 1
• The qualifying RVC of the material to be cumulated shall be in direct
proportion to its actual domestic content.
• However, materials imported under partial cumulation are not
eligible for preferential tariff treatment=> example 2
20. Regional Value Content (RVC) requirement of
40 %
OR
Rule of Origin Change in tariff classification
OR
Specific manufacturing or processing
operations
21. Regional Value Content
(RVC) requirement of 40 %
Change in Tariff Classification Rule of
Origin
OR
Change in tariff
classification
OR
Specific manufacturing or
• In terms of: processing operations
- Chapter
Change in first 2 digits of HS Code, e.g. 1200.00 to 2300.00
Most significant change in products, e.g. cotton to (cotton) dress
- Heading
Change in first 4 digits of HS code, e.g. 1234.00 to 4321.00
Moderate change
- Sub-heading
Change in the last two digits of HS code, e.g. 1111.22 to 1111.33
Minimal change to products, e.g. sugar syrup to sugar cubes
22. Example of Change of HS Code
at Chapter Level
Regional Value Content
(RVC) requirement of 40 %
OR
Rule of Change in tariff
Origin classification
OR
Specific manufacturing or
processing operations
23. Regional Value Content
(RVC) requirement of 40 %
Change in Tariff Classification Rule of
Origin
OR
Change in tariff
classification
OR
Specific manufacturing or
processing operations
• In terms of:
- Chapter
Change in first 2 digits of HS Code, e.g. 1200.00 to 2300.00
Most significant change in products, e.g. cotton to (cotton) dress
- Heading
Change in first 4 digits of HS code, e.g. 1234.00 to 4321.00
Moderate change
- Sub-heading
Change in the last two digits of HS code, e.g. 1111.22 to 1111.33
Minimal change to products, e.g. sugar syrup to sugar cubes
24. Example of Change of HS Code
at Heading Level
Regional Value Content
(RVC) requirement of 40 %
OR
Rule of Change in tariff
Origin classification
OR
Specific manufacturing or
processing operations
25. Regional Value Content
(RVC) requirement of 40 %
OR
Change in Tariff Classification Rule of
Origin
Change in tariff
classification
OR
Specific manufacturing or
processing operations
• In terms of:
- Chapter
Change in first 2 digits of HS Code, e.g. 1200.00 to 2300.00
Most significant change in products, e.g. cotton to (cotton) dress
- Heading
Change in first 4 digits of HS code, e.g. 1234.00 to 4321.00
Moderate change
- Sub-heading
Change in the last two digits of HS code, e.g. 1111.22 to 1111.33
Minimal change to products, e.g. sugar syrup to sugar cubes
26. Example of Change of HS Code
at Sub-Heading Level
Regional Value Content
(RVC) requirement of 40 %
OR
Rule of Change in tariff
Origin classification
OR
Specific manufacturing or
processing operations
27. Regional Value Content (RVC) requirement of
40 %
OR
Rule of Origin Change in tariff classification
OR
Specific manufacturing or processing
operations
28. Specific Manufacturing and
Processing Operations
• The product must have undergone its last
manufacturing process/transformed in an
ASEAN country
e.g. Product X in Japan Product X in America
Product X in any
ASEAN country
Regional Value Content
(RVC) requirement of 40 %
OR
Rule of Change in tariff
Origin classification
OR
Specific manufacturing or
processing operations
29. Specific Manufacturing and Processing
Operations
• Neutral Elements are factors of production which accompany a
product but does not change the quality of the final product sold
• As such the origin of such neutral elements is not taken into the
account in determining the origin of a good
• E.g. Machine X originated from Australia and will be exported to
Singapore. Grease (made in Laos) is used for maintenance and trial-
runs of the machine.
• Machine X’s FOB price is $100 while the grease is $1000.
However, when determining the origin of the entire machine, the
price of grease is excluded since grease is a neutral element.
• Thus, we see that Machine X does not originate from an ASEAN
country (i.e. Australia) and so, cannot qualify for AFTA. Regional Value Content
(RVC) requirement of 40 %
OR
Rule of Change in tariff
Origin classification
OR
Specific manufacturing or
processing operations
30. Regional Value Content (RVC) requirement of
40 %
OR
Rule of Origin Change in tariff classification
OR
Specific manufacturing or processing
operations
31. How to qualify your products for
AFTA?
Originate from ASEAN partners
Rule of Origin
Certified by a Preferential
Certificate of Origin
32. Preferential CO
In order to apply for a Preferential Certificate of Origin (which
serves as validation that product meets with ROO), the following
documents are to be prepared and submitted
Supporting
documents like Other documents
Form D (CEPT) invoices and needed by
through bill of importing state
lading
33. Validity of Preferential CO
• 12 months from the date of issuance
• Exporters are required to keep supporting
records of their CO (Form D) applications for
not less than 3 years from the date of
issuance, subject to the laws and regulations
of the exporting Member State.
