2023 has been an odd year where seemingly global trade appears to have slowed down somewhat. Yet, trade regulations have continued to see modifications, enhancements and enforcement. We discuss some of the key developments across Southeast Asia, including investigations and sunset review relating to anti-dumping and safeguard measures, developments relating to export/import, free trade agreements, as well as sanctions in this Update titled "Regional Trade Mid-Year Highlights 2023" that spans the 1st half of 2023.
Some of the key developments highlighted in this Update include those on anti-dumping and safeguard duties in Indonesia, the Philippines, Thailand, and Vietnam, various regulatory changes that may affect the ease of import and export of goods, particularly with new procedural requirements being introduced in Thailand and Myanmar, and new rules of origin for imports and exports in Cambodia and Vietnam. Perhaps of somewhat serious consequence is a new rule introduced by Indonesia mandating exporters of natural resources to place their foreign exchange export proceeds from the natural resources into a special account for such proceeds within three months of receipt and thereafter to maintain at least 30% thereof for a further period of three months from the date of initial deposit.
Regulatory requirements and enforcement aside, there continues to be numerous developments in the negotiation and conclusion of various free trade agreements ("FTAs"), such as the Regional Comprehensive Economic Partnership (RCEP) Agreement being ratified by Indonesia and the Philippines, and various countries like Indonesia, the Philippines, Thailand, and Vietnam being actively involved in negotiating FTAs. In Singapore specifically, there has also been a surge in new digital trade agreements, and economic agreements relating to the green economy. The ASEAN Trade in Goods Agreement (ATIGA) is also being reviewed by member states to upgrade it for continued relevance amidst emerging global trends.
On sanctions, Singapore continues to ban exportation of, transhipment in, or transit through, Singapore of specified dual use goods which destination is or is intended to be Russia. Also, the US has imposed additional sanctions onto certain entities in Myanmar, as well as sanctions on certain individuals in Cambodia.
Part 2 of our Regional Trade Mid-Year Highlights 2023 discusses the key developments relating to the export and import of goods in the region. For updates relating to anti-dumping and safeguard measures taken by the regulators, Free Trade agreements and trade sanctions in the region, please refer to Parts 1 and 3 of our Regional Trade Mid-Year Highlights 2023.
Exports & Imports, Export Control, and Others
There have been a variety of developments relating to the export and import of goods in 2023 thus far. The developments relate to changes in export/import processes, changes in rules of origin, prohibitions on exports, imposition of duties, etc, as well as other general regulatory changes affecting the export/import of goods. We highlight some of these key developments below.
Export & Import: Controlled Goods, Duties and Tax, Others
In Indonesia, on 12 July 2023, the Government issued Regulation PP-36 of 2023 addressing foreign exchange export proceeds from the business, management and processing of certain natural resources arising from mining, plantation, forestry and fishery. The requirement, which took effect on 1 August 2023, requires proceeds from the export to be placed into a special account within three months of the export. Following this deposit, at least 30% of the foreign exchange export proceeds must be maintained for a further minimum period of three months from the date of the deposit. To encourage the deposits, various incentives will be made available, including making it easier for exporters to export their products. Note that non-compliance will attract administrative sanctions.
Separately, still in Indonesia, the Government also intends to prohibit the exportation of bauxite to encourage the domestic smelter construction, and to prohibit the exportation of liquified natural gas to encourage the utilisation thereof domestically within the industry.
In Malaysia, the Ministry of Finance issued a new Customs (Prohibition of Imports) Order 2023 and Customs (Prohibition of Exports) Order 2023, each effective 15 April 2023 (together, the "Prohibition Orders"). These Prohibition Orders, which replace the previous versions issued in 2017, update the range of goods regulated by the Malaysian customs authority. These are important to note as they have direct impact on businesses undertaking regular imports and exports into the country.
In Myanmar, on 23 May 2023, the Department of Trade under the Ministry of Commerce ("MOC") issued new guidelines on importer and exporter registration under Notification 35/2023, which replaces the previous Order 42/1954 and Export and Import Bulletin No. 6/2018. Under the new procedure, the registration structures are divided into two categories: (i) for trading purposes; and (ii) for non-trading purposes. Both categories require an import export registration certificate ("EIR"). Applicants can apply for an EIR through the TradeNet 2.0 system, following which MOC will carry out an on-site inspection and provide its decision to the application after 15 working days. Renewal applications must be submitted six months before expiry, rather than the three months previously. If there is no renewal application within one year after the EIR expires, the EIR will be automatically canceled.
In Singapore, Singapore Customs issued an advisory on 9 June 2023 to remind traders and declaring agents that parties who have no interest in goods being imported, no involvement in the movement thereof, and no actual relationship with the actual traders of the goods, must not be declared as the "Importer" in permit applications. Surprising as it may appear, there are parties who do provide such services. Apart from potential criminal liability for providing false or misleading information, the misdeclaration of the "Importer" in permit applications will also have implications on any input tax claims under the Goods and Services Act 1993. The Inland Revenue Authority of Singapore (IRAS) requires any GST-registered business who wishes to claim input tax in respect of its imported goods to hold import permits showing the business as the importer of goods to support its input tax claims. Thus, it is important for businesses who wish to claim input tax in respect of their imported goods to ensure that their service providers correctly declare them as the "Importer" in the permit applications.
With effect from 14 February 2023, the excise duty across all tobacco products was increased by 15%. For example, the excise duty on cigarettes was increased from 42.7 cents per stick to 49.1 cents per stick. This comes as part of Singapore's Budget 2023 to fortify Singapore's fiscal position and discourage the consumption of tobacco products.
With effect from 23 February 2023, various wildlife and timber species (such as the white-rumped sharma, hammerhead shark, several freshwater turtle species, etc.) have been included into the Appendices of the Convention on International Trade in Endangered Species of Wild Fauna and Flora ("CITES"). Singapore is a party to CITES and enforces CITES through the Endangered Species (Import and Export) Act 2006. Businesses that wish to import, export or re-export CITES specimens (which include live specimens, their parts and products) are required to obtain a CITES permit from the National Parks Board (NParks).
Export Control: Strategic / Dual-Use Goods
In Malaysia, the mandatory death penalty was abolished on 4 July 2023, through the passing of the Abolition of Mandatory Death Penalty Act 2023. This had impact on the penalty under the Strategic Trade Act 2010 ("STA"). Specifically, punishment by death or imprisonment for natural life is the penalty provided for offences under the STA relating to the export, transhipment, transit, brokering of or transactions relating to strategic items and unlisted items, as well as the provision of technical assistance in connection with restricted activities. In these instances, the Abolition of Mandatory Death Penalty Act 2023 varied the natural life imprisonment sentence to imprisonment of a term between 30 and 40 years instead. The penalty of death provided under the STA was not removed, as only mandatory death penalties were abolished.
In Philippines, from 1 January 2023, authorisation by the Department of Trade and Industry-Strategic Trade Management Office ("STMO") is required for all exports of strategic goods from the Philippines. This is in accordance with Republic Act No. 10697 (An Act Preventing the Proliferation of Weapons of Mass Destruction by Managing the Trade in Strategic Goods, the Provision of Related Service, and for Other Purposes) ("STMA"), which was signed into law in 2016 to comply with the United Nations Security Council Resolution No. 1540. STMO has urged all entities engaged in exporting strategic goods to register and apply for authorisation before carrying out any regulated business activities, and to refer to the Nationally Controlled Goods List issued by the Strategic Trade Management Committee to determine if their goods are items that require export authorisation. Any failure to comply with the prescribed authorisation requirements will result in the imposition of administrative or criminal penalties under the STMA.
Interestingly, Thailand which introduced export control rules and specifically criteria for an Internal Compliance Program Certification and Catch-all-Control measures at the end of 2021 through Trade Controls of Weapons of Mass Destruction Act, has been enforcing quietly over the last two years. The focus has, however, been on encouraging companies to put in place voluntarily an Internal Compliance Program Certification partially so as to ensure that adequate due diligence is undertaken to ensure that the goods exported are not going to be used in the creation of weapons of mass destruction. The Department of Foreign Trade ("DFT") has indicated that they will continue with this approach for the immediate future. This does mean, however, that anyone exporting dual used goods out of Thailand must nevertheless ensure proper compliance.
Rules of Origins; Preferential Tariffs and Duties
In Cambodia, the new Law on the Rules of Origin ("LRO") was promulgated on 5 July 2023. The new LRO sets out principles and rules of origin in relation to imports and exports. The LRO aims to promote and facilitate businesses, and prevent counterfeiting. Certificates of origin issued prior to the entry into force of the LRO remain valid. Containing eight chapters and 35 articles, the LRO sets out various provisions, including rules on how to determine the origin of goods that fall outside preferential trade systems, certificate of origin and exceptions, record keeping obligations, competent authorities, verification, investigation, and penalties. The LRO also defaults the determination of origins of goods under free trade agreements, trade agreements and unilateral preferential trade framework to the rules of origin under the respective documents/framework.
In Thailand, exporters to India making use of the ASEAN-India and Thai-India FTAs may face more challenges and investigations by India’s Customs, who are paying more attention to whether imports into India under FTAs meet the applicable FTA origin rules. In particular, India’s Customs no longer systematically accepts the origin certification granted by DFT in Thailand. Thai companies exporting to India are thus advised to keep good records of all evidence that can support FTA compliance to minimise the scope of investigation.
In Vietnam, on 31 May 2023, the Ministry of Finance (MOF) issued Circular No.33/2023/TT-BTC regulating determination of origin of imports and exports ("Circular 33"), which took effect from 17 July 2023. Circular 33 provides, amongst other things, provisions on the: (i) contents of custom dossiers; (ii) receipt and inspection of applications for the pre-determination of origin; (iii) declaration and submission of documents certifying the origin of imports and exports; and (iv) procedures and contents of inspection, determination, and verification of the origin of imports and exports. The declarant must submit to the customs office documents certifying the origin of goods in certain cases, e.g. where the declarant wants to enjoy special preferential tax rates for imported goods originating from countries, etc.
On 31 May 2023, the Government also issued Decree No. 26/2023/ND-CP on schedule of export tariff, preferential import tariff, list of goods and absolute tax rate, mixed tax, import tax outside tariff quota ("Decree 26"); and Decision No. 15/2023/QD-TTg regulating the normal tax rates for imported goods ("Decision 15"). Decision 15 provides that for goods included in the list in Section I and Section II of Appendix II of Decree 26, the normal tariff is at 0%. For goods included in the list promulgated together with Decision 15, the normal tariff is at 5%. For other goods, normal tariff is applied at 150% of the preferential import duty rate applicable to each corresponding item in Appendix II of Decree 26. Both Decree 26 and Decision 15 have taken effect on 15 July 2023.
Trade regulatory requirements in import and export, and in export control is an area which sees regular updates. This necessitates businesses to regularly review and update the requirements themselves; and indeed each time there is to be an import or export, steps should be taken to verify the current status. Specifically, as regards export controls, an increasing number of Southeast Asian countries have introduced laws and mandated compliance, as has the STMO in the Philippines. With export controls, errors can have dire consequences and hence verifying before actual export is critical. Process-wise, the nuances such as who is declared as the "Importer" in permit applications can have implications in terms of false declarations as well as on input tax claims in Singapore. What all this means is that a regular review of internal trade compliance programmes is necessary to catch these developments.
Please click here for the full version of the Rajah & Tann Asia Regional Trade Mid-Year Highlights 2023.