Trade Intelligence Asia Pacific October / November 2017
Worldtrade Management Services
Significant tariff reduction for a large range of goods in China
Indonesia's new excise rates for 2018
Red lane galore in the Philippines
Surge of assessments in Thailand
IGST payable on sales within bond in India
Launch of first phase of Digital Free Trade Zone in Malaysia
When is an importer not an importer in Singapore?
TP studies used to challenge customs values
Trade Intelligence Asia Pacific seeks to capture the essence of selected issues that are of particular interest to clients of PwC. Our regional network of customs and international trade consultants routinely gather, analyse and disseminate information and knowledge to our clients. Based on studies as well as meetings and discussions that take place across the region with various trade and customs officials, we consolidate our findings into Trade Intelligence Asia Pacific.
The robots are coming! Can data analytics replace your job as customs and trade professional?!
Changes to Missile Technology Control Regime 4 (MTCR) Equipment, Software and Technology
Update on Thailand's export measures of dual-use items
Updates from the 31st ASEAN Summit and related summits
Country Reports Australia
Free Trade Agreements focus ASEAN - HK sign FTA and Investment agreement
Hong Kong 15 India
22 27 28
Australia and Peru sign declaration of intent to conclude negotiations on bilateral FTA
China and Chile sign agreement to upgrade existing bilateral FTA
China and South Korea to proceed with FTA negotiations on services and investment
Japan 16 Malaysia
16 Myanmar Philippines
33 36 37 41 42
Hong Kong and Macau sign CEPA
India and Canada to fast track CEPA negotiations
Indonesia continues with CEPA negotiations with Australia, Chile, European Union, India and Turkey
16 Taiwan 17 Thailand
47 51 52
Pakistan pursues FTA with Indonesia, Japan and
17 Around the world
The EU - Japan EPA finalised
18 Results of PwC's 2017 APEC CEO Survey
Philippines and the European Free Trade
18 World Customs Organisation
Association (EFTA) push for quicker ratification of
WCO Harmonized System Committee celebrates
its 60th session
Philippines to commence FTA negotiations with United States
18 Case study on challenging customs values through 56 transfer pricing documentation
Thailand and Pakistan to finalise negotiations and 18 World Trade Organisation
WTO report regarding Indonesia import
Upgraded Singapore - Australia FTA comes into
18 restrictions of horticultural and animal products
Turkey - Singapore Free Trade Agreement (TRSFTA) enters into force 1 October 2017
RCEP countries to intensify efforts for conclusion
Moderate growth Projected in Q4 19
Panel report on US anti-dumping measures on 19 Korean tubular goods
of FTA in 2018
US files a protest to the WTO against China's bid
Remaining TPP countries move forward with
19 for recognition as a market economy
negotiations without the United States
58 59 59
Trade Intelligence Asia Pacific October / November 2017 3
Can data analytics replace your job as customs and trade professional?!
Technology has redefined the way our world works, transforming the way we communicate and the way we do business. In particular, data analytics has revolutionised the way businesses operate from redefining what it means to truly `understand your customers' via consumer analytics in marketing and retail, to fraud detection in banking, and the provision of real-time patient feedback in healthcare. These success stories are just the tip of the iceberg. Data Analytics' flexible application across different industries has created quite a buzz among businesses, and for a good reason. So what exactly is data analytics? For the benefit of the unfamiliar, data analytics refers to the process of extracting insights from sources of raw data, which are then used to drive fact-based business decision-making. We all know that today's business environment is extremely data rich. According to an IBM Marketing Cloud publication, we are creating 2.5 exabytes of data daily. That is, 2.5 billion gigabytes or 2.5 quintillion bytes of data every day! This number is expected to continue to grow at an exponential rate with the boom in cloud technologies and the rise of social media. Data analytics is therefore a way for us to extricate meaningful insight from this deluge of data.
There are typically three types of analytics that are widely recognised today: Descriptive, Predictive and Prescriptive. Descriptive analysis focuses on drawing insight and providing an overview of `what has happened?' Predictive analysis moves up a level by modelling and forecasting future trends and scenarios based on a set of predetermined rules for the purpose of understanding `what could happen?'. The last and most sophisticated category, prescriptive analysis, goes beyond predictive analysis by using machine learning to evaluate and prescribe `what should we do?'.
What has happened? Gives insight into past business, from a minute to years ago
What could happen? Models and forecasts future scenarios based on probabilities
What should we do? Provides guidance by evaluating possible future scenarios
PwC | January 2014
The type of data analytics performed and the level of sophistication applied by companies are largely dependent on a mix of internal and external factors, including the industries they are in, data availability, and their readiness to embrace change.
So, what could data analytics mean for the field of customs and trade?
Data analytics from Customs' perspective
The World Customs Organisation (WCO) declared 2017 as the year of Data Analysis. Specifically, 2017 has been dedicated to promoting "Data analysis for effective border management". In line with this initiative, customs authorities around the world are expected to adopt various forms of analytics to strengthen enforcement and boost compliance levels. The objective of this initiative is also to use data analytics as a cost-cutting measure for resource-strapped authorities, through automation of certain functions and reallocation of officers towards more value-adding activities.
Take for instance the innovative approach taken by Singapore Customs to detect duty-unpaid cigarettes using consignment weight. A shipment that turned out to contain duty-unpaid cigarettes was flagged and targeted for inspection as the weight of goods declared was lower than a historical norm, and shipment details were inconsistent with the importer's past business activities. The flagging of such irregularities required minimal effort and allowed officers to detect the cigarettes despite the large volume of goods flowing in and out of Singapore, one of the world's busiest and largest ports.
While not every customs authority is fully prepared, willing or equipped to use data in the same manner, Customs' capabilities around the world are certainly well ahead of the days when effective risk management meant customs officers relying on their knowledge, experience, and perhaps even intuition.
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Data analytics in the customs and trade function
Comparing the above with our experience of how customs and trade teams in organisations operate reveals considerable and concerning differences. While some companies have managed to very successfully use data analytics to improve their customs and trade footprint, in general there has been no drastic change in the way many customs and trade functions are carried out, including how they develop insight, between twenty years ago and today.
The primary mode of generating insight today is remains an ad hoc "glorified Excel" approach, where analyses conducted and insights gathered are very much manually driven. The depth of insight is further constrained by the crudeness of tools used, and the often limited experience and expertise of the person running the analyses. It is clear that very little work has been done in the customs and trade space to move beyond the most basic descriptive analysis.
At least, you could argue, that means that there must be lots of low-hanging fruit to pick. As you are reading this you may ask yourself how data analytics can add value to your own organisation. A good starting point to this question is typically to ask yourselves things like the following:
Q: Do you know....
What is your annual duty spend globally?
Where are you spending it? How much duty are you
managing? Where are you incurring cost? Is HS classification applied
consistently? Have you maximised the use of
Free Trade Agreements (FTAs) and other saving
opportunities? How significant are your duty
minimisation savings? What is the source of these
savings? Are you confident of the values
you declare to the authorities?
In response to the above, customs and trade managers by and large tell us that they do not know the answers to these questions off the top of their heads (nor are they usually expected to), but that they can do some digging to try to pull these figures together an exercise that may take days or even weeks and may or may not reveal meaningful answers. So why has there been so little progress? The most commonly cited reason is (perceived cost). However, based on our experience, the challenges point more to the following:
lack of data; lack of aspiration; and lack of pragmatism.
1. Lack of data
This might seem a surprising challenge, given the wealth of data organisations collect these days. However, we see time and again that key customs and trade data are simply not captured, or spread so widely through an organisation's systems that they
are virtually impossible to report on easily.
Failure to capture and store key customs data points The UN Conference on Trade and Development estimates that the average customs transaction involves 20-30 different parties, 40 documents, and 200 data elements. Some of these are key customs data elements that tend to be spread throughout an organisation, across various functions. For instance, trade terms might be kept by Legal, information on royalty payments by Finance, supplier information by Purchasing, and exporter information by Supply Chain.
Further, internal Enterprise Resource Planning (ERP) data also tends to focus much more heavily on finance and tax-related matters only. People in charge of designing ERP systems often have little appreciation of customs data requirements, especially if they are irrelevant for any other business reason. Consequently, in many instances some very basic, yet critical, customs declaration data may not even be captured in the first place. Instead, the expectation is often for such data to be managed and maintained by third party customs brokers.
To make up for the lack of internal data, some companies attempt to extract the relevant data directly from Customs' systems. While this tends to be a rather straightforward process in places with strong data management structures such as Australia, the US or the EU, the same cannot be said for Asia, where customs data may not even be available from or maintained by the authorities. In many Asian countries there is a discrepancy between the data that is supposed to be available according to local customs law and what is available in practice, adding an additional layer of complexity. While these challenges make the application of data analytics more challenging, there is of course hope that data availability will improve with efforts made under the WTO Trade Facilitation Agreement and the ASEAN Economic Community.
Even where necessary customs and trade data is captured by an organisation, successful analytics usually requires the linking of different datasets within the organisation, and often also different systems relevant to customs and trade. Connecting to third party systems, such as those of customs brokers, securely may also be necessary and present its own host of issues. All this makes data consolidation more challenging than if such data elements were localised within a single function.
Lack of convergence on data format and content requirements Another difficulty with data capture and analysis relates to the heterogeneous forms in which key customs data elements are contained. This includes data from physical import/export declarations, internal ERP systems, financial transactions, and directly from customs systems. To be able to draw useful business insights from these datasets, companies need to possess the capabilities to receive, store, and amalgamate the information contained within.
To further complicate matters, the content requirements in import/export declarations and permits are inconsistent across countries. Textbox placements within these
Trade Intelligence Asia Pacific October / November 2017 7
documents are also not aligned, making it difficult to utilise text-mining software. Take into account free text fields and language and translation issues, and it becomes clear why organisations tend to shy away from taking on this uphill task.
International data standards have been introduced in response to these variances, including the WCO Data Model, which complements other pre-existing data standards such as the United Nations (UN) Trade Data Element Directory (UN/TDED) and the UN Electronic Data Interchange (EDI) for Administration, Commerce and Transport (UN/EDIFACT). As of 1 July 2017, almost two-thirds of WCO members are in the process of adopting or have adopted the WCO Data Model. In practice however, these initiatives are yet to have a tangible impact on how organisations manage data. As more countries continue to implement these initiatives, we are hopeful that progress will be made on this front.
2. Lack of aspiration
In addition to the difficulties with data collection, we have noticed that many customs and trade teams perceive their role as being solely operationally-focused, in that their objective is to ensure quick and smooth clearance of goods with minimal duty exposure. Often, the occasions during which such teams pop up on the radar screens of Management are when a shipment is stopped at a border or if the company is slapped with a hefty penalty. In practice, therefore, it almost feels as though a measure of work well done becomes synonymous with going unnoticed for a lengthy period of time.
Falling duty rates with the growing number of free trade agreements reinforces the above thinking, as it means customs expenditure across board is low and therefore less likely to attract scrutiny. As a result, there is little external impetus for change. Individuals continue to be bogged down by their day-to-day work, viewing increased visibility as a threat to their well-oiled operational machine, regardless of how inefficient or ineffective that machine may be.
To transform the culture of a function to one that is data-driven requires dedicated time and effort time that teams do not always have, and effort that they do not always want to commit. This inertia is partly to do with the lack of clout such teams experience in many an organisation. The field of customs tends to be subsumed under larger Tax, Finance or Supply Chain functions, such that any ground-up initiative needs to pass through multiple levels of bureaucracy and win support from many parts of an organisation before it can really find an audience.
In addition, the transactional and real-time nature of customs compliance, tied with a general lack of understanding at higher levels of management of what exactly trade compliance entails, means that making a business case for function-specific IT investment is nigh-on impossible.
3. Lack of pragmatism
On the opposite end of the spectrum, we do sometimes see overenthusiastic trade and customs teams that try to run before they can walk. They look to data tools as turnkey solutions that will be able to solve all their customs problems at the press of a button. They are often inspired by how data analytics tools have overhauled and transformed the way other functions (such as GST) work. If they are not inspired, they might be pressed by others in the organisation that believe that an extension of such data analytics into the field of customs should be straightforward, and expect the same ease of implementation and strength of results.
Unfortunately, the nature of customs and trade - as alluded to above - means that such direct comparisons are misleading. For example, the real-time nature of declaration data is fundamentally different from periodic tax filings, which benefit from the luxury of time. The complexity and number of data fields that impact trade compliance also tends to be much larger, and therefore determining where and how data analytics can offer true insights (as opposed to fancy but impactless reports) is generally more complex. However, protests such as these tend to be dismissed out-of-hand by technology specialists, who think that they are simply a manifestation of a lack of knowledge and appreciation on the part of the customs specialists. Anyone who has been involved in the implementation of a Global Trade Management system will probably be all too familiar with this. Nevertheless, we see companies either rush to adopt various tools without first understanding what they are after, or have them forced upon them by senior management. When this happens, the end result is more often than not the same. Teams are left disappointed as they struggle to see or demonstrate the value of their investment. The value of customs data analytics Notwithstanding the above, adopting the right analytics tool for the customs and trade function of your business can be hugely rewarding. For one, the collection of import and export data can give companies immediate insight into how much their global duty bill is, and how it breaks down on a regional and national level in a matter of minutes. This allows quick, if not real-time, corrective action to be taken. More importantly, data analytics can easily extend to pattern or trend analyses to identify risks and leverage on opportunities that were perhaps not visible before, when analyses were conducted on a static level.
Trade Intelligence Asia Pacific October / November 2017 9
Analysing trade flows in the right manner allows companies to gain increased visibility over their trade function and their supply chain operations as they get increasingly complex with the rise of global value chains. This would enable, for example, proactive identification and maximisation of FTAs or other duty exemption schemes. For instance, we have seen companies heavily reliant on FTAs develop compliance systems that automatically run document checks for each shipment, to ensure that a Certificate of Origin is uploaded prior to approving an export. Furthermore, tools are also able to check declaration data against tariff concession orders and by-laws, and flag where anti-dumping duty exemptions may apply. It would perhaps be a small step from such predictive analysis to a prescriptive approach.
On a daily basis, analytics can also be employed to assist in the declaration process by learning from past data. Provided the right data is captured as early as available in the relevant system(s), this would help in picking up likely declaration errors based on historical declaration data before they have a chance to occur. For instance, triggering and populating licensing requests based on product description and/or SKU, and narrowing down potential HS codes based on supplier name, item description, and past use.
In addition, data analytics can be employed as a strategic tool to easily quantify the impact of proposed strategies on trade costs. For instance, the impact of a change in trade routes on FTA preference could be visualised and measured. Taking into account scheduled decreases in duty rates under various FTAs could further allow teams to make more objective decisions on when it becomes worthwhile to change a sourcing country.
How to move forward
It is clear from the above that data analytics can help improve decision making in organisations, and give customs and trade teams a greater degree of control over their processes and operations. However, the experience of many companies with data analytics tools is often not a very positive one, for many of the reasons set out above. In addition, many technology solution providers need scale to be economically viable. They therefore develop tools that are as broad as possible, in the hope that they will appeal to many companies, and include at least some components that offer value. Unfortunately, the output of such tools is often in the form of a plethora of dashboards that are hard to interpret and even harder to act on for the users. They also provide many false negatives (possible non-compliance that on closer examination turns out to be easily explicable) and false positives (possible cost saving opportunities that on closer examinations turn out to hold no value). All of this is a results of using tools that are not tailored to a specific set of problems and desired outcomes. More often than not, it puts users off believing that useful data analytics for trade compliance is even possible.
So - where and how should you begin?
1. Identify your problem statements
Naturally, it is easier to know what data you should be collecting, and if a particular tool is fit for your purpose and therefore likely to benefit you, if you first understand the problems you are trying to solve. It is therefore critical to identify your prioritised objectives and define clear problem statements for them. These problem statements can be compliance-related or focused on extracting opportunities for improvement. For example, you may worry that you are not declaring supportable customs values. Or you may be looking to use FTAs more effectively. Or you are concerned that you do not have up-to-date import licenses. Or you lie awake at night wondering whether the
guys in the lab are reformulating some products that means their customs classifications are changing. And so on and so forth.
Defining clear problem statements early on will help make the approach to data analytics more manageable, allow you to stay on track, and make it more likely that the tool you are seeking is right for your purpose and your business. After all, if you are seeking a control framework to track, manage, and verify FTA use, is there really a need to purchase an off-the-shelf solution that contains a suite of other functions (say, denied party screening) which may not even be relevant to your business?
2. Start consolidating the data you need
With clear problem statements, relevant data points can be identified, collected, stored and consolidated. Companies should be careful to ensure that the raw data is of high quality. While you do need to be agile with how you view and use data, the reliability and integrity of the data is key, as people are quick to accept conclusions when "the data says so", creating a false sense of security. When undue reliance is placed on inaccurate, incomplete, and therefore misleading data, you can seldom be confident of the findings generated, and even less confident of the actions taken on that basis. For that reason, quality of data is paramount.
3. Consider your organisation's capabilities and readiness
Purchasing the latest predictive analytics solution might be tempting, but it will necessarily entail significant investment. In addition, what many technology providers fail to tell you is that it will also require as a baseline, sophisticated data structures that an organisation just starting out on its analytics journey is unlikely to possess. For that reason, it is crucial for businesses to take into account their organisation and their industry. For instance:
What are your current analytics capabilities? What is your budget? Are you after a global, regional, or national solution? What is your risk appetite are you comfortable with approximations? How will you show value created for your organisation in order to get management
buy-in? Is a descriptive or predictive solution more suitable for your problem statement? Is it
scalable from one to the other? Are there synergies with the supply chain, tax, or finance folks?
Sometimes, simple is still most effective. Businesses should allow themselves time to mature and grow in their capabilities, and to scale up only when ready.
4. Consider the options available
Only at this stage should you begin to consider the solutions available in the market, whether it means adopting an off-the-shelf solution, or customising a simple solution to your specific problem.
In our experience, the following considerations are particularly helpful when making a decision on what solution may work best for your organisation: Data analytics tools that work well with other tax management (such as GST and
Trade Intelligence Asia Pacific October / November 2017 11
transfer pricing) are typically not easily adapted for customs and trade purposes. There are analytics solutions specific to customs and trade, but these are still a
maturing set of technologies, limited both in number and in power. Solution providers and professional service firms have developed compliance
management tools easily available in the market. While these tools can assist teams with day-to-day execution work, they are usually not equipped with analytics capabilities and are therefore limited in the type of insights they can generate. These tools are also built to be generic, in order to cater to a mass audience. For that reason, they require substantial implementation work to be assimilated to individual systems and are rarely fit-for-purpose without significant customisation.
The reality is that for customs and trade management, data analytics has not yet come very far and remains a work in progress. The technology and tools currently available are not necessarily where they could or should be. At least they are not (yet) able to revolutionise how organisations manage their customs and trade function. At its core, most available tools remain dashboard solutions that provide users with a snapshot of their operations i.e., they do not move past the descriptive stage of data analytics. Gradually, a handful of solutions is moving into the predictive stage, but these tend to require significant upfront investment simply to integrate with existing internal systems. While these tools can of course add considerable value, they will not offer a turnkey solution that will solve all the challenges of managing customs and trade.
Remember, though, that integrating data analytics into your trade and customs operations and making it an integral part of your decision-making need not be an all-or-nothing venture. Purchasing a simple customised solution, or building your own targeted solution to address your key problem statements tends to result in the most value being extracted in a short space of time. The above examples automatic completing of licensing requests based on SKUs, flagging of incomplete documentation sets prior to export are simple, but can be immensely valuable depending on your organisation's needs. Such examples highlight the importance of clearly defining specific problem statements to identify what measures add the most value to your organisation. Successful implementation of narrower solutions often makes broadening the solution set an easier task on the way to a more comprehensive data analytics approach to customs and trade compliance.
In our increasingly data-driven environment, investing in technologies, software and data analytics tools is seen as crucial to remaining relevant. However, doing it simply for technologies' sake is likely to lead to wasted investment and little to show for it. Companies who are able to use their data to its fullest potential are those who possess a more nuanced view of data analytics. They understand that despite the hype that surrounds it, there is no turn-key solution to all their customs and trade problems. They understand that data, no matter how voluminous, is worthless without the right applications to process and distil it to yield valuable business insights. For that reason, they invest time and effort to identify their problem statements, and are able to find targeted solutions to address them. Technology could learn a thing or two from that.
Updates from the 31st ASEAN Summit and related summits
Over 13-14 November 2017, the 31st ASEAN Summit was held in Manila, Philippines. The theme was "Partnering for Change, Engaging the World". Over the course of the two days, other ASEAN-related summits were held on the sidelines of this meeting.
The key messages emerging from these summits are summarised below:
1. Economic outlook The ASEAN economy is projected to grow at improved rate of 5.0% in 2017. Regional trade is expected to stage a rebound following broader global trade improvements. In 2016, ASEAN merchandise trade stood at USD 2.2 trillion, of which 23.1% was intraASEAN trade. This is still low compared to internal trade in other economic blocs around the world and a focus for growth.
2. ASEAN Economic Community (AEC) 2025 Ongoing efforts to implement the AEC Blueprint 2025 were unsurprisingly - lauded. All 25 AEC 2025 sectoral work plans are reported to be in place. Implementation of these work plans is being carried out, and monitored under the AEC 2025 Monitoring and Evaluation Framework.
3. Regional Comprehensive Economic Partnership (RCEP) Representatives from the 16 participating countries reiterated the potential of the RCEP to be a key driver of sustainable growth and equitable economic development. Parties also lauded efforts in advancing the negotiations, and pressed for a swift resolution. Nevertheless, no firm commitments on timetables were expected or made. The varying levels of development of each participating country will be taken into account in the negotiations. For instance, flexibility in the form of provisions for special and differential treatment, and for least-developed ASEAN member states will be applicable.
An outline of the RCEP Agreement (as at November 2017) was published. We have highlighted the key points of this outline:
Trade in Goods Chapter Text-based discussions and market access negotiations are being held. The aim is to progressively eliminate tariffs over a "reasonable period" of time and to address non-tariff barriers, to achieve a "high level of trade liberalisation" that builds on existing liberalisation levels between countries.
Rules of Origin (ROOs) Chapter The RCEP aims to have more trade facilitative and business friendly ROOs. More simplified ROOs are intended to ensure that SMEs are better able to understand and utilize the RCEP Agreement.
Customs Procedures and Trade Facilitation (CPTF) Chapter This chapter looks to ensure predictable, consistent, and transparent application of customs laws and regulations, as well as the efficient administration of customs procedures and clearance of goods. The Chapter will align with the WTO Trade Facilitation Agreement, and harmonise international best practices and standards.
Sanitary and Phytosanitary (SPS) Measures Chapter Care is being taken to ensure that SPS measures are applied only where necessary to protect health, are not overly trade restrictive, and do not unjustifiably discriminate between participating countries where similar conditions exist. The Chapter is intended to enhance the implementation of the WTO SPS Agreement.
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Standards, Technical Regulations and Conformity Assessment Procedures (STRACAP) Chapter The chapter is intended to enhance the implementation of the WTO Technical Barriers to Trade Agreement.
Electronic Commerce (e-commerce) Chapter This chapter aims to promote the growth of e-commerce among participating countries and globally. It is intended to facilitate cooperation between participating countries to create a strong e-commerce ecosystem.
Small and Medium Enterprises (SMEs) Chapter This chapter focuses on boosting SMEs' integration into regional and global supply chains.
The outline of the RCEP Agreement can be accessed at the following link: http://asean.org/storage/2017/11/RCEP-Summit_Leaders-Joint-Statement-FINAL1. pdf 4. Other multilateral trade agreements The ASEAN-Hong Kong FTA was signed at the sidelines of the ASEAN Summit,
marking ASEAN's sixth FTA with external partners. Both sides have committed to expedite internal procedures to allow entry into force by 1 January 2019. ASEAN and Korean officials are working towards liberalising Sensitive Track products under the ASEAN-Korea Trade in Goods Agreement (AKTIGA). "Substantial outcomes" are expected. ASEAN and Chinese officials are eager to see the early ratification of the ASEANChina FTA Upgrade Protocol, and the completion of negotiations for trade facilitating Product Specific Rules. In particular, parties are keen for a quick resolution of longstanding issues such as those concerning iron and steel. ASEAN and Canada officials will soon begin exploratory discussions and a feasibility study for the potential ASEAN-Canada FTA, for the potential ASEANCanada FTA. Both ASEAN and the EU are working towards resuming negotiations on the ASEAN-EU FTA. Note the lack of specific date commitments for most of these agreements.
Free Trade Agreements focus
Agreements entered into Force Turkey Singapore Free Trade Agreement
1 October 2017
Agreements signed Hong Kong Macau Comprehensive Economic Partnership Arrangement (CEPA) ASEAN Hong Kong Free Trade Agreement (AHKFTA)
27 October 2017 12 November 2017
Agreements with negotiations concluded Peru - Australia Free Trade Agreement (PAFTA) EU - Japan Economic Partnership Agreement
10 November 2017 8 December 2017
ASEAN and Hong Kong sign FTA and Investment agreement
On the sidelines of the 31st ASEAN Summit in Manila, ministers from Hong Kong and ASEAN member countries have signed a free trade agreement and investment pact to strengthen economic cooperation and stimulate economic development in the region. The FTA encompasses trade in goods such as tariffs, rules of origin, non-tariff measures, customs procedures and trade facilitation, as well as trade in services, investment, economic and technical cooperation, and dispute settlement mechanisms. An Economic and Technical Cooperation (ECOTECH) Work program, intended to facilitate cooperation among local businesses via internship programmes, capacity building exercises and information sharing, will also be implemented upon entry into force of the FTA.
Both the ASEAN Hong Kong FTA (AHKFTA) and the ASEAN Hong Kong Investment Agreement (AHKIA) are expected to officially enter into force on 1 January 2018 after all necessary domestic procedures are completed.
Australia and Peru sign declaration of intent to conclude negotiations on bilateral FTA
On 10 November 2017, Australia and Peru signed a declaration of intent to conclude negotiations for the Peru Australia FTA (PAFTA). The text of the agreement is currently undergoing a legal review process and the FTA is expected to be signed in December 2017. Following completion of domestic procedures on both sides, the FTA is expected enter into force in January or February 2018.
Under the PAFTA, Australian exporters will enjoy reduced tariffs on 99% of tariff lines. Key agricultural commodities such as Australian sheep and kangaroo meat, wheat, and most horticulture and wine products will be entitled to immediate duty-free access upon entry into force. Other products, such as sugar, dairy products, rice, sorghum and beef will be eligible for increased tariff quota quantities or reduced tariff rates that will be phased in gradually within the next five to eighteen years. Apart from the agricultural sector, pharmaceutical products, textiles, machinery parts, metals and ships will also enjoy duty-free treatment on import.
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Both countries have also agreed to deepen cooperation in areas such as education, health services, hospitality, telecommunications, e-commerce, and mining equipment services and technologies.
With reduced tariff rates and increased market access to the Latin America region, the PAFTA is expected to boost Australia's agriculture export sector and fuel trade and economic growth. The bilateral deal will also serve as a stepping stone towards potential FTAs with the Pacific Alliance countries including Chile, Colombia and Mexico.
China and Chile sign agreement to upgrade existing bilateral FTA
On the sidelines of the Asia Pacific Economic Cooperation (APEC) Economic Leaders' meeting in Vietnam, China and Chile have officially signed an agreement to upgrade their existing bilateral FTA. This follows from four rounds of negotiations conducted earlier this year, where both sides have agreed on new protocols to manage areas such as e-commerce, government procurement and competition policies. Apart from trade in goods, the FTA will be expanded to cover investments and trade in services. Both countries will also be deepening cooperation in the infrastructure, telecommunications, new technologies, industrial manufacturing, agriculture, renewable energy and transport sectors.
China and South Korea to proceed with FTA negotiations on services and investment
South Korea and China have agreed to proceed with additional negotiations in December for the second phase of its FTA, which involves the services and investment sectors. Negotiations were previously intended to be completed this year but both sides had held off discussions since 2015 following China's economic retaliation to the Terminal High Altitude Area Defence (THAAD) deployment by the US in South Korea.
Discussions are likely to concentrate on reducing restrictions and facilitating processes to improve market access for local businesses. South Korea is likely to request for China to open its services sector and relax certain constraints for South Korean businesses operating in China. The expanded FTA is expected to further benefit the entertainment, logistics, information and communications, finance, legal, tourism, healthcare and medical services sectors for both countries.
Hong Kong and Macau sign Comprehensive Economic Partnership Arrangement (CEPA)
On 27 October 2017, Hong Kong and Macau signed a bilateral CEPA to further liberalize trade in goods and services and strengthen economic and commercial relations. Under the CEPA, both sides have agreed to facilitate
customs and trade procedures, open up trade in services, as well as strengthen bilateral cooperation in areas such as intellectual property and infrastructure development in line with China's "Belt and Road" initiative.
The first phase of the agreement will enter into effect from 1 January 2018 and will focus on liberalizing trade in services between both sides. Hong Kong will open up 105 types of services to Macau, and Macau, in return, will liberalize 72 types of services to Hong Kong. In addition to their own development objectives, both sides will also jointly participate in two other projects, the Guangdong Hong Kong Macau Greater Bay Area development project, and the soon-to-be completed Hong Kong Zhuhai Macau Bridge. There are also plans for further cooperation in areas such as financial services and the Meetings, Incentives, Conferencing and Exhibitions (MICE) industry sectors.
India and Canada to fast track CEPA negotiations
Canada and India have agreed to expedite discussions and work towards an early conclusion of the Comprehensive Economic Partnership Agreement (CEPA). Both sides have concluded the tenth round of negotiations for the proposed trade pact, which involved discussions surrounding trade in goods and services, e-commerce, telecommunications, sanitary and phytosanitary measures, as well
as technical barriers to trade. Both countries have exchanged their wish lists for goods and services to be included in the CEPA. India has emphasised the services chapter and requested for provisions relating to the movement of people or workers to be built into the agreement.
Leaders have also agreed to explore collaboration in areas such as export credit insurance through India's Export Credit Guarantee Corporation and Export Development Canada. Separately, both sides will also push forward negotiations for early conclusion of the Foreign Investment Promotion and Protection Agreement (FIPA), which has not yet been ratified.
Indonesia continues with CEPA negotiations with Australia, Chile, European Union, India and Turkey
Indonesia is continuing to push forward with bilateral CEPA negotiations in order to boost exports and economic growth. Currently, Indonesia is involved in 16 ongoing negotiations, of which the government has expressed hope for conclusion of the following three agreements: Indonesia Chile CEPA, Indonesia Australia CEPA and the Indonesia European Union CEPA by end 2017, although that deadline may prove too ambitious in practice.
Currently, CEPAs with Australia and Chile are close to conclusion and the final round of negotiations have been held in December and late November respectively. The 13th round of negotiations will also be held for the CEPA between Indonesia and the EU, where both sides will discuss issues such as market access for goods and services, investment, intellectual property protection, strategic partnerships and access for workers.
Indonesia and Turkey have also signed an agreement leading to negotiations for a bilateral CEPA. The CEPA is expected to improve trade and economic relations and both countries have agreed on a
roadmap to achieve a bilateral trade volume of USD 10 billion by 2023. Both sides are also intending to strengthen cooperation in the tourism, defence and aerospace sectors.
Pakistan pursues FTA with Indonesia, Japan, and Vietnam
In order to enhance multilateral trade and improve competitiveness, Pakistan has expressed intentions to initiate negotiations with several Asian nations on proposed FTAs. Specifically, Pakistan has indicated its focus on Indonesia, Vietnam, and Japan and has commenced with preliminary dialogue for a Preferential Trade Agreement (PTA), which may eventually lead to an FTA.
Currently, discussions with Indonesia are underway for a renegotiation of the PTA, and both sides have agreed on additional tariff concessions for more than 20 tariff lines, including rice, textiles, ethanol and mangoes. Going forward, both sides have also agreed to upgrade the PTA and pursue a bilateral FTA. Pakistan has also commenced bilateral FTA negotiations with Vietnam, and has agreed to share an initial list of products for duty concessions. Both sides have discussed ways to enhance cooperation in various sectors of mutual interest, including textiles and garments, energy, banking, chemicals, agriculture machinery, automobiles, food processing and infrastructure development. Officials have also expressed commitment and support towards ensuring the smooth progress of dialogues towards conclusion of FTA negotiations.
Pakistan has also submitted Terms of Reference to Japan for a proposed early harvest program leading to an FTA. Both countries have notified their respective Joint Trade Committees (JTC) and are proceeding with internal consultations before discussions resume at the next JTC meeting.
Trade Intelligence Asia Pacific October / November 2017 17
The EU - Japan Economic Partnership Agreement finalised
After constructive negotiations and meetings at both technical and political levels that were started in 2013, the European Union and Japan eventually finalised the EU-Japan Economic Partnership Agreement (EPA) on 8 December 2017. The EU and Japan are now working on the legal verification of the EPA text, following which the agreement will be translated into 23 official languages of the EU and Japanese. The text will afterwards be submitted to the European Parliament and EU Member States for approval. The EPA is aimed to be effective before the end of the current mandate of the European Commission in 2019.
Through the EPA, once fully implemented, Japan will eliminate tariffs on 97% (in tariff lines) of all imports from the EU, including about 82% on farm and fishery products, while the EU will abolish tariffs on about 99% of imports from Japan. In relation to non-tariff measures, both side have agreed and committed to aligning themselves to the same international standards as well as removing unnecessarily complex processes so that import procedures can be completed without undue delays.
In parallel, the EU also continues negotiations on a Strategic Partnership Agreement with Japan as well as investment protection standards and dispute resolution that are planned to be concluded and signed in 2018.
Philippines and the European Free Trade Association (EFTA) push for quicker ratification of their FTA
During a meeting with the EFTA parliamentary committee in October, officials from the Philippines have expressed support and commitment towards
accelerating and completing the FTA ratification processes by end 2017. Currently, the FTA is awaiting ratification by the President, following which approval by the senate and minority bloc will have to be obtained before the trade pact can enter into force.
Signed in April 2016, the FTA covers, among others, trade in goods and services, rules of origin, customs cooperation, trade facilitation, government procurement and intellectual property rights. On implementation, it is expected to further bolster trade, enhance economic growth and deepen bilateral relationships between Philippines and the EFTA member countries, consisting of Norway, Iceland, Liechtenstein and Switzerland. Both sides have also agreed to provide preferential customs duties on imports of local products such as fish and marine products.
Philippines to commence FTA negotiations with the United States
The Philippines and the United States have expressed intentions to conduct negotiations to elevate their current Trade and Investment Framework Agreement (TIFA) into an FTA during the strategic dialogue meeting scheduled for December. Under such an FTA, the US is expected to seek concessions and greater investment access to Philippines' infrastructure and utilities industries and better market access for frozen meat products, while the Philippines will request for preferential access for its garments, textile, seaweed and carrageenan, and agriculture products. The timeline and scope, as well as a preliminary report on the impact of a potential FTA on both economies will also be discussed during the meeting. Negotiations are expected to last two to four years before conclusion of the FTA.
Thailand and Pakistan to finalise negotiations and sign FTA on 15 January 2018
The 9th round of FTA negotiations have been completed on 8 November 2017, at which both sides have presented their
final offer lists of items for freer trade. This includes products from the automobile, textile, agriculture, plastics and pharmaceutical sectors. Pakistan has requested for Thailand to provide it with the same concessions currently granted to other FTA partners of Thailand. During the discussions, both countries also discussed the text of the agreement, tariff reduction modalities and the complete request and offer lists.
To be signed on 15 January 2018, the FTA is expected to further enhance bilateral trade and boost production and economic growth. Both countries are also likely to benefit from better market access for key export industries such as textiles and garments, agriculture, leather products and agriculture products.
Upgraded Singapore Australia FTA comes into force
Signed in 2003 and entered into force on 24 February 2006, a number of changes have been made to the Singapore-Australia Free Trade Agreement following the assent of multiple legislative instruments. There have been 6 amendments to the SAFTA: on 24 February 2006, 13 February 2007, 11 October 2007, 2 September 2011, and the just recently concluded one on 1 December 2017. The last amendment to the SAFTA reflects the outcomes of the third review of SAFTA, and formalises the trade outcomes announced on 6 May 2016 under the auspices of the Australia-Singapore Comprehensive Strategic Partnership (CSP).
The updated agreement introduces new rules of origin for goods that are imported into Australia from Singapore, new procedures to claim preferential rates of duty for certain Singapore-originating goods, and an extension to the record keeping obligations of exporters and producers of Australia-originating goods that are claiming preferential tariff treatment when exported to Singapore.
Full text of the upgraded SAFTA (currently in force) as well as the previous version (prior to 1 December 2017) can be read at the following link http://dfat.gov.au/trade/agreements/ safta/official-documents/Pages/ default.aspx. For further information the SAFTA outcomes and fact sheets, please refer to the following link http:// dfat.gov.au/trade/agreements/safta/ pages/singapore-australia-fta.aspx
Turkey Singapore Free Trade Agreement (TRSFTA) enters into force on 1 October 2017
The TRSFTA has officially entered into force from 1 October 2017. Signed in November 2015, the TRSFTA covers areas such as trade in goods and services, investments, e-commerce, competition and transparency. Under the TRSFTA, Turkey has committed to removing tariffs on 80% of tariff lines for Singapore's exports, which will extend to more than 95% of all tariff lines over the next decade.
Singapore will also provide preferential tariff treatment for all products subject to customs duty (stout, beer, ale, medicated samsu and other samsu) originating from Turkey. Both countries will also provide enhanced access to service sectors such as retail, business and construction services, and deepen cooperation in defence, counterterrorism, culture, technical training, education, and science and research.
RCEP countries to intensify efforts for conclusion of FTA in 2018
The 16 member countries of the Regional Comprehensive Economic Partnership (RCEP) have expressed commitment towards expediting negotiations for conclusion of the trade pact. Since negotiations commenced in 2012, participating countries have already missed three deadlines due to difficulty in agreeing on areas such as market access and offer lists for goods, services and investments. Leaders from all countries have agreed to intensify discussions towards finding common
landing zones for existing issues, while addressing the sensitivities and political constrains of each member country.
Remaining TPP countries move forward with negotiations without the United States
On the side-lines of the recent Asia Pacific Economic Cooperation (APEC) Leader's Summit in Vietnam, the remaining 11 member countries of the Trans-Pacific Partnership (TPP) (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) have agreed to proceed with negotiations on a "new" trade pact, named the Comprehensive and Progressive Agreement for the TPP (CPTPP). Compared to the TPP, the CPTPP has remained largely the same. It suspends only 20 provisions from the original agreement, most of which are related to intellectual property rights, rules and measures in Chapter 18. No other changes have been made to any of the current tariff schedules or commitments in areas such as market access for goods, services, investments or government procurement. Chapters such as e-commerce, data flows, intellectual property, services and investments will also remain as they were in the new agreement.
Currently, four areas in the agreement, including state-owned enterprises and dispute settlement, are still under negotiation. All countries are also proceeding with domestic public consultation procedures. Once the legal texts and tariff schedules are finalised, the CPTPP can enter into force following ratification by at least six out of the eleven member countries.
The CPTPP is expected to be signed in early 2018, and leaders are aiming for entry into force by late 2018 or early 2019.
Trade Intelligence Asia Pacific October / November 2017 19
Changes to the Missile Technology Control Regime Equipment, Software, and Technology Annex
The 31st Plenary Meeting of the Missile Technology Control Regime Equipment (MTCR) was held in Dublin, Ireland. During the meeting, expert groups exchanged knowledge on proliferation and technology trends, as well as procurement strategies that have been employed by those looking to circumvent export control rules. Much of the discussion surrounded challenges posed by Intangible Technology Transfer (ITT), Unmanned Aerial Vehicles (UAVs), Catch All Controls, and Regional Proliferation. The MTCR Equipment, Software, and Technology Annex was also revised. Some changes include the addition of gel propellant rocket motors and modifications to receiving equipment for navigation satellite systems. The updated version with tracked changes can be accessed at the following link: http://mtcr.info/mtcr-annex/
Thailand's update on export control measures of dual-use items
According to a Cabinet Resolution on 17 October 2017, the Cabinet has approved the principles of a new Ministry of Commerce (MOC) Notification re: Specifying dual-use items as goods requiring permission and subject to export measures (No.2). It is expected that the MOC Notification No. 2 will revoke the original MOC Notification which was issued in October 2015 and was scheduled to enter into force on 1 January 2018. Based on the Cabinet Resolution, it is likely that the implementation on export control measures of the dual-use items originally scheduled to be implemented on 1 January 2018 will be postponed. Although the official MOC Notification No. 2 has not been published yet, it is understood that the export control measures will be implemented from 1 January 2019 onwards.
Gary Dutton +61 (7) 3257 8783 [email protected]
Consolidated Cargo Clearance benefit for Australian Trusted Traders
The Australian Department of Immigration and Border Protection has announced a new benefit for its Trusted Traders.
From 15 November 2017 onward, the Australian Trusted Traders (ATT) or their brokers may lodge a single import declaration for a consolidated consignment for all sea cargo and air cargo, thus attracting a single Import Processing Charge (IPC). The amendments seek to streamline costs and clearance requirements, thus improving efficiency and offering tangible financial benefits for Trusted Traders.
GST on low value imports of physical goods
Commencing 1 July 2018, the Goods and Services Tax (GST) will apply to imports of low value goods landed in Australia. The legislative reform deems low value goods as having a customs value of AUD$1,000 or less. In relation to this legislative change, the Australian Tax Office has released a guidance on their website. It may be accessed here: https://www.ato.gov.au/business/international-tax-for-business/gst-on-low-valueimported-goods/
Strengthening of Australia's biosecurity Legislation
The Australian Government has introduced the biosecurity Amendment (Miscellaneous Measures) Bill 2017, which aims to enhance the operation of Australia's biosecurity regulatory framework. Key aspects of the proposed legislative change includes extending information gathering powers and providing flexibility to amend biosecurity import conditions to ensure the effective management of biosecurity risk.
Additionally, the Australian Government has introduced the Imported Food Control Amendment (Country of Origin) Bill 2017 which seeks to amend the Imported Food Control Act 1992. The purpose of the Bill is to incorporate the Country of Origin Food Labelling Information Standard 2016 (the CoOL Information Standard). The amendments reflect the requirement for mandatory country of origin labelling for food for human consumption that is sold in Australia. Additionally, the bill aims to increase importers' accountability for food safety, increase the number of importers who are sourcing safe food, improve monitoring and management of new and emerging food safety risks.
Trade Intelligence Asia Pacific October / November 2017 21
Adjustment to supervision period for imported goods with duty reduction and exemption
In order to support technological transformation and to facilitate equipment and industrial upgrading activities, the General Administration of Customs (GAC) has recently issued a new Announcement  No.51 specifying adjustments to the Supervision Period for Imported Goods granted duty and tax reduction or exemption.
This announcement has officially entered into force with effect from 24 October 2017. Consequently, the previous provisions regarding the supervision period as regulated in GAC Order No.179, the Administrative Measures of the Customs of the People's Republic of China for the Reduction and Exemption of Import and Export Duties, will be abolished.
The key details specified within the announcement are as follows:
1) Reduction of supervision period Special goods Vessels, Aircrafts and Motor vehicles
The supervision period of will remain unchanged at 8 years and 6 years respectively for vessels and airplanes, and motor vehicles. General goods All other types of goods or equipment The supervision period of general duty reduction and exemption goods (excluding vessels, airplane & motor vehicles) will be reduced from 5 years to 3 years. This allows enterprises to enjoy greater flexibility in managing such goods.
2) Retroactivity of announcement The supervision period will commence from the date when imported goods are released by customs authorities. This applies both to goods imported after the announcement, and goods imported prior to the announcement that are still under supervision. That is to say, if the aforementioned general goods were imported three years ago, the supervision of relevant goods will be automatically released from the date of the announcement.
3) Calculation of taxes clawback Based on the previous GAC Order No. 179, where payment of taxes are necessary for disposal or sale of such goods (e.g. Resale of goods to companies without duty reduction or exemption quotas), the formula for the calculation of the value base for tax clawback is as follows:
A: Import Value of goods; B: Length of time period from the date of import, by month; C: Supervision period, by year. This will change from 5 to 3 years under the new
Duty payable = Value base for tax clawback x equipment duty rate Import VAT payable = (Value base for tax clawback + duty payable) x 17%
Enterprises may take advantage of the reduction in supervision period to upgrade their facilities and equipment. However, despite the change in supervision period, note that other supervision requirements on imported goods granted import duty and tax relief remain unchanged as per GAC Order No.179.
Specifically, importers are still required to: Report the use of the duty exemption goods in the first quarter of each year; Ensure storage of relevant documents for at least 3 years after the end of the
supervision period in case of a Customs audit; Report to the Customs officer in charge prior to usage of goods; Obtain approval from Customs authorities before any transfer of title of goods
Significant tariff reduction for a large range of goods
Background The China Government has announced to significantly cut import tariffs for a large range of goods with effect from 1 December 2017 through the Interim Import Duty Rate (IDR) System. The IDR system generally provides importers with lower tariff rates than the Most-Favoured-Nation (MFN) duty rates (i.e. the WTO bound rates). Hence such goods are subject to lower import tariff rates than those under China's WTO commitments. The intention is to encourage consumer spending. IDR rates are typically reviewed by the China Government every 6 months and revisions are made to reflect changes in the business environment and government policy.
According to the "Notice of the Tariff Commission of the State Council on Adjusting Import Tariffs of Consumer Goods" recently released by the Ministry of Finance, starting from 1 December 2017, China will further reduce tariffs for a total of 187 tariff codes at the 8-digit level, with an average tariff rate reduction from 17.3% to 7.7%. The categories of consumer goods covered by the notice include the following:
Food Healthcare products Pharmaceuticals and health supplements Daily chemicals Clothing and footwear Household equipment Sports and entertainment accessories Other general merchandises (such as toiletries, pens, diapers, etc.)
The IDR rates for the majority of the consumer goods listed in the notice would be around or less than half of the MFN rates. For some of the commodities already covered under IDR in the past, the IDR rates are now further reduced or the scope of the commodities covered further expanded under the latest revisions.
Potential implications/considerations Whilst this obviously is very good news to those companies importing such goods into China, there could nonetheless be implications which may not be as apparent that require consideration:
1. Arm's length pricing for related party transactions Companies importing and trading in products covered by the tariff reduction may enjoy higher profit margins resulting from lower import costs. However, companies procuring from related parties should pay special attention to updated financial projections and forecasts, and the benchmarking profit margin range stated in the transfer pricing documentation, in order to mitigate the risk of challenges from China
Trade Intelligence Asia Pacific October / November 2017 23
Customs in relation to the arm's length nature of the import price.
In line with the principles in Case Study 14.2 recently published by the World Customs Organisation (WCO) Technical Committee on Customs Valuation, China Customs could challenge the arm's length nature of import prices of companies deriving a profit margin above the interquartile range stated in the transfer pricing documentation, and may assess additional import taxes to these companies on the basis that the imported goods were undervalued (please see our other alert on Case Study 14.2 for more information).
Hence, if companies are expecting to derive a profitability resulting from the tariff reduction above its arm's length range, the related customs valuation risks should be reviewed and addressed in order to prevent unexpected additional import tax assessments. If this aspect is not managed properly, any savings from the rate cut could be lost.
2. E-commerce import model still most tax efficient?
There are various types of e-commerce models adopted by companies where different types of import taxes could be applicable to the e-commerce importations. For example, goods imported under the B2B e-commerce model may be subject to import taxes under the so-called "General Trade" customs category. Goods imported under the B2C e-commerce model may be subject to import taxes either under the 70% comprehensive e-commerce tax or under the personal parcel tax rule depending on various conditions of the e-commerce transactions.
The recent tariff reduction may render some models to be more attractive, e.g. the B2B General Trade e-commerce model may be more favourable than say the B2C personal parcel tax model for some businesses. Companies engaging in e-commerce importations may want to review their existing model to see whether it is still the most tax efficient under the latest IDR rates.
3. Applications for tariff reduction under IDR
The general objective of the IDR system is to allow reduced import tariffs to those industries and commodities encouraged by the Central Government in accordance with its policy to improve China's competitiveness, to assist in advanced technological development, to improve the environment, to satisfy demand for certain necessities, etc.
If a company imports a commodity that falls within the context of an encouraged industry or commodity as described above, but the applicable tariff code (HS codes) is not currently covered under the IDR list, there is a chance that the customs classification currently used by the company may not be correct. However, if the tariff code used is correct but the commodity is still currently subject to "unreasonably high" MFN duty rates, an application for IDR may be made with the Customs Tariff Commission of State Council (CTCSC) for their consideration.
The CTCSC is a coordination department managed by the Ministry of Finance (MoF) and the members of the CTCSC include various ministries including the MOFCOM, GAC, NDRC and SAT.
Classification decisions on several commodities
The General Administration of Customs (GAC) promulgated on 30 September 2017 Announcement  No.46 on commodity classification decisions for several type of commodities, comprising 22 commodities "newly" classified and 1 commodity previously classified to a certain HS code abolished, i.e. plastic wood grain (Classification Decision No. J2008-0007). This announcement has entered into force on 1 October 2017.
Issued regularly by GAC, the commodity classification decision is a supplement of the Customs Law, and together with the import and export tariffs (and the explanatory notes) forms the main basis for customs commodity classification.
Some of the commodities classification decisions can be seen in the table below. For full list of the decisions, please check the following website: http://www.customs.gov.cn/customs/302249/302266/302267/737470/index.html
No Commodity / Description 1 Organic mixed fruit puree (apple, banana and pear)
Classified to HS code
Fruits such as apple (60%), banana (20%), pear (10%), and other organic puree (10%) are made into jam through the process of sorting, pulping, filtering, high speed blending, sterilizing, heating, cooling/drying then aseptically preserved and canned. Suitable for infants and toddlers over 6 months.
2 Organic peroxide mixture
An organic peroxide containing about 50% silicone oil and about 10% silica. This product is used as a cross-linking agent for silicone rubber, molded by mixing with silicone rubber and heated at a high temperature.
3 Smart composite wristwatch
A smart watch that can be connected with mobile phone via Bluetooth connection. The watch can also display several health indicators of the user.
4 Aerial photography quadrotor (drone)
5 Ford F 150 RAPTOR Truck
The car specification is as follows: dimension 5910mm (length) / 2192mm (width) /
1992mm (height); four double row seats holds up to 5 people; gasoline type; engine capacity 3497cc; 10-speed automatic transmission; intelligent four-wheel drive system; double panoramic sunroof; 8-inch color touch screen multimedia communications
entertainment system; front and rear leather seats; front and rear air curtain system; rear seat heating function.
6 Waist belt for pain treatment
The belt is made of textile fabrics, rubber band and plastic buckles. Prior to use, this product can either be placed in a microwave oven for 1 to 2 minutes to help relieve chronic pain, or placed in a refrigerator to help relieve inflammation
2909.6000 8517.6299 8525.8029 8703.2419
Trade Intelligence Asia Pacific October / November 2017 25
Amendment to the catalogue of commodities subject to inspection and quarantine
The General Administration of Quality Supervision and the GAC issued Announcement No.93/2017 on the Adjustment of Catalogue of Entry-Exit Commodities Subject to Inspection and Quarantine by the Entry-Exit Inspection and Quarantine Authorities on 31 October 2017. A total of 158 HS codes associated with industrial products classified in Chapter 48, 54, 64, 72, 76, 85, 92, 94 (such as electric vacuum cleaners, patterned hot rolled coil, etc.) are no longer under supervision condition "A" (i.e. subject to inward inspection), while 4 HS codes associated with tobacco products, i.e. 240210, 240220 and 240290, previously under supervision condition "A/B" (i.e. inward and outward inspection) are now under condition "B" (outward inspection). These amendments took effect on 1 November 2017.
Details of the announcement can be obtained from the following link http://www. aqsiq.gov.cn/xxgk_13386/jlgg_12538/zjgg/2017/201710/t20171031_500772.htm
New decision on imported drugs registration
The China Food and Drug Administration (CFDA) has issued Order  No.35 removing certain restraints on clinical trials and registrations for imported drugs. The main purpose of this Order is to encourage the research and development of new medicine and to meet clinical needs in China. This Order has entered into force since 10 October 2017.
Details of the Order can be read at the following link http://www.cfda.gov.cn/WS01/ CL0053/178363.html
Shenzhen Customs issues guidelines and code of conduct for e-commerce enterprises
In recent years, cross-border e-commerce has been seen as one way to boost foreign trade. In China, more than 10 cross-border e-commerce pilot zones have been built in Shanghai, Chongqing, Hangzhou, Zhengzhou and Guangzhou, and more and more cities in China are preparing to build pilot zones as well. With the growing trend of cross-border e-commerce, local Customs offices in China have been issuing numerous laws and regulations expecting enterprises to pay closer attention to related customs compliance requirements.
Shenzhen Customs has recently issued new regulations relating to the supervision of cross-border retail e-commerce import and export procedures that will come into force on 1 January 2018. The regulations set out the reference (guidelines) and the compliance requirements (code of conduct) for enterprises engaged in cross-border e-commerce business, each elaborated according to the type of the enterprise:
e-commerce enterprises - enterprises that conduct cross-border e-commerce businesses using their own developed platform or third-party platforms;
e-commerce trading platform enterprises - enterprises providing platform services;
logistics enterprises - enterprises carrying out logistic business, such as storage and delivery; and
payment enterprises - enterprises that provide monetary payment and/or fund platform for cross-border e-commerce businesses, including bank payment agencies and non-bank payment agencies.
To read the details of the publications, check the following website: http://shenzhen.customs.gov.cn/publish/portal109/tab61257/info865657.htm
Derek Lee +852 2289 3329 [email protected]
ASEAN Hong Kong FTA and Investment Agreement (AHKIA) come into force next year
Ministers from Hong Kong and ASEAN member countries have signed a free trade agreement and investment pact on the sidelines of the 31st ASEAN Summit in Manila. Both are expected to officially enter into force on 1 January 2018. Please refer to the FTA Focus section for more information on this.
Update on customs facilitation measures for wine entering the Mainland
In 2010, the Customs and Excise Department of Hong Kong and the General Administration of Customs of the Mainland signed the "Co-operation Arrangement on Customs Facilitation Measures for Wine Entering the Mainland through Hong Kong". A supplementary agreement was afterwards signed in 2014 with the aim to strengthen Hong Kong's position as a wine trading and distribution hub in Asia.
With effect from 9 November 2017, the customs facilitation measures for wine entering the Mainland through Hong Kong are further extended to all ports under all 42 Customs Districts in the Mainland. Those who have registered with the Hong Kong Trade and Industry Department (HKTID) as Registered Wine Exporters can enjoy immediate customs clearance of wine imported into the Mainland through Hong Kong.
Local companies/registered businesses may apply to the HKTID for registration as Registered Wine Exporters. The registration is voluntary. Non-registered companies may continue to export wine to the Mainland in accordance with the general procedures of the Mainland Customs.
Further detailed information on this, such application procedures and obligations, as well as the relevant forms can be obtained through this link: http://www.tid.gov.hk/ english/import_export/nontextiles/wine/circular_forms.html
Trade Intelligence Asia Pacific October / November 2017 27
Nitin Vijaivergia +91 (0) 982 023 9915 [email protected]
IGST payable on sales within bond
On 24 November 2017, the Central Board of Excise and Customs (`CBEC') issued Circular 46/2017-Customs to clarify that where goods deposited in a customs bonded warehouse are sold, before clearance for home consumption, Integrated Goods and Services Tax (IGST) is payable on the transaction of supply between original importer and the buyer. IGST will also be payable at the time of clearance of such goods by the buyer, as a part of the customs duty. The basis of the clarification is summarised below:
In-bond sale considered as `supply' under IGST Act As per section 7(2) of the IGST Act, any supply of imported goods which takes place before they are transported across the customs frontiers of India will be treated as an `inter-state supply'. Under the IGST Act, such transactions of sale or transfer will be subject to IGST, regardless of the fact that customs duty (including basic customs duty and IGST payable under the Customs tariff act) will be levied and collected at the ex-bond stage. The value of such supply liable should be determined as per the respective provisions under the Central Goods and Services Tax (CGST) Act and IGST Act.
Tax on value addition For customs duty purposes, the value of imported goods is determined as per section 14 of the Customs Act at the time of filing of the "Into-bond bill of entry". The transaction of sale or transfer of warehoused goods between the importer and any other person can be at a higher price than the assessable value of such goods. There are no provisions in the customs law to amend the customs value of imported goods at the ex-bond stage except for cases where goods are subject to tariff value based valuation.
An illustration is provided in the example below.
Goods are imported by `A' on 2 July 2017. Importer wants to deposit the goods in a bonded warehouse to defer duty
Importer files an `into-bond bill of entry' and the goods are deposited in a Bonded Warehouse. Basic Customs Duty and IGST (Section 3(7) of Customs Tariff Act 1975) are deferred. Illustration of duty deferment: (i): Value of goods = INR 100 (ii) If BCD is 10% = INR 10 (10% of INR. 100) (iii): If IGST is 12% = INR 13.2 (12% of INR 110) (IV): Total Duty and GST Deferred (ii+iii) = 23.20
`A' sells the goods to `B' on 21 July 2017 for INR 300 and charges IGST of INR 36 @12%. Payment of the above IGST of INR 36 and filing of return for the same should be done by 20 August 2017.
`B' files an `ex-bond bill of entry' on 25 September 2017 and pays INR 23.20 (the deferred duty). (In addition to duty of INR 36 paid earlier).
The official Customs Circular No. 46/2017- Customs can be accessed at the following link: http://www.cbec.gov.in/resources//htdocs-cbec/customs/cs-circulars/cscirculars-2017/circ46-2017cs.pdf;jsessionid=31C600EEAE621B438627DC0F509797 0A
Import duty exemption for Advance Authorization, Export Promotion of Capital Goods (EPCG) scheme and Export Oriented Units (EOU)
The Central Government has issued Customs Notification 78/2017 and 79/2017 on 13 October 2017 to amend previously published notifications No. 16/2015, 18/2015, 20/2015, 21/2015 and 22/2015 , each is the embodiment of Section 25 of the Customs Act 1962 (52 of 1962) of customs duty exemption. Under the amendments, traders that import goods under the EPCG and Advance Authorization Schemes will be exempted from Goods and Services Tax (GST) and Compensation Cess, where applicable, up to 31 March 2018. This exemption is subject to the condition that export obligations would have to be fulfilled by way of physical exports only. The same exemption will also be granted to goods imported by EOUs until 31 March 2018.
Customs Notification 78/2017 and 79/2017 can be obtained via the following links: http://www.cbec.gov.in/resources//htdocs-cbec/customs/cs-act/notifications/ notfns-2017/cs-tarr2017/cs78-2017.pdf http://www.cbec.gov.in/resources//htdocs-cbec/customs/cs-act/notifications/ notfns-2017/cs-tarr2017/cs79-2017.pdf
One-time relaxation for combining of Advance Authorizations and extension of export obligation period
On 24 October 2017, the Director General of Foreign Trade (DGFT) issued Public Notice No. 34/2015-20 permitting a one-time relaxation for combining ("clubbing") of Advance Authorizations issued under FTP 2002 -2007 and 2004 2009. The notice also allows for an extension of the export obligation period for advance licenses or authorizations issued under FTP 2002-07, 2004-09 or those issued prior to 5 June 2012 under FTP 2009-14. This will assist exporters in fulfilling their pending export obligations and faster redemption of Advance Authorization licenses.
An Advance Authorization permits traders to import inputs used in the manufacturing of exported products without payment of applicable customs duties. However, a stipulated quantity or value of such goods manufactured using the duty exempted inputs is required to be exported within the export obligation period. To apply to request for clubbing of advance authorizations or extend the export obligation period, traders are required to file an application with the Regional Authorities (RA) using Form ANF 4C. The last date for submission is 31 March 2018.
Clubbing of Advance Authorizations for redemption and regularization will not be permitted for authorizations issued on or before 31 March 2009. Only two extensions of six months in export obligation period are allowed, where payment of the required composition fee is made, where applicable. Any relaxation on these guidelines will be decided on merit. Authorities have been relatively stringent on clubbing requests or extensions recently.
The full Public Notice No. 34/2015-20 can be accessed at the following link: http:// dgft.gov.in/Exim/2000/PN/PN17/PN%2034%20in%20english.pdf Customs Department accordingly.
Trade Intelligence Asia Pacific October / November 2017 29
Trade facilitation measures for EPCG Scheme authorisation holders
The Director General of Foreign Trade (DGFT) has issued Public Notice 35/2015-20, 36/2015-20, and 37/2015-20 to further facilitate procedures for authorisation holders of the Export Promotion of Capital Goods (EPCG) Scheme. These facilities will be available for EPCG authorisation issued from 1 September 2004.
1. Relaxation of procedures for obtaining block-wise extension The DGFT has granted a one-time relaxation on procedures for obtaining of block-wise extension in the export obligation period under the EPCG Scheme. Previously, EPCG authorisation holders were required to approach the relevant Regional Authorities (RA) within the prescribed period to obtain the requisite extensions on payment of composition fees.
With the one-time relaxation, condonation of delay in obtaining block-wise extension in Export Obligation period will be allowed subject to fulfilment of certain conditions. RA may consider extension requests that have been submitted beyond the prescribed period provided that payment is made for the regular composition fee and an additional composition fee of INR 5,000 applies. The above applies to all requests filed with the RA before 31 March 2018 and are submitted with an installation certificate for the capital goods imported.
The full Public Notice No. 35/2015-2020 can be accessed at the following link: http://dgft.gov.in/Exim/2000/PN/PN17/PN%2035%20english.pdf
2. Relaxation of procedures for obtaining extension of export obligation period
The DGFT has announced a one-time relaxation on procedures for obtaining extension of the export obligation period under the EPCG Scheme. Previously, requests for extension were required to be filed within the prescribed time period. However, RA may now consider requests that are received beyond the prescribed period, subject to fulfilment of certain conditions and the provision of payment for the additional composition fee of INR 5,000. Such requests can be submitted up till 31 March 2018.
The full Public Notice No. 36/2015-2020 can be accessed at the following link: http://dgft.gov.in/Exim/2000/PN/PN17/PN%20No.36(e).pdf
3. Relaxation of procedures for acceptance of installation certificates Public Notice No. 37/2016 was issued on the condonation of delay in submission of installation certificate under the EPCG Scheme. Previously, EPCG authorisation holders are required to submit the installation certificate showing installation of imported capital goods to the RA within the prescribed time period. Such procedures have been relaxed and RA may now accept installation certificates that were submitted beyond 18 months from the date of import and subject to certain conditions. EPCG authorisation holders are also required to pay a penalty of INR 5,000 to the RA and the certificates are required to be submitted by 31 March 2018.
The full Public Notice No. 37/2015-2020 can be accessed at the following link: http://dgft.gov.in/Exim/2000/PN/PN17/PN%20No.37(e).pdf
GST exemption on import of goods under lease
The Central Government has exempted GST on import of all goods, vessels, ships (other than motor vehicles) that are imported under lease for use after import. This exemption is only applicable to the GST levied on import. All other applicable fees such as customs duty and cess are still payable.
The exemption of GST is subject to the furnishing of a bond by the importer, and the fulfilment of the following conditions:
GST should be paid on lease rentals considering this as service transaction as specified;
Goods are required to be re-exported within 3 months from the expiry of the period for which they were supplied and covered under a transaction for the services mentioned above;
Importers are not allowed to sell or part with the goods without prior permission from Customs.
In the event of violation of any of the above conditions, importers are required to pay to Customs an amount equivalent to the GST payable on the exempted goods. Further information on this can be found in Notification No. 65/2017 Customs tariff, dated 8th July, 2017 and Notification No. 85/2017, dated 14 November, 2017.
Exemption of GST on supply of services to Nepal and Bhutan
Under the GST law, services will qualify as an export if one of the conditions i.e. receipt of payment in convertible foreign exchange is fulfilled. As this condition could not be fulfilled for services supplied to Nepal and Bhutan, such transactions did not qualify as exports and were subject to GST.
To overcome this issue, the Central Government has issued Notification No. 42/2017 to exempt GST on the inter-state supply of services to Nepal and Bhutan where remittance is provided in Indian Rupees.
Exemption from GST on domestic procurement of goods by Export Oriented Units (EOU)
The Government has issued Notification No. 48/2017 and Notification No. 3/2015-20 exempting EOUs from payment of GST on domestic procurements. Exemption of GST will be available via the following two options:
Option 1 1. Under this option, supply of goods to EOU would be treated as `Deemed Exports',
where the supplier will charge the applicable GST to the EOU under a tax invoice. 2. Amount charged as GST would be paid and claimed as refund by the suppliers
from the GST authorities. This is subject to the fulfilment of certain conditions.
Option 2 1. Suppliers can continue to charge GST on supplies to the EOU as per normal 2. The EOU can subsequently claim credit and refund of the GST paid on these
This exemption is subject to the fulfilment of certain conditions. Some of the key conditions are laid down below:
1. The EOU is required to self-certify the copy of Tax invoice issued by the Supplier
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and share the same tax invoice with the Supplier of goods. 2. Provide an undertaking by the EOU stating that:
No credit will be claimed on the GST charged by the supplier in the Tax invoice
No refund will be claimed on the supplies received from the supplier The supplier shall claim refund of the GST charged in the Tax invoice Note that the above exemption of `deemed exports' is applicable only to goods. For services, the EOU will be required to pay GST and claim GST refund from the GST authorities. Further information on this can be found at Notification no. 48/2017 - Central Tax dated 18 October 2017 and Notification no. 3/2015 - 20 dated 13 October 2017 (under FTP 2015-20)
Enna Budiman +62 (21) 5289 0734 [email protected]
New regulation on import of CKD/IKD vehicles
In a bid to improve the investment climate as well as to develop an independent four or more wheeled motor-vehicle industry capable of completing globally, the Ministry of Industry has issued Regulation No. 34/M-IND/PER/9/2017 on Four or More Wheeled Motor-Vehicle Industry ("M-IND 34/2017") which will be effective from 8 December 2017. M-IND 34/2017 refines Regulation No. 59/M-IND/PER/5/2010 ("M-IND 59/2010").
The key features of the new regulation are summarised below:
1. Importation of Completely Knocked Down (CKD) vehicles Any importation of CKD vehicles must encompass four main components, specifically 1) body/ cabins and/or chassis, 2) engines, 3) transmissions/transaxles; and 4) axles. Companies are required to manufacture CKD vehicles domestically, a process which requires the following activities out of the ten activities required by MOI in Article 2 of M-IND 34/2017: Body welding; Body painting; Assembly; and Quality testing and control.
There is an exception for body welding and body painting for vehicles under HS heading 8703 for sedan, passenger cars 4x2 and 4x4 with CKD value at minimum IDR 200 million per set. This is limited to a maximum import quantity of 5,000 sets per type per year, unless the excess is designated for export.
2. Importation of Incompletely Knocked Down ("IKD") vehicles Companies are required to manufacture all imported IKD vehicles domestically. This process should cover at least two out of ten of the relevant manufacturing activities mentioned in Article 2 of M-IND 34/2017. IKD vehicles are to be used in the production of the following: Road tractors for semi-trailers; Motor vehicles under HS heading 8702; Motor vehicles under HS heading 8703 which are limited Sedan and Passenger
Vehicles (both 4x2 and 4x4); Motor Vehicles under HS heading 8704; and Chassis equipped with Machine/Engine from HS heading 8706 which is used for
vehicle under HS heading 8702 with Gross Vehicle Weight (GVW) over than 5 ton.
Two requirements must also be satisfied when importing IKD vehicles: a. Minimum knockdown - a vehicle body must not be imported in welded
and painted condition, except for vehicles under Heading 87.03 that have a transaction value of more than IDR 150 million per set; this is limited to only 5,000 sets per type per year, unless the excess is designated for export; and b. Minimum completeness - should at least comprise of two types of goods and which should not include any components which have been exempted in regard to IKD vehicles.
Import procedure Prior to the importation of any CKD or IKD vehicles, companies are first required to secure approval from the relevant Director General at the Ministry, by submitting an application using the format which is stipulated under Appendix III of M-IND 34/2017, along with the documents required in Article 16 and 26 of M-IND 34/2017.
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If everything is in order, the Director General will then issue the aforementioned approval within five business days of taking receipt of any completed application. Once issued, this approval will remain valid for a period of five years.
This approval mechanism was not present in M-IND 59/2010. M-IND 59/2010 also did not incorporate any knockdown and completeness requirements.
To read the entire regulation, including more detail information about `minimum knockdown' and `minimum completeness' requirements, the M-IND 34/2017 can be obtained at the following link: http://jdih.kemenperin.go.id/site/baca_ peraturan/2330.
New requirements on import of textiles and textile products
On 31 August 2017 , the Ministry of Trade issued a new regulation concerning the Amendment of Regulation No. 85/M-DAG/PER/10/2015 ("M-DAG 85/2015") on the provisions on the Importation of Textiles and Textile Products ("TPT") i.e. No. 67/M-DAG/PER/8/2017 ("M-DAG 67/2017") which has been effective since 31 August 2017.
M-DAG 67/2017 introduces some amendments on previous regulation concerning the importation of TPT including the approval for General Importer Identification Number ("API-U") holders to import TPT into Indonesia. Previously in M-DGA 85/2015, the importation of TPT could only be performed by Producer Importer Identification Number ("API-P") holder.
Under M-DAG 67/2017, the TPT are divided into Categories A and B which are further detailed in the Appendix of M-DAG 67/2017. Both API-P and API-U are required to apply for the Import Approval of TPT (Persetujuan Impor TPT/"PI TPT") from the Director General of Foreign Trade under MOT, before importing TPT A. In addition, the PI TPT is not required for TPT B.
The API-P holder is allowed to import TPT A as raw materials or supporting goods for its production process. In addition, TPT A should be imported through a port near the industry area.
The API-P holder is allowed to import TPT B only as raw materials or supporting goods for its production process. In addition, the imported TPT B is not allowed to be handed over to other parties.
For the API-U holder, the importation of TPT A is allowed to meet the requirements of small and medium industries and should be conducted through a port near the Bonded Logistic Centre where TPT is going to be released.
The importation of TPT B by API-U holder can be conducted without PI TPT. Furthermore, the imported TPT B can also be sold or handed over to other parties.
Postponement of payment of customs duty and administration sanctions
The Ministry of Finance has issued Regulation No. 122/PMK.04/2017 regarding the postponement of payment of import duty, export duty, and/or administration sanctions payable. This has come into force as of 5 October 2017. This regulation revoked Regulation No. 26/PMK.04/2008 and Article 17 to 23 of Regulation No.214/ PMK.04/2008.
The postponement of the payment is granted to importers or exporters who experience financial liquidity difficulties. The deferred payment can be in the form of payment rescheduling or payment restructuring through installments. The postponement can be granted for a maximum of 12 months from the due date of the assessment letter and subject to a 2% interest of the debt principal per month. In order to obtain postponement approval, companies must submit an application to Customs at the latest twenty days before the due date of the assessment.
Full text of the regulation can be obtained at the following link http://www.jdih.kemenkeu.go.id/fullText/2017/122~PMK.04~2017Per.pdf
New Treatment of Long Stay Goods in Tanjung Priok Port
Effective from 6 October 2017, any imported goods that have obtained Custom Clearance Approval (Surat Persetujuan Pengeluaran Barang/SPPB) and have been stacked for more than three days in the port area, must be transferred to outside the port area (Lini 1). However, the three days deadline does not apply to goods which:
1. have not received SPPB; 2. need to be put into a quarantine process; or 3. receive Intelligence Notes (Nota Hasil Intelijen/"NHI") or a Note of Legal Action
(Nota Informasi Penindakan/NIP).
The transfer cost is to be borne by the importer regardless of who carries out the transfers. The transfer of such goods should be reported daily using the transfer realisation report to the Port Authorities. If an importer fails to transfer such long stay goods, penalties will be imposed. There is also a chance that it will affect the importer's business license.
New excise rates for 2018
In order to balance the control of the consumption of tobacco products across Indonesia and accommodate targets for the excise contribution from tobacco products to government revenue in 2018, the Ministry of Finance, through Regulation No.146/PMK.010/2017, has revised the excise tariff for tobacco products effective from 1 January 2018 (some listed in Appendix II will be effective on 1 July 2018).
For the new excise tariff and strata of excise tariff on tobacco products, please refer to the following link: http://www.jdih.kemenkeu.go.id/fullText/2017/146~PMK.010~ 2017Per.pdf
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Howard Osawa +81 (0) 3 5251 6737 [email protected]
AEOs get free choice on which Customs office to declare to
Effective from 8 October 2017, AEO operators enjoy more relaxed requirements for import and export customs clearance.
In principle, all importers or exporters are required to file an import or export declaration with the Customs office that has jurisdiction at the place where goods are imported or exported. However, under the new rules, AEO operators, including AEO importers, exporters and customs brokers are allowed to declare the imported and exported goods to any Japan Customs office via the automated customs clearance system - NACCS (Nippon Automated Cargo and Port Consolidated system).
Through this scheme, importers and exporters will be able to optimize customs clearance procedures and reduce the time and cost spent on such processes. This will also serve as an additional incentive for companies to utilise an AEO customs broker or to work towards being accredited as an AEO importer/exporter. It is suggested for companies to assess the potential benefits associated with utilizing this new scheme.
Chandrasegaran Perumal +60 (3) 2173 3724 [email protected] my.pwc.com
Transposition of the ATIGA PSR's from HS 2012 into HS 2017
As decided during the 24th Sub-Committee on ATIGA Rules of Origin (SCAROO) meeting on 12 -13 June 2017, all ASEAN Member States have agreed that while Product Specific Rules (PSRs) transposition from HS 2012 to HS 2017 is ongoing, those who have implemented HS 2017 now have the following two options:
1. To indicate HS 2012 tariff classifications in brackets when issuing the Certificate of Origin, i.e. Form D, to the importing countries who are still using HS 2012; or
2. To indicate either HS 2012 or HS 2017 tariff classifications when issuing Form Ds to the importing countries who have implemented HS 2012 and HS 2017 respectively.
Of the above, Malaysia has chosen Option 1. This means all applications for ATIGA Form D should indicate the following information in Box 7: Number and type of packages, description of goods (including quantity where appropriate) and HS number of the importing country:
a. Importing Country HS Code (based on importer's advice to the applicant for Form D); and
b. Exporting Country HS Code with Remark of HS 2012 in brackets. As a reference, the Ministry of International Trade and Industry suggested the applicant company to use the HS tariff classification approved for finished products in its cost analysis before 1 April 2017.
Anti-dumping duties on certain cold-rolled stainless steel in coils, sheets or any other form
On 11 October 2017, the Malaysian Government imposed provisional antidumping duties on the imports of cold-rolled stainless steel in coils, sheets or any other form, with a thickness of not more than 6.5 millimeters and width of not more than 1,600 millimeters (HS codes 7219.31.00 00, 7219.32.00 00, 7219.33.00 00, 7219.34.00 00, 7219.35.00 00, 7220.20.10 00 and 7220.20.90 00), originating or exported from China, Korea, Taiwan, and Thailand.
The anti-dumping duties imposed on these cold-rolled stainless steel products range from 7.27% to 111.61%. They have been made effective from 12 October 2017 to 8 February 2018. The MITI will make a final determination in relation to the investigation within the period of 120 days from 12 October 2017.
Further details of the Customs (Provisional Anti-Dumping Duties) Order 2017 can be found at the following link: http://www.federalgazette.agc.gov.my/ outputp/pua_20171011_PU%20A%20310.pdf
Pangkor Island, Perak is now a Duty Free Island
On 27 October 2017, the Malaysian Government declared Pangkor Island as a Duty Free Island from 2018 onwards. The duty free status is aimed stimulating the economic growth of the country, besides boosting tourist arrivals to Perak. However, the status will exclude products such as alcoholic beverages, tobacco and tobacco products, and motor vehicles.
The Perak State Government will work to itemize the goods that can be given import duty and GST exemptions. A list will be presented to the Ministry of Finance (MOF) for consideration before being included in a Gazette Order
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Cancellation of Certificate of Registration for importers of defunct electronic equipment
On 10 November 2017, the Energy Commission (EC) of Malaysia announced that importers of electronic equipment that have failed the consignment assessment conducted by the Scientific and Industrial Research Institute of Malaysia (SIRIM) due to defects, have 90 days to repair or dispose of such equipment.
After the given period, the SIRIM will notify the EC on the consignment assessment outcome through the issuance of a failure report. The EC will then proceed to cancel the importer's Certificate of Approval (COA) for the affected import consignment.
Importers who are found to be selling or releasing the defective electronic equipment and to have failed to conduct a product recall, advertise in local newspapers widely, or dispose of or return the defective equipment to the countries of origin, will have their Certificate of Registration (COR) cancelled by the EC.
Further details can be found at the following link: http://www.mytradelink.gov.my/admin-page/-/blogs/suruhanjaya-tenagapemakluman-pembatalan-perakuan-pendaftaran-certification-of-registration-
*Note: COA can only be applied for after the importer obtains the COR in Malaysia.
Termination of anti-dumping duty on imports of biaxially oriented polypropylene films
On 13 October 2017, the MITI gazetted a notice of impending termination on the imposition of anti-dumping duty on the imports of biaxially oriented polypropylene films of thickness between 13 to 50 microns. The relevant HS/AHTN codes are 3920.20.200 / 3920.20.1000, respectively.
The current rates of the anti-dumping duty for the above products are between 0% and 12.37% of the export price. These anti-dumping duty rates are due to expire on 22 April 2018.
Printable shrink films, metallised films and tape originating or exported from Indonesia, China, Taiwan, Thailand, and Vietnam are however excluded. Importers, traders, producers and other interested parties who wish to share their views should have submitted their written views by 22 December 2017.
Further details can be found at the following link: http://www.federalgazette.agc.gov.my/outputp/pub_20171013_P.U.%20(B)%20 477%202017.pdf
Amendments to the Customs (Prohibition of Exports) Order 2017
Key changes of the amendments to the Customs (Prohibition of Exports) Order 2017 are as follows:
1. All exportation of used televisions, washing machines, clothes dryers, refrigerators, air conditioners, hand phones, and mobile phones are now required to obtain a letter of approval issued by the Department of Environmental Quality.
2. All pesticides whether or not technical grades, technical concentrates or formulated products that fall under subheading 3808.50 are now to be covered by subheading 3808.52.
Further details of the Customs (Prohibition of Exports) (Amendment) Order 2017 can be found at the following link: http://www.federalgazette.agc.gov.my/outputp/pua_20171020_PUA%20321.pdf
Launch of first phase of Digital Free Trade Zone
On 3 November 2017, Malaysia and the world's largest online retailer Alibaba launched operations at the Digital Free Trade Zone (DFTZ), a regional logistics hub aimed at small and medium-sized enterprises (SMEs).
The first phase of the DFTZ is a warehousing facility located in Aeropolis Park, Kuala Lumpur International Airport (KLIA), and is operated by national courier POS Malaysia. The former cargo terminal has already been transformed into a full-fledged warehouse with sorting, shelving and pick-pack facilities that deploy automated guidance vehicles. The DFTZ will merge the physical and virtual spaces, providing offline as well as online digital services.
Two important components expected to support SMEs with end-to-end cross border trade are:
e-Fulfillment Hub: Aims to help SMEs and businesses export their goods easily. It also serves as a cluster of facilities for customs clearance, warehousing and logistics, to facilitate and accelerate double digit growth of trans-shipment air cargo volumes. The eFulfillment Hub will be located at the KLIA Aeropolis and will include state-of-the-art facilities such as robot-equipped warehouses.
e-Services Platform: Offers services ranging from customs clearance to freight forwarding that will manage cargo clearance and other processes needed for cross-border trade. The platform aims to provide a seamless service through an integrated trade facilitation platform that provides access to eCommerce ecosystem players (financing, last mile fulfilment, insurance, digital marketing and others).
Further details about the first phase of the DFTZ can be found at the following link: https://mydftz.com/wp-content/uploads/2017/11/DFTZ-GOES-LIVE-PRESSRELEASE.compressed.pdf
Issuance of Correlation Table Customs Duties Order 2017
On 23 October 2017, the Royal Malaysia Customs Department issued correlation tables showing the conversion of tariff codes from the Customs Duties Order 2012 and the ASEAN Harmonised Tariff Nomenclature 2012 to the Customs Duties Order 2017.
The complete correlation tables can be found at the following links:
For the Customs Duties Order 2012: http://www.customs.gov.my/en/ Documents/PDK%202012%20-%20PDK%202017.pdf
For the ASEAN Harmonised Tariff Nomenclature 2012: http://www.customs.gov. my/en/Documents/AHTN%202012%20-%20PDK%202017.pdf
Special Border Economic Zone (SBEZ) in Bukit Kayu Hitam to become a Free Trade Zone
On 28 October 2017, the Special Border Economic Zone (SBEZ) in Bukit Kayu Hitam, a border town strategically located at the Malaysian-Thai border was proposed to be developed into a Free Trade Zone in the 2018 Budget.
The much-awaited project will help to transform the border town and is expected to boost the economic activities in the northern region of Peninsular Malaysia by tapping into the economic boom of southern Thailand.
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Dagang NeXchange Bhd launches first web portal for cargo and trade management
On 5 October 2017, the e-services provider, Dagang NeXchange Bhd (DNex) launched 1Trade Malaysia's first cargo and trade management web portal. 1Trade is designed to converge supply chain and cross border logistics processes in order to simplify cargo and trade management processes for businesses in the trade facilitation and logistics sector; namely, exporters, importers, and logistics service providers. The web portal captures data from the initial stage of importers' and exporters' invoicing and packing list through the forwarding and shipping journey, regulatory and agency clearance and approval, up to the delivery point. Meanwhile, DNex has also inked a Memorandum of Understanding with e-commerce service providers from six countries namely Singapore, Thailand, Indonesia, Philippines, Taiwan and South Korea, to work together towards a more efficient cross border trade system.
Tanarat Permpoonsap +66 (2) 344 1196 [email protected] com
Implementation of HS 2017 version
The Myanmar Customs Department has published the Customs Tariff of Myanmar version 2017, which has been effective since 1 October 2017. The 2017 version follows the WCO HS 2017 as well as the ASEAN Harmonised Tariff Nomenclature 2017. Under the new 2017 version, the tariff also provides Myanmar Automated Cargo Clearance System Code (MACCS Code) to ease customs formalities on imports/exports via the MACCS.
Note that old HS versions may still apply for particular preferential Certificates of Origin (CoO), e.g. Form E under the ASEAN-China Free Trade Agreement that still uses the HS 2012 version. As such, companies using preferential CoOs need to ensure that they indicate the appropriate HS codes based on the relevant HS version in the CoO.
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Alex Saborio +65 6236 4192 [email protected]
Return of audit function to the Bureau of Customs
An Executive Order (EO) No. 46/2017 was issued on 20 October 2017, returning the post clearance audit function from the Department of Finance back to the Bureau of Customs. This mandates Customs to create a permanent body to perform the audit function that should compose of the Trade Information and Risk Analysis Office and the Compliance Assessment Office. The EO takes effect 15 days after it is published in a newspaper of general circulation.
The EO also reverted the statute of limitation from 10 years to 3 years.
Tightened Customs measures: 80% of cargoes to the red lane
With the suspension of the green lane since 31 August 2017, all shipments, except for certified Super Green Lane and Super Green Lane Plus importers, now fall in the red or yellow lanes. This means that all shipments either undergo document review and X-ray examinations, or document review alone respectively.
On 29 September 2017, the Customs selectivity system was adjusted to raise the threshold of containers that must enter the red lane daily, from 20% to 80%. This means the remainder 20% will be flagged to the yellow lane. Previously, approximately 20% of cargoes were directed to the red lane, 60% to the yellow lane, and 20% to the green lane.
Further, from 12 October 2017, Customs ordered the examination of all containerized cargoes intended to customs bonded warehouses and all shipments tagged under the red lane, with the exception of shipments bound to Philippine Economic Zone Authority (PEZA), cargoes containing perishable goods not originating from China, cargoes consigned to multinational companies, and shipments for government projects. These shipments will be directed to the "yellow" lane, unless concerning information is discovered causing the cargoes to be subjected to red lane inspection. There is no clear definition of what may be concerning information.
The "square root rule" was also implemented on 25 October 2017 to ease port congestion. This means that when an import entry covering a bill of lading with multiple containers is tagged for x-ray inspection, the actual number of containers to undergo x-ray inspection will be the square root, rounded upwards, of the total number of containers (e.g., if there are nine containers, three will be x-rayed; if there are six containers, three will be x-rayed). If any container within the square root rule is found to be suspicious, the containers of the entire shipment will undergo 100% physical examination or be issued with an Alert Order.
Major entry ports have introduced 24-hour operation of x-ray inspections to keep up with the volume of cargoes for examination. Yet authorities have encountered problems in the operation of x-ray machines, forcing Customs to reconsider and adjust the selection threshold to 20% for red and 80% for yellow lanes at the Port of Manila and the Manila International Container Port. For all other ports, the thresholds remain at 80% red and 20% yellow. as it would increase costs.
Customs releases reference values
One of the priorities of the new Customs' Chief is to improve revenue collection by ensuring that good are properly valued. He ordered a stop to the benchmarking of goods in the assessment of duties and taxes, and reiterated the use of correct valuation methodology according to the WTO Valuation Agreement which primarily uses the transaction value method. Benchmarking favors the use of discretionary values over the documented invoice values, which leads to room for corruption.
In relation to this, Customs issued a number of memoranda enumerating reference values for certain goods such as meat, fishes, iron, steel, aluminum, certain articles of rubber, photographic paraphernalia, etc. These reference values serves as a guide to Customs officials to scrutinize importation of specified items falling below the established value. This will only serve as basis for Customs to review and verify the value declared and does not work as a substitute value.
A list of goods affected with their established reference values may be accessed through the following links:
Mandatory 5-day response time for Customs to act on official communication
Following the President's directive requiring government agencies to process requests from the public within 15 working days, the Commissioner of Customs has ordered a more aggressive five-day timeframe for Customs to act on official communication by stakeholders.
For further reference, access the Bureau's Freedom of Information Manual at the following link: http://customs.gov.ph/wp-content/uploads/2017/10/mem-201710-021-Freedom-of-Information-FOI-Manual.pdf.
Mandatory use of Document Processing Time Form
Customs has mandated the use of the Document Processing Time Form. The Document Processing Time Form is a means utilized by Customs to provide stakeholders with a uniform process flow, clearly identifying the person responsible for every activity and period of time involved for each process; and to acquire information as to which areas or stages in the customs clearance process incur delay.
The form can be found at: http://customs.gov.ph/wp-content/uploads/2017/11/mem-2017-11-020Mandatory-Use-of-the-Document-Processing-Time-Form.pdf.
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Advance ruling guidelines on tariff classification of goods
The Customs Modernization and Tariff Act provides that traders may apply for an official written decision from the Tariff Commission on the appropriate tariff classification of goods prior to importation or exportation.
Procedure on securing an advance ruling on tariff classification 1. Submit the application form (TC Form 1) in three copies, together with
supporting documents and samples of the good, if necessary. The application must be made at least 90 days before the date of importation or exportation, and one application must cover one product only. 2. Pay the filing fee of 500 pesos (approx. USD 10) and legal research fund fee of 10 pesos (approx. USD 0.20). 3. Submit additional information, if required by the Tariff Commission. 4. Check status of application at www.tariffcommission.gov.ph. 5. Issuance of advance ruling within 30 days of a complete application
The advance ruling is effective and valid for 5 years.
New internal revenue stamps for cigarettes
The Bureau of Internal Revenue, in an effort to counter fake stamps resulting in smuggling and lost revenues, released a new cigarette stamp with a new design and added features. Effective 1 September 2018, all imported and locally manufactured cigarettes must be affixed with the new stamp.
The new stamp comes in different color designs according to whether the cigarettes are packed by hand or by machine (bearing a unitary tax rate) for locally manufactured cigarettes, imported cigarettes, or designated for export.
New guidelines concerning the certification of portland cement and blended hydraulic cement with pozzolan
New rules and regulations regarding the mandatory Philippine Standard (PS) Licensing Scheme of locally manufactured and imported (1) portland cement covered by Philippine National Standard (PNS) 07:2005 and (2) blended hydraulic cement with pozzolan covered by PNS 63:2006 have been set, to ensure that cement products distributed in the Philippines meet the criteria prescribed by the Bureau of Philippine Standards.
The guidelines provide that only cement from cement manufacturing plants with valid PS License may be distributed in the Philippine market. The PS License is the authority given to a local or foreign manufacturer found to be compliant with the requirements of the Bureau of Philippine Standards, authorizing the use of PS Certification Mark on its products. The Certification Mark is affixed on the cement bag, sling bag or jumbo bag, whichever is applicable.
For imported cement, the importer must apply for a Statement of Confirmation (SOC) on a per product, per shipment, per bill of lading basis to prove that the importation was sourced from a manufacturer with a PS License, and that the imported cement product appeared to be compliant with specified requirements after undergoing inspection and verification.
PS Licenses issued prior to the effectivity of this regulation (15 days, after publication on 14 November 2017) remain valid until expiration or sooner revoked or withdrawn.
Frank Debets +65 6236 7302 [email protected]
Turkey Singapore Free Trade Agreement (TRSFTA) enters into force
The TRSFTA has officially entered into force from 1 October 2017. Signed in November 2015, the TRSFTA covers areas such as trade in goods and services, investments, e-commerce, competition and transparency.
For more information, please refer to the FTA Focus section.
Singapore Customs updates security application and extension forms
Traders who are required to furnish security to Singapore Customs should take note of changes made to the security application/extension forms. These new forms took effect on 23 October 2017.
Previously, traders had to lodge separate security application forms for "Permits" and "Permits & Licensed Premises". These forms have since been updated and consolidated into a single Security Application Form. The new Security Application Form clarifies that the security lodged covers various capacities in which a trader may be liable to Singapore Customs. This includes the capacity of an importer, exporter, Customs' permit holder, Customs' Scheme holder, licence holder, declaring agent, etc. The Security Extension Form has also been updated.
Singapore Customs have been sending out security renewal letters throughout November 2017 to traders with security expiring in December 2017. This is to remind traders to lodge a new security with the updated Security Application Form, as an extension of an existing security lodged with the previous form is not allowed.
Prohibition on all commercially traded goods to or from the Democratic People's Republic of Korea (DPRK)
Singapore has placed a prohibition on all commercially traded goods to or from the DPRK from 8 November 2017. `Commercially traded' goods refer to goods that are exchanged for money or barter-traded. The embargo covers imports, exports, transhipments and goods brought in transit through Singapore. Significant penalties apply to persons who contravene the above prohibition.
Trade of non-commercial goods must comply with the United Nations Security Council Resolutions 2371 and 2375, which are published in the Regulations of Imports and Exports (Amendment No. 2) Regulations 2017. A TradeNet permit application is required and must be submitted at least 3 working days prior to the intended date of shipment.
Electronic exchange of ATIGA Form D from 1 January 2018
Singapore Customs announced on 9 November 2017 that Indonesia, Malaysia, Singapore, and Vietnam will transition to the ASEAN Single Window (ASW) on 1 January 2018. This means that from 1 January 2018, traders will be able to electronically transmit the preferential Certificate of Origin for ATIGA (Form D) from Singapore to any of the other three countries to enjoy preferential tariff treatment. This is referred to as an "e-ATIGA Form D". Exporters are encouraged to utilise the ASW, as barring potential teething problems, the ASW is expected to expedite the customs clearance of goods.
Pre-registration required Note that exporters or their declaring agents must be pre-registered with Singapore Customs to authorise the transmission of e-ATIGA Form Ds via the AWS. A copy of
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the registration form can be requested from [email protected]
Back-to-back Form D application
For back-to-back Form D application, exporters need not provide a hardcopy Form D. Exporters can simply make reference to its e-ATIGA Form D reference number that was issued in the first exporting country in the "Remarks" column of the corresponding TradeNet declaration. This is provided the following conditions are met:
Goods originate from Indonesia, Malaysia, Singapore, or Vietnam; The e-ATIGA Form D is issued on or after 1 January 2018; and The exporter has successfully received the e-ATIGA Form D from the first
exporting country via TradeNet.
Exports can also utilise the same procedures for e-ATIGA back-to-back Form D, if goods are subsequently being exported from Singapore to one of the other three countries and the above conditions are met.
Singapore Customs Circular No. 15/2017 can be accessed at the following link: https://www.customs.gov.sg/~/media/cus/files/circulars/ca/2017/ circular152017%20ver%201.pdf
Freight forwarder not considered importer in trademark infringement case
In 2013, two shipments of goods from China bound for Batam, Indonesia were transhipped through Singapore. While the goods were in the Singapore ports, Singapore Customs intercepted and inspected them, and found that they were counterfeit goods. The goods were seized by Singapore Customs under Part X of the Trade Marks Act under "assistance by border authorities". The transhipment in Singapore was handled by a freight forwarder, Megastar Shipping Pte Ltd ("Megastar"), on behalf of a third party in Batam. On the Sea Waybill, Megastar was named as the consignee and notify party. They should have also been named as the "importer" and "exporter" on the cargo clearance permits if the goods had not been seized. Invoices and packing lists for both shipments named the third party in Batam as the consignee.
Subsequently, the trade mark owners: Louis Vuitton Malletier, Guccio Gucci SPA, Burberry Limited, Hermes International and Sanrio Company Ltd (collectively "trade mark owners") launched an action for trade mark infringement against Megastar.
On 24 November 2017, a decision was made at the High Court determining that for the purposes of the Trade Marks Act, the transhipment action was considered to be an importation. However, Megastar, as the freight forwarder, was not considered the importer. It therefore follows that it did not commit the act of importing or exporting counterfeit goods.
The decision recognises that the definition of terms such as "import", "export", "importer" and "exporter" are not the same across different statues the Customs Act, the Regulations for Import and Export Act, and the Trade Marks Act that this action was brought under. It was found that Megastar had no responsibility for making the shipping arrangements, packing or loading the containers on board the inbound vessels. For the purposes of the Trade Marks Act, Megastar could not be considered to have "brought" or "caused to have brought" counterfeit goods into Singapore. Therefore, they were not considered the importer. Instead either the shippers in China or the third party in Batam should be considered the importer in this case.
Janice Lee +886 2 2729 6666 Ext. 23856 [email protected]
New import regulations for beef and beef products from Japan, Netherlands and Sweden
The Ministry of Health and Welfare has announced new import regulations for beef and beef products from Japan, the Netherlands and Sweden. The new regulations have been effective since 18 September 2017.
The applicable import regulations for each country are summarized below:
Requirements for beef and beef products
Permitted countries for importation of beef and beef products
1. Must be locally born and raised, or born in the permitted countries for beef and beef product importation and raised in Japan for at least 100 days or more.
2. Must be Bos taurus and Bos indicus with age less than 30 months old.
3. Factories and facilities for beef production in Japan must be registered under the Ministry of Health, Labour and Welfare (MHLW) and are required to implement the periodic monitoring and audit plans approved by the MHLW.
4. Ante-mortem and post-mortem inspections must be supervised by a Veterinary Meat Inspector to ensure compliance with Japanese legislation and regulations.
1. Must be locally born and raised, or born in permitted countries for beef and beef product importation and raised in the Netherlands for at least 100 days or more.
2. Must be Bos taurus and Bos indicus with age less than 12 months old.
3. Factories and facilities for beef production in the Netherlands must be registered under The Netherlands Food and Consumer Product Safety Authority (NVWA) and are required to implement periodic monitoring and audit plans approved by the NVWA.
4. Ante-mortem and post-mortem inspections must be supervised by a Veterinary Meat Inspector to ensure compliance with Dutch and EU legislation and regulations.
1. Must be locally born and raised, or born in the permitted countries for beef and beef product importation and raised in Sweden for at least 100 days or more.
2. Must be Bos taurus and Bos indicus with age less than 30 months old.
3. Factories and facilities for beef production in Sweden must be registered under the Sweden National Food Administration (NFA) and are required to implement the periodic monitoring and audit plans approved by the NFA.
4. Ante-mortem and post-mortem inspections must be supervised by a Veterinary Meat Inspector to ensure compliance with Swedish and EU legislation and regulations.
Apart from specific requirements on beef products, the three countries are also required to comply with the following policies and procedures during meat production in order to ensure the appropriate handling or disposal of Specified Risk Material (SRM).
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Documentation upon import
Procedures and requirements for beef and beef products
Beef and beef product should hold specific certificates issued by the MHLW (for exports from Japan), NVWA (for exports from the Netherlands), NFA (for exports from Sweden). Certificates should contain, but are not limited to, the following information:
Origin country of birth and feed; Information of the specific slaughterhouse, meat production
factories or storage facilities, Export documentation showing the name and signature of the
Veterinary Meat Inspector, and Specific declaration statements in accordance with regulations.
Bovine Spongiform Encephalopathy (BSE)
Import restriction or suspension measures
Where there are cases of bovine spongiform encephalopathy (BSE), the MHLW (Japan), NVWA (the Netherlands) or NFA (Sweden) should immediately inform the relevantTaiwanese authorities and agencies, who will perform the necessary investigations and supervisions. For such cases, Taiwan retains the legal right to conduct field audits in Japan, the Netherlands or Sweden; and suspend beef and beef product when necessary in accordance with the World Organization for Animal Health.
Taiwan retains the legal right to perform import restriction or suspension measures.
For cases of serious violations of food security policies, imports of beef and beef products from Japan, the Netherlands or Sweden will be suspended.
Regular field audits on meat production factories and facilities can also be performed. Where field audit results depict a violation of regulations, beef and beef product imports can also be suspended.
Competent authorities may also conduct inspections at the port-of-entry, where supplementary documents and adjustment plans will be requested by the authorities.
1. Beef and beef products made from bovine animals suspected or proven to be contaminated by bovine spongiform encephalopathy (BSE) are prohibited from import into Taiwan.
2. All imported beef and beef products are subject to inspections at the source, border and market end in accordance with the relevant legislation, regulations and protocols governed by the Taiwan Ministry of Health and Welfare and Food and Drug Administration.
3. Certain beef and beef products such as ground meat, skull, brain, eyes, spinal cord, heart, lungs, pancreas, kidneys, livers spleens, stomach, guts, bladders, uteri and other prepared or preserved internal organs are prohibited from import into Taiwan.
Refer to the following link for more information on import regulations for beef and beef products: http://www.ieatpe.org.tw/nboard/view.asp?ID=7485
Import controls extended to Canada, Japan, the Nederlands and Sweden
On 21 September 2017, following the amendment of the "List of Commodities Subject to Import Restriction", the Ministry of Economic Affairs has updated the regulation description for import regulation code "113". In Taiwan, for the purpose of import declaration and for the convenience of the public, most import/export regulations have been compiled into three numerical digit codes and put under the Commodity Classification of The Republic of China (CCC) code. For example, "111" is for import of controlled goods subject to license from the Bureau of Foreign Trade (BOFT) and "114" is for goods prohibited for import from the Democratic People's Republic of Korea (North Korea). Code "113", which covers imports of controlled goods from the United States or Canada that are subject to import licenses from the BOFT, has now been updated to include Canada, Japan, the Netherlands and Sweden. When applying for licenses, applicants must submit certificates for meat products issued by the national competent authorities of animal health and food safety. Applicants for products from the US, for example, must submit FSIS Form 9060-5 (Application for Export Certificate), FSIS Form 2630-9 (Veterinary Certificate for Meat Products), or FSIS Form 9285-1 (Certificate for Export to Taiwan), each issued by the USDA. Applicants for products from Canada must submit a veterinary certificate and a certificate of inspection covering meat products, issued by Health Canada or the Canadian Food Inspection Agency. Please refer to the following links for the notice http://gazette.nat.gov.tw/egFront/ detail.do?metaid=93684&log=detailLog and the full list of import regulation codes https://f bf h.trade.gov.t w/rich/text/f hj/asp/FHJ P050Q.asp
Standards for cosmetics products' ingredients 2017 edition
The FDA has published the new edition publication on standards for cosmetic product ingredients. This booklet of cosmetic ingredient standards includes the common cosmetic ingredients, its required standards, and the various testing methods for inspection. Refer to the following link for more information on the required standards for specific cosmetic ingredients: https://www.fda.gov.tw/TC/siteList.aspx?sid=646
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Amendments to Regulations governing Customs Clearance Procedures for Maritime Express Consignments/ Air Express Consignments / Postal Parcels
The following table illustrates the amendments on Regulations governing Customs Clearance Procedures for Maritime Express Consignments/ Air Express Consignments / Postal Parcels.
Amendments on Regulations governing Customs Clearance Procedures for Maritime Express Consignments/ Air Express Consignments / Parcels
Maritime Express Consignments
Air Express Consignments
Regulations Governing Customs Clearance Procedures for Maritime Express Consignments
Regulations Governing Customs Clearance Procedures for Air Express Consignments
Amendment of Article 10: Where the transition of goods occurs on a no transaction basis with no commercial invoices attached, the consigner is required to attach documents indicating the value of the goods for Customs inspection purpose.
Regulations Governing Customs Clearance Procedures for Parcels
Duty Exemption Limitation
Amendment of Article 11 In accordance with the amendment of Customs Act Article 49.2 on the duty exemption threshold, the duty exemption threshold is adjusted from NTD 3,000 to NTD 2,000. This will take effect from 1 January 2018.
Amendment of Article 21 In accordance with the amendment of Customs Act Article 49.2 on the duty exemption threshold, the duty exemption limit is adjusted from NTD 3,000 to NTD 2,000. This will take effect from 1 January,2018
Duty Exemption for sample products
Simple Declaration for Foreigners
Amendment of Article 12 Importers may utilize simple declaration processes for sample goods imported via non personal importation express parcels, provided the import customs value (per shipment basis) is less than NTD 3,000 .
Amendment of Article 14 and 19 Foreigners can now import via simple declaration by providing their Foreign Resident's Certificate or passport number.
Amendment of Article 12 Importers may utilize simple declaration processes for sample goods imported via non personal importation express parcels, provided the import customs value (per shipment basis) is less than NTD 3,000 . However, goods subject to commodity tax, luxury tax, or tariff quotas must still be imported via formal import declaration processes.
Amendment of Article 13 Foreigners can now import via simple declaration by providing their Foreign Resident's Certificate or passport number.
Not Applicable Not Applicable
Amendment of Article 12 The definition of frequent importation has been applied to Postal Parcels in accordance with Customs Act 49.2.
Paul Sumner +66 (2) 344 1305 [email protected]
Update on export control measures of dual-use items
According to a Cabinet Resolution on 17 October 2017, the Cabinet has approved the principles of a new Ministry of Commerce (MOC) Notification regarding Specifying dual-use items as goods requiring permission and subject to export measures (No.2). For more information please refer to Export Control section.
Introduction of Tariff e-service
In November 2017, Thai Customs introduced a new online channel to apply for advance classification rulings called "tariff e-service" to facilitate companies to submit application forms.
Under the new online channel, companies can submit an application and all supporting documents via the customs website. The new system also allows companies to check the status of the application online. However, it is understood that the integration of e-payments with the application system is not yet operational. This is expected to be integrated by January 2018.
Rulings will still be issued in hard-copy format and subsequently sent to the company via post. Similar to manual submissions, rulings will be valid for two years from the date of issuance.
The current Customs Notification No.39/2558 (2015) regarding Advance Tariff Classification Services is still valid. However, Thai Customs is in the process of issuing a new Notification to cover the e-service, and it is understood that this will be published soon.
Implementation of new Customs Act triggers surge of Notices of Assessment
Following the implementation of the new Customs Act on 13 November 2017, we understand that many companies have recently been issued with a Notice of Assessment (NoA) from Thai Customs. The NoA may have been issued just before or around the same time the new Act came into force.
The NoA typically covers significant amounts, particularly if it was issued following a pending post-clearance Customs audit or investigation covering many years of back duties and fines. If a company does not agree with an NoA and decides to appeal against it, it must do so within 30 days of receiving the NoA. Such company would need to first pay the NoA, also within 30 days of receiving it, before being able to appeal. This could be a significant administrative burden, as an appeal has to be filed for each and every NoA and the amounts covered by these NoA may be significant.
The current rules do allow companies to place a deposit guarantee instead of paying the NoA upfront, but this requires written approval from the Customs Director-General.
If a company has recently received a NoA and would like to appeal against it, we recommend you make sure that the appeal is lodged within 30 days of receiving it. Also, if the company is not in the position to pay the NoA first, early discussions with Customs on the possibility of deferring payments are strongly recommended to ensure that the company will not lose its right to appeal.
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Pham Van Vinh +84 (8) 3823 0796 Ext.1503 [email protected]
Stricter control on preferential Certificate of Origin
On 6 November 2017, the General Department of Customs issued Official Letter no. 7225/TCHQ-GSQL ("OL 7225") to Customs Sub-departments of provinces and cities regarding inspection procedures for verification of origin and labelling of imported goods.
As specified in the letter, the customs office can perform physical inspections on goods and conduct verification procedures for cases of: Suspicion or doubt on the origin declarations of imported goods or Inconsistent information declared in the Certificate of Origin compared to the
information shown on the label of imported goods (e.g. product name, name and address of organizations or individuals responsible for the goods, origin of goods etc.)
Where violations are detected, provincial customs authorities are required to report to the Customs Control and Supervision Department of the General Department of Customs, including all relevant documentation.
Refer to the following link for the Official Letter no. 7225/TCHQ-GSQL: https://thuvienphapluat.vn/cong-van/Xuat-nhap-khau/Cong-van-7225-TCHQGSQL-2017-tang-cuong-cong-tac-kiem-tra-xuat-xu-nhan-hang-hoa-366474.aspx
Issuance of Supplementary Explanatory Notes 2017 (SEN 2017)
On 18 October 2017, the General Department of Customs issued Official letter 6803/TCHQ-TXNK ("OL 6803") together with additional supplementary explanatory notes for the classification of export and import goods. The list of Vietnamese Exports and Imports are regulated in Circular 65/2017/TT-BTC and guidance for classification and analysis of goods are specified in Circular 14/2015 TT-BTC.
Although the SEN 2017 is not part of the ASEAN Harmonized Tariff Nomenclature (AHTN), it is considered a technical tool and can be used as technical reference material for the classification of goods. Specifically, the SEN provides guidance for classification of certain specific goods at the 8-digit level in the AHTN as proposed by member countries. The SEN 2017 should be read together with the Explanatory Notes (EN) to the HS.
The official letter will replace the previous letter No. 6901/TCHQ-TXNK issued by the General Department of Customs.
Refer to the following link for the Official Letter 6803/TCHQ-TXNK: https://thuvienphapluat.vn/cong-van/Xuat-nhap-khau/Cong-van-6803-TCHQ -TXNK-2017-Chu-giai-bo-sung-SEN-365784.aspx
Guidelines issued on implementation of certain articles in the Law on chemicals
On 9 October 2017, the Government issued Decree 113/2017/ND-CP ("Decree 113") providing guidelines for the implementation of certain articles in the Law on chemicals. This decree, which replaces Decree No. 108/2008/ND-CP, entered into force on 25 November 2017.
The key points specified in the Decree are summarized below:
The decree specifies five lists of chemicals (Annex 1 to 5) which are subject to specific conditions and regulatory control requirements for manufacture or trade. The lists of regulated chemicals are as follows:
1. Annex 1: List of chemicals subject to conditional production or import 2. Annex 2: List of chemicals restricted from production or import 3. Annex 3: List of banned chemicals 4. Annex 4: List of hazardous chemicals where chemical incident prevention
and response plans are required 5. Annex 5: List of chemicals requiring compulsory declarations via the
national single-window portal before customs clearance. The required information includes chemical information, commercial invoices and chemical safety data sheets in Vietnamese. Manufacturers are also required to declare these chemicals annually in their annual reports.
Chemicals that are within Annex V may be exempted from declaration provided they fall under the following categories:
1. Chemicals that are produced or imported for the purposes of national security, defense and encounter to natural disasters and epidemics
2. Chemicals used as narcotic pre-substances, explosive pre-substances, industrial explosive materials and chemicals from chemical table where licenses for production or import have been issued
3. Chemicals imported that weigh less than 10 kg per shipment. This exemption, however, does not apply to chemicals that are restricted from production or trade for the industrial sector
4. Chemicals used as raw materials for the production of medicines or pharmaceutical substances imported for production under medicine registration dossiers that have been issued a Certificate of Registration for Circulation of Medicines in Vietnam
5. Chemicals used as raw materials for the production of plant protection medicines or pesticides, which have been granted the Certificates of Registration of Plant Protection Medicine in Vietnam
Documents related to the declaration of imported chemicals are required to be retained for at least 5 years.
Chemicals traders will be allowed to keep the name and quantity of chemicals and information regarding technological and trade secrets confidential. However, important information used for the protection of community health and environment, such as product trade names, names of producers or importers, chemical safety data sheets, cautions for use, measures in response to possible incidents etc. will still be required to be disclosed or declared.
Transitional arrangements and implementation periods for projects requiring an emergency response plan is also included in the decree. Current permits that have been issued will also remain valid until expiry.
The full regulation can be accessed at the following link: https://thuvienphapluat.vn/ van-ban/Tai-nguyen-Moi-truong/Decree-113-2017-ND-CP-guidelinesimplementation-Law-on-Chemicals-364873.aspx
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Six procedures to be implemented in the National Single Window system
The Ministry of Industry and Trade (MoIT) has coordinated with the General Department of Customs to implement six new administrative procedures in the National Single Window (NSW) in 2017, i.e. 1. application of import/export licenses for explosive precursor substances used in
industry; 2. application of import-export licenses for precursor substances used in industry; 3. procedure for declaration of import of chemicals; 4. procedure for import of cigarettes for non-commercial purposes; 5. procedure for requesting participation in pilot of self-certification of origin in
ASEAN; 6. procedure for informing import quotas of cigarette ingredients, tobacco paper. MoIT has completed building the system for receiving dossiers from the NSW for procedure 1, 2, and 5 above, and also completed the online public services for procedure 4 and 6. Procedure 3 has been launched on 25 November following the coming into force of Decree 113/2017/ND-CP.
Pilot implementation of 24/7 electronic duties payment with 5 banks
In order to streamline the administrative procedure, reduce lead time, and optimise customs duty and import taxes payment collection, the General Department of Customs has signed agreements with 5 banks on the pilot implementation of 24/7 electronic duties payment (e-payment). The banks are the Commercial Bank for Foreign Trade of Vietnam (Vietcombank), the Vietnam Commercial Bank for Industry and Trade (VietinBank), the Bank for Investment and Development of Vietnam (BIDV), Military Commercial Bank (MB Bank), and the Vietnam Technological and Commercial Bank (Techcombank). The system has been developed since June 2017 and marked as one of Vietnam Customs' key projects in 2017. The e-payment can be accessed via https://epayment.customs.gov.vn/ epaymentportal/login to monitor and obtain information on companies' tax payment and liabilities.
Around the world
Results of PwC's 2017 APEC CEO Survey
Published in November 2017, PwC's APEC CEO Survey shows that Asia Pacific CEOs expect their business in the coming three years will become more global, more automated and more tied to a region that they believe is slowly and steadily becoming more economically cohesive. Furthermore, they are more optimistic than they were two years ago with 37% saying that they are very confident of their prospects for revenue growth in the coming year. Stronger prospects for GDP growth in some APEC economies and from export markets in Europe are bolstering that sentiment.
International trade flows are also picking up and projected to outpace global economic growth in 2017 for the first time in five years, according to the WTO. A total of 1,412 CEOs and industry leaders took part across all 21 APEC economies online or on paper between 9 May and 14 July 2017. 63% of those regional business leaders expect their global footprint will expand over the next three years. A net 50% plan to increase investments globally, up from 43% at the same time last year.
The survey key findings can be accessed at the following link https://www.pwc .com/gx/en/ceo-agenda/apec/pdf/pwc-2017-apec-ceo-survey-key-findings.pdf
World Customs Organisation
The WCO Harmonized System Committee celebrates its 60th session
From 27 September to 6 October 2017, the WCO Harmonized System Committee (HSC) held its 60th session at WCO Headquarters in Brussels. The session represented a significant milestone for the Committee as it officially exceeded the number of sessions held by its predecessor, the old Nomenclature Committee.
During this milestone session, 50 classification decisions and 18 sets of amendments to the Explanatory Notes were made, and 21 new Classification Opinions were approved by the Committee. No official publication on the list of decisions, amendments, and opinion made during the session as yet, however according to the agenda of the session, considered were, among others: amendment to the Compendium of Classification Opinions to reflect the
decision to classify "arachidonic acid oil" in heading 15.15 (subheading 1515.90); amendment to the Compendium of Classification Opinions to reflect the decision to classify rapid diagnostic test kits for detecting the Zika virus and other diseases transmitted by mosquitoes of the Aedes genus in heading 38.22 (HS code 3822.00) (Product 1) and in heading 30.02 (subheading 3002.15) (Products 2 and 3), respectively; amendment to the Compendium of Classification Opinions to reflect the decision to classify a "shower set" in heading 39.24 (subheading 3924.90); amendment to the Compendium of Classification Opinions to reflect the decision to classify certain containers of base metal referred to as "electronic safes" in heading 83.03 (HS code 8303.00);
Trade Intelligence Asia Pacific October / November 2017 55
amendment to the Explanatory Note to heading 13.02 with respect to the classification of "bilberry and bergamot extracts";
amendments to the Explanatory Notes to headings 21.06 and 30.04 in regard to food supplements;
classification of books and sound reproducing apparatus; classification of a tobacco product called "Tobacco Capsule"; classification of gazebos; and classification of certain footwear.
The Committee also provisionally adopted six set of amendments to the Nomenclature in preparation of the Seventh Edition of the Harmonized System (HS 2022). In addition, classification decisions on possible amendments to the Nomenclature were submitted to the HS review Sub-Committee for consideration to facilitate the classification of certain products. These products included 3D printers and motor vehicle windscreens.
The Committee also dedicated time to exchanging ideas and information on how to address and manage classification challenges in industries that has experienced a lot of innovation in recent years. Examples of industries that was highlighted during the session included cutting-edge technology, the food industry and the tobacco industry.
The agenda for the 60th WCO HSC session can be obtained at the following link https://www.cbp.gov/sites/default/files/assets/documents/2017-Aug/Vol_51 _No_34_Title.pdf
Case study on challenging customs values through transfer pricing documentation
In brief The World Customs Organization's Technical Committee on Customs Valuation (the Committee) issued Case Study 14.2 to address whether certain transfer pricing documentation was sufficient to support the arm's length nature of a related party pricing transaction. While the Committee found that the companies included in the transfer pricing report were suitably comparable, their gross margins were significantly lower than that achieved by the importer. Also, the Committee noted that the the importer did not make a transfer pricing adjustment to address the inconsistency. Accordingly, the Committee determined that the relationship between the parties had influenced the price. As a result, the Committee concluded that declared value had not been settled in a manner consistent with the pricing practices of the industry, and that alternative valuation methods must be used.
In detail In Case Study 14.2, the Committee addressed whether a customs authority may accept an importer's transfer pricing report in determining whether the price paid or payable for imported goods was an arm's length price. The Committee used an example of the importation of luxury handbags in considering this question. The case study was based on a submission to the Committee by China, and is pending approval by the WCO Council.
Under the facts presented, a distributor imported bags purchased from a seller located in another country. Both the seller and distributor were subsidiaries of the brand owner, a multinational corporate parent. The distributor declared value
using transaction value method based on the value on the invoice issued by the seller. The invoice price was derived from the company's transfer pricing policy.
Under this policy, bag prices were determined using a resale price method. At the end of each year, the importing company calculated the import price by subtracting a targeted gross margin from the resale prices. For the year in question, the targeted gross margin was determined to be 40%. Actual domestic bag sales during the year in question left the importer with a gross margin of 64% based on a higher number of bags being sold at full price than were anticipated.
Doubting the acceptability of the pricing used at import, customs authorities inquired into the support available for the arm's length nature of the sales. The importer provided a transfer pricing report that compared its gross margin with comparable companies. Notably, the comparable companies used in the report: Were located in the same country as the importer; Imported comparable products from the same country as the handbag
seller; Performed similar functions and assumed similar risks as the importer;
and Similar to the importer, did not employ any valuable intangible assets.
The gross margin interquartile range for these comparable companies was between 35% and 46%.
Consistent with its previously articulated position, and based on the factors described above, the Committee reiterated that customs authorities may utilize transfer pricing studies to aid in determining the acceptability of customs values. The Committee further concluded that the comparable companies were suitable for customs valuation purposes. However, rather than establishing the arm's length nature of the values declared by the importer, the comparability of these companies served to establish that the price declared by the importer had, in fact, been too low.
Specifically, the importer earned a gross margin much higher than the comparable companies. This result would have been unexpected given the competitive nature of the luxury handbag market in the country of import, and the similar operating profits and expenses between the importer and comparable companies. The Committee also noted that the importer did not make any compensating adjustments to account for this higher gross margin. As a result, the Committee concluded that the declared import value was not settled in a manner consistent with the normal pricing practices of the industry, and that an alternative valuation method should be used.
The takeaway Case Study 14.2 is a reminder to importers that without coordination, transfer pricing documentation and the attendant decisions regarding transfer prices may also be used by customs authorities to undercut the arm's length nature of related party pricing.
The importer's decision to forgo a transfer pricing adjustment to bring its results in line with the interquartile range identified in the transfer pricing
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documentation led the Committee to conclude that the prices were not settled in a manner consistent with normal pricing practices of the industry. Thus, the related party pricing was not arm's length, and requires an alternative method of customs valuation. This result potentially leaves the local importer in a worst case scenario. From the income tax perspective, the high gross margin will be subject to taxation. From the customs perspective the imported merchandise likely would be subject to the increased administrative burden of applying an alternative valuation method plus a likely adverse duty impact based on such alternative customs values. Close cross-functional coordination of tax and customs considerations can help importers mitigate their risk of being challenged by customs and tax authorities.
The case study can be found at the following link http://www.wcoomd.org//media/wco/public/global/pdf/media/press-release/2017/case-study-14_2_en -release-version.pdf?la=en
World Trade Organisation
Panel report on Indonesian import restrictions on chicken
On 17 October 2017, a WTO dispute panel published a report regarding Indonesian restrictions on chicken imports. The report was the result of Brazil requesting consultations with Indonesia in October 2014, regarding certain measures imposed by Indonesia on imports of chicken meat and chicken products and the investigation and determinations leading thereto.
The panel report concluded that the import restriction measures imposed by Indonesia are inconsistent with certain provisions of the GATT 1994 and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement). In particular, the Panel determined that the application timeframe, validity period and the fixed license terms enacted by Indonesia are inconsistent with Article XI:1 and not justified under Article XX(d) of the GATT 1994.
As a conclusion to the report, Indonesia was recommended to bring its measures into conformity with its obligations under Articles III:4 and XI:1 of the GATT 1994 and Article 8 and Annex C(1)(a) of the SPS Agreement.
The report can be accessed at the following link: https://www.wto.org/english/tratop_e/dispu_e/484r_e.pdf
WTO report regarding Indonesian import restrictions of horticultural and animal products
In March 2015, New Zealand and the US requested for a panel concerning 18 measures imposed by Indonesia on the importation of horticultural products, animals and animal products. As a result of the request, Indonesia appealed to the WTO Appellate Body to reverse certain legal interpretations leading to the panel conclusion.
On 9 November 2017, the Appellate Body issued a report on the above dispute. The report concluded that the panel did not agree with Indonesia that agricultural measures maintained under Article XI:2(c) of the GATT 1994 are not "quantitative import restrictions" within the meaning of Article 4.2 of the Agreement on Agriculture. As a result, the WTO Appellate
Body recommended the Dispute Settlement Body (DSB) to request Indonesia to bring the measures found to be inconsistent with the GATT 1994, into conformity with its obligations under that Agreement.
Moderate growth Projected in Q4
The World Trade Outlook Indicator (WTOI) suggests moderate growth in global trade for the fourth quarter of 2017, by recording a WTOI reading of 102.2 for November 2017. Slightly down from 102.6 in August, the WTOI signals continued trade expansion in terms of volume, building on the even stronger growth that was experienced earlier in the year. A reading of 100 indicates trade growth in line with trend while readings more or less than 100 suggests above or below trend.
Two of the six component indices of the WTOI, air freight and electronic components showed strong performances while the indices for automobile production and sales, and agricultural raw materials are below trend.
The full version of the WTOI report can be accessed at the following link: https://www.wto.org/english/news_e/news17_e/wtoi_13nov17_e.pdf
Panel report on US anti-dumping measures on Korean tubular goods
On 14 November 2017, a WTO dispute panel published a report regarding US anti-dumping measures on certain Korean tubular goods. The report was the result of Korea requesting consultations with the US in December 2014 and the investigation and determinations leading thereto.
The panel concluded that the US acted inconsistently with Articles 2.2.2 (1) and (iii) of the Anti-Dumping Agreement because the United States Department of Commerce (USDOC) did not determine the Constructed Value (CV) profit of the Korean respondents based on actual data pertaining to their sales of a similar product in the home market. Instead they relied on an impermissibly narrow definition of the "same general category of products" in concluding it could not determine CV profit under Article 2.2.2(i) or calculate the profit cap required by Article 2.2.2(iii). In addition, the USDOC failed to calculate and apply a profit cap as required by that provision. As a consequence, the report concluded that the US acted inconsistently with Article 2.2 of the Anti-Dumping Agreement by failing to use a reasonable amount for profits in the construction of normal value for the Korean respondents.
The report can be accessed at the following link: https://www.wto.org/english/tratop_e/dispu_e/488r_e.pdf
Trade Intelligence Asia Pacific October / November 2017 59
Actions against China's bid for recognition as a market economy China requested to accede to the WTO in November 1995 and officially became the 143rd member of the WTO on 11 December 2001. Under Section 15 of the Protocol of Accession, China's recognition as a market economy should have been automatic on the completion of 15 years of its WTO membership in 2016. However, the EU and the US seemingly disagree with the status conversion. They seem set to continue their anti-dumping policies against China through imposing anti-dumping duties on Chinese products. According to the WTO statistics, by 31 December 2016, there are 866 anti-dumping measures against China products, making China the top anti-dumping target among 50 members 111 (13%) measures are imposed by the US and 91 (11%) by the EU. On 12 December 2016, China requested consultations with the EU and the US concerning certain provisions pertaining to the determination of normal value for non-market economy countries in anti-dumping proceedings. China claimed the measures appear to be inconsistent with Articles 2.1, 2.2, 9.2, 18.1, 18.4 of the Anti-Dumping Agreement; Articles I (1), VI (1) and VI (2) of the GATT 1994; and Article XVI (4) of the Marrakesh Agreement. No withdrawal or mutually agreed solution has been notified up to date and it is believed to take years to settle. During its plenary session in Strasbourg on 15 November 2017, the European Parliament passed new anti-dumping rules, introducing a new "trade defense instruments" to calculate dumping practices where new benchmarks for the costs and sale of products in countries with a similar economic development as the exporting country can be taken into consideration. China seems worried as this aspires to indirectly avoid granting China a market economy status. Late last month, following the launch of the US first time ever self-initiated anti dumping investigation into Chinese stainless steel flanges (the estimated dumping margins alleged by the petitioners range from 99.23% to 257.11%), the US Trade Representative submitted a legal document to the WTO to defend its right to consider China a non-market economy status. Through its Ministry of Commerce, China has expressed a strong dissatisfaction over this action.
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