APEC Environmental Goods Agreement

Jeff Eversman

Office of Trade Negotiations and Analysis

Industry and Analysis

APEC Environmental Goods Overview

1. APEC Environmental Goods Agreement

Overview

2. Product Descriptions and New Export Opportunities

3. U.S. Exporters: How to Benefit

APEC EG Background

• In 2011, APEC leaders agreed to reduce applied most-favored nation (MFN) tariff rates on select Environmental Goods (EG) by end of 2015.

– “In 2012, economies will work to develop an APEC list of environmental goods that directly

and positively contribute to our green growth and sustainable development objectives, on which we are resolved to reduce by the end of 2015 our applied tariff rates to 5% or less, taking into account economies’ economic circumstances, without prejudice to APEC economies’ positions in the WTO.” –APEC Leaders’ Declaration, 2011

• The EG product list was negotiated from March to September, 2012.

• The recent EG commitments build upon past efforts to liberalize trade.

– From 1997 to 1999, APEC countries embarked upon increased market access for various sectors through Early Voluntary Sectoral Liberalization (EVSL).

– During the early 2000s, the WTO gave scope and focus to its Committee on

Trade and Environment, which laid the groundwork for the APEC EG agreement before the WTO’s own environmental goods agreement began to take form.

APEC Countries

• Australia • Brunei Darussalem • Canada • Chile • China • Hong Kong • Indonesia • Japan • Korea • Malaysia • Mexico

• New Zealand • Papua New Guinea • Peru • Philippines • Russia • Singapore • Taiwan • Thailand • United States • Viet Nam

21 countries have become members of the Asia-Pacific Economic Cooperation since its foundation in 1989. As of 2014, they accounted for 39% of the world’s population, 57% of global GDP, and 49% of world trade.

Source: APEC in Charts 2015, APEC Policy Support Unit

APEC EG Overview: Tariff Reductions to 5% on Environmental Goods

• Environmental products were identified within 54 lines of the Harmonized System (HS).

– The HS is a nomenclature system developed by the World Customs Organization and used by more than 200 countries to standardized product classification for purposes of levying tariffs and collecting trade data

• Under the APEC EG agreement, countries committed to maintain tariffs at or below 5 percent, reducing tariffs as needed by January 1, 2016.

– Countries with Tariffs already at or below 5% in 2012: Australia, Hong Kong, Japan, New Zealand, and Singapore

– Countries with Tariffs at or below 5% in 2012: Brunei, Canada, Chile, China, Indonesia, Korea, Malaysia, Mexico, Papua New Guinea, Peru, the Philippines, Russia, Thailand, the United States, and Vietnam

• Countries reduced tariffs on a total of 375 product lines.

Product Coverage Examples

6

• Renewable Energy Technologies • Solar cells • Wind turbines • Biogas generating sets

• Air Pollution Control Technologies

• Gas filtering machinery • Soot removers • Waste gas incinerators

• Water Treatment Technologies

• Water filters and purifiers

• Waste Treatment and Recycling Machinery

• Sorting and recycling equipment

• Environmental Monitoring and

Assessment Equipment • Gas analyzers • Water quality monitors

• Energy Efficiency Technologies

• Economisers

Covered Environmental products include:

Product Coverage: Renewable Energy Technologies

7

Wind and Solar Equipment • Wind turbine blades and hubs • Solar, geothermal, and hydro-powered generators • Solar water heaters and parts thereof • Solar heliostats, and parts thereof • Photosensitive semiconductor devices, including photovoltaic cells, modules,

and panels

Biomass and Biogas Equipment • Boilers, steam turbines, and electric generators • Natural gas-powered turbines • AC generators and electric converters • Electric converters

Product Coverage: Air Pollution and Waste Water Treatment

8

Air Pollution • Soot removers and waste heat recovery units • Gas-cooling condensers for contaminant capturing • Catalytic converters • Air liquefiers, filters, and purifiers • Laminar flow units • Refrigerant recovery and recycling units

Waste Water Treatment • Water filters and purifiers • Machinery for waste water management and drinking water production • Sludge dryers and dewatering equipment • UV disinfection instruments

Product Coverage: Waste Treatment/Recycling and Environmental Monitoring and Assessment Equipment

9

Waste Management and Recycling • Earth and ore crushing and grinding machinery • Waste compactors and separators for recycling, water treatment, and

composting • Machinery for soil remediation • Hazardous waste incinerators and parts thereof

Monitoring and Assessment Equipment • Ozone and natural disaster monitoring instruments • Air quality and dust emissions monitors • Manometers, chromatographs, and electrophoresis instruments • Spectrometers, water quality photometers • Magnetic resonance instruments, mass spectrometers, microtomes • Vibrometers, electron microscopes

Product Coverage: Energy Efficiency Technologies

10

Energy Efficiency Technologies • Economisers • Electric generators • Differential temperature controllers

Product Coverage

HS6 Subheadings 441872 841919 847989 854140 902730

840290 841939 847990 854390 902750

840410 841960 850164 901380 902780

840420 841989 850231 901390 902790

840490 841990 850239 901580 903149

840690 842121 850300 902610 903180

841182 842129 850490 902620 903190

841199 842139 851410 902680 903289

841290 842199 851420 902690 903290

841780 847420 851430 902710 903300

841790 847982 851490 902720

Top APEC Importers and Exporters of EG Product List

Top APEC Importers of covered products from APEC Countries, 2015 • China - $68 billion • United States - $35 billion • Mexico - $16 billion • Japan - $15 billion • Hong Kong - $14 billion

Top APEC Exporters of covered products to APEC Countries, 2015

• China - $64 billion • Japan - $29 billion • United States – $29 billion • Taiwan - $18 billion • Singapore - $12 billion

Data Source: UN Comtrade

U.S. Exports of Covered Products

Non-U.S. FTA Economies

U.S. Exports to, million, 2015

World Exports to, millions, 2015

U.S. Share of Country’s Total

China $7,176.4 $95,603.0 7.5%

Japan $2,992.3 $18,177.1 16.5%

Russia $1,089.7 $7,503.4 14.5%

Hong Kong $1,077.2 $15,869.3 6.8%

Taiwan $890.5 $7,541.4 11.8%

Malaysia $715.5 $6,444.1 11.1%

Thailand $627.3 $6,138.8 10.2%

Indonesia $413.0 $4,193.1 9.8%

Vietnam $230.8 $4,246.0 5.4%

New Zealand $189.4 $664.5 28.5%

Philippines $138.7 $1,967.0 7.1%

Papua New Guinea* $61.0 $288.5 21.1%

Brunei Darussalem $38.6 $138.1 28.0%

Total $15,640.4 $168,774.3 9.3%

Source: Global Trade Atlas *Only 2012 UN Comtrade data available,

U.S. Exports of Covered Products to Non-FTA Partners within APEC*

Brunei 0%

China 50%

Indonesia 3%

Japan 21%

Malaysia 5%

Philippines 1%

Russia 8%

Taiwan 6%

Thailand 4%

Vietnam 2%

*Non-U.S. FTA Partners Source: Global Trade Atlas

Reduced Costs to Export by Economy

Source: APEC Implementation Plans *Papua New Guinea occasionally referred to as “PNG”

1 2 3

5 5 6 6 6

8 16

19 27

29 73

84 85

Papua New Guinea*Canada

PeruRussia

Viet NamUnited States

PhilippinesTaiwan

MalaysiaIndonesiaThailand

ChinaMexico

ChileBruneiKorea

0 20 40 60 80 100

FTA Non-FTA United States

U.S. Exports of Covered Products

Source: APEC Implementation Plans *Incidentally includes some products not included in the APEC list but that still fall within a 6-digit HS line whose tariff rate is reduced.

Non-FTA Countries Number of Tariff Cuts

U.S. exports, millions, 2015*

China 27 $905.28

Thailand 19 $116.15

Malaysia 8 $12.36

Indonesia 16 $7.89

Philippines 6 $1.95

Taiwan 6 $1.00

Russia 5 $0.06

**Data for Brunei, Papua New Guinea, and Vietnam unavailable at the national level

New Opportunities: China

Data Source: APEC Implementation Plans; Global Trade Atlas

Highlights

• 27 Tariff Cuts

• $905 million in imports from U.S. affected

• Tariffs reduced from as high as 35%

Select Products World Imports U.S. Market Share Pre-APEC EG Tariff

Certain AC generators $111,456,033 21.6% 10.0%

Water treatment technologies and parts thereof

$90,220,952

17.9% 25.0%

Renewable energy electric generating sets

$66,418,817

50.7% 10.0%

Wind-powered electric generating sets

$454,608 12.0% 8.0%

New Opportunities: Thailand

Data Source: APEC Implementation Plans; Global Trade Atlas

Highlights

• 11 Tariff Cuts to 5%

• 7 Tariff cuts to 7%, to be reduced further

• $116 million in imports from U.S. affected

• Tariffs reduced from as high as 20%

Select Products World Imports U.S. Market Share Pre-APEC EG Tariff

Non-electric water heaters, including solar-powered

$61,110,065 0.0% 10.0%

Wind-powered electric generating sets

$12,117,704 0.0% 10.0%

AC generators $6,766,157

16.0% 10.0%

New Opportunities: Malaysia

Data Source: APEC Implementation Plans; Global Trade Atlas

Highlights

• 8 Tariff Cuts

• $12.4 million in imports from U.S. affected

• Tariffs reduced from as high as 30%

Select Products World Imports U.S. Market Share Pre-APEC EG Tariff

Air pollution control equipment

$54,252,991 19.3% 25.0%

Instantaneous gas water heaters

$2,633,678

0.0% 30.0%

Non-electric water heaters, including solar-powered

$148,076

14.3% 30.0%

New Opportunities: Indonesia

Data Source: APEC Implementation Plans; Global Trade Atlas *Excludes imports of sets whose tariff cuts were not yet implemented by January 2016.

Highlights

• 3 Tariff Cuts with 13 more to be gradually implemented

• $7.9 million in imports from U.S. affected

• Tariffs reduced from as high as 10%

Select Products World Imports U.S. Market Share Pre-APEC EG Tariff

Electric generating sets $31,522,951* 1.2% 10.0%

AC generators $25,897,327 0.5% 10.0%

Non-electric water heaters, including solar-powered

$184,069

0.0% 10.0%

New Opportunities: Philippines

Data Source: APEC Implementation Plans; Global Trade Atlas

Highlights

• 6 Tariff Cuts

• $1.95 million in imports from U.S. affected

• Tariffs reduced from as high as 10%

Select Products World Imports U.S. Market Share Pre-APEC EG Tariff

Water treatment technologies and parts thereof

$18,171,749 5.7% 7.0%

Condensers for steam or vapor power units

$4,054,423 0.0% 10.0%

New Opportunities: Taiwan

Data Source: APEC Implementation Plans; Global Trade Atlas *Average of different tariffs on AC generators

Highlights

• 6 Tariff Cuts

• $997 thousand in imports from U.S. affected

• Tariffs reduced from as high as 10%

Select Products World Imports U.S. Market Share Pre-APEC EG Tariff

AC generators $18,800,032 0.6% 9.3%*

Wind-powered electric generating sets

$15,326,261 0.0% 10.0%

Electric generating sets $8,270,480 7.0% 10.0%

New Opportunities: Russia

Data Source: APEC Implementation Plans; Global Trade Atlas

Highlights

• 5 Tariff Cuts

• $55 thousand in imports from U.S. affected

• Tariffs reduced from as high as 7.5%

Select Products World Imports U.S. Market Share Pre-APEC EG Tariff

Parts of steam and other vapor turbines

$23,906,504 0.2% 6.3%

Parts of engines or motors used in civil aircraft

$1,668,834 0.0% 7.5%

U.S. APEC Commitments

Data Source: APEC Implementation Plans; Global Trade Atlas

Highlights

• 6 Tariff Cuts

• Bamboo flooring panels

• Condensers for steam and vapor power units

• Parts for steam turbines

• Tariffs reduced from as high as 8%

Select Products World Imports Pre-APEC EG Tariff

Parts for steam turbines $285,899,587 6.7%

Bamboo flooring panels $88,372,376 8.0%

Condensers for steam and vapor power units $10,154,049 5.6%

U.S. FTA Partners

Countries that have FTAs with the U.S. already have tariffs on environmental goods at or below the 5 percent level. APEC EG, however, can benefit U.S. exports to FTA partners as there is no requirement to meet a preferential rules of origin (ROO). In cases where the FTA partner’s FTA tariff rate is below the new MFN-applied rate for APEC EG products, meeting the ROO is still necessary to obtain the FTA agreement’s lower preferential tariff rate.

U.S. Exporters: How to Benefit

1. Find the 6-digit HS number for the environmental product you’re interested in exporting.

– If you don’t know you your product’s HS number, start with Census’s Schedule B

Search Engine at: https://uscensus.prod.3ceonline.com/

• Additional information on the HS nomenclature and classifying products can be found through the following links:

– FAQ: Schedule B and HS Numbers http://www.export.gov/faq/eg_main_017509.asp

– http://www.wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonized-system.aspx

– http://www.census.gov/foreign-trade/data/video022.html

2. Check for your product’s 6-digit HS number among the 54 HS lines (see slide 11) where tariff reductions on environmental goods have taken place.

U.S. Exporters: How to Benefit

3. If covered by the agreement, identify where the product is among the list of covered products in the target country’s APEC EG Implementation Schedule.

– Each individual environmental good covered by the agreement is identified by a

“drilled down” 8 or 10-digit identifier, which is how the product appears in each country’s implementation schedule.

– Country implementation schedules: http://www.apec.org/Groups/Committee-on-Trade-and-Investment/APEC-Economies-Implementation-Plans.aspx

– If exporting to a U.S. FTA partner, the FTA tariff rate is likely below that of APEC

EG. FTA Tariff rates can be found at: http://export.gov/fta/ftatarifftool/TariffSearch.aspx

U.S. Exporters: How to Benefit

4. Contact the country customs offices to request advanced ruling on product classification. Customs offices are responsible for determining the classification and applicable tariff rate for imported goods.

– Australia: https://www.border.gov.au/ – Brunei Darussalem: http://www.mof.gov.bn/index.php/about-royal-customs-a-

excise-dept# – Canada: http://www.cbsa-asfc.gc.ca/menu-eng.html – Chile: https://www.aduana.cl/aduana_eng/site/edic/base/port/inicio.html – China: http://english.customs.gov.cn/ – Hong Kong: http://www.customs.gov.hk/en/home/index.html – Indonesia: http://www.beacukai.go.id/websitenew/index.html – Japan: http://www.customs.go.jp/english/ – Korea: http://www.customs.go.kr/kcshome/site/index.do?layoutSiteId=english

U.S. Exporters: How to Benefit (continued)

4. Country customs offices (continued)

– Malaysia: http://www.customs.gov.my/en – Mexico: http://www.sat.gob.mx/English/Paginas/default.aspx – New Zealand: http://www.customs.govt.nz/Pages/default.aspx – Papua New Guinea: http://www.customs.gov.pg/ – Philippines: http://www.customs.gov.ph/ – Russia: http://eng.customs.ru/ – Singapore: http://www.customs.gov.sg/ – Taiwan:

http://www.taiwan.gov.tw/ct.asp?xItem=25590&ctNode=1972&mp=999 – Thailand:

http://www.customs.go.th/wps/wcm/connect/CustEn/Home/HomeWelCome – Vietnam: http://www.customs.gov.vn/home.aspx?language=en-US

U.S. Exporters: Additional Resources

5. Connect with local U.S. Export Assistance Center for assistance on how to

export to APEC countries.

– Visit http://2016.export.gov/usoffices/index.asp for a list of domestic offices.

Sources and Additional Information

APEC Sources – APEC Homepage: http://www.apec.org/ – APEC in Charts 2015: http://publications.apec.org/publication-

detail.php?pub_id=1675 – APEC EG Implementation Schedules: http://www.apec.org/Groups/Committee-

on-Trade-and-Investment/APEC-Economies-Implementation-Plans.aspx – APEC Economic Leaders’ Declaration and Annex C, APEC List of Environmental

Goods, Vladivostok, Russia, 2012: http://www.mofa.go.jp/policy/economy/apec/2012/pdfs/aelm_annex_c_en.pdf

Data Sources

– Global Trade Atlas, retrieved June 2016: http://www.gtis.com/gta/ – UN Comtrade, retrieved June 2016: http://comtrade.un.org/data/

Questions – Contact Information

Jeff Eversman International Economist Office of Trade Negotiations and Analysis Industry and Analysis U.S. Department of Commerce | International Trade Administration (202) 482-2831 Jeffrey.Eversman@trade.gov