Doing business with ASEAN How to use an FTA. NEW ZEALAND CUSTOMS SERVICE Presentation overview 1....

Doing business with ASEAN

How to use an FTA

NEW ZEALAND CUSTOMS SERVICE

Presentation overview

1. More detail on Rules of Origin

2. Look at factors to consider when choosing which FTA to use when trading

Doing business with ASEAN2

NEW ZEALAND CUSTOMS SERVICE Doing business with ASEAN3

What do RoO do?

1. Identify goods that are “made in” a Party that then get preferential tariff rates

2. Prevent “free riding” from non- Parties

3. Set the level of transformation required for goods to become originating.


Figure 1: Boeing Dreamliner 787 GVC (Source: DFAT, 2013)

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3 ways to gain origin

Goods that are wholly obtained or producedGoods that are produced entirely from originating materialsGoods produced from non-originating materials:

» Substantial transformation


Product specific rules

Product Specific Rules (PSRs) establish the threshold of change or value add a product must meet to be considered originating under an FTA.

Three means usedo Change in Tariff Classification (CTC)o Regional Value Content (RVC)o Specific processing requirement


Change in tariff classification Uses the tariff classification to identify whether

‘substantial transformation’ has occurred during production of the good.

A non-originating material used in the production of a good must not have the same classification under the HS as the final good into which it is incorporated. Can be at three levels.

o Change in Chapter (CC) – at 2 digit level in the Tariffo Change in Heading (CTH) - at 4 digit level o Change in Sub-heading (CTSH) - at 6 digit level


CTC rule example – Malaysian vacuum cleaner

New Zealand

Germany

Australia

Malaysia

MotorHS 8412

JapanChina

Ball bearingsHS 8482

Steel springsHS 7320

Vacuum cleanerHS8508

PSR: 8508 Vacuum cleaners: RVC(40) or CTH or RVC(35) + CTSH


RVC rule The specific percentage of value that is required to be

added to a good in the production process.

Calculation of “added value” using ‘Build down’ or ‘Build up’ methodologies.

The final production process must be performed within a Party.


RVC rule – build down exampleAANZFTA Formula: RVC = FOB - VNM x 100

FOB

FOB: Free on board value of the goodsVNM: Value of non-originating materials

$200 - $60 x 100 = 70%$200

NEW ZEALAND CUSTOMS SERVICE11

Retaining origin - transit though Non-Parties / Direct Consignment

General principle is that a good must not undergo any processing during transit in a non-Party (other than minimal processing)

Two common phrases used are o goods must not enter the commerce / trade during transito Goods must remain within customs control

If undergone any processing or entered the commerce / trade of transiting third country, the good will lose its originating status and thus at importation no preference will be granted



So the question becomes….

Which FTA to use?

And the simple answer is….there is no simple answer.


But it’s easy to decide ….isn’t it?



Which trade agreement to use


1. What is the tariff line for your good?

2. Where is the good being exported to / imported from?

3. What is the tariff preference in each relevant FTA?

4. What are the Rules of Origin?

5. What are the documentation requirements?


NZ FTAs in the regionAgreement between New Zealand and Singapore on a Closer Economic Partnership (ANZSCEP) – entry into force in 2001

New Zealand – Thailand Closer Economic Partnership Agreement (NZTCEPA) – eif 2005

ASEAN – Australia – New Zealand Free Trade Agreement (AANZFTA) – eif 2010

Malaysia – New Zealand Free Trade Agreement (MNZFTA) - eif 2010


Working Tariff Document


Anhydrous milkfat

17

HS Classification: 040590

Tariff Rates2014

ThaiBase Rate

NZTCEPA AAN

18% Free 18% (free-2020)



Different FTAs provide different duty outcomes

HS -6 Description OriginFOB (NZ$mil)

Tariff Rates2014

Tariff Duty(NZ$ million)

ThaiBase Rate

NZT AAN NZT AAN NZT Saving

040590 Anhydrous milkfat

NZ 33 18% Free 18% (free-2020)

$0 $6mil $6mil

$6 million difference in tariff duty



Different FTAs contain different origin rules

NZTCEPA AANZFTA

040590 Anhydrous milkfat NZ 33 CTSH CTSH or RVC(40)

Product-Specific RulesHS-6 Description Origin

FOB(NZ$m)

AANZFTA rule has more flexibility/options (either RVC or CTSH can be used)



Different requirements to evidence origin

Measure MNZFTA AANZFTA CommentFormat - CoO of DoO Self-declaration

(My exporters - third-party certification)

3rd-party certification 3rd-party CoO imposes costs on exporterCoO more likely to provide complete dataMigrating to self-declaration (ATIGA pilots)

Slight discrepancies? Permitted Permitted CoO format more likely to be challenged

Export certification CoO to be issued < 3-days after shipment

Shipments may be delayed until CoO issued

Validity period 12 months 12 months

Retroactive issue? My CoO < 1-year AANZFTA CoO < 1-yearMinimum value < $US600 < $US200 Higher MNZFTA threshold

facilitating.

Evidence of Origin



Customs can help

We :•are going to be increasing the outreach activities we undertake to see how we can help NZ exporters access FTA markets•are going to deploy a Trade Specialist into South East Asia to smooth trade access and conduct outreach for traders (exporters and importers)•have information on our website on the RoO elements of different FTAs•can provide advance rulings on tariff classification.


More information

New Zealand Customs website:

www.customs.govt.nz

•Trade Access, Policy:

[email protected];


Doing business with ASEAN How to use an FTA. NEW ZEALAND CUSTOMS SERVICE Presentation overview 1....

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