Barter fli fta_ppt

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Barter fli fta_ppt

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

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