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ASEAN – AUSTRALIA – NEW ZEALAND FREE TRADE AGREEMENT (AANZFTA)

AANZFTA. ASEAN – AUSTRALIA – NEW ZEALAND FREE TRADE AGREEMENT (AANZFTA). AANZFTA. Workshop on AANZFTA Rules of Origin Manila 10 - 12 November 2009. AANZFTA. SESSION 1 – WELCOME AND INTRODUCTION. AANZFTA. SESSION LEADERS & OUTLINE SESSION 1 – WELCOME AND INTRODUCTION

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ASEAN – AUSTRALIA – NEW ZEALAND FREE TRADE AGREEMENT (AANZFTA)

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  1. AANZFTA ASEAN – AUSTRALIA – NEW ZEALAND FREE TRADE AGREEMENT (AANZFTA)

  2. AANZFTA Workshop on AANZFTA Rules of Origin Manila 10 - 12 November 2009

  3. AANZFTA SESSION 1 – WELCOME AND INTRODUCTION

  4. AANZFTA SESSION LEADERS & OUTLINE SESSION 1 – WELCOME AND INTRODUCTION Anna Robeniol (ASEAN Secretariat) SESSION 2 – OVERVIEW OF THE AANZFTA Anna Robeniol (ASEAN Secretariat) SESSION 3 – OVERVIEW OF THE AANZFTA’s RULES OF ORIGIN PROVISIONS Tim Ward (Department of Foreign Affairs and Trade, Australia) and ASEAN Secretariat

  5. AANZFTA SESSION LEADERS & OUTLINE SESSION 4 – RVC RULES John Fenning (Australian Customs and Border Protection Service) SESSION 5 – CTC RULES Richard Bargh (New Zealand Customs Service) (End of Day 1)

  6. AANZFTA SESSION LEADERS & OUTLINE Revision of Day 1 SESSION 6 – OTHER RULES Tim Ward SESSION 7 – CUMULATION AND DIRECT CONSIGNMENT Milton Churche and Richard Bargh SESSION 8 – INTRODUCTION TO THE OCP John Fenning SESSION 9 -APPLICATION FOR AND ISSUANCE OF CERTIFICATES OF ORIGIN Milton Churche (together with Richard Bargh and ASEAN Secretariat) (End of Day 2)

  7. AANZFTA SESSION LEADERS & OUTLINE Revision of Day 2 SESSION 10 – USE OF CERTIFICATES OF ORIGIN TO CLAIM TARIFF PREFERENCE Richard Bargh SESSION 11 – VERIFICATION Richard Bargh and John Fenning SESSION 12 – REVIEW AND DISCUSSIONS Milton Churche (End of Workshop)

  8. AANZFTA SESSION 2 – OVERVIEW OF THE AANZFTA › Construction of the Agreement › Tariff Schedules › Entry into Force › Open discussion

  9. AANZFTA •Agreement signed on 27 February 2009 •Comprises 18 chapters and 4 annexes •Chapter 3 covers Rules of Origin •Annex on to Chapter 3 - Operational Certification Procedures •Appendix on Minimum Data Requirements – Application for a Certificate of Origin •Appendix on Minimum Data Requirements – Certificate of Origin

  10. AANZFTA •Annex 1 of the AANZFTA • Schedule of tariff commitments •Annex 2 of the AANZFTA • Product Specific Rules • Appendix containing an Indicative List of Textile Finishing Processes •Annex 3 of the AANZFTA • Schedules of Specific Services Commitments

  11. AANZFTA •Tariff Commitments • The FTA provides for progressive reduction, or for most products, elimination of tariffs on goods • Exclusions from tariff commitments generally do not exceed 1% of a Party’s tariff lines • Tariff commitments apply to all goods which meet the ROO • Tariff outcomes provide for longer transition periods, and lower tariff elimination outcomes, for Vietnam, Myannar, Cambodia and Laos

  12. AANZFTA Tariff Commitment table – tariff lines with tariff-free treatment in selected years

  13. AANZFTA Tariff Commitment table – tariff lines with tariff-free treatment in selected years

  14. AANZFTA •Entry into Force of the Agreement • Chapter 18, Article 7 (Entry into Force) › Initial Parties must include Australia, New Zealand AND four ASEAN Member States › EIF will occur when those Parties notify each Party that they have completed their domestic (legislative) processes › EIF expected to be 1 January 2010 › EIF for other than the ‘initiating’ Parties will occur 60 days after notification process undertaken

  15. AANZFTA Open Discussion - Overview of AANZFTA

  16. AANZFTA SESSION 3 – OVERVIEW OF AANZFTA RULES OF ORIGIN PROVISIONS › Where the ROO provisions are found › Qualification of goods as originating › Wholly produced or obtained goods › Waste and Scrap › Substantial transformation › General explanation of RVC and CTC approaches › How to find ROO for a particular product

  17. AANZFTA What are Rules of Origin? Rules of Origin (ROO) determine whether an imported good is entitled to the preferential duty rate agreed under a Trade Agreement

  18. AANZFTA Where are the AANZFTA Rules of Origin? Chapter 3 of the AANZFTA contains the ROO used to determine whether goods are “originating goods” of a Party

  19. AANZFTA Articles of Chapter 3 • Article 1 – Definitions • Article 2 – Originating Goods • Article 3 – Goods Wholly Produced or Obtained • Article 4 – Goods Not Wholly Produced or Obtained • Article 5 – Calculation of Regional Value Content (RVC)

  20. AANZFTA Articles of Chapter 3 (2 of 4) • Article 6 – Cumulative Rule of Origin • Article 7 – Minimal Operations and Processes • Article 8 – De Minimis • Article 9 – Accessories, Spare Parts and Tools • Article 10 – Identical and Interchangeable Materials

  21. AANZFTA Articles of Chapter 3 (3 of 4) • Article 11 – Treatment of Packing Materials and Containers • Article 12 – Indirect materials • Article 13 – Recording of Costs • Article 14 – Direct Consignment • Article 15 – Certificate of Origin

  22. AANZFTA Articles of Chapter 3 (4 of 4) • Article 16 – Denial of Preferential Tariff Treatment • Article 17 – Review and Appeal • Article 18 – Sub-Committee on Rules of Origin • Article 19 – Consultations, Review and Modification

  23. AANZFTA Annex toChapter 3 - Operational Certification Procedures Contains: • 25 rules regarding CoO and certification procedures • 2 appendixes on CoO application and issuance

  24. AANZFTA Annex 2 to the Agreement – Product Specific Rules Contains • Explanatory Headnotes • Product Specific Rules (PSRs) for goods in the Harmonized System (HS) at the subheading (6 digit) level not covered by the ‘General Rule’ • An Appendix containing an indicative list of textile finishing processes

  25. AANZFTA Originating Goods (Article 2) • Only “originating goods” can claim preferential tariff treatment • Such goods can be: ► wholly obtained; or ► produced in a Party exclusively from originating materials; or ► produced from non-originating materials (and meets the requirements of Article 4 (substantial transformation)

  26. AANZFTA Substantial Transformation • Kyoto Convention (1977) › “the last substantial manufacturing or processing deemed sufficient to give the commodity its essential character”

  27. AANZFTA MeasuringSubstantial Transformation • Achieve a set percentage of regional value added • Demonstrating that non-originating materials are substantially different to the exported good › change in tariff classification • Meet a specific processing or manufacturing requirement

  28. AANZFTA Concept of “co-equal” PSRs Most 6-digit lines give a trader the option of qualifying under one of two PSRs • a Regional Value Content (RVC); or • a Change in Tariff Classification (CTC) For example, the PSR for goods of HS 6109.10 (T-shirts, of cotton) is: “RVC(40) or CC”

  29. AANZFTA Single option rules – RVC only For example, the PSR for goods of HS 8511.10 (spark plugs for internal combustion engines) is: “RVC(40)” › for origin to be conferred, goods of 8511.10 must have a regional value content of at least 40 per cent

  30. AANZFTA Single option rules – CTC only For example, the PSR for goods of HS 5903.20 (textile fabrics impregnated with polyurethane) is: “CC” › for origin to be conferred, the non-originating materials used to manufacture the goods of 5903.20 must be classified elsewhere than Chapter 59 of the HS

  31. AANZFTA Complex Rules For example, the PSR for goods of HS 8708.21 (seat belts for motor vehicles) is: “RVC(40) + CTSH” › for origin to be conferred, goods of 8708.21 must have an RVC of at least 40 per cent and the non- originating materials used in their manufacture must be classified elsewhere than HS subheading 8708.21

  32. AANZFTA Complex Rules with Specific Process requirements For example, the PSR for goods of HS 6203.11 (men’s and boy’s suits of wool) is: “RVC(40) provided that the good is cut or knit to shape and assembled in the territory of one or more of the parties or CC” › for origin to be conferred using the RVC approach, goods of 6203.11 must have an RVC of at least 40 per cent and the fabric must be cut and assembled in the AANZFTA region (+ there is the option of meeting CC requirement)

  33. AANZFTA Goods which must be Wholly Obtained For example, the PSR for goods of HS 0303.11 (frozen Pacific salmon) is: “WO” › for origin to be conferred, the goods of 0303.11 must be wholly produced or obtained in accordance with Article 2.1(a)

  34. AANZFTA Waste and Scrap For example, the PSR for goods of HS 7404.00 (copper waste and scrap) states that: “Origin shall be conferred to a good of this subheading that is derived from production or consumption in a Party”

  35. AANZFTA Co-equal RVC and CTC requirement Trader only needs goods to qualify under one of the tests CTC tests are only applied to non-originating materials used to manufacture a traded good RVC test is based on one of two optional formulas: • the “Direct Formula” or • the “Indirect / Build-Down Formula”

  36. AANZFTA Finding the PSR for a particular product Step 1 ▪ Are the goods wholly produced or obtained (Article 2.1(a) or ▪ Are the goods produced in a Party exclusively from originating materials from one or more Parties (Article 2.1(c)  YES - goods are originating xNO - proceed to Step 2

  37. AANZFTA Finding the PSR for a particular product Step 2 ▪ Is the rule for the subheading for the good specified in Annex 2 (the PSR Schedule)  YES - the goods must satisfy one of the PSRs set out for that subheading in Column 4 of the Schedule xNO - proceed to Step 3

  38. AANZFTA Finding the PSR for a particular product Step 3 ▪ Test the good under the “General Rule” (Article 4.1) › the goods must have a RVC of at least 40 per cent or › the goods must satisfy the “change in tariff heading” requirement

  39. AANZFTA Open Discussion – Overview of AANZFTA’s Rules of Origin Provisions

  40. AANZFTA SESSION 4 – RVC RULES •Calculation formulas (including definitions) •Minimal operations and processes •Examples of RVC rules •Exercises involving application of RVC rules

  41. AANZFTA RVC Calculation formulas •Direct formula •Indirect/Build Down formula

  42. AANZFTA DIRECT FORMULA AANZFTA Material + Labour + Overhead + Profit + Other RVC = Cost Cost Cost CostsX 100% FOB

  43. AANZFTA RVC DEFINITIONS  AANZ Material Cost = value of originating materials, parts or produce that are acquired or self-produced in the production of the good Labour Cost = wages, remuneration and other employee benefits  Overhead Cost = the producer’s total overhead expense  Profit = commonly accepted definition

  44. AANZFTA RVC DEFINITIONS (2 of 4)  Other Costs = costs incurred in placing the goods in the ship or other means of transport for export (includes domestic transport costs, storage and warehousing, port handling, brokerage fees, service charges)  FOB = the free-on-board value of the goods (includes the cost of transport to the port or site of final shipment abroad) • the value is to be calculated in accordance with the GATT rules on customs valuation (now WTO Customs Valuation Agreement)

  45. AANZFTA RVC DEFINITIONS (3 of 4)  Value of non-originating materials = the CIF (cost, insurance, freight) value at the time of importation or the earliest discernable price paid for all non-originating materials, parts of produce that are acquired by the producer in the production of a good • non-originating materials includes materials of undetermined origin but do not include a material that is self-produced

  46. AANZFTA RVC DEFINITIONS (4 of 4)  CIF = the value of the good imported and includes the cost of freight and insurance up to the port or place of entry into the country of importation • the value is to be calculated in accordance with the GATT rules on customs valuation (now WTO Customs Valuation Agreement)

  47. AANZFTA INDIRECT/BUILD-DOWN FORMULA RVC = FOB - Value of non-originating materials X 100% FOB

  48. AANZFTA MINIMAL OPERATIONS AND PROCESSES Certain processes and operations cannot, either by themselves or in combination with each other, be counted towards satisfying an RVC requirement These are: • ensuring preservation of goods in a good condition for the purposes of transport or storage • facilitating shipment or transportation

  49. AANZFTA MINIMAL OPERATIONS AND PROCESSES (2 of 3) • packaging (excluding encapsulation in the electronics sector) or presenting goods for transportation or sale • simple processes consisting of sifting, classifying, washing, cutting, slitting, bending, coiling and uncoiling and other similar operations

  50. AANZFTA MINIMAL OPERATIONS AND PROCESSES (3 of 3) • affixing of marks, labels or other like distinguishing signs on products or their packaging • mere dilution with water or another substance that does not materially alter the characteristics of the goods

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