Another issue illustrating
some of the frustrations economic actors have with the ASEAN Economic Community
(AEC) regards intra-ASEAN trade in the ASEAN Trade in Goods Agreement
(ATIGA). Under the
ATIGA, goods qualify for the zero preferential tariff rate for intra-ASEAN
trade if they satisfy the rules of origin of ATIGA. Generally, this means that the goods have
either 40% ASEAN value added or have undergone a transformation that shifts the
customs classification of the good.
Theoretically then, once a
good qualifies as ASEAN-origin for ATIGA purposes, it should always
qualify. That’s not the case. As explained earlier, because ATIGA and other
ASEAN free trade agreements (FTA) currently rely on paper documentation (the
“Form D”) to prove origin, inconsistencies in customs treatment can result. For
example, if a good has 40% ASEAN origin, it would qualify for ATIGA and the
ASEAN FTAs in most cases. However, as
discussed in a earlier post, the ASEAN
exporter will have to fill out multiple sets of origin documentation to qualify
for FTA treatment despite having met the qualifications of both FTAs.
Even within ASEAN, in the
ATIGA, there is inconsistent treatment.
A good can lose its “ASEAN identity” and not qualify for ATIGA even
though it has met the ATIGA rules of origin.
If an ASEAN-originating product from Member State A was declared for importation with a Form D in
Member State B, and at a later stage is exported to Member State C, it is at
present impossible (legally and practically) to obtain a Form D in Member State
B, and the full rate of duty will be applied in Member State C. There is only a
provision for ‘back-to-back’ certificates: a certificate of origin can be issued on the basis of another certificate of origin under certain conditions
where goods have not been declared for importation yet and are effectively in
transit.
The ‘loss of origin’ issue has been identified in earlier studies
as one of the possible causes of underuse of preference
in ASEAN. Apart from being a possible cause of underutilization, this issue is also felt to stand in the way of
a true ‘free movement of ASEAN originating goods’, which, with a
view to the AEC objectives, makes finding and introducing/implementing
a solution even more important
(It should be realized, however, that there is no solution that will solve all cases of ‘lost origin’, as there will always be situations in
which an exporter (a trader in particular), is
just
not able to prove that the goods to be exported were already originating in an ASEAN member state. ‘Proof’ is an elementary requirement that should not be dropped.).
There are two possible solutions for this legal
lacuna.
First, ASEAN can undertake full implementation of the ASEAN Framework Agreement on Goods in
Transit. The agreement called for a
protocol to allow for customs transit between and through ASEAN member
states. However, since 1998, the
protocol has not been finalized.
According to sources, differences between Malaysia and Singapore over
railway checkpoints had delayed agreement for years (recall that Malaysia had asserted
that goods and people passed from Malaysia to Singapore at the Tanjong Pagar
train station, which was deep inside the geographical territory of
Singapore). However, with Malaysia and
Singapore having resolved this dispute, and the customs and immigration
facilities having been moved to the Malaysia-Singapore border in Woodlands, the
political obstacles to passing the customs protocol have dissipated. The protocol needs to be finalized.
Second,
ATIGA itself could be amended to deal with this lost origin issue. Under ATIGA, the issuing authorities can only issue a Form
D for goods originating in the country in which the certificate is applied for.
The first step towards a solution is therefore to remove the restriction and to allow that certificates of origin can also be issued when the ASEAN country of origin of the goods in question is different from the issuing ASEAN
member state. The legal basis for the issuing of certificates
of origin is laid down in Article 38 of ATIGA.
The text of this article
does not rule out the issuing of a certificate stating a country of origin different from the country in which the certificate is to be issued, but refers to the procedural
rules contained in Annex 8 of the
ATIGA. Therefore Article 38 would not need to be amended. It is Rule 10.1 of Annex 8 that contains the restriction in question; here the text would require a minor amendment by replacing “.......originating
in
that
Member State”
by
“.........originating
in a Member State”.
With that, Annex 8 would allow for
certificates to be issued/invoice declarations to be made out for goods
originating in an ASEAN member state different from the exporting ASEAN member
state.
Either way, ASEAN needs to
deal with such details if the AEC is to achieve both the single production base
and the single market. Otherwise,
competitors such as nation-states like China and India, or regional blocs like
NAFTA and the EU, where such origin issues have been resolved or do not exist,
will be better placed to attract investment.
