Friday, September 19, 2014

The Broader Effects of ASEAN Rules of Origin

Followers of this blog will notice the link to the right that allows for pre-ordering of Rules of Origin in ASEAN: A Way Forward, an analysis of the rules of origin applied by ASEAN in its free trade agreements, co-authored with Stefano Inama.  Rules of origin are of course important for customs purposes, because goods qualify for duty exemptions or reductions based on where the goods originate.  Only ASEAN-origin goods, for example, qualify for the preferential tariff rates of the ASEAN Trade in Goods Agreement (ATIGA).

However, rules of origin also affect other aspects of trade in ASEAN, particularly because the ASEAN Economic Community is not based on a customs union, but is instead a preferential trade agreement.  As such, the ASEAN member states retain the right to impose trade remedies such as anti-dumping measures, countervailing duties and safeguards, both under their national laws and under the terms of the ATIGA, whereas in a customs union such as the EU, the member states have no such authority.

For example, in one of my recent anti-dumping cases involving two ASEAN member states, the exporting country had only one producer (my client) of the product under investigation.  According to its records, and confirmed by its home government,  the exporting country’s exports would account for less than 3% of total imports in the importing country.  Under the WTO anti-dumping agreement, such exports would be considered too negligible to have caused material injury to the importing country’s local industry – no anti-dumping duties should be imposed under such circumstances.

However, the importing government’s country, based on what was declared by the importers, found that the exports were purportedly double of what was reported by the exporter.   Hence the exports exceeded the 3% negligibility level and the importing government imposed anti-dumping duties.

Now, to qualify as ASEAN-origin, Form D documents would have to have been submitted by the importers.   The difference between the exporting country’s data and the importing country’s data thus most likely results from discrepancies in the filing of those Form D documents, e.g., importers filing Form D documents for which origin was not justified. 

Import and export statistics have also been controversial in ASEAN in other contexts.  For example, for a long time, the exact quantity and value of bilateral trade between Singapore and Indonesia was not publicly discussed, because certain goods (e.g., petroleum and its related products) were politically controversial (as Indonesia shipped much of its petroleum to Singapore for refining).  Singapore routinely shows up as a major exporter of goods to other ASEAN countries which it does not produce (e.g., flat-rolled steel), which frequently results in trade remedy complaints against Singapore.   And for several years, imports declared under the personal duty-free allowance (e.g. duty-free purchases at the airport) accounted for about 10% of annual Indonesian imports.

The foregoing shows that rules of origin have importance beyond preferential import tariffs.  Applying these rules correctly will require greater education of the private sector as well as improved cross-border cooperation by ASEAN customs and trade authorities.