Customs and Trade updates

October 2009

Signing of ASEAN-India Trade in Goods (TIG) Agreement

India and ASEAN finally signed the long-awaited ASEAN-India Trade in Goods (TIG) Agreement at the 7th ASEAN Economic Ministers (AEM) – India Consultations in Bangkok on 13 August 2009.

The TIG will be implemented from 1 January 2010 or the date the notifications of implementation are made by India and at least one ASEAN country.

The TIG covers approximately 5000 products traded between the two sides subject to a rule of origin of:

  • 35% regional content and
  • A change in tariff classification at the sub-heading level (6-digit level).

The tariff commitments provided for under the TIG have been categorised under the following headings:

  • Normal Track for reduction and subsequent elimination of customs duty as per the prescribed schedule;
  • Sensitive Track for reduction to a level of 5% customs duty in accordance with a prescribed country specific timeline;
  • Special Products for which customs duty would be reduced in terms of a prescribed schedule;
  • Highly Sensitive List for specified products for which the reduction in customs duty would be very limited; and
  • Exclusion List for goods not entitled to customs duty concessions under the TIG

India’s exclusions include agricultural goods, textiles, auto and chemicals, in addition to specified highly sensitive goods such as palm oil, coffee and pepper. ASEAN countries have maintained similar exclusion lists.

With the completion of the negotiations of the first phase of the ASEAN – India Free Trade Area (AIFTA) proposed under the Framework Agreement of 2003, the two sides have now reiterated their commitment to conclude negotiations for the Agreement on Trade in Services and Investment at the earliest.

The signing of the TIG also marks the culmination of India’s efforts over the last decade to implement a 'Look East' policy, the seeds of which were planted in the early 1990s. It also marks India’s entry into one of the world’s largest trading blocs. ASEAN is India’s fourth-largest trading partner after the European Union, the U.S. and China. Two-way trade between India and ASEAN amounted to US$47 billion in 2008.

ASEAN and China sign landmark Investment Agreement

China and ASEAN have inked the Investment Agreement of the ASEAN-China Free Trade Agreement (ACFTA) at the 41st ASEAN Economic Ministers' Meeting in Bangkok, Thailand, on 21 August 2009.  The agreement marks the completion of the negotiation process for ACFTA.

The Investment Agreement aims to provide a mechanism for investors of both sides for the protection, promotion and liberalisation of investments.

As of 2008, ASEAN nations had US$52 billion in accumulated investment in China, with Singapore, Malaysia and Thailand ranked as the top three investors into China.

China's FDI to ASEAN countries reached US$2.18 billion in 2008, increasing by 125% over 2007.  Meanwhile, ASEAN is China's fourth largest trading partner after the European Union, the U.S. and Japan.  In 2008, bilateral trade between China and ASEAN was $231.12 billion, up 13.9% from 2007.

ASEAN Trade in Goods Agreement proposed to be implemented by October 2009

The ASEAN Economic Ministers have agreed that the ASEAN Trade in Goods Agreement (ATIGA) will be implemented no later than the ASEAN Leaders summit in October 2009, which has been revised from the original timeline of August 2009. The delay is largely caused by the deliberation of the tariff schedules being released by various member states as well as the sometimes slow domestic ratification process. According to provisions in the ATIGA, the agreement shall only enter into force after all Member States have notified or, where necessary, deposited instruments of ratifications with the Secretary-General of ASEAN upon completion of their internal procedures.

However it should be noted that some of the ASEAN member states such as Malaysia and Thailand have already commenced eliminating their non-tariff barriers and are working towards the trade facilitation measures, in line with their commitments in the ATIGA.

Implementation the Peru-Singapore FTA (“PeSFTA”)

Singapore Customs have issued a circular stating that the PeSFTA was implemented on 1 August 2009. Exporters from Singapore seeking to utilise this agreement are advised to do a self check first to determine if their products enjoy any preferential tariff treatment vis-à-vis the additional administrative work to comply with the FTA requirements. If the FTA is worthwhile for the exporters to utilise, they will have to ensure that the respective rules of origin are satisfied. The Rules of origin can be:

  1. Product wholly obtained or produced in Singapore; or
  2. Product satisfying the Product Specific Rules which can be one of the following:
    • A change in the tariff classification heading (applicable for the majority of  products), or
    • Meeting the value-added criterion of 30% - 60% originating content (depending on the specific tariff classification code of the product), or
    • Specific processes such as chemical reaction.

Once they are confident that they meet the rules of origin, exporters can apply for certificates of origin from Singapore Customs provided the following requirements are met in chronological order:

  • Their factories are registered with the Tariffs and Trade Services Branch of Singapore Customs.
  • If the value-added criterion is used for claiming originating status, their respective manufacturing cost statements for each product model exported is submitted to and approved by Customs. Once approved, the cost statements are valid for one year and have to be amended accordingly if there are any changes to the manufacturing cost figures.
  • Their electronic applications of certificate of origin for the PeSFTA and export permits via TradeNet are submitted and approved. The TradeNet system is the nation-wide Electronic Data Interchange (EDI) System which allows the various parties from the public and the private sectors to exchange structured trade messages and information electronically. Documents relating to the production and shipment of exports accompanied by the Certificate of Origin (CO) for the PeSFTA should be kept for at least 4 years after the date on which the CO was issued for post-verification checks by the relevant authorities.

Bilateral export control talks between Singapore Customs and the US Bureau of Industry and Security (“BIS”)

Singapore Customs and the Bureau of Industry and Security (BIS) of the US Department of Commerce engaged in a discussion on bilateral licensing issues relating to controls on strategic goods which can be used for both civilian and military purposes (dual-use) in July 2009. The dialogue session was the 3rd annual session between the two agencies.

The dialogue discussed the pre-licensing checks and post-shipment verifications on strategic goods for exports from the U.S. to Singapore. Both parties also discussed the possibility of simplifying the documentation required by Singapore Customs for Singapore exporters shipping strategic goods to the U.S.

A simplification of documentation would be welcomed by companies dealing with the export of dual-use goods or military-related goods as they currently have to create two sets of export-control related documentation, even for the same shipment exported from the U.S. to Singapore and from Singapore to the U.S.

This would particularly be relevant for U.S. based companies that have established a repair or warranty centre in Singapore, requiring damaged goods from the U.S. to be exported to Singapore and the repaired / exchanged goods be re-exported to the U.S. With the U.S. being a key strategic trading partner of Singapore, a simplified documentation process would translate to savings in business costs and time incurred by both local and U.S.-based traders of strategic goods.

The dialogue session also serves as a reminder and refutes the common perception for U.S.-based companies that being compliant with the U.S. Export Administrative Regulations will immediately translate to being compliant with Singapore export control legislation as well.

Singapore has been implementing its own domestic export control regime through the Strategic Goods Control Act and its subsidiary legislation since January 2003. In 2007, the Strategic Trade Scheme was launched to allow legitimate traders with a robust internal export compliance programme to enjoy trade facilitation in terms of quicker turnaround time.

For further details, please call your usual PricewaterhouseCoopers contact.