This article aims to provide information on Customs cooperation activities of the Association of Southeast Asian Nations (ASEAN), outlining the scope, coverage and workings of the regional instruments and mechanisms, and on recent developments in the cooperation activities.
Rationale for ASEAN Customs Cooperation
2. ASEAN was established on 8 August 1967 in Bangkok, Thailand, with the signing of the Bangkok Declaration. The ASEAN nations came together with three main objectives in mind: to promote the economic, social and cultural development of the region through cooperative programs; to safeguard the political and economic stability of the region against big power rivalry; and to serve as a forum for the resolution of intra-regional differences. ASEAN now comprises ten member countries: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam.
3. A major milestone in regional economic cooperation was the decision to establish the ASEAN Free Trade Area (AFTA), as announced by the ASEAN Heads of Governments at the Fourth ASEAN Summit held in Singapore in 1992. The Common Effective Preferential Tariff (CEPT) Agreement, signed during the Summit, required that tariff rates levied on a wide range of products traded within the region be reduced to 0-5%. Quantitative restrictions and other non-tariff barriers would also be eliminated. Although originally scheduled to be realized by 2008, the target of a free trade area in ASEAN was continuously moved forward, so that it is now to be established by the year 2002.
4. As a result, ASEAN is creating an integrated market where there is free flow of goods within the region. As at 5th September 2000, the total number of tariff lines in the CEPT Inclusion List is 53,725 tariff lines, which represents about 83.8 % of all tariff lines in the ten ASEAN countries. The average CEPT tariff rate has dropped to 4.43% from 12.76% when it started out in 1993, for the original six member countries.
5. Since 1993, intra-ASEAN trade has grown from US$ 44.2 billion to US$ 73.4 billion in 1998, representing an average increase of 13.2%. Before the financial and economic crisis struck in mid 1997, intra-ASEAN exports had actually been increasing by 29.6% compared to 18.8% of total ASEAN exports. But the advent of the crisis has adversely affected intra-regional trade more than trade with the rest of the world. Intra-ASEAN exports contracted by 15.9% in 1998 compared to the 5.8% reduction in total ASEAN exports.
FIGURE 1: TOTAL AND INTRA-ASEAN EXPORTS
These figures reflect exports of seven ASEAN countries – Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand and Viet Nam.
6. However, tariff reductions alone do not make a free trade area. ASEAN member countries’ commitment to AFTA includes the removal of non-tariff barriers (e.g. quotas) and trade facilitation measures including elimination of unnecessary technical barriers to trade, harmonization of standards and conformance measures, and the simplification and harmonization of customs procedures to ensure smooth flow of goods across borders. Thus regional cooperation in customs matters plays a crucial role in supporting the establishment of AFTA and in promoting closer economic integration objectives of ASEAN.
ASEAN Customs Cooperation Framework
An ASEAN Customs Code of Conduct was first signed by the ASEAN Directors-General of Customs in 1983. The Code was subsequently revised in 1995 to reflect the latest developments in ASEAN, particularly AFTA. Through this Code of Conduct, member countries committed to facilitate intra-ASEAN trade by simplifying and harmonizing trade procedures and to enhancing regional cooperation in customs.
8. This commitment was further deepened and broadened with the signing of the ASEAN Agreement on Customs by the First ASEAN Finance Ministers’ Meeting held on 1 March 1997 in Phuket, Thailand. The Agreement espouses the principles of consistency, simplicity, efficiency, transparency, access to appeals, and mutual assistance in the conduct of Customs. In addition, member countries also agreed to:
- Use a common tariff nomenclature to make it easier for traders operating in the region through the creation of an ASEAN Harmonised Tariff Nomenclature (AHTN);
- Not use customs valuation for protective purposes or as a barrier to trade. In this regard, member countries agreed to implement the provisions of the WTO Valuation Agreement and that a common interpretation of the WTO Valuation Agreement be adopted to ensure uniformity and standardized implementation;
- Continuously simplify and harmonize customs procedures, so as to ensure the expeditious clearance of goods in order to cut the time taken and transaction costs at customs point. In this connection, customs procedures shall be aligned to standards and recommended practices of the Kyoto Convention on the simplification and harmonization of customs procedures;
- Exchange vital information on the prevention and repression of smuggling, trafficking of narcotics and psychotropic substances, and other customs frauds;
- Accord right to appeal decisions taken by the customs authorities of member countries, subject to national laws and regulations in each country; and
- Encourage cooperation and consultations with the ASEAN private sector particularly on ways and means to further enhance intra-ASEAN trade facilitation.
9. Whilst the Agreement provides a legal framework for the then (1996-7) existing work being pursued within the ASEAN customs fora, an ASEAN Customs Vision was developed towards the end of 1997 to provide the necessary long term direction. This was in recognition of the challenges posed by a dynamic economic environment, the need to keep pace with international and regional developments, and the desire to promote and forge closer economic integration within the region. Thus was developed the following theme for the ASEAN Customs Vision:
“an ASEAN Customs Partnership for World Class Standards and Excellence in efficiency, professionalism and service, and uniformity through harmonized procedures, to promote trade and investment and to protect the health and well-being of the ASEAN community”
10. To help realize this Vision, a work program called the ASEAN Policy and Implementation Work Program (PIWP) was established. The PIWP, covering fifteen elements, sets out the objectives, activities and expected outputs planned for the first cycle of implementation i.e. for the period 1999-2004. Appendix I provides a summary of the objectives of the respective elements in the PIWP.
11. The relevant ASEAN bodies on customs matters are as follows:
At the working level is the ASEAN Experts Committee on Customs Matters (ECCM). This body oversees implementation of the various activities, namely on the progress of the implementation of the PIWP, and reports to the ASEAN Directors-General of Customs Meeting. The ECCM can convene special task forces to address specific issues e.g. tariff nomenclature/classification, and such ad-hoc bodies would have to be time-bound and task specific. The ECCM is currently chaired by the ASEAN Secretariat, and it meets about 2-3 times a year. The last ECCM Meeting was the Fifth ECCM Meeting held in ASEAN Secretariat Jakarta in 26-28 April 2000.
In addition to the ECCM, there is a forum of the ASEAN Coordinators of Customs Training Centers (ACCTC), represented by the heads of customs training centers or the heads of human resource division of member customs administrations. This forum was set up to boost cooperation and coordinate the provision of training and technical assistance among ASEAN Members, through the ASEAN Customs Training Network. The ACCTC also reports to the ASEAN Directors General of Customs Meeting and is currently chaired by Malaysia.
The Meeting of the ASEAN Directors-General of Customs is the forum that oversees all customs cooperation activities in ASEAN and is held annually. Chairmanship of the meeting is rotated alphabetically. The current Chairman is Myanmar. At the Ninth Meeting of the ASEAN Directors-General of Customs, Philippines will take over the chairmanship for a period of one year, until the next meeting.
The ASEAN Directors-General of Customs Meeting reports to the following ASEAN ministerial bodies: the ASEAN Finance Ministers’ Meeting, since cooperation in customs matters is also included in the Ministerial Understanding on ASEAN Cooperation in Finance and the AFTA Council Meeting which supervises the implementation of the ASEAN Free Trade Area.
The ASEAN Secretariat provides the necessary support for supervising, coordinating and reviewing the implementation of the cooperation activities.
Highlights of Progress Made in the Implementation of the PIWP
12. The implementation of the PIWP is currently underway, with technical assistance contributed by several ASEAN dialogue partners, such as Australia, Japan and New Zealand. Priority is currently focused on measures that help member countries adopt modern and trade-friendly approaches to customs procedures, such as risk management techniques, implementation of the WTO Valuation Agreement, implementation of customs post clearance audit procedures, and in making available to the trading and business community, facilities such as customs pre-clearance and pre-entry tariff classification services.
13. The element on Partnership with the Business Community is an important one with the long-term objectives of establishing a close relationship of trust and cooperation between Customs and the business community; and to mutually reinforce and integrate business and Customs activities both for the better functioning of Customs as well as for the benefit of trade and commerce. To this end, the annual meeting of the ASEAN Directors-General of Customs has held consultations/dialogue with representatives from the private sector since 1997, through the cooperation and coordination of the ASEAN Chambers of Commerce and Industry. One of the activities currently being pursued is Project ACCESS, which is collaboration between Customs and representatives from the express services industry to look into expediting clearance of international express business without compromising Customs control requirements.
14. To assist member countries in planning for the implementation of Customs Post Clearance Audit (PCA), a two-day workshop was held on 25-26 November 1999 in Jakarta, with resource persons provided by Indonesia, Japan and Australia. Technical assistance for this project is provided by Japan. An ASEAN PCA implementation reference manual is currently being developed, and once completed, joint trainings on PCA will be conducted for the region. Starting July 2000 a Japanese PCA Expert is posted in the ASEAN Secretariat Jakarta to help member countries in need of his expertise.
15. In the area of Cargo Processing, Philippines as Country Coordinator is in the process of carrying out analysis upon information collated from member countries on the survey circulated in 1999, with a view to analyzing areas for simplification. Philippines also proposed to focus on specific areas such as selectivity, risk management and client-based cargo processing (e.g periodic declarations, periodic duty payments and speedy clearance to traders). In addition, as part of ASEAN’s continuous efforts aimed at promoting intra-ASEAN trade, the Green Lane System for CEPT products is in place.
16. As for the WTO Valuation Agreement, five member countries, Indonesia, Malaysia, Philippines, Singapore and Thailand have implemented the WTO Valuation Agreement. Brunei Darussalam is making its final preparations and is ready to implement, once the law is passed, sometime in 2000; Myanmar has obtained approval from the WTO to implement by 1 January 2002; whilst Cambodia, Laos and Viet Nam are working towards full implementation by the year 2003-5. To assist one another in anticipating and addressing any post implementation problems, a number of ASEAN countries that have implemented the Agreement will share their experiences at the ECCM.
17. Work on the finalization of the ASEAN Harmonized Tariff Nomenclature (AHTN) is in progress; the third workshop on AHTN was held in ASEAN Secretariat, Jakarta where Revision 1 C of the draft AHTN was discussed. For this undertaking, ASEAN is assisted by technical assistance from Japan. The AHTN text is targeted to be finalized by the 4thworkshop. Its implementation will be in 2002 to coincide with the implementation of the HS2000 revisions.
18. ASEAN Member Countries have signed the Framework Agreement on the Facilitation of Goods in Transit. To operationalize this Agreement, nine implementing protocols are at various states of completion, and two of these relate to Customs: they are Protocol 2 on Frontier Posts and Protocol 7 on Customs Transit System. These two protocols are still being finalized.
19. In the area of Mutual Assistance, ASEAN has already put in place the Guidelines on Mutual Assistance to Combat Customs Fraud and Smuggling. Efforts are underway to monitor the use and effectiveness of the Guidelines with a view to strengthening this element of cooperation.
20. To promote the principle of transparency, an ASEAN Customs Website has been established, hosted on the ASEANWEB. In addition, information on ASEAN member countries’ existing arrangements for handling complaints and appeals from the public and the trading community are currently being compiled with the view to adopting a set of best practices in ASEAN. The URL for the ASEAN Customs website is: www.aseansec.org/economic/customs/custmain.htm)
Appendix I – ASEAN Customs PIWP Elements and Objectives
Post Clearance Audit
- Development of ASEAN guidelines on customs audit.
- Application of customs post clearance audit in each member country.
- To simplify existing cargo clearance procedures and reduce documentary requirements to the barest necessary essentials for effective customs enforcement.
- To use selectivity and risk analyses.
- To integrate international best practices into the overall standard operating procedures in the cargo clearance systems.
- To harmonise customs valuation methods in ASEAN Member Countries through adoption and operation of the WTO Valuation Agreement.
- To facilitate trade between ASEAN Member Countries through consistent, predictable and assured classification rulings and decisions.
- To promote transparency, consistency and uniformity in the classification of goods within ASEAN Member Countries through the implementation of an ASEAN Harmonised Tariff Nomenclature (AHTN).
- To provide greater comparability of intra-ASEAN trade flows by extending common commodity classification beyond the 6 digits of the Harmonised System.
Goods in Transit
- To facilitate the movement of goods in transit within and through ASEAN Member Countries by the introduction of simplified and harmonised customs procedures and requirements.
- To encourage the use of automation for customs cargo processing within ASEAN countries with the objective of improving clearance times and increasing the level of efficiency and effectiveness.
- To coordinate the development of national automated systems so as to ensure compatibility in data requirements for possible future linkage within the region.
- To improve customs enforcement throughout the region by using risk management techniques together with the latest technical developments and equipment.
Temporarily Admitted Goods
- To simplify and harmonise the customs control of goods under temporary admission in ASEAN Member Countries through simplified and harmonised customs procedures and requirements.
Strategic Planning and Management
- To encourage the development of strategic plans so as to provide the basis of a unified regional approach to the management and direction of customs activity.
- To establish a cooperative framework at the regional level for ensuring the effective and prompt exchange of information, in particular, for the prevention, investigation and repression of smuggling, trafficking of narcotics and psychotropic substances, and other customs offences.
- To ensure that current methods of information dissemination are enhanced and broadened on a regional basis.
Training and Human Resource Development
- To develop the human resource of ASEAN member administrations through training programmes, study visits, attachments, courses and seminars so as to successfully implement the first five-year cycle of Vision 2020.
Technical Assistance to New Members of ASEAN
- To provide technical assistance to the customs administrations of Cambodia, Laos, Myanmar and Viet Nam where particular needs have been identified.
International Customs Fora
- To promote awareness, understanding and adoption of international conventions, standards, recommendations, guidelines and best practices relating to customs matters among ASEAN member countries.
- To create a coherent unified approach by ASEAN Member Countries in relevant international fora
Partnership with the Business Community
- To strengthen and improve existing relationships and institutions of customs with the business community.
- To lay initial foundation for the realisation of the overall objectives of the Plan of Action on the Business Community to be achieved by the year 2020.