Tariff nomenclature, customs valuation and procedures can be classified as ‘non-border’ areas of cooperation. These are an essential part of any free trade arrangement being part of the technical, administrative and regulatory aspects of trade. Their harmonisation would contribute to the smooth flow of goods across borders. In fact, even in the absence of any tariff reductions, harmonisation in these areas can help facilitate or increase the flow of trade. The significant rise in international trade and a more diversified pattern of trade has increased the need to simplify and harmonise these cross-border measures, and to revamp customs administration in ASEAN. These efforts are reflected in a recently revised ASEAN Customs Code of Conduct. Given the importance of customs harmonisation for facilitating trade, the Seventh AFTA Council held in Brunei Darussalam decided to turn this non-binding Code of Conduct into an ASEAN Agreement on Customs Cooperation. This Agreement should be completed by December 1995.
Harmonisation of Tariff Nomenclature in ASEAN
Product nomenclature refers to the classification of goods using some criteria of description e.g., usage, function, or measurement. It becomes Tariff Nomenclature (or tariff lines) when tariff rates are attached to the classification of goods. In international trade, harmonisation and refinement of tariff nomenclature is necessary to ease the process of making products comparable. This is especially true in the ASEAN Free Trade Area where CEPT concessions are only accorded to goods on a reciprocal basis. One would have to compare like with like in order to determine if a particular product qualifies for concessions.
The Harmonised System (HS) is a system which classifies and describes products based on various criteria (i.e. a nomenclature). The Customs Cooperation Council (CCC now the World Customs Organization) created the system in an attempt to harmonise the description of products across countries so as to facilitate international trade. The first version was created in 1950 under the International Convention on the Harmonised Commodity Description and Coding System. ASEAN Member Countries are signatories of the WCO, hence they adopt the Harmonised System. The RS Code is revised frequently. The latest revisions are the 1996 amendments to the HS in which ASEAN Member Countries are preparing to implement. The basis for further refinements beyond the 6-digit level are left to the discretion of the countries who are members of the CCC (or WCO), ASEAN is currently working out a system that would harmonise its nomenclature systems beyond the 6- digit level, that is at the 8 digit level. A harmonised nomenclature system beyond the HS 6 digit level would further facilitate trade.
The harmonisation and refinement of tariff nomenclature are important and have a number of objectives and advantages:
a) For tariff classifications:
– speeds up the process of imports and exports by facilitating product comparability at customs;
– basis for collection of excise and sales tax; and
– simplifies trade transactions.
b) For data collection:
– ensures a comprehensive collection of data on the flow of goods between countries; and
– by increasing comparability of data across countries, it provides a basis for analysis of trade data for decision making.
In the Harmonised System Convention, products are classified under 21 sections. Ranging from “Live Animals; Animal Products” in Section I to “Textiles and Textile Articles” in Section XI to “Works of Art, Collector’s Pieces and Antiques” in Section XXI. In each section, products are further subdivided in double digit Codes (termed “chapters”). Hence, for e.g. HS Code 01 is “Live Animals”, HS Code 17 is “sugars and sugar confectionery” etc. Codes in digits beyond the two-digit level would represent further refinements to the description of the product (termed “sub-headings”). The Harmonised System only provides for descriptions up to the HS 6-digit level. This is depicted in the following example for HS Chapter 01 in which two sub-headings are shown:
HS Code 01 Live Animals
01.01 Live horses, asses, mules and hinnies
– Horses
0101.11 — Pure-bred breeding animals
0101.19 — Other
0101.20 – Asses, mules and hinnies
01.02 Live bovine animals
0102.10 – Pure-bred breeding animals
0102.90 – Other
ASEAN Member Countries currently use various versions of the Harmonised System (HS) classification. Variations also occur at the 6th to l0th digit levels. The 26th ASEAN Economic Ministers Meeting in September 1994 had decided to commence work on the harmonisation of tariff nomenclature in ASEAN. It has been decided that harmonisation of nomenclature be at the 8-digit level. Work on the harmonisation process is well in progress and is targeted to be completed by the end of 1996.
Harmonisation of Customs Valuation Systems
Customs valuation systems embody the method for determining the value of imported goods by a receiving country and is used, among others, for customs duties assessment, statistical collection, quota and licensing requirements, and taxes and other charges levied on imports. There are, however, varying methods for determining the value of a good in ASEAN. Table 5 depicts the various customs valuation methods in ASEAN.
Most ASEAN Member Countries use either the Brussels Definition of Value (BDV) or a combination of the GATT Transactions Value (GTV) and BDV as a system of valuation. The BDV defines the normal price of the goods to be valued as the price the goods would fetch at the time duty becomes payable on a sale in the own market between a buyer and a seller, independent of each other and not influenced by any commercial, financial or any other relationship between the seller and buyer other than that created by the sale itself. This, however, does not give any precise methods of calculating the dutiable value, leaving to each party to decide on how the customs value is to be determined.
In the GTV, customs value is established by using the transaction value of the imported goods, i.e. the price actually paid or payable for the goods being valued as reflected in the seller’s invoice or other documents against which payment is made. As opposed to the BDV, this gives precise methods of determining the customs value. The Philippines however, uses the Home Consumption Value (HCV) i.e. the value at the port of origin vis-a-vis the export.
ASEAN Member Countries, being signatories to the Final Act of the Uruguay Round are committed to implement the GTV method as stipulated in the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994, by the year 2000. This system is intended to be fair, uniform and neutral, and conforms to commercial realities, and which outlaws the use of arbitrary or fictitious customs values.
The Seventh AFTA Council Meeting in Brunei Darussalam has accelerated the timetable for implementing the GATT valuation system to the year 1997. ASEAN is currently cooperating- in the training of relevant customs officials on the management, administrative and technical aspects of the GTV to facilitate its implementation and execution before 2000. ASEAN Member Countries are now preparing the implementation of the GTV. Some Member Countries will be implementing the system as soon as 1996. Steps are also being taken to minimise potential variations in the interpretation of the GTV by adopting common understanding on its implementation and administration.
Harmonisation of Customs Procedures
Customs procedures represent another important administrative aspect of international trade. Trade conducted under the CEPT Scheme is not only governed by the standard customs clearance procedures for all goods but is also burdened by the additional requirement of determining the origin of the product. Goods originating from ASEAN can only be eligible for concessions if at least 40% of the value of its content is from ASEAN and this is certified by the issuance of the CEPT Certificate of Origin. There is therefore a need to simplify and harmonise customs procedures in ASEAN in order to facilitate trade in ASEAN. Two areas of procedures have been prioritised by ASEAN customs for harmonisation.
i. Common CEPT Declaration Form
Goods flowing across borders in ASEAN are subjected to three sorts of procedures viz. the certification of origin, export procedures from the country of origin and import procedures from the importing country. In the first stage, a Certificate of Origin or FORM D will be required for all transactions under the CEPT Scheme in order to determine that the good has at least 40% ASEAN content in value. This will enable the product to be eligible for the tariff concessions under the CEPT. Then, for the product to be approved for export by the customs authorities of the exporting country, an Export Customs Declaration Form must be filled out. Likewise, when the product arrives in the importing country, an Import Customs Declaration Form must be completed.
Since most of the elements in the customs forms are similar, the procedure can be simplified by merging these three forms into a common ASEAN CEPT Form. ASEAN is in the process of formulating such a form. However, since ASEAN will ultimately move into the Electronic Data Interchange (EDI) system, there will be a need in the future to redesign a form consistent with the new system.
ii. Common Import and Export Procedures
A common ASEAN-wide procedure for the importation and exportation of goods will serve the purposes of facilitating the flow of goods between countries. ASEAN is in the process of formulating common and simplified procedures which will emphasise, among others, the following:
a) formalities prior to lodgement of goods declaration at the time of export;
b) formalities prior to lodgement of goods declaration at the time of import;
c) concerning examination of goods;
d) concerning consignment where the certificate of origins are issued retroactively;
e) concerning refunds etc.
Cognizance will be given to the Kyoto Convention, an international standard for customs procedures, when formulating common procedures. It is recognised that the harmonisation and simplification of customs procedures is a complex and difficult task. Nevertheless, ASEAN is committed to ensuring that these procedures are simplified and harmonised to promote transparency, consistency, efficiency and simplicity in its customs administration. ASEAN is also currently formulating a mechanism which expedites the clearance of CEPT goods.
Table 5
METHODS OF CUSTOMS VALUATION IN ASEAN
| COUNTRY | METHOD OF VALUATION | |
|---|---|---|
| Brunei Darussalam | Valuation using the BDV i.e. based on price which an importer would give for the goods on a purchase in the open market inclusive of freight, insurance, commission and all other costs, charges and expenses incidental to the purchase. Assessed value based on Carriage, Insurance and Freight (CIF) declared in invoice and are checked against value dockets, price lists and/or expert opinion. | |
| Indonesia | – Goods with FOB USD 5,000 and above valuation is based on prevailing export market price and will be subjected to preshipment inspection (PSI). – For imports of below FOB US$5,000, valuation is based on the transaction value which is generally stated in the invoice, and is not subjected to PSI *) | |
| Malaysia | Based on BDV, However, appeals are entertained. | |
| Philippines | Based on the Home Consumption Value of the exporting country in usual wholesale quantities, in ordinary course of trade, of the same, like or similar article. | |
| Singapore | Based on the BDV, but in limited use. Importers will be required to declare and present evidence in arriving at the CIF value. Procedures are established if no substantial evidence is shown for the value. Temporary uplifts are added to the CIF for first time imports by related companies. | |
| Thailand | Duty is computed based on the true market value or value of any goods which is the wholesale cash price of which goods of like kind and quality would be sold without loss at the time and place of importation or exportation without deduction or abatement. “Check List Price” is used and is revised periodically. Such revision will usually adopt the highest import prices recorded during the immediate preceding six months. | |
Source: ASEAN Member Countries
*) Based on information as of 11 April 1995.
October 3rd, 2012
