Q1. What are CEPT concessions?
Concessions granted under the CEPT refer to the lower tariff rates or customs duties that exporters from an ASEAN Member State have to face when exporting a product to another ASEAN Member Country.
Q2. How are CEPT Concessions Exchanged ?
In the CEPT these concessions are granted on a reciprocal basis. A Member Country is automatically eligible for concession if the tariff rate on a product it has included in the CEPT is at or below 20%. This means its exports of this product to any other Member Country will be levied the CEPT rate (which is lower than or equal to the MFN rate) set by those other countries. However, if the tariff rate on a product it has included in the CEPT is above 20%, then it is eligible for concessions only in those Member Countries that also impose a CEPT rate that is higher than 20%.
Q3. What is the ASEAN Preferential Tariff Arrangement (PTA) ?
The ASEAN PTA is an arrangement entered into by the ASEAN Member Countries in 1977 to offer preferential tariff treatment to products originating from ASEAN states. Under this arrangement an ASEAN-based importer will pay a lower tariff rate on a product if it originated from another ASEAN Member Country than if the same product were obtained from a non-ASEAN source.
Q4. What is a Margin of Preference (MOP)?
A MOP is a tariff preference and is one of the instruments for preferential trading arrangements under the ASEAN PTA since its initiation in 1977. All products originating from ASEAN which are under the PTA will be accorded preferential tariffs which will be a margin lower than the MFN tariff rates of the ASEAN Member Countries. MOPS are usually defined in terms of a percentage applied to the rate of an ASEAN country and is currently 50% for all PTA items.
Q5. How is the CEPT different from the PTA?
The CEPT scheme is the major instrument in moving ASEAN to its goal of a free trade area. Hence the CEPT requires that the tariff rates of those products included in the scheme ultimately be reduced to 0-5%. The ASEAN PTA does not require a reduction of tariffs of this magnitude. It only requires that whatever tariff rates are applied by an ASEAN country on imports from the rest of the world that a margin of preference be given to ASEAN partners. Concessions offered under the CEPT are on a reciprocal basis only while the concessions offered under the PTA is on an ASEAN MFN basis. The number of products included in the CEPT is also much larger than that covered in the PTA. The CEPT also includes provisions for the elimination of quantitative restrictions, non-tariff barriers and other cross- border measures.
Q6. What are Rules of Origin?
Rules of origin are defined as the Set f criteria used to determine the country or customs territory of origin of a good or service in international trade. It is a crucial component of any regional trading arrangement and would serve to prevent non-members of a free trade area from taking advantage of differential external tariff rates imposed by individual member countries. It would be used to determine the eligibility of a product to receive concessions. Rules of origin rest on the concept of “substantial transformation” so that origin is assigned to the country where the last substantial transformation occurred. Substantial transformation may be defined on the basis of a change in tariff heading, achieving a threshold proportion of value-added or on the basis of certain manufacturing processes. In AFTA, the rule of origin is based on value-added with the threshold level set at 40% of the value of the product.
Q7. What are the basic documents which one needs to obtain more information about the CEPT Scheme for AFTA?
The basic documents include the (i) Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area and its Interpretative Notes, (ii) the CEPT product lists and tariff reduction schedule, (iii) the legal enactment of each country and (iv) the CEPT Concessions Exchange Manual (CCEM).
Q8. What are the CEPT Product Lists?
They are a compilation of products included in the CEPT Scheme either in the fast track, normal track or for temporary exclusion. The tariff reduction schedule for these products start from the year 1993 and ends in 2008.
Q9. Are these CEPT Product Lists and their Tariff Reduction Schedule fixed?
No, ASEAN Member Countries are allowed to increase the number of products in the Inclusions Lists (Fast and Normal Tracks) or quicken the pace of tariff reduction. The revision of the List can be done every three months in the ASEAN Senior Economic Officials Meetings (SEOM).
Q10. What are the legal enactments under CEPT ?
In order to implement tariff reductions contained in the Tariff Reduction Schedules, each ASEAN Member Country has to have a legal order to effect their tariff reductions each year.
Q 11. What is the CEPT Concessions Exchange Manual (CCEM) ?
The CEPT Concessions Exchange Manual contains information indicating the ASEAN Member Countries and their products that are eligible for tariff concessions. For example, the CCEM of Malaysia in 1994 will show the CEPT tariff rate of each product and the corresponding product(s) of other ASEAN Member Countries that are eligible for that tariff rate.
Q12. How can an importer determine the tariff rate for a particular product brought in from other Member Countries?
To determine the eligibility for concessions, the importer has to make sure that:
a) The same product is in the Inclusion List of the exporting country;
b) The tariff rate in the exporting country for the same product is at or below 20% level. However, if the tariff in the exporting country is above 20%, the concessions can only be given when the CEPT tariff rate of the importing country is also above 20%, regardless of whether there is a tariff reduction in that particular year or not;
c) The imported product must have a CEPT Certificate of Origin (FORM D) to prove that the product has at least 40% ASEAN content.
Q13. What is required in obtaining the certificate of origin under CEPT AFTA?
The exporter has to file the application for the Certificate of Origin with the government agency issuing the Certificate of Origin in their country. Each country has a specific requirement for the application. One of the requirements is the description of the production process and an identification that the product contains over 40% of ASEAN content.
Q14. Are import tariffs the only duties charged by the Customs Department?
No, in most countries, there are additional domestic taxes, e.g., surcharges, sales taxes, value added taxes or luxury taxes. These are domestic taxes which are not discriminatory in nature. Their removal are not covered by the CEPT Scheme.
Q15. Can indirect consignments be accepted under CEPT operation?
No, the CEPT concessions are granted only to direct consignments. Direct consignments refer to products (a) that are transported without passing through the customs territory of a non-ASEAN country or (b) whose transport through the customs territory of a non-ASEAN country can be justified for geographical reason, and has not entered into trade or consumption there, or undergone any operation beyond unloading or reloading.
Q16. Can PTA Products enjoy CEPT Concessions?
PTA products can enjoy the CEPT concessions provided that the products are included in the inclusion list (normal or fast track) of the exporting and importing countries. The product must also have at least 40% ASEAN content.
Q 17. Is it possible for a product appearing both in the PTA and CEPT lists to have a lower PTA rate than CEPT rate?
It is possible for the PTA rate to be lower than the CEPT rate. The reason for this is that the PTA rate is based on a margin of preference over MFN rates. CEPT rates are based on tariff reduction schedules submitted by member countries. Ideally, CEPT rates should incorporate the MOPs granted under the PTA. However, suppose a member country undertakes a unilateral lowering of its MFN rate. This will automatically change the PTA rate but the same adjustment does not occur automatically for the CEPT rate.
Q18. If the PTA rate is lower than the CEPT rate, which one applies for an importer?
The importer should claim whichever rate is lower. If the PTA rate is lower- than the importer will have to claim the PTA concession by filing certificate of origin FORM C. If the CEPT rate is lower, then the importer has to file certificate of origin FORM D to claim that concession.
Q19. Which departments should one contact to obtain further clarification or queries about CEPT for AFTA?
The addresses and telephone numbers of the relevant departments are as follows:
Brunei Darussalam : Ministry of Industry and Primary Resources
Bandar Seri Begawan
Tel No.: (6732) 228601
Fax No.: (6732) 244811
Indonesia: Trade Research and Development Agency
Ministry of Trade
Jalan Ridwan Rais No. 5
Jakarta 10110
Tel No.: (6221) 3857580
Fax No.: (6221) 3857580
Malaysia: Ministry of International Trade and Industry
Blok 10, Jalan Duta
Kuala Lumpur 50622
Tel. No.: (603) 2546022
Fax No.: (603) 2550827
Philippines: Bureau of International Relations
Department of Trade and Industry
357 New Solid Building
Sen. Gil J. Puyat Avenue
Makati, Metro Manila
Tel No.: (632) 873662
Fax No.: (632) 8179823
Singapore: Trade Development Board
World Trade Centre
#10-40 Telok Blangah Road
Tel. No.: (65) 2790317
Fax No.: (65) 2710985
Thailand: Fiscal Policy Office
Ministry of Finance
Rama VI Road
P.O. Bangkok 10400.
Tel No.: (662) 2739020
Fax No.: (662) 2739168
ASEAN Secretariat: AFTA Unit
Tel No.: (6221) 7262272, 7251988- (ext. 313)
Fax No.: (6621) 7398234, 7243348
October 3rd, 2012
