CPTPP workshop clarifies rules of origin
January 21, 2019
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will remove 95 per cent of current tariff lines among the partners, but goods must satisfy the rules of origin (ROO).
Taking place on January 18, the workshop about the CPTPP themed “Benefits or challenges for Vietnamese enterprises” specified many important definitions regarding ROO.
So far, Vietnam has signed 12 FTAs and has implemented 10 so far, while one (the CPTPP) has just been ratified, and another (the ASEAN-Hong Kong-China FTA) has been signed but has yet to be implemented.
The 10 FTAs that are already in effect include the ASEAN Trade in Goods Agreement (ATIGA), ASEAN-China, ASEAN-Korea, ASEAN-India, ASEAN-Australia, New Zealand, ASEAN-Japan, Vietnam-Japan, Vietnam-Chile, Vietnam-Korea, and Vietnam-EAEU.
Once the CPTPP takes effect, one of the benefits will be that 95 per cent of current tariffs among partners will be removed. However, the only way to access this benefit will be to satisfy the ROO designed for each FTA.
The WTO defines rules of origin as the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports.
According to the WTO, ROOs are used to implement measures and instruments of commercial policy such as anti-dumping duties and safeguard measures, to determine whether imported products shall receive most-favoured-nation (MFN) treatment or preferential treatment, for the purpose of trade statistics; for the application of labelling and marking requirements; and for government procurement.
To qualify the goods' origin, imported items must either be wholly-obtained (WO) or produced entirely from one or more parties in an FTA member country; or must have undergone a “substantial transformation.”
The words “one or more parties” really make a difference between WO ASEAN and WO CPTPP, and it makes it easier for small- and medium-sized enterprises to export.
To better understand tax reductions, it would be interesting to compare non-WTO members, WTO members, and FTA members:
|Non-WTO members||WTO members||FTA members|
|Tax applied on textile and raw materials||30 per cent||Average 12 per cent||Average 0-5 per cent|
|Tax applied on garments||37.5 per cent||Average 25 per cent||Average 0-5 per cent|
Bui Kim Thuy, representative of the US-ASEAN Business Council for Vietnam said in her presentation about ROO's importance that ROO will contribute to the sustainable development of exports and improve access to the preferential rates. Also, ROO will help to direct FDI flows into countries that are party to the FTAs, and adjust regional supply chains, limiting the benefits to countries outside of the CPTPP.