DIMPORTS or exports among member countries of ASEAN avail of special tariff rates under the ASEAN Free Trade Area-Common Effective Preferential Tariff (AFTA-CEPT). To avail of the special tariff, the article originating from the ASEAN country must be supported by a Certificate of Origin (Form D) which certifies that the imported article originated from the said ASEAN country and that the article is either
- wholly produced or obtained from the exporting country (e.g. mineral and agricultural products); or
- the article has at least 40% aggregate content originating from the exporting country and any other member states of ASEAN.
These requirements, commonly known as Rules of Origin (ROO), are provided in detail in the rules and procedures issued under the AFTA-CEPT framework.
Various Rules of Origin. There are basically two kinds of ROO, preferential rules and non-preferential rules. Preferential rules provide for special tariff rates while non-preferential rules do not grant such preferences but are required for some other reasons (for example, to prevent the imposition of dumping or safeguard measures on imports from a least-developing country). In general, the origin of the article can affect tariff rate, tariff preference, safeguards or dumping duty, import quota, admissibility, marking and in some countries, procurement by government agencies. For preferential ROO, there are many methodologies for determining whether an article is deemed to be “originating” from the exporting country and is qualified to be issued the applicable certificate of origin.
With the proliferation of free trade agreements (FTAs) entered into by the Philippines and ASEAN with various other countries, there are now numerous ROO governing each and every FTA. We have the Form D Certificate of Origin for AFTA as well as other forms (E, F, G and so on) for the other FTAs. Each of these FTAs has its own set of rules and methodologies to qualify for preferential treatment and other privileges.
Customs Issues on Form D. For those in the trading community, not only are there varying rules of origin but customs authorities are increasingly subjecting the Certificates of Origin under greater scrutiny.
For AFTA Form D, customs authorities among ASEAN countries can raise issues on the imported goods covering such certificate of origin. One, customs may raise issue on the authenticity of the document or the signature therein. Customs may also raise issues as to whether the issuing person is the one duly authorized under the procedures set forth under the AFTA-CEPT rules of origin.
Another issue is with regard the costing methodology or calculation of the 40% ASEAN content. There have been many instances where Philippine exports to other ASEAN countries were subjected to audit and verification with regard to qualifications under AFTA-CEPT. One Philippine exporting company has in fact been assessed with back taxes and duties due to the findings of the customs authorities in the other ASEAN country that the imported article does not qualify under AFTA-CEPT and that the cost methodology made to qualify for issuance of Form D Certificate of Origin was improper.
Under such circumstances, what is the proper procedure for such audits and what is the remedy for the importer or exporter whose AFTA Form D is under examination?
Procedures for Rejection of Form D. In a situation where customs authorities have doubts as to the authenticity of the document or the true origin of the products in question, the proper procedures as provided in the “AFTA-CEPT Operation Certification Procedures” are as follows:
- The customs authorities of the ASEAN member country, which rejects the tariff preference under the Form D certificate, must return the certificate to the issuing authority of the exporting country within 2 months. The issuing authority must be duly notified in writing of the grounds for the denial of tariff preference.
- The issuing authority shall issue a detailed and exhaustive clarification addressing the grounds for denial of tariff preference raised by the importing country. Once the clarification is made, the importing country must reinstate the preferential treatment.
When reasonable doubts remain, the customs authority may request for a retroactive check at random of the exporter’s cost statements within a six month period, as follows:
- The request for retroactive check must be accompanied by the Form D certificate in question and shall provide the reasons and additional information as to possible inaccuracy in the issuance of the certificate.
- The issuing authority shall make a response within 3 months, with the actual process of determining origin of the article to be made within 6 months. While the issuing authority is conducting the retroactive check, the importing country may suspend the provisions on preferential treatment.
- Under exceptional cases (when there is systemic fraud and there is benefit accruing from the verification when compared to the cost incurred), the importing country may submit a written request for a verification visit.
When a dispute results from the retroactive check or verification visit, the importing and exporting countries shall consult each other before elevating the issue before the ASEAN body.
The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs & Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. He was also Bureau of Customs Deputy Commissioner for Assessment and Operations Coordinating Group (2013-2016). For questions, please email at firstname.lastname@example.org and email@example.com