blockchains without borders - pwc

Worldtrade Management Services

Blockchains without bordersCan the new technology improve international trade?

Trade Intelligence Asia PacificAugust / September 2018

www.pwccustoms.com

2 PwC

Key intelligence

Higher prepaid income tax rates in Indonesia3

Stricter enforcement on valuation expected in the Philippines

Page 33

Customs system upgrade in China

Page 14

Philippines to implement Self-certification by mid 2019Page 34

Amendments to import and export prohibitions in MalaysiaPage 26 / 28

Revised Strategic Goods Control list in SingaporePage 36

Export controls around the corner in ThailandPage 39

Taiwan announces amendments on regulations governing customs bonded factoriesPage 38

3Trade Intelligence Asia Pacific August / September 2018

Trade Intelligence Asia Pacific seeks to capture the essence of selected issues that are of particular interest to clients of PwC. Our regional network of customs and international trade consultants routinely gather, analyse and disseminate information and knowledge to our clients. Based on studies as well as meetings and discussions that take place across the region with various trade and customs officials, we consolidate our findings into Trade Intelligence Asia Pacific.

Index

Feature article


4

ASEAN

50th ASEAN Economic Ministers meeting enhances trade facilitation and integration

8

Action lines added to the ASEAN Economic Community 2025 Consolidated Strategic Action Plan

9

Free Trade Agreements focus

The RCEP - up and running by the end of the year?

11

Guidelines agreed for upgrade of ASEAN-Australia-New Zealand FTA

11

ASEAN and Canada conclude joint feasibility study for potential ASEAN – Canada FTA

11

China and Mauritius conclude FTA negotiations 12

China and Norway conclude 12th round of negotiations for potential FTA

12

India - Sri Lanka conclude 10th round of negotiations for an FTA

12

Indonesia and Australia conclude negotiations to Comprehensive Economic Partnership Agreement

12

South Korea and United States conclude and sign renegotiated Korea-US FTA

12

Thailand and Pakistan to start 10th round of FTA negotiations

13

Vietnam and EU sign Investment Protection Agreement

13

Territory Reports

China 14

Hong Kong, China 16

India 18

Territory Reports

Indonesia 23

Malaysia 25

Myanmar 29

New Zealand 31

Philippines 32

Singapore 36

Taiwan, R.O.C. 38

Thailand 39

Vietnam 43

Around the world

World Customs Organisation

WCO releases 2018 edition of the SAFE Framework of standards

44

WCO publishes new guides supporting the implementation of AEO programmes and MRAs

44

World Trade Organisation

US, Japan and the European Union (EU) to submit proposal for WTO reform

45

US – China trade tensions escalate with imposition of fourth round of tariffs

46

Trade monitoring report shows increase in global trade restrictive measures

47

Summary of outcomes: WTO General Council Meeting

47

Intensified work program on fishery subsidies commenced on 17 September 2018

48

World Trade Outlook Indicator (WTOI) for third quarter of 2018: Slowdown in trade growth expected

48

WTO releases 2018 statistical publications on trade and tariff profiles

49

Disputes initiated in the WTO 49

4 PwC


There are growing concerns that a rising tide of trade protectionism, evidenced by new tariffs and other governmental barriers to trade, threatens to ensnarl global trade activity for the foreseeable future. Although protectionism is not a new trend, recent rhetoric has caught the public’s eye and opened a much wider public debate on the benefits and downsides of trade liberalisation. An emerging consensus appears to be that although in the short term some disruption to international trade flow is more than likely, in the longer term international trade, especially between currently emerging markets, will continue to grow.

It is well known that there are many physical and logistical difficulties associated with sourcing, buying, selling, and shipping goods around the globe. Perhaps the greatest challenge to engaging in international trade is the enormous burden of manually processing and transferring the myriad of documents necessary to support a

single transaction. To illustrate, the Financial Times reported that Maersk tracked a single shipment of flowers from the port of Mombasa, Kenya to the port of Rotterdam in the Netherlands. This single transaction generated nearly 200 individual documents involving farmers, freight forwarders, customs brokers, customs authorities, and carriers.

In addition to the administrative challenge of manually handling such a large quantity of documentation, the transfer of information via email, courier, and other forms of peer-to-peer transmission between isolated systems opens up essential business communications to the risk of fraud and manipulation by dishonest individuals. The threat of data loss, manipulation and inaccuracy erodes the trust companies depend on to engage in international business.

With that in mind, the increased use of technology to make such trade more efficient and manage regulatory


compliance better remains of utmost importance. We have reported previously in Trade Intelligence about the use of data analytics to improve compliance levels and perhaps, at some point, create import declarations automatically from ERP systems through use of advanced robotics.

This article looks at the potential that blockchain technology may offer for dealing with some of the practical barriers to trade that exist, separate from governmental trade policies.

What is blockchain?

Blockchain is essentially a cloud-based, distributed ledger that maintains a permanent, decentralized record of transactional data. Each computer on a peer-to-peer network maintains a copy of the ledger, with all copies of the ledger being updated and validated simultaneously. The decentralized, distributed nature of blockchain allows for the maintenance of complicated data-sharing relationships without the need for a centralized administrator or authority.

When a transaction takes place in the network, each step of that transaction is represented by a block, which is joined with other blocks, forming a chain with a record of the full transaction maintained in the ledger. When a new step is initiated, the block representing the new step is sent out to the network to be verified. The block is only added to the chain when it is confirmed as valid. The chain is protected by a cryptographic “key” that ties a block to the previous record in the ledger. Blockchain technology therefore presents an alternative data infrastructure which can help tackle the challenges of excessive bureaucracy and information insecurity.

Blockchain’s distributed ledger structure helps preserves data integrity even with many parties participating in extensive transactions. Not only can the ledger be tightly restricted so that only authorized parties can access the stored information, because change to a block affects subsequent blocks, any change to a block or the chain, including the addition of a block, requires the consent of all parties in the network. Therefore, any attempts to manipulate records in the ledger are easy to detect. Because copies of the ledger are simultaneously distributed to multiple parties, deletion of these blocks at a later time, even by

6 PwC

an authorized party, is virtually impossible. Blockchain also allows transaction documents to be collected in a single, accessible repository. Documentation is instantly transferred to the next party in the transaction chain, removing the need for email or transportation of physical paperwork via courier.

What can blockchain do for international trade?

Blockchain is best known as the underlying data infrastructure for making cryptocurrencies possible. For international trade, it is said to promise a radical improvement in efficiency by simplifying the production, fidelity, and sharing of documents and by establishing a secure, direct flow of information through the chain of import/export transactions.

Depending on the technical capabilities of parties to an international transaction and their willingness to utilize the technology, blockchain can connect the disparate players in a transaction. In the context of trade, a block might represent a Bill of Lading, Purchase Order, or Invoice issued by a buyer, seller, carrier, etc. Everyone with a role to play in international transactions, such as exporters, shippers, forwarders, insurers, brokers, banks and importers, can be granted access to the network. The seller could transfer a Bill of Lading to an agent, carrier, and ultimately the buying entity via the network according to transfers of title dictated by the terms of sale. Approvals can be signed electronically, represented by another block in the chain. Other parties to the transaction will have ready access to documents that are securely maintained in the ledger. Shipping containers could be tracked throughout transportation from the seller to the buyer.

In the future, customs authorities may only need network access to ensure customs compliance in real time and to quickly process imports once they arrive in the destination jurisdiction. Furthermore, any documentation

necessary to optimize or facilitate international trade may be gathered from the network records. For example, a manufacturer utilizing Free Trade Agreements could integrate blockchain into its process to solicit Country of Origin certificates from the company’s supplier base and instantly submit these certificates to customs authorities to support its preferential duty claims. Importers could prove to Customs that their imported goods are not a product of forced labor by providing documents tracing the entire upstream supply chain already stored on the blockchain ledger. A company importing products manufactured through tolling operations in other countries could also gather costing information via blockchain to support complicated value calculations where the use of transaction value is disallowed by Customs. In short, using blockchain to facilitate shipments would result in an end-to-end, reliable electronic document trail that can be shared but not altered without consensus and verification from all network participants.

The road ahead

Of course, the concept of centrally managed and selectively accessible transactional information is not new. There have been many instances in the past few decades of new ideas and approaches that were deemed “revolutionary”, a “change in paradigm”, “fit for the future” and equivalently promising. Yet the world of international trade has remained stubbornly paper-based and inefficient.

Yet, despite the recent origins of the technology, the use of blockchain is not a futuristic, hypothetical scenario in international commerce. Companies such as IBM, Maersk, Barclays, and Walmart have all incorporated blockchain technologies into their business processes. Walmart in particular has used blockchain to track the shipment of food in both the United States and China. PwC’s Australian Firm has partnered with the Australian Chamber of Commerce and Industry


and the Port of Brisbane to develop a pilot program integrating blockchain into the operations of Queensland’s largest port. The Ports of Abu Dhabi and Rotterdam have piloted blockchain-based solutions to their own logistical challenges. Though blockchain applications to trade operations are still in their early stages, private companies and public entities alike are realizing their potential to disrupt markets and reduce inefficiencies.

Nevertheless, a recent report in the Economist argued that many current blockchain solutions are experimental in nature, sitting somewhere between glorified central database solutions and fully-fledged truly business-enabling general ledger technology, without a clear or proven path to up-scaling. Will blockchain break the trend for international trade technology, or will we look back in ten years again at what could have been?

Two aspects in particular are likely to be instrumental for the success of blockchain for international trade in particular: the ability to break through vested interest in the status quo, and the ability to scale up to commercial levels.

Most if not all previous attempts at introducing new technology to centralize the management of international trade transactions have fallen over inertia of parties to get on-board. Either they outsource such management to third parties and don’t care, or they are outright unwilling or hostile to the idea because they make a lot of money out of such outsourced activities. So far, it has not been possible to outflank such parties by creating a coalition of the willing to move ahead with the introduction of new technologies regardless. It is therefore reasonable to surmise that the success of blockchain will be somewhat dependent on doing just that – providing solutions that allow the willing to move ahead without being held back by the unwilling. It is hard to see currently how that would be achievable in practice, but then again, the technological developments are fast and unpredictable. Hence blockchain may well enable companies to create a new ecosystem for their international transactions that can replace their existing ecosystem relatively quickly and is ready to operate at short notice, with limited upfront investment necessary. Even the threat of such disruption may be sufficient to bring currently unwilling parties to the blockchain table.

The ability of blockchain technology to scale up to include most if not all players to a broad set of international trade transactions is hard to predict. Most current examples of blockchain use in international trade is limited to relatively small closed systems with only a handful of players. Opening such systems to much broader general networks is likely to lead to an explosion in data exchanges, requiring resources that may not be so easily available, both from a technical (think for example bandwidth) and physical (think for example energy) perspective. Moreover, international trade management is only one of many business processes looking to develop blockchain based technology solutions.

Discussion at blockchain conferences increasingly strike a tone of caution about the technology’s ability to meet the expectations that businesses are putting on it, with scalability the biggest concern. That is not to say that it will be doomed to failure. Whether it is simple sharding, or entirely new Artificial Intelligence approaches, new ideas and solutions are being developed every day.

For the management of international trade, any blockchain solution is likely to gradually integrate some of its components into other approaches and technologies, applied to willing parties in the international supply chain, rather than an all-or-nothing overnight makeover. The destination looks promising, but as usual, the road ahead looks long and winding.

8 PwC

ASEAN

50th ASEAN Economic Ministers meeting enhances trade facilitation and integration

The 50th ASEAN Economic Ministers (AEM) meeting was concluded on 1 September 2018 in Singapore. During the meeting, ministers agreed on the following key outcomes, including the signing of two agreements aimed at further facilitating trade and customs integration.

No. Key Outcomes Details Benefits

1. Signing of the first Protocol for amendment of the ASEAN Trade in Goods Agreement

This protocol introduces the necessary legal amendments for implementation of the ASEAN – wide self-certification (AWSC) regime.

This will replace the physical ATIGA Form D and is slated for implementation in early 2019.

Exporters will be able to self – certify ASEAN origin, and will not need to bear the associated administrative burden and costs in applying for a physical Certificate of Origin.

It will also improve efficiency for issuing authorities.

2. Signing of the 10th Package of commitments for the ASEAN Framework Agreement on Services

This is the final package of commitments aimed at improving market access for ASEAN service providers and reducing barriers to service trade.

This agreement provides ASEAN service providers with a legally binding guarantee for preferential market access in the region.

It includes increased market access for the following sectors – Transport, logistics, electronics, telecommunications, tourism, construction and professional services.

3. Endorsement of the:• ASEAN Digital Integration

Framework (DIF)• ASEAN Agreement on Electronic

Commerce

Both agreements are aimed at improving the digital ecosystem, promoting regional digital integration and supporting e–commerce flows.

The agreements contain sections addressing the flow of data across borders, adoption of best practices for cybersecurity and binding regulations on electronic authentication.

The ASEAN Agreement on Electronic Commerce will be signed on the sidelines of the 17th AEC Council Meeting in November.

More updates on areas covered within the agreement and their potential impact to businesses will be covered in the upcoming issue of TI.

Member states were also encouraged to move ahead with implementation efforts for the ASEAN Single Window (ASW), and to address any technical and operational issues identified during early stages of implementation. Furthermore, all members committed to accelerating the addition of the ASEAN Customs Declaration Document (ACDD) and the electronic Phytosanitary (e – Phyto) Certificate to the ASW. ASEAN ministers also reviewed the progress of implementation of the AEC Blueprint 2025 and sectoral work plans.

The full text of the joint media statement issued can be accessed at the following link: http://asean.org/asean-economic-community/asean-economic-ministers-aem/asean-economic-ministers-aem/50th-asean-economic-ministers-meeting-singapore-2018/


Action lines added to the ASEAN Economic Community 2025 Consolidated Strategic Action Plan

The ASEAN Economic Community (AEC) 2025 Consolidated Strategic Action Plan (CSAP) was first published on 6 February 2017 and consolidates the action lines drawn from the various ASEAN Sectoral Work Plans. On 14 August 2018, ASEAN Members updated the CSAP to include action lines from sectoral work plans that were agreed to after the initial publication. Such updates are mandated by the AEC Council as the CSAP document is aimed at facilitating stakeholder feedback and engagement on ASEAN’s economic integration priorities and efforts.

The sectoral work plans included in this update are the Strategic Action Plan 2016-2025 for ASEAN Taxation Cooperation, the ASEAN Work Programme on Electronic Commerce 2017-2025, the AEC 2025 Trade Facilitation Strategic Action Plan, and the ASEAN Work Plan on Good Regulatory Practices 2016-2017. This update also included changes to some existing timelines and action lines.

We reported on the details on the original CSAP in the lead article of our February/March 2017 edition of Trade Intelligence. In the table below, we have highlighted key components of the CSAP that we believe will be of particular interest to the customs and international trade community and their implementation status to date.

No. Key action lines identifiedImplementation status (As of June 2018)

Targeted completion date

1. Realise ASEAN-wide self-certification In Progress 2018

2. Develop procedures and/or guidelines to effectively address Non-Tariff Measures

In Progress 2019 - 2020

3. Promote development and utilisation of e-commerce platforms to encourage expansion of SMEs

In Progress as part of the ASEAN E – Commerce Work Programme

2019 - 2025

4. Develop an ASEAN Online Dispute Resolution network

In Progress as part of Strategic Action Plan for Trade in Goods

2017 - 2025

5. Strengthen engagement with businesses to deal effectively with NTMs

6. Review of ATIGA Rules of Origin towards making them more trade facilitative and business friendly

7. Explore possibility of full cumulation under ATIGA

8. Simplify of the Certificate of Origin Form D and Operation Certification Procedures

9. Explore the possibility of allowing businesses to choose Regional Value Content (RVC) built-up or built-down formula

10 PwC

No. Key action lines identified Implementation status (As of June 2018)

Targeted completion date

10. Support adherence to trade facilitation provisions under ATIGA and WTO’s Trade Facilitation Agreement

In Progress as part of the AEC 2025 Trade Facilitation Strategic Action Plan

2018 - 2025

11. Strengthen cooperation among ASEAN Customs administrations in combating transnational crime and illicit trade via best practices and information exchange No Updates. 2016 - 2025

12. Streamline and simplify border procedures

13. Conclude RCEP negotiations In Progress. 2019

14. Sign ASEAN Hong Kong, China FTA Completed. -

15. Finalise review of ASEAN-India Trade in Goods Agreement No updates. 2017 - Onwards

16. Conclude negotiations on further liberalisation of Sensitive Track products under ASEAN-Korea Trade in Goods Agreement

No updates. 2017 - Onwards

17. Implement various trade and investment work programmes/plans with the European Union (EU), Russia, Canada, and the United States of America

In – Progress by the various FTA Committees

2017 - 2025

The table below reflects the new action lines added in relation to trade facilitation.

By 2018

1. Full and effective implementation of ASEAN Member States’ Category A commitments under the WTO’s Trade Facilitation Agreement

2. Develop guidelines for assessing existing NTMs, with the view to identifying trade barrier elements that could subsequently be eliminated

3. Enhance ASSIST to include a feature where the private sector can “report an NTM”

By 2020

1. Update existing ASEAN NTMs database

2. Establish a mechanism to give ASEAN Member States an opportunity, where possible, to comment on the proposed introduction or amendment of laws and regulations of general application governing border measures/ matters before adoption

By 2025

1. Accelerated implementation of ASEAN Member States’ Category B and C commitments under the WTO’s Trade Facilitation Agreement

2. Full utilisation/operationalisation of ASW, ATR, ACTS, ASSIST to facilitate users while doing business in the region, and implement Time Release Studies

3. Enhance institutional coordination among relevant sectoral bodies of ASEAN to effectively implement trade facilitation measures under their purview consistently with their sectoral work plans for 2016-2025 and the AEC Blueprint 2025

4. Work towards increasing participation of all ASEAN Member States, especially least developed ASEAN Member States, in the process of implementation of ASEAN trade facilitation programs

5. Conduct biennial survey on trade facilitation using ASEAN Seamless Trade Facilitation Indicators

The updated CSAP can be accessed here: http://asean.org/wp-content/uploads/2012/05/Updated-AEC-2025-CSAP-14-Aug-2018-final.pdf


Free Trade Agreements focus

Guidelines agreed for upgrade of ASEAN-Australia-New Zealand FTA

The ASEAN-Australia-New Zealand FTA (AANZFTA) contains provisions which allows the agreement to remain consistent and relevant. In 2017, the parties participated in the first stage of a review. The results of this review were published in a report. On 1 September 2018, officials from the member countries convened in Singapore for the 50th ASEAN Economic Ministers’ meeting and endorsed recommendations to guide future negotiations to upgrade the agreement.

The topics of negotiation include rules of origin criteria, efficiencies in customs procedures, services, investment, e-commerce, fair competition and roles of governments. Negotiations are targeted to start in early 2019.

ASEAN and Canada conclude joint feasibility study for potential ASEAN – Canada FTA

Following the ASEAN Economic Ministers (AEM) – Canada Consultation held on the side lines of the 50th AEM Meeting, officials have announced the completion of a Joint Feasibility Study conducted for a potential ASEAN-Canada FTA. The study resulted in a preliminary report detailing key bilateral trade trends, potential approach to negotiations, and the possible economic benefits to each party upon conclusion of the FTA. ASEAN ministers have expressed intentions to move forward with FTA negotiations and conclude exploratory discussions by 2019.

The RCEP - up and running by the end of the year?

During the 50th ASEAN Economic Ministers’ Meeting and related meetings from 28 August to 1 September 2018 in Singapore, ASEAN ministers engaged with counterparts from Australia, Canada, China, India, Japan, South Korea, New Zealand, Russia and the United States (US). The Ministers of the members of the Regional Comprehensive Economic Partnership (RCEP) agreed to the target of concluding negotiations by the end of the year. Guidelines to effective and swift negotiations for the rest of the year were agreed upon, with parties looking to intensify negotiations for the rest of the year.

Ministers in attendance also adopted a Package of Year-End Deliverables and discussed plans on meeting targets laid out on the package. Due to the sensitivity of ongoing negotiations, details on this package are confidential.

RCEP Ministers also agreed and concluded discussions on two more chapters over the 6th RCEP Ministerial Meeting, namely the Chapter on Customs Procedures and Trade Facilitation and the Chapter on Government Procurement, bringing the total number of concluded Chapters to four out of 18 in the proposed agreement. The two previously concluded Chapters are on Economic and Technical Cooperation, as well as on Small and Medium-size Enterprises. The remaining 14 areas include Chapters on the Trade in Goods, Competition, Investment, Intellectual Property, and e-Commerce still remain to be negotiated.

12 PwC

China and Mauritius conclude FTA negotiations

On 3 September 2018, China and Mauritius signed an MOU to finalise negotiations for the China-Mauritius FTA. The FTA aims to improve trade in goods and services, and investments between the two parties. Both sides have also agreed to continue to cooperate in other areas such as climate change.

This FTA is the first between China and an African nation and is expected to pave the way for future stronger cooperation between China and African nations.

China and Norway conclude 12th round of negotiations for potential FTA

The China-Norway FTA had its 12th round of negotiations in Beijing from 25 to 28 September 2018. Further consultations on issues such as the trade in goods and services, investments, customs procedures, rules of origin, intellectual property rights and competition, among others, were conducted. The next round of negotiations has not been announced.

India - Sri Lanka conclude 10th round of negotiations for an FTA

India and Sri Lanka concluded the tenth round of negotiations for the potential India-Sri Lanka FTA on 5 August 2018. The parties have targeted to conclude negotiations by end of 2018, from which efforts to implement the trade deal will commence. The agenda of the negotiations is to expand the current scope of the existing FTA on goods. This includes trade in services, investments as well as fair competition between the countries.

Indonesia and Australia conclude negotiations to Comprehensive Economic Partnership Agreement

On 31 August 2018, Australia and

Indonesia concluded the final round of negotiations to the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA). Under the IA-CEPA, Indonesia will provide concessions on 99% of Australian exports by value, which will either be allowed duty free entry upon implementation, or will be subject to significantly better preferential arrangements by 2020. This is more favourable compared to existing tariff concessions offered under the AANZFTA, which are applicable only to 85% of exports by value. Specifically, import duties on rolled steel, copper cathodes, live cattle and dairy products will be immediately eliminated. Other agricultural goods such as wheat, sugar, vegetables, citrus fruits and frozen meat products will enjoy reduced tariff rates, with better preferential treatment in terms of increasing quotas or elimination of tariffs over the next 5 to 20 years. Indonesia has also guaranteed the automatic issuance of import permits to Australian exporters for these products.

In return, all Indonesian exports, including palm oil and paper products, will be allowed immediate duty free entry into Australia. The agreement will also provide more liberal origin requirements for Indonesian electric motor vehicles.

The IA-CEPA will now undergo checks and reviews on language for accuracy and domestic legal consistency, as well as a translation to Bahasa-Indonesia. Only after the completion of these procedures would the IA-CEPA be formally signed and ratified. During the meeting, Indonesia and Australia also signed various Memoranda of Understandings (MOUs) on cooperation in transport, innovations and cyber security.

South Korea and United States conclude and sign renegotiated Korea-US FTA

The United States and South Korea have concluded renegotiations on the KORUS FTA. Following translation into Korean


and acknowledgement by both countries, the finalised deal was signed on 24th September on the sidelines of the United Nations General Assembly in New York. The agreed outcomes include amendments and revisions to allow greater access for US exports to South Korea. A working group will also be established to monitor the costs and procedures of the origin verification process. In view of US Section 232 of the Trade Expansion Act to protect US national security from imports of large volumes of steel and aluminium, the amendments will include a quota on steel imports equivalent to 70% of the average annual import volume of such products in the last three years.

Agreed outcomes can be found at: https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/march/new-us-trade-policy-and-national

Thailand and Pakistan to start 10th round of FTA negotiations

Thailand and Pakistan will commence the 10th round of negotiations for the Thailand-Pakistan FTA in mid-September 2018. This round will include negotiations on the completed and final list of products offered to benefit from preferential duty rates

from both countries. Both parties also aim to remove restrictions and duties for automobiles and textiles.

More specifically, Pakistani targeted goods for duty concessions include (but are not limited to) plastics and pharmaceuticals while Thailand targeted goods for duty concessions include (but are not limited to) garments, leather products, surgical instruments and sports related products.

Vietnam and EU sign Investment Protection Agreement

The EU and Vietnam concluded their legal review for the Vietnam-EU FTA. The agreement is currently undergoing translation into the respective local languages which will be subject to a final approval. Meanwhile, the negotiations for the Investment Protection Agreement (IPA) between Vietnam and EU has concluded.

This agreement aims to protect investors and investments, and will set up frameworks to ensure fair competition and treatment for entities and individuals in member countries.

14 PwC

Territory reports

ChinaOverview of recent upgrade of customs systems

To further improve the functions of Customs electronic systems and further facilitate trade, China Customs has updated and upgraded several Customs electronic systems.

Specifically the following new systems were launched:

Announcement Date

New System / Platform

Description of new system / platform

1 July 2018 GAC Announcement [2018] No. 74

14 September 2018GAC announcement [2018] No. 117

Introduction of new electronic payment system on the “Internet + Customs” Integrated Platform

Decommissioning of existing electronic payment system

Launched in June 2017, the ‘Internet + Customs” Integrated platform traders to electronically complete up to 60 types of customs formalities, including online payment of taxes. It has the following key characteristics:

• Uniform entry for all Customs affairsEnterprises can log in and conduct user identification through a uniform entry and handle all affairs related to Customs.

• Retaining local customs’ featuresAll Customs affairs will be handled with specific codes. Enterprises can refer to guides on the platform for assistance. There is also a “Local customs’ features” column which retains the special services of several local Customs.

On 1 July 2018, a new electronic payment system for Customs Tariffs and fees was introduced. Compared to the existing electronic payment system, the new system has been updated to provide users with a single consolidated platform enabling more convenient declaration submissions and payment of duties and fees. Port Customs can then release goods upon successful payment of duties and all required fees.

The new e – payment system will thus increase efficiency of duty and fee payments. The original electronic payment system will be decommissioned from 1 October 2018.

Susan Ju

+86 (10) 6533 3319 [email protected]

Derek Lee

+86 (755) 8261 8218 [email protected]

Frank Wu

+86 (21) 2323 3864 [email protected]


Announcement Date

New System / Platform

Description of new system / platform

1 July 2018GAC Announcement [2018] No. 23

Requirement for submission of bonded goods verification and endorsement lists via the ‘Golden Customs II’ Processing Trade Management System

The ‘Golden Customs II’ Processing Trade Management System has been launched in Shenzhen in June. On 1 July 2018, an announcement detailing the requirements for usage of the bonded goods verification checklist was released. This has entered into effect on the same date.

The main characteristics of the system are as follows:

• Bonded goods verification checklistThe bonded goods verification checklist (hereinafter as “checklist”) will be the specific document for the verification of handbooks.

For traditional trade processes, a declaration form is required to be submitted to Customs for the import, export and transfer of all bonded goods. With the implementation of the system, enterprises can modify the inventory of bonded goods in the handbook by submitting the bonded goods verification checklist.

• Material-number data submissionIn the new system, bonded goods will be managed and identified by material numbers. When filing the goods information in the system, enterprises are required to submit the data for material numbers. Otherwise, the bonded goods verification checklists will be rejected.

To ensure compliance and minimise disruptions to their businesses, companies should take note of the relevant changes to policies, procedures and timeline, etc. and implement the relevant processes to manage such changes.

Considering that the original electronic payment system will be decommissioned from 1 October 2018, companies are recommended to make the following changes:

1. Cooperate closely with customs brokers to ensure timely upgrade of payment systems to ensure smooth payment of duty and fees during the transition period;

2. Timely connect enterprise’s internal systems with Customs systems, using the guides published by GAC as reference;

3. Maintain close communication with Customs, banks, China E-Port, and the platform itself in the event of any system errors to ensure issues are resolved quickly.

Meanwhile, the launch of ‘Golden Customs II’ will have significant impact on the formalities of processing trade. Companies are recommended to prepare themselves and make the necessary arrangements, including the following:

1. Internal review of the management status of processing trade before proceeding with the system upgrade, and ensure that all historical issues identified are resolved;

2. During the system transitional period, improve the efficiency and accuracy of the data switch, and implement standard operating procedures to improve internal management;

3. Upgrade and automate internal customs systems and finance systems;

4. Conduct periodic compliance reviews following the system upgrade in order to mitigate potential compliance risks.

16 PwC

Hong Kong, China

Total import and export declaration charges capped at HKD 200

With effect from 1 August 2018, the charge for each import and export declaration will be capped at HKD 200. This will apply to goods imported, exported or re-exported to and from Hong Kong.

Declaration charges will remain unchanged at the following rates.

Import

Non-food items • HKD 0.2 in respect of the first HKD $46,000 of the value of the goods

• HKD 0.125 in respect of each additional HKD $1,000 or part thereof and rounded up to the nearest 10 cents

Food items • HKD 0.2 per declaration irrespective of the value

Export

Goods whether of HKSAR origin or not

• HKD0.2 in respect of the first HKD 46,000 of the value of the goods

• HKD 0.125 in respect of each additional HKD 1,000 or part thereof and rounded up to the nearest 10 cents

• Clothing Industry Training Levy of HKD 0.3 in respect of each HKD 1,000 value or part thereof (applied to Exports of HK manufactured clothing and footwear items specified in Schedule 1 of the Industrial Training (Clothing Industry) Ordinance)

Refer to the following link for further details on import and export declaration charges:https://www.customs.gov.hk/en/cargo_clearance/declaration/charges/index.html

Derek Lee

+852 2289 3329 [email protected]

William Marshall



New registration/renewal of registration for the Transhipment Cargo Exemption Scheme

Subject to certain conditions stipulated by the Trade and Industry Department (“TID”), shipping, transportation and airline companies, and their appointed agents registered under the Transhipment Cargo Exemption Scheme are exempted from import and export licensing requirements in respect of certain types of transhipment cargo.

The Certificates of Exemption previously issued by the TID to the existing registrants under the scheme will expire after 31 December 2018. Existing registrants looking to enjoy continued exemption from licensing requirements under the scheme in 2019 will need to renew their registration with the TID. For new registrations or renewal of registrations under the scheme, interested and eligible parties are required to submit an application to the TID on or before 3 December 2018.

Successful applicants will be issued with a Certificate of Exemption which will be valid from 1 January 2019 or the date of issuance (whichever is later), up till 31 December 2019.

Refer to the link for further details of the new registration or renewal of registration of the Scheme: https://www.tid.gov.hk/english/aboutus/publications/nontextiles/tces.html

18 PwC

Amendments to the Foreign Trade Policy (FTP) 2015-2020

The Government has made the following amendments:

1.1 Removal of restrictions on the use of duty scrips for import of specific goods

Previously, all scrips issued under the Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) were not allowed to be used for import of products such as spices, tea, coffee and certain capital goods (specified in Appendix 3A of the FTP). These restricted items have now been removed from the list and thus, will no longer be subject to import restrictions. Duty credit scrips under MEIS can now be issued and used for import of such items.

(Reference: Directorate General of Foreign Trade (DGFT) Public Notice No. 24/2015-20, dated 26 July, 2018)

1.2 One - time relaxation for submission of installation certificate till 31 March 2019

To facilitate business activities, the Government had previously issued Public Notice 37/2015-20 dated 25 October 2017, allowing for a one-time relaxation in the time limit for submission of the installation certificate under Export Promotion of Capital Goods (EPCG) scheme. This is, however, contingent upon the full payment of any applicable penalties.

Taking into account the public representations received requesting for a waiver of the penalty payment requirement, the Government will now be accepting submissions of the installation certificate without insisting on penalty payment.

This relaxation is available till 31 March 2019, subject to the following conditions:

• Companies should have obtained the EPCG authorization by 31 March 2015;

• Installation has occurred within 18 months from the date of import;

• The entity’s EPCG authorization is not under any investigation/ adjudication by authorities/ other investigative agency;

Note that there will not be any refunds for penalties that have already been paid as per the previous Public Notice.

(Reference: DGFT Public Notice No. 30/2015-20, dated 14 August, 2018)

1.3 Allowance for movement of capital goods imported under EPCG Scheme between registered units

The DGFT has now allowed EPCG Authorization holders to move capital goods imported during the entire export obligation period between their owned / registered units indicated in the Import Export Code (IEC) and Registration cum Membership Certificate (RCMC). Where goods are moved between registered units, EPCG authorisation holders will be required to furnish fresh installation certificates to the concerned Regional Authority (RA) within six months of the goods movement.

(Reference: DGFT Public Notice No. 31/2015-20, dated 29 August 2018)

India

Nitin Vijaivergia

+91 (0) 982 023 9915 [email protected]


1.4 Notification of procedures for export of SCOMET items for repair/ replacement purposes

The DGFT has released procedures for SCOMET items for repair/replacement purposes. The regulation specifies that export of imported or indigenous SCOMET items for repair or replacement of damaged and defective items are permitted on the condition that the export should only be:

• to the entity from which it has been imported; or

• to the OEM (Original Equipment Manufacturer); or

• to the entity to which it had been originally exported.

Further, it is provided that there is no requirement for an ‘End Use’ or ‘End Use Certificate’. The export application should be accompanied with specific documentation such as the bill of entry, contract agreement, purchase order, undertaking from the applicant firm, etc. as specified in the procedures.

(Reference: DGFT Public Notice No. 33/2015-20 dated, 04 September, 2018)

1.5 Notification of procedures for export of SCOMET items for display, exhibition etc.

The DGFT has notified procedures for export of SCOMET items for a variety of purposes including display, exhibition, tenders etc. Specifically, the procedures state that these exports should be purely on a temporary basis and no end user certificate will be required.

Further, exporters will be required to present certain documents, such as proof of the event, proof of participation, undertaking from the applicant firm, etc. This procedure is required for items in the SCOMET list other than those included in category 0, 1, 2 and 6 or ‘Technology’ or ‘Software’ in any category.

(Reference: DGFT Public Notice No. 34/2015-20 dated, 04 September, 2018)

1.6 Removal of INR 10 million limit on export of items free of cost

Under the previous legislation, status holders were allowed to freely export all items on a free of cost basis, subject to an annual limit, which is the lower of INR 10 million or 2% of average annual export realisation during preceding three licensing years.

The FTP has been amended to remove the limit of INR 10 million for exporters, excluding the export of gem and jewellery products, or articles of gold and precious metal. Effectively, status holders of for goods other than gems and jewellery products and articles of gold and precious metals will now be able to freely export on a free of cost basis, subject to an annual limit of 2% of average annual export realisation during preceding three licensing years. This type of supply will not be entitled to any duty drawbacks or other export incentives.

(Reference: Notification No. 28/2015-20 dated, 27 August, 2018)

20 PwC

Amendments to the Foreign Trade Policy (FTP) 2015-2020

2.1 Re-import of certain domestically manufactured electronic goods for repair and reconditioning

As per Customs regulations (Notification issued in the year 1995), exported goods can be re-imported for repairs or reconditioning without payment of customs duty within three years from the date of exportation. Where such goods are imported for reprocessing, remaking or other similar processes, they can be imported within one year from the date of exportation. Re-imported goods must be re-exported within six months from the date of re-import.

This Notification has now been amended to allow for the re-import of certain manufactured electronic goods (such as printing machines, automatic data processing machines, telephone sets, etc.) for repairs and reconditioning within seven years from the date of exportation. This is an extension from the current condition of three years. Additionally, the period of exportation has also been extended from six months to one year.

(Reference: Notification No. 60/2018-Customs dated, 11 September, 2018 and Notification no 158/95 – Customs dated 14 November, 1995)

2.2 Implementation of Paperless Processing/ eSanchit under single window interface for Facilitation of Trade in exports

With the objective of reducing physical interface between Customs Authorities and the trade community, and facilitating processing of documentation, the Central Board of Indirect taxes and Customs (CBIC) has introduced a facility where traders can upload digitally signed documents in case of exports. This process is similar to that for imports as notified under Circular No. 40/2017-Customs dated 13 October 2017.

This facility will be available on a pilot basis for 15 days and will subsequently be mandatory for all exports whose shipping bills are filed on or after 1 September 2018. The circular also provides detailed guidelines on the procedure for uploading of supporting documentation on the Government portal, assessment and document verification, goods registration and goods examination.

(Reference: Circular No. 29/2018-Customs dated, 30 August, 2018)

2.3 Simplification and rationalisation of processing of Authorised Economic Operators (AEO) Tier-1 applications

The Central Board of Indirect taxes and Customs (CBIC) has simplified and rationalised the AEO Tier 1 process. The key features of the revised process are detailed below:

• Application formats and procedures are simplified compared to current formats;

• Application process will be decentralised and application will be filed at a zonal level;


• The decision by Zonal AEO will be communicated to the Directorate of International Customs for the generation of the AEO certificate and statistics management;

• However, for applications already filed, the Zonal AEO Programme Manager will have a discretion to allow the processing of the application as per past format or new formats on a case-by-case basis.

• An online module orf AEO Tier 1 application is currently underway and will commence operation soon.

(Reference: Circular No.26/2018-Customs dated, 10 August, 2018)

2.4 Establishment of Office of Customs Commissioner for investigation

The Central Board of Indirect taxes and Customs (CBIC)has established an Office of Commissioner (Investigation - Customs), which will be responsible for investigation of possible tax evasion matters and data intelligence. The key functions of the newly constituted office are to:

• Act as nodal agency for inter-departmental coordination relating to investigation and enforcement agencies;

• Research and carry out studies to monitor tax evasion and to find out measures to curb tax evasion;

• Facilitate information management, data-warehousing and data mining relating to reduction of tax avoidance and curb tax evasion;

• Manage policy matters related to search, seizure, arrest, prosecution and compounding of offences;

• Monitor work of Director of Revenue Intelligence (DRI) in respect of important seizures and investigation cases and coordinating with DRI in internal action plan, researches to monitor tax evasion, etc.;

• Coordinate with Central Economic Intelligence Bureau;

• Manage issues related to cyber forensic lab, disposal of confiscated goods;

• Manage issues relating to the Narcotics Drugs and Psychotropic Substances Act, 1985 and allied enforcement and co-ordination matters; and

• Manage matters relating to Screening Committee of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act Detentions.

(Reference: Circular No.30/2018-Customs dated, 29 August, 2018)

22 PwC

Updates in the Goods and Services Tax Act

2.5 Retrospective amendment in the GST law relating to refund of Integrated GST (IGST)

The refund mechanism for IGST paid on export of goods is outlined in the Central GST Rules. Refund claims will not be granted to exporters procuring goods from suppliers, utilising duty benefits available to Export Oriented Undertakings (EOU), Advanced authorisation (AA) holders, EPCG holders and merchant exporters.

This rule has now been amended with retrospective effect from 23 October 2017. Under the amended provision, any person claiming refund of IGST should not have received supplies on which the following benefits have been availed:

• Duty exemptions on deemed exports (supplies to EOU)

• Reduced tax rate on Merchant Exports

Further, the rule also mentions that the exporter himself should not have utilised the following benefits:

• Duty exemption on goods imported by EOU

• Duty exemptions on import of goods under AA/ EPCG schemes

(Reference: Notification no. 39/2018, dated 4 September 2018)


Indonesia

Enna Budiman

+62 (21) 5289 0734 [email protected]

Standardisation of Unit of Measurements for imported goods

In order to monitor the import quota of certain commodities into Indonesia and to monitor the distribution of foreign currency into Indonesia, the Indonesian Ministry of Finance (MOF) issued a new regulation concerning Customs Declaration (MOF 104/pmk.04/2018). This regulation has been effective since 3 September 2018.

The following key points are covered in the new regulation:

1. Certain imported goods and commodities e.g. iron and alloy steel products etc. should be declared using the standard Unit of Measurements (UOM) stipulated by the Indonesian Government;

2. Foreign currencies will be continuously monitored by Customs Authorities and should be declared using the standard UOM provided in this regulation.

The regulation (MOF 104/pmk.04/2018) can be accessed at the following link: http://www.jdih.kemenkeu.go.id/#/home

New Prepaid Income Tax rates effective from 13 September 2018

In order to reduce the import volumes of certain products and improve Indonesia’s current account deficit, the Ministry of Finance issued a new regulation, MOF 110/PMK.010/2018 concerning prepaid income tax article 22 (PPh 22) rates. This regulation, which supersedes the previous MOF regulation No. 34/2017, entered into effect on 13 September 2018.

The new prepaid income tax rates applicable for specific types of imported goods are summarised below. Note that this is only a summary of rates applicable to general product categories. A detailed list of goods, identified by HS Codes, and their respective tax rates is provided in the Appendix of the regulation.

The increase in rates may affect importers’ cash flow. However, this should not result in additional costs to importers as it constitutes a prepayment for the current year Corporate Income Tax liability.

The regulation (MOF 110/pmk.010/2018) can be accessed at the following link: http://www.jdih.kemenkeu.go.id/#/home

Types of imported goods Tax rate

• Goods previously taxed at 7.5%, which are now taxed at 10%:

– Laptops and other portable automatic data processing machines – Wireless house phones – Motor vehicles, such as cars, motorcycles, bicycles, golf cars, and go karts

• Goods previously taxed at 2.5%, which are now taxed at 10%:

– Personal care items such as cosmetics and toiletries, including skin, hair, and dental care products – Electric appliances – House supplies and utilities, such as doors, tiles, and lightbulbs – Specific motor vehicles such as station wagon, ambulances, and prison vans

10%

• Goods previously taxed at 2.5%, which are now taxed at 7.5%:

– Food and beverages, such as sausages, meatballs, pastries, coffee, milk etc. – Alcohol and liquors – House utensils such as polish, candles, glue, materials from bamboo and rattan – Tires for vehicles and certain rubber products – Certain textile products such as sports and protective clothing – Audio-visual equipment and appliances, including loudspeakers, cables, and other insulated electric

conductors

7.5%

• Imported raw materials used in the manufacture of goods 2.5%

24 PwC

Reduction of threshold for import duty and import taxes exemption on courier shipments

The Ministry of Finance has issued MOF 112/PMK.04/2018 (MOF 112) to amend MOF regulation No. 182/PMK.04/2016 on provisions on the importation of consigned goods through courier delivery. MOF 112 as entered into effect from 10 October 2018.

Under the new regulation, the threshold for import duty and import tax exemption will be reduced from USD 100 to USD 75. This limit will be applied on all individual consignments imported within one day.

This threshold will also apply to importers importing multiple consignments in a day as long as the combined customs value of all shipments do not exceed the USD 75 threshold. This is implemented to prevent importers from splitting imported goods with customs value exceeding the threshold into multiple shipments to obtain an exemption of duties and taxes. The Customs and Excise office has also indicated that new systems have been implemented to validate and verify values of parcels imported to better detect such incidents.

Note that for imported courier goods with a total value of more than USD 75, a fixed import duty rate of 7.5% will continue to be applied. Article 22 income tax on imports (PPh22 taxes) will also be applied at the normal rate according to the tariff code of the imported goods, regardless of the value of imported goods.

Requirements for domestic insurance and carriage for specific products amended

The Indonesia government has issued a second amendment to the previous Ministry of Trade Regulation No. 82/2017 on the utilisation of Indonesian Sea Carriage and Insurance for Export of certain products such as coal, crude palm oil and rice.

Previously, a first amendment regulation (Ministry of Trade Regulation No. 48/2018) had been issued requiring insurance to be procured from a local or locally incorporated insurance company, or a consortium of national insurance companies. A requirement for mandatory utilisation of vessels controlled by Indonesian shipping companies was also stipulated, with the postponement of the effective date from 30 April 2018 to 1 May 2020 to allow sufficient time for companies in affected industries to adjust.

A second amendment (Ministry of Trade Regulation No. 80/2018) was subsequently issued on 1 August 2018. This amendment entered into force on the same date. Areas covered include:

• Additional requirement for import / export compliance checks, including verification or technical search procedures conducted by authorised surveyors prior to loading of goods for import or export. The procedure will include an administrative assessment relating to the use of Indonesian controlled vessels and insurance products;

• Further extension of deadline for mandatory procurement of insurance from a local (or consortium) insurance company from 1 August 2018 to 1 February 2019;

• Foreign vessels may still be utilised beyond 1 May 2020 if local vessels are unavailable.

Despite continued delay in the implementation of MoT Regulation No. 82, companies involved in the trade of affected goods should take note of the new compliance requirements provided and prepare for implementation of the new legislation.


Re-introduction of Sales and Service Tax effective 1 September 2018

Effective 1 September 2018, Goods and Services Tax has been abolished and replaced by Sales and Service Tax (SST). According to the Sales Tax (Rates of Tax) Order 2018, the sales tax will be charged and levied at a fixed rate of 10% on all goods except:

1. Goods included in any exemption order made under Section 35 of the Sales Tax Act 2018;

2. Goods imported on or with any person entering Malaysia or in the baggage of such person which are not for commercial use, excluding motor vehicles, alcoholic beverages, spirits, tobacco, cigarettes, tyres and tubes;

3. Goods appearing in the “First Schedule”, which will be charged at the rate of 5% e.g. prepared foods and machinery and mechanical appliances; and

4. Goods appearing in the “Second Schedule”, which will be charged at specific rates e.g. oils, petroleum oils and petroleum gases.

Service tax will be charged and levied at a fixed rate of 6% of the price, value, premium or takaful contribution of the taxable service determined in accordance with Section 9 of Service Tax Act, excluding taxable services relating to credit card or charge card services.

Amendments to customs declaration forms and customs prescribed forms

In line with the implementation of Sales Tax in Malaysia, the word “Goods and Services Tax” has been substituted by the word “Sales Tax” in all the customs declarations forms and prescribed forms as follows:

1. Customs Declaration Number 1 Form for goods imported (K1)

2. Customs Declaration Number 2 Form for goods exported (K2)

3. Customs Application/Permit Number 3 Form to transport goods within the federation (K3)

4. Customs Application/Permit Number 8 Form to tranship or remove goods (K8)

5. Customs Requisition/Permit Number 9 Form to remove dutiable goods (K9)

6. Customs Prescribed Number 2 Form to claim for refund/duty drawback/tax/others (JKDM No. 2)

Restriction of tariff code entry limit to 10 characters for the Electronic Preferential Certificate of Origin (ePCO) In line with the implementation of e-Form ATIGA under ASEAN Single Window, the Electronic Preferential Certificate of Origin (ePCO) system has undergone further updates specifically on the restriction of entry of HS codes. From 1 September 2018, the ePCO system will only allow the applicant to enter up to 10 characters for HS Codes in the e-Form ATIGA.

An example can be found at the following link:

http://www.miti.gov.my/miti/resources/Preferential%20Certificate%20of%20Origin/Announcement/LAMPIRAN-ASW_NOTICE_082018_-_Update_on_Number_of_Characters_for_Importing_HS_Code.pdf

Malaysia

Chandrasegaran Perumal

+60 (3) 2173 [email protected]

26 PwC

Amendments to Customs Prohibition of Imports Order 2018 The Customs (Prohibition of Imports) (Amendment) (No.2) Order 2018 entered into effect on 1 September 2018 with the following key amendments:

A. Amendment in Part I of the Second Schedule:

All imported goods that contain N-Phenethyl-4-piperidinone (NPP) and N4-anilino-N-phenethylpiperidine (ANPP) that fall under 2933.39.90 00 will now require an import approval from Pharmaceutical Services Division under the Ministry of Health for importation purposes.

B. Amendment in Part II of the Fourth Schedule:

1. Three additional aluminium goods are added to the list of aluminium goods controlled by the Chief Executive of the Construction Industry Development Board (CIDB). For import of such goods, a certificate of approval issued by or on behalf of the CIDB will need to be obtained to certify that the imported aluminium goods comply with the approved Malaysian Standards.

The affected descriptions of goods and their relevant HS codes are:

Description of Goods Tariff codes

Aluminium and aluminium alloy - extruded shapes 7604.10.10 007604.10.90 007604.21.10 007604.21.90 00

Aluminium composite panel for exterior and interior wall

7606.11.10 007606.11.90 00

Aluminium and aluminium alloy - coated sheet and strips in coil form for general applications

7606.91.00 007606.92.00 00


2. Additionally, six iron and steel goods are added to Part II of the Fourth Schedule

Item No.

Description of Goods Tariff codes Country Manner of Import

22 Bars and rods, hot rolled in irregularly wound coils of other alloy steel

7227.90.00 00 All countries

The import is accompanied by a certificate of approval or a letter of exemption issued by or on behalf of the Chief Executive of SIRIM Berhad

23 Deformed round bar in the form of: 1. Bars or rods of iron or non-alloy steel,

not further worked than cold-formed or cold finished used for concrete reinforcement

7215.10.10 007215.10.90 007215.50.91 007215.90.10 007215.90.10 90

All countries

The import is accompanied by a certificate of approval or a letter of exemption issued by or on behalf of the Chief Executive of the Construction Industry Development Board (CIDB)

2. Bars and rods, hot rolled in irregularly wound coils of other alloy steel

7227.90.00 00

3. Bars or rods of alloy steel, not further worked than forged, hot rolled

7228.30.10 007228.30.90 007228.40.10 007228.40.90 007228.60.10 007228.60.90 00

4. Coils or de-coiled products of alloy steel, not further worked than forged, hot rolled

7227.90.00 00

5. Bars or rods of iron or alloy steel, not further worked than cold-formed or cold finished used for concrete reinforcement

7228.50.10 007228.50.90 00

28 PwC

Amendments to Customs Prohibition of Exports Order 2018

One amendment has been made within the Customs (Prohibition of Exports) (Amendment) (No.2) Order 2018. From 1 September 2018, all exported goods that contain N-Phenethyl-4-piperidinone (NPP) and N4-anilino-N-phenethylpiperidine (ANPP) that fall under 2933.39.90 00 will now be required to obtain approval from Pharmaceutical Services Division under the Ministry of Health for exportation purposes.

Amendments to Customs Duties Order 2017, ASEAN Trade in Goods Agreement Order 2017 and Excise Duties Order 2017

The amendment Orders mentioned above entered into effect on 1 September 2018 with the following key amendments:

Amendments to Customs Duties Order 2017

Amendments to ASEAN Trade in Goods Agreement Order 2017

Amendments to Excise Duties Order 2017

Before After

All imported smoking tobacco goods, whether or not containing tobacco substitutes in any proportion, apart from water pipe tobacco classified under the HS heading 2403.19. 20, 2403.19.20 10 and 2403.19.20 90 are now substituted by HS 2403.19.20 00.

Goods classified in HS heading2403.19.20 10 subject to 5% and RM 70.00 import duty per kilogram

Goods classified in HS heading2403.19.20 90 subjects to 5% and RM 40.00 import duty per kilogram

Goods classified in HS heading 2403.19.20 00 subject to 5% and RM 40.00 import duty per kilogram

No change of import duty rate under ATIGA - 5% import duty per kilogram

5% and RM 15.00 import duty per kilogram

HS heading 2403.99.90 00 is now substituted by HS heading 2403.99.90 with two further breakdowns (i.e. (a) 2403.99.90.10 and (b) 2403.99.90 90).

Goods classified in HS heading 2403.99.90 00 subject to 5% and RM 50.00 import duty per kilogram

1. 5% and RM 70.00 import duty per kilogram and

2. 5% and RM 50.00 import duty per kilogram

No change of import duty rate under ATIGA.

Both HS headings are subject to 5% import duty per kilogram.

-

Revision of national notes in Chapter 84 in respect of the term “cooling towers” for the purpose of subheading 8419.50.10 00.

Yes Yes -

Other smoking tobacco goods, whether or not containing tobacco substitutes in any proportion not “homogenized” or “reconstituted” and not snuff falling under 2403.99.90 90 are now subject to excise duty

- - RM 778.00 excise duty per kilogram of tobacco content


Anti-Illicit Trade Forum 2018

The Anti-Illicit Trade Forum 2018, hosted by EuroCham Myanmar in partnership with the Transnational Alliance to Combat Illicit Trade (TRACIT) and the Economist Intelligence Unit, was concluded in Myanmar on 5 September 2018. This forum was aimed at improving knowledge of the regulatory environment, to understand the economic circumstances that facilitate illicit trade and to provide recommendations on priority areas.

Key takeaways are summarised as follows:

• The overall customs environment in Myanmar appears to be held back by lack of staff and non-standardised control systems;

• There is a strong awareness and willingness by high government officials to improve border control and facilitate trade;

• Liquor, tobacco, timber, consumer goods and pharmaceutical products are current major illicit trade products;

• Possible solutions to combat illicit trade include:

– Increasing capacity-building for customs officials;

– Increasing technical knowledge among officials at borders, ports and special economic zones;

– Developing and implementing Myanmar Automated Cargo Clearance System (MACCS) to reduce illicit trade;

– Imposing tax stamps on specific products; and

– Strengthening legislation and criminal penalties based on Customs policies or best practices from neighbouring countries.

Myanmar government officials are attempting to work with business sectors to develop the appropriate tariff and tax structures and controlling systems in order to mitigate impacts from current illicit trade situations.

Increased tax rates on alcohol and cigarettes

On 24 August 2018, the Union Taxation Bill for FY2018-2019 was submitted by the Ministry of Planning and Finance on behalf of the Union government at the session of Union parliament in Nay Pyi Taw, Myanmar. Under the new bill, the Specific Goods Tax (SGT) rates for alcohol, cheroots and cigarettes will be increased to adjust for inflation and GDP growth. Effective from 1 April 2019, these adjustments for these goods are targeted at helping the government generate higher tax revenues.

Key points are summarised below.

• SGT rates per unit of cigarettes will increase from MMK4-K16 to MMK6-K21 depending on the price of the cigarette.

• Taxes on alcohol will be revised upwards and divided into a total of 16 price tiers. Under the new bill, the minimum price per litre of the lowest tier of alcohol will be increased to MMK 1,000 from MMK 750. As such, taxes will increase from MMK 91 to MMK 122 per litre of alcohol. At the highest tier, the minimum price per litre will be raised from MMK 26,000 to MMK 29,000 and total taxes will increase from MMK 5,100 to MMK 6,703.

• There are no difference in taxation rates for beers and wines under the new bill.

• The tax rate for a cheroot will be MMK0.5 instead of MMK0.25.

Myanmar

Ruben Zorge

+95 979064 [email protected]

30 PwC

Possibility of upcoming review of vehicle import requirements

On 3 September 2018, the Vehicle Import Supervisory Committee (VISC) meeting was held in Myanmar. According to the VISC, due to a rising trade deficit, dollar appreciation, and rising fuel costs, authorities will more deeply scrutinise vehicle importations.

Following the meeting, current processes will be reviewed and changes should be anticipated to licensing (or registration) procedures in relation to importation and selling of vehicles going forward. There is no official announcement released at this stage.

Yangon car imports to be under quota system

Vehicle import in the Yangon Region will be controlled under a Yangon Vehicle Quota Certificate (YVQC) system. The quota will be announced in October 2018.

For import of cars into the Yangon region, car importers will be required to apply and obtain a Yangon car licence under the YVQC system. With effect from October, Yangon car quota will be determined under the YVQC system to control the increasing number of cars in Yangon. Under the YVQC system, a car import permit will need to be purchased, with the price ranging from MMK 3 million to MMK 9 million depending on engine power.


New Zealand

New Customs and Excise Act 2018 The new Customs and Excise Act 2018 (the Act) has entered into effect from 1 October 2018. An important measure introduced by the Act is the provisional values scheme. This scheme is relevant to importers who are unable to establish the customs value of goods at the time of importation. Under the new scheme, importers will be able to enter a “provisional value” for these goods at the time of import, and supplement this with a final value later when full information is available. The key benefit for importers using this scheme is that compensatory interests and penalties under the Act will not be charged on any difference between provisional and final values.

Importers can utilise the provisional value scheme in two ways – either via automatic qualification or via the submission of an application to join the scheme. To automatically qualify, importers are required to possess a binding ruling in relation to a transfer pricing agreement, or use the “transaction value” method and make the relevant post - importation adjustments to the value of the goods to account for royalties, license fee payments etc. in accordance with customs valuation legislation. An importer that automatically qualifies must notify Customs that they wish to use provisional values. If importers do not automatically qualify, they can apply to use the provisional values scheme if and when they cannot determine the final customs value of the goods at the time of importation. To do so, importers must complete the application form and provide supporting information.

WCO3 - Inward cargo reports

New Zealand Customs has been undergoing a reform process for their Inward Cargo Reports (ICR) to comply with the WCO 3 format for inward cargo reporting. While the target mandatory date for ICR was 31 October 2018, it has now been pushed back and NZ Customs has been operating a thorough pilot test to ensure a smooth transition for businesses, systems and agencies. The pilot project is currently being conducted for Airlines, Shipping Lines and Brokers/Freight forwarders.

We will provide more updates on the new mandatory date in future issues of TI.

Eugen Trombitas

+64 (9) 355 8686 [email protected]

32 PwC

Philippines

Paul Sumner


Second tranche of the tax reform program obtains Congress approval

Following the entry into force of the Tax Reform for Acceleration and Inclusion (TRAIN) law in January 2018, the Congress recently approved the second package of the tax reform program - the Tax Reform for Attracting Better and High quality Opportunities (TRABAHO) Bill.

The TRABAHO Bill will gradually reduce corporate income tax from 30% to 20% by 2029, while broadening the tax base in the Philippines via the:

• Removal of certain preferential or lower corporate tax rates;

• Implementation of stricter rules on related party transactions for income tax assessment purposes;

• Review and rationalisation of current tax incentives provided by Investment – Promotion Agencies (IPAs) such as the Philippine Economic Zone authority (PEZA).

More relevant to customs and trade, the table below provides a comparison of the existing fiscal incentives granted by PEZA against the Congress-proposed incentives under the TRABAHO bill.

In addition to the proposed changes, all tax incentives from all IPAs will now be consolidated under a Strategic Investments Priority Plan (SIPP), and will only be granted to projects registered and listed within. This will create a single incentive list detailing all income tax, customs duty and VAT incentives available. The SIPP will be refreshed every three years.

As part of the legislative process, the approved bill will need to clear three further readings in the Senate, before it can be submitted to the President for approval.

Incentive type Existing PEZA incentives

Proposed incentives under the TRABAHO Bill

Income Tax Holiday (ITH)

An ITH is provided for:

• 4 years for non-pioneer projects;

• 6 years for pioneer projects.

Upon expiry of the ITH, a perpetual tax of 5% will be applied on gross income earned.

An ITH will be provided for 3 years.

Upon expiry of the ITH, other income tax incentives e.g. preferential corporate income tax rate of 18% etc. can be applied for up to five years (including the ITH period).

Customs duty incentives

Raw materials, capital equipment and spare parts are allowed to be imported duty and tax free

Customs duties for import of capital equipment and raw materials will be exempted for a period of up to 5 years.For expansion of registered activity, entities will be allowed duty exemption on importation of capital equipment for five years. Duty exemption will only apply on incremental portion of the activity.

Value – Added Tax (VAT) Incentives

VAT is exempted on all local purchases.

VAT exemption is available for registered export enterprises with:

• Export sales exceeding the 90% threshold requirement; and

• Located in ecozones (like PEZA), Free ports, or utilising customs bonded warehouses.

VAT will be zero – rated on export sales and on all imports and domestic purchases of capital equipment and raw materials used in the manufacture of goods.

Entities who do not meet the above criteria will not be granted VAT exemption. However they are still entitled to a VAT refund upon export of goods.


Stricter enforcement by the BOC on physical examination and customs valuation The Bureau of Customs (BOC) has consistently exceeded its revenue target for the past six months. For the period of January to July, Customs collected PHP 332.5 billion, exceeding the target of PHP 328.195 billion by 1.3%. This was largely due to tighter enforcement on customs valuation verification and the conducting of more stringent physical examination and checks which are described below:

• Strict adherence to correct valuation system by using transaction value of goods during assessment of import taxes, or sequential application of valuation methods, as there were cases in the past where assessments were made based on benchmark values;

• Use of reference value of goods as risk management tool for verification – Reference values enable Customs’ field officers to verify value of imported goods for issuance of alert orders, and/or conducting further checks. Reference values have been established for iron, steel, resin, aluminium, apparels, cement, meat, foodstuff, animal feeds and additives;

• Physical examination of alerted reefer agricultural products – Container examinations are conducted either during Customs clearance, or at the warehouse of the consignee. Customs and a representative from the concerned regulating agency (i.e. Bureau of Plant Industry, Sugar Regulatory Administration etc.) will jointly conduct all such examinations.

• Physical examination of shipment under Once-a-year Importation – All imports under the Once-a-year importation are subject to physical examination checks by the BOC.

High revenue in the past 6 months can also be attributed to an increase in oil prices and additional tax revenue due to the introduction of new taxes and excise duties on specific goods as part of the first tranche of the TRAIN law.

Source: Bureau of the Treasury, Philippines

In view of the BOC’s increasing focus on customs value declarations, importers should ensure that declared values are accurately determined and appropriately declared as per the valuation methods stipulated in the customs law. To prevent unnecessary shipment delays, importers should also ensure compliance with all required import licensing and document requirements.

34 PwC

BOC introduces Fuel Marking Task Force The Bureau of Customs has formed a Fuel Marking Task Force to oversee the implementation of the Fuel Marking Program. The Fuel marking scheme, which will take effect in 2019, is a key provision in the first tranche of the TRAIN law targeted at reducing fuel smuggling. Led by the enforcement group of the BOC, the roles of the task force will include formulating and preparing the required administrative issuances and coordinating with the Department of Finance and other relevant government agencies to roll out the program. Bidding for the fuel marking system service provider is currently underway.

Preparing for TradeNet: Harmonising commodity codes

The Department of Finance is collaborating with the Tariff Commission and various trade regulating agencies in the Philippines to come up with harmonised commodity codes that will eventually be used in TradeNet. A series of workshop have been organised for 42 government agencies involved in the regulation of imported goods to gather base data needed to run harmonised commodity codes on a common system platform.

TradeNet.gov.ph is Philippines National Single Window (NSW) system, a trade facilitation platform that will allow traders to secure permits and clearances to import or export regulated goods from different government agencies online.

Philippines to implement ASEAN Self-certification by mid 2019

Economic ministers of ASEAN countries signed the first protocol amending the ASEAN Trade in Goods Agreement (ATIGA) to facilitate implementation of the ASEAN-Wide Self Certification Scheme (AWSC). Under the AWSC, exporters recognized as Certified Exporters (CE) will be able to declare their goods as ATIGA originating on the invoice, and will not need to obtain a Certificate of Origin (Form D). This will largely reduce the administrative compliance required, which will be more cost efficient for businesses.

The Philippines, together with other ASEAN member states, is expected to implement AWSC in early 2019. The Department of Trade and Industry, the Bureau of Customs and Tariff Commission will be promoting the AWSC to business sectors, especially to micro, small and medium enterprises (MSMEs). Businesses should look out for these sessions to understand the criteria to qualify as a CE, and how to take advantage of the upcoming AWSC.

BOC to introduce Cargo Targeting System to replace existing advance manifest system

The Bureau of Customs (BOC) is intending to introduce a new system, the Cargo Targeting System (CTS) to replace their Advance Manifest System (AMS). Implementation of the AMS is currently on hold due to concerns by stakeholders surrounding specific system requirements for documentation.

The CTS is a cargo manifest risk assessment system developed by the World Customs Organization, which provides an advance profiling of shipments prior to arrival in Philippines. Unlike the AMS that requires importers and forwarders/customs brokers to manually upload scanned documents in PDF format, the manifest submitted by the shipping lines to BOC’s electronic-to-mobile (e2m) system will be directly forwarded to the CTS. The BOC is now forming the guidelines and procedures for implementation of the CTS.


BOC introduces Enhanced Goods Declaration Verification System

With effect from 2 August 2018, the BOC introduced the Enhanced Goods Declaration Verification System (eGDVS) at three ports, the Subic, Clark and Batangas ports.

Compared to the previous version, the processing of customs declarations under the eGDVS will be more transparent. Specifically, all declarations will be strictly processed online on a first–in first–out basis, which will reduce corruption by removing the physical processing of declarations and reducing situations where customs personnel may prioritise certain entries over others. The eGDVS will also allow importers and other stakeholders to verify the status of their declarations online, as well as upload and submit scanned import and shipping documents online.

Revised Agricultural Tariffication Bill obtains Congress approval

On 14 September 2018, the Congress approved the third reading of the Revised Agricultural Tariffication bill, aimed at removing import quota restrictions on rice imports. Instead, corresponding additional tariffs and taxes in line with Philippines tariff commitments with the WTO will now be imposed on rice imports. The import of rice will fall under the regulatory purview of the National Food Authority (NFA), which may impose further import permit requirements and guidelines for importation of rice.

Under the new bill, the bound rate for rice will be set to a:

• 40% Most Favored Nation (MFN) rate for imports within the metric ton maximum access volume from non ASEAN and non WTO members;

• 180% MFN tariff rate beyond quota limits.

For rice imports from ASEAN member countries, the Philippines will continue to uphold and apply import duty rate commitments stipulated in the ASEAN Trade in Goods Agreement which is currently at 35%. Following Congress approval, the proposed bill will be required to undergo three subsequent readings and approvals with the Senate before it can be submitted to the Presidential office for signing and implementation.

In addition to the above, an Executive Order removing administrative and non–tariff barriers on fish, sugar, meat and vegetables has been submitted to the office of the President for implementation within September. More details will be provided in the next edition of TI.

36 PwC

Singapore

Frank Debets


Amendments to India-Singapore Comprehensive Economic Cooperation Agreement

The provisions set under the Second Protocol of the India-Singapore Comprehensive Economic Cooperation Agreement (CECA) came into effect on 14 September 2018. The amendments are as follows:

Change in General Rules of Origin (ROO)

Based on the Second Protocol of the CECA, goods will qualify as originating when:

• there is at least 35% local value add (including cumulated materials from the other party); and

• a change in tariff subheading at the 6-digit level for all non-originating materials.

This brings the general rules in line with the general rules of the ASEAN-India FTA. The Second Protocol also introduces a de minimis rule, meaning that a good that fails to meet the required change in subheading may still qualify as an originating good should the non-originating materials that do not undergo the required change in tariff subheading do not exceed: • 10% of the Free On Board (FOB) value of the good (for all goods except where

classified under Chapters 50 to 63 of the Harmonised System); or• 7% of the total weight of all basic textile material (for goods classified under

Chapters 50 to 63 of the Harmonised System).

Updates to the list of Product Specific Rules (PSR)

The PSR of the CECA has also been updated. Importers of goods manufactured in India or Singapore can either choose to satisfy the general rules as set out above or the PSR according to the revised Annex 3A of the ROO Chapter of the CECA in order to qualify as an originating good.

The Second Protocol can be accessed from: https://www.enterprisesg.gov.sg/-/media/8db578483c254c33a58ac4e926dc3572.ashx?h=16&thn=1&w=16&h=16&thn=1&w=16

Revised Strategic Goods Control List

Singapore Customs announced the latest Strategic Goods (Control) Order 2018 (SGCO 2018) on 4 September 2018. This update will take into consideration the 2017 Wassenaar Arrangement’s Munitions List and 2017 European Union’s List of Dual-Use Items and will take effect from 1 November 2018. The changes include new controls, removal of past controls and more specific information on existing controls.

The Strategic Goods (Control) (Amendment) Regulations and the Strategic Goods (Control) (Brokering) (Amendment) Order will also be revised to update references to the new SGCO 2018. There are, however, no changes to the scope of transhipment, transit and brokering controls.

Detailed amendments and a comparison to the current SGCO can be found at:https://www.customs.gov.sg/-/media/cus/files/business/strategic-goods-control/amendments-to-the-strategic-goods-control-list-sgco-2018.pdf


New Networked Trade Platform takes over from TradeXchange

Singapore Customs officially launched the Networked Trade Platform (NTP) on 26 September 2018. Currently, all services on TradeXchange have been fully migrated to the NTP. The TradeXchange platform will be decommissioned from 28 October 2018.

The NTP is a one-stop trade platform that will allow traders, importers and businesses to electronically perform all trade related regulatory formalities, and transact digitally with business partners, stakeholders and government agencies. As Singapore’s official trade management platform, traders will be able to access and perform the following trade related services online via the NTP. These services include:

• Cargo freight booking

• Trade financing

• Cargo insurance applications

• Submission of customs declarations and performing of all customs related e-services

• Payment of fees and reconciliation

With the digitisation and streamlining of trade procedures, the NTP will enable traders to arrange shipments, perform customs formalities and manage trade compliance via a single platform. The NTP also allows traders to store and share digital documents such as permits, licenses and invoices with their relevant stakeholders.

Note that current TradeXchange accounts will not be automatically transferred to the NTP. Thus, in view of the impending transition to NTP, existing TradeXchange users who have yet to set up new NTP accounts should do so prior to the decommissioning of TradeXchange. We have summarised below the relevant steps required to create an NTP account:

1. Sign up for a CorpPass account. Register for CorpPass at https://www.corppass.gov.sg/cpauth/login/homepage

2. Assign NTP as a digital service for the business. Do take note of the different required documentation for Singapore Registered and Foreign Registered Entities. For Singapore registered entities, a letter of authorisation is required. For foreign registered entities, its business registration document and an identity document is required.

3. The key personnel, or the CorpPass administrator will then register for an NTP account and accept the respective Terms and Conditions.The key personnel in this case is referred to as any individual who is registered with the Accounting and Corporate Regulatory Authority or the relevant Issuing Agency of the Unique Entity Number of the company.

4. Create NTP account via CorpPass. Select ‘Sign in/Register’ and ‘Sign in with CorpPass’ > Login to CorpPass > Verify entity details > Enter Business contact details > Enter Personal details > Download Terms & Conditions and agree to them > Click ‘Create my account’ to complete registration process

Refer to the Customs Notice No. 16/2018 for more details on the decommissioning of TradeXchange: https://www.customs.gov.sg/-/media/cus/files/notices/notice-162018-ver-1.pdf

38 PwC

Taiwan, R.O.C.

Simon S Huang

+886 2 2729 6666 Ext. 23918 [email protected]

Amendments announced on regulations governing customs bonded factories

On 8 May 2018, the Ministry of Finance (MoF) announced amendments to regulations governing customs bonded factories. This amendment entered into force on 6 August 2018.

The key amendments are summarised below:

Amendments to Regulations governing customs bonded factories

Impact to businesses

Article 6 • Upon registration approval by the competent authority, bonded factories are allowed to import equipment for self-use during the registration process.

• Importers are required to indicate the temporary regulatory number and to provide a security deposit during the import declaration process. Customs would initiate bonded factories monitoring upon approval of registration and receipt of actual regulatory number.

This will provide greater efficiency and result in less business disruptions to companies intending to set up bonded factories in Taiwan.

Article 10 • Bonded factories will need to submit and retain records of the “Schedule of Raw Materials Used Per Unit of Product” as well as inform customs authorities of raw materials used that are similar and interchangeable.

• If the above mentioned raw materials are of Chinese origin and subject to import restriction or countervailing or anti-dumping duties in Taiwan, they should be assigned separate part or identification numbers to raw materials that are not of Chinese origin. Bonded factories are also required to ensure that materials of Chinese origin are not interchanged with materials from other sources.

• Importers are required to submit an electronic file of “Schedule of Raw Materials Used Per Unit of Product” to the Customs Port if raw materials used in bonded factories are subject to countervailing or anti-dumping duty from Ministry of Finance.

More stringent compliance and record keeping requirements are now applicable to companies operating a customs bonded factory.

Businesses should take note to comply with the applicable accounting and physical segregation requirements for goods or raw materials of Chinese origin.

Article 11 • Bonded factories must set up separate bonding book accounts and ledgers for raw materials and finished goods of Chinese origin. These should be retained for Customs’ inspection purposes.

The regulation governing customs bonded factories can be accessed at the following link:

https://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=G0350005


Thailand

Nu To Van


Thailand export controls legislation may be just around the corner

On 19 and 20 September 2018, the Department of Foreign Trade (DFT) held a public seminar to provide a status update on export controls in Thailand. The draft version of Thailand’s Control of Weapons of Mass Destruction (TCWMD) Act is currently under consideration by the National Legislative Assembly of Thailand. The draft is expected to be concluded by the end of this year.

To facilitate the implementation of the TCWMD Act, the DFT has also indicated that there will be several additional sub-regulations that will need to be concluded to cover the following areas:

• List of products subject to export licensing, and the required procedures;

• List of products subject to self-certification and the required procedures; and

• Procedural requirements for the Internal Control Programme (ICP) (for bulk licensing)

Depending on the implementation timeline, we expect that the existing Ministry of Commerce notification regarding export control measures for dual-use items that was previously indicated to be effective from 1 January 2019 could be delayed. Despite the unclear implementation timeline, we recommend for companies to review their export products ahead of implementation of the TCWMD Act to ensure they are ready for compliance by the time of implementation.

FDA registration required for cosmetics for export

With effect from 6 September 2018, cosmetics products imported and manufactured for export purposes may be required to comply with additional quality, standard, labelling and other requirements in Thailand. Specifically, the manufacturer or importer of such cosmetics will need to ensure that the cosmetics are manufactured in compliance with the overseas purchaser’s requirements and they are registered with the Food and Drug Administration (FDA) prior to manufacture or import into Thailand. These imported cosmetics cannot be sold locally.

During the regular registration process, importers are required to attach additional documents, including a purchase order, and legal references or certificates from responsible government authorities in the destination countries to prove the possibility of sale. Where such cosmetics contain prohibited raw materials under Section 6 (2) of the Ministry of Public Health notification, the manufacturer and

40 PwC

importer are also required to attach a certificate issued by the relevant government agencies. This certificate should certify the security of the plant and the cleanliness of the production area, i.e. that the premises contain a proper waste disposal system and appropriate drainage system, etc.

The manufacturer and importer are also required to prepare a manufacturing or importation inventory control for exported cosmetics using the Ror Ngor. Kor.1 form. The form must be available for official inspections for at least five years from the manufacture or import date.

Customs place higher focus on excise tax reviews

With the conclusion of the ‘adjustment’ period provided to companies to adapt to the Excise Tax Act and new excise tax base calculation methods, there has been an increase in questions from the Excise Department of Customs on the cost elements of the Suggested Retail Price (SRP) submitted by companies.

Previously, the Excise Department had not been proactive or assertive in carrying out excise audits. However, the Excise Act 2017 stipulates that officers are allowed to receive rewards of up to 20% of the excise tax fine collected (capped at 5 million THB per case). Such incentives tagged to the collection of excise fines can lead officers to be more assertive in questioning companies on the submitted cost elements, or even reject the registered SRPs, resulting in a claw back of excise taxes and the imposition of fines.

In view of increasing excise tax audits, in advance of future questions or challenges from the Excise Department, we recommend for companies to review previously submitted SRPs and prepare the required supporting documents for the various cost elements.

Digital Economy: e-Registration, e-Payment and e-Tracking

In line with the Digital Economy and Thailand 4.0 policy, the Customs Department has promoted three electronics systems: the e-Registration, e-Payment and e-Tracking systems to facilitate the completion of customs formalities in Thailand.

1. E-Registration

As stipulated under Customs Notification No. 64 / 2561, the improved E – Registration system will allow companies to submit requests/information via the internet and access e-data links to various government agencies (e.g. the Revenue Department, Department of Business Development and Department of Provincial Registration). In addition to fewer documentary requirements, registrants will also be able to contact and communicate with government authorities upon presentation of their ID card.

To use the E–registration system, the importer/exporter or customs broker is required to register with Thai Customs. Following registration, Customs will request for either party to be present with the registered ID cards in order to verify their identity. ID card verification will be required for first time registrants, or where a new grantee is appointed by the importer or exporter. Should the importer or customs broker be unable to contact Customs in person, the original ID card can be passed to their grantee, who can submit this to Thai Customs on their behalf. Upon submission, Customs will check and verify the ID card against the one registered with the Department of Provincial Registration.


2. E-Payment

Currently, there are two electronic payment methods available, namely the e-Payment and Electronic Data Capture (EDC). Recently, Customs announced the implementation of a new form of electronic payment, the e-Bill Payment system. This has been effective from 1 October 2018. Going forward, Thai Customs intends to only maintain two electronic payment methods – the e-Payment and e-Bill payment methods.

Previously, prior to making an e-Payment, the importer or exporter would be required to register a specific bank account with the customs database. This e-Payment system is linked to the National Single Window (NSW) system. Although accessible online, traders will need to obtain a physical receipt at Thai Customs. This is not available electronically. Alternatively, using the EDC method, traders are currently allowed to make payments with their electronic card i.e. a credit card (no fee) or debit card (0.9% fee and cash card capped at THB 20,000), or a QR Code in person at Thai Customs.

Under the new e-Bill Payment system, importers and exporters will be able to choose from wider payment options, including bank services such as internet banking and mobile banking, or via ATM and counter services (i.e. banks and non-bank outlets such as certain convenience stores). Similar to e-Payments, e-Bill Payments can be completed online and traders will not need to be physically present at Thai Customs to complete payment transactions. e-Bill payments will also be more convenient than current e-Payment systems as there is no requirement for registration of a specific bank with Thai Customs and traders will be able to print out e-receipts via the system.

42 PwC

3. E-Tracking

E-Tracking will allow importer and exporters, customs brokers and relevant stakeholders to electronically track all information relating to customs clearance formalities. The services featured in e-Tracking include tracking the import-export declaration status, goods transition control lists, manifests, Other Government Agency (OAG) declarations (e.g. the license issuing authority), postal parcels, customs registration, customs fees payment history, e-Tax incentive registration, money transfers and e-bills.E-Tracking services have been available since 2010. They are now accessible via mobile applications. However, not all service features are available as yet on the mobile platform.

Public hearing commences for first amendment of the Customs Act

Ten months following the implementation of the Customs Act B.E. 2560 (2017) (Customs Act), Thai Customs held a public hearing of the draft of the first amendment between 19 September and 5 October 2018. Any interested person could vote for or against the proposed changes and provide comments during the public hearing period.

The proposed amendments and additions involve 20 Sections of the Customs Act, covering areas such as the duty assessment period (Section 19), the details of seizure and sequestration criteria and procedures, overdue items, goods in transit and transhipment as well as penalties. Specifically, one key change would be to more clearly define the duty assessment period, which is currently subject to various interpretations. In the proposed amendment, it is clearly stipulated that the duty assessment period would be ten years from the date of submission of the import entry where there is evidence that the importer has the intention to defraud duty payment.

The draft comparison table between the current Customs Act and the proposed changes outlined in the first amendment is available on the customs website in Thai. It can be accessed at the following link: http://apps.customs.go.th/data_files/d11bcb291d2fb1b0ad20d1eb3ba9abd3.pdf


Vietnam

Pham Van Vinh

+84 (8) 3823 0796 Ext.1503 [email protected]

Management of scraps imported into Vietnam

Due to the significant increase in the importation of scraps into Vietnam, theGeneral Department of Customs has issued Official letter no. 4202/TCHQ-PC dated17 July 2018 regulating the management of imported scraps and waste.

Under the regulation, scraps imported for use as raw materials would need to meetthe following requirements:

• be under the list of scrap allowed to be imported as regulated by the Prime Minister

• meet national technical standards on environment protection as regulated by the Ministry of Natural Resources and Environment;

• be imported by enterprises with approval to import scraps for production; and

• be within the provided import quota.

Implementation of the Vietnam Automated System forSeaport Customs Management

On 30 August 2018, the Vietnam Automated System for Seaport CustomsManagement (VASSCM) system was implemented in three additional Ho Chi MinhCity ports – the Saigon Premier Container Terminal, Tan Thuan, and Tan Cang-CatLai. This is in addition to Ho Chi Minh’s Lotus Port and SP-ITC InternationalContainer Terminal, the port of Haiphong, and Hanoi’s Noi Bai InternationalAirport.

The VASSCM is Vietnam Customs’ automated customs management system. Itallows importers, exporters, and warehouse operators to submit standardisedcustoms forms electronically, and provides online updates on the transit andclearance of goods. This system is part of Vietnam’s customsmodernisation efforts under the Customs Modernisation, Develop andModernisation Plan for 2016-2020 and its Customs Development Strategy until2020.

Companies operating ports, warehouses and yards are expected to benefit from therollout of this system as it provides timely updates on the status of licensingclearance and minimises the risk of inaccurate data. For enterprises engaged inimport/export business, this system will remove the need for submission of paperdocuments and speed up processing times.

Introduction of a customs bond system

In a bid to further modernise and reform administrative procedures relating toimport and export, the Vietnam government, in collaboration with the GlobalAlliance for Trade Facilitation and Vietnam Private Sector Forum, has announcedplans to introduce a modern customs bond system for the conditional release ofgoods. Pilots are slated to be conducted in the beginning of 2020.

The system is intended to give traders the option to purchase bonds from approvedsurety companies, guaranteeing their payment of duties and taxes andguaranteeing their compliance to the laws and regulations of Vietnam, therebyallowing Vietnam Customs to expedite the release of their goods. If the trader doesnot fulfil its obligations, these surety companies acting as third parties will payCustoms and seek reimbursement from the trader.

The introduction of this system is expected to streamline import and exportprocessing, thereby facilitating customs clearance. Vietnam has in the paststruggled with clearance congestion due to a lengthy release process andcomplicated administrative procedures.

44 PwC

Around the worldWorld Customs Organisation

WCO releases 2018 edition of the SAFE Framework of standards

The WCO has officially published the 2018 edition of the SAFE framework ofstandards, which aims to enhance supply chain security and efficiency throughstrengthening cooperation between customs authorities, businesses andgovernment agencies. Specific standards and implementation guidelines wereprovided to:

• Enhance and standardise procedures for mutual recognition of customs controls and information exchange between customs administrations and under Authorised Economic Operator (AEO) programs; and

• Deepen customs cooperation with local regulatory authorities to target illegitimate trade and ensure more stringent border management and control.

The updated framework also more clearly differentiates and outlines the benefits ofattaining AEO status via the introduction of a list of core minimum assured andinternationally accepted general trade facilitation benefits that will be provided toAEOs certified under all relevant national programmes. These benefits includeexpedited cargo release and transit processes, facilitation of customs proceduresand the reduction of trade disruption via reduced security inspections etc.Additionally, a comprehensive list of trade facilitation benefits has also beenincluded to serve as a reference guide for customs administrations in developingand reviewing their own national AEO programs.

AEO schemes will be useful for companies looking at achieving lead-timereductions and cost savings. To capitalise on such benefits, it will be useful tounderstand the advantages in attaining AEO status, as well as the requisiteconditions and requirements to attain AEO status under the relevant nationalprograms.

The 2018 SAFE Framework of standards can be accessed at the following link:http://www.wcoomd.org/-/media/wco/public/global/pdf/topics/facilitationinstruments-and-tools/tools/safe-package/safe-framework-of-standards.pdf?la=en

WCO publishes new guides supporting the implementation of AEOprogrammes and MRAs

The WCO has published the “Customs AEO Validator Guide” and the “MRA StrategyGuide”, which provides detailed guidance aimed at harmonising theimplementation of AEO and Mutual Recognition Arrangements (MRAs) globally. These guides are intended to assist customs administrations in improving the AEOvalidation process and to better understand the steps required to plan, negotiateand implement MRAs with partners.

For companies looking towards AEO certification, the guide will also providegreater transparency in terms of the procedures and processes required for AEOapplication and validation, and help companies better understand the skills andcompetencies required to be granted AEO status.


Both guides can be accessed at the following link: http://www.wcoomd.org/enmedia/newsroom/2018/august/wco-publishes-new-guides-supporting-theimplementation-of-aeo-programmes-and-mras.aspx

World Trade Organisation

US, Japan and the European Union (EU) to submit proposal for WTOreform

On the back of the escalating trade friction between the US and China, and inresponse to cases of alleged unfair subsidies granted by China to its domesticindustries, trade ministers from the US, Japan and the EU have jointly agreed toco–sponsor a proposal aimed at:

• Updating current WTO rules in line the current global economy;

• Strengthening current WTO monitoring and surveillance processes and procedures; and

• Modernizing and improving effectiveness of the WTO dispute settlement system.

This proposal is currently awaiting finalisation and will be submitted by endOctober 2018 for consideration at the next WTO Council meeting on Trade in Goodsin November. Specifically, the proposal will cover proposed changes in relation tonotification and reporting requirements for domestic industrial subsidiesimplemented by WTO members. The content of the proposals is expected to includesuggestions for the imposition of fines or increasing contribution quotas on membercountries that do not report such subsidies provided to their domesticmanufacturers, thereby giving them an unfair advantage.

Negotiations will follow between WTO members upon receipt of the proposal bythe committee, with the hopes of reaching a full agreement by end 2019. We willprovide a more detailed update on the proposed rules and the progress ofdiscussions in the next issue of TI.

46 PwC

US – China trade tensions escalate with imposition of fourthround of tariffs

Trade tensions between US and China have continued to escalate, with the USapplying a further 10% in tariffs on an additional USD 200 billion or so of Chineseimports. These tariffs have entered into effect on 24 September 2018 and are slatedto increase to 25% from 1 January 2019 unless some sort of deal is reached, whichcurrently seems unlikely. In retaliation, China has imposed tariffs ranging from 5%to 10% on an additional USD 60 billion worth of US goods. The US has furtherthreatened that it will not hesitate to go ahead with a next phase of tariffs on anadditional USD 267 billion of Chinese goods.

As yet, three rounds of tariffs have already entered into effect:

Round Effective date Description

1 US: Effective 23 March 2018China: Effective 2 April 2018

US imposed 25% tariffs on all steel imports (Except imports originating from Argentina, Australia, Brazil and South Korea) and 10% tariffs on all aluminium imports (Except for Argentina and Australia).

In response to the steel and aluminium tariffs imposed by the US, China has imposed tariffs ranging from 10% to 25% on more than USD 3 billion of US goods, including steel pipes and aluminium products, as well as fruit and wine imports.

2 US and China: Effective from 6 July 2018

US imposed 25% tariffs on USD 34 billion of Chinese imports, to which China has responded by imposing retaliatory tariffs on the same amount of US imports.

3 US and China: Effective 23 August 2018

US imposes 25% tariffs on an additional USD 16 billion worth of Chinese imports, mainly on raw materials e.g. oils, grease, plastics, electric motors etc., as well as motor vehicles. China has also similarly imposed 25% tariffs on an equivalent value of US goods, including automotive and energy products.

Negotiations between both sides have met with very little progress despite the expressed willingness from the US and China to open up opportunities for dialogue. China has also warned that it will not hesitate to retaliate with both tariff and non- tariff measures should the US choose to go ahead with the proposed additional tariffs. China may also reject further participation in any future trade talks with the US.

To mitigate risks, companies engaged in the trade of any affected products between the US and China should begin quantifying the increase in customs duty costs and the associated business impact at the earliest. As trade tensions are expected to continue, it may also be worthwhile for affected traders, manufacturers and businesses to consider other sourcing options, to re-plan and adapt supply chain activities and routes or to explore utilisation of FTAs in view of higher potential tariffs in the future.

More updates on the trade war will be provided in future issues of TI.


Trade monitoring report shows increase in global trade restrictive measures

For the period ended May 2018, import facilitative measures were implemented on approximately USD 110 billion of imports, compared to trade restrictive measures, which were implemented on USD 85 billion of goods. Although signifying that WTO members have still been more trade facilitative on average, compared to a 2:1 ratio of trade facilitation over trade restricting measures in the previous period, the fact that this ratio is dropping is a cause for concern for the global trading community. On average, WTO members have also implemented an average of almost eleven trade restrictive measures per month, an increase from the average of nine measures in the previous period.

The WTO has also cautioned members that further escalation of trade restrictive measures could harm the integrity and resilience of the multilateral trading system, and further slow-down economic recovery. To resolve this, the WTO Director General has urged member countries to make direct efforts to reduce such measures, reverse existing ones and continue to make progress in the implementation of the WTO Trade Facilitation Agreement (TFA).

The full report issued by the WTO trade policy review body can be accessed at the following link: https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/TPR/OVW12.pdf

Summary of outcomes: WTO General Council Meeting

The WTO held its General Council meeting on 26 July 2018, which covered the following key areas:

• Update on implementation of outcomes from the Bali, Nairobi and Buenos Aires ministerial meetings – Various WTO regulatory bodies are currently taking action to realise specific outcomes.

• Reporting on work programme on small economies, including knowledge sharing of specific challenges derived from trade costs.

• Review and reporting of developments on the E-commerce work programme, including sharing of best practices and discussions on the application of customs duty on electronic transmissions.

• Review and discussion of measures to allow graduated Least Developed Countries (LDCs) with a Gross National Product (GNP) of less than USD 1,000 to enjoy benefits outlined in Annex VII (b) of the Agreement on Subsidies and Countervailing Measures.

• Adoption of waiver extension on the Kimberley Process Certification Scheme for rough diamonds and conducted a review of four waivers pursuant to Article IX:4 of the WTO Agreement.

During the meeting, members also finalised that the twelfth session of the WTO Ministerial Conference will be scheduled to take place in Kazakhstan in June 2020.

48 PwC

Intensified work program on fishery subsidies commenced on 17 September 2018

Following from the Ministerial Decision on Fisheries Subsidies concluded in December 2017, members have expressed commitment towards participating effectively in constructive negotiations aimed at reaching a final agreement ahead of the next Ministerial conference in 2020. The agreement is expected to include comprehensive rules prohibiting specific forms of fishery subsidies that contribute to overcapacity and overfishing, and eliminating subsidies contributing to illegal, unreported and unregulated fishing. Negotiating members have also indicated that a key part of negotiations will cover special and differential treatment for developing countries vs least developed countries. This intensified work program will continue till end December 2018.

World Trade Outlook Indicator (WTOI) for third quarter of 2018: Slowdown in trade growth expected

According to the latest World Trade Outlook Indicator (WTOI) released on 9 August 2018, trade slowdown is predicted to continue going forward due to rising trade tensions. The current WTOI value is 100.3, above the baseline value of 100, but below the previous value 101.8 achieved in the second quarter. This loss of trade momentum is largely due to a decline export orders and slowing growth in the automotive and electronic component sectors. Despite remaining above trend, the container port and air freight indices are also experiencing slowing growth.

The full WTOI report for the third quarter can be accessed at the following link: https://www.wto.org/english/news_e/news18_e/wtoi_09aug18_e.pdf

Source: World Trade Organization: WTOI Report Q3 2018


WTO releases 2018 statistical publications on trade and tariff profiles

The WTO has released three annual statistical publications for 2018:

Areas covered in the publication

The World Trade Statistical Review

• Statistical analysis of leading players in trade in goods / services

• Performance of developed and developing economies

• Latest developments in regional trade agreements, digital trade and trade in value added terms

• Updates on trade policy developments, including data on

– Trade restrictive and facilitative measures implemented by WTO members;

– Updates on implementation of the WTO Trade Facilitation Agreement (TFA)

– Commitments to Aid for Trade Initiative

– Latest developments in trade finance

Trade Profiles 2018 2 – page country fact sheet for each economy, highlighting:

• Key indicators on trade in goods and commercial services

• Breakdown of imports and exports, and main trading partners for each economy

World tariff profiles 2018 • Country profiles on tariffs and non-tariff measures imposed

• Global comparative statistics e.g. on non-tariff measures implemented by country and by product group

• Analysis for Least Developed Countries and their utilisation of preferential tariffs

These publications are available in English, and can be accessed via the WTO website: https://www.wto.org/english/news_e/news18_e/publ_30jul18_e.htm

Disputes initiated in the WTO

Over the period of August - September 2018, the following disputes were initiated or considered through the WTO Dispute Settlement Mechanism:

Dispute initiated by

Dispute initiated against

Affected products Background Reference No.

Taiwan Indonesia Certain flat – rolled iron and steel products e.g. Galvalume

On 12 February 2015, Chinese Taipei and Vietnam had requested consultations with Indonesia in relation to safeguards imposed on flat – rolled iron or steel products.

On 15 August 2018, the panel concluded that specific duties applied by Indonesia do not constitute a safeguard measure. However, the application of these duties are still deemed as inconsistent with Indonesia’s MFN obligations – given that it exempts imports from certain WTO members from such duties, but not others. Indonesia is required to bring these measures into conformity with its WTO obligations.

WT/DS496/1

Vietnam WT/DS490/1

50 PwC

Dispute initiated by

Dispute initiated against

Affected products Background Reference No.

China UnitedStates

More than 279 tariff lines– including products such as:

• Lubricating oils and grease;

• Plastics and man - made fibres;

• Specific machinery and equipment;

• Motor vehicles and tractors etc.

On 16 August 2018, the US imposed an additional 25% ad valorem duty on goods originating from China. These rates are applied on top of the existing Most Favoured Nation (MFN) Rates offered.

These additional tariffs have entered into effect on 23 August 2018.

WT/DS565/1

Canada China Cellulose pulp and paper products

On 22 May 2017, China had imposed anti-dumping duties on imported cellulose pulp of Canadian origin. To this, the Dispute Settlement Body subsequently ruled in Canada’s favour and requested China to re-implement measures in line with WTO obligations.

On 12 September 2018, Canada again requested consultations alleging that China had not complied with the previous ruling issued by the DSB and current measures were still inconsistent with the WTO’s anti-dumping agreement. This has been circulated to all members.

WT/DS483/9


Regional Partners Frank Debets +65 6236 7302 [email protected]

Susan Ju +86 (10) 6533 3319 [email protected]

Derek Lee +86 (755) 8261 8218 [email protected]

Frank Wu +86 (21) 2323 3864 [email protected]

Nu To Van +66 (2) 844 1353 [email protected]

Paul Sumner +66 (2) 344 1305 [email protected]

William Marshall +852 2833 4977 [email protected]

Australia Gary Dutton +61 (7) 3257 8783 [email protected]

Cambodia Paul Sumner +66 (2) 344 1305 [email protected]

China

Beijing Susan Ju +86 (10) 6533 3319 [email protected]

Shanghai Frank Wu +86 (21) 2323 3864 [email protected]

South China, Hong Kong Derek Lee +86 (755) 8261 8218 [email protected]

India Nitin Vijaivergia +91 (0) 982 023 9915 [email protected]

Indonesia Enna Budiman +62 (21) 5289 0734 [email protected]

Japan Howard Osawa +81 (0)3 5251 6737 [email protected]

Korea Rosa An +82 (2) 709 8916 [email protected]

Laos Paul Sumner +66 (2) 344 1305 [email protected]

Malaysia Chandrasegaran Perumal +60 (3) 2173 3724 [email protected]

Myanmar Ruben Zorge +95 979064 8780 [email protected]

New Zealand Eugen Trombitas +64 (9) 355 8686 [email protected]

Pakistan Syed Shabbar Zaidi +92 (21) 2413 849 [email protected]

Philippines Paul Sumner +66 (2) 344 1305 [email protected]

Singapore Frank Debets +65 6236 7302 [email protected]

Taiwan, R.O.C. Simon S Huang +886 2 2729 6666 Ext. 23918 [email protected]

Thailand Nu To Van +66 (2) 344 1353 [email protected]

Vietnam Pham Van Vinh +84 (8) 3823 0796 Ext.1503 [email protected]

Wider Europe Leader Lionel Van Reet +32 (2) 710 4212 [email protected]

Americas Leader Anthony Tennariello +1 (646) 471 4087 [email protected]

Contact detailsWorldtrade Management Services (WMS) is the globalcustoms and international trade consulting practice of PwC. WMS has been in Asia since 1992 and is a regionally integrated team of full-time specialists operating in every location.

Our team is a blend of Asian nationals and expatriates with a variety of backgrounds, including ex-senior government officials, customs officers, international trade lawyers, accountants, and specialists from the private sector who have experience in logistics, customs and international trade.

PwC–Globally PwC firms provide industry-focused assurance, tax andadvisory services to enhance value for their clients. More than 208,000 people in 157 territories in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

The information contained in this publication is of a general nature only. It is not meant to be comprehensive and does not constitute the rendering of legal, tax or other professional advice or service by PricewaterhouseCoopers WMS Pte Ltd (“PwC”). PwC has no obligation to update the information as law and practices change. The application and impact of laws can vary widely based on the specific facts involved. Before taking any action, please ensure that you obtain advice specific to your circumstances from your usual PwC client service team or your other advisers.

The materials contained in this publication were assembled in August / September 2018 and were based on the law enforceable and information available at that time.

© 2018 PricewaterhouseCoopers WMS Pte Ltd. All rights reserved. “PricewaterhouseCoopers” and “PwC” refer to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL). Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.

blockchains without borders - pwc

Documents