|Customs Update | September 20, 2018
Authors: Shay Wester, Ian Saccomanno, and Bryan Yeoh
September 27, U.S. - Singapore Trade Facilitation Workshop, Singapore: USTR and Singapore MFA are organizing a week-long workshop for ASEAN government officials on September 24-28 on the implementation of the WTO Trade Facilitation Agreement. They’re inviting our members to speak on a series of private sector panels on September 27. The governments hope to hear perspectives from manufacturers and logistics companies on TFA-related issues, including your challenges with customs systems that the TFA could address and how you envision being able to effectively interact with governments. Please contact Ian Saccomanno at email@example.com if you are interested in joining the event.
October 22, Customs Technology Workshop with the ASEAN Customs Procedures and Trade Facilitation Working Group, Yogyakarta, Indonesia: Please save the date for a one day workshop alongside the October meeting of the ASEAN Customs Procedures and Trade Facilitation Working Group (CPTFWG) for a discussion on the potential of transformative technologies to support customs solutions and ASEAN integration. The event will explore the trade facilitation and supply chain security implications of emerging technologies, including distributed ledger technology, advanced data analytics, artificial intelligence, and global data standards. The draft agenda proposed to the ASEAN Directors General of Customs Meeting and the CPTFWG can be found at this link. Please contact Ian Saccomanno at firstname.lastname@example.org and Shay Wester at email@example.com if you would like to discuss how you can participate.
|THE COUNCIL'S TAKE|
ASEAN Economic Ministers Conclude Important Agreements on Goods Trade
The AEM meeting on 29th August endorsed several new programs that will be important to customs integration:
They also recognized progress in tariff reduction, called for more work on trade facilitation, welcomed recent work on customs integration, and recognized the importance of addressing technical trade barriers. The full text of their joint media statement can be found here and an update copy of the AEC Strategic Action Plan can be found here.
RCEP Moves Closer to Conclusion
From August 30-31 2018, Trade Ministers from the 16 RCEP Participating Countries held the 6th RCEP Ministerial Meeting amid signs that the negotiations are gaining traction. During the meeting, the Ministers adopted a Package of Year-End Deliverables, putting more force behind the deadline for a "substantial conclusion." They also assessed and backed the outcomes of the 23rd round of negotiations held on 17-27 July in Bangkok where the chapters on Customs Procedures and Trade Facilitation and Government Procurement were completed. The Ministers welcomed the successes and said there has also been good progress made in the negotiations of other chapters. The recent progress on these chapters and some apparent deals around tariff offers have raised the prospect that this year’s target of a “substantial conclusion” at the November Leaders’ Summit may be more realistic than past targets. Though there certainly will not be a full completion of the negotiations this year, it now appears that a 2019 completion may be feasible. The following is the Council’s latest understanding of where the key negotiating issues stand:
Though some of these chapters are ambitious and the trade facilitation provisions may significantly reduce the cost of trade, the agreement’s rules are also highly flexible. Many provisions do not require immediate implementation and inclusion of special and differential treatment for developing economy members is common. At the same time, ASEAN has a history of updating its free trade agreements every few years to make them more ambitious. Even after RCEP is competed, members should continue monitoring and advocating for these updates.
ASEAN and Canada Move Forward on Negotiating Free Trade Agreement
The recently concluded AEM-Canada Consultation on September 1 moved ASEAN Member States closer to realizing an ASEAN-Canada FTA with the completion of its Joint Feasibility Study. The preliminary report highlights key trade trends, each party’s approach to FTA negotiations, and the potential benefits of an ASEAN-Canada FTA. The ministers emphasized the need for more expert-level discussions to move the FTA forward following the report’s conclusions and expressed hope that the exploratory discussions can be completed in 2019. The Philippines and Singapore had separately entered discussions with Canada on potential FTAs in the recent past, but their focus will now likely shift to the regional approach. The Philippines started exploratory discussions with Canada in May 2015 and with the regional approach now in motion, has decided with Canada to suspend the bilateral approach. Singapore had first launched negotiations with Canada in 2001 but the two countries put negotiations on the back burner to make way for the TPP in 2009.
The discussion between ASEAN and Canada comes on the heels of the EU’s revival of FTA talks with ASEAN this past July (the Council’s latest update can be found here) and the negotiation of a Memorandum of Understanding with the Eurasian Economic Council.
Indonesia Raises Import Taxes
On September 6, the Ministry of Finance released Finance Ministerial Regulation (PMK) No. 110/2018 as a revision to Finance Ministerial Regulation (PMK) No. 34/2017. The new regulation raises the the import tax on over 1,000 consumer goods. Instead of being standard tariffs, the mechanism is what the Indonesians call an Income Tax that can be paid on top of the standard income tax at the end of the tax year. The government of Indonesia asserts that implementing these measures will reduce the current account deficit amid a weak rupiah and investor selloffs due to rise in U.S. interest rates and fear of contagion from the wider emerging market turbulence. Imported personal care items and electric appliances which have domestic substitutes will be charged a 10 percent tax as opposed to the previous rate of 2.5 percent. Luxury cars will also be taxed at 10 percent. Items such as alcohol, textile products, and electronic audiovisual appliances will see a 5 to 7.5 percent under the new regulation. Despite the steep increase, the government predicts that the impact on inflation will be minimal. Full text and the complete list of taxable items can be found here in Bahasa Indonesia. This is not the first time that the government has introduced regulations which raised import taxes, having acted similarly in 2013 and 2015. In 2013, the government issued PMK No. 175/2013 to control imports during the Taper Tantrum by raising tariffs for over 500 consumer goods from 2.5 percent to 7.5 percent. In 2015, PMK No. 107/2015 was issued to impose a 10 percent tax on over 200 goods which were previously charged a luxury goods tax.
Around the same time that the new taxes were approved, the Ministry of Finance also lowered the de minimis rate from US$100 to US$75 per day in Finance Ministry Regulation No 112/2018, increasing the amount of imports that would be subject to taxes. The new de minimis enters force on October 10.
The government’s decision to raise import taxes along with other measures has been motivated by the latest foreign sell-off of Indonesian assets that followed reports showing the current account deficit had widened in the second quarter, putting further pressure on interest rates and the Rupiah. In mid September, Indonesia’s Rupiah dropped to its weakest level since the 1998 Asian financial, closing at Rp14,930 per dollar. The current account deficit was US$8 billion in the second quarter, twice the total value of consumer goods imported in the same period. Imports for July 2018 far outstripped exports at 24.5 percent to 11.4 percent. Because the tariffs are so small and on such a narrow range of products, mostly in the relatively small consumer sector, it is unlikely they will have a significant short-term effect on the deficit. Bank Indonesia has in recent months raised its benchmark interest rates to prop up the Rupiah. OJK has collaborated with the Finance Ministry and Bank Indonesia to monitor market players to prevent speculative transactions that may have impacted the current negative sentiment. Ordinarily, Indonesia’s current account deficit and reliance on foreign portfolio investment to finance it is not a significant challenge. However, it did leave the country particularly exposed to last quarter’s instability in developing markets, which the government fears will continue. At the same time, foreign direct investment, which is much steadier during periods of turbulence, has been falling as election season begins.
|IN THIS UPDATE|
|Multilateral Trade Agreements
Customs cooperation pact may conclude by 2019: BIMSTEC Secretary General The Economic Times 5th Sep 2018
Narrowing of gaps in latest talks on RCEP: Chan Chun Sing The Straits Times 2nd Sep 2018
Improving trade facilitation The Business Times 29th Aug 2018
Asean ministers ink trade, services deals Bangkok Post 31st Aug 2018
Big cost savings for exporters with new agreement The Straits Times 30th Aug 2018
Indonesia Cuts Import Duty Exemption to USD $75 per Day Indonesia Investments 17th Sep 2018
Liquor among goods to face further import restrictions The Jakarta Post 19th Sep 2018
It’s official: Tobacco excise to help cover healthcare deficit The Jakarta Post 18th Sep 2018
Indonesia alters course on domestic insurance and shippers for certain imports and exports CMS 17th Sep 2018
Government to increase import tax for 1,147 consumer goods The Jakarta Post 6th Sep 2018
Indonesian Government Plans Various Measures to Curb Imports Lexology 5th Sep 2018
Indonesian steel products get tariff exemption from US The Jakarta Post 3rd Sep 2018
Malaysian Customs calls for joint ops among Asean nations to curb smuggling The Star 19th Sep 2018
Customs studying possibility of reducing number of private jetties, says D-G Malay Mail 15th Sep 2018
MyCC starts investigation on tyre and beverage companies The Star Online 7th Sep 2018
Guan Eng: Study on SST exemptions, reductions to be completed by year-end The Star Online 5th Sep 2018
Who are winners and losers of sales and services tax the star 27th Aug 2018
Malaysia to go ahead with Asia-Pacific trade pact CPTPP, says PM Mahathir The Straits Times 27th Aug 2018
Call for Myanmar to Act on Illicit Trade The Maritime Executive 11th Sep 2018
Govt calls for crack-down on illegal border trading The Myanmar Times 30th Aug 2018
More taxes to be levied on alcohol, cigarettes The Myanmar Times 28th Aug 2018
12-point suggestion submitted to control unstable currency exchange rate Eleven Myanmar 26th Aug 2018
Duterte to sign order to tame price hikes The Manila Times Online 13th Sep 2018
After visiting Manila international ports, customs chief declares no congestion PortCalls Asia 10th Sep 2018
Ways & Means Democrats urge Lighthizer not to open trade talks with the Philippines World Trade Online 5th Sep 2018
BOC releases seized rice, food items to DSWD for Ompong victims BusinessMirror 18th Sep 2018
Digital services set for foreign trade Bangkok Post 25th Aug 2018
Online payment for overseas packages Bangkok Post 24th Aug 2018
Canada initiates anti-dumping probe into Vietnam steel Hanoi Times 19th Sep 2018
Updated import regulations to increase trade Viet Nam News 11th Sep 2018
City fights fake goods, trade fraud Việt Nam News 31st Aug 2018
HCM City launches automated customs management system VietNamNet 28th Aug 2018