Trade compliance is at the heart of Asia’s free trade agreement (FTA) hub. However, what’s next for the ASEAN Economic Community (AEC) when it comes to FTAs and the bigger picture of trade compliance?

ASEAN entered a new phase of economic integration in 2015 when it formally established itself as the AEC; signifying deeper levels of economic interaction in terms of goods, services, investments, technology transfer, and harmonized standards. The global significance of ASEAN cannot be overstated. In 2014, its total GDP reached US $2.6 trilling making it the seventh largest economy in the word, while its total trade was US $2.5 trillion the majority of which was intra-ASEAN trade.

The Shanghai foreign-trade zone (FTZ), which opened in Sept. 2013, is set for a new policy in the next State Council meeting. According to Southern Weekly, the updated policy will expand opportunities for the financial sector.

The deputy director of the Shanghai FTZ administration, Sun Jiwei, said that the new draft rules will ease restrictions on overseas investments of individual investors and allow free convertibility of capital accounts.

At its opening, the Shanghai FTZ was the first one in the country to be used as a pilot area for economic and trade deregulation. After an area expansion, the FTZ now covers 80% of Pudong District, which houses the financial, IT, and advanced manufacturing sectors.

For more details on the upcoming Shanghai FTZ policy, please click here.

On Tues., June 16, 2015, Integration Point and PricewaterhouseCoopers trade advisors from China held a webcast on the best practices for managing China tariff classification.

During the webcast, some questions were unanswered due to time constraints. The presenter, Damon Paling, agreed to answer those questions via Global Trade News.

The first edition of this Q&A dealt with pre-classification, appeals, and self-disclosure for wrong classification. You can also find the webcast on-demand here.

This post answers the remainder of questions and touches on general topics around product classifications.

 

Q. What is the right precedence for customs declaration in the event that the recommended HS classification for a given product is different for two approved agencies?

A.  In theory, the two different HS codes are “equal,” but this does not help when it comes to practical implementation from an operations viewpoint.  The approved agencies only give you the HS code for your reference, and they may have worked with limited information. We suggest providing updated information and having further discussion with the approval social agencies in order to arrive at alignment on a single HS code for the same product.

 

Q. Should the HS number be included on the commercial invoice? What is your suggestion?

A. It is not mandatory and not recommended.  In most cases, companies will not include the HS Code on the commercial invoice.  Harmonisation in HS Codes across jurisdictions at a 6-digit or 10-digit level does not always exist, and there may be legitimate reasons for this.  So we tend to favor no HS Code being stated on the commercial invoice.

 

Q. Does China issue FTA rulings to confirm that a product qualifies?

A.  Yes, it depends on the terms of the particular bilateral or regional FTA.  Most FTAs have some “ruling” language written into the Operational Procedures.  However, in practice, it is not common to obtain such FTA rulings.  This could always change in the future as a greater proportion of international trade takes place using an FTA.

 

Q. Is there a program similar to AEO in China?

A.  Yes, there is.  China has had a version of AEO for over 10 years, and it has been updated periodically as the trade landscape has changed.  The most recent change happened effective 1 December 2014.  If the Importer is an “Advanced Certified Enterprise” of China Customs, then enhanced levels of trade facilitation can be enjoyed to save cost and time in the supply chain.  Non-compliant importers will be given a low ranking and suffer higher inspection rates on goods and documentation.