oct 2016 - singapore expeditors glc - tradewin presentation
TRANSCRIPT
Asia Trade Compliance
October 7, 2016
Singapore
Regional Trends & Update
Tradewin Introduction
2
Tradewin is the professional global trade consulting arm of Expeditors.
Established: 1997Global consultants: Over 90 in Asia, Australia, EU, and N America
Core topics and services:
HS classification Free Trade Agreements Strategic goods classification & licensing Import licensing & product requirements Trusted trader programs
Customs valuation Customs Dispute resolution Trade/logistics efficiency Outsourced trade compliance management
Agenda
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FTA Update HS Classification Consistency Strategic Goods Update
Asia FTA Update
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5
Asian FTAs – Savings Potential
Origin: China Indonesia Thailand Australia Korea
CATEGORY MFN ACFTA Savings MFN ACFTA Savings MFN AU-CNFTA
Savings MFN CN-KRFTA
Savings
Diagnostic device 9018.90
5% 0% $2,500 0% 0% $0 0% 0% $0 8% 6.4% $800
8509.80(Electric Toothbrush)
10% 0% $5,000 30% 0% $15,000 0% 0% $0 8% 0% $4,000
6110.20(Cotton jerseys)
25% 0% $12,500 30% 0% $15,000 10% 3.3% $3,350 13% 11.7% $650
A $50,000 shipment of:
FTA savings can dwarf possible logistics savings… But, a 2014 HSBC survey found that less than 40% of eligible goods are benefiting from their use.
However, 85% of companies that did use them reported increased sales…
MFN = normal duty rate ACFTA = ASEAN-China FTA
Asia FTA Landscape - Current Status
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AU CN EU ID IN JP KR MY PH SG TH USA VT
AU
CN
EU
ID
IN
JP
KR
MY
PH
SG
TH
USA
VT
Agreement in force
GSP offered by USA / EU
No current Agreement / GSP
Very limited Agreement in force
Signed, not yet in force
Asia FTA Landscape - Current Status
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AU CN EU ID IN JP KR MY PH SG TH USA VT
AU
CN
EU
ID
IN
JP
KR
MY
PH
SG
TH
USA
VT
Agreement in force
GSP offered by USA / EU
No current Agreement / GSP
Very limited Agreement in force
Signed, not yet in forceActive negotiations
1 AU CN EU ID IN JP KR MY PH SG TH USA VT
AU
CN
EU
ID
IN
JP
KR
MY
PH
SG
TH
USA
VT
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Asia FTA Landscape - Developments
Trans-Pacific Partnership (TPP)Current countries include:
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, USA, and Vietnam
Key new FTA lanes under TPP:
Australia -Mexico Canada - Japan Canada - Malaysia Malaysia – Mexico Vietnam – USA
Australia - Canada Canada – Vietnam Japan – USA Malaysia – USA Vietnam - Mexico
- In many cases duty rates into the US and other countries would fall to 0% immediately
NOTE: TPP is not yet in force and its future remains uncertain. Negotiations are finished but needs to be passed in each country. * This may prove difficult.
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Asia FTA Landscape - Developments
Asia – EU Agreements
EU – Vietnam Many goods into EU go to 0% immediately. Most goods into Vietnam duty rates will decline over time. Implementation expected in 2018.
EU – Singapore FTA Delayed pending European Court of Justice ruling. Future uncertain.
EU – Malaysia; EU – Thailand; EU – Philippines
All are still fairly distant due to political concerns and Brexit
Other developments
Regional Comprehensive Economic Partnership (RCEP)
Most of the countries already have existing FTA – only major new lane will be China-India. Future is uncertain.
‘Brexit’ It appears EU may take a hard line on the single market. It may be challenging to use UK as an EU Regional Distribution location.
Asia FTA Landscape - Compliance
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Most common causes of FTA problems
1. Misunderstanding of the meaning of FTA certification2. Poor HS classification3. Direct shipment / Consolidation / deconsolidation 4. Lack of supporting documents
Xiamen, China
HK Korea
Shanghai, China
EU Korea
Supplier 1 China
HK ASEANSupplier 2
China
Xiamen, China
HK Korea
1. Transshipment – Through BoL
2. Hong Kong RDC
3. Consolidation in Hong Kong
4. EU Global DC
About $99 million SGD
Asia FTA Landscape - Compliance
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Most common causes of FTA problems
1. Misunderstanding of the meaning of FTA certification2. Poor HS classification3. Direct shipment / Consolidation / deconsolidation 4. Lack of supporting documents
Xiamen, China
HK Korea
Shanghai, China
EU Korea
Supplier 1 China
HK ASEANSupplier 2
China
Xiamen, China
HK Korea
1. Transshipment – Through BoL
2. Hong Kong RDC
3. Consolidation in Hong Kong
4. EU Global DC
Asia FTA Landscape - Compliance
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Most common causes of FTA problems
1. Misunderstanding of the meaning of FTA certification2. Poor HS classification3. Direct shipment / Consolidation / deconsolidation 4. Lack of supporting documents
MY Supplier
SG Supplier
SG Manufacturer
Form AK
AKFTA specific Declaration letter
Korea Importer
Note: Singapore is said to be considered a higher risk origin by KCS
Asia FTA Landscape - Compliance
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ORIGIN RISK RATING
Australia Low
China Medium
Japan Medium
Malaysia Medium
Vietnam Medium
Philippines Medium
Indonesia Medium / High (China)
India High
Thailand High
Korea Highest
Destination: Risk of Customs challenge to origin claim at destination
HS Classification Consistency
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HS Classification ConsistencyMany MNCs are undertaking projects to try to harmonize the HS codes they use throughout the Region.
Driven by:- Supply chain delays- FTA usage / issues- Penalties- Growth in regional compliance departments / awareness of a problem- Implementation of global trade related IT systems- Gradual reduction in corrupt practices
HS classification in the region is generally very poor due to:- Lack of understanding of how HS classification works (the Rules and the Notes)- Reliance on customs brokers for classification (no time, no information, often no knowledge of classification)- Misclassification to avoid import licensing and other requirements that may delay supply chain
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HS Classification ConsistencyShould HS Codes be the same globally??
Usually…
A few things to keep in mind:- In theory, yes at 6 digit level 9018.50.9050, rarely at national level
- Usually 90% or more can be harmonized but
- HS classification is not black & white for all products Some require interpretation of the essential character of the product
- Some Customs agencies tend to be ‘material focused’ while others more ‘function focused’
- e.g: Metal faceplate for a medical machine
- China: Essential character is metal (CH 73)
- USA: Essential character is a part of a medical equipment (CH 90)
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HS Classification Consistency
SG CN JP EU USA
8708Auto parts
97 105 18 74 113
8517:Communications equipment
31 50 7 23 12
9018Medical devices
17 33 24 25 42
6110Knitted T-shirts
6 156 24 20 110
Why not just use the exporter’s code? 1. National level tariffs have huge differences 2. Most countries don’t focus on export HS codes
- There is no $ impact - As a result, exporter’s classifications are often
completely wrong
3. There may be an incentive to classify incorrectly- For instance for VAT rebate in China
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HS Classification ConsistencyIs it possible to get it right?
Yes:1. Collect sufficient product information (material, function, end-usage)2. Understand the General Rules of Interpretation (GRI) – the rules of classification3. Reference the WCO Explanatory Notes 4. Reference the ASEAN Supplementary Notes, National Notes, WCO Opinions, and National Rulings5. Be aware of national interpretations
If you need to make HS code changes:- Be strategic
- Consider use of voluntary disclosures- Look for model / specs changes- Consider Rulings
Will Customs agree? Maybe not… but you have no chance if you don’t know why you have classified where you have
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Strategic Goods Update
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Strategic Goods – No Escape…
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In force:
AustraliaChinaHong Kong India Japan
Coming soon:
Philippines (2016?) Thailand (2018)
Strategic goods licensing
Becoming inescapable in Asia
With the end of the ‘wait and see’ period, most countries in the region will likely implement
Enforcement may be lax – until there is a problem…
KoreaMalaysiaPakistan Singapore Taiwan
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Thailand / Philippines Strategic Goods Controls
Philippines Thailand
When? 2016? / 2017 2018
What products? ‘EU’ list plus a national list
Coverage Import & Export & re-export Export
Licensing Individual and bulk (‘global’) Unclear
Supply chain impact Could be severe if no grace period and import coverage
Will depend on the detail of how they implement
* A new Singapore control list will go into effect on Nov 1
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Strategic Goods – Control Lists
* A new Singapore control list will go into effect on Nov 1
Signal analyzers (3A002) - Example
Over 90 GHz Over 75 GHz Over 70 GHz Not listed
JapanKoreaUSA
AustraliaEUHong KongSingapore*Taiwan
MalaysiaNew Zealand
ChinaIndia
Don’t assume the ‘EU’ list being used throughout the region is the same in each country.
Summary
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Topic Recommendation
FTA Use them…carefully.
HS Classification harmonization Get ahead of it
Strategic Goods Start preparing in Philippines & ThailandDon’t assume all lists are the same
Tradewin Event
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Korea Customs EnvironmentKorea is probably the toughest Customs environment in Asia. Our Tradewin Korea General Manager will talk about avoiding trade compliance risks and finding opportunities in Korea.
SPEAKER: Mr. Taein Kim, Tradewin Korea General Manager WHEN: November 9, 2016 9:00 – 11:00 am
WHERE: Life Long Learning Center, Paya Lebar (next to MRT)
PRICE: Free of Charge
REGISTER: Ask your prime Expeditors contact for a flyer or email: [email protected]
October 10, 2016 Tradewin, Business Confidential and Proprietary. Reproduction by written authorization only. ©25
Gregory Nichols
Principal –Asia
Questions?
Let us handle the details…