For the purposes of implementing paragraph 2 of Article 30 of this Agreement:

1. a good shall be deemed to be eligible for partial cumulation, if at least twenty percent (20%) of the Regional Value Content (RVC) of the good is originating in the Member State where working or processing of the good has taken place;

2. RVC of the good specified in paragraph (a) shall be calculated in accordance with the formula provided in Article 29 of this Agreement;

3. a good exported under this arrangement shall not be eligible for tariff preference accorded by the importing Member State under this Agreement;

4. a good exported under this arrangement shall be accompanied by a valid Certificate of Origin (Form D) duly and prominently marked “Partial Cumulation”;

5. the relevant sections of the Annex 8 (Operational Certification Procedures), including Rule 18 (retroactive check) and 19 (verification visit), shall be applicable to Certificate(s) of Origin (Form D) issued for partial cumulation purposes.

Article 21

Measures to Safeguard the Balance of Payments

Nothing in this Chapter shall be construed to prevent a Party from taking any measure for balance-of-payments purposes. A Party taking such measure shall do so in accordance with the conditions established under Article XII of GATT 1994 and the Understanding on the Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994 in Annex 1A to the WTO Agreement.

Article 22

Customs Procedures

1. Each Party shall endeavour to apply its customs procedures in a predictable, consistent and transparent manner.

2. Recognising the importance of improving transparency in the area of customs procedures, each Party, subject to its laws and regulations, and available resources, shall endeavour to provide information relating to specific matters raised by interested persons of the Parties pertaining to its customs laws. Each Party shall endeavour to supply not only such information but also other pertinent information which it considers the interested persons should be made aware of.

3. For prompt customs clearance of goods traded among the Parties, each Party, recognising the significant role of customs authorities and the importance of customs procedures in promoting trade facilitation, shall endeavour to:

Annex 3 Rules of Origin for the ASEAN–China Free Trade Area

In determining the origin of products eligible for the preferential tariff concession pursuant to the Framework Agreement on Comprehensive Economic Co-operation between the Association of Southeast Asian Nations and the People's Republic of China (hereinafter referred to as “the Agreement”), the following Rules shall be applied:

Rule 1: Definitions

For the purpose of this Annex:

1. “a Party” means the individual parties to the Agreement i.e. Brunei Darussalam, the Kingdom of Cambodia, the Republic of Indonesia, the Lao People's Democratic Republic (“Lao PDR”), Malaysia, the Union of Myanmar, the Republic of the Philippines, the Republic of Singapore, the Kingdom of Thailand, the Socialist Republic of Vietnam and the People's Republic of China (“China”).

2. “materials” shall include ingredients, parts, components, subassembly and/or goods that were physically incorporated into another good or were subject to a process in the production of another good.

3. “Originating goods” means products that qualify as originating in accordance with the provisions of Rule 2.

4. “production” means methods of obtaining goods including growing, mining, harvesting, raising, breeding, extracting, gathering, collecting, capturing, fishing, trapping, hunting, manufacturing, producing, processing or assembling a good.

5. “Product Specific Rules” are rules that specify that the materials have undergone a change in tariff classification or a specific manufacturing or processing operation, or satisfy an ad valorem criterion or a combination of any of these criteria.

In determining the origin of products eligible for the CEPT Scheme under the Agreement on the CEPT, the following Rules shall be applied:

Rule 1 Originating Products

Products under the CEPT imported into the territory of a Member State from another Member State which are consigned directly within the meaning of Rules 5 hereof, shall be eligible for preferential concessions if they conform to the origin requirements under any one of the following conditions:

(a) Products wholly produced or obtained in the exporting Member State as defined in Rule 2; or

(b) Products not wholly produced or obtained in the exporting Member State, provided that the said products are eligible under Rule 3 or Rule 4.

Within the meaning of Rule I (a), the following shall be considered as wholly produced or obtained in the exporting Member State:

Rule 2 Wholly Produced or Obtained

(a) Mineral products extracted from its soil, its water or its Scheme;

(b) Agricultural products harvested there;

(c) Animals born and raised there;

(d) Products obtained from animals referred to in paragraph (c) above;

(e) Products obtained by hunting or fishing conducted there;

(f) Products of sea fishing and other marine products taken from the sea by its vessels;

(g) Products processed and/or made on board its factory ships exclusively from products referred to in paragraph (f) above;

(h) Used articles collected here, fit only for the recovery of raw materials;

The rules of origin (RoO) constitute a fundamental foundation for any preferential trade agreement (PTA). RoOs are similar to nationality and citizenship rules for natural persons in a nation-state. Qualifying persons may enjoy the benefits of citizenship, such as freedom of movement, permanent residency and the like. Similarly, RoOs determine the applicable duty rate and other treatment for goods in the PTA.

Taken in this context, the ASEAN RoOs, originating in the ASEAN Preferential Trade Agreement (APTA), developed in the ASEAN Free Trade Area (AFTA) agreement and purportedly refined in the ASEAN Trade in Goods Agreement (ATIGA), have created a relatively muddled and confused trading situation. The ASEAN RoOs are both ill-defined and ill-administered, resulting in less-than-optimal usage of the ASEAN trade preferences and stunting the growth of the ASEAN Economic Community (AEC). These deficiencies have been carried forward into ASEAN’s free trade agreements (FTAs) with its main dialogue partners of Australia–New Zealand, China, India, Japan and Korea.

The poor definition of ASEAN RoOs dates back to the APTA and AFTA. The concept of regional value added as a qualifying RoO was not properly spelled out, with ASEAN customs authorities and practitioners having to fill out the details through trial and error, often to the detriment of the business sector.

Annex 2 Rules of Origin for the ASEAN–India Free Trade Area (AIFTA)

In determining the origin of products eligible for the preferential tariff treatment under ASEAN-India Free Trade Area pursuant to Article 4 of this Agreement, the following Rules shall be applied:

Rule 1

Definitions

For the purposes of this Annex, the term:

1. CIF means the value of the good imported, and includes the cost of freight and insurance up to the port or place of entry into the country of importation;

2. FOB means the free-on-board value as defined in paragraph 1 of Appendix A;

3. material means raw materials, ingredients, parts, components, subassembly and/or goods that are physically incorporated into another good or are subject to a process in the production of another good;

4. originating products means products that qualify as originating in accordance with the provisions of Rule 2;

5. production means methods of obtaining goods including growing, mining, harvesting, raising, breeding, extracting, gathering, collecting, capturing, fishing, trapping, hunting, manufacturing, producing, processing or assembling a good;

6. Product Specific Rules are rules that specify that the materials have undergone a change in tariff classification or a specific manufacturing or processing operation, or satisfy an ad valorem criterion or a combination of any of these criteria;

7. product means products which are wholly obtained/produced or being manufactured, even if it is intended for later use in another manufacturing operation;

8. identical and interchangeable materials means materials being of the same kind possessing similar technical and physical characteristics, and which once they are incorporated into the finished product cannot be distinguished from one another for origin purposes.

The Form D process thus involves an emphasis on the verification of paper documentation, rather than the verification of the underlying facts of the transaction. ASEAN government authorities devote more time and resources to confirming whether the Form D document conforms to the ATIGA requirements than to whether the goods actually qualify for the duty preferences.

Self-certification by exporters would move the focus away from the Form D documentation and toward the fundamentals of the transaction. Under certain conditions, trusted traders/exporters could provide a statement/declaration about the origin of the product in question on the invoice. While maintaining a substantial degree of reliability, it would be simpler and more cost-effective and would therefore enhance utilization of the advantages offered by the ATIGA.

Self-certification is based on the assumption that “the exporter knows best” what it is making, how it is made and who supplied the materials to make it; in other words, the exporter is – almost – always in the best position to initially establish whether its goods satisfy the applicable origin criteria. Frankly, the Form D process is also based on the same principle: it is the exporter that declares in the application for a CO that its goods meet the applicable RoO.

A. Principles to Determine Cost for Regional Value Content

1. Materiality – all cost material to the evaluation, assessment and determination of origin;

2. Consistency – costing allocation method should be consistent unless justified by commercial reality;

3. Reliability – costing information must be reliable and supported by appropriate information;

4. Relevance – costs must be allocated based on objective and quantifiable data;

5. Accuracy – costing methodology should provide an accurate representation of the cost element in question;

6. Application of GAAP of the exporting country – costing information must be prepared in accordance with the generally accepted accounting principles and this includes the avoidance of double-counting of cost items;

7. Currency – updated costing information from existing accounting and costing records of companies should be used to calculate origin.

B. Guidelines for Costing Methodologies

1. Actual Costs – basis for actual costs should be defined by the company. Actual costs should include all direct and indirect costs incurred in producing the product;

2. Projected and Budgeted Costs – projected costs may be used if it is justified. Companies should provide variance analysis and proof during the period origin is claimed to indicate accuracy of projections;

3. Standards Costs – the basis for standards costs should be indicated. Companies should provide evidence that the costs are used for accounting purposes;

4. Average/Moving Average Costs – average costs may be used if justified; the basis for calculating average costs, including time period, etc. should be highlighted. Companies should provide variance analysis and proof during the period origin is claimed to indicate accuracy of average costs;

5. Fixed Costs – fixed costs should be apportioned according to sound cost accounting principles. They should be a representative reflection of unit costs for the company in the particular period in question. The method for apportionment should be indicated.

ASEAN Rules of Origin (RoOs) have often been branded as an example of simplicity, including by ASEAN's own leaders. However a number of reports and the increased calls by the same leaders to further simplify the ASEAN RoOs tell a different story.

In reality, the RoOs contained in the AFTA implementing the Common Effective Preferential Tariff (CEPT) Scheme have been systematically revisited for more than two decades by the ASEAN negotiating machinery in a perpetual quest to improve them. The results have been less than meager. Such failure is the result from, on the one hand, a consistent allergy to drawing from the lessons learned in ASEAN and in other regions, and, on the other hand, lack of capacity or simple inability to draft predictable and transparent legal texts on RoOs. All of this has been complicated by the “ASEAN Way” of consensus and non-confrontation; the “ASEAN Way” prevents problems from being raised or addressed.

In the face of its domestic failures, ASEAN has tried to export its model of RoOs when negotiating bilateral or plurilateral FTAs with, again, meager results. So far, the FTAs with China and India still reflect the shortcomings of the ASEAN RoOs, while the other FTAs negotiated by ASEAN with Japan, Korea and Australia/New Zealand reflect the RoOs models of these respective ASEAN partners.