Background. At the Fourth ASEAN Summit in Singapore in January 1992, ASEAN initiated the ASEAN Free Trade Area, or AFTA, which laid out a comprehensive program of regional tariff reduction, to be carried out in phases through the year 2008. This deadline was subsequently moved forward to 2003. Over the course of the next several years, the program of tariff reductions was broadened and accelerated, and a host of "AFTA Plus" activities were initiated, including efforts to eliminate non-tariff barriers and quantitative restrictions, and harmonize customs nomenclature, valuation, and procedures, and develop common product certification standards. In addition, ASEAN later signed framework agreements for the intra-regional liberalization of trade in services, and for regional IPR cooperation. An industrial complementation scheme designed to encourage intra-regional investment was approved, and discussions were held on creating a free investment area within the region. During the financial crisis of 1997-98, ASEAN reaffirmed its commitment to AFTA, and as part of a series of "bold measures," agreed that the original six AFTA signatories would accelerate many planned tariff cuts by one year, to 2002 from 2003.
When the AFTA agreement was originally signed, ASEAN had six members (Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand). Vietnam joined in 1995, Laos and Myanmar in 1997, and Cambodia in 1999. All four countries were required to sign on to the AFTA agreement in order to join ASEAN, but were given longer time frames in which to meet AFTA's tariff reduction obligations.
The US-ASEAN Business Council has long supported the ASEAN Free Trade Area and other initiatives to promote regional economic integration. The Council and its member companies have pointed out that with ten integrated markets with a population exceeding half a billion people, ASEAN will be much more attractive to large-scale direct investment than it would as a collection of relatively small, segmented markets.
Common Effective Preferential Tariff (CEPT)
The CEPT is the mechanism by which tariffs on goods traded within the ASEAN region, which meet a 40% ASEAN content requirement, will be reduced to 0-5% by the year 2002/2003 (2006 for Vietnam, 2008 for Laos and Myanmar, and 2010 for Cambodia). The tariff reductions are moving ahead on both the "fast" and "normal" tracks. Tariffs on goods in the fast track were largely reduced to 0-5% by 2000. Tariffs on goods in the normal track will be reduced to this level by 2002, or 2003 for a small number of products. Currently, about 81% of ASEAN's tariff lines are covered by either the fast or normal track.
ASEAN members have the option of excluding products from the CEPT in three cases: 1.) Temporary exclusions; 2.) Sensitive agricultural products; 3.) General exceptions.
Temporary exclusions refer to products for which tariffs will ultimately be lowered to 0-5%, but which are being protected temporarily by a delay in tariff reductions. This is permissible under the AFTA agreement, and is spelled out under a Protocol Regarding the Implementation of the CEPT Scheme Temporary Exclusion List. Malaysia invoked this protocol in 2000, delaying tariff reductions on completely-built-up automobiles, and automobile knock-down kits, in order to protect its local auto industry.
A small number of sensitive agricultural products will be extended a deadline of the year 2010 for their integration into the CEPT scheme. In an agreement that has yet to be fully spelled out, the process of tariff reduction on these products will begin between 2000-2005, apparently depending on the country and the product.
General Exceptions refer to products which a country deems necessary for the protection of national security, public morals, the protection of human, animal or plant life and health, and protection of articles of artistic, historic, or archaelogical value. Approximately one percent of ASEAN tariff lines fall into this category.
The CEPT scheme will cover nearly 98 percent of all tariff lines in ASEAN by the year 2003; by then, the only products not included in the CEPT Scheme will be those in the General Exceptions category and sensitive agricultural products.
In the longer term, the ASEAN countries have agreed to enact zero tariff rates on virtually all imports by 2010 for the original signatories, and 2015 for the four newer ASEAN members.
CEPT Tariff Database
The US-ASEAN Business Council and the ASEAN Secretariat have developed a tariff database that allows for quick, easy searches for tariff rates on specific products under the CEPT. To use this database, click here.
ASEAN Industrial Cooperation Scheme (AICO)
The AICO is intended to be an important feature of ASEAN economic cooperation. It is designed to encourage technology-based investments in ASEAN, and is open to any ASEAN-based company meeting the following requirements: 1.) incorporated in and operating in an ASEAN country; 2.) a minimum of 30 percent ASEAN equity; 3.) the company engages in some form of resource sharing (such as sharing of technology, market sharing, or consolidated purchases of raw materials).
A minimum of two companies in two ASEAN countries must participate. Output of approved AICO projects will enjoy 0-5% tariffs immediately, as will raw materials and intermediate products. Such products will also enjoy local content accreditation and non-tariff incentives. The rules of origin will be the same as under the CEPT (40% ASEAN content). The non-tariff incentives will be determined by each country individually, and have not yet been specified. The above criteria for participation, particularly by the 30% ASEAN equity requirement, may be waived under certain circumstances. This will be settled by consultation.
The AICO was approved by the ASEAN Economic Ministers' Meeting in Singapore in late April 1996, was ratified by the then seven ASEAN members, and went into effect on November 1, 1996. Laos and Myanmar both acceded to the AICO agreement upon joining ASEAN in July of 1997.
A number of American companies have indicated their interest in the scheme, particularly those in the auto and autoparts sectors. As of July 2002, there were 98 approved AICO ventures, and a cumulative total of approximately 150 applications. These projects had an estimated annual transaction value of US$1.09 billion, according to the ASEAN Secretariat.
AICO Documents:
For a copy of the AICO agreement, AICO application forms and application procedures, a list of projects, and other background, click here.
ASEAN Customs Initiatives
ASEAN has taken a number of steps to modernize and streamline customs administration within the region, including through the regionwide adoption of the WTO valuation system; the harmonization of customs procedures; and the adoption of common interpretation of the Harmonized Code. ASEAN is currently in the third year of a 1999 - 2004 work program, which focuses in these areas. Other activities have included work on implementing customs post clearance audit (Customs PCA), finalization of the two protocols under the ASEAN Framework Agreement on the Facilitation of Goods in Transit, i.e. Protocol 2 on the Designation of Frontier Posts and Protocol 7 on the Customs Transit System, and development of a regional training plan and provision of technical assistance to the new members of ASEAN – Cambodia, Lao PDR, Myanmar and Viet Nam.
In the area of tariff nomenclature, work is continuing to establish and implement a common tariff nomenclature for the region, which will be harmonised at the 8-digit level, based on the Harmonised System (HS) of the World Customs Organisation. The process of integrating and harmonising the nomenclature system of ten member countries has proved to be a challenging and complex undertaking. ASEAN is however at the final stages of developing the ASEAN Harmonised Tariff Nomenclature (AHTN), which is targeted for implementation in 2002.
Five ASEAN member countries – Indonesia, Malaysia, Philippines, Singapore and Thailand – have implemented customs valuation method in accordance with the WTO Valuation Agreement. The other member countries are at various stages of preparation to implement the same, with target dates of implementation ranging through 2005.
Customs PCA is another priority area in ASEAN Customs cooperation. Traditionally, customs checking of documents and goods submitted for import clearance takes place before the goods are released. Post clearance audit provides for checking to be performed subsequent to the release of the goods thus allowing for speedier clearance at entry points; thus facilitating trade. The concept of post clearance audit entails a significant shift from current customs practice and requires staff to acquire the necessary skills/techniques to undertake effective auditing. In fact, its introduction would require some significant changes to current goods clearance system, including legislation, to enable the implementation of a post clearance audit system. The establishment of PCA would also facilitate the implementation of the WTO Valuation Agreement, which lays emphasis on the process of verification through post-importation audit. ASEAN has aimed for PCA to be implemented in each member country by 2003.
Partnership with the business community is also an important element in ASEAN customs action plan. The US-ASEAN Business Council has held dialogues with the ASEAN Customs Directors-General for a number of years, and these forums provide a valuable opportunity for the business community to discuss key customs issues and concerns directly with ASEAN officials. (See highlights from the Council's July 2002 meeting with the ASEAN Customs Directors-General). In addition, under its Center for Technology Cooperation (CTC), the US-ASEAN Business Council has organized customs training workshops with the customs agencies of the Philippines and Thailand. Another activity currently being pursued is Project ACCESS, under which Customs and representatives from the express services industry are looking into expediting clearance of international express business without compromising Customs control requirements.
ASEAN customs documents:
ASEAN Agreement on Customs (1997)
Get more detailed information at the ASEAN Customs Website. In addition, check these contact points of ASEAN customs adminstrations.
Harmonized Standards
The ASEAN Consultative Committee on Standards and Quality (ACCSQ) continues to make progress in the implementation of the Hanoi Plan of Action, especially in terms of Standards Harmonization and Mutual Recognition Arrangements (MRAs).
Cosmetics. ASEAN cosmetic regulators and the cosmetic industry have been working together to look into harmonization of technical requirements and facilitation of the removal of TBTs for cosmetic products. A comparative study on Member Countries’ regulations was recently completed. The ASEAN Cosmetic Directive is intended to provide all requirements that cosmetic products should comply with in all ASEAN countries. In other words, a product produced or marketed in any ASEAN country meeting requirements of the Directive should be able to access other ASEAN countries.
Electrical and Electronic Equipment. The ASEAN Sectoral MRA for Electrical and Electronic Equipment was endorsed by the ASEAN Economic Ministers at their 33rd Meeting in Ha Noi, Viet Nam. In preparation for its implementation, member countries have undertaken confidence-building activities, such as seminar/forum for regulatory authorities, study visits to testing laboratories, and analysis of regulatory regimes in ASEAN. The summary of regulatory regimes and technical infrastructure in member countries has been finalized and posted in the ASEAN Secretariat’s website with the following address: http://www.aseansec.org/accsq/sqmain.htm.
Telecommunications Equipment. The MRA for Telecommunications equipment was initiated by the ASEAN Telecommunications Regulators’ Council (ATRC) and finalised by the Sixth ATRC Meeting held in October 2000 in Brunei Darussalam. The 1st Telecommunications Ministers Meeting held on 13-14 July 2001 Kuala Lumpur endorsed this arrangement for the implementation of the ATRC. The MRA is expected to promote cross-recognition of conformity assessment procedures for type-approving telecommunications equipment in ASEAN.
Pharmaceuticals. A comparative study of the ASEAN regulatory regimes for pharmaceuticals has been completed. Four areas have been identified for harmonization, including quality, efficacy, safety and administration data. An ASEAN Format of Common Technical Requirements (CTR) was developed to place all agreed requirements in a harmonized structure. Member countries are working on the ASEAN Common Technical Dossier (CTD) for Pharmaceutical Product Registration. The CTD will serve as a basis for consideration of the MRA in this sector.
AFTA Services negotiations
An ASEAN Framework Agreement on trade in services was adopted at the ASEAN Summit in Bangkok in December 1995. Under the agreement, ASEAN countries will negotiate intra-regional services liberalization in a number of sectors, including telecommunications, tourism, financial services, construction, and maritime transport.
ASEAN has concluded three packages of commitments from two rounds of negotiations on liberalising trade in services in seven sectors: air transport, business services, construction, financial services, maritime transport, telecommunications and tourism.
At their September 2001 annual meeting in Vietnam, the ASEAN Economic Ministers (AEM) launched a third round of negotiations, to begin in 2002 and end in 2004, covering all sectors and modes of supply. During the Seventh ASEAN Summit, held in Brunei in November 2001, the Leaders agreed to speed up negotiations in liberalizing intra-ASEAN trade in services and also to start negotiations on mutual recognition arrangements to facilitate flow of professional services in the region.
Background on the ASEAN Services Negotiations
ASEAN Investment Area
The December 1995 ASEAN Summit endorsed in principle the concept of an ASEAN Investment Area (AIA), in which barriers to intra-regional investment would be lowered and removed, regulations would be liberalized, streamlined, and made more transparent, and incentives would be offered to boost regional investment. The basic concept is to substantially increase the flow of investment into ASEAN from both ASEAN and non-ASEAN sources by enhancing the region's competitiveness.
The AIA will encompass three broad principles, namely, cooperation, facilitation, and liberalization. ASEAN officials have indicated that the AIA may be modeled along CEPT lines, wherein different sectors would be opened to investment and national treatment on different time frames, depending on each country's particular situation.
An initial list of temporary exclusions, covering the agriculture, forestry, and mining sectors, was adopted at the AIA Ministerial Meeting in Thailand in October 2000. Under the AIA agreement, seven members have agreed to remove their temporary exclusion lists for ASEAN investors in manufacturing by2003. Full realization of the AIA with the removal of temporary exclusion lists in manufacturing agriculture, fisheries, forestry and mining is scheduled by 2010 for the ASEAN-6, and by 2015 for the new members (Cambodia, Laos, Myanmar, and Vietnam).
The main approaches on the AIA are as follows:
-All industries are to be opened up for investment, with exclusions to be phased out according to schedules
-National treatment is granted immediately to ASEAN investors with few exclusions
-Elimination of investment impediments
-Streamlining of investment process and procedures
-Enhancing transparency
-Undertaking investment facilitation measures
Framework Agreement on the ASEAN Investment Area (1998)
AFTA Documents and publications: |
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For more detailed background on AFTA, copies of the AFTA agreement
and subsequent annexes and protocols, click
here. For data on intra-ASEAN trade by value and product,
click
here. |
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AFTA Contact Information
The ASEAN Secretariat is the primary point of contact on AFTA-related matters. Their contact information is:
ASEAN Secretariat
AFTA Bureau
70 A, Jl. Sisingamangaraja
Jakarta 12110 Indonesia
Business (6221) 726-2991, 724-3372
Fax (6221) 739-8234, 724-3504
Email: lim@asean.or.id
http://www.aseansec.org
The following offices are responsible for AFTA matters in each ASEAN country:
Brunei Darussalam |
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Indonesia |
National AFTA Unit |
National AFTA Unit |
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Malaysia |
Myanmar |
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National AFTA Unit |
National AFTA Unit |
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Philippines |
Singapore |
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National AFTA Unit |
National AFTA Unit |
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Thailand |
Vietnam |
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National AFTA Unit |
National AFTA Unit |
©2008. US-ASEAN Business Council | 1101 17th St, NW Suite 411, Washington, DC 20036
p. 202.289.1911 | f. 202. 289.0519 | e. mail@usasean.org