On 19 August 2019, the General Administration of Customs (“GAC”) of the PRC issued its Administrative Measures for the Origins of Imported and Exported Goods under the Framework Agreement on Comprehensive Economic Co-operation between the Association of Southeast Asian Nations (ASEAN) and China (hereinafter referred to as “Announcement No. 136” or the “Upgraded Administrative Measures for Origin”). It became effective on 20 August 2019.
The ASEAN-China Free Trade Agreement (ACFTA) took effect in 2005. It is the largest and most influential FTA signed by China. Negotiations to upgrade ACFTA began in 2014. After several rounds of negotiations, China and the ASEAN countries completed all the necessary domestic procedures for upgrading the FTA, and it was officially implemented on 20 August 2019.
Announcement No. 136 includes updates to the Rules of Origin, changes to the guidelines for populating Form E (hereinafter referred to as the “guidelines”), and updated requirements for origin compliance management. Changes include the following:
1. Rules of Origin
According to the framework for the Rules of Origin, in order to determine the applicable Rules of Origin for goods other than WO or PE products, one must first refer to the PSR list for specific rules. If the goods are not included in the PSR list, one should determine whether the products are applicable to (i.e. listed under the 46 chapters’ HS codes) and satisfy CTH rules or meet the criteria of Regional Value Content (RVC) rules.
2. Guidelines for Populating Form E
Following 31 August 2019, all parties under ACFTA are required to adopt the international standard white-coloured A4 size Form E. The upgraded Form E has been improved and features a simplified process for filling-in information. Major updates to the Form E are as follows:
Announcement No. 136’s rule updates have further improved the preferential rules of origin under ACFTA and have enhanced the implementation of the ACFTA area.
Major adjustments have been made to the Rules of Origin under the Upgraded Protocol. In addition to changes to the framework of the origin rules, a number of changes have also been made to other rules and criteria. For example, the WTO Valuation Agreement’s definition of transaction price has been introduced to determine the prices of materials under the RVC measurement; encapsulation in the electronic industry has been excluded from the Minimal Operations or Processes criteria; simple assembly of products that fall under chapter 27 (mineral products) and chapters 84, 85 and 90 (mechanical and electronic products) has been excluded from originating status; and the definition of “simple” has been clarified in the PSR. Enterprises should carefully study the supplementary criteria and the influence that these changes will have on determination of origin.
In addition, major changes have been made to the guidelines on filling-in the Upgraded Form E. In addition to determining origin based on the appropriate Rules of Origin, export enterprises should also strictly comply with the Form E guidelines to make sure the products enjoy beneficial treatment in the other country.
Announcement No. 136 also added content related to origin verification. China Customs is increasingly focusing on origin compliance, so enterprises should pay special attention to mitigating the risks posed by country of origin verification. Import and export enterprises should fully understand and apply the correct origin rules, focus on the changes in the applicable rules of origin, follow the requirements in filling-in Form E, adhere to the compliance management requirements, and meet other related criteria, in order to ensure that they correctly apply the preferential rules of origin and conduct origin management in a compliant manner.