ASEAN-China Free Trade Area? The ASEAN-China Free Trade Area (ACFTA) is a trade agreement among the ten (10) Member States of the Association of Southeast Asian Nations (ASEAN) and China. The Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China covering trade in goods, trade in services, investments and other measures to develop new areas of economic cooperation was signed on November 4, 2002. The Agreement on Trade in Goods containing the Parties’ commitment to establish the ACFTA, covering trade in goods, by

a) 2010 for ASEAN 6 (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand) and China, and

b) 2015 for the newer ASEAN Member States CLMV (Cambodia, Lao PDR, Myanmar, and Viet Nam), was signed on November 29, 2002.

What are the objectives of ACFTA?

The ACFTA seeks to strengthen and enhance economic, trade and investment cooperation between the Parties; progressively liberalize and promote trade in goods and services as well as create a transparent, liberal and facilitative investment regime. ACFTA also seeks to explore new areas and develop appropriate measures for closer economic co-operation between the Parties; and facilitate the more effective economic integration of the newer AMS and bridge the development gap among the Parties.

What is the Early Harvest Programme (EHP) under ACFTA and what is its product coverage?

The EHP aimed to accelerate the implementation of Article 6 of the Framework Agreement on trade in goods. The EHP covers all products falling under Harmonized System (HS) Chapters 1 to 8 (live animals, meat and edible meat offal, fish, dairy produce, other animal products, live trees, edible vegetables and edible fruits and nuts). Parties were allowed to have an Exclusion List.

What was the modality for tariff reduction and elimination under the EHP?

Product Category EHP Tariff Rate (%) Not Later Than 01 January 2004 2005 2006 With applied MFN tariff rates higher than 15% 10 5 0 With applied MFN tariff rates between 5% and 15% (inclusive) 5 0 0 With applied MFN tariff rates lower than 5% 0 0 0 Implementation began on January 1, 2004 for ASEAN, except for the Philippines and China. On December 29, 2005, the Philippines issued Executive Order (EO) 485 to implement its EHP commitments

What are the timeframes for the Agreement on Trade in Goods?

Implementation began on July 1, 2005 with two (2) programs of tariff reduction:

Normal Track (NT): Reduction to 0%

§ For ASEAN 6 and China: 2005 to 2010, with flexibility up to January 1, 2012

§ For CLMV: 2005 to 2015, with flexibility up to January 1, 2018

Sensitive Track (ST)

§ Sensitive List (SL): ü

For ASEAN 6 and China: 20% by January 1, 2012 to 0%-5% by January 1, 2018

For CLMV: 20% by January 1, 2015 to 0%-5% by January 1, 2020.

§ Highly Sensitive List (HSL):

For ASEAN 6 and China: 50% by January 1, 2015

For CLMV: 50% by January 1, 2018

What are the modalities for tariff reduction and/or elimination for products under the normal and sensitive tracks for ASEAN 6 and China?

Normal Track: Products were classified as belonging to either NT1 (2007 to 2010) or NT2 (tariff elimination in 2012). The modality is shown below:

Tariff Rate ASEAN-6 and China Tariff Reduction Modality 2005 2007 2008 2009 2010 X > 20% 20 12 10 5 0 15% < X < 20% 15 8 8 5 0 10% < X < 15% 10 8 5 5 0 5% < X < 10% 5 5 3 0 0 X < 5% Standstill 0 0 Thresholds: ü 40% of NT tariff lines at 0%-5% by July 1, 2005 ü 60% at 0%-5% by January 1, 2007 ü 100% at 0% by January 1, 2010, with flexibility to eliminate tariffs on tariff lines not exceeding 150 by January 1, 2012 (except for the Philippines whose tariff lines can exceed 150 and which list shall be determined after a review in 2008)

Sensitive Track:

For SL products, tariffs will be reduced to 20% in 2012 and to 0%-5% (ending rates) by 2018.

For HSL products, there is no commitment in 2012, but there is an ending rate of 50% by 2015.

What is reciprocal tariff treatment under the ACFTA?

Reciprocal tariff treatment is not automatically applied. Products that have been placed in ST may be accorded reciprocal tariff treatment as governed by Paragraph 6 of Annex 2 of the TIG, after notification has been received from the Party/Parties that the rates of duty on its products in ST are at 10% and below.

How is reciprocal tariff treatment applied?

The following modalities show how reciprocal tariff treatment is applied:

* Article 6 (3)(a)(iii), Framework Agreement on ACFTA Specific examples are shown below:

AHTN 2017 Code Product Exporting Country (China) Importing Country (Philippines) Applicable ACFTA Rate MFN Rate ACFTA Rate Category MFN Rate ACFTA Rate Category 0409.00.00

Natural honey 15 0 NT 7 0 NT1 0 0705.11.00

Cabbage lettuce (head lettuce) 10 0 NT 25 20 SL 20 1005.10.00 Maize seed 20 20 ST 1 0 NT1 1 3901.20.00

Polyethylene having a specific gravity of 0.94 or more 6.5 6.5 ST 10 10 SL 10 1006.20.10A

Thai Hom Mali Rice, husked (brown) rice, In-Quota 65 5 ST 35 50 (2017) HSL 50 1006.20.10B

Thai Hom Mali Rice, husked (brown) rice, Out-Quota 65 5 ST 50 50 (2015) HSL 50 Country A (Exporting Country) Country B (Importing Country) Applicable ACFTA Rate EHP EHP EHP rate of Country B* NT NT rate of Country B ST ST rate of Country B NT EHP EHP rate of Country B NT NT rate of Country B ST ST rate of Country B ST ST < 10% EHP EHP rate of Country B or ST rate of Country A, whichever is higher (provided that tariff rate to be applied shall not exceed the MFN rate of Country B) NT NT rate of Country B or ST rate of Country A, whichever is higher (provided that tariff rate to be applied shall not exceed the MFN rate of Country B) ST ST rate of Country B ST > 10% EHP MFN rate of Country B NT MFN rate of Country B ST ST rate of Country B

What are the Rules of Origin (ROOs) under ACFTA?

Products which are wholly obtained or produced in the exporting party shall be deemed originating and eligible for preferential tariff treatment. The General Rule of Regional Value Content (RVC) 40 is applicable to all other goods except where there is no Product Specific Rule (PSR). The PSR becomes either the exclusive rule or an alternative to the General Rule depending on the provisions of Annex 3 of the TIG Agreement.

1. ROO Criteria – General Rule RVC 40 or Change in Chapter/Change in Tariff Heading

2. Certificate of Origin (CO) Form Form E

3. Reciprocity Rule Conditions:

1. The product to be imported is in the NT of the Philippines and in the ST of the exporting FTA partner.

2. The ST rate of FTA partner should be 10% and below.

3. The applicable rate is whichever is higher between the FTA partner’s ST rate and the Philippines’ NT rate.

4. The applicable rate should not be greater than the Philippines’ MFN rate.

What Executive Orders (EOs) were issued to implement the Philippines’ commitments under the Agreement on Trade in Goods?

EO No. Date Issued Description Early Harvest Program: 485 December 29, 2005 Implements the tariff commitments to reduce tariffs to zero (0%) for certain products under Chapters 1 to 8

Normal Track: 487 January 12, 2006 Covers the 2005-2008 tariff reduction schedule 613 April 17, 2007 Covers the 2006-2008 tariff reduction schedule 814 June 30, 2009 Covers the 2009-2012 tariff reduction schedule; transfer of certain tariff lines from ST to NT category for elimination by 2010 with flexibility in 2012

Sensitive Track: 618 April 23, 2007 Covers the commitment to grant reciprocal tariff treatment on tariff lines included in the ST 71 April 16, 2012 Implements the tariff commitments on certain products included in HSL 72 April 16, 2012 Implements the tariff commitments on certain products included in SL and the transfer of certain tariff lines from ST to N