25 February, 2019
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) officially entered into force for Vietnam on 14 January 2019. From a customs perspective, there are a number of noteworthy issues as follows:
1. Drastic Tariff Elimination and Reduction
CPTPP member countries agreed to eliminate duties on 97% to 100% of tariff lines for imports from Vietnam that qualify under the applicable rules of origin. For example, Canada agrees to eliminate duties in 95% of tariff lines, which accounts for 78% of the total value of exports from Vietnam. For certain products such as seafood and furniture, Canada's level of commitment is 100%, which means that Vietnam's seafood and furniture will be duty-free when imported into Canada.
Vietnam also commits to eliminate duties on 66% of tariff lines upon entry into force of the CPTPP, and raises the percentage of duty-free tariff lines to 86.5% within 3 years, while maintaining tariff quotas on sugar, eggs, salt, and used automobiles.
2. Advanced Rules of Origin
CPTPP inherited its advanced rules of origin and origin procedure from the Trans-Pacific Partnership (TPP). In particular, the CPTPP rules of origin encourage the integration of member countries' production, and promotes the formation of a complete supply chain among member countries. In this respect, the CPTPP's rules of origin accept partial accumulation, wherein any value-added percentage generated by any CPTPP member country is credited in the determination of the origin of the goods under question. Accordingly, the principle of accumulation can be used to create larger integrated supply chain options.
3. Simplified Origin Procedure
For the first time, Vietnam is engaging in a FTA where origin can be selfcertified by the importer. Traditionally, origin is only certified by the exporter or the manufacturer, after which the Certificate of Origin must be issued by the competent authority of the exporting country. In a more advanced approach, the Certificate of Origin may be issued by the exporter/manufacturer (i.e. the ASEAN Trade in Goods Agreement).
The CPTPP takes a more simplified approach wherein importers are allowed to complete the origin certification for the goods they import. Accordingly, CPTPP member country importers who meet certain conditions set forth by the regulator in their country may self-certify the origin of the product they are importing.
However, origin certification by the importer shall not be applicable for imports into Vietnam for up to 5 years following the CPTPP's entry into force. This is a cautious approach designed to protect against counterfeit certificates of origin, which means that Vietnamese importers may have to wait until 14 January 2024 to be able to self-certify the origin of their imports.
4. Delay in CPTPP Implementation
Though the CPTPP entered into force on 14 January 2019 for Vietnam, the Vietnamese Government is behind schedule on promulgating relevant legislation to implement the CPTPP. In particular, Resolution 72/2018/QH14 approving the CPTPP does not accommodate the direct application of a number of chapters including Chapter 3 on origin and origin procedure. It means that importers have to wait for decrees and circulars to implement the Certificate of Origin commitments. Currently, exporters can not yet apply for a C/O under the CPTPP.
However, since the tariff schedule is applied directly, it is understood that the goods must receive appropriate tariff treatment as agreed to in the CPTPP, so long as the origin is satisfied. The Ministry of Industry and Trade (MOIT) has verbally confirmed that there will be retroactivity in this regard. This means that the Certificate of Origin may still be granted to exporters after the goods have been exported out of Vietnam, and importers may still claim tariff preference later for the goods imported into Vietnam during this period. Currently, the MOIT is accelerating the adoption process; accordingly it may take a few more weeks for their guidance to be available.
For further information, please contact:
Frederick Burke, Partner, Baker McKenzie
frederick.burke@bakermckenzie.com
