Applying the Rules of Origin of Goods in Asean Trade In Goods Agreement (ATIGA) will help enterprises enjoy preferential tax rates and manage compliance costs that enterprises must bear under the form of documents and accounting cost.
Circular No. 22/2016/TT-BCT will come into effect on November 15, 2016, under which the provisions of the Rules of origin are based on the criteria for determining the origin of goods, together with the Appendices to provide guidance on the performance of Chapter 3 - Rules of origin and Procedures for granting and checking C/O in ATIGA. To apply the Rules of origin of goods in ATIGA, the enterprises should perform the following tasks:
1. Plan to meet the origin requirements
The enterprises should plan to meet the requirements of origin to minimize non-compliance with the agreement and to avoid unnecessary trouble with customs authorities to make use of the ATIGA’s incentives.
Accordingly, the enterprises should:
- Research information on the export market and how to take advantage of preferential tariff under ATIGA;
- Gradually change the traditional management model by applying international standards such as ISO;
- Systematize and store accounting documents to meet the standards of the countries of importation when in need of testing and verification;
- Manage and employ employees in accordance with international standards such as SA8000;
- Protect the environment in the production process
2. Identify the benefits of applying ATIGA
In commercial aspects, applying ATIGA is always beneficial to enterprises, especially if the normal tax rate for goods is significantly higher than the preferential tax rate under ATIGA.
However, enterprises should take into consideration the inconveniences or burden of compliance with the provisions of ATIGA vis-a-vis the amount of saved cost by non-payment (or very little payment) of import duties.
In case the importing countries apply anti-dumping, anti-subsidy and safeguard duties, the enterprises may use their knowledge of Rules of origin in ATIGA to protect their interests by filing a direct complaint or notifying the Government to implement appropriate protection methods when the importing countries violate rules.
Only qualified products which meet the Rules of origin are entitled preferential tax rates of ATIGA. Therefore, exporting enterprises should take note that the importers should understand and comply with the Rules of origin of their country to take advantage of the incentives under ATIGA.
3. Identify wholly obtained goods
Wholly obtained criteria prescribe that goods are produced entirely in the territory of a member export country (wholly domestic origin). Goods are deemed to be wholly obtained or are considered wholly produced in the Member Exporting Country in cases stated under Article 3 of Appendix I.
Applied Appendix is: the Rules of Origin (Appendix I).
4. Identify not wholly obtained goods
Not wholly obtained goods are considered originating goods which meet the general criteria or rules of origin of goods stated in Article 4 of Appendix I or if such goods are assembled from material stated in Appendix IV.
- The criteria which have an important influence on the determination of origin are the general origin criteria, including converting four digit codes of goods (CTH) or Regional Value Content of 40 per cent (RVC 40).
- The Rules of specific products prescribe the specific rules of origin for a certain number of products, which allow selection or combination of criteria if they meet corresponding criteria specified for this product.
To calculate RVC, each country will apply the direct or indirect formula. Viet Nam applies the indirect formula to identify the origin for export goods in compliance with ATIGA.
To determine the origin of goods, there are other rules, such as accumulation rules; simple processing and producing stage; direct shipping and insignificant proportion of materials not meeting CTC criteria; as well as packaging and packaging materials; accessories, parts and tools; intermediate elements.
Applied Appendixes are:
- The Rules of origin (Appendix I).
- Product specific rules (Appendix II)
- The Criteria for fundamental conversion of textile products (Appendix III).
- The list of technology products (ITA) (Appendix IV).
- The Principles and guidelines on calculating RVXC (Appendix V).
- The Partial accumulation guidelines (Appendix VI).
5. Registration and verification of certificates of origin
Customs authorities of the importing country only apply preferential tax rate if the goods accompanied by a certificate of origin (C/O) indicate the country of origin. To obtain this C/O, exporting enterprises must ensure the goods meet the rules of origin, prepare and maintain related documents and present them together with the application for the certificate of origin to the agencies which grant the C/O in the exporting country.
Applied Appendixes are:
- Granting and checking C/O (Appendix VII).
- C/O template form D (Appendix VIII).
- Guidelines on declaration of C/O (Appendix IX).
- The List of agencies granting the C/O (Appendix X). — PLF Law Firm