Overview of APTA and E-CO under APTA

Cholpon-Ata, Kyrgyzstan31 May – 1 June 2017

Mr. DongOh NAMExpert on Regional Trade and Monetary Cooperation

Trade, Investment and Innovation DivisionESCAP

Presentation Structure

Part I. Overview of APTA1. History of APTA2. Features of APTA3. Intra-APTA Trade4. The 4th Round Outcomes5. The way Forward

Part II. E-CO under APTA1. Cross-border paperless trade and APTA2. What is E-CO3. APTA’s Mandate for E-CO4. E-CO Related Activities of APTA5. Current Practice of APTA E-CO6. Future Work for APTA E-CO

Part I. Overview of APTA

1. History of APTA• The Asia-Pacific Trade Agreement (APTA): Oldest preferential trade agreement

among developing countries in the Asia-Pacific region. - Predecessor: Bangkok Agreement (BA), signed in 1975

• China joined as a new member of APTA in Nov 2001, providing fresh momentum.

• Renamed to the Asia-Pacific Trade Agreement (APTA) in Nov 2005.

• Established the APTA Ministerial Council in 2005

Beijing (MC1 in Nov 2005); Goa (MC2 in Oct 2007); Seoul (MC3 in Dec. 2009); Bangkok (MC4 in Jan 2017)

• The current members are Bangladesh, China, India, Lao PDR, Republic of Korea, and Sri Lanka.

• Mongolia’s accession was agreed by Standing Committee in Oct 2013.It is waiting for finalization of domestic procedure for ratification.

2. Features of APTA

The *only operational RTA linking China and India and other major Asian Economy

such as ROK.

Truly region-wide trading arrangement linking East, Southeast and South Asia,

open to all UNESCAP developing member countries with no membership fee:

Potential for extending to other sub-regions of ESCAP including Central Asia

Playing a role as an effective bridge to other RTAs in the Asian Region

* RCEP (ASEAN + China. Japan. ROK, India. Australia. New Zealand) is still at negotiation stage

2. Features of APTA (Cont’d)

Adopting RoO with A. Value Addition

B. Change in Tariff Heading (CTH)

Special and differential treatment for LDC members

• APTA RoO originally applied the single criterion of regional value addition:

A. Value Addition: 45% (35% for LDC)Full Cumulation: 60% (50% for LDC)

• For certain products, meeting the value addition criteria were difficult PS agreed to adopt Product Specific RoO (PSR):

B. CTH for selected products to which PSR is applied(from implementation of 4th round outcomes)

2. Features of APTA (Cont’d) Launched as a PTA covering only goods trade: Tariff Concessions

4th Round

Goods: Tariff Concessions

New areas of liberalization and

integration

Framework Agreement on Trade Facilitation

(Signed on 15 Dec. 2009)

Framework Agreement on Investment

(Signed on 15 Dec. 2009)

Framework Agreement on Trade in Services

(Signed on 24 Aug. 2011)

Information Exchange on Non-Tariff Measures

During the 4th round negotiation, the efforts were made to expand coverage to other

areas of cooperation Resulted in adoption of Framework Agreements on Trade

Facilitation, Trade in Service, and Trade Investment as well as NTM information database

A PTA with partial scope coverage Towards a Comprehensive Agreement

Direct market access to APTA member states + Indirect integration to other RTA/FTA

2. Features of APTA (Cont’d)Bridges to other RTAs

Regional Groupings

Total Intra-Regional Exports

(US$ Million)

Total Exports to World

(US$ Million)

Intra-Regional Exports as share of Exports to World (%)

2005APTA 127340.23 1160494.16 10.97ASEAN 165457.14 652998.14 25.34MERCOSUR 25670.39 221137.72 11.61IOR 268717.19 1022835.48 26.27SADC 8327.025 92420.001 9.01CARs 1504.76 38013.01 3.95

2013APTA 351300.11 3129670.21 11.22ASEAN 328806.98 1262529.86 26.04MERCOSUR 58946.84 421069.8 14IOR 640409.95 2179791.21 29.38SADC 24917.275 195828.823 12.72CARs 5200.39 85280.19 6.1

3. Intra-APTA Trade

Intra-regional APTA exports as a share of total exports to the world: 10.97% in 2005 11.2% in 2013

Absolute volume of intra-APTA exports: $127 billion in 2005 $351 billion in 2013 (175%) * ASEAN 98% / MERCOSUR 130% / IOR 138%

Source: IMF Direction of Trade Statistics, 2015

Individual APTA Countries’ Total Exports to APTA

2005 2013A. Intra-APTA export

(USD Million)A as a share of

exports to World (%)B. Intra-APTA export

(USD Million)B as a share of

exports to World (%)

China 47,503.74 6.23 156,938.39 7.1

India 11,636.75 11.85 28,615.19 9.08

ROK 67,342.78 23.68 159,557.84 28.51

020 00040 00060 00080 000

100 000120 000140 000160 000180 000

US

$ M

illio

n

China India Republic of KoreaSource: IMF Direction of Trade Statistics, 2015

Individual APTA Countries’ Total Exports to APTA

0

200

400

600

800

1 000

1 200

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013US$

Mil

lion

Bangladesh Lao People's Democratic Republic Sri Lanka

2005 2013A. Intra-APTA export

(USD Million)A. as a share of

exports to World (%)B. Intra-APTA export

(USD Million)B. as a share of

exports to World (%)

BGD 196.88 2.32 1,040.86 4.02

Lao PDR 25.22 3.47 1,043.04 26.17

Sri Lanka 634.86 9.95 892.62 8.23

Source: IMF Direction of Trade Statistics, 2015

4. The 4th Round Outcomes

Before 4th Round After 4th Round

General Special(for LDCs) General Special

(for LDCs)

Number of products under concession 4,270 587 10,677 1,259

MoP(%)(General) 26.8 58.8 31.46 86.44

MoP (%)(China, India, ROK) 29.53 66.44 33.32 90.98

Widening and deepening the tariff concessions - 10,677 items with 31% MOP in general- 1,259 items with MOP 86% for LDCs- Covering at least 29% of the total intra-regional trade share

NOTES: (1) “Margin of preference” means the percentage difference between the Most-Favoured-Nation (MFN) rate of duty and the preferential rate of duty for the like product, and not the absolute difference between those rates. Thus: (MFN duty–tariff rate conceded under the Agreement) / MFN duty x 100% = MoP

(2) The 4th round concession result is based on HS2012.

Additional Market Access Created under the 4th Round

YEAR 2014China ROK India Sri Lanka

3R 4R 3R 4R 3R 4R 3R 4R

Number of Products

under Concession

1697(161)

2191(181)

1367(306)

2796(951)

570(48)

3142(48)

427(72)

585(75)

Additional Marketfor APTA Import

(USD Billion)12 6.6 9.6 0.14

Increase Rate 14.5% 23.8% 98% 21.2%

Source: WITS, accessed 26 October 2015

4. The 4th Round Outcomes

5. The Way Ahead

Negotiations in trade goods• Launch the 5th round of negotiations for tariff concession with setting the new modalities, which will

be decided at Standing Committee • 4th Round average MoP31% Ideally toward average MoP50 %

Toward comprehensive agreement & ultimately upgrading to FTA / CEPA

Tariff liberalization in parallel with other tracks for enhancing regional integration among PS

Other areas• Undertaking negotiations in a pragmatic way through respective Working Group in the areas of Trade

Facilitation, Investment, and Trade in Service• Reducing or eliminating Non-Tariff Barriers (NTB)

- Broaden the work in exchange of information on NTM by updating database on website- Develop mechanisms to address the issues relating to the NTMs

• Promotion activities to increase APTA awareness for membership expansion• Facilitating the issuance of electronic Certificate of Origin among PS together with introduction of

data exchange system• Setting up APTA Chamber of Commerce and Industry (APTA CCI): pave the way for better interaction

between private sectors as well as with their respective governments in promoting linkages

Part II. E-CO under APTA

1. Cross-border paperless trade and APTA

ESCAP took a gradual step to adopt Framework Agreement on the Facilitation of Cross-Border Paperless Trade in Asia and the Pacific

• ESCAP Resolution 68/3 (May. 2012)• ESCAP Resolution 70/6 (Aug. 2014)• ESCAP Resolution 72/4 (May. 2016)

APTA has been keeping the pace with the ESCAP’s efforts toward cross-border paperless trade by focusing on the development of E-CO system for intra-APTA trade since 2013

• The 42nd APTA Standing Committee (Oct 2013) noted the proposal by the APTA Secretariat on the issuance of Certificate of Origin by electronic means, as part of the future work roadmap of APTA.

2. What is E-CO ?

Certificate of Origin (CO)• CO is a legal document issued by the exporting country or

region in accordance with the rules of origin for the purpose of certifying the origin of a product.

Electronic Certificate of Origin (E-CO) • E-CO is the electronic form of Certificate of Origin, including

the same information and performing the same functions of paper CO. [Static Connotation]

• E-CO further means the electronization of process of CO, which comprises the online application and issuance, and cross-border exchange of CO. [Dynamic Connotation]

APEC report: study on the readiness of E-CO Implementation in Cross-Border Trade in APEC Region (2012)

E-CO among paperless trade measures• Paperless Trade MeasuresPaperless Trade

Exchange of information in electronic form between stakeholders domestically •Electronic/Automated Customs System established (e.g., ASYCUDA) •Internet connection available to Customs and other trade control agencies at border-crossings •Electronic Single Window System •Electronic submission of Customs declarations •Electronic Application and Issuance of Trade Licenses •Electronic Submission of Sea Cargo Manifests •Electronic Submission of Air Cargo Manifests •Electronic Application and Issuance of Preferential Certificate of Origin •E-Payment of Customs Duties and Fees •Electronic Application for Customs Refunds

Cross-Border Paperless Trade

Directly related to cross-border electronic data and document exchanges •Laws and regulations for electronic transactions are in place (e.g. e-commerce law, e-transaction law) •RE-COgnized certification authority issuing digital certificates to traders to conduct electronic transactions •Engagement of the country in trade-related cross-border electronic data exchange with other countries •Certificate of Origin electronically exchanged between countries concerned•Sanitary and Phytosanitary Certificate electronically exchanged between your country and other countries •Banks and insurers in your country retrieving letters of credit electronically without lodging paper-based documents

UNRC Global Survey on Trade Facilitation and Paperless Trade Implementation 2015

• E-CO related paperless trade measures

Electronic Application and Issuance of CO Cross-Border E-CO Exchanges

Advantages of E-COCO PROCESS E-CO

• Visiting issuing agency / using post • Additional documents: revisit / post• Manual validation of application

Application• Anytime anywhere• Additional documents: upload online• Automation of data validation

• CO is in paper form• Receive in person or by post• Exporter sends CO to importer

Issuance• CO is issued online: E-CO• Receive online and self-printing• E-CO data sent to Customs

• Importer declaration with CO• Complex customs clearance process• Possibilities for counterfeit CO, loss of CO, and delay of CO issuance

Cross-Border Procedure

• E-CO data exchanged between Customs• Simpler customs clearance process• Guarantee the authenticity of documents• Saving warehouse cost

Time-consuming Expenses-incurred Possibilities for counterfeit and

loss of CO Complex process between

stakeholders

Summary

Time-saving Cost-saving Safe & Accurate Streamlined process between

stakeholders

The Operational Certification Procedures (OCP) of APTA

Implications

• No rules stipulated for cross border E-CO data exchange• Using both manual and electronical way for application and issuance of CO

• Article 2: Application(1) The exporter and/or the manufacturer of products qualified for preferential treatment shall apply manually or electronically to the relevant Issuing Authorities requesting the pre-exportation verification/registration of the origin of the products.

• Article 4: Issuance of Certificate of Origin(1) A Certificate of Origin shall be issued manually or electronically by the Issuing Authorities of the exporting Participating State at the time of exportation or within three working days from the date of shipment whenever the products to be exported can be considered originating in that Participating State within the meaning of the Rules of Origin under the APTA. A Certificate of Origin shall be valid for one year from the date of issuance.

Regional Forum on APTA Preferential Trade Data and Issue of APTA E-CO (Oct 2013)• Discussed the practices in the APTA Participating States about their present

mechanism of capturing the preferential trade data• Discussed how to make shift to electronic issuance of CO

APTA Business Forum (Nov 2014)• Discussed ESCAP Resolution Cross Border 70/6 for Paperless Trade and APTA’s future

action plan• Shared private Sector’s prospective on APTA

APTA Business Forum (March 2015)• Shared each member state’s efforts taken in reducing the cost of issuance of CO, the

country road map for issuance of E-CO, and necessary technical support

APTA Workshop on “Harmonization of Documents for the Issuance of CO and E-CO”(Nov 2016)

• Shared each member state’s implementation status of E-CO• Discussed future plan for E-CO implementation and Capacity-Building needs

4. E-CO Related Activities of APTA

5. Current Practice in APTA E-CO

Electronic application and issuance of CO• Member states have achieved much development• Technically, online application is available in all members.• For issuance of CO, electronic signature and stamp are available only in ROK.

- China: Despite advanced technology, e-signature has no law validity according to presentation delivered in APTA regional forum in 2013

Cross-border exchange of E-CO data• There are still gaps between among others• E-CO platforms have been developed by the Chambers of Commerce and Industry

in ROK and China. • Two countries already adopted electronic origin data exchange system under ROK-

China FTA in 2016.• They operated the pilot program of E-CO data exchange under APTA from Feb 8 to

May 10 2017.• Other members are trying to develop the system for cross-border exchange.

Exporter Importer

Issuing Body(KCCI, KCS)

Customs(KCS)

Customs(China)

① Application of CO

③ E-CO data

Declare to Customs

Declare to Customswithout CO

Pilot Program between ROK and China

② Issuance of E-CO for view

④ *E- CO data

⑤ Feedback of verification

(Original CO)

* E-CO data: CO number, issuing body, issuing date of CO, valid date of CO, port of loading, port of discharge, quantity, description of goods, HS code, etc

6. Future Work for APTA E-CO Challenge• There are provisions for application and issuance of E-CO under APTA.

But, no stipulated rules for cross-border E-CO data exchange among APTA.• Different level of infrastructure and capacity of issuing authorities among PS• Technical incompatibility between different systems of member countries

Future Work• Accelerating the implementation of national paperless trade systems

Ex. validating the legal effect of Electronic signature and stamps• Adding provisions directly related to E-CO data exchange• Sharing lessons and the outcomes of projects on exchange of E-CO data• Designing and supporting capacity building activities for members in need• Harmonization of documents required for E-CO data exchange• Developing an data exchange and a verification system in a way to advance

interoperability