Questions and Answer
Q1. What have been the recent significant decisions made by the ASEAN Member Countries regarding CEPT for AFTA?
The 26th Meeting of the ASEAN Economic Ministers (AEM) in Chiang Mai, Thailand on 22-23 September 1994 had agreed to accelerate the implementation of CEPT for AFTA. The main decisions were:
- time frame for the implementation of AFTA be shortened from 15 to 10 years so that by 2003, all CEPT products will have a tariff of 0-5%;
- Unprocessed Agricultural Products be included into the CEPT Scheme;
- The Temporary Exclusion List be phased out by 1 January 2000.
Q2. How will the time frame affect the present 'Fast' and 'Normal' Track?
Given the decision to accelerate CEPT for AFTA, the following are the revised guidelines to reduce tariffs in the Fast and Normal Tracks:
- products with tariff rates above 20% will have their rates reduced to 20% by 1 January 1998 and subsequently from 20% to 0-5% by 1 January 2003;
- products with tariff rates at or below 20% will have their rates reduced to 0-5% by 1 January 2000.
- products with tariff rates above 20% will have their rates reduced to 0-5% by 1 January 2000:
- Products with tariff rates at or below 20% will have their rates reduced to 0-5% by 1 January 1998.
New tariff reduction schedules are currently being drawn up for individual products by Member Countries and will be published in October 1995 by the ASEAN Secretariat in the revised Products and Tariff Reduction Programmes under the Common Effective Preferential Tariff Scheme (CEPT).
Q3. How will the Temporary Exclusion List be eliminated?
Products, from the Temporary Exclusion List will be phased into the Inclusion List in five equal installments annually. The first installment will be effected on 1 January 1996. The last installment will be effected on 1 January 2000.
Q4. What tariff reduction schedules will products transferred from the Temporary Exclusion List have?
Products, once transferred into the Inclusion list, are guided by the following:
- Products with tariffs above 20% must have tariffs of 20% by 1 January 1998. Products above 20% and brought into the Inclusion List after 1/1/98 must have a tariff of 20% or less upon transferring. Tariffs should be subsequently reduced to 0-5% by 1 January 2003.
- Products with tariff rates at or below 20%, the tariff rate should be reduced to 0-5% by 1 January 2003.
Q5. How will Unprocessed Agricultural Products be phased into the CEPT Scheme?
Unprocessed Agricultural Products will be divided into three separate lists i.e. those for immediate inclusion, temporary exclusion and those considered sensitive. Products brought into the Inclusion and Exclusion Lists will be subjected to the same conditions as other Products in the lists respectively, these conditions reflecting the latest decision by the 26th AEM. For products in the sensitive list, appropriate mechanisms will be established to phase them in.
Q6. What are sensitive agricultural products?
Sensitive agricultural products refer to Unprocessed Agricultural Products submitted by Member Countries which are considered sensitive to them. These products need not be the same for each country.
Q7. When will these new decisions, viz. new time frame, inclusion of Unprocessed Agricultural Products and elimination of Temporary Exclusion List, be effected?
These new decisions will be effected by 1 January 1996.
Q8. Can products in the Temporary Exclusion and Sensitive Lists enjoy concessions?
Products in the Temporary Exclusion list cannot enjoy concessions since only products in the Inclusion List (i.e. with a tariff reductions schedule) are eligible. Products in the Sensitive List can enjoy concessions but will be subjected to the CEPT rule for the exchange of concessions.
Q9. Can Member Countries accelerate the liberalisation process under the CEPT for AFTA?
Yes, Member Countries can accelerate their tariff reduction and/or include more than 20% of their products in the Temporary Exclusion List into the Inclusion List. The private sector, through ASEAN-CCI, can propose an acceleration to the Senior Economic Officials Meeting (SEOM) via the AFTA Unit or the National AFTA Units.
Q10. How will these decisions affect the various ASEAN economic agreements?
These new decisions will affect both the ASEAN Framework Agreement on Enhancing Economic Cooperation of 1992 and the Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA) of 1992. These Agreements will be amended.
All past decisions by the ASEAN Member Governments after 1992 which may affect the Agreements will also be accounted for in the amendment exercise.
Q11. What other decisions have been made by the 26th AEM to support the acceleration of CEPT for AFTA?
The 26th AEM had also agreed that:
- the harmonisation of tariff nomenclature, customs procedures and valuation systems in ASEAN be completed by the end of 1995;
- an AFTA Unit in the ASEAN Secretariat and National AFTA Units in the Member Governments be established as institutional infrastructure to support the implementation of CEPT for AFTA.
ON-GOING IMPLEMENTATION ISSUES
Q12. When Member Countries effect unilateral reductions in their tariffs, can they enjoy CEPT concessions?
Assuming the product fulfills all the requirements for CEPT concessions (i.e. the product is in the Inclusion List with a tariff reduction schedule and has a 40% ASEAN content), the product will be eligible for CEPT concessions, subject to the CEPT rule for the exchange of concessions.
Q13. When Most Favoured Nation (MFN) tariff rates are revised by Member Countries during the course of the year, when will exporters/ importers be eligible to enjoy the changes in concessions?
When tariff reduction schedules or MFN tariff rates are changed, the eligibility of concessions accorded under the CEPT will be affected. Importers/exporters can claim concessions as and when the new tariff rates are effected as long as the products fulfills the conditions for the enjoyment of concessions (see Q12). There is a need for updating of the CEPT Concessions Exchange Manual (CCEM) to reflect these latest changes. The CCEM of each country depicts the CEPT rate for each product and the ASEAN Member Countries eligible for that rate (i.e. concessions). If such revisions in the reduction schedules or MFN tariff rates are effected during the course of the year, modifications in the eligibility of concessions can only be reflected in the CCEM when they prepared at the end of each calendar year.
Q14. is the ASEAN Preferential Trading Arrangements (PTA) still effective?
Yes, at the moment the PTA is still in force and Countries can enjoy the margin of preference (MOP) granted under that scheme. This is because not all PTA products have been included in the CEPT. The PTA will be phased-out by 1 January 1996. The mechanism to phase-out the PTA is currently being discussed.
Q15. Is the 'CEPT Base Rate' in the Products and Tariff Reduction Programmes under the Common Effective Preferential Tariff Scheme (CEPT) (or Product List) the MFN rate?
Yes. However, there are certain qualifications to this. First, for some PTA products in CEPT Scheme, the base rate is the MFN rate after accounting for the margin of preference (MOP). Second, countries may have effected MFN reductions after the publication of the Product List. Therefore, the base rate may not be reflective of the latest MFN rates of Member Countries. In any case, traders are allowed to choose the lowest rate applicable.
Q16. Is the information contained in the CEPT Products List up-to- date?
Not always for some products. However, the ASEAN Secretariat makes periodic amendments to the Products List. These amendments usually embody modifications to tariff reduction schedules, addition of products into the Inclusion list or corrections to the previous Products List. These amendments will be sent to the Product List subscribers periodically.
Q17. Where can one obtain clarifications and amplifications to the information contained in the CEPT Products List?
One can either enquire at the respective National AFTA Units in respective Member Governments or the AFTA Unit at the ASEAN Secretariat (the list of addresses and telephone numbers appear in the "AFTA Unit and National AFTA Units" section).
Q18. If the tariff rate of a country for a particular product were to be reduced from above 20% to 20% or below, what tariff rate should be applied by that country if the product was traded with another country with tariff rates of above 20%?
The country with tariff rate reduced to 20% or below has the option of imposing either the MFN rate or the previous CEPT rate of above 20%. In this case, the Sixth AFTA Council decided that the country must revert to the previous CEPT rate of above 20% (which is lower than the MFN rate).
Q19. Can products in the Inclusion List be transferred out into the Temporary Exclusion or Sensitive Lists?
No. However, Article 6 on Emergency Measures" of the CEPT Agreement provides that member Countries can suspend preferences provisionally and without discrimination if a particular sector faces injury or the threat of injury. The suspension of privileges must however only be temporary. Furthermore, the CEPT Agreement provides that notification will have to be made to the AFTA Council when Emergency Measures are taken, and such action may be subject to consultations between the affected parties. In the event when the obligations of the CEPT Agreement are not complied with by others, Member Countries can also make proposals for consultations with the other Member Countries, as provided for by Article 8 on "Consultations" in the CEPT Agreement, with the view to achieving satisfactory adjustment of the matter