New Customs Declaration Form in China: Swiss companies required to be prepared!

China Customs announced on March, 24 March 2016 that additional information of import transactions will be collected. These changes will be effective from March 30, 2016. When submitting an import permit the following information has to be provided:

  • Existence of special relationships (between the seller and the buyer)?
  • Does the special relationship impair the import price?
  • Confirmation on royalty payments

Almost all over the world customs duties are levied based on the transaction value (often the sales price) according to the legal principles stated in the WTO Customs Valuation Agreement (Agreement on Implementation of Article VII of the GATT 1994). Switzerland is one of the big exceptions, as for most of the products customs duties are levied based on weight and not on value. As a consequence, many Swiss companies might be a bit uncertain when topics such as Customs Valuation are raised.

What does the new customs declaration form mean?

Read more on our CUSTOMised blog.


The UCC and the exporter saga – myths, facts, latest developments – an opinion

The Union Customs Code (UCC) will be applied from 1 May 2016 and it carries some changes impacting not only EU, but also non-EU established operators. As discussions between the EU commission, businesses and public administrations shape up, it is becoming apparent that the changes will point to streamlining, rather than fundamentally amending EU customs rules.

A topic that received much attention recently relates to the definition of the exporter, the wording of which led to brainstorming with dubious outcomes.

So what is it all about?

Under the UCC, the definition of the exporter moved from a competency-based definition (i.e., the export declaration is to be lodged at the customs office where the exporter is established or where the goods are loaded for export) to a material definition (i.e., what the term ‘exporter’ means).

The new rules explicitly aim to align the rights and obligations of the exporter with the obligations deriving from the export control / dual-use regulations. This has already been the main reason for requiring an EU-established indirect customs representative in the past; nevertheless, it may not have been apparent from the wording of the legislation.

Customs administrations have however long been interpreting the requirements towards an exporter as twofold – namely the correct procedural handling/filing of documents and the responsibilities vested with an exporter in terms of securing and controlling its supply chain. The latter moreover in a way that allows EU authorities to take recourse against the exporter in the case of non-compliance. A non-EU established exporter is hard to catch nowadays.

These are the facts, but what is the myth?

On account of this change in the wording, discussions started to imply that non-EU established entities cannot export from the EU any more, despite having absolutely reasonable and legally stable supply chains.

Further suggestions pointed to a strategic long-term interlinking of the OECD BEPS movement and revision of the permanent establishment (PE) definition with the clear aim to create more/require PEs also for customs purposes. The alarm bells rang more and more loudly, from the lovely Swiss Alps all the way to Brussels.

You’ll find the full article on our CUSTOMised Blog.

What’s new under the Christmas tree for the Eastern European customs landscape?

One can truly say that there is no corner of the world that would rest for a minute. This is true for the Eastern European customs landscape that sets an example of a turbulent year-end.

The New 2016 Year will mark a significant change as the Deep and Comprehensive Free Trade Area (DCFTA) created between the EU and the Ukraine will start to apply on that day. The DCFTA is the ‘trade part’ of the Association Agreement signed by the parties back in 2014 and is more than a ‘classic’ FTA. In addition to opening up markets to trade, the DCFTA also addresses competitiveness issues and the steps needed to meet EU standards when trading on EU markets.

Under the DCFTA, the majority of customs duties on goods will be removed on 1 January 2016. For industrial goods, the liberalization milestones foresee the immediate removal of existing tariffs on most products, with exceptions for a few with a transition period, e.g. in the automotive sector.

Among agricultural goods, duty-free tariff rate quotas have been granted to the Ukraine for cereals, pork, beef, poultry and a few additional products, while for others the progressive elimination of the custom duties by the EU will occur over a longer transition period (generally 10 years).

As regards non-tariff barriers (NTB) on trade in goods, the Agreement incorporates fundamental rules such as e.g. national treatment and the prohibition of import and export restrictions. Export duties will be prohibited right from the start, with some temporary exceptions for Ukraine on a few agricultural and metal products.

The DCFTA is a great benefits for Ukrainian exporters; nevertheless, it is slightly overshadowed by challenges in the East. The EU, Ukraine and Russia have been holding trilateral talks – the last one ending on 21 December 2015 – to reconcile the different interests deriving from the DCFTA on the one hand and Ukraine’s association with the Commonwealth of Independent States CIS and the free trade zone thereunder on the other.

Despite continued efforts, the trilateral negotiating parties could not reach a mutually satisfying standpoint in the areas of customs cooperation, technical barriers to trade and sanitary/phytosanitary measures.

And what news do Ded Moroz and Snegurochka bring to the business community?

From the CIS side, Russia has announced that the CIS-FTA benefits will be suspended with regard to Ukraine by a presidential decree. The President confirmed this decision during its annual press conference of 17 December 2015. This step has caused controversies as Ukraine would not be the first country enjoying free FTA privileges with Russia/CIS and other trade blocks. The above changes and their rapid implementation will undoubtedly subject traders in both trade blocks to increased challenges with regard to smooth documentation and conduct of shipments.

On a more light-hearted note, the Eurasian Economic Union has taken steps forward to further integrate Armenia and the Kyrgyz Republic and also introduced measures to facilitate smoother trade within the Union.

As an example, customs transit procedure will be simplified for authorized economic operators and customs carriers already registered with customs by dropping the need for certifying their status on paper for each shipment. Also, transit by instalments under certain conditions will be subject to less paperwork.

Apart from reforms from within, the Union is also strengthening its international ties. In November, it signed a Memorandum of Cooperation with South Korea setting a platform for discussions on trade and economic issues, technical regulations, tariff and non-tariff measures and innovation.

As an attempt to increase supply chain security, preliminary information on goods imported into the Union by air will be obligatory from 1 April 2017. This will supplement the already operational preliminary information filing for rail and road shipments. Hence, carriers are advised to implement the required system changes to comply adequately.

Harmonization efforts have been made in the field of technical regulations, in particular with respect to tobacco products and their conformity, too. In this respect, new labelling and sketch warnings are expected to be implemented to raise health awareness. Traders in this field are advised to follow the upcoming requirements closely.

Read more here.

World of FTAs – Part 3

On 4 August 2015 the successful finalization of the Free Trade Agreement (FTA) negotiations between the EU and Vietnam have been announced (as mentioned in the blog). The intention is that the FTA will be signed beginning of December 2015.

However, many things happened since August.

As announced too, the negotiations of the Trans-Pacific Partnership (TPP) have been successfully finalised. The future will show what impact the TPP will have on the negotiations between the EU and the U.S. on the TTIP (Transatlantic Trade and Investment Partnership). It is obvious that the political landscape and the pressure has much increased for both parties, internally (will TPP standards find its ways into the TTIP?) as well as externally (protests in Berlin of over 150,000 citizens).

Nonetheless, the EU continued to be focused and active:

The European Commission announced on the 15 November 2015 that the relationship with Australia will be deepened and that it is planned to start FTA negotiations in a very near future.

On the 16 November 2015 the European Council announced its approval to start FTA negotiations with the Philippines. This will be the third ASEAN country with whom the EU will negotiate a FTA (still to be ratified: Singapore and Vietnam). Others will come, since the EU has started FTA negotiations with Malaysia in 2010 (seven rounds of negotiations have been held) and with Thailand in 2013.

The last one to be mentioned is the EU – Japan FTA. The negotiations started in 2013 and the EU has pushed Japan to finalize those negotiations towards the end of 2015. However, in the last months Japans trade negotiators were kept busy with the TPP negotiations. Returning to the EU negotiations with new confidence, Japan pushes now for similar standards such as the ones mentioned in the TPP and the TTIP, to which the EU may not easily agree with. To cut a long story short, it has just been announced that the negotiations will not be finalised in 2015.

It will be interesting to see the future developments. The EU keeps its trade agenda busy and continues its efforts to enhance trade for companies. Not only on the FTA side, but also with the upcoming Unions Customs Code, which will enter into force on 1 May 2016. We will keep you posted.

To the above mentioned topics:

EU-Vietnam FTA

UCC 1 (only in German)

UCC 2 (only in German)

Update Free Trade Agreements in Asia – Regional Comprehensive Economic Partnership

Newspapers in Europe including Switzerland talk about TPP (Trade Pacific Partnership) and TTIP (Transatlantic Trade and Investment Partnership). Swiss based companies are well advised to follow the discussions about TTIP (negotiating parties are the U.S. and the EU) since it will have an impact on the future trade landscape. Anyway, a post on those topics will follow later.

There is little information to read in the newspapers about the Regional Comprehensive Economic Partnership, short RCEP. RCEP will be an important Free Trade Agreement for Swiss and European companies doing business or manufacturing activities in Asia. For the ones looking to expand to Asia and define a strategy to enter into Asia it may as well be of high importance. The RCEP aims for a harmonisation of Rules of Origin, which currently differs in each different FTA the ASEAN members (Association of Southeast Asian Nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) have concluded with its trading partners Australia / New Zealand, China, India, Japan and South Korea. Amongst many other topics, RCEP aims to reduce non-tariff barriers as well as sanitary and phyto-sanitary measures and Technical Barriers to Trade.

Negotiations on RCEP started in November 2012 with nine rounds of negotiations. The last one took place in Nay Pyi Taw, Myanmar, between the 3rd and 7th August 2015 and the 10th round will take place next October in South Korea.

As TPP negotiations were not concluded end of July in Hawaii, the RCEP is gaining more importance. Why?

The RCEP is perceived as a counteraction of China against the US-led TPP negotiated between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the U.S. RCEP countries account for 45 per cent of the world population. The aim is to finalise the agreement by the end of this year although the deadline might be pushed to 2016.

The ambition to come up with a “high-end mega-FTA” is not a priority for all negotiating partners. Where Australia wants customs duty cuts on over 90 per cent tariff lines, India has a different view. India is reluctant to offer too high tariff reductions and the domestic industry is against giving more access to goods from China. According to the latest information, India decided to offer 80 to 85 per cent of tariff lines for duty cuts to South Korea and Japan, 70 to 75 per cent tariff lines to ASEAN and about 40 to 50 per cent to China, Australia and New Zealand. Because of this, the RCEP loses some of the initial expected impacts. Still, RCEP will facilitate and enhance trading activities in the Asian region. It is therefore crucial for Swiss and European companies to carefully analyse future opportunities for doing business in Asia.

Further information click here.

In principle agreement on EU – Vietnam Free Trade Agreement

Yesterday, the EU agreed with Vietnam another FTA with an Asian country. The final legal text should be available after the summer break. It is the second FTA the EU concludes with an ASEAN (Association of Southeast Asian Nations) country after Singapore and will clearly increase its footprint in the region.

This is an important next step for EU exporters to expand trade activities in ASEAN, mainly in the field of machinery and appliances, motorcycles, car parts, textile fabric, pharmaceuticals and chemicals. Depending on the tariff lines, preferential treatment will be available for a large part of tariff lines. Some of the above-mentioned industries will get partial duty elimination over a period of 7 years for the EU and up to 10 years for Vietnam.

Aside from tariff elimination, reduction in non-tariff barriers to European exports, protection of European Geographical Indication, Government Procurement, Intellectual Property Rights, are topics of the agreement.

What does this mean for Switzerland? We are optimistic that the successful negotiations between the EU and Vietnam will boost the talks between Switzerland (EFTA) and Vietnam since both agreements should cover similar topics. It may also be an opportunity for Switzerland to leverage on the content of the EU – Vietnam FTA to be better placed for future discussions.

The EFTA-countries have finished their 12th round of negotiations with Vietnam about two months ago; the next round will take place in October 2015. The negotiations should have been concluded by the end of 2014.

Vietnam is an interesting entry point to ASEAN and its participation in the TPP (Trans-Pacific Partnership) negotiations will strengthen its position as a trading partner. However, it is important for Switzerland to increase its footprint in Asia / ASEAN, since it is not participating in the TPP talks. Negotiations with Malaysia is still in its starting phase, similar for the Philippines, with Thailand, the talks are suspended, and negotiations with Indonesia are on hold since the change in government.

Remember: Switzerland has currently FTAs with various partners in Asia, such as Japan, Hong Kong, Singapore, China and South Korea (some under the EFTA framework, some bilateral). It is therefore important for Switzerland to increase its FTA network to remain competitive and to raise business opportunities for Swiss companies.

Further details about EU-Vietnam FTA available here.

Link to blog

WTO members conclude expanded ITA agreement

Twenty-nine participants at the Singapore Ministerial Conference concluded the Ministerial Declaration on Trade in Information Technology Products (ITA) back in December 1996.

The ITA provides for participants to eliminate duties on IT products covered by the Agreement. Since 1996 and with the fast development of IT products in the last 19 years, the covered products by the ITA were outdated.

Yesterday, on the 24 July 2015, the WTO members concluded an expanded deal that eliminate tariffs on more than 200 IT products. After the Bali agreement, this is the second important agreement that the WTO delivers within the last 2 years.

More details…

Link to blog

Indonesia increases import duties

Due to economic slowdown, Indonesia announced yesterday an increase of import duties in a range of consumer goods (meat from 5 to 30 per cent, coffee from 5 to 20 per cent, alcohol from $9.32 per liter to 150 per cent).

This comes in addition to the last month announcement of an increase of import duty on luxury goods from 7.5 per cent to 10 per cent.

More details

Link to Blog

A look at the present and future of customs and trade

To stay competitive in a global trade environment increasingly dominated by preferential trade, electronic customs clearance and export regulations, companies need a smart strategy integrating the entire range of customs and trade activities in their value chain − particularly on the IT side.

Take a look at our new article in the PwC online magazine Disclose regarding current big trends in the area of trade and customs, focusing on risks and suggesting solutions.

Read more in the Disclose Update July 2015.