General Department of Customs and Excise

Cambodia-Korea Customs forum

2017

ASEAN-Korea
Free Trade Agreement
 Contents

I. Introduction to Trade and Customs

II. Background of AKFTA

III. AKFTA, ROO, OCP and Schedule

IV. Implementation and Procedures

2
I. Introduction to Trade and Customs

3
 Cambodia Economy
Recent Macro-economic Indicators (GDP Growth Rate)

– GDP : About 22,2 B USD in 2017

– GDP Growth Rate: 7% in 2017
– GDP per capita: 1,434 USD in 2017
– Asia New Tiger Economy in May 2016
– Cambodia joined the middle income
club in July 2016
– Vision (Middle Income in 2030, high
income 2050)

– Trade Volume: 22 Billion USD (2013)

– Major Import: Petroleum products,

construction materials, machinery, motor
vehicles, pharmaceutical products
Sources: Ministry of Economy and Finance, 2017
– Major Export : Clothing, footwear,
electronics, timber, rubber, rice, fish,
4
tobacco
 International Trade

Source: Cambodia Trade Policy Review, 2017 5

 Trade Policy and Integration

???
GSP : Almost 40
countries
2004
TAs :10 countries

2001
WTO APEC?
1999
WCO
ASEAN ASEAN +

6
 ASEAN AND OTHER DIALOGUE PANTHERS

ASEAN-INDIA
ATIGA
ASEAN-ANNZ
ASEAN-JAPAN
ASEAN-KOREA 2010 2010
2010
2008
ASEAN-CHINA
2007
AFTA 2005
Upgrading ACFTA 2017
1993
Amendment of AKFTA 2017

Source : WCO 2012, http://origindb.wcoomdpublications.org/SearchResults.aspx

7
 International Affiliation of the GDCE

International
Convention
on the
Harmonized
155th member Commodity
of the World Description ASEAN WTO
Customs and Coding Agreement on TFA, Feb
Organization System Customs 2016

Convention International 94th Contracting

Establishing A Customs Co- Party of Revised
Customs- operation and Kyoto Convention
Cooperation Mutual (28 June 2014).
Council Administrative
Assistance
Agreements
 Challenges

Tax Revenue

Tariff
 FTAs
Rate
Emerging role  Taxes Exemption
20%
of Customs is to Regime
boost trade by  Import Substitution with
15% facilitate global demotic production
trade with the  Smuggling and Tax
balance of
evasion
protection of
10%
society and  Source of revenue are
environment concentrated on few
commodities (62% from
5% Tariff collected vehicle and petroleum)
Tariff
Rate

2007 2015 Year

2010

9
 Trade Facilitation and Reform Program Payoff

Cambodia LPI : 83rd in 2014 Vs.129th in 2010

: 83rd in 2014 to 73rd in 2016

Clearance time : 5.9 days Vs. 1.4 days

GDP Growth : 7%, Asia New Tiger Economy
2016, Joined Middle Income
Country
Trade Volume : 23B (2016) Vs.10B (2010)
Revenue : USD 1.75B (2016) Vs. USD
714M (2010)

Mainly resulted from modernization program 2004-

2008, 2009-2013, 2014-2018: Law on Customs and
enforcement, ASYCUDA, Risk Management,
PCA,CPPM, Best Traders, Advanced Ruling, RKC
accession and Capacity Building.

10
 II. Background of AKFTA
Agreement on Trade in Goods

11
 History of AKFTA
ASEAN-Korea Singed on third
Signed the FTA Framework
Framework Protocol to
Agreement, Dispute
Agreement amend the
Settlement
for the Agreement, Trade agreement on
Strengthening in Goods trade in goods 11/05/17
of Bilateral Agreement entered
22/11/16
Economic into force.
07/11/11 Royal
Relations
Jun 2007 Kram on
Aug 2006 Singed on Third
Dec 2005 second Protocol to
Nov 2004 Signed the protocol to amend the
ASEAN- amend the agreement
Announced the agreement on trade in
Korea
launch of the on trade in goods
FTA Trade
ASEAN-Korea goods
in Goods
FTA
Agreement
negotiations at
the Summit
12
Meeting
 Legal Instrument
• Royal Kram No.1207/034 dated 08 December 2007 on Framework
Agreement on Comprehensive Economic Co-Operation between
the Association of South East Asian Nations and the Republic of
Korea.
• Prakas No 613 MEF dated 13 Aug 2008 on The Implementation of
Tariff Reduction and/or Elimination Schedule of the Kingdom of
Cambodia.
• 3rd Protocol to amend the Agreement on Trade in Goods, which
enables the GDCE to accept electronically signed, stamped and
issued CO (Article 4 of the 3rd Protocol), since 21st August 2017
(Letter 7903, dated 21st August 2017).
• Implementation on the TRS in HS2012 since 16 August 2017
(Anukret 63, dated 27th April 2017)
13
 Structure of AKFTA

Annex 3 includes : Appendix 1 on OCP and Appendix 2 on PSR

14
 III. AKFTA, ROO, OCP and Schedule
References :
1. Third Protocol to admen the agreement of trade in goods under the
framework agreement on comprehensive economic cooperation among
the government of southeast Asian national and the Republic of Korea
2. Annex 3: Rule of Origin
1. Appendix 1 on Operational Certification Process
2. Appendix 2 on Product Specific Rule
3. Consolidated Appendix to Annexes 1 and 2 Tariff Reduction and/or
Elimination Schedule 15
 AKFTA: Third Protocol to amend the
agreement on trade in Goods
• Article 1 : amend and replace article on Transparency, Customs
Procedure and Trade Facilitation and the publication of laws and
regulations
• Article 2 : Insert on new article on advance ruling and Enquiry
Points
• Article 3: Amendment of Footnote to Paragraph 2 of Rule 4 of
Annex 3 to the Agreement : on flexibility of method of calculation
of RVC (Build up or Build down).
• Article 4: Amendment of Paragraph 1 of Rule 5 of Appendix 1 to
Annex 3 to the Agreement on the Format of CO as printed
formatted (Manually singed or stamped)

16
 AKFTA: Third Protocol to amend the
agreement on trade in Goods
• Article 5 : Amendment of Paragraph 7 of Annex 2 to the
Agreement on the reciprocal tariff rate treatment in Sensitive Track
• Article 6 : Amendment to Insert a New Paragraph 7 bis into Annex
2 to the Agreement on reciprocal arrangement
• Article 7 : Amendment of Paragraph 8 of Annex 1 to the
Agreement on consolidated appendix of TRS on normal track.
• Article 8 : Amendment of Paragraph 8 of Annex 2 to the
Agreement on consolidated appendix of TRS on sensitive track.
• Article 9: Amendment to Delete Appendices 1 and 2 to Annex 2
and Insert a New Consolidated Appendix to Annexes 1 and 2 to the
Agreement on the 10 countries’ TRS
• Article 10 Entry into Force
17
 AKFTA : Annex 3 on Rules of origin

• Rule 1 : Definition
• Rule 2 : Origin Criteria
• Rule 3 : Wholly Obtained or Produced Goods
• Rule 4 : Not Wholly Obtained or Produced Goods
• Rule 5 : Product Specific Rules
• Rule 6 : Treatment of Certain Goods
• Rule 7 : Accumulation
• Rule 8 : Non-Qualifying Operations
• Rule 9 : Direct Consignment

18
 AKFTA : Annex 3 on Rules of origin

• Rule 10: De Minimis

• Rule 11 : Treatment of Packaging and Packaging Material
• Rule 12: Accessories, Spare part and Tools
• Rule 13 : Neutral Elements
• Rule 14 : Identical and Interchangeable Materials
• Rule 15 : Certificate of Origin
• Rule 16 : Consultations, Review and Modification
• Rule 17 : Institutional Arrangement
• Rule 18 : Settlement of Dispute

19
 Rule 2: Origin Criteria
1. A good imported into the territory of a Party shall be deemed to be
originating and eligible for preferential tariff treatment if it conforms
to the origin requirements under any one of the following:

(a) A good which is wholly obtained or produced entirely in the

territory of the exporting Party as set out and defined in Rule 3; or

(b) A good not wholly obtained or produced in the territory of the

exporting Party, provided that the said good is eligible under Rule 4 or
5 or 6 or 7.

2. Except as provided for in Rule 7, the conditions for acquiring

originating status set out in this Annex must be fulfilled without
interruption in the territory of the exporting Party.

20
 Basic structure of rules of origin
Wholly obtained or
Origin produced goods
Product Specific Rules
criteria
Change in tariff classification
Rules of criterion
origin Goods satisfied substantial
Consignmen Value-added criterion
transformation criterion
t criteria Specific manufacturing or
processing operation criterion

Procedural
Exceptions to the substantial
provisions transformation criterion
・Certification Procedures
・Verification Procedures Accumulation
・Denial of Preferential
Major Elements of ROO Tariff Treatment De minimis

Non-qualifying
operations

3
 AKFTA : Annex 3 on Rules of
origin

Wholly Produced or Obtained

Produced exclusively from

Originating materials
RVC (40)
General Rule
CTH
Rule of Origin
RVC (X)
CTC
Annex of PSR (CC, CTH, CTSH)

Specific Process of
Production

22
 Rule 3 Wholly Obtained or
Produced Goods
• (a) plants and plant products harvested, picked or gathered after being grown
there;
• (b) live animals born and raised there;
• (c) goods obtained from live animals referred to in sub-paragraph (b);
• (d) goods obtained from hunting, trapping, fishing, aquaculture, gathering or
capturing conducted there;
• (e) minerals and other naturally occurring substances, not included in
subparagraphs (a) through (d), extracted or taken from its soil, waters, seabed
or beneath its seabed;
• (f) products of sea-fishing taken by vessels registered with the Party and entitled
to fly its flag, and other products taken by the Party or a person of that Party,
from the waters, seabed or beneath the seabed outside the territorial waters of
the Party, provided that the Party has the rights to exploit1 the natural
resources of such waters, seabed and beneath the seabed under international
law;
23
 Rule 3 Wholly Obtained or
Produced Goods
• products of sea-fishing and other marine products taken from the high seas by vessels
registered with the Party and entitled to fly its flag;
• (h) goods produced and/or made on board factory ships registered with a Party and
entitled to fly its flag, exclusively from products referred to in sub-paragraph (g);
• (i) goods taken from outer space provided that they are obtained by the Party or a
person of that Party;
• (j) articles collected from there which can no longer perform their original purpose nor
are capable of being restored or repaired and are fit only for the disposal or recovery of
parts of raw materials, or for recycling purposes;
• (k) waste and scrap derived from:
– (i) production there; or
– (ii) used goods collected there, provided that such goods are fit only for the recovery
of raw materials; and
• (l) goods obtained or produced in the territory of the Party solely from goods referred to
in sub-paragraphs (a) through (k).

24
 EXAMPLE OF RICE
1006.40.90

HS Descriptio Working Or Processing

Heading n of Operations which
Products Confer Origination
Status

(1) (2) (3)

Chapter Cereals Manufacture in

10 which all the
materials of Chapter
10 used are wholly
obtained

1006.40.10

Source : Commission Regulation (EU) No 1063/2010, 18 November 2010

25
 Rule 4 Not Wholly Obtained or
Produced Goods
A good shall be deemed to be originating: if the regional value content “RVC” is
not less than 40% of the FOB value

or if a good has
undergone a
change in tariff
classification at
four digit-level
(change of tariff
heading) of the
Harmonized
System.

26
Change in tariff classification

Heading 1401 Heading 4602

The manufacture of a straw basket, classified in heading 4602 of the HS.

The rule for the whole of Chapter 46 is "manufacture in which all the
materials used are classified within a heading other than that of the
product". As the basket is classified in HS4602, while the straw material
was imported in HS1401, the origin criterion is clearly satisfied.

27
 Rule 5 Product Specific Rules
• A criterion of specific manufacturing or processing operations
(technical requirement)
For the purposes of
• Regardless a change in its classification, a good is
Rule 2, goods which considered substantially transformed when the good has
satisfy the Product undergone specified manufacturing or processing
Specific Rules operations
provided in
• Ex: “manufacture from yarn”
Appendix 2 shall be
considered to be
yarn fabrics garment
originating in the
territory of the Party
where working or cutting,
weaving
processing of the sewing,
goods has taken etc.

place.
1st process 2nd process

28
 Rule 7 : Accumulation

A good originating in the

territory of a Party, which
is used in the territory of
another Party as material
for a finished good eligible
for preferential tariff
treatment, shall be
considered to be
originating in the territory
of the latter Party where
working or processing of
the finished good has taken
place.

29
 Rule 9: Direct Consignment

A good of which transport involves transit through one or more intermediate third
countries, other than the territories of the exporting Party and the importing Party, shall be
considered to be consigned directly, provided that:

• (a) the transit is justified for geographical reason or by consideration related exclusively
to transport requirement;
• (b) the good has not entered into trade or consumption there; and
• (c) the good has not undergone any operation other than unloading and reloading or any
operation required to keep it in good condition.

Japan Cambodia

Non-Party
30
 [Sample]
through bill of lading

CHINA JAPAN

HONG KONG

Pre-carriage by Place of Receipt

HUANGPU, CHINA CY
Vessel Voy. No. Port of Loading

TS KEELUNG KEFA○○○ HONG KONG CY

Port of Discharge Place of Delivery
19
TOKYO, JAPAN TOKYO, JAPAN CY
 [Sample]

Certificate of Non-Manipulation
SINGAPORE CUSTOMS
(Issued by CUSTOMS)

CERTIFICATION BY
SINGAPORE CUSTOMS The goods described above were transshipped
to the above country of final destination from
Singapore without any alteration or manipulation

20
 Rule 15: Certificate of Origin

A claim that a good shall

be accepted as eligible for
preferential tariff
treatment shall be
supported by a
Certificate of Origin
issued by a competent
authority designated by
the exporting Party and
notified to all the other
Parties in accordance
with the Operational
Certification Procedures,
as set out in Appendix 1.

33
 Appendix 1: Operational
Certification Procedures -OCP
• Definition : Rule 1
• Issuing Authority: Rule 2 and Rule 3
• Issuance of CO : Rule 4-8
• Presentation: 10: Rule 9-12
• Record Keeping : Rule 13
• Verification : Rule 14-16
• Denial of preferential tariff treatment: Rule 17
• Special case : Rule 18-21
• Action again flatulent act: Rule 22
• Customs Contact point : Rule 23

34
 Issuing Authority

Rule 2: Each Party shall provide the names, addresses, specimen

signatures and specimen of official seals of its issuing authorities to all
the other Parties, through the ASEAN Secretariat.

Any Certificate of Origin issued by an official not included in the said

list shall not be honoured by the customs authority.

Rule 3 : The issuing authorities shall have the right to request for
supporting documentary evidence or to carry out the check considered
appropriate in accordance with a Party’s respective domestic laws and
regulations.

35
 Issuance of CO : Rule 4-8
• Rule 4
• 1. Exporter or its authorised representative, shall apply to the issuing authority, in
accordance with the Party’s domestic laws and regulations, requesting for pre-
exportation examination of the origin of the good. The pre-exportation examination may
not apply to the good of which, by its nature, origin can be easily determined.
• 2. Exporter or its authorised representative shall apply for a Certificate of Origin together
with appropriate supporting documents...
• 3. The issuing authority shall, upon each application for a Certification of Origin to ensure
that:
– (a) the Certificate of Origin is duly completed and signed by the authorised signatory;
– (b) the origin of the good is in conformity with Annex 3; (c) other statements in the Certificate of Origin
correspond to supporting documentary evidence submitted; and
– (d) the description, quantity and weight of the good, marks and number of packages, number and kinds of
packages, as specified, conform to the good to be exported.
• 4. Multiple items declared on the same Certificate of Origin, shall be allowed, provided
that each item must qualify separately in its own right.

36
 Tariff Reduction schedule

CLM
Korea VN
Asean 6
will reduce at least
Will eliminate at will reduce at least
will eliminate at 50% of all tariff
least 70% of the 50% of all tariff
least 50% Tariff lines from 0-5%
tariff lines since lines from 0-5%
lines 0-5% not later not later than 01
the agreement not later than 01
than 01 Jan 2007, Jan 2015,
come into force, Jan 2013,
90% of the tariff 90% of the tariff
95% of the tariff 90% of the tariff
lines not than 01 line not later than
lines not later than line not later than
Jan 2009, 01 Jan 2017,
01 Jan 2008, 01 Jan 2015,
and all the tariff an all the tariff line
and all the tariff an all the tariff
lines not later than not later than 01
lines not later than line not later than
2010 with Jan 2018 with
01 Jan 2010. 01 Jan 2016 with
flexibility 2012. flexibility 2020.
flexibility 2018.

37
Agreement on Trade in Goods of AKFTA

38
Agreement on Trade in Goods of AKFTA

39
 What does it mean to
Cambodia trader?
Table : Difference between MFN and AKFTA Rate

2015 2018
Difference Between Difference Between
MFN & Preferential Number of Lines MFN & Preferential Number of Lines
Rate Rate

0 2,898 0 670

2 666 2 2,898

7 669 7 385

10 485 10 2,423

15 152 15 614

30 385 30 666

35 2,423 35 152

40
IV. Implementation and Procedures

41
 Free Trade Agreements
No. CO Form Name of FTAs Year of Implementation
1 CO Form D ASEAN Trade in Goods- 29th Aug 2009 (TRS: 31th Mar 2011), HS 2012
ATIGA

2 CO Form AK ASEAN-Korea 08th Dec 2007 (TRS: 13th Aug 2008, Amended
2017), HS2012

3 CO Form E ASEAN-China 08th Dec 2007 (TRS: 22nd Aug 2008),

HS 2012
4 CO Form AI ASEAN-India 9th Feb 2011 (TRS: 15th Jun 2011, Upgraded
2017),
HS2012
5 CO Form AJ ASEAN-Japan 22nd Sep 2009 (TRS: 30th Dec 2009), HS2007

6 CO Form AANZ ASEAN-Australia/New 29th Sep 2010 (TRS: 29th Dec 2010),
Zealand HS2012

42
Statistics Implementation of FTAs (USD)

43
4.6 How To enjoy atiga rate in
Cambodia ?
ASEAN
origin
(40%)

form Reduction
ATIGA
D Schedule

Internation
al
Checkpoint
s

44
 1. Trader/Broker Registration
Eligibility to be Trader
1. Being a legal company
2. Company registration at
the Ministry of
Commerce
3. Value added tax number
4. Patent Payment
Registration system for
trader
Eligibility for customs clearance
According to Ministerial Prakas on
Establishing and Functioning of Customs
Brokers
1. Importer/Exporter (Owner of
imported/exported goods or
his/her representative)
2. Customs brokers (legal person or
individual) authorized by the MEF.
Broker need to register at
45
Customs
 Supporting documents
7. Transport Document
1. Being a legal company (Airway bill, Bill of
2. Value added tax lading, Truck Order…etc)
8. Certificate of Origin (AK)
number
9. Customs Permit ( for
3. Patent Payment restricted and prohibited
goods)
4. Letter of attorney 10. Other necessary documents
5. Invoice (If required)

6. Packing List

46
 Cases of CO Rejection
• Signatures on the COs did not match with the
Specimens officially provided by issuing
authorities
• Different HS Classification between importing and
Exporting parties
• Misclassification to the tariff line with preferential
rates
• Direct consignment criteria was not met

47
 Cases of CO Rejection
• The request for transit declaration were not
fulfilled
• Abnormality of third party invoicing CO in Box 13
• Abnormality of the CO issued retroactively
• Abnormality of Back to Back CO
• Difficulties in identifying the Electronic CO from
Korea issued by Korea Customs because there is
no website available to check verify information
• Products are in Sensitive List
48
General Department of Customs and Excise

Thank You
For Your Attention