pwc worldtrade management services asia - us-asean sme … · · 2016-05-27• sme development...

Automotive Industry and Beyond Worldtrade Management Services January 2016

www.pwccustoms.com

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Agenda

ASEAN Economic Community and Automotive Industry

Intra-ASEAN Trade Environment

Customs – Philippine focus

Core Strategies

Worldtrade Management Services – AEC for Automotive Sector 2

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AEC 2015

Regional focus


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ASEAN Economic Community


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10 Member States

• Brunei Darussalam

• Cambodia

• Indonesia

• Lao PDR

• Malaysia

• Myanmar

• Philippines

• Singapore

• Thailand

• Vietnam

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ASEAN Economic Community

an economically integrated region focusing on a free flow of goods, services, investment, capital and equitable economic development

- Integration of 10 Countries

- 622 Million People

- USD 2.6 Trillion Combined GDP (USD 4,135 per capita)

- USD 136B Foreign Direct Investment (FDI)

- Trade USD 2.51 Trillion

- USD 1,271,128 Million Exports

- USD 1,240,388 Million Imports

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02 Pillar

Competitive Economic Region

04 Pillar

Integration with Global Economy

Pillar

Single Market and Production Base

03 Pillar

Equitable Economic development

01

4 Key Pillars

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AEC 2015 Blueprint


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Pillar 2 – Competitive Economic Region Pillar 1 – Single Market and Production Base

Pillar 3 – Equitable Economic Development

• Free flow of goods • Free flow of services • Free flow of investment • Free flow of capital • Free flow of skilled labour • Priority Integration Sector • Food, Agriculture and Forestry

• Competition Policy • Consumer Protection • Intellectual Property Rights (IPR) • Infrastructure Development • Taxation • E-Commerce

• Coherent approach towards External Economic Relations

• Enhanced Participation in global supply networks

• SME Development • Initiative for ASEAN Integration

Pillar 4 – Integration with Global Economy

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ASEAN Integration


Are we there yet?

- ASEAN countries has yet to meet its full potential

- 463 out of 506 or 91.5% or prioritized AEC Blueprint measures have been implemented.

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Intra-ASEAN the Trading Environment


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Intra-ASEAN Trade Environment

Unique challenge of integrating diverse economies.

Projected ASEAN GDP Growth Rates


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Country 2013 2019 2003-2007 2011-2013 2015-2019 Brunei Darussalam -1.8 1.9 1.7 0.9 1.6

Cambodia 7.5 7.3 10.6 7.3 7.1

Indonesia 5.8 6.3 5.5 6.2 6

Lao PDR 8 7.7 7.1 8.1 7.6

Malaysia 4.7 5.6 6 5.2 5.6

Myanmar 7.5 7.8 - 6.9 7.8

Philippines 7.2 6.3 5.7 5.9 6.2

Singapore 3.9 3.6 7.9 4.1 3.5

Thailand 2.9 4.6 5.6 3.2 4.1

Vietnam 5.4 5.8 7.2 5.6 5.7

ASEAN Average 5.2 5.8 5.9 5.4 5.6 Source: OECD: Economic Outlook for South East Asia

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1 2 3 4 5 6

Aims of Automotive Sector for ASEAN Integration

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Abolition of regional tariffs

Harmonisation of automotive technical regulations

Mutual recognition and certification

Streamlining of customs procedures and distribution systems

Fostering of supporting industries and human resources

Promotion of safety and greater environmental protection

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Increased Intra-ASEAN

Trade

01 Tariff Elimination 02

Elimination of Non-tariff measures

03 Increased Customs cooperation

04 Effective implementation of AICO &

CEPT

05 06

07

08

Rules of Origin improvement

Standards and conformance

Future investment

Improvement of logistics

services

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Tariff Elimination

Largely achieved as most tariff rates has been reduced to 0-5 %


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Source: ASEAN Secretariat

99.1 99.2 99.2 99.2 99.2

80.3

87.8 89 89

96

49.3

68.9 72.6 72.6

90.8

40

50

60

70

80

90

100

2011 2012 2013 2014 2015

% Share of Tariff Line at 0% in the ATIGA Tariff Schedule

ASEAN 6 ASEAN CLMV

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Elimination of Non-tariff Barriers

While tariff rates are lessened, countries create more policies that hamper the flow of goods.

Examples of Non-tariff Barriers:

- “Approved Permits” (AP) in Malaysia

- Indonesian National Standard (SNI)

- Thailand’s approval/homologation standards


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Elimination of Non-tariff Barriers


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Source: WTO, Integrated Trade Intelligence Portal (As of Jan 2015)

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Increased Customs Cooperation

Self-Certification

- Incentive that would allow exporters to certify on their own the products as goods qualified for preferential rates

ASEAN Trade Repository (ATR)

- A one-stop online database containing all ASEAN trade-related information

ASEAN Single Window (ASW)

- Integration of application and processing of permits, licenses and clearance for import and export for all member countries


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ASEAN integration

ASEAN Member State

ASEAN Single Window

Self Certification Scheme

National Trade Repository

Brunei 5 3 5

Cambodia 5 3

5

Indonesia 3 3 3

Laos PDR 5 3 3

Malaysia 3 3 3

Myanmar 5 3 5

Philippines 5 3 5

Singapore 3 3 5

Thailand 3 3 3

Vietnam 3 3 5


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Future Investment

Commitment to create ASEAN as a single investment destination.

ASEAN Comprehensive Investment Agreement (ACIA)


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Improvement of Logistical Service

Increase in infrastructure

Ease of access to ports and other terminals

Competitive rates of service providers


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ASEAN Automotive Sector


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Top Global Automotive Markets 2014 vs 2020 Projection


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Rank Country 2014 (Actual) Country 2020

1 China 23.5 China 34.5 2 USA 16.8 USA 17.4 3 Japan 5.6 India 7.7 4 Brazil 3.5 Brazil 4.9 5 Germany 3.4 ASEAN 4.5 6 ASEAN 3.3 Japan 4.3 7 India 3.2 Russia 3.6 8 UK 2.8 Germany 3.4 9 Russia 2.6 UK 2.8

10 France 2.2 France 2.6 Source: OCIA, Frost & Sullivan

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Vehicle Production vs Sales


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34%

15%

2%

48%

1%

Vehicle Production 2014

Indonesia Malaysia Philippines Thailand Vietnam

6%

31%

12%

40%

6% 5%

Vehicle Sales 2014

Indonesia Malaysia Philippines Thailand Vietnam Others

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Narrowing the gap for ASEAN production hub • Increase export and promotion of environmental protection

• Local demand vs global standard

• Should ASEAN manufacturers ensure compliance with the international standards, ASEAN products will be competitive

• Utilize FTAs and explore potential markets (EU / US)

• Create laws/incentives that would create level playing field to all key players

• Simplify taxation schemes on automotives


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Philippine Automotive industry in focused


Although small from a regional perspective, PH is experiencing growth in the last 5 years.

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2011 2012 2013 2014Sales 141,616 156,654 181,738 234,747Production 64,906 75,413 79,169 88,845

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Philippines’ Automotive Performance

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Challenges


1. Liberalized entry of CBUs

2. Massive Car Smuggling

3. Policy Incoherence

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MFN Tariff Rates in ASEAN Countries with Assembly facilities (per cent, 2000)

Products Indonesia Malaysia Thailand Philippines

CKD 35 - 50 42 - 80 33 10

CBU 45 - 80 140 - 300 80 30

Source: Department of Trade & Industry, 2001

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Hot Areas of Origin Risk

There is more regional focus on origin issues, with many more challenges being made within ASEAN as well as by the Korean Authorities and the US/EU. Some of the common problems include -Goods not qualifying because suppliers do not know or do not understand the rules

-Mistakes in the basic documentation

- Differences in policy interpretation (e.g. third / fourth country invoicing)

- Qualification calculations not being updated in a timely manner - Challenges to HS Tariff Classification

-The impact can be assessments of duties and penalties between 2 and 10 years depending on the ASEAN country making the challenge

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Comprehensive Automotive Resurgence Strategy (CARS) Program


A scheme that aims to bolster the competitiveness of the Philippines as a top destination for regional car manufacturing.

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Fixed Incentive Support (FIS) Parts and components manufacturing; establishment of shared service facilities

Production Volume Incentive (PVI) Production of vehicle model with planned production volume of 200,000 units over a period of 6 years.

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Provides for two (2) types of fiscal support that may be enjoyed for up to a maximum of six (6) years.

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Philippine Customs Environment


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The Bureau of Customs

• The Bureau of Customs (BOC) will have to contribute with 20% of the total Revenue budget with 456.5 Billion Pesos.

• Revenue Target represents 3.2% of the GDP (Same % than for 2014)

+ 8% +8%

+24% +12%

050

100150200250300350400450500

2011 2012 2013 2014 2015

BIL

LIO

NS

REVENUE TARGET

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Actions taken by the Bureau of Customs to fill the revenue deficit Campaign against Smugglers

• The Bureau of Customs strengthens campaign and filed investigation cases against smugglers.

• Customs become more critical in challenging valuations and classification to detect technical smuggling.

• Much aggressive audits under post entry

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So what’s new?


Post Entry Audit

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The function of the BOC Post Entry Audit Group was transferred to the Fiscal Intelligence Unit (FIU) of the Department of Finance.

• Audit procedure was changed.

• They gather information & data sources from the Bureau of Customs and the Bureau of Internal Revenue.

• Voluntary Disclosure Program (VDP) Still viable?

• One time response within 30 days

• FIU auditors are perceived to be better auditors, with background on tax and extensive audit training.

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So what’s new?


Customs Modernization Program (CMTA)

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Seen modernization program for the Philippine Bureau of Customs that will update the current old structure.

• Increased De Minimis Value

• Increased fines and penalties

• Incentives included (SGL, SGL+, AEO)

• Drive for transparency and technological advancement

• Additional programs beneficial to stakeholders

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So what’s new?


Strategic Trade Management Act (STMA)

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An Act to Prevent The Proliferation of Weapons of Mass Destruction, By regulating the Trade of Strategic Goods, and for other Purposes

• Designed to institute trade controls over export, import, re-export, transfer, transit, and transshipment of identified strategic goods.

• Committee yet to publish the National Strategic Goods List (NSGL)

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Broad Principles of Export Controls What are Export Controls?

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• Laws and regulation Zone established to curb the proliferation of weapons of mass destruction and their means of delivery and instruments of national policy

• National export control regimes based on international agreements

• Export licenses are required to export controlled products or technology

• Customs authorities typically act as the appointed enforcement agencies for Export Controls

• Accountability of exporters of record when dealing with controlled goods / technology

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Types of Goods Covered in Export Controls

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Military Goods

Dual-Use Goods

National Controlled Goods

Scope of goods controlled (Hardware, software, technology relating to design, development and production of weapons of mass destruction (“WMD”)


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Concept of Dual Use – military and civilian purpose

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ASEAN Moving Forward


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Regional Trade Blocs


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New Zealand

Australia

Japan

Brunei

Malaysia

Singapore

Vietnam

China

India

Korea

Indonesia

Philippines

Thailand

Laos

Cambodia

United States

Canada

Chile

Peru

Mexico

TPP RCEP

ASEAN

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Gains and Losses

ASEAN internal economic cooperation and integration may be hampered

Thailand will gain but might incur losses on the diversion of US and Japan to Vietnam and Malaysia for preferable tariff and regulatory treatment.

Vietnam and Malaysia will benefit from new electronics supply chain under TPP

Cambodia and Laos are expected to experience growth as US and Japanese companies might move assembly lines to TPP members in Asia and Latin America (RIETI,2014)


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Gains and Losses

RCEP as an expansion of the five FTAs of ASEAN (China, India, Korea, Australia and New Zealand)

RCEP is expected to bring income gains that are more balanced to ASEAN member states

Possible reduced economic gains due to tariff elimination coverage


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Core Strategies


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But first, start internally


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We suggest to make an internal analysis on the following questions:

1. Does the company know my compliance level?

2. Has the company made a compliance check?

3. Do we pay royalties?

4. Do we have transfer price adjustments?

5. For PEZA locators how do we control our inventories?

6. If Certificates of Origin are being issued, are we certain that we are complying with the corresponding rules?

7. Are we certain that we are using the correct Tariff Classification?

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Risks may lead to…

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Charges against Directors and Officers

Customs Clearance Delays

Seizure of Goods

Imposition of Penalties

Revenue Losses

Loss of Market Share

Adverse Publicity

Legal Proceedings

Non-Compliance

Thank you

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Isla Lipana & Co., its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2015 Isla Lipana & Co. All rights reserved. In this document, “PwC” refers to Isla Lipana & Co. which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

pwc worldtrade management services asia - us-asean sme … · · 2016-05-27• sme development...

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