a reference guide to customs and trade compliance in asia ... · reference guide to custom and...

208
A Reference Guide to Customs and Trade Compliance in Asia Pacific 2017 www.pwccustoms.com

Upload: others

Post on 04-Jun-2020

12 views

Category:

Documents


1 download

TRANSCRIPT

Page 1: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

A Reference Guide to Customs and Trade Compliance in Asia Pacific 2017

www.pwccustoms.com

Page 2: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

2 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

DisclaimerThe information in this publication is presented in a summarised form and is intended to provide general guidance only. It does not constitute professional advice. Rates and other information contained here may change as a result of legislation or regulation issued after time of print. You should not act upon the information contained in this publication without obtaining specific professional advice. No representative or warranty (expressed or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers International Limited, its members, employees and agents accept no liability, and disclaim all responsibility, for the 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.

PricewaterhouseCoopers (www.pwc.com) provides industry focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 180,000 people in 158 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

“PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

Copyright © May 2015 PricewaterhouseCoopers WMS Pte Ltd(Singapore). All rights reserved.

Page 3: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 3

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

ForewordThe competitive land, labour and capital advantages for manufacturing coupled with stand out domestic demand underpin Asia as one of the most prolific cross border trading zones in the world. The political and economic factors behind the current protectionist conventions and associated import taxes show no sign of abating.

While many of the rules governing cross border trade are based on market principles outlined by organisations like the World Trade Organisation, the practical interpretation and implementation of these vary significantly across Asia. This issue is further complicated by the fact that several key territories in the region continue to adjust policy to reflect transition trends and opportunities in their economies.

In addition, import taxes are usually determined or impacted by other considerations such as the sourcing or destination of trade flows and the evolution of technical characteristics of products, or physical ownership of goods as they cross borders. It is therefore of utmost importance for business to have a strong grasp of the risks and opportunities presented by cross border trade in this region.

Ensuring your business has efficient compliance requires practical knowledge, foresight and planning. PwC have recognised the unique place and importance of this discipline in its own right and created a dedicated regional team of customs and trade specialists, called Worldtrade Management Services. It is this team that compiles this Reference Guide to Customs and Trade Compliance in Asia Pacific. I trust it will set you on the way to both better understanding as well as better practice in managing your international trade footprint around the region.

Tom SeymourRegional Tax Leader, Asia PacificPwC

May 2017

Page 4: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

4 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

ContentsPreface 5Introduction 6

Country chapters

Australia 14China 24Hong Kong 35India 45Indonesia 61Japan 69(South) Korea 78Malaysia 86New Zealand 97 Philippines 106Singapore 117Sri Lanka 127Taiwan 138Thailand 149Vietnam 162

PwC’s World trade Management Services (WMS)Our services –an overview 170Value –added mass customs classification services 172Automated origin compliance management services 175\Contact information 178

Page 5: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 5

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Preface

Asia Pacific continues to be the place to be for businesses seeking sustainable growth and success. It is home to two of the world’s three biggest economies (China and Japan) and one of its largest Trade Blocs (The Association of South East Asian Nations, or ASEAN). It covers a significant proportion of the word’s international trade, both within the region and to other parts of the world. It holds a sizeable and fastest growing middle class, creating vast new consumer markets. And it has plenty of young and relatively cheap labour in many industries, providing fertile ground for a continuing role as factory of the world.

In addition, in the current climate of increasing anti-globalization rhetoric in many parts of the world, many parts of Asia are shining beacons of continued support for further trade liberalization. Although of course they started from a lower level of market open-ness in the first place, opportunities for business looking for international expansion remain strong in most of Asia. Implementation of the ASEAN Economic Community’s Consolidated Strategic Action Plan, as well as the WTO’s Trade Facilitation Agreement, should over time make procedural requirements for goods crossing border become more transparent and easier to manage.

It is no wonder then that many companies’ growth plans center around supplying customers in this region and/or supplying customers in other parts of the world from this region. Such plans include setting up facilities, be they factories or distribution centers, as well as accessing new consumer markets. In many instances, one of the first challenges for a new or changed supply chain is import and export compliance.

Page 6: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

6 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

On the ground, though, the landscape governing imports and exports is often vague, subject to many different interpretations and implementations, and changing both quickly and unpredictably. Furthermore, many customs authorities in Asia are under significant revenue pressures. A muddy cocktail of both risk and opportunity thus emerges. PwC’s Worldtrade Management Services team has created this guide to customs and trade to serve as a first point of reference for both planning and compliance purposes, for specialists and non-specialists alike. Without aiming to be comprehensive, it summarises the customs and trade regulatory environment in15 countries in the region. I would like to thank all contributors across those territories, as well as all others who have made this guide possible.

Frank DebetsManaging PartnerPwC Worldtrade Management Services, Asia.

Page 7: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 7

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

IntroductionAs long as there has been international trade (a few thousand years, approximately!), there have been rules trying to protect nations from international competition, as well as safeguarding their populations from inappropriate goods and materials, for whatever political, cultural or emotional reasons. Those rules currently display some intriguing characteristics:

• They are fairly consistent between territories;• They do not change all that frequently; • They are hard to find;• They are open to wildly different interpretation and

implementation;• Breaking them tends to constitute a criminal (as opposed to

civil) offense.• The above applies as much in Asia Pacific as it does elsewhere in the world. The fast economic growth in the region led to a sharp rise in imports and exports, which has come to a screeching halt in the past three years. In conjunction, the authorities have been signing up to many international agreements and conventions, while at the same time looking at other ways to protect domestic industries and economies and maintain revenue collections. Customs officers at port level may struggle to keep up with all these developments, leading to risk and uncertainty for importers and exporters. At the same time, penalties for non-compliance can be extremely harsh, as bad four times the value of imported goods in Thailand for serious declaration errors or the death penalty in Malaysia for extreme cases of Export Controls violations.

As a result, it is of vital importance for such importers and exporters to have a knowledge and understanding of both national legislation and its practical application by officers at port, regional and national levels. Although the legislation will usually follow international standards (such as the GATT Valuation Agreement, the Harmonized System for customs classification, the Revised Kyoto Convention for customs procedures), it may not be appropriate for modern trade and could be “hidden” in unexpected corners (for example, the Treaty of Amity and Economic Relations between the US and Thailand). Its interpretation will vary from country to country and even port to port (for example, imports of software may or may not be deemed subject to duty).

Page 8: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

8 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

This reference guide summarises some of the key regulatory requirements governing imports and exports in 15 countries around Asia Pacific as a first reference for both compliance and planning purposes. It covers the following broad areas:

Regulatory framework

Most major trading nations in the world are either members of the World Trade Organization and World Customs Organization, or abide by their principles if they are not. Many will therefore have legislation covering customs valuation and classification, the main drivers for duty costs and non-tariff barriers that is consistent with global principles. A significant number have signed up to the Information Technology Agreement, making cross-border trade in many technology products duty free. In addition, most will have signed the Revised Kyoto Convention and either have implemented or are implementing import and export facilities and procedures under its principles. Many will have started to implement, or will soon be implementing, the WTO’s Trade Facilitation Agreement signed in Bali in 2013 to enhance those procedures further. Member States of the Association of South East Asian Nations (ASEAN) will be implementing the roadmap for the ASEAN Economic Community (AEC) in line with its Consolidated Strategic Action Plan over the next five to ten years.

Having said all that, many of such international agreements do not have force of law in individual signatory countries, and their wording is consequently perhaps less tight than it should be. Hence, national legislation will be implemented in each country that, although using the same principles, may well divert in some important details. Therefore, a single approach to customs and trade compliance around the region that does not allow for flexibility to deal with such deviations may lead to non-compliance and exposure. Understanding both the regulatory underlying principles and national deviations is crucial to minimize these risks.

In addition to the regulatory framework directly related to customs compliance, many countries will have other trade regulations in place, either based on international guidelines or purely for domestic purposes. These regulations, although often implemented and policed by the customs authorities, may be under the auspices of other government bodies, such as food health and safety requirements required by a Ministry of Agriculture, or pharmaceutical product licensing requirements implemented by a Ministry of Health. A broad knowledge of these additional regulations and how they apply to a company’s imports or exports

Page 9: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 9

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

is required to avoid surprises and delays at borders, or inadvertent non-compliance.

Finally in this section, we list the authorities that companies most likely need to deal with when managing imports and exports. Whereas the primary role for supervising international trade usually falls with Customs (commonly part of the Ministry of Finance), other authorities, such as quarantine or inspection services, may play an equally important role. The role of the customs authorities has been diversifying in recent times, including duty collection, port inspection, data collection and dissemination, supply chain security enforcement, to name but a few. Once again, prior knowledge of the role of other authorities that direct the activities of customs personnel, and how they should be dealt with, is necessary for a smooth and compliant clearance process.

Import and export procedures

Whether or not a country is a signatory to the Revised Kyoto Convention and/or the WTO’s Trade Facilitation Agreement, procedures and facilities for importing and exporting goods tend to be fairly consistent around the world. Once again, though, the “devil” is in the detail, and a thorough understanding of national requirements and peculiarities will go a long way in ensuring both efficiency and compliance.

Before a company can engage in import and export activities, it will typically need some sort of registration. This registration, as well as the activities themselves, does not necessarily create or constitute a legal presence in a territory, for tax or other purposes. Some countries will allow non-resident companies to act as importer or exporter, others may not, or only under certain circumstances or in certain industries. Commonly, a third party can be appointed to provide customs brokerage services for the declaration process. Liability, however, usually remains with the importer or exporter and cannot be outsourced.

Increasingly it is possible, sometimes even mandatory, to use electronic declaration processes. Eligibility for this may require a stricter physical control process to be in place, but generally it helps improve efficiencies. An importer, especially a new one, may need to post a guarantee and can be subject to frequent and intrusive inspections, putting pressure on supply chain efficiency. Typically, goods will be released upon payment of all possible dues, even if such payment may be made under protest. Obtaining a refund of duties paid, whether or not under protest, remains an uncommon and cumbersome process in many Asian countries, if provided for

Page 10: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

10 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

at all.

In certain industries and for certain products, import or export licenses may be required. Registration as well as licensing can be a time-consuming process and should be started as early as possible, preferably long before any shipments take place.

Trade facilitation

Under the principles of the Revised Kyoto Convention and the WTO’s Trade Facilitation Agreement, most countries provide a range of trade facilitation options. Making use of such facilities can sufficiently enhance supply chain efficiency. They usually come at a cost of additional compliance or control requirements, though.

Merit based duty exemptions, i.e. permanent or temporary reduction or elimination of duty rates on products that are not available in the country of import, are one of the most direct and most impactful measures. A variety of bonded facilities, from Free Trade Zones to bonded manufacturing or storage facilities, can be called upon to defer payment of import taxes until goods are cleared for import or re-exported, thus easing cash flow requirements.

The rules governing eligibility for such facilities, permissibility of operations, administrative requirements and penalties for noncompliance vary significantly between countries, and between facilities within countries. Detailed cost-benefit analysis of the most advantageous option should be undertaken before such facilities are put into use.

Aside from specific facilities, most countries will also offer preferential treatment to importers and exporters that can demonstrate high levels of compliance and control in their import and export operations. These schemes go by a variety of names, such as Authorized Economic Operator, Golden/Green/Priority Lane, TradeFirst, to name but a few. Achieving the highest status under such schemes will require strong internal control processes, but provide many benefits in terms of reduced intervention by the authorities.

In an increasing number of countries it is possible to obtain rulings from the customs authorities. Although the applicability of such rulings may be limited to very precise circumstances only, they can still provide a level of certainty and predictability for importers that facilitates smoother flowing of trade.

Page 11: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 11

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Classification

Determining and declaring what a product is may seem like a straightforward exercise. Although this may be the case for many imports, it is also a key reason for non-compliance for many others.

Different types of classification are relevant. For importation, and occasionally, exportation, a customs tariff classification is required. This classification determines duty rates, applicability of non-tariff barriers such as licenses and quotas, and eligibility for preferential treatment. Most countries have adopted the International Convention on the Harmonized Coding System (HS Convention), more commonly referred to as the HS. Even countries that have not signed this Convention usually have a customs tariff that follows the same structure. Under the HS, all products are classified following a set of definitive rules up to a certain level of detail (a six digit numeric code). 2017 saw the introduction of a new version of the HS, which all signatory countries are expected to adopt. Some have done so already, others may require as much as a few years to move from the previous (2012) version.

Beyond the six digits of the HS, countries are free to subdivide as they see fit, using additional numeric or alpha-numeric divisions for national purposes. There could be as many as eight additional digits before a full national classification is arrived at. However, customs duty rate commitments under the GATT Uruguay Round are at HS level (i.e. a further subdivision should not lead to a different duty rate).

Although the HS rules are fairly comprehensive, much scope for ambiguity remains, often because the development of new products not foreseen or directly provided for in the HS or even a national tariff. In addition, many companies do not have a robust classification process, instead relying on third parties to determine a customs classification code for them. This can lead to significant liabilities incurred over many years. Some countries will offer classification rulings to increase certainty and predictability.

In addition to HS based classification, products may need to be classified for either export controls or other tax (such as excise) purposes. Although such classification is somewhat related to HS based customs classification, it is subject to its own rules, and separate processes need to be in place to ensure appropriate classification of imports and exports for these purposes.

Page 12: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

12 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Valuation

Once a product has been classified and the applicable import tax rates have therefore been determined, it needs to be valued for import purposes. Most countries follow some or all of the principles of the “Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994” (more commonly referred to as the GATT or WTO Valuation Agreement).

The Agreement sets out the principles for determining a customs value. Its premise is the “transaction value”, which is the price paid or payable for imported goods. In most international trade, an invoice price between supplier and importing purchaser will be a valid customs value. There are however circumstances under which such an invoice value is not acceptable as a customs value under either the principles of the Agreement or its national implementation. Typically, this happens in sales between related parties, where the relationship has influenced the price between them.

If such an import price is challenged by the customs authorities, detailed and protracted technical arguments often ensue to arrive at a mutually agreeable customs value. Although customs authorities will work on the basis of arm’s length principles, resulting pricing assessments can be very different to those used for transfer pricing purposes, mainly as comparability to unrelated sales is based on products rather than functionality. Customs authorities around Asia are increasingly understanding of transfer pricing principles. Although they are willing to consider transfer pricing principles when deciding on an appropriate customs values, they rarely find transfer pricing support sufficient. In addition, the recent developments at the Organization for Economic Cooperation and Development (OECD) in relation to Base Erosion and Profit Shifting (BEPS) are making customs officials more suspicious and less open to accepting transfer pricing arguments as support for declared customs values. They are increasingly insistent that such considerations are only a starting point, and need to be localised before they are of real value to customs value determinations in their country.

Additionally, transfer pricing adjustments and any additional payments made by an importer to an overseas party, such as license or service fees, can all lead to customs valuation challenges that are not obvious to deal with. A specific approach to support customs values, in addition to any transfer pricing policies and procedures,

Page 13: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 13

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Origin

A third characteristic, after classification and valuation that deter-mines the customs duty impact of imported goods, as well as the application of other trade regulations, is their origin. There are two distinct types of origin – non-preferential and preferential.

Non-preferential origin usually determines the application of any non-tariff barriers to an imported or exported product. The World Trade Organization has been working for decades to agree upon a universal set of rules that would determine the non-preferential origin of a product, with limited success. Hence such rules tend to be country specific and to some extent unilateral. In other words, a product that is considered to be originating in India by, say, Australia, may not be considered of Indian origin by, say, Korea. Having said that, there is some consistency in global approach, and typically a change in HS code at four digit level between imported components and exported product is deemed sufficient to “confer origin”. Typically, a chamber of commerce may issue non-preferen-tial certificates of origin.

Preferential origin rules are more clearly regulated but at the same time much more variable. They are determined specifically for any Preferential Trade Agreement by the signatory countries to that agreement. Those could be two or more countries. Although there is significant overlap in rules between different agreements, there are also many differences. Hence, a product that counts as Malaysian for purposes of applying the ASEAN-Japan Free Trade Agreement, may not count as Malaysian if exported to Pakistan under the Malaysia – Pakistan Free Trade Agreement. A product that can be considered originating for preferential trading purposes generally benefits from reduced or zero rates of import duty in the country of import.

In practice, there are many implementation challenges in order to benefit from preferential duty rates. Because of the duty benefit, strict certification and control requirements are in place under most agreements. Often, customs officers at port level will look for rea-sons not to accept a certificate of preferential origin so as to protect their revenue intake. Consequently, indirect shipment or invoicing of products, often a result of centralizing certain roles in principal structures, can play havoc with the availability of preferential market access. Therefore, thorough planning and documentary

Page 14: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

14 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

compliance are essential to secure and safeguard such benefits.

After a spur of new Preferential Trade Agreements dealing primarily with reduction in customs duty rates in the previous few decades, more recently many governments have been under popular pressure to be far more cir-cumspect about entering into new Agreements, or enhancing old ones. Con-sequently, fewer new Agreements are being implemented, Agreements are taking longer to negotiate, and those that do get implemented tend to deliver fewer benefits than originally promised or expected.

Dealing with the customs authorities

No matter how much attention is paid to customs and trade compliance, challenges will from time to time crop up. These could be the result of an obvious declaration error, a regular customs audit, or a specific investigation, often instigated by a whistle-blower.

It is important for companies to have set procedures in place that guide how such challenges are dealt with. An understanding of a company’s rights and obligations is an important starting point. Appreciating the potential penalties, both theoretically and practically, and financial or non-financial, is essential for contingency planning purposes. Where compliance violations are discovered internally, voluntary disclosure options may exist that can mitigate potential liabilities significantly.

Any historic non-compliance is typically limited to a set period (a statute of limitations) that varies from country to country (usually about 5 years). This limitation generally does not apply in cases of deliberate non-compliance. If an assessment of unfavourable decision is made against an importer or exporter, typically an appeals or dispute mechanism will be available to contest such actions. Availing of such a mechanism is often time-consuming, and may in practice strain a company’s relationship with the customs authorities, possibly leading to additional scrutiny on such a company’s trade flows.

Clearly this guide cannot, and is not intended to, be comprehensive. It will likely be somewhat out of date by the time it is published. It will however provide a useful starting point and repository of relevant types of information for all those who either are concerned about or need to deal with the management of customs and international trade compliance.

Page 15: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 15

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 16: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

16 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Australia

Customs & international trade framework

International organisations and agreements

Australia is a member and/or signatory party of the followinginternational organisations and agreements relevant to thegovernance and regulation of import and export transactions:

• World Trade Organization (formerly the General Agreement on Tariffs and Trade)

• World Customs Organization • International Convention on the Harmonized System (HS

Convention)• The Asia-Pacific Economic Cooperation • The International Convention on the Simplification and

Harmonization of Customs Procedures • ATA Carnet System • Chemical Weapons Convention • The Convention on International Trade in Endangered Species

of Wild Fauna and Flora (CITES)• The Basel Convention on the Control of Transboundary

Movements of Hazardous Wastes and their Disposal• The Waigani Convention (global control system for shipment of

hazardous wastes under the Basel Convention)• Kimberley Process, concerning trade in diamonds• Trade Facilitation Agreement (TFA) (Australia ratified on 9 June

2015)

Roles and responsibilities of authorities

Authority RoleAustralian Border Force (Customs)

Customs is a Federal Government agency, responsible for facilitating trade and the movement of people across the Australian border. Its duties include collecting revenue and administering industry specific assistance schemes.

Australian Taxation Office (ATO)

ATO is responsible for the administration and regulation of Goods and Services Tax (GST), Wine Equalisation Tax (WET) and Luxury Car Tax (LCT), which is levied on domestic sales and imports.

Page 17: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 17

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Department of Agriculture and Water Resources (DAWR)

DAWR provides quarantine inspection services for the arrival of international passengers, mail, cargo, animals and plants or their products into Australia.

DAWR Biosecurity is responsible for managing quarantine controls (including issuing import and export permits) at the Australian border to minimise the risk of foreign pests and diseases entering Australia.

Australian Government Anti-Dumping Commission

The Anti-Dumping Commission administers Australia’s anti-dumping and countervailing (anti-subsidy) system.

Legislation

Part 8 of the Customs Act 1901 is the principal legislation for the administration of customs duties. The regulations that implement this Act can be found in the Customs Regulations 2015 and the Customs (International Obligations) Regulation 2015.

The Customs Tariff Act 1995 contains Australia’s import tariff, which prescribes the rate of customs duties applicable to imported goods.

Further legislation governing trade in Australia includes:• A New Tax System (Goods and Services Tax) Act 1999 • A New Tax System (Wine Equalisation Tax) Act 1999 • Biosecurity Act 2015 • Commerce (Trade Descriptions) Act 1905 • Commerce (Trade Descriptions) Regulation 2016 • Copyright Act 1968 • Customs (Prohibited Imports) Regulations 1956 • Customs (Prohibited Exports) Regulations 1958 • Customs Tariff (Anti-Dumping) Act 1975 • Customs Tariff (Anti-Dumping) Regulation 2013• Excise Act 1901 • Excise Tariff Act 1921 • Imported Food Control Act 1992• Defence Trade Control Act 2012 • Trade Marks Act 1995• Customs (International Obligations) Regulation 2015 • Weapons of Mass Destruction(Prevention of Proliferation) Act 1995

Australia

Page 18: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

18 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Import and export procedures

Registration

Importers and exporters must register as a client in Customs’ Integrated Cargo System (ICS) to lodge import and export declarations. Clients are registered via their Australian Business Number (ABN). Entities that have no ABN are issued with a Customs Client Identifier number. An ABN is applied for via the ATO. Non-resident entities are permitted to apply for an ABN and to register as both an importer and/or exporter with Customs.

Process

Imports valued over AU$1,000 must be entered using an import declaration, which can be communicated electronically through the ICS or manually via Customs Form B650 – Import Declaration (N10). Customs may require the submission of a commercial invoice, bill of lading/airway bill, packing list, certificate of origin and any other commercial documents relating to the import, before releasing the goods. Customs duties and GST are payable by the importer to Customs before the goods will be released. In some circumstances, an importer may be able to apply for deferral of GST on import transactions.

Exports that have a value exceeding AU$2,000 or require an export permit, must be declared to Customs and given approval for export by a ‘cleared’ Export Declaration Number.

Licenses

Categories of goods that require an import permit include, but arenot limited to:

• Used mining, agriculture and earth moving machinery • Dairy products• New and used motor vehicles • Biological materials • Asbestos and goods containing asbestos • Synthetic greenhouse gases and ozone depleting substances,

and goods containing such gases (e.g. air conditioners and refrigeration equipment)

• Cigarette lighters• Weapons

Page 19: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 19

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

• Antibiotics, therapeutic drugs and substances

Categories of goods that require an export permit include, but are not limited to:

• Military goods and equipment• Dual use goods under the Defence Strategic Goods List• Dairy products• Meat and livestock• Asbestos and goods containing asbestos• Biological agents• Rough diamonds• Wine & brandy

Taxes and fees

Goods may be subject to the following taxes at import:• Customs duties, including anti-dumping and countervailing duties• Excise duties on Excise Equivalent Goods (EEGS), including alcohol (excluding wine), tobacco, fuel and petroleum products • Wine Equalisation Tax • Luxury Car Tax • GST, which is calculated as 10% of the Value of the Taxable Importation (VoTI). The VoTI is equal to the sum of the customs value of the goods, any customs duty payable, international transport and insurance costs and any Wine Equalisation Tax (WET) payable. WET is calculated at 29% of the VoTI being the customs value of the goods, any customs duty payable, international transport and insurance costs.

Goods exported from Australia do not attract an export duty and are generally GST free (subject to the goods being exported within 60 days of the supplier receiving any payment for the goods or the supplier issuing an invoice for the goods, whichever is the earliest).

The owner of the goods must pay import processing charges when an import or warehouse declaration is communicated to Customs. In regards to electronic declarations, the amount charged is $50.00 per declaration for consignments valued AU$1,000 - AU$10,000 and $152.00 per declaration for consignments valued over AU$10,000 for goods arriving by air and sea. Documentary declarations are charged $90.00 per declaration for consignments valued AU$1,000 - AU$10,000 and $192.00 per declaration for consignments valued over AU$10,000 for goods arriving by air and sea.

Australia

Page 20: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

20 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Duty refunds

Under certain circumstances, an importer may be eligible for refund for an overpayment or wrong payment of customs duties. The period for lodging a refund is within four years after the date on which the customs duty was first paid. A refund application is lodged by making amendments to the import declaration under which goods were cleared into Australia. A refund application can be lodged to Customs National Refund Centre electronically through the Customs Integrated Cargo System or by submitting a completed and signed Form B653 - Refund Application.

Depending on the type of refund, the importer is applying for, different forms of evidence will be needed such as:

• a copy of the commercial invoice• shipping documents• other supporting documentation such as illustrative descriptive material of the goods being imported.

An importer is not entitled to a refund of customs duty if a drawback has been received for the same goods. Further, an importer is not entitled to a refund of any Goods and Services Tax (GST) paid on importation if they have already claimed GST as a credit on their Business Activity Statement (i.e. the GST Return).

Export Controls

Australia controls the export of certain defence, strategic or dual use goods, software and technology. The Defence and Strategic Goods List (DSGL) is the legislative instrument that contains a list of all the defence and strategic goods (including dual use goods) that are subject to export controls.

A license/permit is required in order to export controlled goods or technology. An application for a license can be made to the Defence Export Controls – Department of Defence. The licence allows multi-ple exports of specific items to specified destinations, end-users, or purposes as stipulated in the licence.

Penalties apply for non-compliance with export controls include seizure and forfeiture of goods, fines, injunctions and imprison-ment.

Page 21: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 21

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Trade facilitation

The most commonly used customs schemes in Australia are outlined below.

Duty suspension and exemptions

Tariff Concession Scheme

The scheme allows the granting of a Tariff Concession Order (TCO) to eliminate the customs duty otherwise payable on imported goods where there are no substitutable goods produced in Australia.

Certain Inputs to Manufacture

The programme provides import duty concessions for certain imported raw materials, intermediate goods as well as prescribed metal materials and goods, which have demonstrably superior advantages over locally produced goods.

Duty Drawback The scheme enables exporters to obtain a refund of customs duty paid on imported goods where those goods are exported unused since importation, or are treated, processed, or incorporated into other goods for export.

Tradex The scheme provides cash-flow benefits through an up-front exemption from customs duty and GST on imported goods that are intended for export markets, or to be used as inputs to manufactured goods that are ultimately exported.

Bonded warehousing and processing

Customs Warehouses Deferment of Duty

The warehouse licensing system allows owners of imported goods to store their goods ‘under bond’ in a licensed warehouse to defer the payment of customs duty until such time as the owner wishes to enter the goods for home consumption into the Australian market.

Australia

Page 22: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

22 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Rulings

An Advanced Ruling is a formal advice on how Customs will apply certain laws to goods for importation. The rulings can only be relied upon by the entity that applied for the ruling. Rulings can be in the form of a Tariff, Valuation or Origin Advice ruling and typically have validity for a five year period.

Classification

Australia adopts the Harmonized System (HS) of classification and has been using it as the basis of classifications for both imported and exported goods since 1988. Following the completion of the WCO’s fifth review of the HS in June 2014, with significant input from Australia, HS 2017 is officially implemented effective from 1 January 2017. Goods exported from Australia are classified under the Australian Harmonised Export Commodity Classification (AHECC).

Valuation

General

Australia’s legislation is based on the WTO Customs Valuation Agreement. Australia’s customs valuation rules can be found in Division 2, Part 8 the Customs Act 1901 and follows the hierarchical order of valuation methods outlined in the WTO Valuation Agreement, with the transaction value being the most common method of valuation. Generally speaking, these methods seek to establish a Free on Board (FOB) or notional FOB value as the customs value of imported goods. Valuation of goods for GST purposes is prescribed by the A New System (Goods and Services Tax) Act 1999. As outlined in the

Customs Clearance Schemes

Australian Trusted Trader Programme

The Australian Trusted Trader is an Authorised Economic Operator (AEO) programme.

The Australian Trusted Trader is a voluntary trade facilitation initiative which recognises businesses with a secure supply chain and compliant trade practices and rewards certified businesses with a range of trade facilitation benefits.

Page 23: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 23

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

‘Taxes and Fees’ section of this guide, GST is calculated as 10% of the VoTI.

Related party transactions

Customs may challenge related party transactions where they believe the relationship between the parties has influenced the price of the goods. In such circumstances, the onus is on the importer to demonstrate by either the ‘circumstance of sale’ or ‘test values’ test that the relationship has not influenced the price of the imported goods. Where the relationship has influenced the price, the transaction value cannot be used and an alternate valuation method must be adopted.

Other payments

Other payments which may be required to be included in the customs value of imported goods (under the transaction value) for the purposes of calculating duty include:

• Production assist costs• Packing and costs associated with preparing the goods for export• Foreign inland freight and insurance charges to the place of export • Commissions and brokerage (other than buying commissions) • Royalties and license fees (where they are a condition of the export sale) and proceeds of subsequent resale

Transfer pricing

Where a transfer pricing adjustment relates to the price of the goods, importers are obligated to adjust the customs value of the imported goods, usually done through a voluntary disclosure. This obligation occurs regardless of whether there has been an upward or downward adjustment to the price. Generally Customs will require a valuation advice ruling prior to the finalization of the voluntary disclosure to confirm that the appropriate customs valuation methodology has been applied in respect of the related party transactions.

It is important to note that in Australia, Customs may be willing

Australia

Page 24: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

24 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Bilateral agreements in force

Chile, Malaysia, New Zealand, Singapore, Thailand,United States, South Korea and Japan.

Agreements under negotiation

Gulf Cooperation Council (GCC), India, Indonesia, Pacific Agreement on Closer Economic Relations (PACER), Regional Comprehensive Economic Partnership (RCEP), Trans Pacific Partnership (TPP)

Depending on the laws governing the relevant free trade agreement, Customsmay require submission of a certificate of origin that has been issued by anauthorised body, or alternatively by the manufacturer of the goods in order toprovide preferential treatment. Such documentation is generally required tobe on hand at the time the goods are declared to Customs.

The authorised bodies in Australia that can issue certificates of origin are:

• Australian Chamber of Commerce and its affiliate State members• Australian Industry Group

Origin

Regional agreements Association of South East in force

Asian Nations (ASEAN) – Australia– New Zealand, South Pacific Area Regional Trade Economic Cooperative Agreement (SPARTECA)

to accept a bulk adjustment where there has been an upward adjustment to the price; however it will not permit a bulk adjustment where a refund is due to the importer. In such circumstances, the importer would be required to amend on a transaction by transaction basis to obtain refunds where there has been a downward adjustment to the price. Transfer pricing is currently a key focus for Customs compliance activity.

Page 25: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 25

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Managing customs and trade compliance

Customs audits and investigations

Customs uses audits to verify the integrity of information supplied by importers and exporters. Customs audits are typically selected on a targeted risk assessment basis and can range from a simple desk top verification to a comprehensive systems and transactional based audit at the importer’s/exporter’s premises.

Penalties

Making a false or misleading statement to Customs is a strict liability offence. Customs’ Infringement Notice Scheme enables Customs to impose financial penalties. The penalty for making a false or misleading statement that results in a loss of duty is the greater of 75% of the amount of duty short paid or the amount of refund/drawback paid erroneously or a fine of 45 penalty units (15 penalty units multiplied by three due to the corporate multiplier) which is equal to AU$7,650. If a business does not improve compliance, Customs has the flexibility to increase the corporate multiplier to four or five times the amount payable by a natural person.

Alternatively, Customs can choose not to issue an infringement notice and instead proceed to prosecution.

In circumstances where there is a shortfall of indirect tax (GST, LCT and WET), Customs may impose indirect tax administrative penalties on behalf of the ATO, including general interest charges.

Customs can also impose a range of non-financial sanctions (in addition or as an alternative to penalties) to ensure ongoing compliance. These can include pre and post-clearance intervention, more frequent and comprehensive audits, covert cargo searches, increased surveillance and monitoring.

Australia

Page 26: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

26 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Voluntary disclosure

Import declaration procedures are based on a system of self-assessment by importers. Consequently, importers are encouraged to voluntarily disclose any errors made in their import declarations to ensure the integrity of the information communicated to Customs. In most cases, an importer is protected from penalties where it makes a voluntary disclosure by written notice to Customs in advance of being notified of its selection for audit.

Appeal and dispute settlement

Traders typically have the right to an internal review of a decision made by Customs. Beyond the internal review process most decisions of Customs can be appealed for external review to the Administrative Appeals Tribunal.

Statute of limitations The statute of limitations is four years. However this statutory time limit will not apply to cases where fraud or evasion is involved.

Page 27: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 27

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 28: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

28 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

China

Customs & international trade framework

International organisations and agreements

China (also referred to as the Peoples’ Republic of China PRC) is a member and/or signatory party of the following international organizations and agreements relevant to the governance and regulation of import and export transactions:• World Trade Organization (formerly General Agreement on Tariffs and Trade)• World Customs Organization ;• International Convention on the Harmonized System (HS Convention)• The International Convention on the Simplification and Harmonization of Customs Procedures • ATA Carnet System• Chemical Weapons Convention • The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)• Basel Convention, concerning import/export of hazardous waste• Kimberley Process, concerning trade in diamonds• Trade Facilitation Agreement (TFA) (China ratified on 4 September 2015)

Roles and responsibilities of authorities

Authority RoleGeneral Administration of Customs (GAC)

The China GAC is established by the State Council and is the state authority responsible for supervision and control over all arrivals and departures from the customs territory.

Customs Tariff Commission of the State Council (CTC)

Members of the CTC are from various administrative authorities. They review, approve and adjust customs duty rates, interim duty rates, quotas and headings of the HS codes. They also review tariff policies, tariff negotiations and

Page 29: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 29

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ)

A department of the State Council; responsible for national quality, Inspection and Quarantine metrology, entry-exit commodity inspection, entry-exit health quarantine, entry-exit animal and plant quarantine, import-export food safety, certification and accreditation, standardization, as well as administrative law-enforcement.

Ministry of Commerce (MOFCOM)

A department of the State Council; responsible for internal and external trade and international economic cooperation nationwide.

State Administration of Foreign Exchange (SAFE)

Administers and controls foreign exchange, plays an important role in relation to the trade payables and receivables for imported and exported goods.

State Food and Drug Administration (SFDA)

A department under the State Council; managed and directed by the Ministry of Health. Responsible for the safety management of food, drugs, cosmetics and medical devices.

Ministry of Agriculture (MOA)

A department of the State Council. Responsible for the review and approval of the import of agricultural genetically modified organisms (GMO) used directly as consumer goods and the import and export of agricultural goods.

Legislation

The customs law of the PRC and the Foreign Trade Law of the PRC are two of the most fundamental laws within China’s legal frame-work. The Import and Export Commodity Inspection Law of the PRC is another related law.

Administrative rules are legal pronouncements made at a national level. Although they are inferior to national regulations made by the State Council, they are still fundamental in the guidance of foreign trade.

China

Page 30: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

30 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Import and export procedures

Registration

There are typically two types of enterprise that are permitted to conduct customs declaration registration with Customs, i.e. consignor/consignee of import/export goods and customs broker. Applicants must lodge the required application materials with Cus-toms for its review and approval. Upon successful registration, the applicant will be assigned a 10-digit Customs Code. Only import-ers/exporters with Import/Export (I/E) rights or are I/E agents can act as the Importer or Exporter of Record.

Process

In general, there are four steps during an import or export customs declaration process, i.e. the submission of the declaration, coordi-nation of inspection by Customs and/or CIQ, payment of duties/ taxes, and pick up of goods.

Electronic data should be declared to Customs to generate an e-dec-laration form. Customs will conduct an initial check of the data. Once accepted and notified by Customs, two different approaches can be taken depending on the declaration method, i.e.

1. Paper declaration: a printed paper declaration form together with other required documents should be lodged on-site.2. E-declaration: an electronic declaration form together with other required documents should be lodged on-line. For qualified enterprises, only the electronic declaration form needs to be lodged.

Customs may request to inspect the declared goods to determine the classification, value or origin after receiving the declaration. An importer/ exporter should coordinate with Customs to complete in-spection formalities. Payment of duties and taxes should be carried out through banks designated by Customs via either electronic or non-electronic method.

Page 31: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 31

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Licenses

Categories of goods requiring a type of import license into China include, but are not limited to:

• Dual-use items and technology• Gold products• Textile products• Drugs and medicines• Goods requiring Certificate of Inspection for Goods In ward/Outward• Waste and scrap• Goods of endangered species• New and used equipment• Audio/video products

Export licenses may be applicable to dual use items and technology, goods of endangered species, psychotropic drugs, medicines, etc. Import and export license applications should be submitted to the in-charge authorities for their verification and approval.

Taxes and fees

Goods may be subject to the following duties and taxes at import:

• Customs duties, primarily ad valorem at an average rate of 9.5%• Value Added Tax (VAT), primarily at 17%• Consumption tax, specific or ad valorem, applicable to four types of consumption goods, i.e. special goods that may harm human health, social order and ecological environ ment (e.g. alcohol), luxury goods (e.g. jewellery), high energy-consumption goods (e.g. motor vehicles) and non-renewable resources (e.g. petroleum).

Export duty is levied on limited types of goods such as key natural resources. Customs clearance fees are chargeable at import and export.

China

Page 32: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

32 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Duty refunds

Where any duty-paid imported goods are shipped in their original status out of China due to the reason of quality defects or specifi-cation inconsistence, the importer may, within one year from the day when the duties are paid, file an application to the Customs for refund of the paid import taxes.

In filing the application to the Customs for refunding the import taxes, the importer shall submit the following documents:

• The refund application form;• The original Import Declaration Form, the import taxes (duty, import VAT, etc.) receipts, and the invoice;• The Export Declaration Form for shipping the goods out of China; and• The agreement between the consignor and the overseas consignee on returning the goods.

Export Controls - Dual-use Items/Technologies

China has established a legal system regarding export control of dual-use items and technologies since the mid-1990’s, including nuclear dual-use, biological, chemical, missile and other sensitive items and technologies. China does not promulgate an overall ad-ministration measure on dual-use items and technologies. Instead, there is a specific administration measure and control lists for each category of dual-use items and technologies.

In order to facilitate Customs supervision on import / export of the listed items, Ministry of Commerce (MOC) worked with the General Administration of Customs (GAC) to jointly issue a com-bined Control List for Dual-use Items (“the List”), specifying the Item Number, Name, Description, HS code and Unit. The List is a combination of 9 sub-lists of dual-use items and technologies:1. Nuclear Control List2. Nuclear Dual-use Control List3. Biology Dual-use Control List4. Supervised Controlled Chemicals Control List5. Certain Chemicals and Related Equipment Control List6. Missile Control List7. Precursor Chemicals (I) 8. Precursor Chemicals (II)9. Partial dual-use items and technologies

Page 33: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 33

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Trade Facilitation

The most commonly used customs schemes in China are outlined below.

The HS code is attached for more than 70% of the listed items in order to ensure control. The remaining less than 30% are not sub-ject to HS classification regime and only controlled by the product description and specification. As technology is an intangible good which is out of the supervision scope of the GAC, there is no HS code for dual-use technologies in the Control List. The dual-use technologies are only controlled through their description and specification.

The exporter intend to export the dual-use items should file appli-cation with provincial MOC and subject to review by Central MOC.

Duty suspension and exemptions

Processing Trade Import of raw materials for manufactur-ing followed by the export of finished products. Import duty and VAT is exempt (bonded) for raw materials imported by Processing Trade enterprises to manufac-ture finished goods for export.

Duty-exempted Capital Equipment

If a FIE invests in a business which is “encouraged” according to the Investment Catalogue, it is eligible for customs duty exemption when importing equipment, provided certain criteria are met.

Temporary Import/Export Goods

Goods which are imported for exhibitions, repairs and other approved purposes with-out payment of duty/VAT, if re-exported within a pre-determined period of time.

Interim Duty Rate System (IDR)

A preferential rate that is lower than the MFN rate and published by the Customs Tariff Commission of State Council on a yearly basis to encourage the import of specific goods.

China

Page 34: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

34 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Supply chain security

The Enterprise Classification System was first introduced in 1999 and recently updated in 2014 through Interim Measures of the PRC Customs on Enterprise Credit Management (GAC Order [2014] No. 225). Each registered enterprise belongs to one of the four categories of the enterprise classification, i.e. advanced certified enterprise, general certified enterprise, general credit enterprise and discredited enterprise.

China Customs provides different levels of trade facilitation and control depending on the category. Advanced certified enterprise and general certified enterprise are entitled to preferential treatments including expedited customs clearance, preferential deposit procedures and priority declaration. Additionally, advanced certified enterprises are entitled to trade facilitation programs offered by the contracting party under mutual recognition of Authorized Economic Operator (“AEO”). General credit enterprise is subject to normal customs supervision, while discredited enterprise is subject to more stringent supervision.

Bonded Zones

Operations in Bonded Zones

Nine types of bonded zones have been established in China with different func-tions and preferential policies. Traders can make use of the appropriate bonded zone for manufacturing, transfers, distribution, entrepot trade, etc.

Customs Clearance Schemes

Customs Enterprise Credit Management

Under this scheme, enterprises are catego-rized into Certified Enterprises (including Advanced Certified Enterprises and Gen-eral Certified Enterprises), General Credit Enterprises, and Discredited Enterprises. Different customs clearance facilitation treatment will be applied to enterprises with different credit standings.

Page 35: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 35

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Centralized Taxation Since 27 July 2015, the GAC promoted the “Centralized Taxation” model on a nation-wide basis.

Qualified importers are entitled to tax payment on a monthly basis, changing the traditional “verify per shipment, release after taxation” duty collection model.

Specifically, reputable enterprises will file the application with its in-charge Customs with a bank guarantee or cash deposit. When handling import/export declaration, Customs would release the goods after deducting a credit quota equivalent to the duty payable, rather than actually collect-ing the duty.

Rulings

In accordance with the Administrative Measures on Classification of Import and Export Goods (GAC Order [2007] No. 158), importers and exporters can request classification rulings prior to, during, or after clearance.

The Administrative Measures on Advanced Valuation (trial programme) was released by GAC and entered into force on 1 January 2012 in several ports in China. The trial programme covers a small number of HS codes imported under specific conditions.

Classification

China adopted the Harmonized Commodity Description and Coding System (HS Code) on 1 January 1992. There are 21 sections, 97 chapters and 8,285 tariff items in the 2015 edition of the Tariff Book of the PRC. China will likely adopt HS2017 on 1 January 2017.

Valuation

Customs valuation for imported and exported goods is based on the following two regulations which were effective from 1 February 2014, replacing the previous prevailing Measure GAC Order No. 148:

• Measures of the PRC Customs on Determination of Dutiable Value for Imported and Exports Goods (GAC Order [2013] No. 213); and

China

Page 36: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

36 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

The new Measures retain the core element of Article VII of the General Agreement on Tariffs and Trade (GATT) and the changes are subtle rather than substantial in nature. If there is a sale with price being the sole consideration, the import value of goods will be the CIF (cost, insurance and freight) price based on the sale. A price reference database is used by China Customs as a risk management and enforcement tool.

Related party transactions

Customs is aggressive in ensuring that the transaction value between related parties is arm’s length. The importer may need to provide evidence that their declared value is arm’s length by proving the declared value is close to any of the below prices:

1. The transaction price of identical or similar imports sold to a buyer in China which does not have a special relationship with the seller.

2. The dutiable value of identical or similar imports determined using a deductive value method.

3. The dutiable value of identical or similar imports determined using a computed value method.

Other payments

Customs will treat all royalties and license fees connected to the imported goods as dutiable unless the importer can evidence that the payment is not made as a condition of sale of the goods for export to China.

Transfer pricing

Currently, there is no formal mechanism for reporting transfer pricing adjustments to China Customs. It is a good practice to negotiate with Customs in advance of a transfer pricing adjustment to avoid challenges from China Customs. Customs often request for a copy of Transfer Pricing Documentation (TPD) when reviewing the declared import price.

• Measures of the PRC Customs on Determination of Dutiable Value for Domestic Sale of Bonded Goods (GAC Order [2013] No.211)

Page 37: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 37

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Origin

Preferential origin

Regional agreements in force

ASEAN - China, Asia Pacific Trade Agreement

Bilateral agreements in force

ASEAN – China (“10+1”), Australia, Chile, Closer Economic Partnership Agreement (Hong Kong, Macau), Costa Rica, Korea, New Zealand, Pakistan, Peru, Singapore, Taiwan, Iceland, Switzerland

Agreements under negotiation

China – Korea – Japan, Georgia, Gulf Cooperation Council (GCC), Maldives, Norway, Regional Comprehensive Economic Partnership (RCEP), Sri Lanka, Israel

Preferential Certificates of origin are issued by AQSIQ (local CIQ).

Non preferential origin

An ordinary certificate of origin can be applied for to evidence that goods are wholly obtained or processed in China. For processed goods, there are defined minimal processes that do not qualify for conferring China origin. There are two authorities that may issue an ordinary certificate of origin:

1. General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ)2. China Council for the Promotion of International Trade (CCPIT)

Managing customs and trade compliance

Customs audits and investigations

Currently, Customs has implemented four types of audits:1. Regular audit (random check)2. Specific audit (based on intelligence or commodities/industry

selected)3. Qualification verification audit (assessing the application for

upgrading Enterprise Classification)4. Bonded goods audit (focused primarily on processing trade)

China

Page 38: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

38 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Customs investigations, generally arising from a significant or suspected breach of law, are conducted mainly to disclose and penalize illegal violations. Cases that commence as a customs audit can be transferred to the Anti-Smuggling Bureau for investigation where an illegal violation is detected during the course of the routine customs audit.

Audits and investigations can be conducted within three years from the date of release of the goods or within the period of customs supervision (e.g. for bonded materials).

Penalties

There are two types of financial penalties for violation of the law and regulations, i.e. administrative penalties and criminal penalties. In addition to administrative penalties, imprisonment may apply to the directly in-charge and involved individuals.

As the provisions of both penalties are complex, the facts and circumstances of each case should be assessed in order to determine what type of penalty may be applied.

Voluntary disclosure

An importer can make a “voluntary disclosure” with lenient penalty or without penalty treatment, although Customs will only confirm this on a case-by-case basis. A best practice is to initiate discussions with Customs about any potential voluntary disclosure on a “no-name” basis and through a third party.

Self-discipline measures

Advanced Certified Enterprise (previously as category “AA”) and General Certified Enterprise (previously as category “A”) are required to establish an internal audit system regarding import/export operation and ensure internal audit is conducted at least once per year. The enterprises could engage a qualified “social agency” to assist in conducting the internal audit.

PwC was approved by Shanghai Customs in January 2015 as a “social agency” with qualified professional knowledge and technical abilities. With this qualification, PwC is qualified to be engaged by an entrusted enterprise that is located in Shanghai or be engaged by Shanghai Customs to:1. Conduct self-disciplinary management and assist the enterprise to report and conduct voluntary disclosure; and

Page 39: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 39

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

2. Conduct verification audit for the enterprise upgrading to Customs Advanced Certified Enterprise or General Certified Enterprise; and3. Provide related support through audit, evaluation, identification, authentication during Customs bonded investigation and routine enterprise auditing.

Appeal and dispute settlement

If a company does not accept a decision made by Customs resulting in penalties, tax back payment, etc., it is entitled to file an application of administrative appeal against the decision. The application should be filed to the higher level of Customs authority within 60 days upon receiving the decision.

Being the applicant, the company has the right to: 1. Entrust attorneys2. Request to review the written response submitted by the defending party 3. Apply for a hearing 4. As appropriate, go through the reconsideration process to reach a consensus with the defending party

The appeal decision will be made within 60 days (could be extended to 90 days if hearing is held) after the date of acceptance. Reconsideration can reached any time before the final decision being made.

If the applicant does not accept the appeal decision, it can file a lawsuit within 15 days after receiving the appeal decision.

Statute of limitations

According to Regulations of the PRC on Customs Inspections, within three years from the date of Customs release of the imported/exported goods or within Customs supervision period (as well as the following three years) of bonded goods and duty reduced/exempted goods, Customs has the right to inspect accounting books, accounting vouchers, declaration documents and other relevant documents of directly related enterprises, and supervise the authenticity and legality of imported and exported goods.

Import and export enterprises should, in accordance with the above time limits, therefore, take care of the customs declaration documents, import and export documents, contracts and other documents or electronic data.

China

Page 40: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

40 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 41: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 41

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Hong Kong

Customs & international trade framework

International organisations and agreements

Hong Kong is a member, associate member and/or signatory partyof the following international organisations and agreementsrelevant to the governance and regulation of import and exporttransactions:• World Trade Organization (formerly General Agreement on

Tariff and Trade)• World Customs Organization • ATA Carnet • Chemical Weapons Convention • The Convention on International Trade in Endangered Species

of Wild Fauna and Flora (CITES)• Kimberley Process, concerning trade in diamonds • Asia-Pacific Economic Cooperation • Pacific Economic Cooperation Council • United Nations Economic and Social Commission for Asia and

the Pacific • United Nations Conference on Trade and Development • Trade Committee of the Organization for Economic Cooperation

and Development• Asian Development Bank• Trade Facilitation Agreement (TFA) (Hong Kong ratified on 8

December 2014)

Authority RoleHong Kong Customs and Excise Department (HKCED)

Responsible for the enforcement of customs and trade laws, trade facilitation schemes, consumer protection, goods and documents inspection, trade controls and the collection of import related taxes in Hong Kong.

Hong Kong Census and Statistics Department t

Responsible for trade administration (including administration of trade declarations and cargo manifests) and management of trade and cargo statistics..

Page 42: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

42 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Hong Kong Trade and Industry Department (HKTID)

Responsible for facilitating the development of trade policies and foreign trade relations as well as maintaining trade security measures including import and export licensing and export controls. Industry and business support services are also provided by the HKTID.

Legislation

Hong Kong’s Customs and Trade Laws are found in a number of different pieces of legislation. These include, but are not limited to:• The Hong Kong Dutiable Commodities Ordinance, Cap 109 (HKDCO)• The Hong Kong Import and Export Ordinance, Cap 60• The Hong Kong Import and Export (Registration) Regulations, Cap 60E• The Hong Kong Import and Export (Strategic Commodities) Regulations, Cap 60G • The Hong Kong Trade Descriptions Ordinance, Cap 362 • The Hong Kong Chemical Weapons (Convention) Ordinance, Cap 578• The Hong Kong Reserved Commodities Ordinance, Cap 296

Legislation can be accessed at https://www.elegislation.gov.hk/

Registration

Traders who wish to import and export goods into or from Hong Kong must first register with the Hong Kong Companies Registry and obtain a valid Business Registration (BR) number. Any company with a valid BR can act as the Importer of Record (IOR) and Exporter of Record (EOR).

Non-residents can also conduct import and export activities in Hong Kong by appointing an agent to complete the customs clearance process (e.g. trade declarations, license applications, utilising bonded warehouses, etc.) on their behalf.

Process

Any person who imports or exports any article, other than an exempted article, is required to lodge an accurate and complete import or (re-)export declaration within 14 days after the import or export of the articles.

Page 43: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 43

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Trade declarations can be lodged electronically using any of the three service providers appointed by the Hong Kong Government, namely:

1. Brio Electronic Commerce Limited2. Global e-Trading Services Limited3. Tradelink Electronic Commerce Limited.

Payment of duties and declaration charges can also be executed through these service providers by the IOR (including agents appointed by traders).

Licenses

Hong Kong’s import and export licensing requirements are summarised below based on product categories (include but not limited to):

Product Import license required?

Export license required?

Licensing authority

Powdered formula

No Yes (unless exempted

HKTID

Rice Yes Yes HKTID

Rough diamonds

Yes Yes HKTID

Strategic commodities

Yes Yes HKTID

Ozone depleting substances

Yes Yes HKTID

Chinese herbal medicines and propriety Chinese medicines

Yes Yes Department of Health

Frozen, chilled meat and poultry

Yes No Food and Environmental Hygiene Department

Non-pesticide hazardous chemicals

Yes Yes Environmental Protection Department

Hong Kong

Page 44: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

44 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Optical disc mastering and replication equipments

Yes Yes Hong Kong Customs

Pesticides Yes Yes Agriculture, Fisheries and Conservation Department

Pharmaceutical products and medicines

Yes Yes Department of Health

Radioactive substances and irradiating apparatus

Yes No Department of Health

Radio transmitting equipment

Yes Yes Office of the Communications Authority

Animals and plants

Yes Yes Agriculture, Fisheries and Conservation Department

Control chemicals

Yes Yes HKCED

Dutiable commodities

Yes Yes HKCED

Food Yes No Food and Environmental Hygiene Department

Sand Yes No Civil Engineering and Department

Smokeless tobacco products

Yes No Food and Environmental Hygiene Department

Wastes Yes Yes Environmental Protection Department

Motor Vehicles Yes No HKCED

Page 45: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 45

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

ExportGoods whether of Hong Kong origin or not*

• $0.2 in respect of the first $46,000 of the value of the goods $0.125 in respect of each additional $1,000 or part thereof and rounded up to the nearest 10 cents

* For exports of Hong Kong manufactured clothing and footwear items specified in the Schedule 1 to the Industrial Training (Clothing Industry) Ordinance, Chapter 318, Laws of Hong Kong, Clothing Industry Training Levy of $0.3 in respect of each $1,000 value or part thereof in addition to the declaration charge will be required.

Taxes and fees

Goods may be subject to the following taxes at import. Excise duties are levied on tobacco, liquor (with an alcoholic strength of more than 30% by volume, measured at a temperatureof 20°C), methyl alcohol and hydrocarbons oil.

There are no taxes levied at export.

Trade declaration fees are chargeable on a per declaration basis based on the following rates:

ImportNon-food items • $0.2 in respect of the first $46,000 of

the value of the goods• $0.125 in respect of each additional

$1,000 or part thereof and rounded up to the nearest 10 cents

Food items • $0.2 per declaration irrespective of the value

Duty refund

Subject to case by case determination, the HKCED may grant a refund of duty subject to certain conditions, such as for goods not in accordance with the contract of sale, damaged in transit and subsequently destroyed in Hong Kong, or returned to the supplier outside Hong Kong with the written consent of the HKCED Commissioner.

Hong Kong

Page 46: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

46 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Trade facilitation

The major trade facilitation schemes of Hong Kong are outlined below.

Automated processes

Electronic System for Cargo Manifests (EMAN)

EMAN enables carriers (air, ocean and river) to submit cargo manifests electronically to Customs, the Census and Statis-tics Department and HKTID in one transaction.

Air Cargo Clearance System (ACCS)

ACCS expedites clearance of air cargo where a direct system interface can be established between Customs and cargo operators for the exchange of cargo data and customs clear-ance instructions.

Export Controls

Import, export, transhipment and transit of strategic commodi-ties are subject to licensing control in Hong Kong under the Im-port and Export Ordinance (Cap 60) and the Import and Export (Strategic Commodities) Regulations (Cap 60G).

The HKTID is responsible for reviewing and issuing licenses cov-ering the import and export of strategic goods, and the enforc-ing authority is the HKCED. The HKTID and HKCED collaborate closely to ensure all applicants of the strategic commodities license comply with the provision of the relevant laws and regu-lations in Hong Kong.

Penalties for offences involving the imports or exports any stra-tegic commodities not under and in accordance with an import or export license the transfer include seizure and forfeiture of goods, fines and imprisonment.

Page 47: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 47

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Road Cargo System (ROCARS)

ROCARS enables registered shippers or their authorised agents to submit ad-vanced cargo information of road cargo by elec-tronic means. Under this scheme, truck drivers can enjoy seamless and speedy customs clearance when they convey road cargoes across land bound-ary control points.

Bonded zones

Bonded warehousing

Customs operates an “Open Bond System” that controls bonded warehouses by means of regular excise audits and compliance checks. Control of the warehouse is by the maintenance of records rather than by a customs officer. Certain operations may be performed on dutiable goods stored in bonded warehouses including marking, remarking, repacking, surveying and denaturing.

Supply Chain Security

A company which has been accredited as an Authorised Economic Operator (AEO) is recognised as a trusted partner of Customs to jointly secure the global supply chain. The company benefits from incentives that include reduced or prioritised customs inspections. This partnership programme is open to all stakeholders including manufacturers, importers, exporters, freight forwarders, warehouse operators and carriers, etc. involved in the international supply chain. Hong Kong currently implements Mutual Recognition Arrangement on the AEOs with China, Singapore, Korea and Japan.

Classification

While Hong Kong is not a Contracting Party to the International Convention on the Harmonized System (HS Convention), Hong Kong has adopted the HS in full for trade declaration purposes since 1 January 1992.

Hong Kong maintains a Hong Kong Imports and Exports

Hong Kong

Page 48: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

48 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Classification List (Harmonised System / HKIECL) and it is amended annually to take into account the international requirements and significant changes in trade patterns and technology. The 2017 HKIECL edition has taken into effect since 1 January 2017, replacing the 2012 edition. The 2017 HKIECL incorporates the 242 sets of amendments recommended by the WCO. This is to ensure Hong Kong’s commodity classification system for both imports and exports continues to be compatible with those implemented and used by its major trading partners.

Valuation

Hong Kong’s valuation rules for dutiable commodities can be found in the HKDCO. Although Hong Kong is a founding member of the WTO, there is no legislation implementing the WTO valuation agreement (i.e. WTO Agreement on Implementation of Article VII of the GATT 1994) (the WTO Agreement) and continues to use the Brussels Definition of Value (BDV) in the HKCDO. However, in practice, Hong Kong Customs allows the importer to declare the value on the basis of the invoice value (i.e. using the “transaction” between the unrelated seller and buyer) which mirrors the WTO Agreement.

For non-dutiable commodities imported into Hong Kong, there is no written law governing valuation methodologies. In practice, the value declared on the import declaration for non-dutiable commodities will be accepted so long as it is a “reasonable” transaction value.

Related party transaction

Customs may challenge declared values in related party transactions. The importer may be required to demonstrate that such transaction is at arm’s length and represents the “normal value”, which means the purchase price available to any independent buyer in the open market.

Other payments

The HKDCO prescribes that the dutiable value should generally include the value of the right to use any patent, design or trade mark in respect of the goods (including the value of any royaltyor license fee). Hong Kong Customs will treat all royalties and license fees connected to the imported goods as dutiable unless the importer can demonstrate otherwise.

Page 49: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 49

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Transfer pricing adjustments

Customs permits a trader to amend the customs value arising from a transfer pricing adjustment (TPA) provided that there are reasonable grounds for the adjustment. However, Customs does not generally accept a consolidated one-off adjustment, and any adjustment made should be done on an entry-by-entry basis (i.e. adjusting previously lodged individual declarations as appropriate). Traders should file a voluntary disclosure with Customs detailing the basis for the pricing change and any duty or charges payable or if a refund is sought

Origin

Preferential origin

Regional agreements in force

European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland)

Bilateral agreements in force

Closer Economic Partnership Agreement (China, Macau), New Zealand, Chile

Preferential certificates of origin can be applied for at the HKTID or one of the five following Government Approved Certification Organisations (GACOs):

1. The Hong Kong General Chamber of Commerce2. The Federation of Hong Kong Industries3. The Chinese Manufacturers’ Association of Hong Kong4. The Chinese General Chamber of Commerce5. The Indian Chamber of Commerce, Hong Kong

Non preferential origin

Non-preferential certificates of origin can be applied for with the HKTID or one of the GACOs.

Managing customs and trade compliance

Customs audits and investigations

Hong Kong Customs does not administer a standard audit programme or timeframe. However, Customs closely monitors import and export transactions and carries out investigations based on high risk profiling. The scope of an investigation varies but generally includes document retention periods, payment of duties and declaration charges.

Hong Kong

Page 50: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

50 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Inaccurate or incomplete lodging of declaration

On summary conviction, a fine of HK$10,000 per declaration.

Inadequate record keeping

A fine of HK$5,000 per declaration.

Inadequate licensing for strategic commodities

On summary conviction, a fine of HK$500,000 and imprisonment of up to two years; on conviction on indictment, an unlimited fine and imprisonment of up to seven years.

Voluntary Disclosure

There is no formal voluntary disclosure process in Hong Kong. However, Customs and the relevant authorities such as the HKTID, are generally receptive to voluntary disclosures (via paper submission or meetings) to resolve cases with traders. There is no guarantee that penalties will be waived or reduced.

Appeal and dispute settlement

Traders may lodge an appeal to the Compliant Appeals Committee if they are not satisfied with the investigation results.

The HKTID inspects the licensing obligations of traders, including applications for strategic commodities. When HKTID identifies a case of non-compliance, it may direct the case to Customs for further investigation.

Penalties

The most frequently occurring offences in Hong Kong and the associated penalties are summarised below.

Page 51: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 51

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Statute of limitations According to the Hong Kong Import and Export Ordinance, in any case of an offence, other than an indictable offence, a complaint shall be made or an information laid in respect of such offence within 2 years from the time when the matter of such complaint or information respectively arose. Record keeping requirements for import/export documents are not specified in the Import and Export Ordinance in Hong Kong. Generally, Customs require import/export documents to be kept for at least 2 years.

For any financial and tax related matters, companies shall observe the Companies Ordinance and the Inland Revenue Ordinance, and they provide documentation retention requirement which may extend to 7 years.

Hong Kong

Page 52: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

52 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 53: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 53

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

India

Customs & international trade framework

International organisations and agreements

India is presently a member and/or signatory party of the followinginternational organisations and agreements. Only those relevant totrade or regulation of import and export transactions have beenincluded:• World Trade Organization (formerly General Agreement on Tariffs

and Trade)• World Customs Organization • International Convention on the Harmonized System (HS

Convention)• Basel Convention, concerning import and export of hazardous

waste• Kimberley Process, concerning trade in diamonds• Chemical Weapons Convention• United Nations Conference on Trade and Development (UNCTAD)• The Economic and Social Commission for Asia and the Pacific

(ESCAP)• ATA Carnet• The Convention on International Trade in Endangered Species of

Wild Fauna and Flora (CITES)• Trade Facilitation Agreement (TFA) (India ratified on 22 April

2016)

Roles and responsibilities of authorities

Authority RoleDirectorate General of Foreign Trade (DGFT)

Responsible for formulating and implementing import and export policies, issuing licenses to exporters, implementing various import and export schemes and regulating trade under preferential trade agreements.

Central Board of Excise and Customs (CBEC)

National agency for administering service tax, central excise and customs duties in India.

Page 54: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

54 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

CBEC would be reorganised for the implementa-tion of the Goods and Services Tax (GST) regime and will be renamed the Central Board of Indi-rect Taxes and Customs (CBIC)

Central Board of Indirect Taxes and Customs (CBIC)

CBIC would supervise the work of all its field formations and directorates. Assist the government in policy making in relation to GST, continuing central excise levy and customs functions.

Customs Authorities (a range of customs bodies/ levels collectively referred to as the Customs Authorities)

Administers customs regulations and assists in monitoring and supervising the clearance of imports to and exports from India.

Export Inspection Council

Export Promotion Councils (EPCs)

Responsible for the enforcement of quality control and compulsory pre-shipment inspection of various commodities intended for export.

Provide information and assistance to its members in developing and increasing their exports. Also monitors and encourages the observance of international standards and specifications by exporters. EPCs are industry and product specific.

Page 55: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 55

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Legislation

The principal legislation on implementing and facilitating import and export in India includes:

• Customs Act 1962• Customs Tariff Act 1975• India Foreign Trade Development and Regulation Act 1992• Foreign Trade Policy 2009-2014 (FTP)• Foreign Exchange Management Act 1999• Integrated Goods and Service Tax

There are further ancillary regulations which govern the import and export of specified products.

Import and export procedures

Registration

An Importer-Exporter Code (IEC) is required in order to conduct import or export activity in India. The IEC certificate is issued by DGFT upon application using the prescribed forms. Additionally, an exporter must register with the DGFT and acquire a Business Identification Number (BIN). Electronic form or e-IEC has been operationalized. However, an assessee continues to have an option to file an application for obtaining IEC manually. Further, it has been instructed that IEC’s to be issued in digital mode only. It has also been directed that all applications should be processed and disposed within two working days of their receipt.

A Non Resident Indian (NRI), including a company or firm, may also make an application for an IEC certificate in India. However, it is required to obtain special permission from the RBI before making an application.

A foreign company cannot apply for an IEC and must appoint an agent, who is a resident of India, to undertake import and export activities on its behalf.

India

Page 56: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

56 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Process

The import to and export from India are regulated by the Foreign Trade Policy. DGFT specifies the import and export procedures to be followed and regulates the licenses required. The assessment process for customs clearance for import or export is undertaken by the Customs Authorities.

Currently, importers and exporters may self-assess the amount of customs duty payable on import or export and, as such, the responsibility to declare information such as classification, applicable rate of duty, valuation and applicability of exemption notifications, is on the importer or exporter. The submission of documents and assessment process can be completed online using the Electronic Data Interchange (EDI) system. However, the EDI system is available only at selected seaports and airports.

Bill of Entry to be filed by the end of next day from the arrival of vessel or aircraft. A penalty to be levied for delayed presentation of Bill of Entry without sufficient cause.

Major importers, as notified by Customs, are entitled to utilise the Green Channel clearance facility. This provides importers with benefits such as customs clearance without the need for routine examination. “Major importers” may include importers who import high value and volume goods, importers with good customs compliance records and/or with good public sector undertakings, State Corporations, and research institutes.

Goods that require licenses for import or export may undergo a detailed inspection procedure by Customs.

Licenses

The majority of goods may be imported or exported without the requirement of a license. Certain items such as wild animals, animal products, specific food items and articles of wood are prohibited from export. The import and export of arms, weapon technology and/or related material from and to countries that include Iran, Iraq and North Korea is prohibited.

Categories of goods which require licenses for export include, but not limited to:

Page 57: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 57

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

• Special chemicals, organisms, materials and technologies (SCOMET) as notified by the DGFT;

• Live animals, such as cattle, horses and camels;• Seeds, such as wheat, paddy, cashew and plants;• Certain types of fertilisers.

Categories of goods which require licenses for import into India include, but are not limited to: • Precious and semi-precious stones;• Products related to safety and security;• Certain plants, animals and seeds;• Various types of marble, granite and travertine;• Insecticides, pharmaceuticals, and chemicals.

An application for an authorisation or license shall be submittedto DGFT or relevant Regional Authority. The DGFT and/or RegionalAuthority may grant or refuse to grant a license in accordance withthe prevailing laws in India. Further, the granting of a license orauthorisation is subject to terms and conditions such as the importor export price to be declared and end user conditions beingsatisfied.

Taxes and fees

Import duties are calculated on the basis of the tariff rate specifiedin the Harmonized System Code (HS Code) of classification. TheGovernment periodically issues notifications to provide dutyconcessions or exemptions for specified goods and subject tofulfilment of conditions.

Customs duty comprises the following components: • Basic customs duty (BCD)• Additional duty of customs equivalent to Central Excise Duty,

leviable in India on manufacture of goods (CVD)• Additional duty of customs equivalent to Value Added Tax,

leviable in India on sale of goods (SAD)• Education Cesses of Customs

There are also various other duties, such as the National Calamity

India

Page 58: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

58 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Contingent Duty (NCCD), Anti-Dumping Duty, Safeguard Duty andother cesses, applicable on certain imported goods as notified bythe Customs Authorities.

The time limit for payment of customs duty is 1 day from the date offiling the Bill of Entry.

Under the GST regime, the Customs duty would comprise of thefollowing components: • Basic customs duty (BCD• Integrated Goods and Service Tax (IGST)

The DGFT and Customs Authorities may charge fees for clearance,licenses and other miscellaneous activities involved in the importand export process.

Customs Authorities.The Time for payment of customs duty has been reduced from 2 days to 1 day from the date of filing the Bill of Entry.

Under the GST regime, the Customs duty would comprise of the following components:

• Basic customs duty (BCD• Integrated Goods and Service Tax (IGST)

The DGFT and Customs Authorities may charge fees for clearance, licenses and other miscellaneous activities involved in the import and export process.

Duty refunds

The CVD and SAD are meant to countervail the indirect taxes in the form of excise taxes and VAT applicable in India. In case where the imported goods are used for further manufacturing, the importer manufacturer in India can avail credit of the Additional CVD paid and avail a set-off against the manufacturer’s State VAT liability.Customs law in India provides for refund of Additional CVD paid at the time of import of goods, in case the said imported goods have been re-sold in India in as such condition on payment of appropriate Sales tax (i.e. Indian State VAT in case of intra-state sale/Central Sales Tax in case of inter-state sale). CVD is non-

Page 59: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 59

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

refundable and would be a cost to the importer.

Key conditions for claiming refund are:1. All components of custom duty, including Additional CVD has been paid at the time of import;2. On sale of such goods appropriate sales tax has to be paid;3. The burden of the duty paid has not been passed on by the importer and the principle of unjust enrichment is not attracted i.e. the burden of SAD should not have been passed on to the buyer;4. A refund claim of the SAD paid has to be filed with the jurisdictional customs officer before the expiry of one year from the date of payment of SAD along with the requisite documents.

Duty drawback scheme enables refund of duty on imported goods which are re-exported in their original form or that are used for manufacture of goods which are exported.

Trade facilitation

The DGFT provides facility of online filing of various applications under the FTP by exporters/ importers such as IEC application and for claiming various benefits under different schemes. Further, documents such as certificates issued by Chartered accountants/ Company Secretary/ Cost Accountant etc. can also be uploaded in digital form. This move is towards paperless processing of reward schemes. Furthermore, the procedures have been simplified, digitized and e-governance is now in place.

As a step towards harmonization and simplification of the procedures, a comprehensive scheme for promoting export of merchandise has been prescribed. A similar incentive has been granted to service exporters.

India

Page 60: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

60 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Duty suspension and exemptions for export operations

Scheme DescriptionMerchandise Exports From India Scheme (MEIS)

The objective of the scheme is to provide rewards to exporters for offsetting infrastructural inefficiencies and associated costs involved in export of goods/ products, which are produced/manufactured in India, especially those having high export intensity, employment potential and thereby enhancing India’s export competitiveness.

Under MEIS, exports of notified goods to different countries are eligible for rewards in the form of duty credit scrips that can be utilised, unconditionally, to pay customs duty and other local taxes. The scrip is transferable.

Service Export From India Scheme (SEIS)

The objective of the scheme is to encourage export of notified services from India. Under SEIS, service providers of notified services are eligible for rewards in the form of duty credit scrips. Same as the MEIS, scrips can be unconditionally utilised to pay customs duty and other local taxes. The scrip is transferable.

Advance Authorisation Scheme

This scheme enables duty free import of materials which are physically incorporated in the manufacture of an export product, but subject to fulfilment of value add and other certain criteria.

Users of the scheme must satisfy various conditions and fulfil export obligations of a predetermined quantity or value notified by the Customs Authorities within a specified period of time.

Page 61: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 61

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Duty Free Import Authorisation (DFIA) Scheme

This scheme enables duty free import of inputs required for production of exported goods. Users of the scheme must meet a value add criteria.

The DFIA may be transferred to another user once the export obligation is fulfilled. Request for transfer of DFIA may be made to regional authority within a period of 12 months from date of export or 6 months from the date of realization of export proceeds, whichever is later.

Export Promotion Capital Goods (EPCG) Schem)

This scheme enables import of capital goods at a concessional rate of customs duty. Use of the scheme is subject to fulfilment of an export obligation over a notified period. In case of indigenous sourcing of capital goods under the authorization, the export obligation shall be reduced by 25% to boost ‘Make in India’

Duty Drawback Scheme

This scheme enables refund of duty on imported goods which are re-exported in their original form or that are used for manufacture of goods which are exported.

India

Page 62: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

62 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017Bonded facilities and other incentive schemes

Scheme Description

Private & PublicBonded Warehouse

Temporary facility for storage of imported goods. Customs duty is deferred until goods are removed for domestic consumption.

Special Economic Zones(SEZ)

Special geographical area established for the promotion for export of goods and services. The area designated as a SEZ is considered as “outside India” and a sale to a SEZ is treated as an export as per the SEZ Act, 2005.

Servicing and manufacturing activities are permitted within a SEZ. A SEZ user must be a positive “net foreign exchange” earner. Fiscal and tax incentives are available to SEZ service providers and manufacturers. Trade facilitations, such as faster customs clearance and other infrastructural

Free Trade Warehousing Zones (FTWZ)

Similar to a SEZ, however, the activities which can be performed in a FTWZ are restricted in comparison. Simple packing, re-packing and la-belling activities are permitted. Fiscal and tax incentives are available to FTWZ units (businesses).

Page 63: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 63

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Export Oriented Units Scheme/Electronic Hard-ware Technology Parks Scheme/Software Tech-nology Parks Scheme /Bio Technology Parks Scheme

Various schemes available for units that export entire production of goods and/or services. Limited domestic sales allowed subject to achieving Net Foreign Exchange earnings and other prescribed conditions. Eligible activities include manufacture of goods, repair, remaking, reconditioning, re-engineering and rendering of specified services. Trading activities are not covered under this scheme.Unit must be a net positive foreign exchange earner and meet the minimum investment criteria. In case of genuine hardships and adverse market conditions, the period of 5 years for NFE completion can be extended by one year. Units are eligible for fiscal and tax incentives.

In respect of Export Oriented Units, permission to export a prohibited item may be considered, by BOA, on a case to case basis, provided raw materials are imported

One star/ two star/ three star/ four star/ five star export house

Schemes available to manufacturers, exporters and service providers. The status category of the business would be determined based on total FOB value of

export proceed realized during cur-rent and previous two financial years. Privileges include faster customs clearance for imports and exports on a self declaration basis. Additionally other exemptions depending on the category of status granted.

India

Page 64: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

64 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Market Access Initiative (MAI)

The MAI scheme is intended to provide financial assistance for medium term export promotion efforts with a sharp focus on a country and product. The financial assistance is available for Export Promotion Councils, Industry and Trade associations , Agencies of State Governments , Indian Commercial Missions abroad and other eligible entities as may be notified from time to time. A whole range of activities can be funded under the MAI scheme. These include market studies, setting up of showroom/ warehouse, sales promotion campaigns, international departmental stores, publicity campaigns, participation in international trade fairs, brand promotion, registration charges for pharmaceuticals and testing charges for engineering products etc. Each of these export promotion activities can receive financial assistance from the Government ranging from 25% to 100% of the total cost depending upon the activity and the implementing agency

Marketing Development Assistance (MDA)

The MDA Scheme is intended to provide financial assistance for a range of export promotion activities implemented by export promotion councils, industry and trade associations on a regular basis every year.

As per the revised MDA guidelines with effect from 1st April,2004 assistance under MDA is available for exporters with annual export turnover upto Rs 5 crores.

These include participation in Trade Fairs and Buyer Seller meets abroad or in India, export promotion seminars, etc.

Page 65: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 65

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Supply chain security

Introduced by World Customs Organization (“WCO”) to secure the global supply chain mechanism, Tthe Authorised Economic Operator (AEO) programme is implemented by the Director General of Inspection with an aim to increase security in global trade and the legitimate flow of goods. Accredited Client Programme (‘ACP’) has been merged with a new AEO Programme. The new Programme offers following AEO certification:

• Economic operators other than Importers and Exporters – AEO LO • Importers and Exporters - AEO Tier 1, AEO Tier 2 and AEO Tier 3 By registering under the programme, importers enjoy benefits such as:

• Deferment of duty payment • Reduced examination and inspection, • aAcceptance of pre-arrival import and export declarations, and • Qquicker approval for new warehouses,.• Bank Guarantee - 50% of original requirement • Onsite audit will be conducted once in two years only• 24/7 clearances on request at all sea ports and airports without

Merchant Overtime Fee• Dispute resolution at the level of Adjudicating Authorities /

Investigation – within 6 to 9 months• ID cards for hassle free entry to Custom Houses, CFSs and ICDs, • Expeditious disposal of refund and rebates, etc.

Any person involved in an international supply chain may apply for AEO status, this includes manufacturers, importers, logistics providers, carriers and freight forwarders.The AEO status is granted by the Directorate General of Inspection subject to the fulfilment of all requisite conditions. Normally, the AEO assessment process is completed within 90 days of the AEO application being filed.

Rulings

Any person that is classified as an “applicant” for the purpose of making an application for an advanced ruling may apply for an advance ruling from the Authority for Advance Ruling in India. Applicants can include non-residents setting up a joint venture in India, resident Public Limited Companies, resident Private Limited and all resident assesses (which includes a firm, limited liability partnership, sole proprietorship, and one person company). An application may be filed for an advanced ruling with regards to any question of law or fact regarding customs, excise or service taxes

India

Page 66: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

66 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

affecting any proposed activity or a proposed new line of business. An advanced ruling is binding on the applicant who sought an advance ruling and there is no option to appeal a ruling.

Classification

India has adopted the Indian Trade Classification (ITC) based on the Harmonized System of coding for import and export operations. The Customs Authorities uses eight digit ITC - HS codes for the purposes of classification. The creation or addition of new codes is regulated by DGFT.

With the amendments notified in Section 141 and 146 of the Finance Act 2016, India now implements HS 2017 version effective from 1 January 2017. The new version includes 233 sets of amendments

Valuation

General

India follows the WTO Agreement on Customs Valuation for the determination of the value of imported goods.

Customs duty is levied on an ad valorem basis except where the tariff values are fixed. The Customs Valuation Rules provide the methods of valuation based on the Agreement on Customs Valuation. The transaction value method is the primary basis of valuation.

Related party transactions

As per the Customs Valuation Rules, 2007 (valuation rules), the valuation of related party transactions is undertaken by the Special Valuation Branch (SVB). Where the buyer and seller are related, it is assumed that the relationship has influenced the price. Therefore, the importer is required to prove to the authorities that the import is at arm’s length price failing which the SVB may determine the value of the imports as per the applicable provisions or rules under the valuation rules.

Other payments

• In certain cases, while determining the transaction value, the customs authorities assess whether cost of services incurred by the buyer for importing goods into India, including the cost of packing and cost of containers, where not already included in the price, is considered as a condition of sale of goods and determine

Page 67: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 67

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

whether such payment should be added to the transaction value for customs levy.

• Value of free of charge goods, services such as engineering, art work and design work undertaken outside India and are necessary for production of the imported goods.

• Payments such as royalties, license fees, transfer of intellectual property where the fees are payable as a condition of sale of the goods to the importer in India.

• The value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues, directly or indirectly, to the seller.

• All other payments made as condition of sale of goods being valued made directly or to third party to satisfy obligation of the seller to the extent not included in the price.

Transfer pricing

Importers are required to maintain information on comparable as per their transfer pricing documentation to demonstrate to the authorities that the price of the imports are at arm’s length and not influenced by the relationship of the parties.

Customs, after verification, can decide to increase the value of the imports if the transfer price is found to be much lower than the value of the goods.

If there is a retroactive amendment to the transfer price, the adjustment must be reported to the Customs Authorities and any additional duty payment if required, must also be paid with interest.

Origin

Preferential origin

Regional agreements in force

ASEAN, Asia Pacific Trade Agreement, MER-COSUR, South Asian Free Trade Agreement, Tariff Scheme for Least Developed Countries, SAARC Preferential Trading Agreement

Bilateral agreements in force

Afghanistan, Bhutan, Chile, Japan, Korea, Ma-laysia, Nepal, Singapore, South Africa, Sri Lanka,U.A.R. and Yugoslavia

India

Page 68: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

68 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Non preferential origin

Non preferential origin certificates can be procured from any of the agencies notified by the Customs Authorities such as the DGFT and Federation of Indian Export Organisations for a fee payment of approximately US$ 5.

Managing customs and trade compliance

Customs audits and investigations

In order to verify the validity of a self-assessed customs value, the Post Clearance Audit Scheme was established to audit the assessment of the importer or exporter. An onsite audit is undertaken on a periodic basis and includes a check of documents and records at the premises of the importer or exporter.

Penalties

[Note: for ease of understanding, penalties are expresses in US$s only for the purposes of this guide; in practice Indian Rupiah amounts apply]

The specific customs penalties are summarised below. • In respect of improper import, export, or misdeclaration of goods imported or exported, a penalty not exceeding the duty sought to be evaded or five thousand rupees; whichever is greater is prescribed. • Short levy or non-levy of duty due to collusion, suppression of facts, willful misstatement, etc. is subject to a penalty equal to the amount of the under paid duty plus interest. • Non accounting for goods imported or exported is subject to a penalty of up to twice the amount of duty that is chargeable on the goods. • Certain offences are declared as criminal and not subject to bail such as:

Agreements under negotiation

Australia, Bangladesh, Canada, European Un-ion, Gulf Cooperation Council, Indonesia, Mal-dives, Mongolia, Regional Comprehensive Economic Partnership (RCEP)

Page 69: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 69

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

− Evasion of tax exceeding approximately US$ 83,000− Offences in relation to prohibited goods notified− Import or export of any goods exceeding approximately US$ 166,000, which have not been declared in accordance with the Customs Act− Fraudulently availing or attempting to avail drawback on goods exceeding approximately US$ 83,000

Furthermore, the Customs Authorities can provisionally attach property in cases where duty has not been paid due to collusion, willful misstatement or suppression of facts.

Where no penalty is expressly provided for, the general penalty imposed is a maximum of US$ 1,600.

Voluntary disclosure In case of short levy, non-levy of duty, undervaluation of goods, wrong classification or incorrect application of any exemption notification which results in the wrong disclosure of the duty liability to the authorities, the importer or exporter can make an application to the settlement commission fully disclosing the duty liable to be paid.

The importer or exporter must make additional payments with interest and the settlement commission will pass an order with the terms of settlement or amount of settlement, if any. Such application can be made only if the additional amount to be paid exceeds US$5,000.

The settlement commission, if satisfied that full disclosure is made and there is full co-operation, may grant the importer or exporter immunity from prosecution and penalties.

Appeal and dispute settlement

Indirect Tax Dispute Resolution Scheme

Indirect Tax Dispute Resolution Scheme was introduced in 2016. This scheme is applicable to all importers, Customs Brokers, and the member of the Trade.Complaints would be broadly categorised into the following three categories:

India

Page 70: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

70 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

(i) Quality complaints;(ii) Complaints other than quality complaints against registered exporters; and(iii) Complaints other than those at (i) & (ii) above.

The Customs & Central Excise Settlement Commission

The Commission has its Principal Bench at New Delhi and three Additional Benches at Chennai, Kolkata and Mumbai.

The basic objective of setting up of the Settlement Commission is to expedite payments of Customs & Excise duties involved in disputes by avoiding costly and time consuming litigation process and to give an opportunity to tax payers to come clean who may have evaded payments of duty.

The proceedings before the Settlement Commission are declared judicial proceedings. The Settlement Commission if it is satisfied about bonafide conduct of the applicant can grant immunity from prosecution or imposition of penalty, fine, either in whole or in part. Settlement of a case should be within nine months from the date of the application. The period can be extended by a further period of three months.

Statute of limitations

In case of duties not levied or not paid or short-levied or short paid, the period of limitation for issuing a show cause notice is 24 months. However, in case of fraud, collusion, suppression of facts, willful misrepresentation, etc. is involved this limitation can be extended up to a period of five years.

Page 71: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 71

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 72: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

72 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Indonesia

Customs & international trade framework

International organisations and agreements

Indonesia is a member and/or signatory party of the following international organizations and agreements relevant to the governance and regulation of import and export transactions:• World Trade Organization (formerly General Agreement on Tariffs and Trade)• International Convention on the Harmonized System (HS Convention)• ASEAN Harmonized Tariff Nomenclature • The International Convention on the Simplification and Harmonization of Customs Procedures • ATA Carnet system • Chemical Weapons Convention • The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)• Basel Convention concerning import/export of hazardous waste• Kimberley Process

Roles and responsibilities of authorities

Authority RoleIndonesia Customs A department (general directorate) of the

Ministry of Finance (MOF), responsible for monitoring the movement of goods in and out of Indonesia customs territory and for collection of import and export duty, excise and other import taxes.

Ministry of Trade and other ministries

Responsible for the control of trade in goods.

Food & Drugs Control Body

A state-owned agency responsible for the supervision and investigation of the distribution and sale of food and medicine in Indonesia.

Tax Authority A department (general directorate) under MOF, responsible for formulating and implementing policies and technical standardisation in the field of taxation.

Page 73: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 73

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Central Bank of Indonesia

Responsible for the control of the proceeds from exports.

Legislation

The principal customs legislation of Indonesia is customs law No. 10/ 1995 and its amendment No. 17/2006, Excise Law No. 11/1995 and its amendment No. 39/2007 and the implementing regulations. There are further implementing regulations published by various Ministries on the prohibition and limitation of import and export of goods.

Other laws relevant to customs, trade and excise matters in Indonesia include the Free Trade Zone Law and Tax Court Law.

Customs legislation can be accessed at www.beacukai.go.id

Import and export procedures

Registration

A business intending to import and export goods in Indonesia must have Importer Identification Number (API/Angka Pengenal Impor). Only an Indonesian resident individual or entity can act as the importer or exporter of record. Additionally, a new company invest in Indonesia currently will only have the Tax Payer ID (NPWP/Nomor Pengenal Wajib Pajak) as their Customs Identity Number (NIK/Nomor Identitas Kepabeanan).

Process

Import and export declarations are filed using the Electronic Data Interchange (EDI) system. Import clearance time is vary depending on the clearance lane used (green, yellow or red). Duties and taxes must be paid prior to customs clearance. All stakeholders involved in the import and export process, including Customs, national banks and other regulatory bodies such as MOT, have an access to the Indonesia National Single Window (INSW) portal to monitor import and export activities conducted by the Company.

Licenses

Goods that are required specific import licenses in Indonesia are:• Alcoholic beverages; • Animal and animal products ;• Cements; • Cosmetics;

Indonesia

Page 74: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

74 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

• Chemicals; • Children toys; • Clothing and other textile products; • Electronics; • Food and beverages products; • Food supplements; • Footwear and other accessories; • Lubricants; • Medicines and pharmaceutical goods; • Optical discs; • Sugar; • Steel; • Telecommunication devices (cellular phones, handheld and

tablet computers); and• Tobacco products.

Taxes and fees

Goods may be subject to the following taxes at importation:

• Import duties;• Value Added Tax (VAT);• Prepaid Income Tax Article 22; • Excise duties, applicable to ethyl alcohol, alcoholic drinks and

tobacco products; and/or• Sales Tax on Luxury Goods (STLG), applicable to specified

imported goods including vehicles and categories of electronic goods

Duty refunds

A partial or full import duty refund can be made to the Importer in case of the following:• Excess payment of import duty due to the stipulation of import duty tariff and/or customs value by the Customs and Excise officer;• Excess payment of import duty due to re-stipulation of import duty tariff and / or customs value by the Director General of Customs and Excise;• Overpayment of Import Duty due to a mistake in administration (writing error, calculation error, etc.);

Page 75: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 75

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Free Trade Zone (FTZ)

Goods entered into and goods distributed inside a FTZ are exempted from import duty, import taxes (VAT, STLG and Prepaid Income Tax Article 22) and excises.

Import Duty Exemption

Raw materials can be imported with the exemption of import duty with the condition that the finished products used these raw materials are exported.

Import Duty Drawback

Import duty paid on raw materials incorporated into finished products which are subsequently exported can be refunded.

• Import of goods subject to exemption or relief of import duty;• Import of goods which for some reason must be re-exported or destroyed under the supervision of the Customs and Excise Officer;• Import of goods before being given import approval to be used to find actual quantities smaller than those paid by import duty, defects, not goods ordered, or of lower quality;• Objection decision;• Overpayment of Import Duty as a result of the Appeals Court decision.

Application for refunds is submitted to the relevant Customs office attached with relevant supporting document, such as:• Objection or appeal decision• Commercial Invoice• Packing list• Arrival notice/freight notification or delivery order• Bill of Lading/ Airway Bill• Any other documents required by Indonesia Customs to verify the claim

All successful refunds will be credited directly to the company account.

Trade facilitation

Duty suspension and exemptions

Indonesia

Page 76: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

76 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Masterlist There is exemption of import duty for capital goods and raw materials to meet two year production requirements for companies operating in certain industries. There is also a VAT exemption for capital goods (either imported or locally sourced) that should be applied to Tax Authority. The Prepaid Income Tax Article 22 can be exempted provided that the company is a new investment or in a loss making position.

Temporary Import There are two types of temporary import:a) Temporary import with exemption

facility (Import duty and import taxes are

exempted and must be secured with a bank guarantee. This applies to certain goods such as aircraft, vessels, etc.)

b) Temporary import with relief facility (Import duty is reduced to 2% of the

total amount due per month and the Prepaid Income Tax Article 22 is also exempted. The VAT must be paid in full. The balance of the unpaid import duty and Prepaid Income Tax Article 22 must be secured with a bank guarantee).

Bonded warehousing and processing

Bonded Zone A facility to promote exports by exempting imported capital equipment and raw materials from import duty and other import taxes provided that the finished goods are predominantly destined for export. A Bonded Zone company is only allowed to sell goods to the domestic market for 50% of the exports value and/or sales value to other Bonded Zones, Free Trade Zones and other Economic Zone of the previous year.

Bonded Warehouse The payment of import duty and import taxes is deferred on goods imported into a Bonded Warehouse until the goods have been delivered from the Bonded Warehouse to the domestic market. The

Page 77: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 77

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

goods must be destined to support a manufacturing industry or to supply duty free shops. Goods may be stored up to one year.

Bonded Logistics Centre

A Bonded Logistic Centre (Pusat Logistik Berikat/PLB) facility is provided to companies who store imported goods from outside the Indonesian Customs Area and/or goods from other places within the Indonesia Customs Area and conduct one or more activities.

In a PLB goods can be stored up to three years. In addition, PLB facility users can use Certificates of Origin flexibly when delivering imported goods to other places within the Indonesia Customs Area.

Customs Clearance Schemes

Green Lane Importer An import clearance process without physical goods inspection, but with document examination after the issuance of Release of Goods Approval Letter (“SPPB”/”Surat Persetujuan Pengeluaran Barang”).

Yellow Lane Importer An import clearance process without physical goods inspection, but with document examination before the issuance of SPPB.

Red Lane Importer An import clearance process with physical goods inspection and document examination before the issuance of SPPB.

A red lane importer status is usually for :1. New importers2. Importers high risk category3. Temporary import goods4. Mining Operational Goods type II5. Re-import goods6. Random physical checks7. Certain imported goods determined by government

Indonesia

Page 78: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

78 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Supply chain security

Companies with Authorised Economic Operator (AEO) status can benefit from the following favourable treatment by Customs:

• Quick release of goods with no documental and/or physical examination

• Shorter transit time• Access to information on the activities of other AEOs• Preferential service in the case of elevated threat levels and/or

simplification of customs system and procedures

Classification

Indonesia adopted the Harmonized System (HS) of classification in 1989 and its tariff also incorporates the ASEAN Harmonized Tariff Nomenclature (AHTN). Effective from 1 March 2017, Indonesia implements HS 2017.

Valuation

General

The value to be used as the basis for calculating import duty and import taxes is the “transaction value” of goods subject to certain requirements.

The transaction value constitutes the price paid or payable by a buyer to the seller on goods sold for export. Further costs may be

Imported goods will be in a high risk commodity code and/or come from high risk countries.

Main Partner (MITA) MITA is a status granted to an exporter and/or importer who will enjoy special treatment due to a good track record in customs activities (e.g. compliance with customs provisions for the past six months, no customs assessments etc.). The clearance process for MITA is simple and quick (no documentation and physical inspection).

Page 79: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 79

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Certificates of origin are issued by the Indonesia Ministry of Trade (MOT).

Regional agreements in force

ASEAN Trade in Goods (ATIGA), through ASEAN with Australia, China, India, Japan, Korea and New Zealand.

Bilateral agreements in force

Japan and Pakistan

required to be added to the transaction value on the basis they are not already included in the price paid or payable. As a member of World Trade Organization (WTO), Indonesia also adopts the WTO valuation methodology.

Related party transactions

Customs may query related party transactions, whether or not they are at arm’s length price.

Other payments related to the imported goods

Royalty paid by the Company shall be added to the transaction value, if: • they are paid by the purchaser directly or indirectly;• they are a condition of purchasing the imported goods;• they are related to the imported goods for which the customs value is being determined; and • they are not included in the price actually paid or which should be paid.

A proportion of the income received by an importer from the resale, the use, or utilization of the imported goods, which is then directly or indirectly distributed to the seller, should also be added to the transaction value. This portion of the income is called as proceeds.

Rulings

An importer can apply for a valuation ruling or a customs advice prior to a shipment. In addition, an importer can also apply for a classification ruling prior to a shipment and it is valid for three years.

Origin

Preferential origin

Indonesia

Page 80: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

80 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Managing customs and trade compliance

Customs audits and investigations

A customs audit is an examination of the financial statements, books, records and any documentation which is basic evidence of the bookkeeping, securities related to the company business activities and/or goods traded.

According to Indonesia customs law the documentation retention period for import and export procedures is 10 years.

Penalties

Failure to keep proper records is subject to a penalty of Rp. 25 million and companies with no record keeping procedures are subject to a penalty of Rp. 50 million

Under payment of import duty due to incorrect customs value and quantity or type of goods discrepancy

Administrative penalty as a percentage of the underpaid duty amount

up to 25% >25 % - 50% >50% - 75% >75% - 100% above 100%

100%200%400%700%1000%

Where the rate of import duty is 0% there is an administrative penalty applicable of Rp. 5 million per import document.

Voluntary disclosure

Voluntary disclosure may mitigate the customs penalty risks arising from an incorrect customs valuation due to futures prices (commodities), royalty, and proceeds.

Page 81: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 81

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Dispute settlement An importer can submit an objection pertaining to a Customs Assessment within 60 days from the assessment date. For the objection process, the importer must settle a payment or put a bank guarantee in the amount of the total import duty and import taxes payable (in full) as stated in the Customs Assessment.

Further, the importer can submit an appeal to the Customs Objection result or Customs Audit result within 60 days from the date of the Customs Objection result.

Statute of limitations For general customs audit, the statute of limitations is ten years, except for matters related to customs value and tariff classification, where the statute of limitations is two years.

Indonesia

Page 82: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

82 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 83: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 83

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Japan

Customs & international trade framework

International organisations and agreements

Japan is a member and/or signatory party of the following international organizations and agreements relevant to the governance and regulation of import and export transactions:• World Trade Organization (formerly General Agreement on Tariff and Trade)• World Customs Organization• International Convention on the Harmonized System (HS Convention)• The International Convention on the Simplification and Harmonization of Customs Procedures• ATA Carnet System• Chemical Weapons Convention• The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)• Basel Convention• Kimberley Process, concerning trade in diamonds• Trade Facilitation Agreement (TFA) (Japan ratified on 1 June 2015)

Authority RoleCustoms and Tariff Bureau

An internal bureau of Japan’s Ministry of Finance. Responsible for the strategic planning and management of a wide range of trade matters including customs duties, collection of import taxes, import and export controls, operation of customs areas and trade statistics.

Japan Customs Responsible for the collection of import taxes, border checks, supply chain security and customs facilitation measures.

Ministry of Economy, Trade and Industry (METI)

Responsible for matters relating to export controls under the Japanese Foreign Exchange and Foreign Trade Law and tariff quotas.

Page 84: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

84 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Legislation

The principal legislation for customs and trade affairs in Japan are:• Customs law;• Customs Tariff Law;• Temporary Tariff Measures Law;• Customs Brokerage Law and;• Foreign Exchange and Foreign Trade Law, Import Trade Control

Order, Export Trade Control Order. Further key legislation concerning trade in Japan includes:• Poisonous and Deleterious Substance Control Law;• Pharmaceutical Affairs Law and;• Law Concerning Screening of Chemical Substances and

Regulations on their Manufacture.

Import and export procedures

Registration

The Nippon Automated Cargo and Port Consolidated System (NACCS) is the information and communication platform used by Customs to facilitate international trade. Operated as a public-private system, NACCS plays a major role in processing import and export declarations at seaports and airports, and is managed by the Japan Association for Simplification of International Trade Procedures (JASTPRO). Companies engaged in import and export activities can register with JASTPRO and obtain a NACCS code, which provides customs benefits including simplified customs procedures.

Common practice is for a resident company (e.g. Japanese affiliate) or individual (e.g. Japanese customer) to act as an importer and/or exporter. A non-resident company is eligible to take on this role by appointing a Customs Affairs Representative (e.g. Japanese affiliate or customs broker) to file import and export declarations and performs other customs clearance procedures on behalf of the non-resident company.

Process

A company wishing to import goods must declare them to the respective customs office holding jurisdiction over the bonded area (designated area where imported goods can be temporarily stored until the completion of the customs formalities) and obtain an import permit following inspection of the goods and payment of customs duties and excise taxes (both national and local), as applicable.

Page 85: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 85

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

The exporter of goods must declare the export to Japan Customs and obtain an export permit following physical examination of the goods. The declaration should be accompanied by supporting documentation such as an invoice and, if required by Japanese law and regulation other than the customs law, other documents such as a permit, approval or license.

Licenses

When goods for import or export require a permit and approval under laws and regulations other than the customs law, a certificate of application for a permit and approval must be submitted prior to clearance to the relevant Customs office.

Taxes and fees

Customs duties (an ad valorem rate, a specific rate, or a mixed ad valorem and specific rate), consumption tax and local consumption tax are levied on imported goods. The value of the taxable base is the sum of wholesale cost, freight and insurance (CIF).

In general, no duties are levied at export and export transactions are exempt from consumption tax.

Duty refunds

When there is an overpayment or wrong payment of duty and import consumption tax, the importer can claim a refund by submitting an application form. In principle refunds are available within five years from the date of the import permit.

Export Controls

The principal legislation on export control in Japan is provided in the Foreign Exchange and Foreign Trade Act, which outlines the basic framework and the principles to be applied to control exports. Japan Export Control covers the export, transship, brokering of tangible products and intangible technologies.

For both tangible products and intangible technologies, there are two types of export controls that are enforced in Japan; the “List Control”, and the so-called “Catch-All Control”.

1. List Control: Items or technologies are listed in the control list; or

Japan

Page 86: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

86 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Permanent duty reduction and exemption system stipulated by the Customs Tariff Law

There are a number of permanent customs duty reductions and exemptions available, which include:• Reduction or refund for deteriorated

or damaged goods stored in a bonded area.

• Reduction for goods exported for processing or repair.

• Reduction and exemption for raw materials for use in manufacturing.

• Reduction and exemption for re-imported goods.

• Exemption for special use (e.g. articles used for scientific research or education).

• Reduction and exemption for goods destined for re-exportation.

• Reduction and exemption for raw materials used in the production of exported finished goods.

• Refund and exemption for exportation of goods manufactured from duty-paid raw materials.

• Refund for export of goods whose nature and form do not change from the moment of import.

• Refund for the re-export of claimed goods

2. Catch-All Control: The export is under the provision of end-use, end-user condition

An exporter may obtain either an individual export license or a bulk export license for exporting items or technologies. If an exporter is not eligible to obtain the bulk export license, the exporter is required to apply for an individual export license for each instance it wishes to export its products.

Trade facilitation

Duty suspension and exemptions

Page 87: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 87

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Bonded Warehouse Long-term storage of foreign goods with duty suspended for a period not exceeding two years (may be extended).

Bonded Factory Duty suspension on foreign raw materials used for processing and manufacturing goods for export. Duty suspension period may not exceed two years (may be extended).

Bonded Display Area Display and demonstration of foreign goods for a length of time determined by the head of the customs office. Mainly used for temporary exhibitions of foreign goods not intended to be imported into Japan.

Integrated Customs Area

Offer similar functions to the Bonded Warehouse, Bonded Factory and the Bonded Display Area (long-term storage, processing and manufacturing, and exhibition of foreign goods with duty suspended for a period not exceeding two years (may be extended).

Temporary duty reduction and exemption system stipulated by the Temporary Tariff Measures Law

Exemption for imported aircraft parts.

Reduction for products manufactured from goods exported for processing or assembly.

Bonded Facilities

Designated Customs Area

Temporary storage of foreign goods with duty suspended for a period not exceeding one month. Mainly used for the purpose of ordinary customs clearance.

Japan

Page 88: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

88 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Customs Clearance

Japan Customs has developed an Authorized Economic Operator (AEO) program for importers, exporters, warehouse operators, customs brokers, logistics operators and manufacturers, which is consistent with the “SAFE Framework” developed by the World Customs Organization, and is focused on ensuring security in the international supply chain and a safe and secure society.

Benefits differ according to the nature of the business activities and, for example, the program provides AEO importers and AEO exporters with benefits such as compliance-reflected reduced examination and inspection. Furthermore, “pre-arrival lodgement of import declaration and permission”, “release of cargoes before duty/tax payment declaration” and “periodical lodgement of duty/ tax payment declaration” are allowed for AEO importers, and the requirement to deposit cargoes into the customs area before export permission is waived for AEO exporters.

Rulings

An advance ruling for classification, customs valuation, and country of origin can be obtained from Customs. Generally, an advance ruling requires an application to be submitted in written form, and is effective for up to three years.

Classification

The Customs Tariff Schedules of Japan is based on the International Convention on the Harmonized System (HS Convention). The Customs Tariff Schedules of Japan further divides the HS Nomenclature as required by local practices.

Japan has been implementing WCO HS since 1 January 1988 and, effective from 1 January 2017, uses the HS 2017 edition.

Valuation

General

The Customs Tariff Law prescribes detailed provisions in

Page 89: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 89

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

accordance with the WTO Customs Valuation Agreement. Methods of determining “customs value” as prescribed by the Customs Tariff Law consist of the primary (transaction value) method and alternative methods.

Related party transactions and transfer pricing

In general, Customs accepts the transaction value between a related seller and buyer calculated by applying any transfer pricing method so long as the transaction is a sale for import into Japan and the transaction value is at arm’s length.

Other payments

In recent years, Customs’ valuation audits have primarily focused on royalty payments, transfer pricing adjustments, and tangible and intangible assists provided free of charge or at reduced cost.

Origin

Preferential origin

Regional agreements in force or Signed

ASEAN, Trans-Pacific Partnership (TPP)

Bilateral agreements in force or Signed

Australia, Brunei, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, Peru, Philippines, Singapore, Switzerland, Thailand and Vietnam

Agreements under negotiation

Columbia, China and Korea (Trilateral), European Union, Regional Comprehensive Economic Partnership (RCEP) and Turkey

Negotiations postponed or suspended

Gulf Cooperation Council, Korea and Canada

Under the Chambers of Commerce and Industry Act, the Japan Chamber of Commerce and Industry (JCCI) is the issuing authority of certificates of origin (both preferential and non-preferential) for goods originating in Japan.

Japan

Page 90: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

90 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Non preferential origin

Companies applying for Non Preferential certificates of origin must register with JCCI and submit the requisite application materials.

Managing customs and trade compliance

Customs audits and investigations

Export and import audits are performed by designated teams assigned by Japan Customs. While the export audit focuses on procedural compliance, the import audit mainly focuses on the appropriateness of the duty and tax paid. Depending on the volume of imports or exports, the audit cycles may range from three to five years, and will be initiated through a notification of audit from Japan Customs, which will also include an initial information request.

Penalties

In the case of under payment of duty and/or import consumption tax at the time of filing the original import declaration, the applicable penalty is 10% of the under-paid amount. If the under-paid amount exceeds the principal tax paid at time of importation or JPY 500,000 (whichever is higher), the penalty will be collected at a rate of 15%. When there is a voluntarily disclosure before receiving the notification of conducting the customs audit, the full penalty will not be imposed but a 5% of penalty will be imposed for the disclosure made after receiving the notification.

In addition, per annum interest charges (2.8% since 1 January 2015, 2.9% for the period between 1 January 2014 to 31 December 2014 and 4.3% for the period on and before 31 December 2013) will be collected on the under-paid amount for up to 365 days after the original import declaration date.

The customs law sets out the range of violations and corresponding penalties. The maximum potential penalty (e.g. for export of prohibited goods) is imprisonment for up to 10 years and/or a penalty not exceeding JPY30,000,000.

Voluntary disclosure

In cases where a voluntary disclosure is made, the penalties described above (10% or 15% of the short-paid duty and import consumption tax amount) will not be imposed. A voluntary dis-closure must be made before notice or commencement of customs

Page 91: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 91

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

checks and audits, otherwise, as noted above, a 5% penalty may be imposed.

Appeal and dispute settlement

Traders can make a ‘request for reinvestigate’ to the Director-General of Customs by submitting a ‘Request form for reinvestigation’ or appeal to the Minister of Finance by submitting a ‘Request form for review’ before the due date for settlement.

Statute of limitations

The statute of limitations is five years. However, the statute of limitation becomes seven years, where fraud is involved.

Japan

Page 92: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

92 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 93: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 93

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

South Korea

Customs & international trade framework

International organisations and agreements

Korea is a member and/or signatory party of the following international organisations and agreements relevant to the governance and regulation of import and export transactions: • World Trade Organization (formerly General Agreement on Tariffs and Trade)• World Customs Organization • International Convention on the Harmonized System (HS Convention)• The International Convention on the Simplification and Harmonization of Customs Procedures • ATA Carnet system • Chemical Weapons Convention • The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)• Basel Convention, concerning import/export of hazardous waste • Kimberley Process, regarding trade in diamonds• Trade Facilitation Agreement (TFA) (Korea ratified on 30 July 2015)

Authority RoleKorea Customs Service

A department within the Ministry of Strategy and Finance. Responsible for the management of trade regulations, trade facilitation, and trade security. In charge of collecting import related taxes in Korea.

Ministry of Strategy and Finance (MOSF)

Responsible for proposing and implementing laws and regulations related to customs matters. Also responsible for overseeing and supervising Korea Customs Service and National Tax Service.

Ministry of Trade, Industry & Energy (MOTIE)

Responsible for promoting global trade and establishing regulations related to country of origin and export controls.

Page 94: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

94 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Legislation

The Customs Law (Article 330) is the principal legislation for the administration of customs duties. In addition to the Customs Law, there are further laws concerning trade in Korea, some of the most important of which are:• Foreign Exchange Transaction Law • Foreign Trade Law • Quality Control and Safety Management of Industrial Products Law• Law on Implementation of Free Trade Agreement• Notice on Trade of Controlled Goods• Notice on Operation of Country of Origin System• Notices on Bonded Facilities

Customs legislation can be accessed at https://unipass.customs.go.kr/clip/index.do

Import and export procedures

Registration

A business intending to import and/or export or operate a bonded warehouse must register with the Korea Customs Service. Upon successful registration, it will be assigned a customs registration number.

Any person or entity has the right to import goods. The party in whose name the entry is made is the importer of record (IOR). The IOR must generally be either the owner or buyer of the imported goods or an authorised agent, provided that the agent is appropriately designated by the owner, purchaser or consignee of the goods.

Process

For the purpose of filing the import declaration, the company can declare the import via the Korea Customs Service database, “Unipass,” with a unique customs registration number assigned to the company upon request. The request for a customs registration number can be filed by providing Unipass with basic company information (e.g. business registration number).

Page 95: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 95

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Licenses

The categories of goods requiring an import license into Korea include, but are not limited to: • Animals and animal products• Chemicals• Chlorofluorocarbons (CFCs)• Cosmetics• Firearms, swords and explosives• Fishery products• Medicines and pharmaceutical goods• Telecommunications equipment

The categories of goods requiring an export license out of Korea include, but are not limited to:

• Commodities containing endangered species• Certain animals bred in Korea• Goods listed under the Notice on Trade of Controlled Goods

Import and export license applications are submitted online via Unipass.

Taxes and fees

Goods may be subject to the following taxes at import:

• Customs duties calculated on an ad valorem basis • Value Added Tax (VAT), 10%• Individual consumption tax for specific goods, the rate varies

depending on the product

There are no taxes levied at export.

In general, there are no customs clearance fees charged by Customs at import and export. However, in special cases where the customs authorities must travel to a specific location due to the nature of the goods or work overtime to process the import or export, there may be additional fees levied by Korea Customs. Duty refunds

When a person liable for duty payment has found that the paid duty amount is excessive (limited to the time after an elapse of revision period) in the paid duty amount, he or she may file an application for duty amendment and refund within two years

South Korea

Page 96: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

96 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Temporary Import Goods can be imported for repair and other approved purposes without payment of duty and VAT on the condition that they are re-exported within a certain period.

Duty Reduction for Goods Manufactured under OEM (Original Equipment Manufacturing)

The duty-reduction scheme is available to goods imported under HS code Chapter 85 (electronic goods) and Chapter 9006 [photographic (other than cinematographic) cameras; photographic flashlight apparatus and flashbulbs other than discharge lamps of heading 8539] in cases where the finished goods are manufactured or processed overseas using raw materials or parts originating from Korea.

Bonded Warehousing

Bonded Facilities A designated area licensed by Korea Customs where goods can enter Korea for storage, manufacture, processing, sale, construction, or exhibit without customs clearance.

from the date on which the first duty declaration was made. In case he or she found that there exists some deficiency in the paid duty amount, he or she may file an application for duty amendment and pay additional duties. For a duty amendment, duty, VAT and both interests and penalties of additional duties and VAT will be applied.

Export controls

In general, before a company applies for an export license, it must identify whether the item for export is classified as a dual-use item. There are three licensing authorities, each issuing export licenses for different categories of strategic item. A public notice listing the items subject to export control is updated annually to reflect changes in the control lists of the multilateral export control regimes.

Trade facilitation

The most commonly used customs schemes in Korea are outlined below.

Duty suspension and exemptions

Page 97: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 97

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Rulings

Specific customs classification, customs valuation or origin rulings can be obtained from Customs. Rulings can be relied upon so long as the ruling completely covers the commercial scenario.

Classification

Korea adopted the Harmonized System (HS) of classification in 1988 and now implements the HS 2017 edition, or HSK 2017 (the Harmonised Tariff Schedule of Korea), effective from 1 January 2017.

Valuation

Korea follows the WTO Customs Valuation Agreement (previously GATT) and the customs valuation rules can be found in the Customs Law.

The transaction value is calculated on a CIF (cost, insurance and freight) basis. To the extent that insurance and international freight are not included with the value, there is a requirementto make an addition for these expenses when determining the dutiable value.

Free Trade Zone A specially designated area where duties are deferred to promote international trade, foreign investment and production.

Customs Clearance Schemes Korea adopts an Authorized Economic Operator (“AEO”) pro-gram, which gives benefits in customs clearance procedures from lower customs clearance costs through expedited cargo release, to reduced number of and required time in cargo security inspec-tions.

There are four criteria of legal compliance, operation control system, financial stability, and security management that must be met for a company to qualify for an AEO status.

South Korea

Page 98: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

98 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Status AgreementImplemented Chile, Singapore, EFTA, ASEAN, India, EU,

Peru, US, Turkey, Australia, Canada, China, New Zealand, Vietnam, Columbia

Concluded Central America

Under negotiation Japan-China, Regional Comprehensive Economic Partnership (RCEP), Ecuador, Israel

Under consideration Mexico, Gulf Cooperation Council (GCC), Mercado Común del Sur (MERCOSUR), Israel, Eurasian Economic Union (EAEU)

Origin

Status of free trade agreement

Related party transactions

Customs may challenge related party transactions. The importer will be required to demonstrate that the transaction is at arm’s length by comparing the transaction value of identical or similar goods sold between non-related parties or by calculating the deductive or computed value of identical or similar goods. Alternatively, the importer can demonstrate the transaction value is acceptable by testing the circumstances surrounding the sale. The importer must demonstrate that although the buyer and the seller are related, they buy from and sell to each other as if they are not related.

Other payments

Customs will treat all royalties and license fees connected to the imported goods as dutiable where the royalties payments and license fees related to the imported goods are paid as a condition of sale of the goods for export to Korea.

Transfer pricing

Customs permits an importer to amend the customs duty value following a transfer pricing adjustment. It is usual practice in Korea for the trader to make a voluntary disclosure to Customs detailing the basis for the pricing change and any duty payable or duty refund sought. In practice, however, duty refunds are not paid to the importer in case of a downward adjustment.

Page 99: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 99

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Managing customs and trade compliance

Customs audits and investigations

There is a range of customs audits in Korea and the applicable audit will depend on the issues to be reviewed. • A regular audit is a routine audit conducted every four or five years. Under this audit, a full-scale screening on customs compliance of a company is conducted. • A planned audit is conducted where Customs have specific issues which they intend to examine. • A comprehensive audit is conducted on Authorized Economic Operator (AEO) accredited companies.• A foreign exchange transaction audit is conducted by Customs to review compliance of transactions in accordance with the Foreign Exchange Transaction Law, which is unique to Korea. The issues reviewed under this audit include overseas loans, remittances and payments, capital transactions and offsetting transactions. • An origin verification audit is conducted by Customs to examine the authenticity of documents certifying the origin of the goods.

Penalties

The amount of penalties varies depending on the case. Penalties are calculated based on a formula prescribed in the customs law and Value Added Tax Law and are computed based on a daily compounding basis.

Voluntary disclosure

Beginning January 1, 2015, the penalties imposed upon duty amendment is lessened to promote a taxpayer’s voluntary disclosure (i.e. duty amendment).

Prior to the amendment of the Korean Customs Law, a taxpayer was allowed reduced penalties for filing incorrect import declarations if a duty amendment of the relevant import entry was filed within six months from the date on which the declared duties were paid. After the six months of the revision period, the full amount of penalties was imposed when the taxpayer filed a corrected declaration to correct any deficiencies in the amount of declared duties.

South Korea

Page 100: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

100 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

With the amended law, even after the six months of the revision period, the taxpayer may file a corrected declaration and be allowed a reduced amount of penalties depending on the period from the date on which the declared duties were paid. If the corrected declaration is filed after six months but within one year from the date on which the declared duties were paid, the taxpayer will be allowed to pay reduced amount of penalties by 20%. If the corrected declaration is filed after one year but within two years from the date on which the declared duties were paid, the taxpayer will be allowed to pay reduced amount of penalties by 10%.

Appeal and dispute settlement Taxpayers can file for an appeal if he/she disagrees with a decision/assessment made by the Korea customs authorities. In general, taxpayers file an appeal to the customs office that made duty assessment but he/she can escalate the case further to the Korea Customs Service (i.e. headquarters to customs offices) or Tax Tribunal. If the outcome from the appeal with the Korea Customs Service or Tax Tribunal is disagreeable, taxpayer can proceed with court litigation process.

Statute of limitations

The statute of limitations is five years.

Page 101: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 101

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 102: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

102 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Malaysia

Customs & international trade framework

International organisations and agreements

Malaysia is a member and/or signatory party of the following international organisations and agreements relevant to the governance and regulation of import and export transactions:• World Trade Organization (formerly General Agreement on Tariffs and Trade)• World Customs Organization • International Convention on the Harmonized System (HS Convention)• ASEAN Harmonized Tariff Nomenclature • The International Convention on the Simplification and Harmonization of Customs Procedures • ATA Carnet system • Chemical Weapons Convention • The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)• Basel Convention, concerning import/export of hazardous waste• Kimberley Process, concerning trade in diamonds• Trade Facilitation Agreement (TFA) (Malaysia ratified on 26 May 2015)

Roles and responsibilities of authorities

Authority RoleRoyal Customs Department

A department within the Ministry of Finance. Responsible for the management of trade regulations and trade facilitation, trade security, collection of indirect taxes and import and export tariffs, physical checking of cross border goods movement including hand carry goods.

Ministry of International Trade and Industry

Responsible for endorsement of preferential certificate of origin and policy matters on Free Trade Agreements, licensing of a number of controlled imported and exported goods, including goods regulated under export controls laws (Strategic Trade Act).

Page 103: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 103

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Ministry of Health Responsible for regulating food, pharmaceuticals, medical devices and cosmetic products.

Malaysia Industrial Development Authority (MIDA)

The principal agency for the promotion of the manufacturing and services sectors in Malaysia. MIDA is responsible for processing applications for manufacturing projects and related service sectors.

Legislation

The Customs Act 1967 is the principal legislation for the administration of customs duties. There are a number of implementing Regulations and Orders that legislate for specific controlled goods or trade measures.

In addition to the Customs Act, there are a further laws concerning trade in Malaysia, the most important of which are:• Excise Act 1967• Goods and Service Tax 2014 • Free Zones Act 1990• Strategic Trade Act 2010

Customs legislation can be accessed at http://www.customs.gov.my/

Import and export procedures

Registration

A company intending to import and/or export must first register with the Companies Commission of Malaysia and obtain a unique “Importer Number” from the Customs Authority. Once registered with the Customs Authority, the company may choose to operate as a “Business Direct” (the customs clearance is undertaken by the company’s own employee certified by the Customs Authority) or a “Business Forwarding” (the customs clearance is managed by ap-pointing a third party licensed customs agent or forwarder).

A foreign company must appoint a Malaysian agent to act on its behalf for the completion of customs formalities. It cannot obtain its own Importer Number from the Customs Authority. Whether a foreign company can appoint an agent to apply for import licenses

Malaysia

Page 104: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

104 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

on its behalf depends on the provisions of the license and should be checked with Customs in advance.

Process

Import and export declarations are filed on-line using DagangNet. For air and sea freight via the main ports (including Kuala Lumpur International Airport and Port Klang) same-day cargo clearanceis possible. According to a recent World Bank report, the average lead time for import and export customs clearance is three days.

Import tariffs levied at import are paid by the importer to Malaysia Customs, with the option of using ePayment (Electronic Fund Transfer “EFT”), either by way of eDuty (duty payment to Customs Authority only) or Financial Services Payment Gateway, which handles duty payment to the Customs Authority, fees payment to permit issuing agencies, marine cargo insurance payment and other services through participating banks.

The rate of inspection of goods prior to customs clearance is usually low. The risk of inspection may be further reduced if the importer or exporter is a participant in the Authorised Economic Operator (AEO) programme.

Licenses

Categories of goods requiring an import license into Malaysia include, but are not limited to: • Animal and plant products • Certain food products, medical devices, pharmaceuticals and cosmetics • Certain electrical operated machinery • Sugar • Copying machines, colour toner other than black • Motor vehicles for the transport of persons, goods or materials • Motor cycles, auto-cycles and cycles fitted with an auxiliary motor • High speed duplicator including master electronic control, master playback with or without loop pin and slave recorder • Film or tapes for magnetic recording commonly known as pancakes excluding in cassettes or cartridge • Liquid milk in any form including flavoured milk recombined or reconstituted • Liquid sterilised flavoured milk including flavoured milk recombined or reconstituted

Page 105: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 105

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

• Cereal flour • Billets of iron or steel • Alloy steel and high carbon steel • Stranded wire, cables, cordage, ropes, plaited bands and the like of aluminium wire • Insulated electric wire, cable, bars and strip and the like, whether or not fitted with connectors• Polymers of ethylene in primary forms• Polymers of propylene in primary forms• Heavy machineries• Plastic waste• Chlorofluorocarbons (CFCs)• Medicines and pharmaceutical goods• Petroleum• Telecommunications equipment• Tobacco products, alcoholic beverages• Radioactive/nuclear materials/prescribed substances

Categories of goods requiring an export license include, but are not limited to:• Milk and milk products • Oils and fats of palm oil excluding margarine, imitation ghee, shortening and palm kernel oil • Cement clinker • Portland cement • Slags, dross, scaling and similar waste of iron and steel, zinc • Scrap and other waste of iron and steel, copper, nickel, lead, zinc, tin, magnesium • Tin slag and hardhead of tin • Zinc dust, powders and flakes • Naphtha • Cinematograph film exposed but not developed of 16mm or 35mm • Roofing tiles • Textiles to European Economic Community, United States, Canada, Sweden, Norway, Finland and Austria • Military clothing and equipment • Bricks • Unwrought tin, unalloyed (tin ingot)• Sugar • Billets of iron or non-alloy steel • Bars and rods of iron or non-alloy steel • Stainless steel vessels, pumps of medium or large capacity and drivers (gas turbines and electric motors) designed for used in the transportation of crude oil and natural gas

Malaysia

Page 106: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

106 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

and equipment designed for use in crude oil export terminals (to Libya )

Import and export license applications may be submitted electronically via DagangNet (e-Permit) or manually to the relevant license/permit processing authority. Approvals are either paper or electronic based or both.

Taxes and fees

Goods may be subject to the following taxes at import:• Customs duties, ad valorem, specific or composite • Excise duties, specific and/or ad valorem, applicable to motor vehicles, alcoholic beverages, cigarettes

Goods and Service Tax at 6% Goods subject to export duty include crude petroleum oil (10% ad valorem), rattan (RM2.70/kg) and crude palm oil (scales rates, based on gazetted value).

Duty refunds

Importers can claim a refund for overpayment or wrong payment of duties or GST within 1 year from the date of duty payment, or within 6 years from the date of GST payment. Applications for refunds are required to be submitted manually/by hand to Customs Refund Division at State office attaching the following supporting documents:• K1 Import Declarations Commercial Invoice• Packing list• Arrival notice/freight notification or delivery order• Bill of Lading/ Airway Bill• GST/Duty Computation• Any other documents required by Malaysia Customs to verify the claim

All successful refunds will be credited directly to the Inter-bank GIRO account maintained with Malaysia Customs.

Export Controls

The Malaysia Strategic Trade Act (STA) regulates the export, transship-ment, transit, and brokering of strategic goods and related technology.

Page 107: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 107

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Goods covered under these regulatory controls are specified within the Strategic Goods Control List and include military and dual-used products. For the transfer or brokering of such goods, it is mandatory for traders to apply with the Ministry of International trade and Indus-try (MITI), Malaysian Communications and Multimedia Commission (MCMC), Atomic Energy Licensing Board (AELB) or Pharmaceutical Services Division (PSD) under the Ministry of Health (MOH) and obtain a strategic goods permit under the e-Permit STA Online System prior to export.

Type of permit Type of permitSingle use Permit At least 30 days before exportd.Bulk Permit At least 30 days prior to export. An

application for bulk permit is only considered if the company applying for this permit has an Internal Compliance Program (ICP) approved by the Strategic Trade Secretariat (STS) under MITI.)

Multiple-use permit At least 30 days prior to export. An application for multiple use permit is also only considered if the company applying for this permit has an ICP approved by the STS under MITI

Multiple-use permit At least 30 days prior to export

Brokering Registration

At least 30 working days before brokering of goods

Penalties for offences involving the transfer or brokering of strate-gic goods without a valid strategic goods permit include seizure and forfeiture of goods, fines and imprisonment.

Malaysia

Page 108: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

108 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Bonded warehousing

Scheme Description

Licensed Manufacturing Warehouse

Designated premise licensed by Malaysia Customs for the production and storage of dutiable goods is exempted from Import Duty. To qualify, the applicant must export 80% or more of its output. Goods removed from the bonded area for local consumption are subject to Import Duty.

Scheme Description

Temporary Import Approvals for Temporary Import are at Customs’ discretion and are generally limited to the import of machinery and tools used for implementing Government projects. The goods must be re-exported within three months (extendable to no more than twelve months) and a bank guarantee is required.

Merit-based Duty Exemption

A merit based import duty exemption is available for manufacturers in Principal Customs Area using dutiable raw materials that are not available from local producers. Machinery and equipment are also exempted from Import Duty. An application must be made in advance of the import shipment to either the Malaysian Royal Customs Department or the Malaysia Industrial Development Authority.

Specific Duty Exemptions

An importer may be eligible to claim a customs duty under the Customs Duty (Exemption) Order 2013 provided that prescribed conditions are met. For example, goods imported temporarily for repair, demonstration, research and propaganda purposes, which are re-exported within three months, may qualify for a customs duty exemption.

Trade facilitation

The most commonly used customs schemes in Malaysia are outlined below.

Duty suspension and exemptions

Page 109: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 109

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Approved Toll Manufacturer Scheme and Approved Trader Scheme

Although Import Duty is exempt for goods delivered to Licensed Manufacturing Warehouse (LMW), Goods and Service Tax (GST) is charged at the point of Customs clearance. As all exports are zero rated, LMW operators/exporters who mainly re-export their finished products do not collect output tax on their supplies or only collect a minimum amount of output tax which can help them offsetting against the GST paid on their imports. This would therefore cause a cash flow problem to them because they would have to pay GST upfront.

To help to alleviate their cash flow problem, the Approved Trade Scheme (ATS) and Approved Toll Manufacturer Scheme (ATMS) have been introduced to allow a LMW to suspend the GST payable on imported goods (i.e. raw materials) until the finished goods are subsequently re-exported.

Public or Private Bonded Warehouse

Designated premise licensed by Malaysia Customs for the storage of third party goods is exempted from Import Duty. Goods removed from the bonded premise for local consumption are subject to Import Duty. Eligibility is restricted to public listed companies or private companies that have International Procurement Centre (IPC) or Regional Distribution Centre (RDC) status.

Excise Factory Designated premise licensedby Malaysia Customs for the manufacturing of goods subject to excise duty (e.g. motor vehicles, cigarettes and beers).

Free Zones Designated areas gazetted by law with special customs law provisions. Minimal customs formalities apply and the area is treated as a place outside Malaysia for customs purposes (not subject to most import/export license restrictions).

Operations in the Free Zones are subject to approval by the relevant Free Zone Authorities. A qualifying business must export 80% or more of its output.

Malaysia

Page 110: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

110 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Rulings

Specific customs classification and customs valuation rulings can be obtained from Customs for a nominal fee of RM200. Rulings are binding and are valid for three years. Upon application, a ruling can be extended for further two years provided that the underlying facts remain unchanged.

Customs Clearance Schemes

Authorised Economic Operator (AEO)

An authorised economic operator (AEO) is defined as an economic operator who is reliable/compliant in the context of their customs related operations, and therefore, is entitled to enjoy benefits provided in the AEO Programme.

The AEO:• is required to submit electronically

minimum data in the form of Permission Request Slip (PRS) for customs clearance;

• is not subject to physical inspection (except on specific reason) on his cargo i.e. customs release via green lane, for import, export and bond-to-bond movement;

• is required to submit electronically a periodic self-assessment declaration on import/export/movement known as the Consolidated Statement (CS), based on specified schedules.

• is allowed deferred duty payments via electronic Fund Transfer (EFT) done periodically with the CS and

• is allowed to use the Consolidated Statement (CS) to apply for the Certificate of Origin (Form D) from the

Page 111: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 111

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Classification

Malaysia is a contracting party to the Harmonized System (HS) Convention since 1988 and adopts HS classification in its combined tariff and statistical nomenclature. For ASEAN trade, the tariff schedule is based on the ASEAN Harmonized Tariff Nomenclature (AHTN).

Effective 1 April 2017, all tariff lines in Malaysia are converted to a 10 digits code under the implementation of the new Harmonised System 2017. This is formalized in the Customs Duty Order/Perintah Duti Kastam 2017 (PDK 2017). This replaces the PDK 2012.

Valuation

Malaysia follows the WTO Customs Valuation Agreement (previously GATT) and the customs valuation rules can be found in Customs (Rules of Valuation) Regulations 1999.

For locally manufactured goods, valuation for excise purposes follows the notional “open market value” concept

Related party transactions

Customs may challenge related party transactions, and may send a valuation questionnaire to an importer, often a pre-cursor to a post-importation audit. The importer will be required to provide information and records to demonstrate that the transaction is at arm’s length by comparing the transaction value of identical or similar goods sold between non related parties or by calculating the deductive or computed value of identical or similar goods.

Other payments

Customs will treat all royalties and license fees connected to the imported goods as dutiable unless the importer can provide evidence that the payment is not made as a condition of sale of the goods for export to Malaysia.

Malaysia

Page 112: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

112 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Preferential certificates of origin for exported goods originating from Malaysia are issued by the Ministry of International Trade and Industry (MITI).

Non preferential origin

An ordinary certificate of origin can be applied for to evidence thatgoods are wholly obtained or processed in Malaysia. A total of 73federal or state chambers of commerce and trade associations are appointed by MITI to issue non-preferential certificates of originincluding:

• Federation of Malaysia Manufacturers• Malaysia International Chamber of Commerce and Industry• Malaysia Textiles Manufacturers Association• Malaysia-German Chamber of Commerce and Industry• Malaysia-China Chamber of Commerce

Regional agreements in force

ASEAN Trade In Goods Agreement (ATIGA), through ASEAN with Australia, China, India, Japan, Korea, New Zealand

Bilateral agreements in force

Australia, Chile, India, Japan, New Zealand, Pakistan, Turkey

Agreements under negotiation

European Union, Regional Comprehensive Economic Partnership (RCEP), Trans Pacific Partnership (TPP)

Transfer pricing

Customs will permit a trader to amend the customs duty value following transfer pricing adjustments to account for short payment of duty, but will not allow a retroactive refund. It is a usual practice in Malaysia for the trader to submit a voluntary disclosure to Malaysia Customs detailing the basis for the pricing change and any duty payable. There is, however, no established programme and hence the approach and information required by the local customs office may vary.

Origin

Preferential origin

Page 113: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 113

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Managing customs and trade compliance

Customs audits and investigations

There is no standard audit programme. Normally, Malaysia Customs will only instigate an investigation in the event of non-compliance or suspicion of non-compliance. Random post import audits are conducted from time to time to ensure compliance.

For businesses importing dutiable goods (e.g. tobacco, alcoholic beverages, automotive and luxury consumer goods), the chance of a customs audit is likely to be much higher. Retroactive recovery of underpaid duty is usually limited to three years under customs law.

Penalties

For compoundable offences, a penalty of not more than 10 times the amount of customs duty (dutiable goods) or ten times the value of the goods (prohibited goods) can be imposed in lieu of prosecution. For administrative errors, a nominal penalty will usually apply (e.g. RM5, 000).

Penalties for a range of more serious offences, including submission of an incorrect declaration, falsifying documents, refusing to answer questions or giving false information, may be liable to a penalty ranging from a fine of RM1, 000 and/or imprisonment for a term not exceeding six months to a fine not exceeding RM500, 000 and/or imprisonment for a term not exceeding five years, upon conviction.

Smuggling offences, including fraudulent evasion of customs duty, can be subject to a maximum fine of up to 40 times the value of goods or RM500,000, whichever is greater, and/or imprisonment of five years, if convicted, depending on whether the goods are dutiable, prohibited or being the first offence or otherwise.

Malaysia

Page 114: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

114 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Voluntary disclosure Fines may be waived or reduced if a voluntary disclosure is made, limiting the liability to only duty shortfall. The disclosure must be submitted before notice or commencement of audit checks and investigations.

Appeal and dispute settlement Traders can make an appeal pertaining to a Notice of claims and related offence by Malaysia Customs by contacting the relevant customs division or branch before the due date for settlement, i.e. 14 days after the issuance of the Notice.

Statute of limitations The statute of limitations is three years. However, this statutory time limit will not apply to cases where fraud is involved.

Page 115: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 115

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 116: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

116 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

New Zealand

Customs & international trade framework

International organisations and agreements

New Zealand is a member and/or signatory party of the following international organisations and agreements relevant to the governance and regulation of import and export transactions:

• World Trade Organization (formerly General Agreement on Tariffs and Trade)

• World Customs Organization • International Convention on the Harmonized System (HS

Convention)• The International Convention on the Simplification and

Harmonization of Customs Procedures• ATA Carnet System• The Convention on International Trade in Endangered Species

of Wild Fauna and Flora (CITES)• Trade Facilitation Agreement (TFA) (New Zealand ratified on

29 September 2015)

Roles and responsibilities of authorities

Authority RoleNew Zealand Customs Service

Responsible for ensuring the security of the New Zealand borders. In charge of the collection of import related taxes (duty, excise and GST), investigation of illegal activities and carry out prosecution where necessary.

Immigration New Zealand

Responsible for managing border security regarding the movement of people. Immigration New Zealand officers refer any trade and customs matters to Customs for follow-up.

Page 117: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 117

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Ministry for Primary Industries (MPI)

MPI is a new ministry formed from the merger of the Ministry of Agriculture and Forestry, the Ministry of Fisheries and the New Zealand Food Safety Authority. Responsible for increasing sustainable resource usage, protecting New Zealand from biological risk and delivering high-quality services and support to the primary sector.

Legislation

The Customs and Excise Act 1996 is the principal legislation administered by Customs. Additionally, there are a number of implementing Regulations and Orders that legislate for specific controlled goods and trade measures.

The additional statutes are:• Customs and Excise Regulations 1996• Tariff Act 1988• Goods and Services Tax Act 1985

The Customs and Excise Bill 2016 is a new Bill that was introduced in late 2016. The main purpose of the Bill can be found in clause (3) and states that the Bill aims to set out the powers of Customs in relation to goods, persons, and craft. The Bill is designed to modernize the current Customs legislation. The new law is likely to apply from April 2018 (once passed by Parliament).

Five notable changes proposed in the new Bill:1. Provisional value for imports (subject to criteria).2. Binding valuation rulings.3. Currently, the export price of goods are used to determine the

customs value. Under the proposed rules, customs values for imports are based on the sale values of the last sale price of the goods prior to importation of the goods into New Zealand.

4. Alcohol producers – Currently only wine manufacturers are allowed to transfer finished goods to off-site storage areas without triggering an excise tax. The new rules will allow other alcohol manufacturers to apply for this concession.

5. Storing business records in the cloud or offshore.

New Zealand

Page 118: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

118 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Further information of these changes can be accessed at –

http://www.pwccustoms.com/en/recent-developments/assets/nz-customs-and-excise-bill-review.pdf

Customs legislation can be accessed at http://www.legislation.govt.nz/

Import and export procedures

Registration

Registration is required before lodging entries. Registered importers are allocated a Customs Declarant Code and a unique identifier which is used as an importer’s “electronic signature”. In addition, importers must also register with the Electronic Commerce Network, which manages the online declarations system on behalf of Customs.

There is no restriction on a non-resident business conducting import or export activities in New Zealand. However, a non-resident business intending to import goods for sale in New Zealand may be required to account for Goods and Services Tax (GST) on sales.

Process

Clearance of commercial imports and exports can be achieved by lodging an import or export entry either over the internet or using the Electronic Data Interchange (EDI) software. Certain low value shipments, i.e. less than NZ$1,000, can be cleared using an Electronic Cargo Information (ECI) report. An ECI is also used for importing low value goods where the total Customs charges are below NZ$60. Import and export entries may be lodged by a freight forwarder or a customs broker on behalf of the importer or exporter.

Goods being imported or exported that are valued at more than NZD$1,000, or goods exported under the Secure Export Scheme, will need to be cleared using an export entry clearance. The importer or exporter must hold a Customs Client Code, which is issued upon application to Customs, and a supplier code is required for the exporting party, also issued by Customs. For example, if you are the New Zealand importer, you will require a client code and hold a supplier code for the party you are importing from. If you are the New Zealand exporter, you will need both a client code and a supplier code.

Page 119: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 119

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Licenses

Categories of goods requiring an import license into New Zealand include, but are not limited to:• Animals, plants, birds, bees, dairy and plant products, etc.• Chemicals• Chlorofluorocarbons (CFCs)• Firearms• Hazardous substances• Infringing trademarks and pirated copyright goods• Prescription medicines

Categories of goods requiring export license out of New Zealand include, but are not limited to:• Aircraft • Animal products (including cattle, deer, goats, and sheep

for slaughter)• Chemicals • Cluster munitions • Controlled drugs • Conventional weapons dual-use goods and electronic

publications• Dairy produce

Taxes and fees

Goods may be subject to the following taxes at import:• Ad valorem customs duties • Excise duties, specific or ad valorem, applicable to alcohol,

petroleum and other fuels, and tobacco• Goods and Services Tax currently 15%

There are no taxes levied on export.

An import and export entry transaction fee is charged on every import and export entry lodged with New Zealand Customs, unless exempted. • The import entry fees charged per entry is NZ$49.24 (including

GST) which comprises of a customs fee of NZ$29.26 and a Ministry of Primary Industries biosecurity system entry levy of NZ$19.98.

• The export entry transaction fee is NZ$12.01 (including GST) per entry for Secure Export Scheme members or NZ$17.94 (including GST) per entry for non-Secure Export Scheme members.

New Zealand

Page 120: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

120 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Duty refunds & drawbacks

An importer may be eligible for a refund if they have overpaid duty or GST on goods brought into New Zealand. Similarly, if they have paid the correct duty on imported or excisable goods, but later re-export those same goods, or use them in the manufacture of goods which are then exported, they can claim a 'drawback' – a refund of the duty paid. In some cases GST can also be claimed back.

Refunds of duty and GST for commercial importers

Customs dutyAn importer can apply for a refund of duty when: • Duty is paid in error.• A concession is later approved for the goods.• Goods are of faulty manufacture.• Goods were in a damaged or deteriorated condition prior to

leaving Customs' control.• Goods were destroyed, pillaged or lost prior to leaving Customs'

control.

To apply for a refund, an importer must complete an Application for Refund of Revenue (NZCS 223) form and send it, along with sup-porting documentation, to the Customs office where the goods were cleared. Refunds will not be issued where the amount of the refund is NZ$50 or less.

The following rules apply for refunds:

• If the importer uses the broker deferred credit facility or have paid by cash, their refund will be made by cheque direct to them.

• If they are paying cash, and their payment has not yet been received, New Zealand Customs will adjust their entry to reflect the correct charges.

• If they use the deferred payment scheme their account will be credited with the amount directly.

GSTIf an importer is registered for GST purposes, they will not receive refunds of GST. The only exception is for those importers who are on the deferred payment scheme where their refund application for adjustment is processed prior to the due date of payment. In this instance, the GST adjustment can be made to their account.

Page 121: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 121

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

If they have applied for a GST refund and use a broker deferred credit facility, their broker will need to lodge an adjustment ap-plication with Customs. Applications need to be made within one calendar month from the date of entry clearance.

Drawbacks of duty and GST

Customs dutyA drawback is a refund of previously paid duty (and sometimes GST) when goods are exported. Exporters can claim drawback of paid duty for:• Imported goods which are later exported• Excisable goods which are exported• Imported parts and materials used in, worked into, or attached

to goods manufactured or produced in New Zealand and later exported

• Imported materials, except fuel or plant equipment, consumed in the manufacture or production of goods in New Zealand and later exported.

Import duty, excise duty and, in limited circumstances, goods and services tax (GST) may all be approved for a drawback.

Commercial exporters can claim a minimum of NZ$50 drawback. There is no minimum amount for private exporters.

Anyone can legally claim drawback as long as they can provide all the required information and evidence.

GSTIf an importer is not registered with Inland Revenue (IRD) for GST purposes they may apply for drawback of GST.

If an importer is registered for GST purposes, they cannot receive drawback of GST if the goods are of a kind used in their taxable activity. Any GST they pay to Customs on the importa-tion of such goods will be able to be claimed back as an input credit when they lodge their GST return to the IRD.

If they wish to claim a GST drawback, the following conditions will apply:• The goods must be found to be faulty or supplied in error.• For faulty goods, drawback must be claimed within 12

months of the date of importation.

New Zealand

Page 122: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

122 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

• For goods supplied in error, drawback must be claimed within two months of the date of importation. There is provision for this period to be extended but it will be consid-ered on a case-by-case basis.

• The person who imports the goods must also be the person who exports them.

Re-import of drawback goods

If an importer has claimed drawback on goods they have export-ed, they will not normally be permitted back into New Zealand.

If such goods do get re-imported after export, and drawback have been paid, they will be required to pay the usual duty and any other applicable Customs charges on their re-importation.

Applying for a drawbackTo apply for a drawback the importer will need to submit an electronic export entry for drawback clearance at least six work-ing hours before the goods are loaded for export. Be aware that:• A TSW client registration (also known as a client code) is

required. Applications are made on form NZCS 224.• The entry type must be shown as drawback.• The import entry number on which duty was paid must be

listed.• They may be required to produce the goods for examina-

tion.• Invoices and other documents may be required to verify the

claim.• An export entry transaction fee will be payable.

Page 123: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 123

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Trade facilitation

The most commonly used customs schemes in New Zealand are outlined below.

Duty suspension and exemptions

Temporary Import Non-consumable goods that are re-exported within twelve months may be brought in using a Temporary Import Entry. Security may be required (amount equal to the duty and/or GST payable on the goods) before Customs releases the goods without payment of duty.The importer will be released from the conditions of the security (e.g. amount of deposit is refunded) when the goods have been exported or destroyed. Goods temporarily imported that are used for industrial or commercial purposes may be subject to duty on re-export, to the extent they have reduced in value from the time of importation.

Deferred Payment Scheme

The requirement to account and pay Customs charges at the point of import is deferred until the 20th of the following month. The scheme is administered by Customs. No entry fee is charged

Customs Controlled Areas(CCAs)

A licensed area used for the manufacture of goods that are subject to excise duty.

Supply chain security

The Secure Exports Scheme (SES) is a voluntary arrangement between exporters and New Zealand Customs designed to protect the exporters’ international supply chain against tampering, sabotage, smuggling and other trans-national crimes. SES ensures goods to be exported are packaged securely, with no other goods, and are conveyed to the place of shipment securely and without interference.

New Zealand

Page 124: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

124 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Classification

New Zealand adopted the Harmonized System (HS) of classification in 1988 and now implements HS 2017 edition effective from 1 January 2017.

Valuation

New Zealand follows the WTO Customs Valuation Agreement (previously GATT) and the customs valuation rules can be found in Schedule 2 of the Customs and Excise Act 1996. A customs value must be specified for all goods imported into New Zealand regardless of whether the goods are the subject of sale, supplied free of charge, personal possessions or temporarily imported.

There are six methods of customs valuation – the primary method (transaction value) and five alternative methods of valuation (identical goods value, similar goods value, deductive value, computed value or residual basis of valuation). Furthermore, they must be applied in a sequential order. The transaction value must be used whenever possible to determine the value of the imported goods.

Related party transactions

Customs may challenge related party transactions. The importer may be required to demonstrate that the transaction is at arm’s length by comparing the transaction value of identical or similar goods sold between non related parties or by calculating the deductive or computed value of identical or similar goods.

Rulings

Importers and manufacturers can apply to Customs for a ruling on the tariff (or excise) classification of their goods or on whether they are subject to a specified duty concession. A customs ruling is given in writing and is valid for up to three years from the date of issue. A customs ruling can only be used by the person who sought the ruling and applies only to the specific goods covered by the ruling.

Page 125: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 125

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Regional agreements in force

1. ASEAN – Australia – New Zealand Free Trade Area Agreement

2. New Zealand – Hong Kong, China Closer Economic Partnership

3. South Pacific Regional Trade and Economic Co-operation Agreement

4. Trans-Pacific Strategic Economic Partnership

Bilateral agreements in force

1. Australia – New Zealand Closer Economic Relations Trade Agreement

2. New Zealand-China Free Trade Agreement

3. New Zealand – Malaysia Free Trade Agreement

4. New Zealand and Singapore Closer Economic Partnership

5. New Zealand and Thailand Closer Economic Partnership

6. New Zealand – Korea Free Trade Agreement.

Other payments

Customs will treat all royalties and license fees payable as a condition of sale of the goods for export to New Zealand as an addition to the transaction value.

Transfer pricing

Customs permits an importer to amend the customs duty value following transfer pricing adjustments. It is usual practice in New Zealand for the importer to make a disclosure to New Zealand Customs detailing the basis for the pricing change and any additional duty/GST payable or duty refund sought.

Origin

Preferential origin

New Zealand

Page 126: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

126 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Managing customs and trade compliance

Customs audits and investigations

Customs carries out regular audits to ensure compliance. Retrospective assessments (e.g. on audit) can be for up to four years.

Penalties

A person may be issued a penalty notice if the New Zealand Customs is satisfied that an entry of goods made by the person contains an error or omission; or, as a result of the error or omission, the duty payable has not been paid or declared for payment; or the entry is materially incorrect. The penalty notice may require the person to pay a penalty in addition to the duty payable under the Customs Act. A graduated system of penalties ranging from NZ$200 to NZ$50,000 can be imposed.

Additional duty may be imposed if the duty remains unpaid by the due date. The additional duty is 5% of the amount of the duty unpaid by the due date, and 2% of the duty including any additional duty, unpaid at the end of one month after the due date, and 2% of the duty plus any additional duty

Agreements under negotiation

1. New Zealand - Gulf Cooperation Council Free Trade Agreement

2. New Zealand – Russia – Belarus - Kazakhstan Free Trade Agreement

3. New Zealand – India Free Trade Agreement

4. New Zealand – Korea Free Trade Agreement

5. Trans-Pacific Strategic Economic Partnership

6. New Zealand – Hong Kong, Closer Economic Partnership Investment Protocol

7. Regional Comprehensive Economic Partnership

Page 127: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 127

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Voluntary disclosure

Penalties may be waived or reduced if a voluntary disclosure is made. However, in order to qualify the disclosure must be completed, voluntary and made before notice or commencement of audit checks and investigations.

Appeal and dispute settlement

Importers and exporters can appeal a decision or direction made by New Zealand Customs. An appeal must be made within 20 working days of the date the Customs decision or direction is received.

Statute of limitations

The statute of limitations is four years. However, this statutory time limit will not apply to cases where fraud or willful misleading is involved.

New Zealand

Page 128: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

128 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 129: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 129

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Philippines

Customs & international trade framework

International organisations and agreements

The Philippines is a member and/or signatory party of the following international organizations and agreements relevant to the governance and regulation of import and export transactions:• World Trade Organization (formerly General Agreement on

Tariffs and Trade)• World Customs Organization• International Convention on the Harmonized System (HS

Convention)• ASEAN Harmonized Tariff Nomenclature• The International Convention on the Simplification and

Harmonization of Customs Procedures• The Convention on International Trade in Endangered Species

of Wild Fauna and Flora (CITES)• Basel Convention, concerning import/export of hazardous

waste• Montreal Protocol• Chemical Weapons Convention• The Philippines participates as a WTO beneficiary nation of

the Generalized System of Preferences (GSP) programme. Qualifying products originating in GSP countries can be exported to major developed countries and receive lower or zero tariff rates, which aid in the promotion of exports for the GSP country.

• Trade Facilitation Agreement (TFA) (Philippines ratified on 27 October 2016)

Authority RoleBureau of Customs Department within the Ministry of Finance.

Responsible for international trade facilitation and regulation and collection of import/ export duties at all Philippine ports.

Bureau of Internal Revenue

The powers and duties of the Bureau are the assessment and collection of all internal revenue taxes, fees and charges and enforces all forfeitures, penalties, and fines connected therewith.

Page 130: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

130 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Philippine Port Authority

Organization under the Department of Transportation and Communications. It is responsible for financing, management and operation of public ports throughout the Philippines.

Philippine Economic Zone Authority

Agency that promotes investments, grants incentives and facilitates business operations of investors in export oriented manufacturing and service facilities inside the Special Economic Zones.

Bangko Sentral ng Pilipinas

Administers Philippine monetary policy, acts as clearinghouse for all import and export trade.

Department of Trade and Industry

Controls the import and general trade for certain commodities regulated for import into the Philippines. Issues permits required for the clearance of goods.

Legislation

The Customs Modernization and Tariff Act (CMTA) is the principal legislation for the administration of customs duties. The correspondent organizations can publish additional regulations for specific issues, such as Free Trade Zones, Dual Usage goods and National Internal Revenue Code, etc. There are several bills and memorandums that legislate for specific controlled goods or trade measures.

In addition to CMTA, there are further legislations that may apply such as the National Internal Revenue Code.

Import and export procedures

Registration

A company that intends to conduct business transactions with an import and/or export activity requires an import license. A general license to import is granted by both, the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).

The Philippine entity must have a tax identification number and undergo a two tier accreditation processes. The first step is to secure an Importer’s Clearance Certificate from the Bureau of Internal

Page 131: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 131

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Revenue. The second step is the registration to the Accounts Management Office (AMO) of the Bureau of Customs. Validity of the accreditation is 3 years with the condition of annual submission of reports to the BIR.

Entities under the Philippine Economic Zone Authority (PEZA) are exempted from BIR ICC and are eligible for accreditation as importer. They must comply with documentary requirements to the Bureau of Customs. Once approved, the accreditation remains effective as long as the company’s registration to PEZA is valid.

Likewise, companies engage in export activities must register to the Philippine Exporters Confederation Inc. (PHILEXPORT).

Process

There are 17 approved ports of entry throughout the Philippines which include: Port of Manila, Manila International Container Port, Ninoy Aquino International Airport, Port of Subic, Port of Batangas Port of Davao, Port of Iloilo, Port of Cagayan de Oro, Port of Legaspi, Port of San Fernando, Port of Tacloban, Port of Surigao, Port of Zamboanga, Port of Cebu, Clark International Airport, Port of Limay and Port of Aparri

Import begins when a carrying vessel or aircraft enters the jurisdic-tion of the Philippines with the intention to unload its cargo. The import is deemed terminated upon payment of duties, taxes and other charges due or secured to be paid, at a port of entry. The legal permit for withdrawal will then be granted, or in case the goods are free of duties, taxes and other charges, when they have legally left the jurisdiction of Customs.

Regardless of applicability of import duty, import entries are to be filed with the Bureau of Customs. A customs broker generally pro-cesses the Goods Declaration. If applicable, the payment of duties and other payments is processed through authorized banks.

The following are authorized to make an import entry:• Importers and other persons who are holders of the bill of

lading.• Licensed customs brokers acting under authority of a holder of

the bill of lading.• A person duly empowered to act as agent or attorney.

A Goods Declaration must be filed with Customs within 15 days

Philippines

Page 132: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

132 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

from the date of discharge of the goods, which may be extended on valid grounds for another 15 days. Provided, a request for extension is made before the expiration of the original period to file a decla-ration. Failure to file the goods declaration constitutes an implied abandonment of the goods or shipment.

All goods imported into the Philippines must be entered through a custom warehouse at a port of entry, whether subject to import taxes or not. Upon arrival at the customs warehouse the goods will be inspected by Customs and will be assigned a tariff classification. All duties, taxes and other charges due must be paid before being released from customs custody.

Imports for consumption are either treated as an Informal or Formal Entry depending on the purpose of the import or the value of the goods.

An Informal Entry is required for the import of the following: a. Articles of a commercial nature intended for sale, barter or hire with Free on Board (FOB) or Free Carrier At (FCA) value of which is PHP 50,000 or less; andb. Personal and household effects or articles imported in pas senger’s baggage, mail or otherwise which are for personal use and not in commercial quantity.

A Formal Entry is required for imports where the value exceeds PHP 50,000. A Formal Entry is also required for goods that will be sold to the Philippines market.

All imports must be accompanied by the following basic documen-tation:• International air waybill (for airfreight) or Bill of Lading (for sea freight) • Commercial Invoice or Pro-Forma Invoice• Packing List

Import clearance must also be approved by the relevant government agency before or upon the arrival of the goods. The authorising document will be required for reasons of public health and safety, national security, to satisfy international commitments, or for the protection or development of local industry. It must be submitted to Customs upon filing the import entry or prior to release of the regulated goods.

Page 133: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 133

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Licenses

For reasons of public health and safety, national security, international commitments and development of local industry, the import of certain commodities are regulated or prohibited.

Categories of goods requiring an import license into the Philippines include, but are not limited to:• Agricultural (fertilisers, pesticides etc.) • Atomic energy materials• Chemicals• Coal• Colour reproduction machines• Flammable Materials• Medical drugs• Ships• Used motor vehicles

Categories of goods requiring export license out of the Philippines include, but are not limited to:• Bamboo• Coffee• Copper concentrates• Cultural property• Firearms ammunition and explosives• Live animals and plants• Mine minerals• Optical and magnetic media• Radioactive materials• Sugarcane based sugar

The route for obtaining the license depends on the nature of the controlled product.

Taxes and fees

Goods may be subject to the following taxes at import:• Custom duties are assessed based on the CIF (cost, insurance

and freight) value of the goods. Depending on the country of origin and any trade preferences being extended to a specific country, the normal duty ranges between 0% to 30%Excise duties are levied on alcohol (including spirits, wine, beer and liquors), petroleum products, tobacco products, manufactured oils or other fuels, mineral products and motor vehicles.

• Value Added Tax (VAT), currently at 12%, is levied and collect-ed on every import. It is charged on the total customs value plus customs duties, excise duties and any other charges at import.

Philippines

Page 134: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

134 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Warehouse storage fees may be applied to goods that are not expeditiously cleared and removed from the bonded customs warehouse.

There are no taxes levied at export.

Import and export processing fees are chargeable. The cost varies according to the dutiable value of the shipment and can fluctuate from US$5.80 to US$23.50.

Duty refunds

Within one year from the date of importation, refund or tax credit for the duties paid may be filed to the Bureau of Customs on fuel used for propulsion of vessels engaged in foreign and coastwise trade; and petroleum and crude oil used for generation of electric power and manufacture of city gas.

Imported materials used in the production of export products may also process refund within 6 months from the date of exportation.

While the recovery of duties and taxes arising from incorrect Cus-toms assessment may be filed within 1 year from the date of duty and tax payment, refund may be processed when:1. There are correction of errors i.e. in assessment, goods decla-

ration, and manifest;2. There are changes in customs procedure

However, refund less than USD 100 shall not be granted.

Export Controls

The Strategic Trade Management Act (STMA) mandates the issuance of export licenses and registration of entities engaged in the trade of strategic goods. However, the implementing rules and regulations, including the National Strategic Goods List de-scribing the strategic goods subject to authorization are still under discussion.

Page 135: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 135

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Scheme Description

PEZA Locally established entities that export their manufactured goods in Special Economic zones, may import raw materials and capital equipment free of duties and taxes under the Philippine Economic Zone Authority (PEZA). These entities must comply with exporting at least 70% of their total production.

Duty Drawback Customs can refund or provide Tax Credit Certificates to entities that paid duties on materials that were used in the production of goods destined for the export market.

To qualify for drawback processing the importer or his agent must certify the goods qualify and meet the criteria for drawback which includes that the goods must be exported within one year of the raw materials having been imported.

The claim for drawback must be filed within six months of the date of export.

VAT is recoverable as well. Some of the documentation required will have to be presented before the BIR.

Trade facilitation

Duty suspension and exemptions

National Single Window

An on-line system that provides accessibility to parties involve in trade. It enables traders to lodge information and obtain permit/s with a single point of entry to fulfil import and export regulatory requirement.

One Stop Shop Documentation Centre

A section under the Philippine Exporters Confederation Inc. (PHILEXPORT which houses different government agencies that handles the processing of Export documentations.

Philippines

Page 136: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

136 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Rulings

Specific customs classification, customs valuation or origin rulings can be obtained from the Bureau of Customs. Rulings can be relied upon so long as the ruling completely covers the commercial scenario. Any variation from the scope of the ruling would compromise the ability to rely on the ruling.

Classification

The Philippines adopted the 6 – digit Harmonized System (HS) of classification in 1988 and its tariff also incorporates the 8-digit ASEAN Harmonized Tariff Nomenclature (AHTN). There has been no official confirmation yet as to when HS 2017 edition will be implemented.

Customs Bonded A service facility that handles the Warehouse “tax and duty free” import of raw materials, packing materials and accessories required by export producers for the manufacture of products intended for export within nine months.

Scheme Description

Super Green Lane A facility which allows advance processing and clearance of shipments of qualified importers without the benefit of prior physical examination and documentary check.

Super Green Lane Plus An enhanced Super Green Lane facility that provides additional benefits to qualified members which simplify and accelerate customs clearance processing and administrative process

Authorized Economic Operators

A voluntary certification scheme that benefits accredited entities to a simplified customs clearance processing.

Customs Clearance Schemes

Page 137: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 137

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Valuation

General

The primary basis for determining customs value in the Philippines is “transaction value.” The transaction value is the price actually paid or payable for the goods when sold for export. The transaction value must comply with the rules concerning adjustments to the transaction value as set out by the World Trade Organization (WTO) valuation code and the customs valuation rules of the Philippines. The Philippines legislation can be found in Republic Act 10863, also known as the Customs Modernization and Tariff Act (CMTA).

The Philippines legislation covers the six methods of customs valuation. One of the five alternative methods of customs valuation must be used (applied in order) when the transaction value is not applicable. However the transaction value must be used whenever possible to determine the value of the imported goods.

The Philippines Customs Law enforces the proper use of the valuation methods and the need for accuracy of the declared value. If Customs detects that the imported goods are not correctly valued then Customs has the right to seize the imported goods.

Related party transactions

Customs are starting, as part of their audit programme, to challenge related party transactions. The importer will be required to demonstrate that the transaction is at arm’s length by comparing the transaction value of identical or similar goods sold between non related parties or calculating the deductive or computed value of identical or similar goods.

Other payments

Philippines Customs will treat all royalties and license fees connected to the imported goods as dutiable unless the importer can evidence that the payment is not made as a condition of sale and the imported goods are not related to the finished goods.

Philippines

Page 138: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

138 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Transfer pricing

Customs allow an importer to correct the customs duty value following transfer pricing adjustments to account for short payment of duty. Customs will request a detailed documentation support stating the basis for the pricing change and any duty payable.

Origin

Preferential originRegional agreements in force

ASEAN, through ASEAN with Australia,China, India, Japan, Korea, New Zealand

Bilateral agreements in force

Japan

Agreements under negotiation

European Union

Non preferential origin

To demonstrate that goods were obtained in their totality or manufactured in the Philippines, an ordinary certificate of origin can be obtained the Philippine Chamber of Commerce or other agency approved by Customs.

Managing customs and trade compliance

Customs audits and investigations

The Bureau of Customs resumes the function of conducting an audit and investigation relating to import activities. It aims to conduct post clearance audit under the regime of informed compliance, and raise additional Customs revenues. The Bureau will try to detect, among other compliance issues, discrepancies in the values declared during importation.

Penalties Penalties in the Philippines may vary from an administrative penalty to criminal charges, depending on the nature of the offence. The most frequently occurring customs offences in the Philippines are undervaluation and incorrect classification of goods on the customs entry.

Page 139: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 139

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

According to the Tariff and customs laws of the Philippines the authorities can impose fines equivalent to 125% to 600% of the revenue loss and two to eight years of imprisonment depending on the degree of violation.

Voluntary disclosure The Bureau of Customs has revived a programme which allows companies to disclose errors in customs declarations and to pay duties and other import charges due, subject to payment of reduced penalty. In order to apply the programme the company must not yet have been subject to an audit by Customs. Currently, this program is still pending for the corresponding guidelines.

Appeal and dispute settlement Importers can make an appeal to penalties arising from post clearance audit to the Court of Tax Appeals within 30 days from receipt of notice.

Statute of limitations

The statute of limitations is three (3) years from the date of final payment of duties and taxes or customs clearance.

Philippines

Page 140: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

140 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 141: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 141

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Singapore

Customs & international trade framework

International organisations and agreements

Singapore is a member and/or signatory party of the following international organizations and agreements relevant to the governance and regulation of import and export transactions:

• World Trade Organization (formerly General Agreement on Tariffs and Trade)

• World Customs Organization • International Convention on the Harmonized System (HS

Convention)• ASEAN Harmonized Tariff Nomenclature • The International Convention on the Simplification and

Harmonization of Customs Procedures • ATA Carnet System • Chemical Weapons Convention • The Convention on International Trade in Endangered Species

of Wild Fauna and Flora (CITES)• Basel Convention, concerning import/export of hazardous

waste• Kimberley Process, concerning trade in diamonds• Trade Facilitation Agreement (TFA) (Singapore ratified on 8

January 2015)

Roles and responsibilities of authorities

Authority RoleSingapore Customs A department within the Ministry of

Finance. Responsible for the management of trade regulations, trade facilitation and trade security. In charge of the collection of import related taxes in Singapore.

Immigration & Checkpoints Authority (ICA)

Responsible for the physical checking of goods arriving at the Singapore border. ICA officers refer any trade and customs matters to Singapore Customs for follow-up.

Inland Revenue Authority of Singapore (IRAS)

Responsible for the administrationand regulation of Goods and Services Tax which is levied on imports and domestic sales.

Page 142: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

142 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Agri-Food and Veterinary Authority of Singapore (AVA)

Responsible for the control and licensing of imported and exported food, animals and plants.

Legislation

The Customs Act (Chapter 70) is the principal legislation for the administration of customs duties. Additionally, there are a number of implementing Regulations and Orders that legislate for specific controlled goods and trade measures.

In addition to the Customs Act, there are a further laws concerning trade in Singapore, the most important of which are:• Chemical Weapons (Prohibition Act)• Goods and Services Tax Act• Regulation of Imports and Exports Act• Strategic Goods (Control) Act• Free Trade Zones Act• United Nations Act

Customs legislation can be accessed at https://www.customs.gov.sg/about-us/acts-and-subsidiary-legislation

Import and export procedures

Registration A business intending to import and/or export or operate a bonded warehouse must register with the Accounting and Corporate Regulatory Authority (ACRA). Upon successful registration, it will be assigned a Unique Entity Number (UEN) by ACRA. The business is then required to activate the UEN with Singapore Customs before it is able to conduct any import/export procedures.

There is no restriction on a non-resident business from conducting import or export activities in Singapore. However a non-resident business intending to import goods for sale in Singapore will be required to appoint an agent for the purposes of payment of Goods and Services Tax (GST) levied at the point of import, unless it can complete the necessary procedures by itself.

Process Import and export declarations are filed on-line using TradeNet, Singapore’s Electronic Data Interchange (EDI) system. Clearance can be achieved in a matter of hours. According to a recent World

Page 143: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 143

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Bank report, the average lead time for both import and export clearance is about two days. Duties and GST levied at import are paid by the importer to Singapore Customs using an Inter-Bank GIRO (IBG) facility.

An importer may authorize its declaring agent to submit payment permits on its behalf. Unless goods are identified as high risk in the nature of origin, the risk of inspection of the goods at point of customs clearance is low. The risk of inspection should be further reduced if the importer or exporter is a participant in the Singapore Secure Trade Partnership programme.

Licenses

Import and export license applications are submitted online via TradeNet.

Categories of goods requiring an import license into Singapore include, but are not limited to: • Animals and animal products• Chemicals• Chlorofluorocarbons (CFCs)• Diesel oil/fuel• Flammable materials• Medicines and pharmaceutical goods• Petroleum• Telecommunications equipment

Categories of goods requiring export license out of Singapore include, but are not limited to:• Singapore manufactured textiles and garments for export to

Canada, European Union and United States • Military equipment and spare parts to Liberia, Sierra Leone,

Iraq, Iran, Sudan, Cote d’Ivoire, Congo• Military equipment and spare parts, and certain consumer

items to North Korea• Goods listed under the Singapore Strategic Goods Control Act

(SGCA)

Taxes and fees

Goods may be subject to the following taxes at import:• Customs duties, ad valorem, applicable on beer and stout • Excise duties, specific or ad valorem, applicable to alcohol, petroleum and other fuels, cigarettes and motor vehicles• Goods and Services Tax , currently 7%

Singapore

Page 144: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

144 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

There are no taxes levied at export.

Customs clearance fees are chargeable at import and export. The average cost of an import permit is US$2.30 and the average cost of an export declaration together with a certificate of origin is US$7.00

Duty Refunds

Traders can claim a refund for overpayment or wrong payment of duties or GST within 1 year from the date of duty payment, or within 5 years from the date of GST payment. Applications for refunds are required to be submitted online via TradeNet attaching the following supporting documents:• Refund Permit• Replacement Permit (If applicable)• Commercial Invoice• Packing list• Arrival notice/freight notification or delivery order• Bill of Lading/ Airway Bill• GST/Duty Computation• Any other documents required by Singapore Customs to verify

the claim

All successful refunds will be credited directly to the Inter-bank GIRO account maintained with Singapore Customs.

Export Controls

The Singapore Strategic Goods (Control) Act (SGCA) regulates the export, transshipment, transit, Intangible Transfer of Technology (ITT) and brokering of strategic goods and related technology.

Goods covered under these regulatory controls are specified within the Strategic Goods Control List and includes military and dual-used products. For the transfer or brokering of such goods, it is mandatory for traders to apply with Singapore Customs and obtain a strategic goods permit under the Strategic Trade Scheme (STS) prior to export.

Page 145: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 145

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Type of Permit RequirementIndividual Permit At least 5 working days before export

ITT Permit At least 7 working days before transmission of technology

Bulk Permit To obtain pre-approval for bulk permit and apply for TradeNet permit prior to export

Brokering Registration At least 14 working days before brokering of goods

Penalties for offences involving the transfer or brokering of strategic goods without a valid strategic goods permit include seizure and forfeiture of goods, fines and imprisonment.

Trade facilitation

The most commonly used customs schemes in Singapore are outlined below.

Duty suspension and exemptions

Temporary Import Goods, with the exception of liquor and tobacco, can be imported for repairs and other approved purposes without payment of duty and GST on the condition that they are re-exported within six months.

Major Exporter Scheme

Approved exporters with significant exports are granted a suspension of import GST. The scheme is administered by IRAS.

Industrial Exemption Factory Scheme

A duty-exemption scheme available to local industries using dutiable raw materials for the manufacture of non-dutiable finished goods.

Import GST Deferment Scheme

The requirement to account and pay GST at the point of import is deferred until the monthly GST return is due. The scheme is administered by IRAS.

Bonded Facilities

Licensed Warehouse Designated area licensed by Singapore Customs for the storage of imported dutiable goods with duty and GST payable suspended.

Singapore

Page 146: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

146 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Zero GST Warehouse Designated area licensed by Singapore Customs for the storage of imported non dutiable goods with GST payable suspended.

Excise Factory Designated area licensed by Singapore Customs for manufacturing dutiable goods with duty and GST payable suspended.

Customs Clearance Schemes

TradeFIRST programme

A mandatory compliance assessment framework that uses a single set of criteria to assess if companies are eligible to apply for and utilize various customs schemes. Companies will be assessed by Singapore Customs and categorized into five bands ranging from Basic to Premium. The resulting rating determines the level of schemes and facilitations that they are accorded, provided that certain essential criteria for specific facilitation are met.

Secure Trade Partnership (STP) and STP - Plus Scheme

A voluntary self-assessment programme that aims to enhance supply chain security. STP- certified companies will enjoy recognition as a lower risk company, reduced cargo checks and expedited clearance leading to quicker lead times.

Company Declaration Scheme

Approved operators in the Airport Logistics Park (ALPS) are allowed to remove local goods or goods with GST paid into customs territory using a Company Declaration form. GST will not be payable again on such goods.

Rulings

Specific customs classification, customs valuation or origin rulings can be obtained from Customs. Rulings can be relied upon so long as the ruling completely covers the commercial scenario. Any variation from the scope of the ruling would compromise the ability to rely on the ruling.

Classification

Singapore adopted the Harmonized System (HS) of classification in 1988 and its tariff also incorporates the ASEAN Harmonized Tariff Nomenclature (AHTN). Singapore is expected to start implementing HS 2017 edition in 2018.

Page 147: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 147

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Valuation

Singapore follows the WTO Customs Valuation Agreement (previously GATT) and the customs valuation rules can be found in Customs Act, Customs (Valuation) Regulations.

Singapore’s customs valuation legislation only applies to dutiable goods. The customs value of non- dutiable goods is not defined in the Regulations. The method for the valuation of imported goods for the purposes of GST is found in the Good and Services Tax Act. If there is a sale with price being the sole consideration, the import value of the goods will be the CIF (cost, insurance and freight) price based on the sale.

Related party transactions

Customs may challenge related party transactions. The importer will be required to demonstrate that the transaction is at arm’s length by comparing the transaction value of identical or similar goods sold between non related parties or by calculating the deductive or computed value of identical or similar goods.

Other payments

Customs will treat all royalties and license fees connected to the imported goods as dutiable unless the importer can evidence that the payment is not made as a condition of sale of the goods for export to Singapore.

Transfer pricing

Customs permits a trader to amend the customs duty value following transfer pricing adjustments. It is usual practice in Singapore for the trader to make a voluntary disclosure to Singapore Customs detailing the basis for the pricing change and any duty payable or duty refund sought.

Singapore

Page 148: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

148 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Origin

Preferential originRegional agreements in force

• ASEAN • Through ASEAN with Australia and

New Zealand (AANZFTA), China (ACFTA), India (AIFTA), Japan (AJCEP), Korea (AKFTA)

• EFTA (ESFTA)• GCC (GSFTA) • Trans Pacific-SEP (TPSEP)

Bilateral agreements in force

Australia, China, Costa Rica, EFTA, GCC, India, Japan, Jordan, Korea, New Zealand, Panama, Peru, Taiwan, United States

Agreements under negotiation

Canada, Mexico, Pakistan, Trans Pacific Partnership, Regional Comprehensive Economic Partnership, Sri Lanka, Ukraine

Preferential Certificates of origin are issued by Singapore Customs.

Non preferential origin

An ordinary certificate of origin can be applied for to evidence that goods are wholly obtained or processed in Singapore. For processed goods, there are defined minimal processes that do not qualify for conferring Singapore origin. In addition to Singapore Customs, there are five Authorized Organizations (AOs) that issue ordinary certificates of origin, which are:• Singapore Chinese Chamber of Commerce and Industry• Singapore Indian Chamber of Commerce and Industry• Singapore International Chamber of Commerce• Singapore Malay Chamber of Commerce and Industry• Singapore Manufacturing Federation

Managing customs and trade compliance

Customs audits and investigations

There is no standard audit programme. Normally, Singapore Customs will only instigate an investigation in the event of non-compliance or suspicion of non-compliance. For businesses importing dutiable goods (e.g. automotive), the chance of a customs audit is likely to be much higher.

Page 149: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 149

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Penalties

The onus for compliance is placed on the importer, exporter, and their agent. Penalties are designed mainly to encourage them to voluntarily comply with the regulations. In general, warnings or composition sums may be issued for minor offences without fraudulent intent. A fine not exceeding S$10,000, or the equivalent of the amount of the customs duty, excise duty or GST payable, whichever is the greater amount, or imprisonment for a term not exceeding 12 months, or both, for example, is imposed upon conviction for key offences such as making incorrect declaration or failure to produce trade documents upon demand by Customs. In another case, for minor offences, such as omission of insurance charges in the value, Customs may offer to compound the offences for a sum of not more than S$5,000 per offence

However, traders with fraudulent intent will be prosecuted in court.

Voluntary disclosure

Penalties (in the form of a composition fine) may be waived or reduced if a voluntary disclosure is made. However, in order to qualify for a consideration of that nature, the disclosure must be complete, voluntary and made before notice or commencement of audit checks and investigations.

Appeal and dispute settlement

Traders can make an appeal pertaining to a Notice of Customs Offence by Singapore Customs by contacting the relevant customs division or branch before the due date for settlement.

Statute of limitations

The statute of limitations is five years. However, this statutory time limit will not apply to cases where fraud is involved.

Singapore

Page 150: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

150 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 151: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 151

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Sri Lanka

Customs & international trade framework

International organisations and agreements

Sri Lanka is a member and/or signatory party of the following international organisations and agreements, relevant to the governance and regulation of import and export transactions:• World Trade Organization (formerly General Agreement on

Tariffs and Trade)• World Customs Organization (WCO)• International Convention on the Harmonized System (HS

Convention)• Revised Arusha Declaration• Revised Kyoto Convention• ATA Carnet System• Chemical Weapons Convention (CWC) • Convention on International Trade in Endangered species of

wild fauna and flora (CJTES) • Kimberley Process Certification Scheme• Trade Facilitation Agreement (TFA) (Sri Lanka ratified on 31

May 2016)

Roles and responsibilities of authorities

Authority RoleSri Lanka Customs A department within the Ministry of

Finance; responsible for:• Collection of import and export related

taxes• Prevention of revenue leakages and

other frauds• Monitoring the import and export of

restricted/prohibited goods that are of environmental, health, social and security concern

• Facilitation of legitimate trade and management of trade regulations

• Collection of import and export data for statistical purposes.

Page 152: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

152 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Department of Inland Revenue (IRD)

A department within the Ministry of Finance. Responsible for the administration and regulation of Value Added Tax (VAT), Nation Building Tax (NBT) and Economic Service Charge (ESC) which are levied on the import of goods.

Department of Import and Export Control

A department within the Ministry of Trade and Commerce; responsible for the control of the import and export of specified goods and issuance of licenses where applicable.

Sri Lanka Standards Institution

Responsible for ensuring that selected imported goods conform to relevant standard specifications.

Director, Plant (Quarantine) Service of the Ministry of Agriculture

Responsible for monitoring the pre export and post-import quarantine period for plants.

Director General of Animal Production and Health

Responsible for monitoring the health requirements for the import of animal products (meat and meat products) as well as pre-export and post-import quarantine of live animals.

Legislation

The principal legislation for the administration of customs and international trade in Sri Lanka includes: • Air Navigation (Customs) Regulation, 1938 • Air Navigation (Special Provisions) Act, No 55 of 1992 (War-

saw Convention) • Board of Investment of Sri Lanka Law, No 4 of 1978 • Carriage of Goods by Sea Act, No 21 of 1982 • Customs Ordinance No 17 of 1869 and Amendments • Economic Service Act. No 13 of 2006 • Exchange Control Act, No 24 of 1953 • Excise (Special Provisions) Act, No 13 of 1989 • Fauna and Flora Protection Ordinance, No 2 of 1937 • Food Act, No 26 of 1986 • Imports and exports (Control) Act,

No 1 of 1969 • Intellectual Property Act, No 36 of 2007 • Nation Building Tax Act, No 9 of 2009 • Ports and Airports Development Levy Act, No 18 of 2011 • Protection of Government Revenue (Special Provisions) Act,

No 1 of 2006 • Quarantine and Prevention of Diseases Ordinance, No 3 of

1897

Page 153: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 153

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

• Revenue Protection Act, No 19 of 1962• Special Commodity Levy Act, No 48 of 2007 • Sri Lanka Export Development Board Act, No 40 of 1979• Sri Lanka Standards Institution Act, No 38 of 1964• Tea Board Act, No 14 of 1975• Value Added Tax Act, No 14 of 2002

Import and export procedures

Registration

Any business intending to import and/or export goods must first register with Customs. Both importers and exporters must obtain a Taxpayer Identification Number (TIN) and a Value Added Tax (VAT) Registration Number from the Inland Revenue Department (IRD) which need to be registered with Customs afterwards.

Additionally, exporters must register with the Export Development Board and with the following competent authorities as applicable:

Product AuthorityTea Sri Lanka Tea Board

Coconut products Coconut Development Authority Gems and jewellery Sri Lanka Gem and Jewellery Authority

Textile products and ready-to-wear

Textiles Division of the Ministry of Industry and Commerce

A foreign company cannot register with Customs to conduct import and export activities and must appoint a local agent for this purpose.

Process

Every importer and exporter or authorised agent is required to submit a Goods Declaration (CUSDEC) and relevant shipping documentation to clear cargo for import or export.

Every declarant is required to use the official codes approved by Customs for processing purposes by the Automated Customs Cargo Entry Systems of Sri Lanka (ACCESS).

Sri Lanka Customs has introduced the online processing of import and export declarations using the Automated System of Customs Data (ASYCUDA).

Sri Lanka

Page 154: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

154 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Item Category Recommending Authority

Live Animals & Animal Products

Department of Animal Production & Health

Monofilament Fishing Nets

Ministry of Fisheries and Aquatic Resources

Tea Tea Board

• Certificate of origin, if applicable • Certificate of Registration (with translation) for used motor

vehicles • CUSDEC (7 copies)• Delivery order • Import Control License, if applicable • Load Port Survey Certificate for food items • Packing list, if applicable • Sri Lanka Standards Institution/Industrial Technology

Institute/Quarantine Certificate, if applicable• Copy of Business Registration Certificate or copy of the

national identity card, if the applicant is an individual

Export documentation• CUSDEC (4 copies)• Export license and export permit, if applicable• Invoice• Other supporting documents as applicable• Packing list• Shipping note/airway bill

Licenses

The direction of Sri Lanka’s trade policy is to progressively minimise import restrictions by limiting them to a well-defined narrow list that are considered necessary to national security and public health. Therefore, imports are generally free from import control requirements.

Recommendations from the authorities mentioned below are required to obtain an import license.

Import documentation• Authorisation from relevant Ministry, if applicable • Bank endorsed commercial invoice (performa invoice) • Bill of lading • Catalogue on product literature to identify classification

Page 155: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 155

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Explosives, Arms and Ammunitions

Ministry of Defence

Timber Department of Forest Conservation

Coins and Medals Central bank of Sri Lanka

Sports Goods Ministry of Sports

Sludge Oil Marine Environment Protection Authority

Metal scraps, metal waste and other waste materials specified by basal convention

Central Environmental Authority

Plastic Packaging Items

Central Environmental Authority

The export of goods from Sri Lanka is unrestricted except for a narrow category of goods that are prohibited or require an export license. Goods that require an export license include:• Metal scraps, slag, dross, ingots, granules, powders etc.• Wood and Articles of wood excluding coconut shell charcoal,

household utensils of wood, and manufactured articles of wood• Ivory and Ivory products• Passenger Motor Vehicles first registered in Sri Lanka prior to

01.01.1945

The authority responsible for import or export permit issuance is the Controller of Imports and Exports.

Taxes and levies on imports

The taxes, duties and levies charged on the import of goods into Sri Lanka include:• Customs Duty (CD)• Economic Service Charge (ESC) • Excise (Special Provisions) Duty (ED)• Import Cess (CESS)• Nation Building Tax (NBT)• Ports & Airports Development Levy (PAL)• Special Commodity Levy• Value Added Tax (VAT)

Sri Lanka

Page 156: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

156 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

On a policy decision aimed at consolidation of taxes and levies at import stage• Customs duty and Cess only on the import of liquor,• Excise (Special Provisions) Duty only on the import of cigarettes

and certain articles specified in Chapter 87 of Customs Tariff Code (vehicles and parts and accessories thereof) is now levied in lieu of the multiple taxes and levies at import stage.

Tariff and other tax rates

Sri Lanka has a simplified four tier tariff structure for imports:

Items Tariff

Not manufactured locally and/orabsolutely essential products,raw materials, machinery, etc.

0%

• Semi-processed raw materials• Intermediate goods, spare parts

15%

Motor vehicles and other finished essential goods

30%

Within this overall tariff structure, there are a few variations. Most goods are subject to ad valorem duties calculated on the transaction value. Specific duties are applicable to few goods.

Other than the following items, the export of goods is not subject to taxes or levies: • Tea - A sum of Rs10 per kilogram or 2.5% on the preceding

week’s Colombo Auction average price of tea, whichever is lower (a promotion and marketing levy of Rs 3.50 per kilogram is also imposed by the Sri Lanka Tea Board).

• Raw rubber - a Cess of Rs12.00 per kilogram.• Copper waste and scrap - 50% tax on the FOB value.• Ferrous and non-ferrous metal in the form of scrap or other

forms - 10% or 25% tax respectively of the FOB value.

Fees

Sri Lanka Customs charges fees for the provision of services and issue of documents.

Details of the fees are available on the Sri Lanka Customs website at www.customs.gov.lk

Page 157: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 157

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Duty refunds

Sri Lanka customs ordinance does not provide for duty refunds to importers. However, in practice, if The Director General of Sri Lanka Customs concludes that an importer has overpaid import duty, it may refund the excess amount by filing a refund claim to Customs.

Further, if such importer is registered for VAT with the commission-er General of Inland Revenue, it can claim, from the commissioner General of Inland Revenue, the excess amount of VAT paid at the time of importation as input VAT credit.

Trade facilitation

Trade facilitation schemes and measures are administered by Customs to facilitate exports. The most commonly utilised schemes are outlined below.

Duty suspension and exemptions

Temporary Importation for Export Processing (TIEP)

Enables exporters and manufacturers to import raw material and other inputs for use in the manufacture of products and services for export free of duty. The materials do not need to be stored in a bonded warehouse.

Scheme for Exemption of Fiscal Services on Imported Capital Goods and Intermediate Goods

Permits whole or partial exemption of fiscal levies on the import of capital equipment and intermediate goods used for the manufacture of goods or provision of services for export.

Duty Rebate Scheme Assists export-oriented manufacturers, who use inputs imported directly by them or having purchased them locally, to either manufacture and export such products themselves or supply them to the Board of Investment of Sri Lanka (BOI) approved export-oriented enterprises.

Sri Lanka

Page 158: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

158 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Other exemptions/concessions at import

Further, exemptions can apply on the import of goods with respect to:

• Customs Duty• Nation Building Tax• Ports & Airports Development Levy• VAT

The lists of exemptions are found in the respective legislation or in the Gazette Notifications issued pursuant to provisions regarding such legislation. A customs duty exemption may be granted (for a specified period) on the import of goods by enterprises which have entered into agreements with the BOI.

Gazetted Strategic Development Projects qualify for exemption from all or almost all taxes, duties and levies at import. The Gazette Notification specifies the period and the applicable conditions.

Rulings

Specific customs classification, customs valuation and origin rulings can be obtained from Customs.

Classification

Sri Lanka follows the Harmonized System (HS) of classification that has been implemented since 1 January 1989. Sri Lanka implements HS 2017 effective since March 2017. The national tariff codes and rates can be found in Sri Lanka Customs National Import Tariff Guide (NITG) 2017.

Bonded Facilities

Entrepot Trade Assistance

Warehousing facilities are made available to companies importing and re-exporting goods in the same form or importing in bulk and re-exporting after packaging and labelling.

Private Bonded Warehouse

A private bonded warehouse can be established for the purpose of transacting legitimate business.There are published regulations regarding the nature of the storage, prohibited goods and other related matters.

Page 159: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 159

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Valuation

The valuation of goods imported into Sri Lanka is governed by the provisions of the Customs (Amendment) Act No 2 of 2003, which is based on the WTO Valuation Agreement.

The customs value of any goods imported into Sri Lanka is based on the transaction value. If the customs value cannot be determined on that basis, a legal provision is available to take a series of consequential steps to determine the value in following order – the transaction value of identical goods or similar goods followed by the unit price of the imported goods or the identical or similar goods – until the value can be determined using reasonable means.

The basis for the calculation of value for the levy of other taxes, duties and levies varies.

Related party transactions

According to the Customs Valuation Rules set out in Schedule E to the Customs (Amendment) Act No 2 of 2003, where there is a sale between related persons, the transaction value shall be accepted and the goods valued accordingly whenever the importer demonstrates that such value closely approximates the transaction value in sales to unrelated buyers of identical or similar goods for export to Sri Lanka, or other tests set out in schedule E.

Other payments

In determining the customs value, royalties and license fees related to the imported goods being valued that the buyer must pay either directly or indirectly as a condition of sale of the goods being valued should be added to the price paid or payable for the imported goods, to the extent that such royalties and fees are not included in the price actually paid or payable.

Transfer pricing

Where there is a post import adjustment to the price of goods sold, the customs value must be retrospectively revised, disclosed to Customs and any additional duty arising as a result of the adjustment paid.

Sri Lanka

Page 160: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

160 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

OriginRegional agreements in force

• Global System of Trade Preferences (GSTP)

• Asia Pacific Trade Agreement (APTA)• South Asian Association for Regional

Co-operation (SAARC)• South Asian Free Trade Agreement

(SAFTA)Bilateral agreements in force

India, Pakistan

Unilateral agreements in force

General System of Preferences (GSP)

Certificates of origin are issued by the Department of Import and Export Control.

Managing customs and trade compliance

Customs audits and investigations

There is no standard audit programme. Generally, Sri Lanka Customs will initiate an investigation in the event of noncompliance or suspicion of non-compliance. The Customs Ordinance authorises the Director General of Customs or any officer duly authorised, to enter any premises, examine documents, and take possession of documents and other related matters for investigation purposes.

Penalties

The Customs Ordinance stipulates a range of penalties for Customs offences. An offender can be required to pay either treble the value of goods and/or be liable to a monetary penalty of Rs 100,000or such other sum at the discretion of the Director General of Customs. Persons reasonably suspected of any customs offences may be arrested and prosecuted by the Magistrate’s Court.

Voluntary disclosure

In the event of a voluntary disclosure, Customs may mitigate the amount of the penalty.

Page 161: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 161

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Appeal and dispute settlement Any importer who is aggrieved by the amount of an assessment made by Customs on the valuation of the imported articles may appeal in writing to the Director General of Customs, then refer the appeal for further studies to the Appeals Directorate who will prepare a detailed report for the Director General’s consideration.

Statute of limitations

Sri Lanka customs ordinance has not provided any limitations on issuing assessment to importers.

Sri Lanka

Page 162: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

162 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 163: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 163

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Taiwan

Customs & international trade framework

International organisations and agreements

Taiwan is a member/signatory of or adheres to the following international organisations and agreements relevant to the governance and regulation of import and export transactions:• World Trade Organization (formerly General Agreement on

Tariffs and Trade)• World Customs Organization • International Convention on the Harmonized System (HS

Convention)• The International Convention on the Simplification and

Harmonization of Customs Procedures• The Convention on International Trade in Endangered Species

of Wild Fauna and Flora (CITES)• Trade Facilitation Agreement (TFA) (Taiwan ratified on 17

August 2015)

Authority RoleCustoms Administration (CA)

A unit under the Ministry of Finance (MOF), responsible for customs policies, regulations and the enforcement of government controls in Taiwan. Responsible for the collection of customs duty as well as other taxes and fees on behalf of other government authorities.Keelung, Taipei, Taichung, and Kaohsiung Customs are all under the Customs Administration.

The Bureau of Standards, Metrology and Inspection (BSMI)

A unit under the Ministry of Economic Affairs (MoEA), responsible for the standardisation, metrology (measurement) and product inspection in Taiwan.

The Bureau of Foreign Trade (BOFT)

A unit under the MoEA, responsible for drafting Taiwan’s international trade policies, promoting trade, managing trade-related activities and monitoring import and export controls of Strategic High-Tech Commodities (SHTC).

Page 164: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

164 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

National Communications Commission

A unit under the Executive Yuan (EY), responsible for the import, export and authorisation of telecommunication equipment.

Council of Agriculture A unit under the EY, responsible for the import, export and authorisation of agricultural products, animals and plants. The Bureau of Animal and Plant Health Inspection and Quarantine works under the Council of Agriculture.

Department of Health A unit under the EY, responsible for the import, export and authorisation of medicine, pharmaceutical products and foods. The Food & Drug Administration works under the Department of Health.

Ministry of Transportation

A unit under the EY, responsible for and Communications the import, export and authorisation of aircrafts, vehicles, vessels, and other transportation.

Ministry of National Defence

A unit under the EY, responsible for the import, export and authorisation of weapons and firearms.

Atomic Energy Council A unit under the EY, responsible for the import, export and authorisation of atomic-related commodities.

Legislation

The Customs Act is the principal legislation for the collection of customs duties and the clearance of goods in Taiwan. Additionally, there are a number of other regulations and laws concerning trade in Taiwan, the most important of which are:• Commodity Tax Act • Customs Anti-Smuggling Act • Enforcement Rules of the Customs Act • Foreign Trade Act • Regulations Governing Certificates of origin and Certificates of

Processing • Regulations Governing Export and Import of Strategic High-

Tech Commodities • Value-added and Non-value-added Business Tax Act (VAT Act)

Page 165: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 165

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

The Specifically Selected Goods and Services Tax Act (Luxury Tax Act)

• Tobacco and Alcohol Tax Act & Tobacco Hazards Prevention Act (for tobacco health tax)

Customs legislation can be accessed at http://law.moj.gov.tw/

Registration

Unless otherwise specified, a company, either local or foreign, may register with BoFT as a trader and qualify to conduct import and export operations. However, for a foreign non-resident company to be able to act as the IOR/EOR, the company will have to go through the following process, first, establish and register with the MOEA to obtain the GUI number, and then, secondly, register with the BoFT as a trader and qualify to conduct import and export operations. The registration may be filed online with the requisite documents sent to BoFT by facsimile. The process for registration usually takes one to two days.

Prior to registering with BoFT, a company must apply for a Government Uniform Invoice Number (GUI Number or VAT registration number) at the Department of Commerce. The application process for obtaining a GUI Number generally takes between one and three months depending on the complexity and nature of the company to be established.

Although a company can appoint an agent to act on its behalf as the importer of record, in practice, there may be VAT and income tax complications.

Process

The importer must complete and file the customs declaration within 15 days following the date of arrival of the goods. Declarations can be filed online and the subsequent procedures may include submission of requested documents and/or cargo inspection, depending on the inspection criteria the importeris subject to and payment of duty. Once the procedures are completed, Customs will release the goods and the goods may enter domestic areas.

Exporters must complete and file the customs declaration before the goods depart. The export declaration may be submitted on-line.

Taiwan

Page 166: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

166 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Licenses

Categories of goods requiring import licenses into Taiwan include, but are not limited to: • Alcohol and spirits • Animals and animal products • Automobiles, aircrafts, vessels and other transportation tools • Certain Chinese origin goods (including agricultural and • apparel)• Chlorofluorocarbons• Diesel oil/fuel• Firearm and weapons• Flammable materials• Medicines and pharmaceutical goods• Nutritional supplements• Plants and vegetation• Strategic high-tech commodities (SHTC)• Telecommunications equipment• Tobacco products

Categories of goods requiring export licenses out of Taiwan include, but are not limited to:• Nuclear energy substances, facilities and equipment • Materials, chemicals, micro-organisms and toxins • Telecommunication equipment and certain electronics • Sensors and lasers • Navigation and avionics • Maritime • Aerospace and propulsion systems • SHTC and those listed on the Sensitive Commodity List for

Exports to North Korea and Iran

Import and export license applications are submitted to the BOFT and other competent authorities. The BOFT will provide the import or export license, with a unique license number to the applicant upon approval. Depending on Customs request, the importer or ex-porter must submit a copy of the license or affix the corresponding license number to the import or export declaration for Customs to conduct a documental cross-check.

Taxes and fees

Goods may be subject to the following taxes at import:• Customs duties • Alcohol & tobacco tax • Anti-dumping duties

Page 167: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 167

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

• Commodity tax • Health tax (for tobacco products)• Luxury tax • Trade Promotion Service Fee, 0.04% (not levied if the fee falls

below TW$100 per shipment)• Value Added Tax (VAT), currently 5%

There are no taxes levied at export.

Trade Promotion Service Fees are chargeable at both import and export.

Duty refunds

A company can claim refunds for an over or under-payment of duties within 1 year from the date of duty payment, or within 5 years from the date of other tax payment. Applications for refunds are required to be submitted online via CPT (Customs-Port-Trade) Single Window along with the following information:• Import declaration number• The competent authority• Basic information of the duty-payer• The statutory reason to apply for refund• The amount of refund

Export Controls

Taiwan’s Foreign Trade Act regulates the exportation, transship-ment, transit and storage of strategic high-tech goods. Goods covered under these regulatory controls are specified within the list of “types of strategic high-tech commodities, specific strategic high-tech commodities and exportation to restricted regions” published by the MOEA. For the exportation of these strategic high-tech goods, it is mandatory for exporters to apply with the BoFT and obtain a strategic high-tech goods permit prior to exportation.

Penalties for exporting strategic high-tech goods without a valid strategic high-tech goods permit include seizure and forfeiture of goods, fines and imprisonment.

Taiwan

Page 168: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

168 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Duty suspension,exemptions, and refund

Temporary import Goods, with the exception of liquor and tobacco, imported for repairs and other approved purposes are not subject to payment of customs duty, commodity tax, and VAT on the condition that they are re-exported within six months.

Import for rent or lease

Goods, with the exception of liquor and tobacco, imported for rent or lease and other approved purposes, are subject to customs duty, commodity tax, and VAT, but levied on the basis of the lease amount plus the transportation fee and insurance, or 10% of the customs value depending on the purpose of the goods. The goods should be re-exported within an approved period.

Bilateral ATA Carnet Imports with Carnet are not subject to payment of customs duty, commodity tax, and VAT on the condition that they are re-exported within 12 months.

Taiwan has signed bilateral ATA Carnet agreements with a limited number of nations, namely, Australia, Canada, EU, New Zealand, Singapore, South Africa, South Korea, Switzerland, and the US.

Raw Material Duty Drawback

Unless specified by the MoF, raw material’s import customs duty paid may be refunded if the manufactured goods are subsequently exported. Duty refund shall be applied within 18 months following the date of importation.

Trade facilitation

The most commonly used customs schemes in Taiwan are outlined below:

Page 169: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 169

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Bonded warehousing and processing For the categories for bonded warehouses and zones listed below, customs duty and other taxes may be suspended.

Agriculture Science Park

Designated for manufacturing, processing, and limited logistics functions.

Bonded Factory Designated for manufacturing and processing functions.

Bonded Warehouse Designated for storage and limited logistics functions.

Bonded Logistics Centre

Designated for logistics and/or storage functions.

Duty Free Shop Designated for retail, limited storage and logistics functions.

Export Processing Zone

Designated for manufacturing, processing, and limited logistics functions.

Free Trade Zone Designated for manufacturing, processing, and logistics functions

Science Park Designated for manufacturing, processing, and limited logistics functions.

Customs Clearance Schemes

Subject to certain specific criteria, a company may apply to qualify as an Authorised Economic Operator (AEO). AEOs may enjoy a significantly lower customs inspection rate, bimonthly payment of duties, simplified customs clearance and other benefits. There are two categories of AEO certification, i.e. “General AEO” and “Security and Safety AEO.” The latter requires higher qualification standards but also offers increased benefits.

Rulings

A tariff classification ruling may be requested. However, Customs would not render a ruling if the goods are subject to administrative/judicial review or in dispute.

An importer may request Customs to make a customs valuation ruling for a defined scope (for example the determination of the treatment of additional payments) prior to the import of the goods. The rulings are generally provided in written format.

Taiwan

Page 170: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

170 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Classification

Taiwan adopted the Harmonized System (HS) of classification in 1989, and has combined it with Taiwan’s CCC codes (Customs Import Tariff and Import and Export Commodity Classification) as a complete set of import and export classification codes that are 11 digits. The customs duty rate is determined at eight-digit level, and the remaining three additional digits are for statistic and border control purposes. All imported or exported goods should be classified and declared at an 11 digit level.

Taiwan now implements HS 2017 edition effective from 1 January 2017. The Tariff Database of Customs Clearance System for the HS 2017 amendments has been updated and can be found here http://web.customs.gov.tw/public/attachment/612301973871.pdf

Valuation

Taiwan follows the WTO Customs Valuation Agreement. The relevant provisions regarding the transaction value and dutiable additions are set out in the Taiwan Customs Act and Enforcement Rules of the Customs Act. The provisions on customs valuation in Taiwan and the WTO Customs Valuation Agreement may generally be deemed as identical in content.

The customs value for goods imported into Taiwan is generally the CIF (cost, insurance and freight) value, and the FOB (free on board) value for exported goods.

Related party transactions

Where the purchase and sale transaction is conducted between related parties, the importer, if challenged, should be able to demonstrate to Customs that the price has not been influenced by the relationship. The transaction value in a sale between related parties may be accepted by Customs if the importer demonstrates that such value closely approximates one of the following: • The transaction value in sales to unrelated buyers of identical or

similar goods for export to the country of importation;• The Customs value of identical or similar goods under the

deductive value (sales minus value); or• The Customs value of identical or similar goods under the

computed value (cost-plus value).

Page 171: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 171

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Other payments

Expenses that may be added to the calculation of the customs value include, but are not limited to, commissions, royalties and license fees related to the goods paid by the buyer as a condition of the sale of the goods, provided that such an amount is not already included in the price actually paid or payable for the goods.

Expenses that may be deducted from the calculation of customs value include maintenance fees and cost of transport incurred post import, customs duties or taxes levied on the goods and deferred interest.

Transfer pricing

Customs does not accept the use of transfer pricing guidelines and methodologies to support the customs value. Besides making amendments on historical declarations for past 6 months, there are defined rules for transfer pricing adjustments and whether an amendment should be made to the customs value as a result of a transfer pricing adjustment is evaluated by Customs on a case by case basis.

When disclosing such an adjustment to Customs, it is likely Customs may inquire further and may even challenge the arm-length nature of the initial declared value.

Origin

Preferential origin

Bilateral agreements in force

China (pre FTA under Economic Cooperation Framework Agreement), El Salvador, Guatemala, Honduras, Nicaragua, Panama, Singapore, New Zeeland

Agreements under negotiation

United States, European Community, Japan, Indonesia

Certificates of origin are issued by the BoFT or other BoFT authorised agencies.

Taiwan

Page 172: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

172 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Non preferential origin

An ordinary certificate of origin can be obtained in order to evidence that goods are wholly obtained or undergone substantial transformation in Taiwan. The Regulations governing certificates of origin and certificates of processing set out the standards for origin determination.

Managing customs and trade compliance

Customs Audits and Investigations

Taiwan Customs works closely with the BSMI, BoFT, and other authorities in detecting non-compliance. Customs may conduct random inspections or spot checks as they deem necessary. Goods which are subject to significant duty or tax rates, import permits, specific requirements from other governmental units (such as BSMI) are more likely to undergo documental review or physical inspection.

Taiwan Customs imposes a high level of scrutiny on new duty payers, including a 100% inspection rate on initial shipments.

Customs may conduct import pricing enquiries or post-entry audits should they deem the customs value declared is inconsistent.

In practice, when Customs suspects that a declared price is not reasonable, they would most likely adopt the deductive method for customs valuation, which uses the gross margin on the tax return to

Economic Cooperation Framework Agreement (ECFA)

The ECFA, signed in 2010 between China and Taiwan, is a pre-FTA agreement. Goods which are listed on the Early Harvest List under ECFA may enjoy a preferential customs duty rate. Third party invoicing within a limited scope is permissible under ECFA.

Chinese import ban

A significant number of tariff codes are subject to Chinese import restrictions, many of which are agriculture and textiles. If goods of China origin are classified under a tariff code marked with “MW0” or “MP1,” then the goods are completely prohibited from being imported into Taiwan or may only be imported subject to conditions being met.

Page 173: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 173

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

test whether the declared value is reliable. They may also initiate an investigation upon suspicion of false declaration of the description, quantity, weight and value of the goods.

Penalties

Infringement of the laws and regulations may, depending on the severity, lead to financial penalties and suspension of business or import and export activities and confiscation of goods. Further detrimental effects may include a higher inspection rate for future imports and a more difficult AEO application process.

Customs related penalties are set out in the Customs Act, Customs Anti-smuggling Act, the Foreign Trade Act, and other public rulings. The ECFA also stipulates its own penalty criteria.

The maximum penalty is a fine equivalent to five times the duty evaded together with the confiscation of the goods in question. Subject to the severity and nature of the cause of the duty short-paid or evaded, Customs may retrospectively apply penalties for non-compliance up to a period of five years.

Voluntary disclosure

Penalties, in the form of composite fines, may be waived or reduced if a voluntary disclosure is made. However, in order to qualify for consideration, the disclosure must be completed voluntarily and made before the notice or commencement of audit checks and investigations.

Appeal and dispute settlement Duty payers can request Customs to review its duty-related decision within 30 days after receiving the duty memo. If the duty payer is dissatisfied with the outcome of the administrative review by Customs, an appeal may be filed to enter into administrative litigation process.

Statute of limitations

The statute of limitations on customs duty, delinquent fees, late fees, interest, fines or penalties on the value of the goods which are levied in accordance with Taiwan Customs Act is 5 years.

Taiwan

Page 174: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

174 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 175: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 175

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Thailand

Customs & international trade framework

International organisations and agreements

Thailand is a member and/or signatory party of the following international organisations and agreements relevant to the governance and regulation of import and export transactions:• World Trade Organization (formerly General Agreement on

Tariffs and Trade)• World Customs Organization International Convention on the

Harmonized System (HS Convention)• ASEAN Harmonized Tariff Nomenclature (version 2017)• Export Control (United Nations Security Council Resolution

1540 (2004) regarding the non-proliferation of weapons of mass destruction, the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies and Chemical Weapons Convention)

• ATA Carnet system• Organisation for the Prohibition of Chemical Weapons (OPCW)• The Convention on International Trade in Endangered Species

of Wild Fauna and Flora (CITES)• Kimberley Process, regarding trade in diamonds• Basel Convention on the Control of Transboundary Movements

of Hazardous Wastes and their Disposal• Trade Facilitation Agreement (TFA) (Thailand ratified on 5

October 2015)

Roles and responsibilities of authorities

Authority RoleRoyal Thai Customs Customs controls the import and export of

goods, as well as the collection all duties and taxes applicable to imports and exports.

Excise Department Responsible for the collection of excise duty on specific products including alcohol, tobacco, automobiles and luxury goods. The collection of excise duty is conducted on its behalf by Customs.

Page 176: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

176 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Revenue Department Responsible for the administration of the national revenue system and the collection of taxes prescribed by the Revenue Code. Import Value Added Tax is collected by Customs at the point of import on behalf of the Revenue Department.

Department of Foreign Trade (DFT)

DFT (under the Ministry of Commerce) is responsible for international trade matters including trade facilitations and trade restrictions as well as issuing of certificates of origin.

Food and Drugs Administration (FDA)

FDA is a government body under the Ministry of Public Health. It is responsible for controlling the import and export of consumer products such as foods, drugs, cosmetics and hazardous substances.

Department of Industrial Works (DIW)

Responsible for controlling the import and export of hazardous substances. They are the authorised government body for issuing import and export licenses related to hazardous substances, chemical wastes and used electrical and electronic appliances.

Legislation

The Customs Act B.E. 2469 (1926) is the principal legislation for the administration of customs duties. Additionally, there are a number of implementing Ministerial Regulations, Customs Announcements, Notifications, General Orders and Rulings.

There is a draft of new Customs Act which would repeal and replaced the current Customs Act and its amendments. The key changes include:• Bribery and reward regime (e.g. current reward is 25% or

30% of duty fine or selling amount of seized goods) would be reduced to 20% from 30%. There would be no bribes for false declaration, duty evasion and import of restricted goods offences. A cap of 5 million Baht per case is also introduced.

• Introduction of ‘willful intent’ or ‘negligence’ to be considered for duty evasion offences.

• Limiting the period for Customs to carry out post-clearance

Page 177: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 177

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

audits to 5 years from the import or export date (to align with record retention requirements).

• Introduction of timeline (180 days) for Customs’ Board of Appeal to consider appeal cases.

• Capping of duty surcharges per month at the duty shortfall amount itself;

• The duty refund period will be extended from 2 years to 3 years.

• Reduction of statutory penalties and fines for duty evasion offence to be in a range between 0.5 and 4 times of duty shortfall, imprisonment not exceeding 10 years, or both.

• Changes to licensing requirements for goods consigned into Free Zone areas as specified in the relevant Ministerial Regulation.

There would be a transitional period of 180 days after the announcement date in the National Gazette before it becomes effective (expected to take effect by the end of 2017 as the soonest.) Following the implementation of the new Customs Act, sub-legislations would be issued accordingly.

In addition to the above Act, there a number of relevant laws concerning trade in Thailand, the most important of which are:• Criminal Procedure Code B.E. 2477 (1934)• Excise Tax Act B.E. 2560 (2017) – The new Excise Tax Act was

announced in the National Gazette on 20 March 2017 and would become effective on 17 September 2017. Not only it would repeal and replace Excise Tax Act B.E. 2527 (1984) and its amendments but it would also incorporate other relevant excise laws into the new Act (e.g. Excise Tariff Act B.E. 2527 (1984) and laws on liquor). The most important change would be the excise tax base which will be collected based on a suggested retail price instead of the ex-factory price, last wholesale price (for liquor products) or CIF value (for imported products).

• Hazardous Substances Act B.E.2535 (1992)• Investment Promotion Act B.E.2520 (1977) • Revenue Code B.E. 2481 (1938) • The Customs Tariff Decree B.E.2530 (1987)

Thailand

Page 178: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

178 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Import and export procedures

Registration

In order to register as an importer or exporter in Thailand, a company is required to have a company’s registration in Thailand (or a copy of the company’s overseas registration certified by a Public Notary) and a VAT registration certificate in Thailand. A registered importer or exporter company can appoint a customs broker to act on its behalf.

Process

Customs procedures for goods arriving in Thailand in any manner are similar to those of most other territories. An importer is required to file an entry form together with other requisite documents including a bill of lading, invoice, and packing list via the e-Customs system. A company can access the e-Customs system once they are registered as an importer or exporter.

Import duties and other relevant payable taxes (e.g. VAT and excise tax) are due upon the arrival of the vessel carrying the imported goods and goods that may be stored in a bonded warehouse. Landed and storage charges must be paid before the goods are released.

Import Restrictions

Most goods can be freely imported into Thailand, except for those listed as “prohibited” (such as goods carrying the Thai national flag, narcotics and fake currencies) or “restricted” (such as certain drugs, foods, cosmetics, hazardous substances, weapons, explosives, and wild fauna).

Applications for import and export requirements such as licenses for controlled goods must be submitted to Ministry of Commerce and other relevant issuing authorities together with the required documents (e.g. supplier order, order confirmation and invoice) prior to importation. The license may be valid for a fixed duration or for a single importation. The issuing authorities may include, but not limited to, the Food and Drug Administration, Department of Agriculture, Department of Fisheries and Department of Industrial Works. There are over forty agencies involved in the licensing of goods and it is the importers’ as well as the exporters’ responsibility to obtain the appropriate license.

Page 179: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 179

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Taxes and fees

There are normally three types of import related taxes that importers have to pay before the imported goods are released from the custody of Customs, which are:• Import duties• Excise tax for the Excise Department and interior tax• Value Added Tax (VAT)

Other taxes such as Anti-Dumping Duty, Health Tax and Television/Broadcasting Tax may apply to limited specified products.

Only three categories of goods are currently subject to export duties under the Customs Tariff Decree. These are raw hides, wood and oil exported from the Joint Development Area (JDA) between Thailand and Malaysia.

Duty refunds

Duty refunds are possible if importers/exporters ‘reserve the right or place a deposit guarantee’ at the time of import (or export) and before the goods are removed from the Customs’ custody. Under the current law, requests for duty refunds must be submitted within 2 years from the date of import or export.

Export Controls

On 16 October 2015, the Ministry of Commerce (MOC) issued a new notification specifying dual-use items as goods requiring permission and subject to export measures. The notification is scheduled to take effect on 1 January 2018.

The regulation introduces two control lists: one of Thailand’s dual use items (DUI) based on the EU’s list and the other of around 1,800 goods based on their HS codes at the eight-digit level based on Thailand’s adoption of HS 2012. Under the first list (DUI list), exporters must obtain an export license for goods on this list or for goods likely to be involved in the development of Weapons of Mass Destruction (WMDs). For goods on the second list, exporters are obliged to register and follow specific self-certification procedures at the Department of Foreign Trade, Ministry of Commerce.

Most industries will be affected, but the most likely to be impacted include:

Thailand

Page 180: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

180 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Duty and Tax Compensation (tax coupons)

Importers of goods and raw materials that are used for manufacturing in Thailand, whom have not used any tax privilege, will be able to apply for a tax coupon when exporting out of Thailand. Tax coupons can be used against any form of tax in Thailand (except for withholding taxes) or sold to another party prior to issuance.

Duty Drawback under Section 19 bis for Imported Raw Materials used in Export Production

Under Section 19 bis, Customs Act (No.9), B.E. 2482 (1939), a refund of import duties can be obtained for raw materials imported into Thailand to produce or assemble into finished goods and re-exported out of Thailand within one year from the date of import.

• Electronics• Semiconductors• Computers• Chemicals and pharmaceuticals• Medical• Automotive• Steel, and• Telecommunications.

Although this MOC Notification was issued in pursuant to the Export and Import of Goods Act B.E. 2522, there is a draft Trade Control on Weapons of Mass Destruction related Items (TCWMD) Act which is currently under the Council of State’s consideration. At this stage, it is not certain whether and when the TCWMD would become effective. If so, there could possibly be some changes regarding sub-legislation (e.g. the MOC Notification) on export control of DUI.

Trade facilitation

Duty suspension and exemptions

Various customs incentives schemes, each with its own specific conditions and duty privileges, are available in Thailand, including the following:

Page 181: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 181

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Duty Drawback for Re-export in the Same State under Section 19

Section 19 is a duty drawback mechanism for goods which are re-exported in the same state as they were imported, within one year after import.

Free Zones (FZ) (Customs or Industrial Estate Authority of Thailand Free Zones)

Duty and VAT exemption for items imported into the FZ for use in a manufacturing process (including materials and equipment) and subsequently exported. Goods removed from a FZ for domestic sale are dutiable. However, if the goods qualify under the FZ rules of origin then a preferential duty rate may apply.

Manufacturing Bonded Warehouses (MBW)

The scheme offers import duty suspension for goods and raw materials that are imported into Thailand to produce or assemble into finished goods for re-export out of Thailand. An MBW provides duty exemption for imported machinery and tooling which are used in the production process. The imported materials can be stored for up to two years, regardless of whether they have been transformed into final products.

Board of Investment (BOI) Promotion

Board of Investment (BOI) promoted companies may import machinery and equipment for the promoted projects and enjoy import duty exemption or reduction, depending on the BOI zone where the projects are located, on such items. Imported raw materials will be eligible for an import duty exemption or reduction if they are used in the manufacture of exported goods.

The promoted company may also be accorded a corporate income tax exemption for a period that varies according to the BOI zone where the company is located.

Thailand

Page 182: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

182 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Customs Clearance Schemes

Customs launched the Authorised Economic Operator (AEO) programme for importers and exporters (Customs Notifications No. 12/2556) in 2013 and revised its AEO programme for customs brokers under Customs Notifications No. 79/2556, No. 113/2556 and No. 63/2557.

Key benefits under the AEO programme include:• Exemption from inspection upon import or export• Special channels for inspection in case physical inspection is

required• No requirement on placing guarantees for bulk cargos • Exemption from sample withdrawal for exported cargo• Special timelines in relation to certain privilege schemes such as

re-export, transshipment, through shipment, duty refund (e.g. Section 19 bis, duty and tax compensation), bonded warehouse, and customs free zone.

Rulings

Advanced rulings on Customs valuation, origin, and classification are possible in Thailand. Applications for advance binding rulings will only be accepted for future import shipments/transactions. Applications will not be considered if the relevant transaction or product is currently under consideration by an internal division of Thai Customs or in the process of appeal or legal proceedings.

Advance rulings are legally binding between the Customs and the applicant for 2 years from the date of issuing.

Classification

The current Customs Tariff Nomenclature of Thailand is based on the World Customs Organization Harmonized System (HS) Convention. The harmonised tariff schedule of Thailand that was enforced under the Customs Tariff Decree B.E. 2530 (1987) came into effect on 1 January 1988. It replaced the Customs Co-operation Council Nomenclature (CCCN) which had been adopted since 1960. There was a new Customs Tariff Decree (No. 6) B.E. 2559, effective on 1 January 2017 which repealed and replaced Part 2: Customs import duty rates of Customs Tariff Decree B.E. 2530 (1987) which was amended by Customs Tariff Decree (No. 5) B.E. 2555 (2012). The change/update was a result of the change of HS version from 2012 to 2017.

Page 183: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 183

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Thailand has adopted the ASEAN Harmonized Tariff Nomenclature (AHTN) 2017, effective from 1 January 2017.

Valuation

Thailand has implemented the World Trade Organization (WTO) Valuation Agreement which can be found in the Customs Act (No. 17) B.E. 2543 and Ministerial Regulations No. 132 (B.E. 2543). The primary basis for determining the customs value is the “transaction value” of imported goods, the actual price paid or payable for the goods when sold for export. This is subject to adjustments for certain / other payments including royalties and license fees which are considered to form a part of the value for customs purposes, but are not yet included in the selling price.

Related party transactions

Customs may challenge related party transactions. In case of challenge, companies are required to demonstrate that the price between related parties is at arm’s length by comparing the transaction value of identical or similar goods sold between non related parties or by calculating the deductive or computed value of identical or similar goods. There has been an increased focus by Customs on related party transactions.

Other payments

Customs is traditionally very aggressive on challenging companies on overseas payments for management fees, royalties, license fees etc. Typically, Customs will consider these payments as being connected to the imported goods as dutiable unless the importer can prove otherwise.

Transfer pricing

Customs does not have formal guidelines on how to treat transfer pricing adjustments from a customs valuation perspective. Typically, companies will make a voluntary disclosure to Customs where a transfer pricing adjustment has led to a duty shortfall. Duty refunds resulting from a transfer pricing adjustment are generally not provided by Thai Customs.

Thailand

Page 184: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

184 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Origin

Preferential origin

Regional agreements in force

ASEAN (ATIGA) and through ASEAN with Australia, New Zealand, China, India, Japan and Korea

Bilateral agreements in force

Australia, India, Japan, New Zealand, Peru, Chile

Agreements under negotiation

• European Union (EU)• European Free Trade Association

(EFTA)• Regional Comprehensive Economic

Partnership (RCEP)• ASEAN-Hong Kong• Thailand-Pakistan FTA

Preferential certificates of origin are issued by the Department of Foreign Trade under the Ministry of Commerce.

Non preferential origin

Non preferential certificates of origin, “General Form”, can be issued by several organisations for conferring Thailand origin, which are:

• Department of Foreign Trade• The Federation of Thai Industries (F.T.I.)• The Thai Chamber of Commerce

Managing customs and trade compliance

Customs audits and investigations

Post-clearance audits in Thailand are performed by the Post-Clearance Audit Bureau (PCAB), whereas customs investigations are carried out by the Investigation and Suppression Bureau (ISB). Companies are generally selected for audit on the basis of “risk profiling” exercises performed by the PCAB team. It is normal for Customs to audit a number of companies within a particular industry sector at the same time. Investigations on the other hand are more random and are usually carried out as a result of a “whistle blower” or an “informant”.

Page 185: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 185

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Penalties

Although, technically, an offence against the customs law is a criminal offence, in practice, legal procedures are usually related to the recovery of tax arrears and fines. Offences include noncompliance with customs procedures, false declarations, and the most serious offence is the smuggling and evasion of customs duties.

Statutory penalties are as prescribed by relevant provisions of the Customs Act. Where Customs and the offender agree to settle the case at the Customs level (i.e. waiver of prosecution), the penalties will be in accordance with the settlement criteria as prescribed by the Director-General of the Customs Department. This is typically two times of the customs duty amount and one times of the VAT evaded.

For import licensing and smuggling, the penalty can be based on a multiple of the value of the goods. In particular, failure to provide import licenses is subject to the value of the goods plus the duty payable and VAT payable. In case of smuggling, the penalty is two times of the value of the goods including duty, and one time of the value of the VAT, excise, interior and other applicable taxes. Further, the goods shall be surrendered to the State.

Voluntary disclosure

Penalties may be waived or reduced if a voluntary disclosure is made, provided the company can demonstrate that there was no intention to defraud.

For year 2017, the Voluntary Audit Program (VAP) is available until 31 December 2017. The key principles of the VAP are, for instance, offences that render companies ineligible to join the programme are those relating to smuggling of goods, evasion of duty with proof of fraudulent intent, evasion of import/export restrictions, and counterfeit trading, along with offences that were also disclosed under previous VAPs. In addition, companies that are currently under audit, investigation, or internal process by the Customs, Department of Special Investigation (DSI), or Economic Crime Suppression Division will not be eligible.

The key advantages of the VAP includes a simplified declaration process and the potential waiver of penalties and a duty surcharge for cases where Customs is satisfied that an offender did not have any fraudulent intent when the offences were committed.

Thailand

Page 186: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

186 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

The decision to join the programme should be carefully considered and it is advisable to review import and export operations before making any final decision whether to enrol. Companies enrolling in the programme are usually considered lower risk and therefore a lower audit priority in the future.

Appeal and dispute settlement

Importers/exporters have options of either settling a case at the Customs level according to the case settlement criteria or, if they decide not to settle a case at a Customs Department level, appealing the case with the Board of Appeal (BoA). If the appellant is still not satisfied with the BoA’s consideration, the case can be subsequently filed to the Court. Statute of limitations

The statute of limitations in case of a duty deficiency arising in connection with the description, quality, quantity, weight or value of any goods or the rate of duty thereof is 10 years (or 15 yearsin case of criminal proceedings) from the date of importation or exportation. However, typically, Customs would back claim duties for a period of five years.

Page 187: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 187

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 188: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

188 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Vietnam

Customs & international trade framework

International organisations and agreements

Vietnam is a member and/or signatory party of the following international organisations and agreements relevant to the governance and regulation of import and export transactions:• World Trade Organization (formerly General Agreement on

Tariffs and Trade)• World Customs Organization, since 1993 • International Convention on the Harmonized System (HS

Convention) • ASEAN Harmonized Tariff Nomenclature • The International Convention on the Simplification and

Harmonization of Customs procedures• Chemical Weapons Convention • The Convention on International Trade in Endangered Species

of Wild Fauna and Flora (CITES)• Trade Facilitation Agreement (TFA) (Vietnam ratified on 15

December 2015)

Roles and responsibilities of authorities

Authority RoleGeneral Department of Customs

Agency attached to the Ministry of Finance advising and assisting the Minister of Finance in the Statewide management of customs and implementation of customs law.

Local Customs Department

Responsible for the implementation of customs law and customs and trade regulations.

Ministry of Finance Responsible to the Government for the consistent administration of customs across Vietnam.

Ministries and ministerial equivalent bodies

Ministries and ministerial equivalent bodies are responsible for co-ordinating with the Ministry of Finance with respect to the administration of customs.

Page 189: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 189

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Legislation

The Laws on Customs including 54/2014/QH13 dated 23 June 2014and Law 107/2016/QH13 on export & import duties are the principal legislations for the administration of customs. There are a number of implementing Decrees and Circulars that set out customs law. They include:• Decree 08/2015/ND-CP on customs procedures and customs

valuation • Decree 127/2013 and 45/2016 on customs penalties • Decree 134/2016/ND-CP on import and export duties • Circular 14/2015/TT-BTC on classification • Circular 38/2015/TT-BTC on customs procedures, duty

exemption, duty refund, toll manufacturing etc.• Circular 39/2015/TT-BTC on customs valuation

Further legislation concerning the regulation of trade includes:• Commercial law• Tax Administration law• Value Added Tax (VAT) law• Special Sale Tax (SST) law

Customs legislation can be accessed at http://customs.gov.vn

Import and export procedures

Registration

A locally established company must register its tax code with a local Department of Tax prior to carrying out any customs procedures for the import and/or export of goods. A Foreign Direct Investment (FDI) company may import and export machinery, equipment, materials and other goods relevant to its business scope. For the conduct of trading activity and associated import and export transactions, the applicable HS codes of the traded goods must be stated on the investment certificate of the FDI Company.

A non-resident business may apply to the Ministry of Industry and

Vietnam

Page 190: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

190 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Trade for a certificate of registration of export and import rights to conduct import or export activities in Vietnam. The application documents must be certified and legalised by an authorised body, this includes overseas diplomatic agencies.

Process

A customs declaration should be filed electronically via the e-customs system called VNACCS. Manual filing only applies to certain specific goods including personal belongings; temporary import of circulated goods containers; emergency aid goods and etc. Companies must apply for a user name and password to access the e-customs system. A company may appoint a third party (e.g. customs broker) to file a customs declaration on its behalf.

The customs procedure will vary for special schemes such as toll manufacturing, export production, commerce, or temporary import/export for re-export/re-import etc. Normally, duty is payable upon importation. However, there are some exemption applied to goods imported under toll manufacturing/export production.

Licenses

Categories of goods requiring an import license include, but are not limited to: • Wild, rare and valuable animals and plants • Chemicals• Cultural products (including books and CDs)• Medicines and pharmaceutical products• Telecommunications equipment

Categories of goods requiring an export license include, but are not limited to:• Antiques• Cultural products (including books and CDs)

Taxes and fees

Goods may be subject to the following taxes at import:• Import duty• Value Added Tax• Special Sales Tax• Environment Protection Tax

Export duty is charged on a limited number of goods, namely

Page 191: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 191

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

natural resources.

Customs clearance fees are chargeable at import and export. The average cost is US$1 per declaration form.

Duty Refunds

There are various cases where a refund of import duties is possible, including for:• Goods for which import duties have been paid but which are

not actually physically imported;• Imported raw materials that are not used and which must be

re-exported;• Imported raw-materials that were imported for the production

of products for the domestic market but are later used for the processing of goods for export under processing contracts with foreign parties.

Trade facilitation

The most commonly used customs schemes in Vietnam are outlined below.

Duty suspension and exemptions

Incentive Locations and Incentive Projects

Duty exemptions may be available for machinery, equipment and construction materials imported for incentive projects or projects located in incentive locations.

Oil and Gas Activities Goods imported for oil and gas activities may be eligible for an import duty exemption.

Toll Manufacturing/ Export Production

Goods imported into Vietnam under a toll manufacturing or export production procedure may be eligible for a duty exemption

Goods temporarily imported or exported for warranty purpose

In given period of time, goods temporarilyimported or temporarily exported forwarranty purposes may be eligible for dutyexemption

Vietnam

Page 192: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

192 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Rulings

Specific customs classification, customs valuation or origin rulings can be obtained from Customs. Rulings can be relied upon so long as the ruling completely covers the commercial scenario. Any vari-ation from the scope of the ruling would compromise the ability to rely on the ruling.

Bonded warehousing

Scheme DescriptionBonded Warehouse A bonded warehouse is a building or other

secured area in which imported/exported goods are temporarily stored or preserved under customs supervision to undergo further import/export procedures. A rental contract must be in place between the owner of the stored goods and the warehouse operator.

Tax Suspension Warehouse

A tax suspension warehouse allows the storage of raw materials imported for export production with the suspension of import duty and other taxes.

Customs Clearance Schemes

Priority Enterprise • Exemption from actual inspection of documents and goods

• Customs clearance with incomplete declarations

• Priority in customs procedures at all customs points

• Acceptance of enterprise’s declaration in case goods are subject to specialised inspection

• Customs inspection and clearance procedures may be carried out at the enterprise’ warehouse (except otherwise specifically required by law)

• Exemption from the requirement of customs audit at customs office; customs authority may conduct post-clearance audit at the enterprise’s head office only once every three years.

Page 193: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 193

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Classification

Vietnam adopted the Harmonized System (HS) of classification in 1998 and its tariff also incorporates the ASEAN Harmonized Tariff Nomenclature (AHTN). Vietnam is expected to start implementing HS 2017 edition from 1 January 2018.

Valuation

General

Vietnam follows the WTO Customs Valuation Agreement andthe customs valuation rules can be found in Circular 39/2015/TT-BTC. The dutiable value for the imported goods is the actual price payable upon the arrival of goods at the first border gate of importation. Where the transaction value does not apply then the remaining valuation methods should be applied in sequence as per the customs valuation rules.

Related party transactions

Customs may challenge related party transactions. The importer will be required to demonstrate that the transaction is at arm’s length by comparing the transaction value of identical or similar goods sold between non related parties or by calculating the deductive or computed value of identical or similar goods.

Other payments

Customs may treat all royalties and license fees connected to the imported goods as dutiable unless the importer can evidence that the payment is not made as a condition of sale of the goods for export to Vietnam.

Transfer pricing

At present, there is no customs regulation or practice regarding an adjustment to the customs value as a result of a change in the transfer price. In practice, a company may inform Customs if there is such an adjustment and Customs may impose additional duty in case of an upwards price adjustment. Vietnam Customs is normally reluctant to provide a duty refund in case of a downward price adjustment.

Vietnam

Page 194: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

194 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Origin

Preferential origin

Certificates of origin are issued by the Vietnam Chamber of Commerce and Industry or the Ministry of Industry and Trade.

Non preferential origin

A non preferential certificate of origin can be applied for to evidence that goods are wholly obtained or processed in Vietnam. Non preferential certificates of origin are issued by the Vietnam Chamber of Commerce and Industry.

Managing customs and trade compliance

Customs audits and investigations

Customs is primarily focused on post clearance audit.

There is a standard audit programme and normally Customs will only instigate an investigation in the event of non- compliance or suspicion of non- compliance. For businesses importing dutiable goods which are related to royalty or enjoy import duty exemption, the chance of a customs audit is likely to be much higher.

Regional Agreements in force

• ASEAN (ATIGA) • through ASEAN with Australia, China,

India, Japan, Korea and New Zealand• Vietnam and Eurasian Economic Union• Vietnam and the Customs Union of

Russia, Belarus, Kazakhstan;Bilateral Agreements in force

Chile and Japan

Agreements under negotiation

• European Free Trade Association• European Union• Regional Comprehensive Partnership

(RCEP). • Trans Pacific Partnership (TPP)• ASEAN – Hong Kong • Vietnam – Israel

Page 195: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 195

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Penalties

There are various customs penalties which include:• Administrative penalties, which range from 10% to 20%

of the shortfall amount may be applied to importers and exporters who filed incorrect customs declaration in respect of quantity, value or any other information which leads to an underpayment of customs duty.

• Late payment penalties at a rate of 0.03% of the unpaid duty amount per day

• In the case of tax fraud Customs will impose a penalty of one to three times of the shortfall amount.

Voluntary disclosure

A voluntary disclosure may be considered as an extenuating circumstance for the purposes of penalty mitigation. Penalties may be waived or reduced if a voluntary disclosure is made before Customs physically checks the imported/exported goods or decides not to check the imported/exported goods or conducts a post clearance audit at the importer’s or exporter’s premises.

Appeal and dispute settlement Enterprises can make appeal pertaining to Decision on customs administration penalties to customs office issuing the Decision, or higher levels before the regulated due date. For the first appeal, a company has to file the administrative appeal before 90 days from the receiving date of the Decision, i.e. assessment decision, or penalty decision.

Statute of limitations The statute of limitations is five years.

Vietnam

Page 196: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

196 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 197: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 197

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Our services – an overviewCreating value through structuring and implementing smart import/export planning strategies and trade automated software solutions that are aligned to the direction of your business.

Managing risks by having robust defense procedures and documentation to resolve customs challenges, audits and investigations.

Ensuring compliance through conducting proactive self-assessments, implementing standard operating procedures, training and securing advance rulings.

WMS

1. Creating Value

3. Ensuring compliance

2. M

anagin

g ri

sks

FTA Strategy

Duty Exemption

AEO Programmes

Export controls management

Audit supports

Dispute resolution

Process and procedure design

“Mock” audits

Advance rulings

Accurate taiffs classifications

3 PL management

Efficient import pricing

New market entry

Import tax reliefs

Cust

oms a

nd trade solutions

Page 198: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

198 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Our services - examples

1. Creating value

Best Practice • Reducing customs value by

“unbundling” non-dutiable components

• Increasing use of Free Trade Agreements

• Identifying and using duty exemptions and bonded zones

• Implementing strategies for product warranties and replacement of spare parts

Value Added • Reduced duties, taxes and

operating costs • Leveraged preferential

programmes to be more competitive in your industry

• Streamlined supply chain • Reduced clearance time,

inspection frequency and improved trading/ manufacturing efficiency

2. Managing risks

Best Practice • Creating defense

documentation • Delivering tactical and

technical support during customs audit and investigations

• Ensuring business continuity

Value Added • Dealt with customs audits and

investigations in a proper and efficient way

• Minimised impact of customs audit and investigations to your business operation

• Built and maintained effective communication with the authorities

3. Ensuring compliance

Best Practice • Conducting compliance self-

assessments (“mock” audits) • Obtaining advance rulings on

tariff classification, custom valuation, etc.

• Completing 3PL and customs broker selection, engagement, management and performance measurements

• Deploying customs automation and delivering customised customs and trade training

Value Added • Benchmarked against, and

identified and closed gaps with, best practices in your industry

• Identified potential compliance risks in your daily work and implemented the improvements

• Created an efficient, productive and capable internal team as well as a network of service providers you can trust

Page 199: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 199

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Our services - examples

1. Creating value

Best Practice • Reducing customs value by

“unbundling” non-dutiable components

• Increasing use of Free Trade Agreements

• Identifying and using duty exemptions and bonded zones

• Implementing strategies for product warranties and replacement of spare parts

Value Added • Reduced duties, taxes and

operating costs • Leveraged preferential

programmes to be more competitive in your industry

• Streamlined supply chain • Reduced clearance time,

inspection frequency and improved trading/ manufacturing efficiency

2. Managing risks

Best Practice • Creating defense

documentation • Delivering tactical and

technical support during customs audit and investigations

• Ensuring business continuity

Value Added • Dealt with customs audits and

investigations in a proper and efficient way

• Minimised impact of customs audit and investigations to your business operation

• Built and maintained effective communication with the authorities

3. Ensuring compliance

Best Practice • Conducting compliance self-

assessments (“mock” audits) • Obtaining advance rulings on

tariff classification, custom valuation, etc.

• Completing 3PL and customs broker selection, engagement, management and performance measurements

• Deploying customs automation and delivering customised customs and trade training

Value Added • Benchmarked against, and

identified and closed gaps with, best practices in your industry

• Identified potential compliance risks in your daily work and implemented the improvements

• Created an efficient, productive and capable internal team as well as a network of service providers you can trust

Value-added mass customs classification services

Companies face numerous challenges with product tariff classification, including supplier language, product descriptions, access to technical information and availability of technically skilled classification staff with the time to focus on the accurately classifying products in addition to their overall workload.

PwC brings to you an established classification team and toolset that can quickly, efficiently and cheaply classify thousands of SKUs and provide a classification rationale that meets the authorities’ expectations of “reasonable care”. To meet your cost reduction goals we have established a Customs Classification Center (CCC). The CCC, comprised of highly trained and knowledgeable staff can deliver high quality low cost services to you.

The key value drivers for you are elaborated below:

Better accuracy and consistency

Competitive pricing

Scalability and flexibility

Supporting rationales

PwC brand quality

Page 200: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

200 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Competitive pricing Classifying products or defending against challenges from Customs can be a costly and time-consuming exercise. PwC’s global Customs Classification Center provides you with the usual high quality service, but at the lowest prices available. This can relieve internal resources for better deployment elsewhere.

Supporting rationales

In addition to buying an established brand at competitive prices, we will provide you with supporting rationales for the classification codes selected. This helps you to demonstrate reasonable care to Customs. Inability to support a customs code is a red flag to Customs’ focused assessment.

Scalability and flexibility

As no two companies’ classification requirements are the same, an off-the shelf solution will never be an ideal fit to your needs. PwC can tailor and scale our approach, using established IT processes and tools inside non-automated project management, to give you the ideal fit.

Better accuracy and consistency

Selecting an inappropriate customs classification code may well have knock-on effects on license requirements, anti-dumping exposure, FTA utilization etc. Using different codes in different countries or ports for the same product guarantees non-compliance somewhere. PwC can help eliminate such compliance risks.

PwC brand quality You will be buying the PwC brand, which ensures you are buying a reliable, established, high quality and responsive provider with global market reach. The PwC dedicated specialists have both technical expertise and experience in many industries such as automotive, semi-conductor, machinery & equipment, consumer electronics etc.

Page 201: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 201

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

PwC’s customs classification process

You discuss with your in-country PwC contact your needs and wants. You will engage with PwC where you are based, and your in-country contact will manage the execution and delivery of the assignment. Usual PwC quality control processes apply to the work performed by the Customs Classification Center

To ensure a clear definition of the universe of products to be classified:

• You will identify your “current” active parts universe, including all parts traded within the past 12 months, plus any known new parts.

• PwC will develop a grouping of like and similar products. All obsolete parts will be removed,

• PwC will tailor a process driven decision tree based workflow.

PwC’s dedicated classification team will classify the agreed products based on the agreed decision tree based workflow:

• You will provide access to all relevant product information, including responding to our questions for further necessary information.

• PwC will verify product descriptions and functions, then classify and document each product (SKU).

• PwC will utilize a three level quality control process to ensure accuracy, consistency and supportability of the final classification database

The PwC classification process will deliver to a complete classification database that will be consistent, defendable and well documented.

As and how required, we will agree with you the frequency of updates, such as inclusion of new and removal of obsolete products (SKUs).

Connecting Data Review Classification Delivery+

To discuss how we might be able to help you, please contact:

Dennis Forhart Director, United States +1 (248) 623-4000 [email protected]

Frank DebetsManaging Partner, WMS Asia+65 6236 [email protected]

Page 202: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

202 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Automated origin compliance management services

Companies that effectively apply free trade to reduceduties have a cost advantageover those that don’t

Effectively applying free trade is easier said than done. Free trade is designed to benefit only producers that are withinthe free trade area and is applicable only to goods that can properly be proven to qualify. To benefit, companies must establish proof of origin that satisfies very specific free trade rules that vary considerably from product to product and from one free trade agreement to another.

Incorporating the impact of free trade can optimise plant location and procurementdecisions

Simply setting up shop in a free trade area does not make the resulting production qualify for free trade benefits. When seeking cost reduction through increased sourcing from far-flung locations, not factoring in the impact of free trade can result in unexpected duty costs that can nullify any savings.

Issuing free trade origin certification and claiming free trade benefits inherently results in acompliance risk that needs to be managed

For most, the ultimate objective of free trade is the avoidance of tax, usually customs duties, but also other taxes and fees such as the U.S. Merchandise Processing Fee. Regulatory authorities perform audits, and where the certification is found to be unsubstantiated or in error, penalties and retroactive duties with interest can result.

Page 203: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 203

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Companies that effectively apply free trade to reduceduties have a cost advantageover those that don’t

Effectively applying free trade is easier said than done. Free trade is designed to benefit only producers that are withinthe free trade area and is applicable only to goods that can properly be proven to qualify. To benefit, companies must establish proof of origin that satisfies very specific free trade rules that vary considerably from product to product and from one free trade agreement to another.

Incorporating the impact of free trade can optimise plant location and procurementdecisions

Simply setting up shop in a free trade area does not make the resulting production qualify for free trade benefits. When seeking cost reduction through increased sourcing from far-flung locations, not factoring in the impact of free trade can result in unexpected duty costs that can nullify any savings.

Issuing free trade origin certification and claiming free trade benefits inherently results in acompliance risk that needs to be managed

For most, the ultimate objective of free trade is the avoidance of tax, usually customs duties, but also other taxes and fees such as the U.S. Merchandise Processing Fee. Regulatory authorities perform audits, and where the certification is found to be unsubstantiated or in error, penalties and retroactive duties with interest can result.

PwC can help

PwC’s OriginCompliance7’ is a customisableprogrammeusing leading technologies to

• automate the origin calculation process,• better manage the collection of supplier information, and• provide client users with production and procurement planning

capabilities.

OriginCompliance7’ provides a standardisedand simplified origin process that automates origin calculations under multiple free trade requirements and offers a web-based means to collect and maintain supplier information.

The programmeis delivered as a fully hosted and maintained service that is regularly updated by our origin specialists and is maintained by our IT team. This can help reduce your need for staff specialisedin origin activities and lower demand on your internal IT

Page 204: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

204 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Andrew Vanderwal+1 416 869 [email protected]

OriginComplianceTM

Two separate, but interrelated modules

1. The origin qualification module

• Routinely analyses large quantities of bill of material and other production data to provide an efficient, accurate and consistent determination of origin under multiple free trade and domestic content requirements.

• Analysis results are updated regularly to take into account updates to supplier certifications and product harmonised tariff classifications.

• For each origin/content requirement, the origin qualification review module will report whether the product qualifies under the origin rule(s) and, if required, will identify classi-fication and solicitation workflows that, when executed, may enable the product to qualify.

• The results are communicated for review and acceptance via online secure access to OriginComplianceTM and via file transfer.

2. The supplier collaboration module

• Integrates via single-sign-on with your supplier portal to pro-vide a web-based means for supplier collaboration pertaining to your origin certification requirements.

• Supplier solicitations for service and production parts are routinely loaded when it has been identified that certification is required.

• Solicitation administrators go online to manage their work-flows, email suppliers, track supplier compliance history, and efficiently administer the solicitation process.

• Suppliers go online to view the products that are to be certi-fied and access a web-based means to provide the requested origin certification data (and associated documents).

For further information, on how OriginComplianceTM can assist your company to better manage free trade, contact:

Frank Debets+65 6236 [email protected]

Page 205: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 205

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Get in touch with our WMS team

Managing Partner,Worldtrade Management Services AsiaFrank Debets+65 [email protected]

Australia Gary Dutton+61 7 3257 [email protected]

China NorthSusan Ju+86 (10) 6533 3319 [email protected]

China Central Derek Lee+86 (21) 2323 [email protected]

China South & Hong Kong Colbert Lam+86 (21) 8261 [email protected]

IndiaNitin Vijaivergia+91 (0) [email protected]

Indonesia Enna Budiman+62 (21) 5289 [email protected]

JapanHoward Osawa+81 (0) 3 5251 [email protected]

Page 206: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

206 PwC

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Korea Rosa An+82 (2) 709 8916 [email protected]

MalaysiaChandrasegaran Perumal+60 (3) 2173 [email protected]

New Zealand Eugen Trombitas+64 (9) 355 [email protected]

Philippines Alex Saborio +65 6236 4192 [email protected]

Singapore Frank Debets+65 6236 [email protected]

Sri LankaHiranthi C Ratnayake+94 11 [email protected]

Taiwan Susan Ju+86 (10) 6533 3319 [email protected]

Thailand Paul Sumner+66 (2) 344 1305 [email protected]

VietnamPham Van Vinh+84 (8) 3823 0796 ext.1503 [email protected]

Page 207: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

PwC 207

Reference Guide to Custom and Trade Compliance in Asia Pacific 2017

Page 208: A reference guide to Customs and Trade compliance in Asia ... · Reference Guide to Custom and Trade Compliance in Asia Pacific 2017 is required to avoid surprises and delays at borders,

The information contained in this publication is of a general nature only. It is not meant to be comprehensive and does not constitute the rendering of legal, tax or other professional advice or service by PricewaterhouseCoopers WMS Pte Ltd (“PwC”). PwC has no obligation to update the information as law and practices change. The application and impact of laws can vary widely based on the specific facts involved. Before taking any action, please ensure that you obtain advice specific to your circumstances from your usual PwC client service team or your other advisers.

The materials contained in this article were assembled in May 2015 and were based on the law enforceable and information available at that time.

Visit our WMS webpage at http://www.pwccustoms.com or by scanning the QR code