ACCOUNT PROFILE

Message from Secretary General_March 2021

Posted on 06 April 2021

A Second Look at The Regional Comprehensive Economic Partnership (RCEP) – Summary of Key Chapters

The December 2020 edition of the SEAISI newsletter covered SEAISI’s first look at the RCEP. The legal text covers 20 chapters, but the understanding of a few key chapters is probably good enough for most people.

Chapter 2 Trade in Goods

The key point here is that the Parties (or Countries in the RCEP) are:

  • Not supposed to introduce taxes, regulations and requirements that will affect imported goods, for the purpose of protecting the domestic industry;
  • Committed to the reduction or elimination of Customs Duties according to a set schedule submitted;
  • Allowed to accelerate or improve their tariff commitments either unilaterally or bilaterally with other Parties. The accelerated tariff rates have to be better than in the original schedule;
  • Not allowed to adopt any non-tariff measures against imports or measures for in favour of own exports.

Chapter 3 Rules of Origin

Only goods originating from the RCEP partners will enjoy the lowest tariff schedule committed by the Parties.

The document defines originating goods as:

  • wholly obtained or produced in a Party (e.g. minerals extracted from soil, waters or seabed as a relevant material for steel);
  • produced in a Party exclusively from originating materials from one or more of the Parties; or
  • produced in a Party using non-originating materials based on product specific rules.

For steel, product specific rules basically state that the non-originating goods can qualify for the preferential schedule of tariffs under a few conditions:

  • these goods must have a regional value content (RVC) of at least 40% and the value can be cumulative (produced in multiple Parties’ territories);
  • the goods must be substantially modified at the 4-digit HS Code level. The conversion of iron ore to pig iron and eventually to a semi-finished product is one god example;
  • Specifically, for cold rolled sheets / coils, these have to be substantially modified at the 6-digit HS Code level;
  • However, some products do not qualify for preferential tariffs, for example:
    • Hot rolled products made from non-originating slabs;
    • Cold rolled products made from non-originating hot rolled coils ;
    • Narrow hot rolled flat products made from non-originating wider hot rolled coils.

Chapter 10 Investment

The key clauses in this chapter call for the fair treatment of the investment equivalent to how the receiving Party would treat its own investment or investment by other Parties, without any discrimination.

These clauses also include prohibitions of performance requirements that may be imposed on the investment:

  • Restrictions such as export quotas, achievement of domestic content quotas, domestic purchase / use quotas and other restrictions relating to exports or FX earnings;
  • Transfer of technology, process or knowhow (this excludes Cambodia, Laos, Myanmar);
  • Supply of goods exclusively from the territory of the Party to a specific regional market / world market; or
  • Royalty arrangements under an existing licence, unless this is between investor and the Party. This also excludes Cambodia, Laos and Myanmar.

Excluded from the prohibitions are the existing non-conforming measures and policies prior to the RCEP agreement coming into force. The legal text also allows for extensions of these existing measures and policies. Any amendment to any duties, however, is acceptable if it is not higher than what has been committed.

The RCEP agreement does not allow the Parties to set of any requirements at the management or board level, that will directly or indirectly allow the Parties control the investment.

However, this chapter excludes: 

  • government procurement
  • subsidies or grants provided by a Party;
  • services supplied in the exercise of governmental authority
  • measures covered in other chapters or pre-existing ones

Implications

The RCEP made many references to GATT and WTO agreements as to the conduct in trade exchanges. With a framework in place to facilitate trade and investments, Asia Pacific economies are set to grow beyond the impacts of COVID19 pandemic. 

The RCEP will benefit some businesses in the steel industry, but not all. To find out more about this, stay tuned for our final part on RCEP to be published in the near future.

Wear A Mask. Keep Your Distance. Stay Safe.
    
        YEOH WEE JIN

 

Source : SEAISI