AJCEP, its official name is "Agreement on Comprehensive Economic Partnership among Japan and Member States of the Association of Southeast Asian Nations". It is agreement with 11 countries in ASEAN.
Outline of AJCEP
ASEAN is indeed quite an important trade parter for Japan. For ASEAN, Japan is the second biggest trade counter part, the position is the next to US. From April 2005, the negotiation of Japan-ASEAN EPA started, and reached its agreement on November 2007. The signing is also completed in April 2008 with total 11 countries in ASEAN. After necessary procedure of ratification in each country, this agreement will be effective, hopefully within 2008.
ASEAN already have FTA with China (ACFTA) and Korea (AKFTA), so this AJCEP will be great help to Japanese companies to compete with Chinese and Korean companies.
What will be changed in trade?
For Japan, the duty will be eliminated for 93% of trade amount within 10 years, and will reduce duty to certain low level for other products. For Brunei, Indonesia, Malaysia, Phillippine, Singapore, and Thailand, they will eliminate duty for 90% of both trade amount and number of items. As for Cambodia, Laos, Myanmar, and Vietnam, they will also reduce or eliminate of duty within 15 to 18 years time line.
Each 11 countries have each Concessions and the schedule is based on HS2002. For details of each countries' Concessions and note, please find in Annex 1 of below web site of MOFA.
http://www.mofa.go.jp/policy/economy/fta/asean/annex1.html
Specifically for Japan's attitude to Concessions, although most of industrial products will be in zero duty rate, sensitive food and agricultural products are still protected and out of focus in this agreement such as rice, meat, dairy goods, etc. This attitude is consistent to other FTA of Japan. For ASEAN's import (export from Japan), the trade amount of 91% will have zero duty within 10 years. For example as typical cases, duty of flat TV and its module will be eliminated in seven of ASEAN countries.
Accumulation country or origing rule
The most significant essence in AJCEP is the merit of country of origin rule, Accumulation.
(Accumulation rule is, if a product is manufactured in country A, the raw material from country B used for the production is also regarded as country A's origin.)
Japan will be able to use more flexible accumulation rule for country of origin, and this will enable supply chain to enjoy reduced duty in ASEAN.
For example in flat panel TV's case, currently it has been like this. Japan will export essential panel part to Thailand, and the manufacture assemble the flat TV in the factory there, but the panel part is very expensive and consists more than 40% of value in Finished Products. In such as case, the flat TV is not regarded as Thailand origin because the additional value must be more than 40% in order to be regarded as Thailand origin. So, if the flat TV is exported from Thailand to some other ASEAN countries, they are NOT applied to AFTA duty rate, but to MFN (Most Favor ate Nation) rate. (Generally, the duty rate is higher in MFN, and AFTA is cheaper.)
After AJCEP, this will be changed. By using Accumulation rule, the flat TV will be regarded as Thailand origin, even if the value level is unchanged, and will be applied to cheaper duty rate or free in AFTA. This will enable supply chain planning more flexible and can save cost. Also the manufacturing planning in the region can be easier than before.
Bilateral EPA and AJCEP
Japan have bilateral EPA with Singapore, Malaysia, Thailand etc. What is the mutual relations with such bilateral EPA and AJCEP? Actually, no relation and no legally superiority. AJCEP and bilateral FTA is completely different another agreement. That means, the importer can select which rule (bilateral EPA or AJCEP) they apply. The Certificate of Origin form is different, so the importer and exporter need to select which rule they use beforehand. Generally, bilateral EPA have more attractive duty rate, for example, the banana's import to Japan, bilateral EPA with Philippine offer cheaper duty rate than AJCEP. That is because bilateral EPA reflect more through government attitude in the negotiation to be beneficial to own country than group negotiation.
How soon the AJCEP will be effective?
In Japan, the Diet need to approve for ratification. It will enter into force on the first day of the following month after the date of notification made by Japan and at least one ASEAN Member State. In the latest estimation, the Diet is in session now until June 15th in Japan. If it is approved in this session, and one of the ASEAN countries noticed as approve, the fastest will be 1st August. However, it is estimated as rather tough schedule.
Outline of AJCEP
ASEAN is indeed quite an important trade parter for Japan. For ASEAN, Japan is the second biggest trade counter part, the position is the next to US. From April 2005, the negotiation of Japan-ASEAN EPA started, and reached its agreement on November 2007. The signing is also completed in April 2008 with total 11 countries in ASEAN. After necessary procedure of ratification in each country, this agreement will be effective, hopefully within 2008.
ASEAN already have FTA with China (ACFTA) and Korea (AKFTA), so this AJCEP will be great help to Japanese companies to compete with Chinese and Korean companies.
What will be changed in trade?
For Japan, the duty will be eliminated for 93% of trade amount within 10 years, and will reduce duty to certain low level for other products. For Brunei, Indonesia, Malaysia, Phillippine, Singapore, and Thailand, they will eliminate duty for 90% of both trade amount and number of items. As for Cambodia, Laos, Myanmar, and Vietnam, they will also reduce or eliminate of duty within 15 to 18 years time line.
Each 11 countries have each Concessions and the schedule is based on HS2002. For details of each countries' Concessions and note, please find in Annex 1 of below web site of MOFA.
http://www.mofa.go.jp/policy/economy/fta/asean/annex1.html
Specifically for Japan's attitude to Concessions, although most of industrial products will be in zero duty rate, sensitive food and agricultural products are still protected and out of focus in this agreement such as rice, meat, dairy goods, etc. This attitude is consistent to other FTA of Japan. For ASEAN's import (export from Japan), the trade amount of 91% will have zero duty within 10 years. For example as typical cases, duty of flat TV and its module will be eliminated in seven of ASEAN countries.
Accumulation country or origing rule
The most significant essence in AJCEP is the merit of country of origin rule, Accumulation.
(Accumulation rule is, if a product is manufactured in country A, the raw material from country B used for the production is also regarded as country A's origin.)
Japan will be able to use more flexible accumulation rule for country of origin, and this will enable supply chain to enjoy reduced duty in ASEAN.
For example in flat panel TV's case, currently it has been like this. Japan will export essential panel part to Thailand, and the manufacture assemble the flat TV in the factory there, but the panel part is very expensive and consists more than 40% of value in Finished Products. In such as case, the flat TV is not regarded as Thailand origin because the additional value must be more than 40% in order to be regarded as Thailand origin. So, if the flat TV is exported from Thailand to some other ASEAN countries, they are NOT applied to AFTA duty rate, but to MFN (Most Favor ate Nation) rate. (Generally, the duty rate is higher in MFN, and AFTA is cheaper.)
After AJCEP, this will be changed. By using Accumulation rule, the flat TV will be regarded as Thailand origin, even if the value level is unchanged, and will be applied to cheaper duty rate or free in AFTA. This will enable supply chain planning more flexible and can save cost. Also the manufacturing planning in the region can be easier than before.
Bilateral EPA and AJCEP
Japan have bilateral EPA with Singapore, Malaysia, Thailand etc. What is the mutual relations with such bilateral EPA and AJCEP? Actually, no relation and no legally superiority. AJCEP and bilateral FTA is completely different another agreement. That means, the importer can select which rule (bilateral EPA or AJCEP) they apply. The Certificate of Origin form is different, so the importer and exporter need to select which rule they use beforehand. Generally, bilateral EPA have more attractive duty rate, for example, the banana's import to Japan, bilateral EPA with Philippine offer cheaper duty rate than AJCEP. That is because bilateral EPA reflect more through government attitude in the negotiation to be beneficial to own country than group negotiation.
How soon the AJCEP will be effective?
In Japan, the Diet need to approve for ratification. It will enter into force on the first day of the following month after the date of notification made by Japan and at least one ASEAN Member State. In the latest estimation, the Diet is in session now until June 15th in Japan. If it is approved in this session, and one of the ASEAN countries noticed as approve, the fastest will be 1st August. However, it is estimated as rather tough schedule.
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