In order to enjoy the preferential tariff concession under the ACFTA, the products exported by ASEAN or China must comply with the Rules of Origin (ROO). The two most important requirements under the ROO are the origin criteria and the Operational Certification of Procedures (OCP) for issuance and verification of the Certificate of Origin, Form E.
According to Article 5 of the Trade in Goods Agreement, the origin criteria imposed under the ACFTA is General ROO 40% Regional Value Content. The formula for the 40% ACFTA content is calculated as follows:
*The ACFTA content = 100% - Non-ACFTA Materials = at least 40%*
Apart from the General ROO, ASEAN and China have also adopted Product Specific Rules (PSR) for the following products:
ASEAN and Chinese exporters/manufacturers now have the flexibility of choosing the most convenient rule in meeting the origin criteria of the products i.e., either 40% Regional Value Content (RVC) or PSR.
To obtain the Certificate of Origin Form E, exporters are also required to fulfil the conditions for the issuance and verification of the Form E. Further improvement on OCP was carried out to simplify the rules and trading procedures under the ACFTA. The Second Protocol to Amend the Trade in Goods Agreement on the improvement of the OCP was signed in November 2010 and entered into force in January 2011. Under the review, ASEAN and China have agreed on 4 fundamental features in the new revised OCP:
1. Movement of Certificate
Back-to-Back Certificate of Origin arrangement to facilitate exports of partial shipments, of which the bulk-break activities are conducted in an intermediate ACFTA party. Certificate of Origin (Form E) issued by an intermediate exporting Party, based on the original Certificate of Origin (Form E) issued by the first exporting Party proving the origin status of the products in question.
2. Third Parting Invoicing
Sales invoice to the importer are allowed to be issued by companies located in a non-ACFTA territory provided that the product meets the requirements of the ACFTA ROO and must be shipped out from either one of the ASEAN Member States or China.
3. Longer validity period of 1 year for the Certificate of Origin (Form E)
Longer validity period of 1 year from the earlier period of 4 months for the Certificate of Origin (Form E) upon presentation to the Customs authority of the importing Party.
4. Allows for verification visit.
For Malaysian exporters to enjoy the tariff concessions offered by China under the ACFTA, Certificates of Origin (Form E) must be obtained and endorsed by MITI.