Talking Trade blog
RCEP: Facilitating trade for e-commerce?
Published 12 April 2017
The 16 Asian countries currently negotiating the Regional Comprehensive Economic Partnership (RCEP) trade agreement are preparing for the next round in early May in the Philippines.
The ten member countries of ASEAN that lead the talks in conjunction with Australia, China, India, Japan, New Zealand, and South Korea have been working hard on a new chapter on e-commerce.
We have been meeting regularly with officials at different rounds to discuss various elements of this chapter and others.
Getting e-commerce and digital trade to really deliver new opportunities for economic growth, additional markets and jobs, however, requires member states to think beyond just the specific chapter on e-commerce. It means taking a holistic approach to facilitating trade.
One area of particular importance for smaller firms engaged in e-commerce is dealing with problems at customs. Many e-commerce companies are not shipping 40 foot containers but a few boxes or even just one package straight to consumers or to other companies. Yet the paperwork and processing requirements to send one small box can be exactly the same a huge container.
Firms often face complicated and cumbersome paperwork requirements at the border. Some markets charge high fees or inspect every single parcel, which causes expensive delays. Sometimes these issues are so significant that companies simply stop trying to send goods overseas at all.
These problems are not unique to e-commerce shippers, of course, but if one important goal of RCEP is to facilitate trade for e-commerce, then a final agreement that does not address the real impediments to trade in smaller size, smaller value shipments at the borders will be a missed opportunity. The benefits of a robust e-commerce chapter that does not simultaneously tackle customs issues could be lost or watered down.
Smaller firms face particular obstacles in sending goods across borders. These problems include:
- Challenges in understanding technical issues related to customs like HS codes, classification issues, and customs valuation;
- Requirements for importer registration that can be hard to understand with often complicated documentation needed in hard copy;
- Licensing requirements for personal imports;
- Problems with handling returned goods; and
- Tariffs that tend to hit the lower profit margins of smaller e-commerce firms harder than bigger firms.
Two things are critically important for smaller firms: reducing costs and complexity. Achieving these twin goals will require RCEP countries to fully implement the global commitments contained in the World Trade Organization’s (WTO) Bali Trade Facilitation Agreement (TFA). [We covered the Bali agreement in an earlier Talking Trade blog post here.]
While Bali is a good first start, merely implementing this agreement will not provide Asian firms with competitive advantages above and beyond the rest of the world. RCEP officials are hoping to provide their firms and citizens with better benefits than anywhere else.
To achieve better outcomes, RCEP should follow the World Customs Organization (WCO) best practices. For example, the WCO suggests Immediate Release Guidelines with simplified entry thresholds. These should be applied to all goods and not just a subset of goods like postal shipments or “personal” shipments, since these categories allow too much individual discretion and complicate customs clearance for smaller cargo packages.
These thresholds should be set high enough to allow most goods sent by smaller firms to clear (and, ideally, would be set at the same level for all, or for nearly all, RCEP countries). It should be a “hard” threshold and not subject to “informal” assessments. These thresholds should apply for any type of trader and any type of transport.
Two thresholds matter most to smaller firms. The first is the de minimis level, which is the point below which duties and taxes need not be paid (based on the invoice value, not including transport costs). Assuming smart collection systems, a standardized system of de minimis should be set at least at USD$200.
The second threshold for smaller firms is a level for consignments with a simplified goods declaration or consolidated goods declarations with information requirements kept to a minimum needed by border agencies. This second threshold should be set, as WCO recommends, at USD$1400.
Documents should be able to be submitted prior to arrival and in electronic form, as the Bali TFA agreement recommends. This will help allow risk assessment to be conducted between relevant ministries and agencies in a coordinated fashion, using electronic systems. All low risk shipments should not require manual inspection. Those arriving via express or post, in particular, could be released immediately upon arrival, or within a short, specified window. Return shipments should be released without needing a formal declaration.
Note that these “best practice” recommendations do not suggest that all e-commerce shipments be granted expedited clearance. Packages above the thresholds should be subject to normal clearance procedures.
All relevant regulations, laws and administrative procedures must be published clearly online. Proposed changes to the regulatory and legislative environment must be made sufficiently far in advance and with sufficiently clear and transparent communication to allow firms time to adjust.
As always, we recommend that RCEP provide an opportunities for interested parties that have the best sense of rapidly changing conditions on the ground to be given opportunities to provide input on proposed changes to help improve policy outcomes. Especially for e-commerce and digital trade which is evolving so quickly, firms in the sector are likely to have a better sense of trade-offs involved in different policy options than government officials. Their input should be welcomed.
This includes not just the period covering the negotiations, but implementation of the RCEP agreement and any subsequent changes to regulations that affect e-commerce trade facilitation and customs rules.
The overall goal should be to facilitate trade better than anywhere else in the world. Doing so will benefit the smallest firms and position Asian companies to deliver new market opportunities to companies across the region.
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