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In a bid to streamline trade processes and foster greater economic cooperation, the Ministry of Industry and Trade recently issued Circular No. 04/2024/TT-BCT, amending and supplementing several Articles of Circular No. 20/2014/TT-BCT.
These amendments specifically target the rules of origin within the Agreement establishing the ASEAN – Korea Free Trade Area (AKFTA), aiming to enhance clarity and flexibility in determining the origin of goods traded under the agreement.
Effective on May 11, 2024, Circular No. 04/2024/TT-BCT introduces significant modifications, particularly focusing on the calculation methods for regional value content (RVC) and the procedures for issuance and verification of certificates of origin (C/O).
One of the key amendments involves Article 4, Appendix I, which outlines the rules of origin. The circular stipulates that a good will be considered originating if the RVC is not less than 40% of the Free on Board (FOB) value or if the good undergoes a change in tariff classification at the four-digit level of the Harmonized System. This adjustment aims to provide clarity and consistency in determining the origin of goods, thereby facilitating smoother trade under the AKFTA.
Moreover, Circular No. 04/2024/TT-BCT introduces two formulas for calculating the RVC: the direct formula and the indirect formula. The direct formula calculates the RVC based on the value of originating materials (VOM), while the indirect formula considers the value of non-originating materials (VNM). This flexibility allows exporters or producers to choose the method that best suits their circumstances, enhancing efficiency and accuracy in determining the origin of goods.
Furthermore, the circular amends Clause 1 of Article 5 in Appendix V, which pertains to the procedures for the issuance and verification of C/O. According to the revised clause, a C/O must be issued in a printed format, manually or electronically signed and stamped by the C/O issuing authorities of the exporting Party. Additionally, the C/O must adhere to specific formatting requirements, including being printed on A4 size paper and utilizing the prescribed C/O Form AK provided in Appendix VI-A. Furthermore, the C/O must be in the English language, ensuring uniformity and ease of understanding for all parties involved in trade transactions.
Moreover, the “ASEAN – Korea Free Trade Agreement” has been renamed as the “Agreement on Trade in Goods under the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea,” reflecting the comprehensive nature of the economic cooperation between the ASEAN member states and Korea.
These amendments signify an effort to modernize and streamline trade processes within the AKFTA, ultimately contributing to the promotion of economic growth and prosperity for all parties involved. By providing clearer guidelines for determining the origin of goods and enhancing the efficiency of trade documentation procedures, Circular No. 04/2024/TT-BCT aims to facilitate smoother and more robust trade relations between ASEAN member states and Korea.
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