RCEP enjoys preferential tariffs, why value the product “ID card”?

Products to enjoy tariff preferences must meet the rules of origin. One of the most important breakthroughs of RCEP is to coordinate the quite different rules of origin in ASEAN’s existing trade agreements, and set the “regional accumulation principle”.

Shen Minghui: Just like ordinary people, products also have an “ID card”-a certificate of origin. According to the rules of origin, member states can enjoy preferential tariffs or zero tariffs when exporting their own raw materials directly to other member states; if imported semi-finished products and parts are assembled and processed, and then exported to other member states, if they can prove that these semi-finished products or Parts come from other member states, and rules of origin apply.

Zhang Jianping: Not all products in the free trade zone can enjoy preferential tariff treatment. For example, according to the traditional free trade agreement, a product exported from China to other member states must have an added value of 40% in the country of origin in order to enjoy zero tariffs.

However, RCEP adopts the regionally accumulated rules of origin, which breaks through the limitation that only the added value of the product in the origin meets the standard stipulated in the agreement. For example, the added value of a certain product in China is only 10%, while the added value of parts and components from Vietnam, Malaysia, and the Philippines each account for 10%. After the regional accumulation reaches the standard of 40%, it can also enjoy zero tariffs.

Shen Minghui: In the past, some regional free trade agreements only allowed bilateral accumulation. For example, when products from one member country are to be exported to another member country, only semi-finished products between the two countries are allowed to accumulate, and other countries in the region are not allowed to accumulate.

Obviously, the principle of regional accumulation can reduce the cost of the regional supply chain, promote the free flow of production materials or factors, and allocate them to the most efficient places, so that the entire regional industrial chain and value chain can be upgraded and optimized.

Zhang Jianping: The current products are basically the division of labor within the product, and each production link is usually distributed in different countries, forming a division of labor system targeting processes, sections, and links. RCEP’s regional accumulation principle helps to encourage the construction of a new supply chain system and production network system in the region, which not only reduces costs, but also significantly improves efficiency and promotes regional trade and investment prosperity.