What is FTA?

A Free Trade Agreement (FTA) is a legally binding treaty between two or more countries designed to promote trade by reducing or eliminating barriers such as import tariffs, quotas, and other non-tariff measures.

 

Unlike traditional trade relationships, FTAs establish comprehensive rules on critical areas including rules of origin, market access, trade remedies, customs procedures, and often extend to services, investment, and intellectual property rights.

 

While the scope and depth of each FTA may vary, they generally share the following common objectives:

 - To promote cross-border trade

 - To enhance economic cooperation

 - To improve efficiency and competitiveness

 - To lower the overall cost of trade for businesses

Bilateral FTA : A bilateral free trade agreement (FTA) is established exclusively between two nations. This framework creates a unified set of trade regulations, making it simpler for exporters and logistics service providers to navigate compliance requirements and operational procedures between the two markets. For the Example is the Thailand-Australia Free Trade Agreement (TAFTA).

 

Multilateral/Regional FTA : Multilateral free trade agreements are formed among three or more nations to establish extensive, integrated economic markets. By harmonizing trade policies across member countries, these agreements provide significant strategic advantages for supply chains. Companies operating within these zones benefit from standardized customs procedures, greater economies of scale, and enhanced operational efficiencies throughout the entire region. Notable examples of such agreements include:

- AFTA (10 ASEAN Countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam)

- ACFTA (10 ASEAN Countries - China Agreement)

- RCEP (10 ASEAN countries + China, Japan, South Korea, Australia, New Zealand)

 

Customs Union : Overall Conclusion: The more extensive and integrated the FTA (in terms of member countries and rules), the easier logistics management becomes. This leads to lower costs, reduced administrative burdens, and greater flexibility for supply chain planning.

THAILAND FREE TRADE AGREEMENTS

Product Origin refers to the country where a product was manufactured or underwent substantial processing, granting it the "nationality" of that country. In international trade, determining product origin is critically important, as it is a key factor in:

Customs Duty Rates: Determining whether the product qualifies for preferential tariff rates under Free Trade Agreements (FTAs).
Import Quotas: Applying quotas for goods originating from specific countries.
Trade Measures: Implementing measures such as safeguards or anti-dumping duties.
Labeling Requirements: Mandating the "Made in [Country]" label on products.

Rules of Origin

To determine product origin, there are two main types of rules:

1. Wholly Obtained or Produced

Goods entirely obtained or produced within a single country, with no imported materials. Examples include:

Agricultural products: Crops grown and harvested in Thailand.
Live animals: Animals born and raised in Thailand.
Mineral products: Minerals extracted from mines in Thailand.
Marine products: Fish caught by Thai vessels in international waters.

2. Not Wholly Obtained / Substantial Transformation

Goods produced using imported components that undergo significant processing or transformation in a country, altering their essential character. The main criteria for assessment are:

Change in Tariff Classification (CTC): The imported components (e.g., fabric) are processed into a finished product (e.g., clothing) with a different Harmonized System (HS) code.
Value-Added Rule: A specified minimum percentage of the value (e.g., 40% of the FOB value) must be added through local costs (domestic materials, labor, production expenses).
Specific Manufacturing Process: The product must undergo a specific, defined manufacturing process within the country (e.g., spinning or weaving for textile products)
 

Proof of origins

Proof of Origin is a document used to certify the country of origin of goods for the purpose of claiming preferential tariff treatment under Free Trade Agreements (FTAs) to which Thailand is a party.

In Thailand:

- Issuing Authorities: The Customs Department (via electronic systems such as e-CO) and the Board of Trade of Thailand are the primary entities responsible for issuing these documents.

 

-  Verifying and Approval Authority: The Customs Department is responsible for verifying proof of origin and approving preferential tariff treatment for imported goods.

 

Under the various Free Trade Agreements (FTAs) that Thailand is a party to, the documentary evidence used to certify a product's origin has different names and formats, depending on the specific agreement. They can be summarized as follows:

Form E (or e-Form E) is used for the:
Agreement: ASEAN-China Free Trade Agreement (ACFTA)
Form D (or e-Form D) and Origin Declaration are used for the:
Agreement: ASEAN Trade in Goods Agreement (ATIGA)
Form AANZ (or e-Form AANZ) is used for the:
Agreement: ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA)
Invoice Declaration is used for the:
Agreement: Thailand-New Zealand Closer Economic Partnership (TNZCEP)
Form RCEP and Declaration of Origin (both forms are in use) are used for the:
Agreement: Regional Comprehensive Economic Partnership (RCEP)

Proofs of origin can be categorized into three main types as follows:

Certificate of Origin (C/O)

A paper-based document issued by the competent authorities of the exporting country, such as the Customs Department or the Board of Trade. This traditional format requires official signatures and stamps from the issuing agency.

Certificates of Origin can be divided into two main categories based on their purpose:

Type 1: Non-Preferential Certificate of Origin
A document used to certify the origin of goods but cannot be used to claim exemption or reduction of import duties.
Example: General C/O Form (also known as Ordinary Certificate of Origin).

Type 2: Preferential Certificate of Origin
A document used to claim preferential customs tariff treatment (exemption or reduction of import duties). Examples include:

FORM D: Used for tariff reduction under the ASEAN Free Trade Area (AFTA) framework, applicable to ASEAN member countries.
FORM E: Used for tariff reduction under the ASEAN-China Free Trade Agreement (ACFTA), applicable to ASEAN member countries and China.
Other examples of preferential certificates include Form A (for Generalized System of Preferences), Form AJ (ASEAN-Japan), Form AK (ASEAN-Korea), and Form R (RCEP), each corresponding to specific free trade agreements.


Electronic Certificate of Origin (e-CO)

A digital document with the same legal validity as a paper certificate. The entire process of application, verification, and issuance is conducted through the online system of the Customs Department, enhancing speed, accuracy, and reducing paper usage.

 

Self-Certification of Origin

A system that allows eligible exporters (e.g., those who have passed audits and registration) to self-certify the origin of their goods without requesting documents from government agencies, under specified Free Trade Agreement (FTA) frameworks. However, exporters must have a thorough understanding of the Rules of Origin and are required to retain all relevant supporting documents for potential future verification.

References

https://www.logos3pl.com/th/glossary/free-trade-agreement/

https://shorturl.at/YAneg

Importation Utilizing Privileges under Free Trade Agreements (FTAs) by the Thailand Customs Department

Decoding FTAs: A Golden Opportunity for Logistics Stakeholders by the Department of Foreign Trade (DFT)