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This guide summarises the information exporters need in order to assess and take advantage of the tariff preferences available under the Closer Economic Partnership (CEP) Agreement with Thailand.
Exporters need to be aware that the rules determining whether or not exports qualify as being of New Zealand origin are different in this Agreement from those in CER and the CEP with Singapore.
What are tariff preferences?
Tariff preferences are the special, lower than normal, tariff rates or customs duties that Thailand will apply to goods that qualify as being of New Zealand origin under the CEP.
Over half of New Zealand’s current exports to Thailand became duty free from 1 July 2005.[1]
All tariffs and quotas that are not removed immediately will be phased out over a fixed period in accordance with Thailand’s Tariff Schedule (see below).
Most exports that do not go to zero immediately benefited from a tariff reduction from 1 July 2005. In some cases the reduction is significant.
[1] Note: The Agreement entered into force on 1 July 2005.
Four key steps for exporters
To establish how you can benefit from the CEP, it is recommended that exporters take the following steps, in consultation with the importer of your goods:
Establish the tariff classification of your product
Check the tariff phase-out arrangements in Thailand’s Tariff Schedule
Determine the rule of origin applying to your product
Obligatory: Provide a declaration of origin with each consignment that you consider meets the rules of origin. (Note: Certificates of Origin are no longer required.)
These four steps are outlined in more detail in the remainder of this guide.
Sources of Information
The information contained in this guide is not a substitute for the legal texts.
The definitive sources of information for exporters on the rules of origin are Chapter 4 and Annex 2 (1,140 KB, PDF) of the NZ/Thailand CEP Agreement.
Customs Fact Sheet 30 [external link to NZ Customs Service website] contains further explanation of the rules and provides particular guidance on the rules of origin as they apply to imports from Thailand under the relevant Customs and Excise Regulations.
The MFAT publication “The New Zealand-Thailand Closer Economic Partnership” provides a general guide to the Agreement and some details on the tariff phase-out arrangements.
Enquiry points:
Rules of origin :
Graham Webb, Ministry of Economic Development
Tel: +64 4 474 2676
Email: graham.webb@med.govt.nz
Thai tariff :
Tracey Paterson, Trade and Services Issues, South/South East Asia Division, Ministry of Foreign Affairs and Trade, Private Bag 18 901, Wellington
Tel: +64 4 439 8376, Fax +64 4 439 8522
Email: sea@mft.govt.nz
Both the tariff preference and the rule of origin for each product depend on the tariff classification of the product.
Correct classification is therefore critical.
What is tariff classification?
The Harmonised System (HS) of Tariff Classification is an internationally recognised method of determining the classification of all traded products.
It is divided into chapters, then into four-digit headings and six-digit subheadings.
The Tariff Schedules negotiated under the CEP contain tariff phase-out commitments for each six-digit tariff subheading.
Thailand’s Tariff Schedule for the CEP also includes some seven-digit tariff subheadings where six-digit lines are broken down into smaller categories, with different tariff rates applying.
The Rules of Origin refer to chapters, four-digit headings and six-digit subheadings.
Are NZ and Thai classifications the same?
Under the HS, the classification of a product at six-digit level should be the same in New Zealand and Thailand. (Note: you should disregard the last two digits of eight-digit classifications under the New Zealand Tariff for the purposes of the CEP.)
If you do not know the tariff classification of the good you intend to export, you may obtain advice from the NZ Customs Service. See Customs Fact Sheet referred to above for details.
However, to be absolutely certain of how your product will be classified on entering Thailand, you should obtain a binding tariff classification from Thai Customs.
Obtaining binding tariff classifications from Thailand
Thailand and New Zealand are obliged under Article 3.9 of the CEP to provide “advance rulings” on tariff classification. These are the same as “binding tariff classifications” and provide exporters with assurance that their goods will be treated consistently at the border.
Either the exporter or the importer may seek classification rulings from Thai Customs. Requests should be addressed to:
Director of Customs Tariff Classification and Policy Directorate
The Customs Department
1st Sunthornkosa Road Klongtoey
Bangkok 10110
Thailand
Tel: +66 2 249 0431-40
Fax: +66 2 667 7767
Rulings will be provided within 30 days of the complete information being provided to Thai Customs.
Thai rulings are currently binding for two years. (See Article 3.9 of the Agreement for qualifications.)
Thailand’s Tariff Schedule (Annex 1.1 of the CEP - 618KB, PDF) is available on the MFAT website.
How to read the Schedule
The Schedule shows the year-by-year phase-out arrangements for every tariff item. Once you know the tariff classification of your product, you can readily identify whether your product is subject to a tariff and the phase-out schedule that will apply.
Note: You can locate your tariff line using the search function in the PDF document containing the Schedule.
Each line contains the following details:
a “Base Rate” column showing the tariff applicable as at 1 June 2004 (in almost all cases, the current applied tariff);
the applicable preferential tariff rates under the CEP for the years 2005 to 2020.
The tariff cut shown in the 2005 column took effect from 1 July 2005.
The tariff cuts shown in the 2006 and subsequent columns will take effect on 1 January of the relevant year.
Exceptions for SSG/TRQ products
For products where SSG or TRQ appears in the “Remarks” column of the Thai Tariff Schedule, some special provisions apply. These relate to Special Agricultural Safeguards and Tariff Rate Quotas.
Products must qualify as “originating” in New Zealand in order to qualify for preferential tariff treatment under the Agreement.
The Agreement’s Rules of Origin determine whether or not any particular good qualifies as originating.
Any exports that do not meet the Rules of Origin will be subject to normal tariffs.
To qualify as ‘originating’, goods must fall into one of two categories as described below.
Goods wholly obtained or produced in New Zealand
The first category covers goods that are wholly obtained or produced in New Zealand, for example goods grown, fished or mined entirely in New Zealand, or produced in New Zealand from those goods. (These goods are subject to Article 4.2.1(a) of the Agreement.)
All “wholly obtained” goods are considered to originate in NZ.
Goods partly produced in New Zealand
The second category covers goods that are “partly produced” in New Zealand. These goods include input materials from third countries and are subject to Article 4.2.1(b) of the CEP Agreement. They need to satisfy the product-specific rules of origin of Annex 2 of the CEP as a result of processes performed entirely in New Zealand or Thailand or both.
In order to meet the product-specific rules of origin, goods must not enter the commerce of a third country after export from New Zealand and before import into Thailand. Simple trans-shipment is permitted.
It is critical that exporters of “partly produced” goods identify the precise rule applying to their product in order to establish whether or not it will qualify for tariff preference.
Customs Fact Sheet 30 contains further explanation of the rules applying to partly produced goods, including a step-by-step guide to determining origin.
Change of tariff classification
The most common product-specific rule is for a change of tariff classification. This means that the exported product must be classified differently from all the imported inputs (“non-originating materials”) as a result of processes performed entirely in New Zealand or Thailand or both.
This means that you need first to establish the tariff classifications of the exported product and of all the imported inputs that go into it. You can then consult Annex 2 which sets out the specific change of classification required for each four- or six-digit tariff line.
For example, if you are exporting aluminium windows of tariff heading 7610 which are made up from imported aluminium bars of tariff heading 7604 and imported glass of tariff heading 7003, your product will qualify. This is because the rule of origin requires a change to heading 7610 from any other heading.
Exceptions to change of classification rule
A “de minimis” rule allows goods to qualify as originating if they contain non-originating materials which do not undergo the required change of classification provided the CIF value of these does not exceed 10% of the FOB value of the goods. The goods must meet all other applicable criteria.
Goods produced from imported materials by minimal operations or processes (eg drying, freezing, dilution, simple assembly) will not be treated as originating even if they meet the change in tariff classification requirement.
Regional value content requirement for TCFC products
Textile, apparel, footwear and carpet products classified in Chapters 50-64 must meet a 50% FOB Thai/New Zealand value-added content rule, in addition to the change of tariff classification requirement. This requirement is spelled out in the product-specific rules for relevant tariff lines.
See Customs Fact Sheet 30 for an explanation of the “regional value content” calculation.
Chemical reaction rule
For goods classified in Chapters 27-40, a chemical reaction rule can be applied as an alternative to change of tariff classification.
See Customs Fact Sheet 30 and Headnotes to Annex 2 for further details.
Obligatory requirement to provide declaration of origin (not Certificate of origin)
New Zealand exports to Thailand will not qualify for preferential tariffs under the CEP unless they are accompanied by a declaration of origin from the exporter.
Note: this exporter declaration replaces Thailand’s current requirement for imports to be accompanied by a Certificate of Origin issued by a Chamber of Commerce.
The aim of the exporter declaration is both to minimise red tape for exporters and to place a clear responsibility on the exporting company to establish that products for which tariff preference is claimed comply with the CEP’s rules of origin.
The declaration should be included in English on the transaction (export) invoice.
It is suggested that you copy the wording below directly from the MFAT website.
Form of declaration
For “wholly obtained goods”, the exporter declaration needs to read:
"I [state name and position] hereby declare that the goods enumerated on this invoice originate in New Zealand and comply with the provisions of Article 4.2.1(a) of the NZTCEPA".
For “partly produced goods” (ie those containing some inputs imported from third countries), the exporter declaration needs to read:
"I [state name and position] hereby declare that the goods enumerated on this invoice originate in New Zealand and satisfy the requirements of Article 4.2.1(b) and Annex 2 of the NZTCEPA.”
Goods invoiced from a third country
In circumstances where goods are exported directly from New Zealand or Thailand but invoiced from a third country, a different form of declaration needs to be provided by the entity that issues the invoice from the third country.
For “wholly obtained goods”, the declaration should read:
"I [state name and position] of [state name of entity invoicing the goods] being the authorised agent of [state name of producer of the goods] hereby declare that the goods enumerated on this invoice originate in New Zealand and comply with the provisions of Article 4.2.1(a) of the NZTCEPA".
For “partly produced goods”, the declaration should read:
"I [state name and position] of [state name of entity invoicing the goods] being the authorised agent of [state name of producer of the goods] hereby declare the goods enumerated on this invoice originate in New Zealand and satisfy the requirements of article 4.2.1(b) and Annex 2 of the NZTCEPA.”
Ministry of Foreign Affairs and Trade - updated July 2005
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