Tariff Preferences Research Articles

Rules of Origin Within ASEAN and RCEP: Has It Been Resolved?

As a well-established trading bloc, rules of origin (ROO) for ASEAN are expected to benefit member states’ businesses by providing preferential tariff treatment which is the fundamental purpose of trade liberalization. However, these rules are prevented from being applied thoroughly due to the lack of government trust in certain member states in business actors and targets of duty collection for customs authorities. The self-certification by business actors has proven to be a solution to the problem but ASEAN A-X Formula may be counterproductive to ROO, eliminating the foundation of regionalization and potentially causing trade deflection. The First Protocol of ASEAN Trade in Goods Agreement (ATIGA) amendment simplifies the procedure of operational certification for ROO. Furthermore, the Regional Comprehensive Economic Partnership (RCEP) as a significant trading pact including ASEAN members and five major trading partners has adopted proof of origin allowing self-certification applied earlier in the European Union and NAFTA. Alternative solutions should also be explored since distrust and national financial interests have not been resolved. Recently, blockchain embedded with smart contracts has been applied in various business sectors which should be further applied in free trade area (FTA) applications. Blockchain’s characteristics as an immutable ledger originating from the hashing process and cryptography would address the problem of ASEAN ROO application. Therefore, this study aimed to analyze the effectiveness of ROO within ASEAN and RCEP. A literature review and doctrinal study methodology were applied in this analysis.

An Economic Assessment of the EU–Japan Economic Partnership Agreement with Realistic Preference Utilization Rates

Abstract Recent years have seen an increased focus on the implementation of Preferential Trade Agreements (PTAs). While the number of PTAs has risen remarkably since early 2000, data on the utilization of preferential tariffs under these agreements point out that some businesses have not gained access to all the benefits that PTAs can provide. When utilization rates are low, the impact of the agreement will likely differ from what was anticipated by ex-ante economic research. This paper conducts a dynamic Computable General Equilibrium (CGE) analysis of the expected impact of the EU–Japan Economic Partnership Agreement and compares a scenario that includes realistic preference utilization data with a standard scenario where all tariff liberalization is assumed to be fully utilized by businesses. The results show considerable differences between the two scenarios and illustrate the need to make the inclusion of credible utilization data standard practice in the modelling of international trade.

Preferential trade liberalization with endogenous cartel discipline: Implications for trade and welfare

AbstractWe consider an international cartel whose members interact repeatedly in their own as well as in third‐country markets. Cartel discipline—an inverse measure of the degree of competition between firms—is endogenously determined by the cartel's incentive compatibility constraint, which strategically links markets that are otherwise independent. This linkage implies that trade cost reductions induce cartel members to adjust their sales, not only because of direct but also because of spillover effects. We apply these ideas to preferential trade agreements and show that the indirect effects can give rise to trade diversion. We also characterize the welfare effects of preferential tariff cuts for all countries and identify circumstances under which preferential trade liberalization is welfare‐reducing.

Legal Certainty for Providing Preferential Tariffs in the ASEAN-China Free Trade Area (ACFTA) Agreement Based on Operational Certification Procedures (OCP) in Tax Court Decisions

The ASEAN-China Free Trade Area (ACFTA) is an agreement made by the member countries of ASEAN and the People's Republic of China with the aim of promoting a stable and harmonious economy through the free flow of goods. ACFTA also supports the idea that barriers to international trade, both tariff and non-tariff, should be reduced or even eliminated, which is known as preferential tariffs. The countries involved in the ACFTA agreement agree that the Rules of Origin (ROO) provisions are necessary to obtain preferential tariffs. ROO establishes three criteria: Origin Criteria, Consignment Criteria, and Procedural Criteria. (Procedural Criteria). The Procedural Criteria are regulated in the Operational Certification Procedures (OCP) in Appendix 1 of Attachment A of Annex 1 ROO. The OCP contains regulations regarding the time for submitting a Certificate of Origin (SKA) in order to obtain a preferential rate. There are parties that think about the implementation of OCP ACFTA in Indonesia, that further regulations on OCP cannot be made without an agreement from both sides to do so. Research conducted using a normative legal approach with data collection methods through literature study, concluded that there are still differences in the application of Operational Certification Procedures (OCP) in the imposition of preferential rates by customs officers and Tax Court judges in the region in resolving disputes regarding preferential tariff. Therefore, adjustments are needed in the legal products regarding the implementation of preferential tariff imposition, as well as an enhancement of legal understanding and reasoning in the Tax Court to provide legal certainty, justice, and benefits for all stakeholders. Keywords: ACFTA, Preferntial Tariff, OCP.

Choosing a flat rate over a pay-per-use tariff for public transport: Do psychological factors matter?

We investigate the relationship between various psychological factors (taximeter effect, flexibility effect, cost control effect, pre-commitment effect), annual distance traveled, and public transport tariff preferences (pay-per-use vs. flat rate). While a pay-per-use tariff entails ticket prices depending on usage intensity, a flat rate involves an annual public transport subscription covering all journeys within a year. Drawing from a sample of 3,381 Swiss public transport customers utilizing either the pay-per-use option or holding a flat-rate subscription, a binomial logistic regression highlights that the number of passenger kilometers traveled (pkm) predominantly influences the choice of a flat rate. However, the examined psychological factors also significantly shape decision-making. Notably, these effects vary based on the quantity of the product consumed. Specifically, both the taximeter and cost-control effects tend to increase with pkm. Conducting a simulation using binomial logistic regression, we illustrate how different psychological factors are related to the likelihood of opting for a flat-rate subscription. The findings suggest that the level of importance of the psychological factors are relevant to predict the odds of selecting a flat-rate subscription. Hence, emphasizing product advantages in marketing communications and strategically adjusting product design to leverage these psychological factors emerge as effective strategies for enhancing sales promotion and fostering customer loyalty. These results offer insights into consumer psychology and decision-making within the transportation sector. The implications are particularly valuable for managers aiming to address barriers to public transport use. By strategically refining ticket product ranges, managers can actively contribute to reducing CO2 emissions through induced modal shifts.

Should Multinational Suppliers Relocate Their Production Capacity to Preferential Tariff Regions with Unreliable Supply under the Impact of Tariffs?

Should Multinational Suppliers Relocate Their Production Capacity to Preferential Tariff Regions with Unreliable Supply under the Impact of Tariffs?

Certificate of Origin Management in Supporting the Export Process: A Qualitative Descriptive Analysis on Marine Cargo Expeditions

The complexity of managing export documentation and the lack of knowledge of regulations in the importing country cause non-fulfilment of requirements and cancellation of exports. This study aims to determine the stages and the mechanism for managing certificates of origin in the export process by freight forwarding or marine cargo expedition representing the exporter. The research used qualitative descriptive methods and approaches. Data was collected by observation and documentation at two marine cargo expedition companies in Semarang, Central Java, Indonesia. Data is analyzed and presented using a flowchart diagram. The results show that these companies manage COO documents through the eSKA website, with the completeness of filling in the basic information of exporters, consignees, route and transport, and supporting documents, including export declaration, packing list, invoice, goods, and cost structure. Overall, export documents are indispensable for international trade as they ensure goods' legal compliance and smooth flow across borders. The role of the freight forwarding company or marine cargo expedition in this process is to advise the exporter on the required paperwork, ensure compliance with relevant regulations, and communicate with the appropriate authorities to obtain the certificate. The positive implications of this research are that the administration of export documentation, particularly Certificates of Origin (COO) via the eSKA platform by marine cargo expeditions, enhances time efficiency for exporters and proves efficacious in ensuring the legal compliance of COO document handling. Moreover, COOs can yield favourable effects through preferential tariffs, thereby augmenting the competitiveness of exported goods.

Перешкоди впровадженню теплових насосів у централізованому теплопостачанні

Today, heat pumps are recognized as one of the technologies that most contribute to the decarbonization of almost all spheres of modern society life, especially industry and energy. The integration of heat pumps into district heating is considered as an implementation of renewable energy technology that will enable the European Union (EU) to achieve its ambitious energy and climate policy goals for developing sustainable society. The purpose of this article is to analyze and systematize the EU experience in overcoming obstacles to the introduction of heat pump technologies in district heating and to determine the possibilities of its application in Ukraine. It was found that it is impossible to ensure the universal integration of heat pumps into district heating for all EU members, and an individual analysis is required for each EU country, taking all technical and environmental aspects into account. Obstacles to the large-scale implementation of heat pump technologies into district heating are of a complex nature. Complex obstacles require an integrated approach that simultaneously removes these obstacles and includes direct incentives, indirect taxes, technical standards, building codes, education, etc. An analysis of the experience of the EU countries (financial support, education and training, preferential tariffs for electricity for heat pump operation, EU regulations on energy efficiency of buildings, the EU directive on renewable energy sources, etc.) made it possible to identify obstacles to the widespread implementation of heat pumps in district heating. The main such obstacles are the high initial cost of heat pump equipment, the high cost of electricity, the high cost of connecting to electricity and heat networks, insufficient government incentives, the lack of domestic production of heat pumps and highly qualified personnel for their implementation. The proposed main preventive measures to overcome these obstacles are the creation of a State Program to stimulate the introduction of heat pumps; legislative support aimed at accelerating the introduction of heat pumps; creation of financial incentives for their implementation; state stimulation of production of heat pump equipment and professional training of operating personnel. This article is aimed at discussing directions for the formation of effective legislative and regulatory measures for comprehensive stimulation of the large-scale introduction of heat pumps in the district heating in Ukraine. Keywords: heat pumps, renewable energy sources, district heating, implementation, obstacles, overcoming.

Industria láctea en Costa Rica: desafíos y oportunidades para su desarrollo sostenible

This article addresses the contemporary status of the dairy industry in Costa Rica, emphasizing the challenges and opportunities it presents for its evolution. A thorough analysis of the industrial structure, production, employment generation, and the dynamics of exports and imports in relation to preferential tariff fluctuations is conducted. During the study period, a significant increase in Costa Rican dairy production is highlighted, and notable challenges are pinpointed, including tariff changes under the Central America Free Trade Agreement (CAFTA) and heightened competition with global dairy firms. Nevertheless, the vast potential for establishing market differentiators and capturing niche segments in this industry is underscored. The importance of institutional backing and the execution of strategies, designed in synergy between public and private sectors, is accentuated. The study’s outcomes suggest that the competitiveness of the dairy sector, both locally and internationally, is crafted through the amalgamation of efforts in pursuit of a favorable environment. The article concludes with recommendations aimed at amplifying industry competitiveness and advocating sustainable growth.

Russia’s Retaliatory Measures in the Context of the Eurasian Economic Union

The paper examines Russia’s retaliatory measures in regulating foreign trade in goods. Specific examples of the introduction of increased rates of import customs duties and the suspension of tariff preferences are analyzed. The grounds for denial of most-favored-nation treatment declared by the Russian side in accordance with the provisions of the World Trade Organization law are examined. A comparison is made of the countermeasures under the legislation of the Russian Federation on foreign trade activities with the countermeasures under the law of the Eurasian Economic Union. The competence of the Eurasian Economic Commission in the area of taking countermeasures under individual international treaties is disclosed. Contradictions and inconsistencies in the regulation of countermeasures by the Treaty on the Union are demonstrated. Conclusions are formulated about the similarity of countermeasures with Russian special economic measures and measures of influence (counteraction), about the practical advantages of the reasons and grounds for introducing countermeasures under Russian legislation over the referral norms of the law of the Eurasian Economic Union. A reasonable division of retaliatory measures into supranational ones, provided for by international trade agreements, and retaliatory measures introduced in accordance with Russian legislation is proposed.

The impact of LDC graduation on trade: A quantitative assessment

ABSTRACT Twelve Least-Developed Countries (LDCs) will graduate from the LDC status in the coming decade implying that they will lose preferential access to export markets. We quantify the expected impact of LDC graduation on exports of graduating and non-graduating LDCs incorporating detailed preference utilization data in a partial equilibrium model. We compare the results under actual and full preference utilization rates. Separately, we explore how underutilization of tariff preferences affects the exports of countries benefiting from such preferences. The analysis generates four main results. First, we project that graduation will have a negative impact on the exports of graduating LDCs (more than US$ 6 billion export loss or 6% of exports), especially in the clothing sector. Second, the adverse trade effects of graduation would be overestimated by 30% under full instead of actual utilization rates. Third, we show that the increase in exports of non-graduating LDCs following graduation of other LDCs is limited, implying that non-graduating poorer LDCs hardly benefit from graduation of richer LDCs. Fourth, we show that there would be significant benefits of increasing the utilization of LDC preferences. The exports of LDCs would increase by almost US$ 7 billions if they simultaneously switched to a full utilization regime.

Tariffs and Vietnam’s exports of Mach and Elec products to CPTPP partners

Mach and Elec is a vital sector greatly contributing to Vietnam’s economic growth and the trade liberalization mechanism in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has further enhanced our opportunities to boost exporting these products. Hence, in this paper, we made the first attempt to analyze the impact of tariffs on Vietnam’s export of Mach and Elec products to partners within CPTPP. This study utilized a modified gravity model and simultaneous quantile regression to analyze Vietnam’s export turnover of machinery and electronic products to 10 CPTPP member countries from 2005 to 2020 on different quantiles of the export distribution. The primary variable of interest was the applied tariffs (AHS). The results indicate that the most preferential tariff available still has a significantly detrimental impact on Vietnam’s export turnover. Also, exports of Mach and Elec products to larger markets in CPTPP tend to be more affected by tariffs than smaller ones. Our research findings have important implications for Vietnam enterprises and the government exporting machinery and electronic products to make the most of the preferential tariff under the CPTPP agreement.

Storm in a teacup: Empire products, blended teas, and origin marking debates in 1920s Britain

This article uses the origin marking of tea as a case study to examine contemporary debates on imperial preference and ‘soft’ trade protection. The case integrates three themes affecting the UK business environment during the 1920s: protectionism, imperial tariff preference, and consumer choice. We discuss the extent to which consumers’ tea purchases were influenced by proprietary brand, or geographical origin. Our analysis focuses on the legislative framework provided by the Merchandise Marks Act, 1926, mandating origin marking for specific imported foodstuffs. Contrary to the established view, we demonstrate how product quality in the supply chain of tea consumed in the UK was determined not by the producers (tea growers), but by the major UK-based blenders. We argue that UK consumers were unable to exercise any meaningful voluntary preference for empire teas. Our article reveals that the political idea of an ‘empire product’ did not always translate well into commercial reality.

Learning to Use Trade Preferences: A Firm and Transaction Level Analysis of the EU–South Korea FTA

Abstract This article examines imports by Swedish firms and the utilization of the tariff preferences offered by the EU–South Korea Free Trade Agreement. To benefit from tariff preferences, the importer must make a formal request to use the preferences and also document the origin of the imported products (with a certificate of origin provided by the foreign exporter). This may be costly, and some importers choose to pay import tariffs even when tariff preferences are available. Hence, the preferences are not fully utilized. Using a detailed firm–transaction level data set on Swedish imports from South Korea, we analyse the determinants of preference utilization and how firms learn to use preferences. The results show that preference utilization is strongly correlated with potential duty savings, which depend on the preference margin and the size of the import transaction. From a learning perspective, we find that preference utilization is closely related to the number of import transactions undertaken by the firm, suggesting a learning-by-doing mechanism. The length of time the firm has been involved in importing activities plays a smaller role.

한-미 FTA 특혜관세 활용의 결정요인을 위한 실증분석

Purpose: A regression model is designed to analyze the factors affecting utilization of preferential tariffs in FTAs. In particular, determinants of the utilization rate in Korea-US FTAs are empirically analyzed using the FTA barrier index.
 Research design, data, and methodology: This paper empirically analyzes the determinants of FTA utilization based on the research hypothesis that such utilization is determined by costs and benefits. A research model is designed using the FTA barrier index, especially in relation to measuring the strictness of rules of origin as estimated using the Ordinary Least Squares (OLS) model.
 Results: The analysis shows that the import utilization rate of the Korea-US FTA is affected positively by increases in import volume and preferential margins, but is affected negatively by increases in import prices.
 Conclusions: Clearly, strictness in the rules of origin has a negative impact on FTA utilization.

Развитие рыбохозяйственного комплекса России в рамках концепции «экономики потребления»

Modern aspects of the development of the country's fisheries complex are largely related to the processes of managing domestic demand. Based on the concept of “consumption economy” it is evidently formulated that the economic policy of stimulating fish consumption and fish products should be based on expanding the supply of their quantity, quality, assortment, taking into account the emerging solvent demand. It is shown that the global trend of consumption of fish and fish products directly depends on the level of income of the population. Russia is characterized by consumption at the level of middle-income countries. At the same time, it was found that the consumption of fish and seafood in Russia, unlike other types of food products, in the context of decile groups of the population remains unchanged, but with equal consumption volumes, its quality changes. In these conditions, the main limiting factor for the development of domestic consumption is effective demand, which has been declining in recent years. In turn, fish production and other fishing products made by Russian enterprises in recent years is analyzed, forming the supply of domestic fish products on the consumer market, showed a decrease in the profitability of assets of industry enterprises, the tax burden, which is directly related to the increase in cost (mainly of an inflationary nature) and a certain decrease in sales volumes. As measures to stimulate domestic consumption, it is proposed to use instruments of state support for the population with low incomes, subsidies, the establishment of preferential tariffs for transportation, as well as wider use of the system of state (municipal) ordering.

EVALUATING THE EFFECTS OF TRADE ON LAO PDR'S LDC GRADUATION

Lao PDR has achieved remarkable progress in terms of economic development, but it still faces many challenges to achieve its goal of graduation from LDC status by 2026. LDC graduation also comes with some challenges, including the phasing out of international support measures that are associated with LDC status, which will need to be addressed. The objectives of this paper are to identify lessons learned from other countries’ LDC graduation; analyze trade access to the market and expected impacts under LDC and evaluate the perceptions of private sectors on LDC graduation. The Export Potential Indicator was applied to evaluate potential products after graduation from LDC. As there are no changes in tariff preferences and huge export potential in Thailand, Vietnam, and China markets therefore the impact on exports after is expected to be minor. However, LDC graduation is projected to significantly impact exports to the European Union market.

Europe and Latin America: Analysis of the Effect of Trade Agreements on Exports

One of the leading commercial drivers applied in developing countries, especially in economies with conservative policies, is free trade agreements or tariff preferences with strategic economic zones worldwide. The countries of Latin America and the Caribbean are no exception. The United States is the region's leading trading partner; however, several countries have signed trade agreements with the European area in recent years. In this paper, we ask ourselves to what extent these agreements are beneficial. In addition, we evaluate the impact on exports with other world regions. Mainly, we analyze the effect of commercial firms in the European zone on the level of exports of the other partners, especially with the United States. The results consistently suggest that signing trade agreements with the European zone generates an export displacement effect. In other words, although the gross level of exports to the European zone increases, the level of exports to other regions of the world, especially to the United States, grows faster than other countries that do not even have agreements with the Europeans. Generally, exports do not have a statistically significant effect on signing trade agreements with the European zone.

Tariff rates in gravity

This paper considers the case where multiple tariff schemes (e.g. general and preferential schemes) are available between trading countries. We incorporate these tariffs into gravity equations and estimate them by the Pseudo-Poisson maximum likelihood technique. The results show that omitting either tariff type leads to significant estimates biases. If fixed effects to control other tariffs are not included in the model, both preferential and general tariffs are to be introduced in the gravity equation. Indeed, some estimation results for precision metals show that reducing both types of tariffs contributes to significantly increasing trade values. However, reducing general tariffs does not always have a trade-enhancing effect. In leather products, for example, its impact was insignificant. Nevertheless, the reduction of preferential tariffs was again found to increase trade values significantly.

Trade Preference Utilization Post-Brexit: The Role of Rules of Origin

AbstractThe degree to which firms make use of preferences in exporting to a partner country under a Free Trade Agreement will in good part depend on the restrictiveness of the underlying Rules of Origin (ROOs). Focusing on the post-Brexit Trade and Cooperation Agreement (TCA) signed by the United Kingdom and the European Union, we examine how access to zero preferential tariffs has been impacted by ROOs. We do so by constructing a ROO restrictiveness index which varies across products. We find that the TCA has an overall moderate degree of ROO restrictiveness. Using product-country level trade data, we find that preference utilization under the TCA has risen over time, and exhibits a positive correlation at the product level with the EU Common External Tariff. Regressions on the determinants of preference utilization indicate that more restrictive ROOs are associated with a lower degree of preference utilization by UK firms in the EU market and this effect is more evident for consumption goods. Preference utilization is also driven by the size of the preferential margin, the size of the trade flows, and the extent to which exports are undertaken by producers as opposed to distributors, as well as the degree of firms’ engagement in value chains.