Tariff Rate Modification under ASEAN-China FTA

Executive Order No. 487 implements the ASEAN–China Free Trade Area (ACFTA) commitment covering trade in goods by 2010 for ASEAN 6 and by 2015 for the newer ASEAN Member States.
The ACFTA framework is based on the Framework Agreement on Comprehensive Economic Cooperation (Framework Agreement) signed by ASEAN Member State Heads of Government/State and China on 4 November 2002 in Cambodia.
Executive Order No. 487 also implements the Agreement on Trade in Goods of the Framework Agreement, signed by the Economic Ministers on 29 November 2004 in Laos.
Section 402 of the Tariff and Customs Code of 1978 (PD 1464), as amended empowers the President, upon NEDA recommendation, to increase, reduce, or remove protective import duty rates and modify the form of duty.

Executive Order No. 487 carries out the commitment that Normal Track tariff lines under the Agreement on Trade in Goods are subject to gradual reduction and elimination of applied MFN tariff rates following the modalities in Annex 1.
The Normal Track tariff reduction schedule provides that (by 1 July 2005):
- applied MFN tariff rates above 20% are reduced to 20%;
- applied MFN tariff rates from 15% to 19% are set at 15%;
- applied MFN tariff rates from 10% to 14% are set at 10%;
- applied MFN tariff rates from 6% to 9% are reduced to 5%; and
- applied MFN tariff rates from 0% to 5% are maintained.
NEDA Board approval was granted during its meeting on 20 December 2005 for tariff reduction on 1,124 tariff lines in compliance with the modalities in the Agreement on Trade in Goods.

Section 1 subjects the articles specifically listed in Annex “A” (Articles Granted Tariff Concession Under the Normal Track of the ASEAN–China Free Trade Area) to ACFTA rates.
The listed articles are classified under Section 104 of the Tariff and Customs Code of 1978, as amended.
The ACFTA rates applied to those articles are the rates shown in Columns 4–7 of Annex “A.”
The ACFTA rates under Section 1 apply to imports coming from the parties of the Agreement on Trade in Goods that apply tariff concession to the same product under Article 3 of that Agreement.

Section 2 provides an automatic adjustment rule for Annex “A” articles.
If a subsequent change reduces the basic (MFN) Philippine rate of duty on any Annex “A” listed article to a rate lower than the rate prescribed in Columns 4–7 of Annex “A,” that article is automatically accorded the corresponding reduced duty.
The automatic reduction under Section 2 operates by tying the ACFTA duty to the lower of (a) the Annex “A” prescribed rate and (b) the later reduced MFN rate.

Section 3 imposes the ACFTA rates for Annex “A” articles starting from the order’s effectivity date.
Section 3 applies to articles that are entered into the Philippines or withdrawn from warehouses in the Philippines for consumption after the order becomes effective.
The imposed rates are the rates prescribed in Annex “A.”
Section 3 requires compliance with Rules of Origin under Article 5 of the Agreement on Trade in Goods of the Framework Agreement.

Section 4 revokes or modifies all presidential issuances, administrative rules and regulations, or parts thereof that are contrary to or inconsistent with Executive Order No. 487.

Section 5 states that Executive Order No. 487 takes effect immediately following its complete publication in two (2) newspapers of general circulation in the Philippines.
The publication requirement under Section 5 governs the start of tariff application for Annex “A” articles under Section 3.