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June 30, 2018

JICA's cooperation with Royal Malaysia Customs Department to support Malaysia's trade facilitation

Since 2006, JICA has continuously dispatched experts to Royal Malaysia Customs Department (RMCD) and cooperated mainly on the theme of "risk management" and "trade facilitation".

Trade Facilitation and Rules of Origin

Bilateral or multilateral economic partnership agreements (EPAs) and free trade agreements (FTAs) are now concluded in many countries of the world. When exporting the originating goods prescribed by each agreement, you can export under advantageous conditions such as receiving a lower tariff rate than the custom duty that is normally applied. Meanwhile, the customs office of the importing country needs a procedure to confirm whether it is a true originating product.

The rule that determines the nationality of origin of goods is called "Rule of Origin" (Note). Unless this rule is operated in a unified procedure with accurate knowledge in both the exporting country and the importing country, the exporting country cannot enjoy the benefits prescribed by the agreement. That will make it difficult to expand the transactions of goods and services aimed at by the agreement.

While Malaysia has already concluded 14 FTAs, the Malaysian Customs did not have a specialized department responsible for operating that rule. Under such circumstances, JICA has been implemented "Project for Enhancing Transparency and Predictability of Preferential Rules of Origin on EPA/FTAs in Customs Clearance" since June 2015, aiming at improving the system for reliable and prompt application of this Rules of Origin and improving the capacity of customs officials. The final joint coordination committee of the project was held on 5 June, 2018, where the outcome of the three-year project was confirmed by both Malaysia and Japan.

More than 500 custom officers in Malaysian Customs were trained on Rules of Origin

Together with drafting of regulations and guidelines related to the Rules of Origin, the Project has strengthened the capacity of the Unit of Rules of Origin that was established within Malaysia Customs. In addition, in order to execute accurate and speedy procedures based on international custom rules, training was carried out to continuously update the knowledge and maintain capacity of assessment officers mainly in State Customs.

Apart from internal training by RMCD, training was conducted in Japan as well as lectures by inviting lecturers from Japan. As a result, more than 500 officers from RMCD headquarters and State Customs have participated in the training. The project also conducted Training of Trainers that created a system which allows autonomous training in each state.

According to the questionnaire surveyed by the Unit every year, knowledge on the Rules of Origin has been significantly improved compared to the one before the project started. It was reported that the quality of assessment of the certificate of Rules of Origin is also improved.

Mechanism for sustainable training implementation

Even there is sufficient training during the project period, there will be no meaning if that movement stops after the end of cooperation. RMCD plans to set a training course of Rules of Origin in the curriculum of RMCD training Customs Academy (AKMAL), and the project produced the teaching materials. In order to maintain the capacity of over 13 thousand custom officers, it is very important to build a system to continuously conduct training in this way even after the end of cooperation.

The birth of the first Malaysian Pre-Accredited Expert of WCO (World Customs Organization) in the field of Rules of Origin

In January 2018, one of the officers of the Unit participated in the WCO certification expert workshop of the Rules of Origin and won the prestigious Pre-Accredited Expert qualification. In future, if she delivers the lectures at WCO training successfully, she will be officially certified as Accredited Expert. WCO certified expert in this field was the first in Malaysia. Together with the above-mentioned training at AKMAL, she will hold the key to the autonomous operation of the project outcome after the completion of cooperation.

Information provision to Japanese companies in Malaysia

Japanese companies that operate in Malaysia also have a high interest in the rules of origin as to what kind of items are subject to preferential tariffs and how to export under advantageous conditions in dealing with Malaysia and other ASEAN countries. Received requests from Japanese companies through JETRO Kuala Lumpur, expert Masaya Deguchi, a chief advisor of the project, gave a lecture on Rules of Origin at the Japanese Chamber of Trade and Industry in Malaysia (JACTIM).

Although the project ended at the end of June 2018, an advisor has been dispatched to RMCD from the following month to improve other compulsory systems of the trade facilitation agreement in Malaysia.

* Rules of Origin

"Rules of origin" is a set of rules to determine the nationality or country of origin of goods.

Determination of the country of origin of goods is necessary in application of various customs and trade policy measures, because the application of such measures may depend on the origin of a good.

In trade agreements such as FTA (Free Trade Agreement) and EPA (Economic Partnership Agreement), preferential tax rates are applied only to goods recognized as the origin of each agreement. Each Agreement has rules of origin which defines the criteria for a good to be considered originating under the EPA and provides the procedures to declare or prove that the good is an originating good.

(Source: Japan Customs Website "Overview of Rules of Origin").

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