Ratification of the Regional Global Economic Partnership Contract (RCEP)

In short

On August 30, 2022, the Indonesian House of Representatives agreed to pass legislation ratifying the Regional Comprehensive Economic Partnership (RCEP), the largest regional free trade agreement outside the World Trade Organization – involving 10 countries from ASEAN and five non-ASEAN countries, namely China, New Zealand, Australia, Japan and South Korea. With the passage of this law, which has yet to be signed into law by the President, RCEP is expected to come into force for Indonesia, possibly before the end of the year.

RCEP is more than just a free trade agreement limited to trade in goods and services. On the contrary, its 20 chapters also cover investment, intellectual property, e-commerce, competition, government procurement and dispute settlement. As it will soon be implemented in Indonesia, companies should consider whether they can take advantage of the benefits offered by this agreement.

RCEP Ratification Timeline Update

RCEP actually entered into force for participating member states that deposited their instrument of ratification 60 days after the date on which at least six ASEAN member states and three non-ASEAN member states have ratified RCEP. On January 1, 2022, it entered into force for the first ratifying members Singapore, Brunei, Thailand, Lao PDR, Cambodia and Vietnam (all ASEAN member states), China, Japan, New Zealand and Australia (non-ASEAN member states). Indonesia’s ratification has been delayed due to its focus on more pressing domestic issues. Subsequently, Malaysia and South Korea also ratified this agreement, leaving Myanmar and the Philippines as the two participating member states that have yet to ratify RCEP.

What should companies do to prepare for RCEP?

As we eagerly await the implementation of RCEP in Indonesia, companies should consider whether they are able to take advantage of the benefits offered by RCEP, including those listed below. Also in certain areas such as competition policy and consumer protection, they should expect greater harmonization of laws and greater cooperation between competent authorities in the Member States, which may present compliance challenges. for their operations in the Member States:

  • Tariff Planning and Mitigation: RCEP aims to reduce or eliminate customs duties imposed by each member state on originating goods by approximately 92% over 20 years. In particular, companies whose supply chains involve Japan, China and South Korea may note that RCEP establishes a free trade relationship between the three nations for the first time.
  • Further optimization of the supply chain: As RCEP consolidates members of existing ASEAN+1 agreements with the five non-ASEAN states, this will facilitate compliance with regional value content requirements through the stacking rule. Thus, companies can benefit from greater sourcing options as well as greater flexibility in optimizing their manufacturing processes across the 15 Member States.
  • Non-tariff measures: Non-tariff measures on imports or exports between member states are prohibited under RCEP, except in accordance with rights and obligations under the WTO Agreement or RCEP. Quantitative restrictions made effective through quotas or licenses should generally be removed.
  • Trade facilitation: RCEP stipulates trade facilitation and transparency measures, including procedures for approved exporters to make declarations of origin; transparency of import, export and licensing procedures; issuance of advance rulings; fast customs clearance and expedited clearance of express shipments; use of IT infrastructure to support customs operations; and trade facilitation measures for licensed operators. For trade between certain countries, greater trade facilitation can be expected as RCEP introduces the possibility to self-certify the origin of goods through an origin declaration, as the self – certification may not be available under some ASEAN+1 agreements (eg ASEAN-China FTA).
  • Competition and consumer protection: The RCEP provides for the exchange of information between the competition authorities of the Member States and enables the coordination of the enforcement measures taken by them. This chapter also provides for technical cooperation to increase competition law enforcement capacity. Cooperation is also foreseen for matters of common interest relating to consumer protection.
  • E-commerce: Stipulates that the parties will adopt or maintain a legal framework conducive to electronic commerce, including the adoption of laws to protect data privacy and electronic commerce consumers. The parties also agree not to impose customs duties for electronic transmissions.

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