The Chemicals industry has undergone a vast restructuring over the last few decades as many chemicals manufacturing facilities shifted from Europe to Asia, drawn by economic growth and market opportunities. Today, Asian chemical production surpasses that of the rest of the world and in 2012 China was by far the biggest chemicals producer globally.
However, companies that are looking to capitalise on the growth of Asia’s economy and its chemical industry must be cognizant of the potential obstacles in their path – including the prevalence of tight border controls and extensive regulation in most Asian countries, which may be inconsistent in both level and approach. Such controls and regulations, if not managed adequately, can quickly build up to a potential supply chain show stopper and typically include:
Whether and to what extent these requirements apply to a particular chemical product is usually dependent on the classification of the chemical product. As if there are not already enough types of chemical product, their classification is subject to a number of different systems. These include the Globally Harmonized System of Classification and Labelling of Chemicals (GHS), the International Convention on the Harmonized Description and Coding System (HS Code), and country specific systems of classification for domestic purposes. Classification of chemicals requires detailed specialist knowledge in many instances.
We have many years of experience assisting chemical manufacturers, importers and exporters, particularly in the field of regulatory controls. Our services to the industry include assistance in:
A chemical manufacturing company sourced a particular raw material from various countries. The raw materials were stored in the same tank regardless of the country of origin. Post processing, the company was interested in using a particular Free Trade Agreement (FTA) to apply preferential duty for the exported finished product. However the origin of the raw materials could not be easily identified once they were stored in bulk and therefore final origin could not be verified for the purposes of the FTA. The company had planned to use an accounting segregation method that uses the average originating raw materials as the basis for the calculation of the regional value content.
How we helped
WMS conducted a review of the manufacturing processes and the accounting segregation method. Our review and recommendations included:
Benefit for the client
The chemical manufacturing company now has a supportable accounting segregation methodology and is able to apply for the certificate of origin to claim for tariff preferences in the importing country.
Managing Partner, PwC Asia Pacific Customs and Trade
Tel: +65 9750 7745