Lao PDR Takes Progressive Measures to Promote Foreign Trade

With Lao PDR acceding to the World Trade Organization (“WTO”) in 2013 and subsequently ratifying the Trade Facilitation Agreement (“TFA”), which came into force in February 2017, the Lao government has been busy formulating and enacting legislations to meets its WTO commitments and to improve the ease of doing business despite the prevailing challenges, notably foreign investment restrictions in certain sectors, high logistics cost and regulatory uncertainties. In the recently concluded First Trade Policy Review of the Lao PDR, in November 2019, the WTO member states commended the Lao PDR’s efforts to open its economy further to foreign trade and appreciated the overall changes by the Lao PDR to implement its WTO bound tariff ceiling level, which has made the import regime predictable to a certain extent, although the Lao government has continued to apply customs tariff higher than the bound tariff for certain commodity lines as pointed out by some of the member states during the review meeting. In general, the outcome of the First Trade Policy Review of the Lao PDR was positive as WTO remains optimistic about the Lao PDR’s efforts to graduate from the Least Developed Country (LDC) bracket.

In order to implement its TFA commitments in a time-bound manner, the Lao PDR has adopted a comprehensive trade facilitation road map (2017-2022), which aims at full implementation of TFA measures, reducing the time taken for completing the regulatory formalities by 50% and the documentation for exports imports by 30%. Apart from WTO commitments, Lao PDR is also a signatory to the regional trade facilitation agreements: the ASEAN Free Trade Area Agreement (“AFTA”) and the ASEAN Trade in Goods Agreement (“ATIGA”).

The ATIGA replaces the Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for AFTA and defines the Rules of Origin (ROO), which define new provisions for preferential tariff treatment between ASEAN member states, requiring a Certificate of Origin, which in the Lao PDR, must be obtained from the Lao National Chamber of Commerce and Industry (LNCCI) each time. Since then, however, the ASEAN-Wide Self-Certification (AWSC) scheme has taken effect as a protocol to the ATIGA, enabling certified exporters (CEs) to self-certify the origins of their goods by simply presenting an Origin Declaration, containing certain details concerning their exports, so as to streamline the procedure. The Lao PDR recently promulgated Decision 1206/IC.DIMEX on the Self-Certification of Origin under the ATIGA, which details how to become a CE in the country, specifying the various requirements, such as being an exporter which conforms to the laws of the Lao PDR, possessing experience in the exportation of goods, and having a clean history concerning certifications of origin.

Additionally, the Lao government is presently considering the WTO proposal to become a member of Information Technology Agreements (“ITA”) 1 and 2; if ratified, it will help with boosting the trade and digital connectivity in the Lao PDR, as ITA aims at eliminating tariff on ICT goods which will make digital connectivity more affordable for domestic consumers and improve IT infrastructure, a key indicator of a country’s economic development.

Furthermore, the Lao National Single Window System (LNSW) is now in operation, Decision on Trading Rights No. 623/MOIC.DIMEX has been issued, which will facilitate the importation of goods by foreign entities, and AEO accreditation is now enshrined in the new Law on Customs, facilitating customs procedures for those who meet the criteria. We will be taking a more detailed look into these in our upcoming articles.

For more information on this development, or for any other queries about trading in Laos, please contact VDB Loi Laos office: Daodeuane Duangdara ([email protected]), Sornpheth Douangdy ([email protected]).