28 July 2025
- The US and Indonesia agree on a Framework for an Agreement on Reciprocal Trade: Rebalancing global trade or ignoring WTO rules?
- Transshipment in ASEAN Member States under scrutiny: Singapore clarifies rules on preferential and non-preferential declarations of origin
- Switzerland’s new labelling requirements for animal-derived foods promote animal welfare and encourage transparency for consumers
- Recently adopted EU legislation
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The US and Indonesia agree on a Framework for an Agreement on Reciprocal Trade: Rebalancing global trade or ignoring WTO rules?
By Stella Nalwoga, Tobias Dolle, and Paolo R. Vergano
On 22 July 2025, the US Administration published a Joint Statement on Framework for United States-Indonesia Agreement on Reciprocal Trade, announcing that the US and Indonesia had agreed to a Framework for negotiating an Agreement on Reciprocal Trade (hereinafter, Framework Agreement). The Framework Agreement introduces strikingly unbalanced trade concessions whereby Indonesia would eliminate nearly all tariffs on US-origin goods, while the US would, on top of existing tariffs, impose an additional ‘reciprocal’ tariff of 19% on imports originating from Indonesia. Additionally, Indonesia would commit to address various non-tariff issues, such as recognising US standards for certain goods, easing local content and licensing requirements for US imports.
This article reviews the proposed key terms of the Framework Agreement, assesses their compatibility with the rules of the World Trade Organization (hereinafter, WTO), and analyses implications for businesses, as well as for governments currently negotiating trade agreements with the US.
Recounting the ‘liberation day’ tariffs
On 2 April 2025, invoking the US’ International Emergency Economic Powers Act of 1977, US President Donald Trump had signed an Executive Order imposing additional ‘reciprocal’ tariffs between 10% and 50% on US trading partners in order to “rebalance global trade flows”. More concretely, the Executive Order justifies the ‘reciprocal’ tariffs as a response to “large and persistent annual U.S. goods trade deficits”, which are attributed to a lack of reciprocity in trade relationships with trading partners, manifested in unequal tariff rates, non-tariff barriers, and foreign economic policies that affect demand or market access for US exports.
Originally scheduled to take effect on 9 April 2025, the ‘reciprocal’ tariffs were postponed twice, first to 9 July 2025 and, most recently, to 1 August 2025, in order to allow for trade negotiations to unfold. For Indonesia, the US Administration had originally announced an additional ‘reciprocal’ tariff of 32% on imports into the US originating from Indonesia via the Executive Order of 2 April 2025, and later in a ‘tariff letter’ of 7 July 2025.
Anticipating the Agreement on Reciprocal Trade
According to the Framework published on 22 July 2025, the future US-Indonesia Agreement on Reciprocal Trade would provide US and Indonesian exporters with “unprecedented access to each other’s markets” and would build on both countries’ “longstanding economic relationship”. According to the Framework Agreement, the US-Indonesia Agreement on Reciprocal Trade foresees commitments by Indonesia on: 1) Addressing its non-tariff measures regarding trade in goods; 2) Addressing its barriers on digital trade, services, and investment; 3) Protecting internationally recognised labour rights, inter alia by implementing “a prohibition on the importation of goods produced by forced or compulsory labour”; 4) Adopting and maintaining high levels of environmental protection and to effectively enforce its environmental laws; 5) Removing export controls on industrial commodities, including critical minerals. The Framework Agreement also notes that the US and Indonesia commit to “strengthening economic and national security cooperation to enhance supply chain resilience and innovation through complementary actions to address unfair trade practices of other countries, and through cooperation on export controls, investment security, and combatting duty evasion” and enumerates a number of commercial deals between US and Indonesian companies on the purchase of certain US goods.
With respect to the tariff-related measures, the US would impose an additional ‘reciprocal’ tariff of 19% on goods imported into the US originating from Indonesia, which would come on top of any existing tariff, while Indonesia would eliminate approximately 99% of its tariffs on industrial and agri-food products of US origin. The Framework Agreement further provides that the US may reduce reciprocal tariffs on commodities that are not naturally available or produced domestically. In that regard, on 23 July 2025, Indonesia’s Minister of Trade, Budi Santoso stated that the Government of Indonesia was currently negotiating with the US to achieve duty-free market access for crude palm oil, cocoa, and coffee, which are not produced in the US. To ensure that the benefits of the future Agreement accrue primarily to goods originating from the US and Indonesia, the parties committed to negotiating “facilitative rules of origin”.
With respect to non-tariff measures, Indonesia would provide a wide range of concessions to the US in certain “priority areas”. Regarding local content requirements, Indonesia would exempt “US companies and originating goods from local content requirements”. With respect to import licensing requirements, Indonesia would exempt “U.S. food and agricultural products from all import licensing regimes”. With respect to technical barriers to trade, Indonesia reportedly committed to “Accepting FDA certificates and prior marketing authorizations for medical devices and pharmaceuticals”; “Removing certain labeling requirements”; and “Addressing U.S. concerns with conformity assessment procedures”. With respect to sanitary and phytosanitary measures, Indonesia reportedly committed to “Recognizing U.S. regulatory oversight, including listing of all U.S. meat, poultry, and dairy facilities and accepting certificates issued by U.S. regulatory authorities”. It remains to be seen if and how Indonesia will actually address these trade irritants, which have been problematic for many of Indonesia’s trading partners and have led to specific trade concerns being raised in the relevant WTO Committees.
Addressing Indonesia’s non-tariff measures, some of which appear to constitute non-tariff barriers that are likely illegal under WTO rules, could be highly beneficial for all WTO Members. Whether other trading partners would also benefit from any trade facilitative measures will depend on the legal architecture and the implementation of the future US-Indonesia Agreement on Reciprocal Trade and should be closely monitored by trading partners.
Questionable WTO compatibility
The starting point of the future US-Indonesia Agreement on Reciprocal Trade was the announced imposition of additional ‘reciprocal’ tariffs by the US, which are not only inconsistent with the relevant WTO rules for exceeding the US’ bound tariff-rates, and for discriminating between countries contrary to the WTO’s non-discrimination principle (see Trade Perspectives, Issue No. 7 of 7 April 2025), but also currently under litigation domestically in the US for being potentially unconstitutional.
To achieve WTO-consistency, any free-trade area agreed by two or more WTO Members must conform with Article XXIV of the WTO General Agreement on Tariffs and Trade (hereinafter, GATT) 1994. If the future US-Indonesia Agreement on Reciprocal Trade were to contain preferential terms of market access to each other’s territories in ways that would not be extended to other WTO Members, such bilateral agreement would have to cover substantially all the trade between the US and Indonesia, as required under Article XXIV (8)(b) of the GATT in order to qualify as a free-trade area. While there is no official WTO interpretation of ‘substantially all trade’, it is generally considered as liberalising at least 90% of the total value of trade among the parties.
The Framework Agreement suggests that the future Agreement would be based on significant asymmetry, whereby Indonesia would liberalise nearly all tariffs and several non-tariff barriers, yet the US would merely reduce a WTO-inconsistent unilateral additional tariff from 32% to 19%. While the US might also reduce tariffs on select goods not produced domestically, that concession appears to be limited in scope and does not appear to match the breadth of Indonesia’s liberalisation commitments. Furthermore, if the future Agreement does not establish a free-trade area within the meaning of Article XXIV of the GATT, the implementation of Indonesia’s commitments on tariff and non-tariff measures exclusively for benefit of the US would violate the WTO’s non-discrimination principle under Article I:1 of the GATT. Thus, in theory, requiring Indonesia and the US to extend those benefits to all WTO Members.
Setting a precedent for other tariff and trade negotiations?
The US-Indonesia Framework Agreement joins a growing list of similar arrangements limited in scope, as already notionally concluded by the US with China, Japan, the Philippines, the UK, and Viet Nam. For other US trading partners, the Framework Agreement could provide guiding principles on what to expect from the US Administration and/or what to offer the US during the trade negotiations.
The Joint Statement underscores that the US and Indonesia would “negotiate and finalize the Agreement on Reciprocal Trade” in the coming weeks, with a view to preparing it for signature and completing the necessary “domestic formalities in advance of the Agreement entering into force”.
As negotiations proceed between the US and Indonesia, as well as with other trading partners, interested stakeholders should monitor developments closely and actively participate in any consultations. Governments currently negotiating trade agreements with the US should carefully consider any agreements already agreed, as well as their compatibility with WTO rules.
For any additional information or legal advice on this matter, please contact Paolo R. Vergano
Transshipment in ASEAN Member States under scrutiny: Singapore clarifies rules on preferential and non-preferential declarations of origin
By Joanna Christy, Caitlynn Nadya, and Paolo R. Vergano
On 9 June 2025, Singapore Customs issued Circular No. 06/2025 on Accurate Declaration of “Country/Region of Origin” Field in Import, Export and Transshipment Permits. The Circular reminds all traders and declaring agents of the importance of accurately declaring the “Country/Region of Origin” in all import, export, and transshipment permit applications, and reiterates existing rules on the application of both preferential and non-preferential rules of origin for goods imported into, exported from, or transshipped through Singapore. The Circular was issued due to the increased scrutiny by the US on the Member States of the Association of Southeast Asian Nations (hereinafter, ASEAN) for allegedly being used as transshipment hubs, notably for goods from China.
This article discusses the contents of the Circular, analyses the broader context of transshipment-related scrutiny across ASEAN Member States, and highlights the legal and commercial implications for businesses operating in the region.
Growing trend in transshipments
Rules of origin refer to the legal framework used to determine the “nationality” of goods to apply trade measures, such as preferential duties, quotas, and anti-circumvention duties. A certificate of origin is the key document in international trade that certifies a product’s country of origin.
Circumvention through third-country transshipment occurs when goods are routed through an intermediary country where they only undergo minimal processing or repackaging, and are subsequently re-exported with a new certificate of origin. This practice can falsely present the goods as originating from the transit country, typically allowing them to benefit from preferential tariffs.
Such conduct undermines the integrity of trade policy and poses significant challenges to Customs enforcement, particularly when used to evade trade sanctions or (additional) tariffs. Under the applicable rules of origin, in very simple terms, only goods that have been “wholly obtained” in one country, or goods that have been “sufficiently worked or processed” (i.e., ‘transformed’) in a third country, are considered as originating in that country.
Singapore’s Circular No. 06/2025
In response to mounting concerns over transshipments, Singapore Customs recently issued Circular No. 06/2025. Although circulars have no legal effect, they provide detailed explanations of existing laws and serve as guidance for businesses. In this case, the Circular restates that traders and declaring agents are allowed to declare “Singapore” as the “Country/Region of Origin” in two ways.
Firstly, by meeting the rules of origin requirements under various Preferential Trade Agreements (hereinafter, PTAs), which are further explained in the Handbook on Rules of Origin for Preferential Certificates of Origin compiled by Singapore Customs. The Handbook provides general information to help traders and declaring agents understand the rules of origin applicable under different PTAs.
Secondly, by following Singapore’s non-preferential rules of origin. Goods must either be “wholly obtained” in Singapore or must have undergone “substantial transformation” in Singapore. Such ‘substantial transformation’ is only met if the goods contain at least 25% local content based on the ex-factory price (i.e., the price of goods at the manufacturer’s facility), have attained a change in Tariff Classification at the 6-digit level, or have undergone a chemical reaction, for products classified under HS Chapters 27 to 40. Any goods with only minimal processing occurring in Singapore, such as simply mixing products or simply assembling product parts, do not qualify as originating in Singapore.
Incorrect declarations by traders and declaring agents may amount to an offence under Section 128 of Singapore’s Customs Act 1960 and Section 28 of Singapore’s Regulation of Imports and Exports Act 1995. Such offences may result in penalties, ranging from Notices of Advisory (i.e., documents informing traders and declaring agents about trade compliance and the importance of accurate declarations), composition sums, to prosecution in court. This shows Singapore’s commitment to “firm and decisive action” against any breach of its laws in order to protect its business environment. As of now, only Viet Nam has responded to Singapore’s Circular. The Viet Nam Trade Office in Singapore has urged all Vietnamese traders and declaring agents that trade with Singapore to comply with Singapore’s Circular.
Growing scrutiny by the US Administration on ASEAN Member States
Growing scrutiny has been placed by the US on certain ASEAN Member States, which the US Administration under US President Donald Trump has increasingly portrayed as transshipment hubs for Chinese goods seeking to evade US additional tariffs. In this context, US President Trump had explicitly singled out Viet Nam, Thailand, and Malaysia. Notably, the US alleged that Chinese goods were shipped to ASEAN countries, and then labeled as, for instance, “Made in Viet Nam”, before being re-exported to the US, indicating Viet Nam as the country of origin. The US is also taking more concrete actions and the issue of transshipment has emerged as a key element in the ongoing tariff negotiations between the US and third countries.
Other ASEAN Member States, aside from Singapore, have also taken measures to address the US’ concerns on transshipments. For instance, in May 2025, Thailand announced that it would take measures to strengthen inspections for transshipments, as well as conduct enhanced monitoring for any risk of circumvention. Also in May 2025, Malaysia announced that non-preferential certificates of origin for shipments to the US would only be issued by the Ministry of Investment, Trade and Industry, consequently stopping the issuance of the certificates from chambers of commerce or trade associations to assume stricter control (see Trade Perspectives, Issue No. 10 of 19 May 2025). Singapore’s recent Circular indicates that ASEAN Member States continue taking measures to address US’ concerns.
Rules of origin in the tariff agreements being negotiated by the US
US President Trump recently warned that higher duties would apply to goods that are alleged to be “transshipped”’ through a third country and then re-exported to the US. Additional tariffs would be imposed on top of the “reciprocal” tariff rates agreed between the US and a respective trading partner. For instance, in the Agreement with Viet Nam, on top of the 20% “reciprocal” tariffs, the US has included a provision allowing for an additional 40% tariff on goods transshipped from third countries and traded as originating from Viet Nam.
To provide certainty for traders, it is important to have clarity over the rules on transshipment and their application, notably regarding the conditions under which a product would be subject to the higher “transshipment” tariffs. Therefore, ASEAN Member States could consider negotiating specific rules and procedures under their respective agreements with the US.
Implications for exporters
Due to these growing concerns over transshipment, ASEAN traders should exercise additional caution when exporting to the US and ensure that their exports are not subject to the additional tariffs. Companies should ensure full compliance with both their country’s domestic rules of origin requirements and the US’ rules of origin and import documentation requirements, as well as monitor any enforcement developments or policy shifts that may affect their trade into the US.
For any additional information or legal advice on this matter, please contact Paolo R. Vergano
Switzerland’s new labelling requirements for animal-derived foods promote animal welfare and encourage transparency for consumers
By Amanda Carlota, Ignacio Carreño García, and Tobias Dolle
On 28 May 2025, Switzerland’s Federal Council adopted amendments to Switzerland’s Foodstuffs and Utility Articles Ordinance (Lebensmittel- und Gebrauchsgegenständeverordnung, or LGV) and Switzerland’s Food Information Ordinance (Verordnung betreffend die Information über Lebensmittel, or LIV), requiring the labelling on the packaging of animal-derived foods to indicate whether the foods were produced using painful procedures without the animals being anaesthetised beforehand. With this new requirement, the Swiss Federal Council’s aims are two-fold: 1) Increasing transparency for consumers on production methods; and 2) Supporting Swiss farmers, which follow some of the world’s strictest animal welfare rules.
This article provides an overview of the new requirements and examines their compatibility with international trade law, then discusses a proposal in the EU to widen the scope of EU animal welfare legislation.
Food produced using pain-causing procedures must be identified as such
Article 36(1) of the Foodstuffs and Utility Articles Ordinance, as amended, on ‘Pre-packaged food’ requires pre-packaged food of animal origin, which was produced using certain pain-causing production methods, to indicate it on the packaging’s labelling. Annex 2 to the Ordinance identifies the covered foods and production methods, as well as the corresponding label that must be used on their packaging, as follows:
| Food | Production method | Label |
| Beef | Dehorning without castration, without pain elimination | “Produced with pain-causing procedures without eliminating pain”. |
| Pork | Docking of the tail, clamping of the teeth, or castration without pain elimination | |
| Chicken and turkey meat | Coupling of the beak without eliminating pain | |
| Frog legs | Separation of frog legs without anaesthesia | |
| foie gras | Force-feeding of geese or ducks | “Obtained from force-fed geese” or “Obtained from force-fed ducks”. |
| Cow milk | Dehorning without pain elimination | “Produced with pain-causing procedures without eliminating pain”. |
| Eggs from domestic chickens | Coupling of the beak without eliminating pain |
The labelling obligations apply to “anyone who dispenses” the covered foods in Switzerland, from restaurants to retail outlets, and will impact both local producers and imported goods.
Labelling requirements are technical regulations and should not restrict trade
Mandatory labelling requirements are considered “technical regulations” within the meaning of the World Trade Organization’s (hereinafter, WTO) Agreement on Technical Barriers to Trade (hereinafter, TBT Agreement). Under the TBT Agreement, WTO Members have the obligation to notify other WTO Members about draft measures that may have a significant effect on trade, allowing other WTO Members to comment. Article 2.2 of the TBT Agreement requires WTO Members to ensure that technical regulations “are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade”.
Switzerland’s new food labelling requirements would require food producers based outside of Switzerland to create labels specifically for the products they intend to export to Switzerland, be it frog legs from Indonesia or foie gras from France, which can create additional burdens for producers and traders. In the event that other WTO Members were to challenge the measure at the WTO and establish a prima facie case of non-compliance with the TBT Agreement, Switzerland would, inter alia, have to demonstrate that the labelling requirements are not “more trade-restrictive than necessary to fulfil a legitimate objective”. Such legitimate objectives include, inter alia, the prevention of deceptive practices; and the protection of human health or safety, animal or plant life or health, or the environment.
Article 2.4 of the TBT Agreement obliges WTO Members to use relevant international standards, guides or recommendations as a basis for their measures wherever possible. Switzerland notified the draft measure amending the Ordinance on Foodstuffs and Utility Articles on 12 April 2024 to the WTO’s Committee on Technical Barriers to Trade. The notification states that “The proposal provides for mandatory labelling of animal products that are produced using pain-causing procedures without analgesia. The guiding principles of the World Organisation for Animal Health (WOAH) in the area of animal welfare are used as a benchmark for the labelling requirement”. With respect to animal welfare and animal rights, Article 7.1.2. of the WOAH Guiding Principles for Animal Welfare states, in relevant part, “1) That there is a critical relationship between animal health and animal welfare. 2) That the internationally recognised ’five freedoms’ (freedom from hunger, thirst and malnutrition; freedom from fear and distress; freedom from physical and thermal discomfort; freedom from pain, injury and disease; and freedom to express normal patterns of behaviour) provide valuable guidance in animal welfare”. The WOAH Guiding Principles for Animal Welfare do not appear to establish requirements for the labelling of animal products. On 17 January 2025, Switzerland notified the measure as later adopted. In case of a challenge, it would need to be further analysed whether labelling requirements may be established, using the WOAH Guiding Principles for Animal Welfare, “as benchmark”, as indicated by Switzerland.
Mixed reactions from the industry
Media reports indicated mixed reactions from the farming and food industry, as well as from retailers and importers. Concerns included the heavier compliance burden placed on smaller businesses and restaurants, the difficulty in tracing the exact rearing conditions of animals, and possible discrimination against imported foods produced under different animal welfare standards. On the other hand, the Swiss Farmers’ Union (Schweizer Bauernverband) considers that the new rules would enable Swiss farmers to better compete with foreign producers operating under less stringent animal welfare regulations. For instance, force-feeding has been banned in Switzerland for more than 40 years, but is still permitted in several EU Member States and third countries for foie gras production.
The new rules may incentivise foreign producers to adopt pain-free production methods to avoid being negatively branded in Switzerland. Eurogroup for Animals, a non-governmental organisation that represents more than one hundred animal protection organisations in Europe, stated that the new rules could“significantly influence consumer behaviour and the animal products industry”, adding that recent data showed that consumers “care deeply about animal welfare” and that, “when given transparent information, such as whether animals were subjected to painful procedures without anaesthesia, people are more likely to make informed and ethical purchasing decisions”.
Review of EU animal welfare legislation
There has also been increasing interest within the EU to promote animal welfare. From 18 June to 16 July 2025, the European Commission asked citizens, businesses, non-governmental organisations, and other interested parties to give their inputs on the revision of the EU’s animal welfare legislation through a Call for Evidence, and received feedback from 768 stakeholders.
This revision of the EU’s animal welfare legislation will take place in the context of the Vision for Agriculture and Food, in which the Commission committed to closely exchanging with farmers, the food supply sector and civil society, on the issue of animal welfare. The Commission plans to present its first proposal to revise existing EU legislation for on-farm animal welfare in 2026. The Commission will also follow-up on its commitment to phase out cages for certain categories of animals, as called for in the Citizens’ Initiative “End the Cage Age”.
Outlook
The new Swiss labelling requirements went into effect on 1 July 2025. However, Article 95d of the amended Foodstuffs and Utility Articles Ordinance provides for a two-year transition period, during which “Food that does not comply with the amendment of 28 May 2025 may still be imported, produced and labelled under the previous law until 30 June 2027 and may still be sold to consumers until stocks are reduced”. In the meantime, businesses must start self-monitoring in order to determine whether their products are covered by the new requirements, and if necessary, begin implementing the labelling scheme.
For any additional information or legal advice on this matter, please contact Ignacio Carreño Garcia
Recently adopted EU legislation
Market Access
Customs Law
Trade Remedies
Food Law
Amanda Carlota, Ignacio Carreño García, Tobias Dolle, Joanna Christry, Caitlynn Nadya, Stella Nalwoga, and Paolo R. Vergano contributed to this issue.
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