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  jata  Malaysia's Free Trade Agreements

 
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Questions On ASEAN - India FTA (AIFTA)

The ASEAN-India Free Trade Agreement came into force on 1 January 2010 for Malaysia and India. This is an important agreement for Malaysia as India is emerging as an important trading partner as well as a market for Malaysian exports. This FTA creates a market of 1.7 billion people with combined GDP of US$2.8 trillion and combined global trade of over US$2 trillion. 

What are the main elements of the ASEAN-India FTA?

Under the AIFTA, ASEAN Member States and India have agreed to progressively reduce and eliminate duties on substantial number of products over a period of 3-8 years beginning 1 January 2010. The Philippines, Cambodia, Lao PDR, Myanmar and Viet Nam are given an additional 2-3 years to reduce and eliminate their duties under this FTA

The commitment undertaken by Malaysia in the AIFTA is to eliminate import duties on 6,792 products or tariff lines by 31 December 2013. Duties on another 1,266 tariff lines would be eliminated by 31 December 2016. The import duties on 1,336 tariff lines which are considered to be products where domestic industries require some level of protection will be reduced to 5 per cent by 31 December 2016.  The gradual reduction and elimination of duties are also to allow domestic industries sufficient time to adjust to increased competition.  

On her part, India will undertake to eliminate import duties on 7,767 tariff lines or products by 31 December 2013 and 1,260 tariff lines by 31 December 2016. The import duties on 1,810 tariff lines will be reduced to 5 per cent by 31 December 2016.

Overall, by the end of 2013, 71 percent of products exported to India will be able to enter the market duty free and another 10 per cent of products by 2016. In addition, duties on another 10 per cent of products will be reduced to 5 per cent.

This import duty elimination and reduction over the next 3-8 years will open market for Malaysian exports to India.

 

What are the products excluded by both Malaysia and India under the ASEAN-India FTA?

In the FTA negotiations, both ASEAN and India have agreed to allow between 7-9 per cent of tariff lines or products to be excluded from tariff reduction commitments, taking into account the level of development of these products in their respective countries.

Malaysia excluded 898 tariff lines from tariff concessions. The products excluded are selected poultry products, tropical fruits and rice, iron and steel, automotive products, chemicals, alcoholic beverages; tobacco and tobacco products, and used tyres.  These products are excluded based on intensive consultations held with the domestic industries which need longer time frame to enhance their competitiveness vis-a-vis India.  

The products excluded from concessions by India are mainly agricultural products, textiles, iron and steel, automotive and ceramic tiles and this involves a total of 1,298 tariff lines.  

However, these products are not excluded on a permanent basis but are subject to future review as provided for under the ASEAN-India Free Trade Agreement.

What are the conditions exporters need to fulfill to enjoy the preferential tariff?

Compliance to Rules of Origin (ROO) is important in exporting products under the preferential trading arrangements. To qualify for preferential tariffs under ASEAN-India FTA, exporters must meet two conditions: Regional Value Content (RVC) 35% + Change in Tariff Sub-Heading (CTSH).

In other words, to qualify for the preferential tariffs under the AIFTA, exporters must have at least 35 per cent regional value content or originating materials plus the product must have undergone some form of processing at the final point of exports.

RVC is calculated as follows:

RVC =

FOB price  minus  non-originating productsX 100
FOB price

RVC

RM200 – RM123  X 100   =  38.5%
RM200

The originating product accounts for 38.5 %.

In addition to meeting the RVC, the product must have undergone change in tariff sub-heading. For example:

Tariff Heading

Tariff Sub- Heading (CTSH)

Product Description

Rules of Origin

HS8467

HS8467 11

Pneumatic rotary type (tools)

RVC 38.5 + CTSH

This 6-digit subheading for pneumatic rotary type (tools) is HS8467 11. However, in the processing to manufacture this product, other parts of products falling under HS8467 92 and HS8467 99 may have been used. Thus at the 6 digit level there is change from 8467 92 and HS8467 99 to become HS8467 11

Malaysian exporters can benefit from preferential tariff on all products provided it is not in the Exclusion List of India and importers can benefit from preferential tariffs provided the products are not on the Malaysian Exclusion List.

How can Malaysian exporters apply the Certificate of Origin (CO)?

Steps:

a) Obtain the ASEAN Harmonised Tariff Nomenclature (AHTN) or Harmonised System (HS) code from the Royal Customs of Malaysia for your product as well as every product and raw material used.

b) Check your product's eligibility under AIFTA based on India's schedules of tariff elimination/reduction.

c) Product for export must fulfill the condition of the rules of origin under AIFTA.

d) Download/get the Cost Analysis Application Forms i.e. BAK 1(a), BAK 1(b) and BAK 1(c). The forms can be obtained from:

i. MITI Website

ii. Service Counter (Ground Floor), Block 10, MITI, Government Offices Complex, Jalan Duta, 50622 Kuala Lumpur

iii. MITI's branch offices in respective states.

e) Completed Cost Analysis application forms must be submitted to:

Ministry of International Trade and Industry (MITI)
Trade Cooperation and Industry Coordination Section
Ground Floor, (Service Counter), Block 10
Government Offices Complex, Jalan Duta, Kuala Lumpur

Application must be also submitted with:
i. Form BAK 1(a): Details of Exporter/Manufacturer and Products
ii. Form BAK 1(b): Product's Cost Analysis
iii. Form BAK 1(c): Letter of Indemnity
iv. A copy of the following documents:
- Certificate of company's registration
- Invoices of raw material purchasing
- Sample/photograph/products catalogue.
- Flow chart of production process.

f) Once your application is approved, Malaysian exporters have to submit the Form AI which can be purchased from Federation of Malaysian Manufacturers (FMM). For further details, please contact:

Tel : 03 - 6286 7200
Fax : 03 – 62741266 / 7288
www.fmm.org.my

What are the opportunities open to Malaysian exporting community?

Economic factors indicate that India is a market with huge potential. Despite the global economic setback, India continues to register impressive economic growth. The country continues to be fuelled by private sector driven economic growth. There is a rising middle class population estimated at 300 million. Economists predict that by 2020, India will be among the leading economies of the world. India's global trade is expanding rapidly.

These are positive factors that have to be taken into account by Malaysia. India has traditionally maintained high tariffs and over 80 per cent of the products imported into India attract duties ranging from 15-100 per cent. Malaysia and the other ASEAN Member States stand to gain from the FTA as the ASEAN can now export to India at preferential tariffs compared to India's other major trading partners.  ASEAN has a first mover advantage.

What are the likely challenges and the implications to domestic industrial sectors?

Malaysia industries are resilient, as over the last few years these domestic industries have been subjected to competition arising from the implementation of other ASEAN FTAs, such as the FTAs with China, Korea and Japan. Nevertheless, India is emerging as an important supplier of products such as iron and steel, auto parts, textiles and pharmaceuticals which could pose challenges to these domestic industries. Malaysian industries cannot remain complacent and have to factor in possible competition from India as duties are gradually reduced or eliminated.

Another major challenge is the competition posed to attract foreign direct investments as companies have now the choice of setting up operations in India and exporting to Malaysia and the other ASEAN countries. Thus, it is important that Malaysia and the other ASEAN countries work together to strengthen ASEAN economic integration. A deeply economically integrated ASEAN region will enable the region to retain investments in the region. ASEAN with its FTAs with the other East Asian countries offers itself as a key production base for the larger East Asian market.

Where are the areas where strategic partnership can be forged between Malaysian and Indian companies?

Rather than focusing on competition, there are ample opportunities for Malaysian and India businessmen to work together to form strategic partnership. R&D is an area where Malaysian companies can forge linkages to enhance their product strength not only for the Indian market but also the global market. Besides, other sectors where Malaysia and India can form strategic partnership are in ICT, pharmaceutical, healthcare, auto parts, machinery and equipment, rubber and palm oil based products. Many Malaysian companies are already actively involved in activities in India such as building of roads, rails, ports, airports and running of other services facilities. The FTA offers the opportunities for Malaysian companies to source their requirements for their projects in India from Malaysia.

Annex

Additional Information 

Modalities

Duty Reduction/Elimination

Malaysia

India

Tariff Lines

%

Tariff Lines

%

Normal Track 1

Duty free by 2013

3,696

76.74

3,666

70.18

Normal Track 2

Duty free by 2016

489

9.36

479

9.17

Sensitive Track

Duties reduced to 5 per cent by 2016

614

11.75

585

11.20

Highly Sensitive Track

reduction of duty by  50 and 25 per cent  of the normal MFN duty only

65

1.24

5

0.10

Exclusion List

No duty reduction or elimination

361

6.91

489

9.36

Total

5,225

100

5,224

100

Note:

Tariff lines are at 6-digit level.

Normal Track 1: elimination of duties by 31 December 2013;
Normal Track 2: elimination of duties by 31 December 2016
Sensitive Track: reduction of duties to 5 per cent by 31 December 2016
Highly Sensitive Track: longer timeframe and duty reduction to a certain level only.
Exclusion List: not offered for concessions  



Last Updated 2015-06-01 13:19:15 by Administrator

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