|Malaysia's Free Trade Agreements||
ASEAN Free Trade Area (AFTA)
The creation of the ASEAN Free Trade Area (AFTA) was agreed at the 1992 ASEAN Summit in Singapore. The main objectives of the AFTA are to:
AFTA was also created as a response to other emerging regional groupings, such as the North American Free Trade Area (NAFTA) and the expansion of the European Union (EU). It was also to leverage on the huge potentials and complementarities that exist in the region in order to strengthen and deepen intra-ASEAN industrial linkages including creating strong and competitive in small and medium enterprises.
The liberalization of trade in the region through elimination of both intra-regional tariffs and non-tariff barriers had contributed towards making ASEAN's manufacturing sectors more efficient and competitive in the global market. As a result, consumers are able to source goods from the more efficient producers in ASEAN, thus creating a robust intra-ASEAN trade.
Common Effective Preferential Tariff (CEPT) Scheme
The primary mechanism for achieving the goals given by AFTA as above is the Common Effective Preferential Tariff (CEPT) Scheme, which was initiated in 1992 with the self-described goal to reduce and eliminate duties in ASEAN. The reduction and elimination is done gradually depending on the level of sensitivity of the products to the individual domestic industry and on the same time to increase the “region’s competitive advantage as a production base for the world market”.
CEPT is a cooperative arrangement among ASEAN Member States (AMS) to reduce intra-regional tariffs and remove non-tariff barriers over a 15-year period which entered into force on 1 January 1993. The goal of the Scheme is to reduce tariffs on all manufactured goods to 0-5% by the year 2008.
The Economic Ministers further agreed to eliminate import duties on all products except for a small number of sensitive products by 2010 for Brunei, Indonesia, Malaysia, the Philippines, Thailand and Singapore and 2015 for Cambodia, Lao PDR, Myanmar and Viet Nam.
ASEAN Trade in Goods Agreement (ATIGA)
The ASEAN Economic Community (AEC) was first mooted at the Bali Summit in October 2003 and ASEAN Leaders declared that the AEC shall be the goal of regional economic integration by 2020. However, at the 12th ASEAN Summit in January 2007, the ASEAN Leaders affirmed their strong commitment to accelerate the establishment of the AEC by 2015 with the goal to transform ASEAN into a region with free movement of goods, services, investment, skilled labor and freer flow of capital.
Reviewing and enhancing the CEPT Scheme is one of the key measure stipulated under the AEC 2015 as to create free flow of goods in the region. The CEPT Scheme is then superseded by the new agreement namely as the ASEAN Trade in Goods Agreement (ATIGA) in 2010.
ATIGA was signed in Hua Hin, Thailand on 26 February 2009 and entered into force on 17 May 2010. The objectives of ATIGA are:
The ATIGA value-adds to the Common Effective Preferential Tariff ASEAN Scheme in terms of inclusion of disciplines on Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) Measures as well as Temporary Modification and Suspension of Concessions. The Article on Temporary Modification and Suspension of Concessions provides guidelines for compensation as a remedy for losses arising from any modification of existing commitments.
The ATIGA enhances the CEPT with new initiatives such as:
There are many benefits of ATIGA. Among them are:
Effective 1 January 2010, Malaysia with five other ASEAN Member States (Brunei Darussalam, Indonesia, the Philippines, Singapore and Thailand) is a complete free trade area. These countries have eliminated import duties on 99 per cent of products in the Inclusion List (except for products listed in the Sensitive and Highly Sensitive Lists).
Today, the ASEAN-6 has 99.20% of tariff lines in the Inclusion List are offered at 0%. For Cambodia, Lao PDR, Myanmar and Viet Nam, collectively referred to as CLMV, a total of 90.85% of the Tariff Lines in the Inclusion List are already at 0%.
Therefore, on the average, ASEAN member states have a total of 95.99% Tariff Lines at 0% according to the ATIGA Tariff Schedule of 2015.
Malaysia has eliminated duties on 98.74% of its tariff lines in our ATIGA Tariff Schedules for 2015 and only left with 73 tariff lines or less than 1% (0.59%) that have duties ranging of 5% to 20% covering tropical fruits and tobacco and highly sensitive products (rice products), respectively. Malaysia has placed 82 Tariff Lines (TLs) which comprise of alcoholic beverages and arms weapons in the General Exclusion List (GEL). These products are not subject to import duties reduction or elimination.
Based on the commitments under AFTA and ATIGA, Cambodia, Lao PDR, Myanmar and Viet Nam eliminated duties on all products in 2015 with flexibility of 7% of tariff lines up to 2018.
With the reduction and elimination of the import duties, producers/manufacturers can afford to buy raw materials at a cheaper price and better quality from ASEAN countries. This would lead to the reduction in costs of production due to the elimination and reduction in tariff. As a result, prices of products will be cheaper and can compete not only within ASEAN Member States but within other countries as well. With larger scale of production and 625 million ASEAN populations, it provides broader market access to producers/manufacturers.
Intra-ASEAN Trade and Investment
The efforts taken under the AEC have brought beneficial impacts to all ASEAN Member States. ASEAN’s economy has recorded a positive development whereby the average growth for 2007 to 2015 is 5.1 per cent. This was a significant achievement for ASEAN in comparison with other regions in the world. Collectively, ASEAN is the seventh largest economy with US$2.6 trillion Gross Domestic Product (GDP).
The region’s growth rooted from the substantial intra-ASEAN trade activity with the value recorded at US$608 billion or 24 per cent from the grand total of ASEAN’s trade. Furthermore, ASEAN has successfully attracted foreign direct investment (FDI) from year to year and for 2014, the total net inflow of FDI into ASEAN amounted at US$136 billion.
SELF-CERTIFICATION PILOT PROJECT
Self-certification is a system which enables the Certified Exporter (CE) to make out an invoice declaration for the exports of good. The information in the invoice declaration is less than what appears in ATIGA Form D.
A Memorandum of Understanding for the 1st Self Certification Pilot Project involving three participating member states namely Malaysia, Brunei Darussalam and Singapore was signed on 26 August 2010 during the ASEAN Economic Ministers (AEM) Meeting which entered into force from 1 November 2010, while Thailand is the fourth Participating Member State (PMS) and took off effective 28 October 2011. The newer member to the 1st Self-Certification Pilot Project is Cambodia which officially joined the other four participating member states effective 7 July 2015. Another latest addition to the 1st Self-Certification Pilot Project is Myanmar and is currently in the process of obtaining approval from her cabinet to implement this Pilot Project.
The main objectives of Self Certification Scheme are:
The 29th AFTA Council Meeting held on 22 August 2015 agreed to extend the implementation of the 1st Self-Certification Pilot Project until 31 December 2016. This is to provide more time for ASEAN Member States to participate in this pilot project.
Currently, Malaysia has appointed 161 Certified Exporters (CEs), Brunei Darussalam (10 CEs), Cambodia (2 CEs), Singapore (63 CEs) and Thailand 164 (CEs). The certified exporters are comprised of manufacturers and traders.
Meantime, the 2nd Pilot Project also being implemented concurrently with the 1st Self-Certification Pilot Project. Presently, there are five participating member states under the 2nd Self-Certification Pilot Project namely Indonesia, Lao PDR, the Philippines, Thailand and Viet Nam. The 2nd Self-Certification Pilot Project has different set of requirements which make it significantly different from the first one for example, only manufacturers can be appointed as Certified Exporter.
The ASEAN-wide implementation of Self-Certification System is targeted to be realized by 2016. For this purpose, ASEAN has initiated the process by formulating a Work Plan towards achieving the ASEAN-wide implementation and will engage in series of discussion as to come up with the relevant documents to implement the system.
RULES OF ORIGIN
Rules of Origin (ROO) are an integral part of any preferential trading arrangements. ROO sets out the conditions under which goods traded under free trade or preferential trade arrangements are considered "originating". This is to ensure that goods are manufactured or transformed in the exporting country through substantial value-added activities.
ROO is used as a tool for importing countries to ascertain only qualified products are entitled to benefit from the preferential tariff concession committed under the ATIGA. Goods that are merely transshipped or underwent simple processes do not qualify. The preferential import duty rates are then granted when compliance to the specific ROO has been established. As part of the requirements of the ATIGA, imported goods must be accompanied by the Certificate of Origin (COO) Form D issued by a designated authority by the government to support the claim that they are eligible for preferential tariff treatment under the specific FTA.
Types of Rules of Origin
ATIGA has a set of ROOs. It is important that the business community in Malaysia understands the ROOs so as not to be denied preferential tariffs when exporting their products in position to maximize the use of an FTA.
ROO can be divided into percentage criterion a combination of percentage and process criterion.
TRADE FACILITATION IN ASEAN
Trade facilitation is one of the key strategic measures which supports the free flow of goods for the establishment of a single market and production base when the first ASEAN Economic Community 2015 agreed by the Leaders in 2007. Under the AEC 2009-2015, the trade facilitation aimed for a simple, harmonized and standardized trade and customs, processes and procedures which will enhance export competitiveness and facilitate the integration of ASEAN into a single market for goods, services and investments and a single production base.
ASEAN will continue to accord high priority to trade facilitation initiatives and this is embedded comprehensively in the ASEAN Economic Community Blueprint 2025. The trade facilitation initiative pave way for various works including on the efforts towards developing a comprehensive action plan on trade facilitation and welcomed other on-going efforts in enhancing trade facilitation through various initiatives, which includes the ASEAN Self-Certification Scheme, the establishment of ASEAN Trade Repository, ASEAN Single Window, ASEAN Solutions for Investments, Services and Trade as well as the ASEAN Customs Transit System. These initiatives encapsulated ASEAN’s efforts on enhancing transparency and access to information on the regulatory environment of each ASEAN Member State, and greatly facilitate doing business in the region. Furthermore, this will provide a much needed avenue for the private sector to raise their concerns on doing business through a more systematic, timely and cost-effective manner.
ASEAN Self-Certification Scheme
ASEAN Single Window (ASW)
ASEAN Trade Repository (ATR)
ASEAN Solutions for Investments, Trade and Services (ASSIST)
ASEAN Customs Transit System (ACTS)
ASEAN Trade Facilitation Joint Consultative Committee (ATF-JCC)
ASEAN Trade in Goods Agreement
||ASEAN Trade in Goods Agreement, Cha-am, Thailand, 26 February 2009|
||Annex 1 (List of Notifiable Measures)|
||Annex 2 (Tariff Schedules)|
|- Annex 2 (Tariff Schedules) – Lao PDR (AHTN 2012) 2016-2018|
|- Annex 2 (Tariff Schedules) – Myanmar (AHTN 2012) 2016-2018|
|- Annex 2 (Tariff Schedules) – Viet Nam (AHTN 2012) 2015-2018|
||Annex 3 (Product Specific Rules – HS 2012)|
||Annex 3 Attachment 1 (Product Specific Rules for Textile – HS 2012)|
||Annex 4 (ITA products in AHTN 2007)|
||Annex 5 (Principles and Guidelines for Calculating Regional Value Content on the ATIGA)|
||Annex 6 (Implementing Guidelines for Partial Cumulation under Article 30(2) on ASEAN Cumulative ROO)|
||Annex 7 (CO Form D and its Overleaf Notes)|
||Annex 7 (CO Form D (Revised – box 9) and Overleaf Notes)|
||Annex 8 (Operational Certification Procedures-revised)|
||Annex 9 (List of SPS Measures)|
||Annex 10 (Contact Points Designated for the Implementation of the Chapter 8 on SPS Measures of the ATIGA)|
||Annex 11 (List of Superseded Agreements)|
Ministry of International Trade and Industry
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