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  jata  Malaysia's Free Trade Agreements

 
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ASEAN - Korea

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BACKGROUND

  • ASEAN and the Republic of Korea (ROK) initiated sectoral dialogue relations in November 1989. The ROK was accorded a full Dialogue Partner status by ASEAN at the 24th ASEAN Ministerial Meeting (AMM) in July 1991 in Kuala Lumpur. The ASEAN-ROK partnership was elevated to a summit level in 1997 in Kuala Lumpur, and since then relations between ASEAN and the ROK have broadened and deepened.

  • At the 8th ASEAN-Korea Summit held on 30 November 2004, the Leaders signed the ASEAN-ROK Joint Declaration on Comprehensive Cooperation Partnership Agreement. Through the Joint Declaration, the Leaders among others agreed to: 

    • the recommendations of the ASEAN-ROK Experts Group (AKEG) on the measures to expand two-way trade and investment by liberalising and integrating the markets;

    • the establishment of an ASEAN-ROK Free Trade Area; and  

    • launching of the AKFTA negotiations in early 2005 with a goal of having at least 80% of products at zero tariff by 2009, and consideration of special and differential treatment and additional flexibility for new ASEAN Member Countries.  

  • The Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea was signed by the Leaders at the ASEAN-Korea Summit on 13 December 2005 in Kuala Lumpur, Malaysia and came into force on 1 July 2006.   The main elements of the Framework Agreement include: 

    • ASEAN-Korea Trade in Goods (AKTIG) Agreement – signed on 26 August 2006 and took effect in 2007;  

    • ASEAN-ROK Trade in Services (AKTIS) Agreement – signed on 21 November 2007 and took effect on 1 May 2009; and

    • ASEAN-ROK Investment Agreement - signed on 2 June 2009 and took effect on 1 September 2009

  • Subsequently, the ASEAN-Korea Free Trade Agreement (AKFTA) came into effect on 1 January 2010. With the materialising of the FTA, it is envisaged that ASEAN and ROK will strengthen and deepen economic integration, and help to build capacity through sharing of available resources and expertise. It is also expected that the creation of the FTA facilitate greater flow of ROK investments into ASEAN.

  • At the ASEAN-ROK Commemorative Summit in 2014, the Leaders agreed to target US$200 billion of two-way trade volume by 2020, through among other maximising the use of the AKFTA in order to enhance ASEAN-ROK economic linkages.

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TRADE IN GOODS

  • The ASEAN-Korea Trade in Goods (AKTIG) Agreement was signed on 26 August 2006 and took effect in 2007.

  • Main provisions in the Agreement include:  

    • modalities for tariff reduction;  

    • rules of origin;  

    • modification of concessions;  

    • removal of non-tariff barriers; and  

    • safeguard measures, including Balance of Payment.  

  • The first tranche of tariff reduction/elimination for AKTIG began on 1 June 2007.

  • The Third Protocol to Amend the AKTIG Agreement introduced new commitments on Customs Procedures and Trade Facilitation, and gave legal effect to the inclusion of the Parties’ line-by-line Tariff Reduction Schedules to the TIG Agreement.

  • The Third Protocol has been signed by all Parties to the Agreement on 22 November 2015. To date 7 Parties have ratified the Protocol as follows:

    • Thailand and the ROK - 1 January 2016;

    • Myanmar - 11 February 2016;

    • Singapore - 6 April 2016;

    • Lao PDR - 10 June 2016;

    • The Philippines - 14 July 2016; and

    • Malaysia - 26 July 2016. 

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RULES OF ORIGIN

  • Rules of Origin (ROO) for AKFTA are provided for under Article 5 of the Agreement. Trade facilitating ROO have been established under the AKFTA that would help encourage regional cumulation of inputs benefitting both ASEAN Member States and ROK.

  • Under the AKTIG Agreement, a good is considered to be originating if it meets any of the following criteria:

    • A good is wholly obtained or produced entirely in the territory of the exporting Party; or

    • A general rule of the regional value content (RVC) 40% or more of the FOB value or change of tariff heading (CTH) of the Harmonized System thereby providing flexibility for exporters / manufacturers in choosing the rule to apply.

  • There are two methods to calculate RVC:
     
  1. Build-Up Method

build-up (akfta)

Note :

  1. RVC – Value of originating materials, which includes the value of originating materials, direct labour cost, direct overhead cost, transportation cost and profit

  2. FOB –  Free-on-board Value

 

  1. Build-Down Method

build-down (akfta)

Note :

  1. RVC – Regional Value Content

  2. FOB – Free-on-board Value

  3. VNM – Value of non-originating materials which is either
     

  • the CIF value at the time of importation of the materials, parts or goods; or

  • the earliest ascertained price paid for the materials, parts or goods of undetermined origin in the territory of the Party where the working or processing has taken place

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TRADE IN SERVICES

  • The ASEAN-Korea Trade in Services Agreement was signed on 21 November 2007 by ASEAN Member States except Thailand, and ROK. The Agreement took effect on 1 May 2009.

  • The Agreement on Trade in Services between ASEAN and Korea provides for the progressive liberalisation of the services sector through substantial sectoral coverage, which includes all modes of supply. Services and service suppliers/providers in the region will enjoy improved market access and national treatment in sectors/subsectors where commitments have been made.

  • The aim of the Agreement is for easing up of restrictions on entry and treatment on a wide range of services sectors including business, construction, education, communication services, environmental, tourism services, and transport services in the ASEAN region and ROK.

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INVESTMENT

  • The ASEAN-Korea Agreement on Investment was signed on 2 June 2009 between the ASEAN Member States and ROK.

  • The Agreement aims to provide for a transparent, facilitative and a more secure environment for ASEAN and Korean investors and their investments through:

    • Creating conducive environment for ASEAN and Korean investors and their investments;

    • Promoting cooperation on a mutually beneficial basis;

    • Encouraging and promoting the flow of investments and cooperation between ASEAN and Korea;

    • Improving transparency of investment rules; and

    • Providing for the protection of investments.

  • This Agreement sets the foundation for the expansion of investments among the Parties through measures such as improved protection for investors and mostfavored-nation (MFN) that will guarantee protection from discriminatory measures by Governments.

    • Under this Agreement, the protection elements for investors are:

    • Provisions on fair and equitable treatment and full protection and security of covered investments

    • Transfers of funds relating to covered investments

    • Treatment relating to compensation in case of losses incurred due to armed conflict, state of national emergency, and civil strife

    • Compensation in the event of nationalisation or expropriation of covered investments

    • Also in case of disputes, investors have recourse to arbitration as the Agreement provides for an investor?state dispute settlement mechanism

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RELATED DOCUMENTS

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CONTACT US

For Preferential Certificate of Origin / Rules of Origin related matters, please contact:

  1. Datin Mega Marissa Abdul Malek
    DL: 03-62084722
    Email: marissa.malek@miti.gov.my

  2. Mr. Mohd Nazri Abd Ghani
    DL: 03-62084721
    Email: nazri.ghani@miti.gov.my

  3. Mr. Muhammad Faris Sameon
    DL: 03-62084750
    Email: faris@miti.gov.my

For other enquiries, please contact the FTA focal point(s) as follows:

  1. Mr. Mohammad Ishamudin bin Ismail
    DL: 03-62000381
    Email: ishamudin@miti.gov.my

  2. Mr. Mohd Faizol Isma bin Amzan
    DL: 03-62000390
    Email: faizolisma@miti.gov.my

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