MITI FTA

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ASEAN - Hong Kong, China

BACKGROUND

The ASEAN Economic Ministers and the Secretary for Commerce and Economic Development of HKC signed the ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA) and ASEAN-Hong Kong, China Investment Agreement (AHKIA) on 12 November 2017 on the sidelines of the 31st ASEAN Summit in Manila, the Philippines.

The AHKFTA contains 14 chapters covering broad areas of market access liberalisation, trade facilitation, rules to promote confidence in trade, and cooperation aimed at facilitating trade in goods and services in the region.

In addition to AHKFTA and AHKIA, Malaysia, Brunei Darussalam, Singapore and HKC also signed a Side Agreement on the Definition of “Natural Person of a Party” under the AHKIA. The Side Agreement aims to maintain the current status whereby a natural person (Nationals and Permanent Residents – PRs) of Malaysia, Brunei Darussalam, Singapore and HKC will be accorded substantially the same treatment in the four Parties, in respect to measures affecting investment.

The AHKFTA and AHKIA have entered into force for Hong Kong, China and five (5) ASEAN Member States namely Lao PDR, Myanmar, Singapore, Thailand and Viet Nam. Malaysia implements the said Agreements, with effect from 13 October 2019.

TRADE IN GOODS

Chapter 2 (Trade in Goods) under the AHKFTA provides that each Party shall progressively reduce and/or eliminate customs duties on originating goods of the other Parties in accordance with its schedule of tariff commitments in Annex 2-1 (Schedules of Tariff Commitments). The agreed modality for tariff reduction and/or elimination under this Annex is as follows:

Category		End Rate	ASEAN 6				Cambodia/ Lao PDR/ Myanmar
			Brunei Darussalam/ Malaysia/ Philippines/ Thailand		Indonesia/ Viet Nam
Normal Track	Normal Track1	0%	85%	65% within 3 years	75%	50% within 3 years	65%	50% within 8 years
	Normal Track 2	0%		20% within 10 years		25% within 10 years		15% within 15 years
Sensitive Track	Sensitive List	0-5%	10%	5% within 12 years	10%	5% within 12 years	20%	10% within 17 years
	Highly Sensitive List	≤50%		5% within 14 years		5% within 14 years		10% within 20 years
Exclusion List		no tariff commitments	5%		15%		15%

Annex 2-1 (Schedules of Tariff Commitments) by Parties:
Malaysia
- Schedule of Tariff Commitments (HS2017)
- Appendix A - Tariff Reduction Quota (TRQ)
Myanmar
The Philippines
Singapore
Thailand
Viet Nam
Hong Kong, China
The Federal Government Gazette on Customs Duties (Goods under the AHKFTA) Order 2019 can also be obtained here.

RULES OF ORIGIN

The Rules of Origin (ROO) for AHKFTA are provided for under Chapter 3 of the AHKFTA. Trade facilitating ROO have been established under the AHKFTA that would help encourage regional cumulation of inputs benefitting both ASEAN Member States and Hong Kong, China.

Article 4 (Origin Criteria) of Chapter 3 (Rules of Origin) stipulates that a good imported into a Party from another Party shall be treated as an originating good if it conforms to the origin requirements under any one of the following conditions:
1. a good which is wholly obtained or produced in the exporting Party;
2. a good produced in the exporting Party exclusively from originating materials from one or more of the Parties; or
3. a good not wholly obtained or produced in the exporting Party;

and meets all other applicable requirements of this Chapter.

A good shall be treated as an originating good if the good has a Regional Value Content (RVC) of not less than 40% calculated using one of the methods below:
1. Direct/ Build-up Method

Or

Indirect / Build-down Method

Good subject to the Product Specific Rules (PSRs) shall be treated as an originating good if meets those PSRs as specified in Annex 3-2 (Product Specific Rules) of the AHKFTA agreement.

In order to enjoy preferential tariff treatment under the AHKFTA, eligible good must be supported by a Certificate of Origin (Form AHK) which has fulfilled the conditions for the issuance and verification, in accordance with Annex 3-1 (Operational Certification Procedures) of the Agreement.
CO Form AHK

TRADE IN SERVICES

INVESTMENT

Due to HKC’s unique economic status, there is also a stand-alone ASEAN-Hong Kong, China Investment Agreement (AHKIA) in parallel with the main AHKFTA Agreement, in which Parties shall accord to investments fair and equitable treatment and full protection and security.

ASEAN-Hong Kong, China Investment Agreement (AHKIA)

The Parties are expected to enter into discussions to conclude Annex 1 (Schedules of Reservations) and other outstanding issues as stipulated in Article 22 (Work Programme) of the AHKIA.

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