Regional (FTA)

ASEAN Free Trade Area (AFTA)

Common Effective Preferential Tariff Scheme (CEPT)

The CEPT scheme introduced in 1993 to eliminate intra-ASEAN import tariffs is now almost completed. The ASEAN-6 and Viet Nam have reduced duties on all products to 0-5 per cent. ASEAN-6 will eliminate duties on all products by 1 January 2010, except the limited Sensitive and Highly Sensitive Unprocessed Agricultural Products. 

Lao PDR and Myanmar are expected to reduce duties on all products by 1 January 2008 except Sensitive and Highly Sensitive Unprocessed Agricultural Products. Cambodia is given until 1 January 2010 to do so. These countries and Viet Nam will eliminate duties on all products by 1 January 2010. 

Indonesia and the Philippines have yet to offer rice and sugar for concessions. A special dispensation has been given to both countries to phase in these products by 2015. 
Cambodia, Lao PDR and Myanmar have also phased in all products into the CEPT Scheme, except for:
  • 54 tariff lines of Cambodia;
  • 203 tariff lines of Lao PDR; and
  • 27 tariff lines of Myanmar.

These products are still placed under their respective Sensitive Lists. These products are to be transferred into the CEPT Scheme not later than 1 January 2008 for Lao PDR and Myanmar and 1 January 2010 for Cambodia.

Number of Tariff Lines at 0% for ASEAN in the CEPT Package 2007

 

Country Percentage
0%
0%
Total
Brunei D. 71.63 28.37 100
Indonesia (AHTN 2007) 66.48 33.52 100
Malaysia 81.42 18.58 100
Philippines 

50.30 49.70 100
Singapore 100.00 - 100
Thailand (AHTN 2007) 54.37 45.63 100
ASEAN-6 71.54 28.46 100
Cambodia 3 5.79 94.21 100
Lao PDR 6.28 93.72 100
Myanmar 3.44 96.56 100
Vietnam 52.06 47.94 100
CLMV23 17.01 82.99 100
Total ASEAN 49.67 50.33 100

Source: ASEAN Secretariat, as of July 2007

Note :
1) GE products has been included with CEPT rates assumed = MFN
2) Last tranche of TEL has been included with CEPT rates assumed = MFN

Current Status of Tariff Reduction by Malaysia 

Beginning 1 January 2007, Malaysia eliminated duties on 3,368 tariff lines under the CEPT Scheme. The remaining 2,291 tariff lines will be eliminated on 1 January 2010 to fulfil the CEPT commitments. These products are: automotive; iron and steel; glass and glassware; ceramic; and paper products.

GENERAL EXCEPTION LIST

89 tariff lines are exempted from tariff concessions under the CEPT Scheme. These products are: alcoholic beverages; and arms and ammunition.

Malaysia 's Commitment under the CEPT Scheme

Status No. of Tariff Lines Threshold Compliance ¹ (%)
TOTAL
12,581
-
CEPT duties at zero per cent (As of 31 December 2006)
6,767
54.17 ²
CEPT duties eliminated by 1 January 2007 (including PIS products)
3,368
26.96
CEPT duties to be eliminated by 1 January 2010
2,291
18.34
CEPT Duties to be maintained at 5 per cent/20 per cent by 1 January 2010
(tropical fruits, sugar, tobacco, and rice
66
-
Products not offered for tariff concessions under the CEPT Scheme 
(General Exception List) 
(alcoholic beverages and arms and ammunition)
89
-

Source: Ministry of International Trade and Industry
Based on ASEAN Harmonised Tariff Nomenclature (AHTN) 2002


RULES OF ORIGIN (ROO)

ASEAN is simplifying the rules and procedures for using the CEPT Scheme to encourage trade among Member States.

To access CEPT tariff concessions ASEAN exporters/manufacturers can now choose the most convenient ROO, either:

  • the existing 40 per cent local/regional value content;

or

  • the relevant Product Specific Rules (PSR). 
    ASEAN has adopted Product Specific Rules (PSR) for 1,453 tariff lines, effective 1 January 2007. Apart from these newly endorsed PSR, ASEAN has also adopted PSR for:
  • 839 tariff lines of textiles and apparel (1 January 1996);
  • wheat flour (27 April 2005);
  • 23 tariff lines of wood and wood based products and 36 aluminium products (28 September 2005); and
  • 35 tariff lines of iron and steel (1 September 2006). 
    Negotiations for the second or final package of Product Specific Rules have been completed for the remaining tariff lines, except for 144 tariff lines which include automotives, iron and steel and chemical products.
    The Second or final package of PSR will be implemented by the first quarter of 2008.

NON-TARIFF BARRIERS (NTBs)

An agreed work programme was established in ASEAN to eliminate these barriers in three packages:

  • 2008, 2009 and 2010 for ASEAN-5;
  • 2010, 2011 and 2012 for the Philippines;and
  • 2013, 2014 and 2015/2018 for Cambodia, Lao PDR, Myanmar and Viet Nam.

The NTBs are classified according to three types of boxes:

Boxes Treatment
Green These can be retained
Red These will have to be eliminated
Amber Elimination of NTBs in the Amber Box will be subject to negotiations

ASEAN countries are required to notify other members and ASEAN Secretariat when a specific Non-Tariff Measure (NTM) is being introduced. 

A peer review process has been put in place to ensure that the implementation of NTMs is justifiable.

ASEAN INTEGRATION SYSTEM OF PREFERENCES (AISP)

The ASEAN Integration System of Preferences (AISP) is a unilateral scheme of preference given by ASEAN-6 that provides zero duty to products of export interest to Cambodia, Lao PDR, Myanmar and Viet Nam (CLMV).

As at December 2006, ASEAN-6 has offered zero duty for 3,195 products of the CLMV namely:

  • Myanmar with 1,681 products;
  • Cambodia (632);
  • Lao PDR (494); and
  • Viet Nam (388).

Malaysia has granted duty exemption on 793 products to these countries:

  • Myanmar with 293 products;
  • Viet Nam (237);
  • Cambodia (179); and
  • Lao PDR (83).

These duty exemptions are given to products such as:

  • fruits and vegetables;
  • chemical products;
  • rubber products;
  • wood-based products;
  • paper products;
  • electrical and electronics;
  • plastic products;
  • footwear;
  • furniture;
  • textiles and apparel; and
  • iron and steel.



ASEAN HARMONISED TARIFF NOMENCLATURE (AHTN)

AHTN is a harmonised product classification nomenclature implemented by all ASEAN member countries with the aim of further facilitating and promote intra-ASEAN trade. 

The transposition of AHTN 2002 into ATHN 2007 among ASEAN members is on-going. Only Thailand and Indonesia have implemented and transposed their CEPT package into AHTN 2007. 

Malaysia issued the gazette on 31 December 2007 and the AHTN will come into force on 1 April 2008. The application of the AHTN is expected to be extended to non-ASEAN countries by 2011

ENHANCED CEPT AGREEMENT

In August 2007, ASEAN agreed to review and update the CEPT Agreement to become a comprehensive Trade in Goods (TIG) Agreement for AFTA. The reasons are:

  • to update some provisions to accommodate the current development in ASEAN;
  • to provide legal standing to the Ministerial decisions pertaining to CEPT/AFTA;
  • inconsistencies found between the provisions in the CEPT Agreement, Protocols and decisions of the AFTA Councils/AEMs;
  • non-existence of some principle provisions such as Most Favoured Nation (MFN) treatment and National Treatment;
  • some provisions in the CEPT need to be updated to be at par with the disciplines imposed in FTAs. and
  • all past amendments to the CEPT agreements in different protocols will be merged into the new comprehensive agreement.

 

ASIAN - Korea

Background

  • The ASEAN-Korea Summit on 8 October 2003 tasked Ministers to discuss feasibility of a Framework Agreement on Economic Cooperation between ASEAN and Korea with a view towards establishing a Free Trade Area (FTA).
  • At the 8th ASEAN-Korea Summit held on 29 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 (AKFTA ); and
    • launching 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.
  • During the ASEAN-Korea Summit on 13 December 2005, the Economic Ministers of Korea and ASEAN signed: 
    • the Agreement on Dispute Settlement Mechanism between ASEAN and Korea.
  • On 26 August 2006 in Kuala Lumpur, the Economic Ministers of ASEAN and Korea, with the exception of Thailand, signed: 
    • the Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea.

Scope

  • The main elements of the Framework Agreement include: 
    • establishment of ASEAN-Korea Free Trade Area (AKFTA):
  • FTA for Trade in Goods to be realised by 2012 for ASEAN-6, 2018 for Vietnam and 2020 for Cambodia, Lao PDR and Myanmar; and
  • FTA for Trade in Services and Investment to be implemented within the timeframes to be mutually agreed between ASEAN and Korea; and 
    • cooperation in the areas of:
  • Customs Procedures;
  • Trade and Investment Promotion;
  • Small and Medium Enterprises;
  • Human Resource Management and Development;
  • Tourism;
  • Science and Technology;
  • Financial Services;
  • Information and Communication Technology;
  • Agriculture, Fisheries, Livestock, Plantation Commodities and Forestry;
  • Intellectual Property;
  • Environmental Industry;
  • Broadcasting;
  • Construction Technology;
  • Standards and Conformity Assessment and Sanitary and Phytosanitary Measures;
  • Mining;
  • Energy;
  • Natural Resources;
  • Shipbuilding and Maritime Transport; and
  • Film.

Status

FTA for Trade in Goods

  • 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 began on 1 June 2007.
    • The modalities for tariff reduction for products agreed by ASEAN and Korea are:

Normal Track

  • Korea will eliminate tariffs on at least 70% of its products listed in Normal Track upon the entry into force of the Agreement, i.e., 1 June 2007. All tariffs for products listed in Normal Track will be eliminated by 1 January 2010;
  • For ASEAN-6, tariffs will be eliminated in 4 phases beginning July 2006 and concluded by 2012:
  • tariffs for at least 50% of products listed in Normal Track will be reduced to 0- 5% by 1 January 2007;
  • tariffs for at least 90% of products listed in Normal Track to be eliminated by 1 January 2009;
  • all tariffs for products listed in Normal Track to be eliminated by 1 January 2010, with flexibility to eliminate maximum 5% of products listed in Normal Track by 1 January 2012; and
  • all tariffs for products listed in Normal Track will be eliminated by 1 January 2012.
  • Vietnam is given an additional 6 years while Cambodia, Lao PDR and Myanmar are given an additional 8 years.

 

ASIAN - China

Background

  • Cooperation between ASEAN and China was elevated to a higher level with the signing of the Framework Agreement on Comprehensive Economic Cooperation by the ASEAN and China Heads of State / Government on 4 November 2002 in Phnom Penh, Cambodia.
  • The Framework Agreement which came into force on 1 July 2003 is an umbrella Agreement which provides general provision on the establishment of an ASEAN-China Free Trade Area (ACFTA) within 10 years by pursuing: 
    • progressive elimination of tariffs and non-tariff barriers;
    • progressive liberalisation of trade in services and investment;
    • strengthen trade facilitation measures; and
    • economic co-operation in areas of common interest.
  • The following ACFTA Agreements has also being signed:
First Protocol to Amend the Framework Agreement (6 October 2003) : Provide implementation on Early Harvest Programme ( EHP ), an early tariff reduction undertaken on unprocessed agricultural products and selected manufactured goods. 
Also provide the Rules of Origin, a product requirement in order to enjoy the tariff reduction.
Second Protocol to Amend the Framework Agreement 
(8 December 2006) :
To incoporate products offered by few ASEAN Countries into the EHP, which was not finalised earlier.
Trade in Goods Agreement
(29 November 2004) :
Provide implementation and tariff reduction commitment on all other products (other than EHP) beginning 1 July 2005.
First Protocol to Amend the Trade in Goods Agreement (8 December 2006) : Provide improvement to the implementation procedures of the Trade in Goods Agreement. Include Product Specific Rules to enable products to easily comply with the Rules of Origin in order to enjoy tariff reduction.
Dispute Settlement Agreement
(29 November 2004) :
Provide mechanism for both parties in resolving any dispute arising from the implementation of the ACFTA Agreements.
Trade In Services Agreement
(14 January 2007) :
Provide implementation and First Package of Services Liberalisation by ASEAN and China.

Early Harvest Programme (EHP)

  • Tariffs have been reduced from 1 January 2004 by the six original ASEAN member countries (ASEAN-6) and China. Duties were eliminated on 1 January 2006.
  • Malaysia 's products under the EHP: 
    • 503 unprocessed agriculture products; and
    • 87 specific manufactured products such as coffee, animal and vegetable fats/oils, cocoa and cocoa preparations, mineral fuels (coal/coke), soap, stearic acid, article of rubber and glass envelope for Cathode-Ray Tube (CRT).

Trade in Goods

Normal Track

  • Tariff liberalisation on all other products (other than EHP) has been implemented beginning 1 July 2005 and to be conducted in four tranches i.e. 2005, 2007, 2009 and 2010.
  • ASEAN-6 and China is required to reduce tariffs to 0-5% on 40% of their products by 2005 and 60% of their products by 2007.
  • Extended timeframe for tariff elimination of up to 2012 will be given for not more than 150 tariff lines. Malaysia 's 150 tariff lines include: 
    • polyethylene, polypropylene and polystyrene;
    • rubber tyres and tubes;
    • textiles and fabrics;
    • footwear;
    • ceramic products;
    • articles of iron and steel; and
    • electrical products.
  • Continuous improvements are being undertaken on the ROO and Operational Certification Procedures (OCP) to simplify the rules and trading procedures under the ACFTA. These include the possibility of adopting the:
  • Back-to-Back Certificate of Origin arrangement to facilitate exports of partial shipments, of which the bulk-break activities are conducted in an intermediate ACFTA party; and
  • Third-Party reinvoicing arrangement, whereby sales invoice to the importer are allowed to be issued by companies located in a non-ACFTA territory.
  • ASEAN and China has also adopted Product Specific Rules (PSR) for the following products: 
    • textiles and apparel;
    • plastic products;
    • footwear products;
    • iron and steel products;
    • preserved fish canned products;
    • palm oil and ice cream; and
    • jewelry product.
  • With the adoption of PSR, ASEAN and Chinese exporters/ manufacturers now have the flexibility of choosing the most convenient rule in meeting the origin criteria of the products i.e., either 40% Regional Value Content (RVC) or PSR, in order to enjoy the ACFTA preferential rate.
  • In order for Malaysian exporters to enjoy the tariff concessions offered by China under the ACFTA, Certificates of Origin (Form E) must be obtained from MITI. 
    Benefits
  • The establishment of an FTA between ASEAN and China will create an economic region with 1.7 billion consumers, regional GDP of about US$2 trillion and total trade estimated at US$1.23 trillion. It will be the biggest and largest FTA among developing countries.
  • With a population of 1.2 billion, market access opportunities through preferential trade for Malaysian products will increase.
  • The removal of trade barriers between ASEAN and China will lower costs, increase intra-regional trade and strengthen the attractiveness of Malaysia and the region as a preferred investment destination.
    • Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China. 
      List of products offered for tariff reduction beginning 20 July 2005.
    • List of products listed under the Sensitive Track
    • Product Specific Rules under the ASEAN-China Free Trade Area.
    • ASEAN Consultation to Solve Trade Investment Issues (ACT).
    • Framework Agreement on Comprehensive Economic Cooperation between ASEAN and People's Republic of China.
    • Protocol to Amend the Framework Agreement.
    • Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.

Benefits

  • The establishment of an FTA between ASEAN and China will create an economic region with 1.7 billion consumers, regional GDP of about US$2 trillion and total trade estimated at US$1.23 trillion. It will be the biggest and largest FTA among developing countries.
  • With a population of 1.2 billion, market access opportunities through preferential trade for Malaysian products will increase.
  • The removal of trade barriers between ASEAN and China will lower costs, increase intra-regional trade and strengthen the attractiveness of Malaysia and the region as a preferred investment destination.
    • Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.
    • List of products offered for tariff reduction beginning 20 July 2005.
    • List of products listed under the Sensitive Track
    • Product Specific Rules under the ASEAN-China Free Trade Area.
    • ASEAN Consultation to Solve Trade Investment Issues (ACT).
    • Framework Agreement on Comprehensive Economic Cooperation between ASEAN and People's Republic of China.
    • Protocol to Amend the Framework Agreement.
    • Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.

 

 

 

 

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