China Economy Snapshot

ACFTA: Overview

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.

• 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 textiles and fabrics;
  • footwear;
  • ceramic products;
  • articles of iron and steel; and
  • electrical products.
  • 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

• 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;

• Products in the Sensitive Track are divided into Sensitive List (SL) and Highly Sensitive List (HSL).
• Duties for Sensitive List will be reduced to 20% by 2012 and to 0-5% by 2018.
• Duties for Highly Sensitive List will be reduced to 50% by 2015. No further tariff cut commitments.
• Malaysia has 361 products in the Sensitive Track, of which 265 are in the SL and 96 in the HSL. Products in the Sensitive Track include:
  • unprocessed agriculture products
  • tobacco products;
  • plywood;
  • ceramics and glass;
  • iron and steel; and
  • automotive products.

Rules of Origin (ROO)

• 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.

Rubber & Rubber Products: Modality

• What are the rubber and rubber products under the EHP?
  • Articles of rubber – eraser
• Date of implementation: 1 January 2004
• Date of fully eliminated: 1 January 2006

• What are Rubber Products under NT list?
  • Those which are not listed under EHP and Sensitive List (SL) are listed under NT list.
• Date of implementation: 1 July 2005
• Date of fully eliminated : End of year 2010
• How are the rates to be reduced / eliminated? See modalities
• Modalities for ASEAN 6 and China

Tariff Rate (X)	2005	2007	2009	2010
X ≥ 20	20	12	5	0
15 ≤ X < 20	15	8	5	0
10 ≤ X < 15	10	8	5	0
5 < X < 10	5	5	0	0
X ≤ 5	Standstill	0	0

• Threshold :
  • (a) 40% at 0-5% in 2005
  • (b) 60% at 0-5% in 2007
  • (c) 100% at 0% in 2010 (tariffs on some products, not more than 150 lines, will be eliminated by 2012)

• Sensitive Track can be further classified into Sensitive List (SL) & Highly Sensitive List (HSL)
• What are Rubber Products under Sensitive Track?
  • Malaysia: rubber products 26 lines (HS 6-digits)
  • China: all the natural raw rubber lines (HS 4001) in HSL, & one line for Synthetic Rubber (4002 19 19) China’s Sensitive List (Rubber)

    No	HS Code (Year 2004)	Product Description	MFN
    1	4001 10 00	Natural rubber latex	20
    2	4001 21 00	Smoked sheet of natural rubber	20
    3	4001 22 00	Technical specified natural rubber	20
    4	4001 29 00	Other natural rubber	20
    5	4002 19 19	Styrene-butadiene/carboxylated styrene-butadiene rubber, in primary forms	7.5

  • Date of implementation: 1 July 2005
  • How are the rates to be reduced? See modalities
    • SL: the applied MFN tariff rates of SL are to reduce to 20% not later than 1 Jan 2012 and further reduced to 0 – 5% not later than 1 Jan 2018.
    • HSL: the tariff rates shall reduce to not more than 50% in Jan 2015
  • What are the conditions governing the Sensitive Track
    • Reciprocity:
      1. the tariff rate for a tariff line placed by a party in the Sensitive Track must be at least 10% or below in order for that Party to enjoy reciprocity;
      2. the reciprocal tariff rate to be applied to a tariff line placed by a Party in the Sensitive Track :
         • shall be either the tariff rate of that Party’s tariff line, or the Normal Track tariff rate of the same tariff line of the other Party or Parties from whom reciprocity is sought, whichever is higher; and
         • shall in no case exceed the applied MFN rate of the same tariff line of the Party or Parties from whom reciprocity is sought

Malaysia-China Bilateral Trade (Rubber & Rubber Products)

• In 2008, Malaysia’s export of rubber and rubber products to China was recorded at RM5,154.26 million, an increase of 22.0% from RM4,223.45 million in 2007.
• In 2008, Malaysia’s import of rubber and rubber products from China was recorded at RM446.03 million, an increase of 6.1% from RM439.22 million in 2007.

• Our market share (%) in China :

  Year	Market Share (%)
  2004	23.95
  2005	29.04
  2006	26.93
  2007	23.98
  2008	18.63

• In 2008, Malaysia’s export of natural rubber to China was recorded at RM2.609 million (301,178tonnes), a decrease of 0.2% from RM2.614 million in 2007 (370,900 tonnes).
• Major natural rubbers exported in 2008 were:
  • SMR 20 valued at RM1,346.72 million (154,878 tonnes)
  • SMR 10 valued at RM828.55 million (93,863 tonnes) and
  • SMR 5 valued at RM249.71 million (28,369 tonnes)
• In 2008, Malaysia’s import of natural rubber from China was recorded at RM0.10 million and no import in 2007.
• Major natural rubbers imported in 2008 were:
  • Softened or peptised rubber valued at RM93,634 (14.10 tonnes)
  • SMR 10 valued at RM5,910 (0.20 tonnes) and
  • Unvulcanised, uncompounded rubber plates, sheets or strip valued at RM359 (0.07 tonnes)

• In 2008, Malaysia’s export of rubber products amounted to RM262.95 million, an increase of 5.2%, from RM249.93 million in 2007.
• Major rubber products exported in 2008 were:
  • Gloves, other than surgical gloves valued at RM86.80 million
  • Vulcanised rubber thread & cord valued at RM60.80 million and
  • Sheath contraceptives valued at RM23.25 million.
• In 2008, imports of rubber products from China were RM445.50 million, an increase of 6.7%, from RM417.55 million in 2007.
• Major rubber products imported in 2008 were:
  • Other sports footwear, other than riding boots valued at RM40.92 million
  • Other articles of unhardened vulcanised rubber valued at RM39.69 million and
  • Other footwear valued at RM32.30 million.

There were 6 China rubber and rubber products projects were approved amounted to RM67.96 million from year 2004 until 2008(Table 4).

China Statistics

Documents Related to ASEAN China Free Trade Agreement (ACFTA)

1. Schedule 1 /AKTA KASTAM 1967 (ASEAN & CHINA ) preamble
2. Schedule 2 (NT) Chapter 40, Chapter 56, Chapter 59, Chapter 64, Chapter 65, Chapter 85, Chapter 90, Chapter 94 & Chapter 95
3. Schedule 3- Exclusion List
4. ACFTA Form E
5. Abbreviations and Symbols
6. China’s tariff book in 2009
7. ACFTA – Malaysia & China Tariff Reduction Schedule under ACFTA for Rubber & Rubber Products