Asean Japan Free Trade Agreement Rules of Origin

The AJCEP agreement offers traders in Malaysia the advantage of cumulation in the execution of ROO. This means that traders can benefit from a wider supply base, which means they can use raw materials/intermediaries from any part of the AJCEP and benefit from preferential rates. A major advantage is market access through reduced tariff concessions and cumulative rules of origin, making prices more competitive and a wider choice of products for consumers. In November 2007, the Heads of State and Government of the Member States of the Association of Southeast Asian Nations (ASEAN) and Japan met for the 11th ASEAN-Japan Summit. The Heads of State or Government welcomed the conclusion of the negotiations on the Comprehensive Economic Partnership Agreement between ASEAN and Japan (`AJCEP`) on the basis of a series of negotiations since April 2005. The AJCEP entered into force in all countries in July 2010.The AJCEP became the eighth Economic Partnership Agreement after agreements with Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia and Brunei. ASEAN continues to expand beyond its borders to benefit from the strengths of the economies around it. ASEAN`s Individual Free Trade Agreements (FTAs) with China, Korea, Japan, Australia and New Zealand, as well as India, give investors the opportunity to access, connect and do business with some of the world`s most potential markets. 2. The importance of the agreement for JapanAJCEP will give a strong impetus to the revival of trade and investment, thus creating a larger and more efficient market with greater opportunities in this region. In addition, AJCEP contributes to strengthening Japan`s industrial competitiveness in line with the real situation of Japan`s economic activities at the ASEAN level, where not all problems can be solved within the framework of bilateral EPAs between Japan and the respective ASEAN countries. For example, if high value-added components manufactured in Japan are assembled into finished products in the ASEAN region and the products are exported to the region, Japan may not benefit from a special preference within the existing framework (i.e. bilateral EPAs or the ASEAN Free Trade Area (FTA)).

However, the AJCEP offers the possibility to benefit from the special preference, as the cumulation provision in the rules of origin under the AJCEP applies to Japan and the ASEAN region. The ASEAN-India Agreement on Trade in Goods entered into force on 1 January 2010. The signing of the agreement paved the way for the creation of one of the world`s largest markets for free trade areas, creating opportunities for more than 1.9 billion people in ASEAN and India with a combined GDP of $4.8 trillion. AIFTA creates a more liberal regime, facilitating market access and investment between member countries. The agreement provided for tariff liberalization of more than 90% of the products traded between the two dynamic regions. As a result, it was agreed to remove tariffs on more than 4,000 product lines at the earliest in 2016. The ASEAN-Korea Agreement on Trade in Goods was signed in 2006 and entered into force in 2007. It establishes preferential trade regime for goods between ASEAN member states and South Korea, so that 90% of the goods traded between ASEAN and Korea can be processed duty-free. The agreement provides for a gradual reduction and elimination of tariffs by each country on almost all products. Under the Trade in Goods Agreement, ASEAN-6, including Brunei Darussalam and Korea, abolished more than 90% of tariffs in January 2010. In addition to the ASEAN Free Trade Area (FTA) among ASEAN member states, the regional trading bloc has signed several free trade agreements with some of the major economies in the Asia-Pacific region.

These include the ASEAN-Australia-New Zealand FTA (AANZFTA), the ASEAN-China FTA (ACFTA), the ASEAN-India FTA (AIFTA), the ASEAN-Korea FTA (AKFTA) and the ASEAN-Japan Comprehensive Economic Partnership (AJCEP). The objective of these free trade agreements is to encourage and encourage companies of all sizes in ASEAN to trade regionally and internationally without tariff barriers. Companies with branches in ASEAN can use free trade agreements to easily access new export markets for their low-cost products and to benefit from simplified export and import procedures. The ASEAN-Japan Comprehensive Economic Partnership (AJCEP) entered into force in December 2008. The agreement covers trade in goods, trade in services, investment and economic cooperation. The free trade agreement provides for the reduction of tariffs on 87% of all tariff items and includes a dispute settlement mechanism. It also allows for the consecutive shipment of goods between member countries, the invoicing of goods by third parties and the cumulation of ASEAN. ASEAN and Japan have also launched several economic cooperation projects that include capacity-building and technical assistance in areas of mutual interest.

These areas include intellectual property rights, trade-related procedures, information and communication technologies, human resources development, small and medium-sized enterprises, tourism and hospitality, transport and logistics. Mutual trade between ASEAN and Japan reached $239 billion in 2015, accounting for 10.5% of total ASEAN trade. At the same time, Japan`s foreign direct investment (FDI) to ASEAN amounted to $17.4 billion, accounting for 14.5 percent of total FDI inflows into ASEAN. Japan is ASEAN`s second largest trading partner and a source of foreign direct investment for ASEAN. For Malaysia, AJCEP offers additional benefits in the form of immediate and accelerated tariff removal on goods with a view to progressive liberalization under the bilateral agreement with Japan, i.e. the Malaysia-Japan Economic Partnership Agreement (JEPA). Some of the products that are not offered by Japan under the JEPAM and for which tariff liberalization has been carried out under the AJCEP agreement. Over the past decade, trade and investment between ASEAN member states and China has increased significantly under the Asean-China Free Trade Area (ACFTA).

The Agreement on Trade in Goods was signed in 2004 and implemented by all Member States in July 2005. Under the agreement, the original six ASEAN members and China decided to abolish tariffs on 90 percent of their products by 2010, while Cambodia, the Lao People`s Democratic Republic, Myanmar and Vietnam – commonly known as CLMV countries – had until 2015 to do so. .

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