Strategies to Leverage the MNZFTA & AANZFTA


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Leveraging Free Trade Agreements (FTA) to reduce landed costs, Benefits of FTAs

Doing Business With Malaysia Forum - 26 October 2009

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  • *OIC (Islamic Countries) : People’s Republic of Bangladesh, Republic of Cameroon, Arab Republic of Egypt, Republic of Guinea, Islamic Republic of Iran, Hashemite Kingdom of Jordan, Republic of Lebanon, The Great Socialist People’s Libyan Arab Jamahiriya, Malaysia, Islamic Republic of Pakistan, Republic of Senegal, Syrian Arab Republic, Republic of Tunisia, Republic of Turkey, Republic of Uganda, State of the United Arab Emirates ** D8 : Bangladesh, Indonesia, Iran, Malaysia, Egypt, Nigeria, Pakistan and Turkey
  • Strategies to Leverage the MNZFTA & AANZFTA

    1. 1. Worldtrade Management Services 26 Oct 2009 Strategies to Leverage the MNZFTA & AANZFTA
    2. 2. Utilise MNFTA and AANZFTA to Reduce Landed Cost 1 <ul><li>Take advantage of these FTAs to reduce customs duties assessed on goods </li></ul><ul><li>Lowered landed cost improves market access, price competiveness and profitability </li></ul><ul><li>Both FTAs offer duty concessions – a choice to choose? </li></ul><ul><li>MNFTA is expected to offer greater benefits then the recently signed AANZFTA to Malaysian and New Zealand businesses </li></ul><ul><li>Bilateral FTA normally offers ‘deeper cuts’ that offers more immediate benefits whereas multilateral FTA tends to be slower </li></ul><ul><li>Qualifying criteria for a particular product may be different under MNFTA & AANZFTA </li></ul><ul><li>Each FTA that should be studied to identify cost saving opportunities and confirm the qualification criteria </li></ul><ul><li>Consider these FTAs ‘upfront’ in conjunction with broader initiatives e.g. establishing a new sourcing strategy or a new manufacturing entity </li></ul>
    3. 3. Malaysia’s FTAs (Current and Future): Proliferations of FTAs (Malaysia’s perspective)
    4. 4. Reasons Why Duty Concessions May Be Under-utilised 1 <ul><li>This may be due to :- </li></ul><ul><ul><ul><li>Lack of awareness about FTAs and the benefits </li></ul></ul></ul><ul><ul><ul><li>Lack of information on the requirements of the Rules of Origin and the application procedures </li></ul></ul></ul><ul><ul><ul><li>Confusion between preferential origin requirements with other requirements e.g. non-preferential origin declaration & certification, labelling, etc. </li></ul></ul></ul><ul><li>Governments do not automatically grant companies or products a “duty free FTA status” </li></ul><ul><li>Proactive planning and implementing new processes are required to take advantage of FTAs </li></ul><ul><li>Importers have to make a claim for preferential treatment, using a Certificate Origin issued in the country of manufacture </li></ul>
    5. 5. The Origin Dilemma Cost / Information Benefit / Risk Importer Exporter
    6. 6. Benefit of FTAs <ul><li>Benefits </li></ul><ul><li>Market access advantage </li></ul><ul><li>Cost competitiveness </li></ul><ul><li>Supply chain efficiency </li></ul><ul><li>Considerations </li></ul><ul><li>Rules can be complicated </li></ul><ul><li>Require co-ordination with suppliers </li></ul><ul><li>Compliance requires documentation and information system </li></ul><ul><li>Potential duty underpayments/arrears </li></ul>
    7. 7. Capturing FTA benefits <ul><li>Awareness </li></ul><ul><li>Know ALL FTAs involving countries where you are likely to do business, be it procurement, manufacturing or sales. </li></ul><ul><li>Take potential FTA benefits into account when making strategic decisions. </li></ul><ul><li>Develop in-depth knowledge of the product coverage, rules of origin and compliance requirements of the FTAs concerned. </li></ul><ul><li>Utilization </li></ul><ul><li>Structure your supply chain around desirable FTA benefits </li></ul><ul><li>Consider regional manufacturing strategies </li></ul><ul><li>Influence </li></ul><ul><li>Provide input to FTAs under negotiation through appropriate channels (e.g. governments, business associations, public hearings, etc.) </li></ul>
    8. 8. Implementation Issues <ul><li>Different rules of origin for different FTAs </li></ul><ul><li>Inappropriate claim for origin because of incorrect information from suppliers. </li></ul><ul><li>Lack of supporting documents to demonstrate originating status. </li></ul><ul><li>Costing information not updated on a regular basis. </li></ul><ul><li>Different interpretations between the issuing authority in the exporting country and the receiving authority in the importing country on the rules, cost calculation and tariff classification </li></ul>
    9. 9. Conclusion <ul><li>Leveraging FTAs is not an option, it is essential </li></ul><ul><li>Complicated rules require awareness & planning </li></ul><ul><li>The Origin Dilemma means cooperation between exporter & importer is important </li></ul><ul><li>Don’t forget about short term and long term compliance </li></ul>
    10. 10. Thank you Disclaimer The information included in these presentation materials is of a general nature only and is based on current law and practice which is subject to change at any time. It does not purport to be comprehensive and does not constitute legal or tax advice. PricewaterhouseCoopers WMS (Malaysia) Sdn Bhd (&quot;PwC&quot;) has no obligation to update the contents as law and practice change. The materials contained in this presentation were assembled on 23 Oct 2009 and were based on the law enforceable and information available at that time. Whilst PwC agrees to provide a copy of the presentation to you for records, no duty of care or contractual relationship is established between PwC and a third party. Accordingly, PwC does not accept any liability to any person who relies on this presentation. Users of these presentation materials should consult their own tax advisers regarding the tax consequences in light of their own particular circumstance. You agree that you will only use the presentation materials for the presentation on 26 Oct 2009 and not for any other purpose or in any other way. © 2009 PricewaterhouseCoopers. All rights reserved. &quot;PricewaterhouseCoopers&quot; refers to the individual members of the PricewaterhouseCoopers organisation in Malaysia each of which is a separate legal entity or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 