Questions On Malaysia - India CECA (MICECA)

The MICECA is a comprehensive Agreement, covering Trade in Goods, Trade in Services, Investment and Economic Cooperation.

What are the benefits that can be derived from the MICECA ?

• The MICECA 's preferential nature grants advantage to Malaysian exporters and service suppliers wanting to access the Indian market, as opposed to those from other countries that have yet to enter into a preferential trading arrangement with India.
• As a comprehensive Agreement, the MICECA also addresses non-tariff barriers and mechanisms to deal with these, including through capacity building programmes aimed at enabling compliance to standards and conformance measures.
• In the area of investment, the Agreement is comprehensive as it covers the four elements of liberalization, protection, facilitation and promotion. The Agreement provides assurance that the investor and their investments will be treated fairly and protected . The various provisions such as Minimum Standard of Treatment, Compensation for Losses, Expropriation and Compensation, Transfers and Investor State Dispute Settling Mechanism also provides certainty and predictability to the investment regime in Malaysia and India.
• In the area of services, India has committed to allow Malaysian foreign equity shareholding – ranging from 49 to 100% – in more than 80 services sub-sectors. Malaysia too has reciprocated.

How is the MICECA different from the ASEAN -India FTA ?

The ASEAN -India FTA negotiations were ongoing when the MICECA talks began in February 2008. On 13 August 2009, upon conclusion of negotiations on Trade in Goods, ASEAN and India signed the ASEAN -India Trade in Goods Agreement (AITIG). The AITIG entered into force on 1 January 2010. ASEAN and India are currently negotiating the Agreements on Investment and Trade in Services.

Compared to AITIG, the MICECA contains many pluses. These include:

i) The comprehensive nature of MICECA , i.e., it includes Services, Investment, Economic Cooperation, Customs, SPS and TBT chapters. AITIG only covers Trade in Goods.

ii) The Exclusion List (i.e., list of products excluded from tariff concessions) of MICECA is shorter than that of AITIG. India has excluded 1,225 products under MICECA compared with 1,298 under AITIG. Malaysia has excluded 838 products under MICECA , compared with 898 under AITIG.

iii)For Trade in Goods, MICECA has advanced the timelines agreed under AITIG, e.g.:

• Normal Track 1 (NT1): tariffs on all products listed in NT1 will be eliminated by 30 September 2013, i.e., three months in advance of AITIG.
• Normal Track 2 (NT2): tariffs on all products listed in NT2 will be eliminated by 30 June 2016, i.e., six months in advance of AITIG.
• Sensitive Track (ST): tariffs on all products listed in ST will be reduced to 5% by 30 June 2016, i.e., six months in advance of AITIG.

iv) Malaysia has been granted better concessions for palm oil and palm oil products under MICECA :

• India will bind tariffs on refined palm oil (RPO) at 45% by 31 December 2018 (one year earlier than India's committed timeline under AITIG).
• India will bind tariffs on 3 palm products at 45% by 31 December 2018 (these 3 products were excluded from tariff concessions under AITIG).

v) MICECA contains more trade-facilitative Product Specific Rules (PSRs) compared with AITIG.

vi) MICECA contains more stringent anti-dumping provisions compared with AITIG, which will benefit Malaysian exporters.

What are the commitments by Malaysia and India under the MICECA ?

a) Trade in Goods

i) Normal Track 1 (NT1): tariffs on all products listed in NT1 will be eliminated by 30 September 2013.

ii) Normal Track 2 (NT2): tariffs on all products listed in NT2 will be eliminated by 30 June 2016.

iii) Sensitive Track (ST): tariffs on all products listed in ST will be capped at 5% by 30 June 2016.

iv)Highly Sensitive List (HSL): applies to Malaysia only. Tariff cuts on all products listed in HSL will be formula-based:

• for tariffs above 50%, Malaysia will reduce and cap these tariffs at 50% by 31 December 2018; and
• for tariffs at 50% and below, Malaysia will exercise one of the following two options:
  • Option A: tariffs are cut by 50% by 31 December 2018; OR
  • Option B: tariffs are cut by 25% by 31 December 2018.

  v) Special Products (SP): applies to India only. Tariffs will be reduced progressively and capped at 37.5–50%(depending on the product) by 31 December 2018.

  vi) Special Track: tariffs will be reduced progressively and capped at 5–20%. Timeline for reduction of tariffs range from 4 to 7 years, depending on the product.

  b) Trade in Services

  In the area of services, India has committed to allow Malaysian foreign equity shareholding ranging from 49 to 100% in 84 services sub-sectors, including in professional services, healthcare, telecommunications, retail and environmental services. In return, Malaysia has made commitments to allow Indian foreign equity shareholding in 91 services sub-sectors.

  MICECA also contains a dedicated chapter that facilitates the temporary entry of installers and servicers, contractual service suppliers, independent professionals and business visitors (including potential investors) from Malaysia into India, and vice versa. Among others, Malaysian engineers, accountants and IT specialists will now find it easier to gain temporary entry into India to perform contractual work.

  MICECA provides a framework to further facilitate cross border investments between the two countries through commitments on national treatment as well as protection of investors and investments through expropriation, transfers and subrogation provisions.

  What are the products excluded by Malaysia under the MICECA

  Malaysia has excluded 838 tariff lines from the tariff concession under the Exclusion List (EL). These products are excluded for health, safety and moral reasons. Among the products are firearms, bullet, tobacco and liquor.

  What are the conditions exporters need to fulfill to enjoy the preferential tariff?

  Compliance to rules of origin is pivotal in order to benefit from the tariff concessions granted under the MICECA . In order to enjoy the preferential tariff, exporters must ensure that the finished products have undergone substantial transformation in terms of change in tariff classification at 6 digits level and fulfill the general Rules of Origin Qualifying Content ( QVC ) of not less than 35% or Product Specific Rules (PSR).

  The list of PSR as stated in Annex 3-1 .

  How to utilise the MICECA ?

  To benefit from the lower tariff rates, exporters will need to check whether the goods are included under the tariff reduction list. This can be done by checking the product HS Code in.

  The tariff concessions schedule of Malaysia as in Annex 2-1 .

  In order for a product exported by Malaysia to enjoy preferential treatment in India, a Certificate of Origin ( CoO ) issued by the Ministry of International Trade and Industry Malaysia is required. The CoO is a certificate that can be used to satisfy your buyers that the products exported originate from Malaysia.

  How can Malaysian exporters apply the Certificate of Origin (CO)?

  Steps:

  a) Obtain the ASEAN Harmonised Tariff Nomenclature ( AHTN ) or Harmonised System ( HS ) code from the Royal Customs of Malaysia for your product as well as every product and raw material used.

  b) Check your product's eligibility under MICECA based on India's schedules of tariff elimination/reduction.

  c) Product for export must fulfill the condition of the rules of origin under MICECA .

  d) Download/get the Cost Analysis Application Forms i.e. BAK 1(a), BAK 1(b) and BAK 1(c). The forms can be obtained from:

  1. MITI Website; or
  1. Service Counter (Ground Floor), Block 10, MITI , Government Offices Complex, Jalan Duta, 50622 Kuala Lumpur; or
  2. iMITI's branch offices in respective states.

  e) Completed Cost Analysis application forms must be submitted to:

  Ministry of International Trade and Industry ( MITI )
  Trade Cooperation and Industry Coordination Section
  Ground Floor, (Service Counter), Block 10
  Government Offices Complex, Jalan Duta, Kuala Lumpur

  1. Form BAK 1(a): Details of Exporter/Manufacturer and Products
  2. Form BAK 1(b): Product's Cost Analysis
  3. Form BAK 1(c): Letter of Indemnity
  4. A copy of the following documents:
     • Certificate of company's registration
     • Invoices of raw material purchasing
     • Sample/photograph/products catalogue.
     • Flow chart of production proces

  f) Once your application is approved, Malaysian exporters have to submit the Form MICECA which can be purchased from Federation of Malaysian Manufacturers (FMM).

  For further details, please contact:

  Tel : 03 - 6286 7200
  Fax : 03 – 62741266 / 7288
  www.fmm.org.my

  The guidelines for application as in Annex 3-3 and the sample of the CoO form as in Annex 3-3-1
  

  What are the likely challenges and the implications to domestic industrial sectors?

  The main challenge resulting from the implementation of the MICECA will be increased competition to the domestic industry. This is particularly true in areas where India has comparative advantage.

  However, this increased competition is expected to spur our industries to increase their competitiveness through increased productivity and efficient utilisation of resources by shifting limited resources away from less economically-viable activities into areas where Malaysia has comparative advantage. In addition, the MICECA will contribute to lower costs of inputs as Malaysian industries will be able to source cheaper inputs from India.

  MICECA also allows for longer phase-in periods for tariff elimination/reduction for sensitive products. This will then allow Malaysian producers to adjust to the increased competition.

  Where are the areas where strategic partnership can be forged between Malaysian and Indian companies?

  MICECA also provides strategic partnerships between Malaysian and Indian companies which can be undertaken through joint ventures, in services sectors such as tourism, construction, franchising and healthcare.

  The Malaysian business community is encouraged to take full advantage of the opportunities offered under the Agreement. MICECA creates an attractive operating environment for the business community of both countries to further strengthen their bilateral trade and economic linkages on a long term basis.

  Further information on the MICECA as well as the text of MICECA and schedule of goods is available on MITI 's website at www. miti .gov.my

  Last Updated 2015-06-01 17:21:37 by Administrator