ASEAN-CHINA FREE TRADE AGREEMENT (ACFTA)

The Agreement on Trade in Goods (TIG) of the Framework Agreement on

Comprehensive Economic Cooperation between ASEAN and China has been
signed on 29 November 2004. Under the TIG agreement, the modalities for
tariff reduction and elimination have been laid down where for ASEAN 6 and
China, most of the tariffs will be completely eliminated by 2010 while CLMV
countries, tariffs will be eliminated by 2015. The Agreement also provides for
the subsequent liberalization of products sensitive to all parties and the
elimination of non-tariff barriers. The Early Harvest Programme (EHP), where
tariff elimination on some identified products, has been implemented since 1
January 2004.

China is one of Malaysia’s largest market for timber and timber products. In
2005, China is the third largest market for logs, medium density fibreboard
and particleboard. Total exports in 2005 have improved from RM415 million
in 2004 to RM646.4 million in 2005. With the implementation of the ACFTA,
trade will further expand as tariffs on most of the timber products are being
liberalized to zero.

The modality for tariff reduction and elimination for timber and timber
products is categorised as follows:

1) normal track : It is sub-divided into Normal Track 1 and

Normal Track 11
2) sensitive track : It is further sub-divided to Sensitive List and
Highly Sensitive List

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NORMAL TRACK

Normal track is sub-divided into Normal Track I and Normal Track II.

Under the Normal Track I, ASEAN 6 (comprising of Brunei, Indonesia,

Malaysia, Philippines, Thailand and Singapore) and China have committed to
undertake tariff reduction and/or elimination in accordance with the following
thresholds:

(i) Each Party shall reduce to 0-5% not later than 1 July 2005 the
tariff rates for at least 40% of its tariff lines placed in the
Normal Track.
(ii) Each Party shall reduce to 0-5% not later than 1 January
2007 the tariff rates for at least 60% of its tariff lines placed in
the Normal Track.
(ii) Each Party shall eliminate all its tariffs for tariff lines placed in
the Normal Track not later than 1 January 2010.

Malaysia has placed most of the timber and timber products under the
Normal Track I, where tariffs will be completely eliminated in 2010, except
for plywood.

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Under the Normal Track II, member countries are given the flexibility to
have tariffs of some tariff lines under the Normal Track, not exceeding 150
tariff lines, eliminated not later than 1 January 2012. Each Party shall
eliminate all its tariffs for tariff lines placed in the Normal Track II not later
than 1 January 2012.

China has placed the following timber products under the Normal Track 11
where elimination will take place in 2012.

CHINA’S LIST OF PRODUCTS UNDER THE NORMAL TRACK II :

NO. HS CODE DESCRIPTION

1 4404.10 - Coniferous
Coniferous hoopwood; split poles, etc; wooden sticks, etc:
4404.10.00 chipwood
2 4404.20 - Non-coniferous
Coniferous hoopwood; split poels, etc; wooden sticks, etc:
4404.20.00 chipwood
3 4405.00 Wood wool; wood flour
4405.00.00 Wood wool; wood flour
4 4408.10 - Coniferous
4408.10.10 Coniferous wood veneer sheets, thick ≤ 6mm
4408.10.20 Coniferous wood sheets for plywood, thick ≤ 6 mm
Other coniferous wood sheets, not elsewhere specified,
4408.10.90 thick ≤ 6mm
5 4408.31 - - Dark Red Meranti, Light Red Meranti and Meranti Bakau
Veneer sheets of Dark/Light Red Meranti & Meranti Bakau,
4408.31.10 thick ≤ 6mm
Plywood sheets of Dark/Light Red Meranti & Meranti Bakau,
4408.31.20 thick ≤ 6mm
Other sheets of Dark/Light Red Meranti & Meranti Bakau,
4408.31.90 not elsewhere specified, thick ≤ 6mm
6 4408.39 - - Other
4408.39.10 Other specified tropical wood veneer sheets, thick ≤ 6mm
Other specified tropical wood sheets for plywood, thick ≤
4408.39.20 6mm
Other specified tropical wood sheets, not elsewhere
4408.39.90 specified, thick ≤ 6mm
7 4408.90 - Other
4408.90.10 Other wood veneer sheets, thick ≤ 6mm
4408.90.20 Other wood sheets for plywood, thick ≤ 6mm
4408.90.90 Other wood sheets, not elsewhere specified, thick ≤ 6mm

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8 4409.10 - Coniferous
Coniferous wood, continuously shaped along any of its
4409.10.00 edges or faces
9 4409.20 - Coniferous
Non-coniferous wood, continuously shaped along any of its
4409.20.00 edges or faces
10 4411.29 - - Other
Fibreboard of a density > 0.5g/cm3 but ≤ 0.8g/cm3, not
4411.29.00 elsewhere specified
- - With at least one outer ply of tropical woods specified in
11 4412.13 Subheading Note 1 to this Chapter
Plywood with  outer ply of tropical wood, each ply ≤ 6mm
4412.13.00 thick

12 4412.19 - - Other
4412.19.00 Plywood, each ply ≤ 6mm thick, not elsewhere specified
13 4412.23 - - Other, containing at least one layer of particleboard
Plywood … > 6 mm non-coniferous outer ply, with particle
4412.23.00 board
14 4412.29 - - Other
Plywood… > 6 mm non-coniferous outer ply, not elsewhere
4412.29.00 specified
15 4412.99 --Other
4412.99.00 Plywood, veneered panels & similar laminated
wood, not elsewhere specified
16 4413.00 Densified wood, in blocks,plates,strips or
profiles shapes
4413.00.00 Densified wood, in blocks,plates,strips or
profiles shapes
17 4415.10 -Cases,boxes,crates,drums & similar packings;
cable-drums
4415.10.00 -Cases,boxes,crates,drums & similar packings;
cable-drums
18 4418.20 -Doors & their frames & thresholds of wood
4418.20.00 Doors & their frames & thresholds of wood
20 4418.30 -Parquet panels
4418.30.00 Parquet panels of wood
21 4418.90 -Other
4418.90.00 Builders' joinery & carpentry, of wood, not
elsewhere specified

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SENSITIVE LIST

ASEAN 6 and China are allowed to place 400 tariff lines at the HS 6-digit
level and 10% of the total import value based on 2001 trade statistics in the
Sensitive Track (ST). The applied MFN tariff rates for products placed in the
ST shall be reduced to 20% not later than 1 January 2012. These tariff rates
shall be subsequently reduced to 0%-5% not later than 1 January 2018.

MALAYSIA’S LIST OF PRODUCTS UNDER THE SENSITIVE TRACK:

NO. HS CODE DESCRIPTION

1 4412.13 --With at least one outer ply of tropical woods

specified in Subheading Note 1 to this Chapter
4412.13.00 Plywood, with at least one outer ply of
tropical wood, consisting solely of sheets of
wood, each ply not >6 mm thickness
2 4412.14 --Other, with at least one outer ply of non-
coniferous wood
4412.14.100 Plywood, with at least one outer ply of
non-coniferous wood, faced with teak, each ply
not >6 mm thickness
4412.14.900 Plywood, with at least one outer ply of
non-coniferous wood, faced with other wood,
each ply not >6 mm thickness
3 4412.19 --Other
4412.19.000 Other
4 4412.22 --With at least one ply of tropical wood
specified in Subheading Note 1 to this Chapter
4412.22.000 Other with at least one outer ply of non-
coniferous wood;with at least one ply of tropical
wood specified in subheading note 1 to this
Chapter
5 4412.23 --Other,containing at least one layer of
particle board
4412.23.110 Plain
4412.23.191 Other faced with plastics
4412.23.199 Veneered panels, of other materials, containing
at least 1 layer of particle board and at least 1
outer ply of non-coniferous wood
4412.23.911 Other;plain faced with teak
4412.23.919 Laminated wood,plain,faced with other than teak,
containing at least 1 layer of particle board
4412.23.991 Laminated wood,faced with plastics, containing
at with plastics,containing at board and 1 outer
ply of non-coniferous wood
4412.23.999 Laminated wood, faced with other materials,

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 ctg with other materials, ctg particle board and
1 outer ply of non-coniferous wood
6 4412.29 --other
4412.29.110 Veneered panels without particle board and
at least an outer ply of non-coniferous wood,
Plain
4412.29.191 Veneered panels without particle board and
at least an outer ply of non-coniferous wood,
faced with plastics
4412.29.199
Veneered panels without particle board and
at least an outer ply of non-coniferous wood,
faced with any other material
4412.29.911 Other laminated wood,without particle board
and at least an outer ply of non-coniferous
wood,plain,faced with teak
4412.29.919 Other laminated wood,without particle board
and at least an outer ply of non-coniferous
wood,plain, other than faced with teak
4412.29.991 Other laminated wood,without particle board
of non-coniferous wood, faced with plastics
4412.29.999 Other laminated wood,without particle board &
at least an outer ply of non-coniferous wood,
faced with any other materials
7 4412.92 --With at least one ply of tropical wood
specified in Subheading Note 1 to this Chapter
4412.92.000 Other with at least one ply of tropical wood
specified in Subheading Note 1 to this Chapter
8 4412.93 --Other,containing at least one layer of
particle board
4412.93.110 Veneered panels,plain,containing at least one
layer of particle board
4412.93.191 Other veneered panels,faced with plastics,
containing particle board
4412.93.199 Other veneered panels,faced with other one layer
of particle board
4412.93.911 Other laminated wood,plain,faced with teak,
particle board
4412.93.919 Other
4412.93.991 Other laminated wood,faced with plastics,
containing particle board
4412.93.999 Other laminated wood,faced with other one
layer of particle board
9 4412.99 --Other
4412.99.110 Other veneered panels without particle board,
Plain
4412.99.191 Other veneered panels without particle board,
faced with plastics
4412.99.199 Other veneered panels without particle board
4412.99.911 Other laminated wood,without particle board,

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 plain faced with teak
4412.99.919 Other laminated wood,without particle board,
plain other than faced with teak
4412.99.991 Other laminated wood,without particle board,
plain faced with plastics
4412.99.999 Other laminated wood,without particle board,
plain faced with any other materials

CHINA’S LIST OF PRODUCTS UNDER THE SENSITIVE TRACK:

NO. HS CODE DESCRIPTION

1 4410.11 - - Waferboard, including oriented strand board

4410.11.00 Waferboard, including oriented strand board,
of wood
2 4410.19 - - Other
4410.19.00 Other particle board & similar board of wood
3 4411.11 - - Not mechanically worked or surface
Covered
4411.11.00 Fibreboard of a density > 0.8g/cm3, not
worked or surface covered
4 4411.21 - - Not mechanically worked or surface
Covered
4411.21.00 Fibreboard of a density > 0.5g/cm3 but
≤ 0.8g/cm3, not worked…
5 4411.99 - - Other
4411.99.00 Fibreboard of a density ≤ 0.35g/cm3, not
elsewhere specified

6 4412.14 - - Other, with at least one outer ply of non-

coniferous wood
7 4412.14.00 Plywood with  1 outer ply of non-coniferous
wood, not elsewhere specified, each ply ≤ 6mm
8 4415.20 - Pallets, box pallets and other load boards;
pallet collars
4415.20.00 Pallets, box pallets & other load boards
of wood
9 4418.10 Windows, Fench-windows and their frames
4418.10.00 Windows, French-windows & their frames,
of wood
10 9401.20 - seats of a kind used for motor vehicles
9401.20.00 Seats for motor vehicles
11 9401.90 - parts
9401.90.11 Seat angle regulating devices for motor vehicles

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HIGHLY SENSITIVE LIST (HSL)

Tariff lines placed by ASEAN 6 and China in the Highly Sensitive List (HSL)
should be not more than 40% of the total number of tariff lines in the
Sensitive Track or 100 tariff lines at the HS 6-digit level, whichever is lower.

The applied MFN tariff rates of tariff lines placed in the respective Highly
Sensitive Lists shall be reduced to not more than 50% not later than 1
January 2015 for ASEAN 6 and China, and 1 January 2018 for the newer
ASEAN Member States.

Malaysia did not place any timber products under the HSL.

CHINA’S LIST OF PRODUCTS UNDER THE HSL:

NO. HS CODE DESCRIPTION

1 4410.90 - Other
4410.90.00 Particleboard & similar board of other ligneous
Materials
2 4411.19 - - Other
4411.19.00 Fibreboard of a density > 0.8g/cm3, not
elsewhere specified
3 4411.31 - - Not mechanically worked or surface
Covered
4411.31.00 Fibreboard of a density > 0.35g/cm3, but
≤ 0.5g/cm3, not worked…
4 4411.39 - - Other
4411.39.00 Fibreboard of a density > 0.35g/cm3 but
≤ 0.5g/cm3, not elsewhere specified
5 4411.91 - - Not mechanically worked or surface
Covered
4411.91.00 Fibreboard of a density > 0.35g/cm3, not
worked or surface covered
6 4412.22 - - With at least one ply of tropical wood
specified in Subheading Note 1 to this Chapter
4412.22.00 Plywood… > 6mm non-coniferous outer ply,
with specified tropical wood
7 4412.92 - - With at least one ply of tropical wood
specified in Subheading Note 1 to this Chapter
4412.92.00 Plywood … containing at least one layer of
specified tropical wood not elsewhere specified
8 4412.93 - - Other, containing at least one layer of
particle board
4412.93.00 Plywood … containing at least one layer of

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 particle board, not elsewhere specified
9 4414.00 Wooden frames for paintings, photographs,
mirrors or similar objects
4414.00.00 Wooden frames for painting, photographs,
mirrors or similar objects
10 4416.00 Casks, barrels, vats, tubs and other coopers'
products and parts thereof, of wood,
including staves
4416.00.00 Casks, barrels, vats, tubs, etc, and parts
thereof, of wood
11 4417.00 Tools, tool bodies, tool handles, broom or
brush bodies and handles, of wood; boot or
shoe lasts and trees, of wood
4417.00.00 Tools.., broom/brush bodies … of wood; boot
or shoe trees of wood

RULES OF ORIGIN

The agreed ROO is value-added 40%.

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