All About Free Trade Agreements Malaysia

What is a Free Trade Agreement (FTA)?

A Free Trade Agreement (FTA) is an agreement between two or more countries, where they have agreed to provide preferential treatment in each other's markets. These agreements aim to reduce tariffs and introduce mutually beneficial measures to support business and economic growth.

There are two types of FTAs: 

1. Bilateral refers to agreements between Malaysia and a single trading partner/country. 

2. Multilateral refers to agreements between Malaysia and a group of trading partners/countries.

Each FTA partner offers flexibility or incentives to each other for trade, investment, service provision and trade facilities as well as economic cooperation.

What are Malaysia's FTAs?

Malaysia has signed 16 FTAs, including 7 bilateral FTAs and 9 multilateral FTAs. These agreements provide Malaysian businesses with advantages like lower or zero customs taxes, making them more competitive and contributing to Malaysia's economic sustainability.

The table below shows the FTAs that Malaysia is participating in according to the country:

What are the FTA Requirements?

To benefit from FTA tariff preferences, your product must meet the following criteria:

• The product is covered by a specific FTA.

• The product meets the Rules of Origin (ROO) requirements of the FTA.

• You have a Certificate of Origin (CO) for the product.

There are three main types of rules of origin for ASEAN FTAs.

Wholly obtained or produced entirely in an ASEAN member country

This means that the product must be entirely made in an ASEAN member country, using only materials that are also wholly obtained or produced entirely in ASEAN member countries.

Must have undergone a 'substantial transformation'

This means that the product must have undergone a significant change in character or composition during its production in an ASEAN member country. The specific requirements for what constitutes a substantial transformation will vary from product to product.

Contains a certain percentage of ASEAN content

This means that the goods must contain a certain percentage of materials that are wholly obtained or produced entirely in ASEAN member countries. The specific percentage requirement will vary depending on the product.

By adhering to these rules of origin, importers can ensure that their products qualify for preferential tariff rates under the FTAs.

How to Check FTA Rates?

To determine if your product qualifies for tariff elimination or reduction under an FTA, follow these steps:

1. Identify the product's HS code

The HS code is mandatory for all international shipping documentation.

You can easily find it on the Malaysia Customs website or check it using the DHL MyGTS tool.

2. Check the tariff schedule of the relevant FTA partner 

Tariff rates are available on the Malaysia Customs website too.

For accurate identification of tariff rates based on the Free Trade Agreement (FTA) applicable to you, follow our step-by-step guide.

Be sure to meet the requirements for preferential tariff treatment based on the rules of origin.