   
  
WT/REG448/2  
 
6 June 2023 
(23-3850) Page: 1/4 
Committee on Regional Trade Agreements  Original: English  
 
 
FREE TRADE AGREEMENT BETWEEN THE MEMBER STATES OF THE ASSOCIATION OF 
SOUTHEAST ASIAN NATIONS AND HONG KONG, CHINA  
(GOODS AND SERVICES)  
QUESTIONS AND REPLIES  
The following communication, dated 5 June 2023, is being circulated at the request of the delegations 
of the Member States of the Association of Southeast Asian Nations (ASEAN) and Hong Kong, China.  
 
_______________  
 
 
Question from Brazil  
 
Rules of origin  
 
1.1.  Text of the Agreement: Chapter 3. Article 4, f (Wholly Obtained or Produced Goods). 
Footnote. In the footnote of the item (f), of Article 4 (Wholly Obtained or Produced 
Goods), of Chapter 3 (Rules of Origin) of the Agreement (AHKFTA), there is a clarificat ion 
of what "international law" means for the purposes of that item. According to the text of 
the footnote: "2 "International law" refers to generally accepted international law such 
as the United Nations Convention on the Law of the Sea, 1982." (UNCLOS -1982).  
a. In this context, the Brazilian delegation would like to know if the parties to the 
AHKFTA consider any other treaty, besides UNCLOS -1982 and besides 
international customs that are evidence of a general practice accepted as law (as 
per Article 38 (1) b of the Statute of the International Court of Justice), to be 
applicable to the definition of "international law" presented in the footnote.  
b. Do the Parties to the Agreement believe that other treaties could be considered 
as "generally accepted internation al law" and, as such, could entitle a Party to 
the AHKFTA or a national of a Party to AHKFTA the rights to exploit the seabed 
or beneath the seabed outside its waters and, thus, have its products considered 
"wholly obtained"? In case of affirmative respons e, which treaties would be 
that?  
Joint response from the Parties  
 
 Under the definition of "international law" in the said footnote, the United Nations Convention 
on the Law of the Sea, 1982 ("UNCLOS") is cited as an illustration of "generally accepted 
international law". This definition of "international law" does not preclude the application of other 
relevant treaties that are applicable to the Parties.  
 
 The Parties will take into account all their relevant international obligations, including UNCLOS, 
in the assessment of whether a particular good can be regarded as "wholly obtained" by virtue of 
subparagraph (f) of Article 4 (Wholly Obtained or Produced Goods).  
 WT/REG448/2  
 
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  Questions from Japan  
 
Characteristic elements of the Agreement  
 
1.2.  Paragraph 2.4 .: An Agreeme nt on Investment (AoI) was also signed by the Parties 
and is part of a wider process of economic integration and trade liberalization among 
them. In connection with the AoI agreement was reached between Hong Kong, China; 
Brunei Darussalam, Malaysia and Sin gapore on the definition of "natural person of a 
Party", and between Hong Kong, China and Singapore on expropriation and compensation.  
 Please explain the reasons why an Agreement on Investment (AoI) was also signed 
by the Parties separately. Please explai n the reasons why separate agreements were 
reached between some of the ASEAN member countries and Hong Kong, China.  
 
Joint response from the Parties  
 
 Signing the AoI alongside the AHKFTA was the agreed arrangement between ASEAN and Hong 
Kong, China (HKC). The AoI complements the AHKFTA by providing investors of a Party with non -
discriminatory treatment of investments in non -services sectors and protection of investments in all 
sectors, in respect of their investments in the area of other Party.  
 
 In connection with the AoI, two side agreements were reached (i) between Brunei Darussalam, 
HKC, Malaysia and Singapore on the definition of "natural person of a Party", and (ii) between HKC 
and Singapore on expropriation and compensation. On (i) concerning t he definition of "natural 
person of a Party", ongoing discussions are being held between HKC and ASEAN under the AoI's 
Work Programme. Before the AoI's definition of "natural person of a Party" comes into effect, the 
protection of investments of natural pe rson investors only applies among Brunei Darussalam, HKC, 
Malaysia and Singapore pursuant to the side agreement. On (ii), the side agreement was reached 
by the two parties to confirm the understanding of the "real value" of compensation for the 
expropriate d investment for the purposes of Article 10 (Expropriation and Compensation) of the AoI.  
 
Provisions on trade in goods  
 
1.3.  Paragraph 3.32.: Table 3.5 shows tariff liberalization by Hong Kong, China for 
imports from the ASEAN Member States. In 2021, 100% of Hong Kong, China's MFN 
applied tariff (7,588 lines) was duty free, thus the entry into force of the Agreement did 
not prov ide further tariff preferences to ASEAN Members. The value of Hong Kong, China's 
imports from each ASEAN Member State (averaged over the period 2018 -2020) is also 
indicated in Table 3.5.  
 Please explain the quantitative and qualitative economic benefits o f this FTA. We 
would appreciate it if you could share the results of such analysis with us, if any.  
 
Joint response from the Parties  
 
 ASEAN and HKC have very close and strong economic and trade relations. In terms of trade 
in goods, ASEAN is HKC's second largest trading partner, whereas HKC is ranked sixth among 
ASEAN's largest trading partners. Under the AHKFTA, HKC and Singapore commit to granting tariff 
free access to all products originating from ASEAN Member States (AMS) and HKC respectively when 
the AHKFTA takes effect. As for other AMS, they agree to gradually eliminate or reduce their customs 
duties on goods originating from HKC.  
 
 AMS and HKC hold regular meetings to review the implementation progress of the FTA. At the 
6th ASEAN Economic Minister s-HKC Consultation held in September 2022, both sides noted that 
despite the global economic downturn due to the pandemic, the AHKFTA had reinforced the strong 
bilateral merchandise trade relations. According to ASEAN's statistics, total merchandise trade 
between ASEAN and HKC reached USD 132.9 billion in 2021, an increase of 18% year -on-year from 
2020. Meanwhile, the total foreign direct investment (FDI) flows from HKC to ASEAN amounted to WT/REG448/2  
 
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  USD 8.11 billion, or 3.1% of ASEAN's total FDI, placing HKC the 5th largest source of FDI for ASEAN .1 
The latest annual figures of HKC also demonstrated this continuing positive trend. The bilateral trade 
in goods between the two sides reached USD 165.3 billion in 2022, representing an increase of 
25.2% as compared to the statistics of 2020, the year befo re the AHKFTA was entered into full force. 
The growing bilateral trade has definitely brought about economic benefits to both sides and 
ultimately contributed to the prosperity of the region.  
 
Apart from tariff reduction, there are provisions in the AHKFTA  for ASEAN and HKC to promote 
mutual cooperation in the administration of customs matters. They seek to ensure that the customs 
procedures and practices applying to goods traded between the two sides are predictable, consistent, 
transparent and trade facil itating. The AHKFTA also contains provisions to strengthen cooperation 
and enhance transparency in the areas of sanitary and phytosanitary measures as well as technical 
barriers to trade.  
 
 Indeed, the benefits of the AHKFTA go far beyond trade in goods. As regards trade in services, 
AMS and HKC have made WTO -plus commitments under the AHKFTA. Service providers can thus 
enjoy better market access and legal certainty in a wide range of services sectors. The AHKFTA also 
facilitates the movement of persons in  terms of temporary stay and entry for business purposes.  
 
 The AHKFTA also comprises a chapter on Economic and Technical Cooperation (ECOTECH). 
Both sides have conducted ECOTECH activities in certain priority areas, such as e -commerce, 
intellectual proper ty, professional services, small and medium enterprises, and trade 
facilitation/logistics. These activities have greatly enhanced the benefits of the AHKFTA through 
capacity building programmes and technical assistance. So far, a total of 21 ECOTECH projec ts have 
been approved by the AHKFTA Joint Committee.  
 
 All in all, the AHKFTA brings about legal certainty and better market access for the trade in 
goods and services that provides a framework for further collaboration conducive to the long -term 
economic growth and development of the region.  
 
Regulatory Provisions of the Agreement  
 
Customs -related procedures and trade facilitation  
 
1.4.  Paragraph 3.62.: In Chapter 4 (Customs Procedures and Trade Facilitation) the 
Parties aim to ensure predictability, consiste ncy and transparency in the application of 
their customs laws; to promote efficient and economical administration of customs 
procedures, and expeditious clearance of goods; to simplify and harmonize customs 
procedures to the extent possible; to promote co -operation among their customs 
administration; and to facilitate trade among them. In addition to disciplines to improve 
efficiency in customs procedures and trade facilitation the Chapter adopts procedures for 
pre-arrival processing and risk management to determine control measures. The customs 
authorities of each Party shall endeavour to establish a programme of authorized 
economic operators (AEOs) based on the SAFE Framework of the World Customs 
Organization and to work towards mutual recognition of AEOs (Article 10). Advance 
rulings are to be provided by the Parties and be valid for three years (Article 12). There 
are also provisions for customs cooperation through contact points on issues related to 
trade in goods arising from the implementation of the C hapter (Article 17), while under 
Article 18 importers, exporters or any other person affected by a Party's administrative 
rulings may have recourse to an administrative appeal or review by an authority higher 
than or independent of the official or office r esponsible for the rulings.  
 While AHK has set the objective of the expeditious clearance of goods in Article 2 of 
Chapter  4, we do not see the provisions of Release of Goods, which we think are one of 
the standard and important provisions in CPTF chapter . Please kindly share with us the 
reason why AHK does not have Release of Goods provisions in CPTF chapter.  
 
 
1 Please refer to the joint media statement of the 6th ASEAN Economic Ministers -HKC Consultation 
which can be accessed at https://asean.org/joint -media -statement -of-the-sixth-aem-hong-kong-china -
consultation/ . WT/REG448/2  
 
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  Joint response from the Parties  
 
 The provision on "Express Consignments" (Article 14) in Chapter 4 of the AHKFTA 
demonstrated the commitment of the Parties to facilitate customs clearance of express consignments 
by putting in place adequate measures such as pre -arrival lodging and processing of declaration.  
 
 We would also suggest to draw reference to "Pre -Arrival Processing" (Articl e 5), "Risk 
Management" (Article 6), "Use of Information Technology System" (Article 9) in Chapter 4 which 
reference the facilitation of customs clearance and the release of goods. Hence, a separate provision 
is not required.  
 
Question from the United Stat es 
 
Rules of origin  
 
1.5.  Annex 3.3 of the agreement contains products for which no product -specific rule of 
origin was developed. Footnote 24 to paragraph 3.38 of the Secretariat report states that 
the negotiations have been completed.  
 What is the projected timeline when these rules will be incorporated into the 
agreement and become applicable?  
 
Joint response from the Parties  
 
 Pursuant to Article 17 (Sub -Committee on Rules of Origin) of Chapter 3 (Rules of Origin), the 
Parties have finalised the n egotiations on the Product Specific Rules of the tariff lines listed in Annex 
3-3 (Product Specific Rules to be Reviewed) of Chapter 3 (Rules of Origin) and are now working on 
the legal instrument to incorporate the outcome of the negotiations into the AHK FTA. The Product 
Specific Rules will become effective in accordance with the provisions of the legal instrument. It is 
the Parties' shared target to implement the subject Product Specific Rules as soon as possible.   
 
__________  