CHAPTER 5

SSPB 4233

INTERNATIONAL INTERNATIONAL
TRADE REGULATIONS
BUSINESS LAW
MA KALTHUM ISHAK
Ph.D; LL.M; LL.B
By the end of this class you should be able to
understand:

What are
What is the
the
Why What are position of
governing
countries trade international
body for
trade? barriers? trade in
trade
Malaysia
regulation?

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 WHY NATIONS TRADE?

RESOURCE
ABSOLUTE ADVANTAGE
DISTRIBUTION

COMPARATIVE
ADVANTAGE
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RESOURCE DISTRIBUTION
➢ The factors of production are not evenly distributed throughout
the world
➢ Human capital is more skilled in nations with higher literacy
rates
➢ Physical capital is deeper in some nations
➢ Better machinery
➢ Infrastructure is better

➢ The unequal distribution of resources encourages nations to

specialize

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COMPARATIVE ADVANTAGE

➢ The ability for a nation to produce at a lower opportunity

cost

➢ The nation with the lowest opportunity cost should

specialize in that product

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ABSOLUTE ADVANTAGE

➢ When one nation can produce a good at a lower cost than another

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INTERNATIONAL
TRADE

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FREE TRADE?
• Many people argue that governments should regulate trade in order
to protect industries and jobs from foreign competition

• This is known as protectionism

• Many nations set up trade barriers in order to provide protectionism

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PROTECTIONISM?
• Countries try to stop foreign imports.
• Countries try to help their own businesses export.
• They do this by using trade barriers.
• Eg. Tariff, quota, embargo, subsidy.

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Why Protectionism?

Protects jobs

Protects infant
industries

Protects national
security

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 PROTECTIONISM

TARIFF QUOTA EMBARGO SUBSIDY

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1) Tariff
• Is a tax that a country adds on to imports.

• Eg. customs duty/import duty.

• This makes imports dearer & less attractive to consumers

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2) Quota
• Countries put a limit on the amount of a good that can be imported.

• Consumers then must by from indigenous businesses.

• The EU has a quota on the no. of Chinese garments it will allow into the
EU.

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3) Embargo
• Countries puts a complete ban on goods being imported from a certain
country.

• Consumers have no choice but to buy home produce.

• The USA has a trade embargo with Cuba.

• During apartheid Ireland had a trade embargo with South Africa.

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4) Subsidy

Is a direct payment to a It reduces the cost of

producer. production.

It makes exports
It boosts employment.
cheaper.

Eg. Irish farmers obtain

It improves the balance
direct farm payment
of trade.
from the EU.

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INTERNATIONAL
TRADE
ORGANISATION

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Asian Development Bank

• ADB assists its members, and partners, by providing loans, technical assistance,
grants, and equity investments to promote social and economic development.

• ADB maximizes the development impact of its assistance by facilitating policy

dialogues, providing advisory services, and mobilizing financial resources through
cofinancing operations that tap official, commercial, and export credit sources.

• Malaysia is a signatory since 1966

This Photo by Unknown Author is licensed under CC BY-NC-

ND
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 Asian Trade Promotion Forum (ATPF)

• Asian Trade Promotion Forum (ATPF) is a

gathering of Trade Promotion Organizations
(TPOs) in the Asian Region. It was established
in 1987, and currently has 23 members.

• The objective: to enhance trade in the region

through information exchange,
implementation of cooperative projects and
strengthening networks among member TPOs.

• CEO meetings and Working Level Meetings are

held once a year. Capacity Building Initiative
Program, Joint Exhibition, and various
cooperative projects are also actively carried
out by the members.

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 China-ASEAN Expo (CAEXPO)

• International economic and trade event jointly confirmed by the leaders of China and
ASEAN.

• It was proposed by the Chinese side at the 7th ASEAN-China Summit in October 2003
that the CAEXPO be annually held in Nanning, Guangxi, China from the year 2004
onwards.

• The proposal gained positive feedback from the heads of state/government of the 10
ASEAN countries and was written into the Chairman's Statement released afterwards.
The 1st CAEXPO was successfully concluded in Nanning in November 2004, since then
Nanning has become the permanent host city of the CAEXPO.

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 Project in Malaysia:

• https://special.caexpo.org/caexpoparks/park_malaysia/listpa
ge.html

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Economic and Social Commission for Asia and the
Pacific (ESCAP)
• The most inclusive intergovernmental platform in the Asia-Pacific region. The
Commission promotes cooperation among its 53 member States and 9 associate
members in pursuit of solutions to sustainable development challenges. ESCAP is one
of the five regional commissions of the United Nations.

• The ESCAP secretariat supports inclusive, resilient and sustainable development in the
region by generating action-oriented knowledge, and by providing technical assistance
and capacity-building services in support of national development objectives, regional
agreements and the implementation of the 2030 Agenda for Sustainable
Development.

• Malaysia is a signatory since 1957.

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Economic and Social Commission for Asia and the
Pacific (ESCAP)
• The most inclusive intergovernmental platform in the Asia-Pacific region. The
Commission promotes cooperation among its 53 member States and 9 associate
members in pursuit of solutions to sustainable development challenges. ESCAP is one
of the five regional commissions of the United Nations.

• The ESCAP secretariat supports inclusive, resilient and sustainable development in the
region by generating action-oriented knowledge, and by providing technical assistance
and capacity-building services in support of national development objectives, regional
agreements and the implementation of the 2030 Agenda for Sustainable
Development.

• Malaysia is a signatory since 1957.

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International Trade Centre

• Multilateral agency with a joint mandate with the

WTO and UN through the United Nations
Conference on Trade and Development.

• Improve the availability and use of trade

intelligence; strengthen trade support institutions;
enhance policies for the benefit of exporting
enterprises; build the export capacity of enterprises
to respond to market opportunities; and
mainstream inclusiveness.

• Connect micro, small and medium-sized

enterprises to global and regional value chains, a
major contributor to economic growth and poverty
reduction.

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World Bank

• Works in every major area of development.

• They provide a wide array of financial products and technical assistance, and help
countries share and apply innovative knowledge and solutions to the challenges they
face

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World Bank

• Works in every major area of development.

• They provide a wide array of financial products and technical assistance, and help
countries share and apply innovative knowledge and solutions to the challenges they
face

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World Trade Organisation

• The World Trade Organization (WTO) is

the only global international organization
dealing with the rules of trade between
nations.

• At its heart are the WTO agreements,

negotiated and signed by the bulk of the
world’s trading nations and ratified in
their parliaments. The goal is to ensure
that trade flows as smoothly, predictably
and freely as possible

• Malaysia is a signatory since 1995

This Photo by Unknown Author is licensed under CC BY-SA

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POSITION IN
MALAYSIA

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 INTRODUCTION
• Malaysia was a signatory to the General Agreement on Tariffs and Trade (GATT) on 24
October 1957 .

• In response to Article VI of GATT, Countervailing and Anti-Dumping Duties Act

1993 (CADDA) was enacted.

• With regard to safeguarding measures, Malaysia enacted the Safeguards Act

2006 (SA) to fulfil its obligations as a World Trade Organization (WTO) Member

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 INTRODUCTION
• Malaysia was a signatory to the General Agreement on Tariffs and Trade (GATT) on 24
October 1957 .

• In response to Article VI of GATT, Countervailing and Anti-Dumping Duties Act

1993 (CADDA) was enacted.

• With regard to safeguarding measures, Malaysia enacted the Safeguards Act

2006 (SA) to fulfil its obligations as a World Trade Organization (WTO) Member

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LEGAL FRAMEWORK

Anti dumping measures

Subsidies and countervailing measures

Safeguard measures

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 1) Anti Dumping Measures
• CADDA is the primary law that provides for trade remedies in Malaysia. It is also the
most widely used. Approximately 70 anti-dumping investigations have been initiated
in the past 20 years.

• Although this is a small number in comparison with other jurisdictions, there has been
an increase in investigations in recent years, with more than 30 initiations between
2011 and 2018 alone.

• 'Dumping' is defined as the importation of merchandise into Malaysia at less

than its normal value as sold in the domestic market of the exporting country
(S.2 (1) CADDA)

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• S.16 (1): 'normal value' means the comparable price actually paid or payable in the
ordinary course of trade for the like product sold for consumption in the domestic
market of the exporting country.

• S. 2 (1): ‘exporting country' to mean the country of export of the subject merchandise.
In instances where the subject merchandise is not exported directly to Malaysia but
trans-shipped through an intermediate country, the intermediate country would be
considered to be the exporting country if the subject merchandise is substantially
transformed in that country.

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• In the event that there are no sales in the domestic market of the exporting country or
when sales do not permit a proper comparison, the normal value can be determined
by two methods.

• S. 16 (2) (a): The first is by comparing the comparable price of the like product
when exported to an appropriate third country.

• S. 16 (2) (b): The second is constructing the value of the subject merchandise by
adding the cost of production to a reasonable amount for selling, administrative
and other general expenses and for profits

• S. 16 (5): The amount for selling, administrative and other general expenses and
profits shall be based on actual information pertaining to production and sales in the
ordinary course of trade

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• CADDA defines 'export price' to mean the price actually paid or payable for the subject
merchandise (S. 17 (1)).

• S. 17 (2): f there is no export price, or if the exporter and importer or a third party are
related, or there is a compensatory arrangement between the exporter and the
importer or a third party, the export price may be constructed on the basis of the
price at which the subject merchandise is first resold to an independent buyer or, if it
is not resold, on any reasonable basis

• S. 18 (5): If the subject merchandise is not imported directly from the country of origin
but is exported from an intermediate country, the price at which the subject
merchandise is sold from the exporting country to Malaysia shall be compared

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• S. 2 (1): 'injury' to mean material injury or threat of material injury to the domestic
industry, or material retardation of the establishment of such an industry

• S. 22a (1): A determination of injury for the purpose of an anti-dumping duty

investigation shall involve an objective examination of both the volume of imports of
the subject merchandise and the effect of the subject merchandise on prices in the
domestic market for like products and the consequential impact of the imports on the
domestic producers.

• S. 22a (2): it must be demonstrated that the subject merchandise, through the effects
of dumping, is causing injury to the domestic industry

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Procedure for Anti Dumping Measures
Phase 1
(Pre-lodgement)

Phase 2
(Filing of petition)

Phase 3
( Initiation and Preliminary determination)

Phase 4
(Final determination)

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 Phase 1 - (Pre-lodgement)
• During the pre-lodgement phase,
the potential applicant/petitioner
may contact the officers of Trade
Practices Section for assistance in
understanding the requirements
of a written petition.

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 Phase 2 (Filing of petition)
• This is a prima facie phase. The Investigating Authority must examine the accuracy and
adequacy of the evidence contained in the written petition and any other available
information to determine whether in fact there is sufficient evidence to warrant the
initiation of an investigation.

• The Investigating Authority is allowed 30 days to make a decision whether to accept or

reject the petition.

• If the petition is accepted, the Investigating Authority must notify the petitioner and
publicly announce the initiation of the investigation

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 Phase 3 ( Initiation and Preliminary determination)
• Following initiation, the Government shall carry out a full investigation of the alleged
dumping or subsidy, material injury and causal link, and make a preliminary
determination within 120 days (can be extended by another 30 days) from the date of
the publication of the notice of initiation of investigation.

• During this preliminary investigation period, the alleged parties are given the
opportunity to defend their interest by submitting the relevant data pertaining to the
case.

• Where there is an affirmative preliminary determination of dumping or subsidy

consequent injury to a domestic industry, temporary duty known as provisional
measures in the form of a bank guarantee or bank draft may be applied against the
future importation of the products only if such a measure is considered necessary to
prevent injury being caused during the period of investigation.

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• Provisional measures shall not be applied for sooner than 60 days from the date of
initiation of the investigation and the period of application of such measures should
normally not exceed 4 months (can be extended by another 30 days).

• Where there is a negative preliminary determination with regard to the existence on

dumping or subsidisation and injury, the Investigating Authority shall publish a notice
stating the reasons for the negative determination.

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 Phase 4 (Final determination)
• The Investigating Authority must make a final determination of dumping or
subsidisation and injury within 120 days from the date of the publication of the notice
of preliminary determination.

• During the final investigation period, the Investigating Authority will carry out on-site
verification visits of the alleged parties to verify the data submitted to ensure its
accuracy and relevance. The investigation is intended to further establish and verify
dumping, injury and causation to justify the application of definitive duty.

• Where there is an affirmative final determination, a definitive duty will be imposed for
a period of 5 years from the date of the publication of the notice of the final
determination.

• Where there is a negative final determination, a notice stating the reasons for the
negative determination and termination of investigation is published.
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 2) Safeguard Measures
• The SA came into force on 22 November 2007.

• Def: restrict imports of a product temporarily if a domestic industry is seriously

injured or threatened with serious injury caused by a surge in imports

• Despite receiving a lukewarm response in the beginning, with the first petition not
submitted to the government until nearly 4 years later, on 1 April 2011, since then
Malaysia has seen two other safeguard investigations and two further petitions in
2016, and another investigation in 2020, bringing the total to six

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• From a legislative perspective, the SA is a reflection of the WTO's Agreement on
Safeguards.

• S.10 - A petition can be initiated either by the domestic industry or by the government
at its own initiative.

1) a surge in imports must be established.

Requirements 2) imports caused serious injury (S.8(1))
3) carry the threat of serious injury to the
domestic industry (S.9 (1))

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Investigation procedure – S. 14(1)
• publication of a notice of initiation – S. 16
• Interested parties may participate in the investigation – S. 2(1)
• All interested parties will have the opportunity to present their
views and evidence at a public hearing.
• Gov will make a preliminary determination on whether the
product under investigation is being imported into Malaysia in
increased quantities and whether the conditions for a safeguard
measure have been met.
• The government can impose either a negative final determination
or an affirmative final determination.
• An affirmative final determination shall include, inter alia, a
complete description of the product under investigation, the
factors that led to serious injury, the duration, and a list of the
developing countries exempted

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 3) Subsidies and Countervailing Measures

• Like anti-dumping measures, countervailing measures are provided for in CADDA.

• Countervailing: imported goods are benefiting from subsidies

• However, in contrast to anti-dumping, there has been very minimal activity in this
area. To date, there have been no countervailing investigations initiated by Malaysia to
report to the WTO

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• Much like an anti-dumping investigation, initiation of investigation of countervailing
duties can be made on behalf of the domestic industry or by the government in
special circumstances.

• One of the distinguishing factors in the procedure under CADDA between

investigations for countervailing measures and for anti-dumping measures is that, for
countervailing measures, there is a requirement to have a consultation with the
interested foreign governments with the prospect of arriving at a mutually agreed
solution.

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• If a mutually agreed solution is not reached, injury and causal link would have to be
established before an affirmative decision can be made.

• The procedural requirements for countervailing measures resemble those for anti-
dumping

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THANK YOU

In the Name of God for Mankind

www.utm.my