By David Manning - Manager, Blockchain & Crypto Team While the title might seem dramatic, it is certainly the sentiment you will find across the array…
Good news if you buy or sell goods to Japan, or even if you don’t it may be worthwhile considering it going forwards.
On 1 February 2019, the EU-Japan Economic Partnership Agreement is planned to enter force. It is touted as “the biggest trade zone ever negotiated” covering 635 million people and almost one third of the world’s total GDP. It is also the first to include an explicit reference to the Paris climate agreement.
The major aim of the agreement is the elimination of 99% of tariffs currently imposed on goods traded between the EU and Japan. The agreement can be utilised by UK businesses for the duration of the UK’s remaining membership of the EU customs union (including any transitional period).
Interesting parts of the agreement include:
- Elimination of duties on many cheeses such as Gouda and Cheddar (which currently are taxed at nearly 30%) as well as on wine exports (currently at 15% on average);
- allow the EU to substantially increase its beef exports, and open additional opportunities for export of pork products;
- ensure the protection in Japan of more than 200 Geographical Indications (GIs), high-quality European traditional food specialities, and the protection of a selection of Japanese GIs in the EU;
Some tariffs will immediately be reduced to nil while others will be gradually eliminated over a period of up to 15 years (for imports into Japan) and 20 years (for imports into the EU).
For any business that purchases a significant amount of goods from Japan, this will allow a significant reduction in the overall Customs Duty liability.
Similarly any business that regularly sells goods to Japan may find it easier to make sales as their prices will be more competitive to Japanese customers.
Like all other Free Trade Agreements, a good can benefit from this “preferential” tariff treatment when they are proven to have a “preferential” country of origin. The country of origin often requires examination of processes performed on the goods and detailed calculations using a bill of materials. It should never be simply assumed to be the country of export.
Once established, the preferential origin has to be confirmed by a “Statement of Origin” made out on a commercial document. Where the value of the consignment is more than 6,000 Euros prior authorisation is required. To receive this authorisation you need to be either an Approved Exporter (AE) or Registered Exporter (REX) depending on the agreement (Japanese agreement requires REX).
Businesses that made an export to Canada between 1 December 2015 and 1 December 2016 will find that they already hold a REX registration as HMRC pre-registered these businesses in preparation for the launch of the Canada Free Trade Agreement (CETA). It is currently unknown whether a similar automatic pre-registration will take place for the Japanese agreement.
A UK company can ask to be added to REX which:
- Exports to a third country that has a trade agreement with the EU (Where the REX system applies)
- Exports goods to GSP Beneficiary Countries which are to be imported back into the EU (Bilateral Cumulation)
- Is an established re-consignor of GSP goods to other member states?
Note: GSP “Generalised Scheme of Preferences” is a unilateral preference that removes or reduces tariffs on imports from certain Less Economically Developed Countries
Applications for REX can be completed and submitted using a HMRC Government Gateway account.
Businesses should also be aware that further Free Trade Agreements with both Singapore and Vietnam have been signed and are likely to be implemented this year.
Please also be aware that the above is a simplified summary. Establishing the country of origin can prove particularly troublesome so if you have any queries, please do not hesitate to contact us.