Preferential Trade updates 10/21

Australia: Enhancing the ASEAN-Australia partnership

Australia will enhance our cooperation with the Association of Southeast Asian Nations (ASEAN) to strengthen our partnership with the region to address the current and future challenges in the Indo-Pacific. Australia will implement a new package of initiatives under Partnerships for Recovery to meet the health security, economic and stability challenges in our region, including COVID-19.

China moves to join the CPTPP

China formally submitted a request to accede to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) trade agreement. This was not surprising news, but it was still big news. The CPTPP is the survivor to the American exit from the original Trans-Pacific Partnership (TPP) at the behest of former U.S. President Donald Trump. The reconfigured trade grouping retained the ambitious targets for tariff elimination and high standards on trade and investment liberalization. From its inception, the TPP project has anticipated welcoming new members both to increase its economic heft and to disseminate quality rules for economic integration. Acceptance of the CPTPP’s extant disciplines is required of all prospective members.

General rules to determine the origin of your products for trade between the UK and EU

These general provisions set out the general rules for determining the origin of products traded under the Trade and Cooperation Agreement. They cover the basic ideas, of origin and how origin should be determined in specific instances, such as:

• when a product has accessories or is part of a set
• how packaging and materials used in production should be treated
• They need to be read with the product-specific rule for a given product.

It is important that you are familiar with all the general provisions from the text of the Trade and Cooperation Agreement (TC), however this guidance explains some of the most important and more complex elements and gives examples to show how to apply them. These include:

• cumulation of origin
• wholly obtained products
• insufficient production
• tolerance
• accounting segregation

There are additional provisions that are not covered in this guidance. You can find more information on all the general provisions in the full Trade and Cooperation Agreement text.

EU publishes guidance on the transitional rules of origin applicable in the pan-Euro-Mediterranean area

The EU Commission published guidance on the transitional rules of origin in the pan-Euro-Mediterranean area (the “Transitional Rules“). The EU is currently amending 21 origin protocols within the pan-Euro-Mediterranean (“PEM“) area by implementing an alternative set of rules of origin which will apply alongside the rules of the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (the “PEM Convention“). The amendments will apply on a bilateral basis pending the adoption of the revised Convention. The new rules, which seek to improve and simplify the current PEM Convention, were endorsed by a large majority of PEM Contracting Parties who wished to benefit from the changes in advance of the revised Convention.

The transitional rules should initially apply from 1 September 2021 between the EU and Switzerland, Norway, Iceland, Albania, Jordan and Faeroe Islands. The adoption of the amendments to the bilateral origin protocols on rules of origin with other countries (North Macedonia, Serbia, Montenegro, Bosnia and Herzegovina, Kosovo, Republic of Moldova, Georgia, Ukraine, Palestine, Lebanon, Turkey and Egypt) is ongoing.

Peru becomes a Party to CPTPP

Peru becomes the eighth economy to bring the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) into force. The CPTPP’s free trade area eliminates more than 98 percent of tariffs on trade and captures future services liberalisation which will supercharge trade, jobs and growth opportunities for its member countries. Peru is a fast-growing, dynamic economy offering Australian exporters a gateway to Latin America and the CPTPP will support trade with Peru growing beyond our existing bilateral agreement, the Peru-Australia Free Trade Agreement.

Peru and Guatemala sign an agreement to promote mutual commercial operations

The National Superintendency of Customs and Tax Administration (Sunat) and the Superintendency of Tax Administration (SAT) of Guatemala signed a Mutual Recognition Agreement to promote the Authorized Economic Operator (OEA) program, which will streamline foreign trade operations between the two countries. Between 2019 and 2021, commercial operations between Peru and Guatemala exceeded 350 million dollars. Imports (of products such as cane sugar, furniture, Kraft paper and rubber), amounted to 130 million dollars, while exports (plastic plates or sheets and shellfish tails, among others) exceeded 220 million dollars. This agreement is the seventh signed by Peru, after having signed it with Korea, Uruguay, the United States, the countries of the Pacific Alliance (Chile, Mexico and Colombia), the Andean Community (Bolivia, Colombia, Ecuador) and Brazil.

Using the Harmonised System and product-specific rules for trade between the UK and EU

You will need to use the Harmonised System (HS) to classify your goods and check they meet the rules of origin. It is an internationally standardised system of description and numbers and forms the first part of the:

• 10-digit commodity code used to classify goods when importing them into the UK
• 8-digit commodity code used to classify goods when exporting from the UK

It is used by customs authorities around the world to identify products when working out tariffs and taxes, and for gathering statistics. The HS is administered by the World Customs Organisation and is updated every 5 years. It serves as the foundation for the import and export classification systems used in every country. The main categorisations for products are:

• chapters (2-digit level or first 2 digits of the HS)
• headings (4-digit level of the HS)
• subheadings (6-digit level of the HS)

Introduction to rules of origin and claiming duties when trading between the UK and EU

The UK has a trade agreement with the EU – the Trade and Cooperation Agreement. This guide will help you to understand how you may be able to pay a reduced rate of Customs Duty (known as a tariff preference).

UK-EU trading relationship

To export tariff-free under the Trade and Cooperation Agreement, goods must meet the UK-EU preferential rules of origin. This means that there must be a qualifying level of processing in the country of export to access zero tariffs. This applies to EU origin goods imported and moving through the UK from an EU member state to another EU member state, as well as goods imported from outside of the UK or EU.

These rules are set out in the Trade and Cooperation Agreement and determine the origin of goods based on where the products or materials (or inputs) used in their production come from. Their purpose is to make sure that a reduced rate of Customs Duty is only given to goods that originate in the UK or EU, and not from countries outside the UK and the EU member states.

For goods that were imported from the EU and are being returned or redistributed in the EU without obtaining UK origin, the importer in the EU may be able to claim Returned Goods Relief.

If goods entered the UK under the internal Transit procedure (T2) and have not been entered into any customs procedure other than Transit or Customs Warehousing, they may be able to keep their EU status. This will mean that EU customs formalities, including duties and taxes, can be avoided. For more information, please click here.

Insufficient production for manufacturing and agri-food processes when trading between the UK and EU

For a product to qualify for a zero tariff, it must meet its product specific rule. Each product specific rule describes the nature or value of processing that must be carried out on any materials that do not originate in the country of export. The processing of these materials must go beyond the list of minor processes (known as insufficient production).
You cannot treat the product as originating in the UK (or EU) if insufficient production is the only processing carried out in the country of export, (even if the product meets its product-specific rule through that processing).

Check if operations can be considered as production

You must consider if the operations undertaken can be considered as production. The Trade and Cooperation Agreement defines production as any type of working or processing including assembly. For example, transportation or storage of goods would not be considered as production under the Trade and Cooperation Agreement. While some operations may be considered to go beyond insufficient, they may not be considered as production in the first place. For more information, please click here.

General rules to determine the origin of your products for trade between the UK and EU

These general provisions set out the general rules for determining the origin of products traded under the Trade and Cooperation Agreement. They cover the basic ideas, of origin and how origin should be determined in specific instances, such as:

• when a product has accessories or is part of a set
• how packaging and materials used in production should be treated

Key general provisions for EU trade

It is important that you are familiar with all the general provisions from the text of the Trade and Cooperation Agreement (TC), however this guidance explains some of the most important and more complex elements and gives examples to show how to apply them. These include:

• cumulation of origin
• wholly obtained products
• insufficient production
• tolerance
• accounting segregation

There are additional provisions that are not covered in this guidance. You can find more information here.