The UK Has Acceded to a New Preferential Trade Agreement

Last month saw the UK accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade agreement (FTA) for products and services linking the following contracting countries: UK, Canada*, Australia, New Zealand, Japan, Malaysia, Singapore, Vietnam, Chile, Peru, Mexico*, and Brunei (*still to ratify UK accession).
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Although this agreement overlaps with the UK’s existing bilateral FTAs with a number of these countries, there is still plenty of opportunity in it for UK business to profit from. Other countries in the regions concerned have applied to join (Uruguay, Costa Rica, and Ecuador), and more have expressed interest (Thailand, the Philippines, and South Korea).

The new agreement should greatly ease market access for traded goods and services between the countries involved, acting as a spur to economic growth at a time when there is rising concern about the prospect of tariff walls going up between economies. Focused on tariff elimination / reduction and lowering barriers, the CPTPP is a welcome tonic that may offer alternatives to some businesses. Possibly providing timely new options for diversifying sourcing, improving competitiveness and for supplying certain markets differently.

UK companies should be able to trade with most of the CPTPP countries under the agreement more or less straight away, the exceptions being Canada and Mexico, until they have ratified the UK’s accession, the agreement becoming applicable 60 days thereafter.

Key Benefits of the CPTPP for UK Trade and Investment

The CPTPP should strengthen trade ties between the economies of the UK and key countries in Asia and the Americas, helping to boost economic growth, with the near-term prospect of further expansion in the number of economies included. The main benefits of the agreement are outlined below.
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• Improved market access and increased opportunity to competitively export and source.
• Most goods traded between member countries will not be subject to customs duty (tariffs), helped by the agreement’s rules of origin which should enable businesses to trade more freely across the free trade area.
• Member countries have agreed to minimise the circumstances in which new customs duties can be introduced or existing duties increased, and have undertaken to progressively eliminate customs duties in respect of originating products, where currently applied.
• As well as expanding the scope for trade in goods, the CPTPP makes significant provision for trade in services, and for e-commerce (e.g. the remote delivery of digital products).
• The agreement aims to foster economic integration and co-operation within a predictable legal and commercial framework for trade and investment through mutually advantageous rules.
• Better trade facilitation between member countries through the implementation of efficient and transparent customs procedures, reducing costs and barriers, and improving commercial certainty for business.

In addition to the above, provisions within the CPTPP make the agreement more inclusive for small to medium sized enterprises. It recognises their importance to national economies and seeks to make it easier for such companies to engage in international trade. Similarly, under the agreement, member countries are to strive to implement it in such a way as to make their economies more responsive to international market developments, informed by best practices. The idea being to improve economic competitiveness and to support the development and strengthening of supply chains, in order to integrate production, facilitate trade and reduce the costs of doing business within the free trade area created.
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CPTPP Origin Rules: Ensuring Eligibility for Duty-Free Trade

The CPTPP’s rules of origin - which determine what the ‘economic nationality’ of goods is considered to be, and therefore whether preference is applicable under the agreement -, should enable businesses to trade more freely across the free trade area. While the UK’s existing bilateral FTAs with a number of the countries party to the agreement may limit its benefits, the CPTPP’s cumulation and product specific provisions under its rules of origin may differ for some goods, possibly allowing more to qualify for preference duty relief.

In common with other FTAs goods are considered originating if they are wholly produced (obtained) in the CPTPP free trade area or, where non-originating material is used, goods undergo sufficient processing in the CPTPP such that the resulting good satisfies the applicable product specific rule (PSR). The latter describes the required changes that non-originating materials must undergo in order for a good produced from such materials to be considered originating. For many goods, there are two options: a.) change of tariff classification of the good, that excludes the use of certain non-originating materials, and b.) an alternative that allows for the use of the excluded non-originating materials, provided that a regional content value requirement is met.

The CPTPP’s cumulation provisions mean that materials that qualify as originating based on their production in the free trade area, will maintain that status when used in further production within the area. Such that any production undertaken in a CPTPP country on a non-originating material may be counted toward the originating status of goods subsequently produced with the material.

As regards transit and transhipment, to maintain their originating status, when moving via non-CPTPP contracting countries, goods must not undergo any production outside the free trade area. Any operation must be confined to unloading, loading, and storing or be necessary to preserve goods in good condition or to transport them, and the goods must be under customs control at all times.‍

CPTPP Trade Opportunities

While there is a certain degree of duplication by the UK in acceding to the CPTPP, in relation to a number of the contracting countries and the bilateral FTAs already in place, the agreement still represents welcome new opportunity for UK business to profit from. Whether as regards countries with which no other similar arrangement otherwise exists bilaterally (e.g. Malaysia), or where certain provisions within the CPTPP improve upon those applicable in the next best alternative agreement.

In short, the CPTPP is worth a look, especially if you source / produce goods in any of the countries concerned, or are considering doing so. Get in touch to understand more and see if there is something within the agreement that might benefit your business, to enable you to reduce or eliminate import duty for example.

Further detail on the CPTTP can be found: here

Want To Take Advantage of CPTPP Opportunities?

Whether you're looking to expand your market reach, reduce tariffs, or enhance your supply chain efficiency, the CPTPP offers a wealth of opportunities for UK businesses. Don’t miss out on the chance to stay ahead in a competitive global market. Contact us today to learn how your business could benefit.

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‍‍This article was written by Christopher Starns, Customs & Trade Advisor (BKR Consultants Limited).