The Trump Administration’s new trilateral trade agreement, rebranded as the United States-Mexico-Canada Agreement (USMCA), is meant to replace the North American Free Tree Agreement (NAFTA) and to set out a new framework for U.S. trade agreements, assuming it secures Congressional passage. U.S. Trade Representative Robert Lighthizer has called the USMCA a “paradigm-shifting model,” as the Trump administration looks to negotiate agreements with the European Union, the United Kingdom, and Japan.
While many USMCA provisions mirror the Trans-Pacific Partnership (TPP) negotiated by the Obama administration, USMCA reflects a different balance of priorities. Broadly consistent with the Obama administration, the Trump administration has prioritized the knowledge economy as befits American strengths, but the Trump administration has also sought to favor local manufacturing, shorten supply chains and set precedents for future trading rules addressing state-dominated economies.
In the midst of the trade war between the United States and China there is an opening up of trade in Asia–the entry into force of the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) on December 30, 2018, 60 days after the date of the 6th entrant’s ratification. The members who will begin receiving CPTPP benefits beginning on December 30 are the six ratifying members: Australia, Canada, Japan, Mexico, New Zealand and Singapore. As a result of the efforts of Japan and the other members, the landmark trade deal is taking shape and influencing the global trade landscape. As the trade war tariffs impact investment and push supply chains out of China, the CPTPP will attract trade and provide incentives for the consolidation of supply chains in the member states and the Asia Pacific region.
With the ratification of the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) by Mexico, Japan and Singapore, and the expectation that other parties will follow, we anticipate the agreement will enter into force by early next year. Although the CPTPP differs from the Trans-Pacific Partnership (TPP) due to the suspension of 22 provisions, most chapters of the new agreement remain untouched. One of those is Chapter 3: Rules of Origin and Origin Procedures.
As we get closer to entry into force, businesses should prepare to take advantage of the reduced tariffs and take steps to prepare for the new origin procedures. Under the CPTPP, the certificate of origin requirements are less onerous, do not require a specific form, require fewer data elements, and allow for self-certification. Many businesses will find this to be good news, and the simplified process is likely to facilitate trade among the eleven parties to the agreement. However, in order to substantiate the claims, businesses should start preparing for the new requirements and put in place procedures, including recordkeeping requirements, to provide sufficient support for preferential duty claims made under the CPTPP.
Self-certification and verification requirements
The rules of origin under the CPTPP differ from the usual origin procedures that are utilized in the Asia Pacific region under the existing ASEAN agreements. For duty preference claims, the ASEAN agreements most often require a government-issued certificate of origin. Under the CPTPP, importers, exporters and producers may “self-certify” or have the importer, exporter or producer sign the certificate of origin.
As the trade conflict between the United States and China continues, three free trade agreements are pressing ahead, including– the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), soon to enter into force, the Japan-EU Economic Partnership Agreement (JEEPA), recently signed and which represents 30% of global economic output, and the Regional Comprehensive Economic Partnership (RCEP), an agreement that includes both India and China and comprises the largest trading block in the region.
Specific developments include recent ratification by Mexico and Japan of the CPTPP that now requires ratification by four more signatories before entry into force. Additionally, CPTPP parties recently met to discuss and lay out a procedure for how other countries that are not currently members of the CPTPP can join the agreement. Japan and the EU recently signed JEEPA and hope it is ratified and enters into force early next year. And, separately, the RCEP’s Trade Ministers met in Tokyo in early July, with further working level negotiations planned in July and August 2018.