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.
The Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) is moving forward and has gained momentum recently as Japan, Singapore and Mexico have ratified the 11-party agreement and Australia’s ratification is imminent because the deal recently passed both Houses of Parliament. Canada is closing in on ratification as well.
It seems apparent that even after the US withdrawal from the deal in January 2018, the agreement will enter into force by the end of 2018 or beginning of 2019. And although there are already a number of FTAs in place among certain members of the CPTPP, this Mega-FTA, unprecedented in scale, is expected to have influence not only among the members, but also will impact globalization and potentially leave non-members behind.
Following the unexpected victory of the Mahathir-led coalition party in the Malaysian general elections in May 2018, the 60-year uninterrupted rule of the Barisan National came to a historical halt, ending with it many policies and initiatives previously undertaken by the Najib-led administration. In the firing line, stood the CPTPP, in respect of which Mahathir had briefly announced in early June 2018 the potential need for Malaysian to review its participation in the same during his maiden visit to Japan after taking office as the premier, citing the need to consider the terms of the CPTPP vis-a-vis ‘the level of development of a country’. The months ensuing the no less than ambiguous statement saw critics from both flanks voicing their sentiments on the CPTPP whilst Malaysia’s participation in the same remains uncertain.
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.