The 11 parties to the Trans-Pacific Partnership Agreement who remained following the withdrawal of the United States have set March 8th in Chile as the date for signing the successor to that agreement, the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (“CPTPP”). Once ratified by at least six (6) of the 11 parties, the CPTPP will enter into force. Below is a synopsis of what has changed in the new agreement and an overview of opportunities for businesses operating in the CPTPP area.
Approximately 20 provisions in the original TPP have been “suspended” in the new CPTPP. Many of them were the more difficult concessions that the United States pushed for in the TPP negotiations, including:
What are the Opportunities and Benefits for Businesses Operating in the Region?
Transparency and Trade Facilitation
Many of the benefits related to tariff reduction, non-tariff barriers to trade and transparency remain in the agreement. Some of the highlights include the following:
- progressive elimination of customs duties on certain non-originating goods,
- elimination of waivers for customs duties, which are conditioned on the fulfillment of a performance requirement,
- elimination of customs duties for goods re-entered into a host country for repair or alteration,
- the duty-free entry of commercial samples and advertising materials,
- the duty-free entry of goods that are temporarily imported including goods intended for display or demonstration, sports purposes, commercial samples and advertising films and recordings and goods admitted for sports purposes,
- elimination of certain restrictions on imports and exports including commercial cryptographic goods and remanufactured goods,
- consistency and transparency for import licensing requirements and transparency of export licensing procedures,
- the assurance that administrative fees and formalities are not indirect protection for domestic goods or a taxation on imports or exports,
- prohibition on export duties, taxes and other charges unless the duties, taxes and charged are applied to domestic consumption, and
- transparency and publication of rules and regulations including penalty provisions and appeal procedures.
Trade in Goods
Additionally, the rules of origin that will be applicable to trade in goods will provide opportunities for many businesses in the region and include:
- Made in the CPTPP. There are three ways to define “Made in the CPTPP” which allows goods to receive reduced tariffs. First, goods that are wholly obtained or produced in CPTPP countries such as crops and fish are considered Made in the CPTPP. Also, those goods produced exclusively from CPTPP materials also receive Made in the CPTPP benefits. Finally, many goods may be considered TPP originating if they meet product-specific rules. The product-specific rules limit the type or amount of non-CPTPP materials allowed in production and therefore encourage investment and sourcing in CPTPP countries.
- Cumulation. For purposes of producing goods, the CPTPP generally treats materials from one CPTPP country the same as another CPTPP country. This allows for the concept of “cumulation” and provides incentives for businesses to integrate production and supply chains within the CPTPP countries.
- Recovered Materials and Remanufactured goods. When recovered materials derived from a CPTPP country are used in the production of remanufactured goods, the CPTPP allows for the recovered materials to be originating and “CPTPP material,” which encourages domestic production of remanufactured goods.
- Transit and Transshipment. Chapter three ensures that preferential treatment is not lost when CPTPP goods are in transit or being transshipped. It also includes limitations on production processes for in transit goods when those processes are conducted outside of the CPTPP region.
- Origin Procedures. Standardizes and creates consistency among the CPTPP countries for claims for preferential treatment including procedures for self-certification and verification procedures for origin claims.
- Adaptability. Allows for the parties to meet and consider improvements to the rules of origin.
The E-Commerce chapter remains unchanged and should ensure the free flow of data (subject to public-interest regulation, for example to prevent spam, protect privacy, and fight crime), prevent the spread of ‘forced localization’ of technologies and servers such as redundant data centers, and help to more effectively guarantee the security and privacy of internet users through consumer protection laws.
The chapter prohibits the imposition of customs duties on digital products, to ensure that products distributed electronically, such as software, music, video, e-books, and games are not disadvantaged. A companion provision prevents CPTPP countries from favoring national producers or suppliers of such products through measures such as discriminatory taxation or outright blocking or other forms of content discrimination.
To facilitate digital trade, the chapter includes provisions encouraging CPTPP countries to promote paperless trading between businesses and the government, such as customs forms being put in electronic format, as well as providing for electronic authentication and signatures for commercial transactions. The chapter prohibits requirements that force suppliers to share valuable software source code with foreign governments or commercial rivals when entering a CPTPP market.
We will continue to monitor these developments as the parties go through the process of ratification, implementation and enforcement.