CPTPP, trade and investment, Asia Pacific, customs, rules of origin, cumulationThe 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.

E-Commerce

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.

Author

Frederick Burke has over 20 years experience practicing in the area of corporate law. He served as the Practice Group Leader of the Firm’s Global WTO & International Trade Practice Group from 2006 to 2007, and has been ranked by Chambers Global as a leading lawyer in both Corporate Mergers & Acquisitions and International Trade for three successive years. Mr. Burke has also been recommended in more categories than any other lawyer in Vietnam by PLC Which Lawyer? in 2008. He is currently a member of the Prime Minister’s Advisory Council on Administrative Reform in Vietnam. Mr. Burke is highly regarded for his work on foreign investment projects in Vietnam and China for key players in the property development, trade, IT/C, and project finance areas. He provides practical advice in the related issues of securities, finance, tax, labor, regulatory compliance and dispute resolution. Mr. Burke also has extensive experience in working closely with Vietnamese legislators and law drafters on the many new laws and decrees that have been introduced to integrate Vietnam into the global economy.

Author

Jon joins Baker McKenzie from a large retailer where he was an Assistant General Counsel, Customs and International Trade, based in their head office in Oregon. He advised the global business on import and export laws and regulations in the areas of sanctions, customs, free trade agreements, export controls and anti-boycott. He also oversaw customs audits, investigations and litigation globally, and focused on improving supply chain efficiency and managing compliance risk. In this role, he worked extensively in the Asia Pacific region. Earlier in his career, Jon worked in trade teams in the Big Four accounting firms in the U.S. and in Baker McKenzie's Hong Kong office as an Associate between 2010 and 2012. He advised technology, apparel and consumer product companies on regional customs and international trade matters over the years.

Author

Kana is a corporate and commercial lawyer. Her practice is particularly focused on international agreements governing the cross border movement of products and provision of services, supply chain management as well as organizational restructuring. Kana has represented a broad range of multinational clients across various industries, such as consumer goods and retail, infrastructure, manufacturing and transportation. Kana also advises on various product safety, consumer protection and environmental compliance issues — including hazardous chemical substance import/export regulations, waste management issues and product lifecycle-related recycling — on a daily basis.

Author

Anne Petterd focuses on technology, telecommunications, customs and export controls, and consumer and commercial law issues. Much of her practice involves online, telecommunications and IT businesses as well as defence and government procurement. She previously worked with the Australian Government Solicitor. She also worked in Baker McKenzie's London office for 18 months and seconded to major telecommunications and information technology service providers. Anne handles projects involving digital economy, cloud computing and large-scale IT supplies in the Asia Pacific. Her work focuses on the retail, telecommunications, defence, government and financial services sectors, and often involves new business models and test regulatory issues on privacy and telecommunications. Anne also advises on customs assessment, compliance and export control requirements as well as related trade and product compliance issues. She regularly works with regulators on these matters.