CLIENT UPDATE - TPP

LOCH M FRASER LOGISTICS PTY LTD CLIENT UPDATE

Dear Valued Client,

Trans-Pacific Partnership (TPP)

The second version of the Trans-Pacific Partnership (TPP) was signed in Chile overnight.  While Australia has free trade agreements with 9 of the 11 TPP members, the TPP still represents significant opportunities for importers and exporters of goods. 

What is the TPP?

The TPP is a comprehensive free trade agreement being negotiated between Australia, Japan, Canada, Mexico, Malaysia, Vietnam, Chile, Peru, New Zealand, Singapore and Brunei.  The TPP originally included the US, but President Trump withdrew the US from the agreement on his first day in office.   When enacted, the TPP will extensively liberalise trade in goods and services and remove investment restrictions amongst TPP members.  However, with Australia being a party to so many existing FTA, it is right will the TPP have any impact.

Benefits of the TPP

While there is considerable overlap with Australia's existing FTAs, the TPP will provide customs duty free trade for the first time on the vast majority of goods imported and exported from Canada and Mexico. 

The TPP will be easier than other FTAs

Under the TPP a certificate of origin can be issued by the producer, exporter or importer, can be in electronic form and does not have to take any specific form.

Rules of Origin

To qualify for a FTA the goods must satisfy the rules of origin.  If goods contain material from a third country, this may disqualify the good.  However, under the TPP, material from any TPP member can be used without disqualifying the goods.  As an example, Australian beef could be marinated with New Zealand wine and Vietnamese flavours and exported to Japan as a TPP originating good.  The same good may not qualify under Australia's FTA with Japan.

It will get better

The TPP membership is not set.  There is capacity for other countries to join and the following countries have shown an interest: Taiwan, Thailand, the Philippines, Indonesia and Korea.  The more countries that join, the more likely it is that the TPP can become the default FTA for the region and encompass entire regional supply chains.

Some important points

Exporters and importers will need to ensure high levels of trade compliance. 

The risks with the TPP include:

•    ensuring that the certificate of origin includes all the required information.  While there is no set format for the certificate of origin, there are a range of mandatory requirements;

•    making sure you are using the correct FTA.  The rules under each FTA are different.  There needs to be alignment between the rules of origin you have applied, the certificate of origin produced and the FTA the importer wishes to use;

•    have Canadian and Mexican goods been transhipped via the US?  This can occur but goods generally cannot be altered and must remain under customs control; and most importantly;

•    ensuring that goods actually meet the rules of origin.  This will be especially the case with goods that include content from a non-TPP member.

Planning

Companies should start to take the TPP outcomes into account when developing supply chain strategies and undertaking long term planning.

We will provide more information as it becomes available.

If you have any questions, please do not hesitate to contact me.

Kind regards,

Dave Simmons

GENERAL MANAGER

INTERNATIONAL LOGISTICS CONSULTANT