KNEPPELHOUT & KORTHALS: EU – Japan Trade Agreement entered into force on 1 February 201903/13/2019
By Eline Mooring - attorney
After four years of negotiation, the Economic Partnership Agreement between the EU and Japan has entered into force on 1 February 2019. The free trade agreement with Japan is the biggest free trade deal ever concluded by the EU. The purpose of this free trade agreement is to facilitate and therefore grow the trade between the EU and Japan. For international operating companies, particularly in the agriculture, the car and food industry, this free trade agreement offers great benefits.
Elimination import duties
One of the most important agreements in the trade agreement is that Japan as well as the EU eliminate the majority of their import duties. In the long term almost all of them disappear. 90% of all duties will be eliminated, corresponding to almost €1 billion of duties that are now being paid annually by EU companies exporting to Japan. For some products the import duties disappear immediately, while for other products this is a gradual process. For example, the EU will scrap the tariffs on Japan-built cars gradually from 10% to 0% over eight years.
On the other hand Japan eliminates or reduces the duties on the popular high quality products of European origin. This includes products such as cheese, wine and chocolate. The percentage of import duties for cheese could previously rise up to 40% and for wine exports the tariff was 15% on average. Also for other luxury products, such as chocolate (30%) and beef (38,5%) Japan levied high import duties. With the entry into force of this free trade agreement, these high import duties are ancient history.
Annually companies in the EU export more than € 58 billion worth of goods to Japan and €28 billion worth of services. The free trade agreement creates a trade zone of 635 million people and covers almost one third of the global GDP (Gross Domestic Product), with approximately 40 percent of the world trade.
Import and origin
To benefit from the advantages of the trade agreement it is important that the products to be exported have the preferential EU or Japan origin status. To determine whether a product can be regarded as a preferential good, specific conditions have been included in the trade agreement. The first step is to determine the status of the product, the commodity code (HS code) and the preferential tariff. It is important that the product is wholly obtained or produced with materials originating from the EU of Japan. If this is not the case, there are possibly alternative rules or requirements applicable. For example the value criterion, the tariff heading offset, processing rules or a combination hereof.
Proving preferential origin in the free trade agreement with Japan is not possible by providing an EUR.1 certificate. Instead of that, it is necessary to provide a REX declaration (statement on origin), or rely on “importers knowledge”. In the first case it is a matter of certification by the exporter. If it concerns a shipment with a value above € 6.000, it is important you are registered in the REX system. By relying on importers knowledge, the importer himself is fully responsible for proving the origin of the goods. Based on the importers knowledge of the origin of the goods he can request the application of a preferential tariff treatment.
Kneppelhout can assist your company with understanding and using the benefits of the free trade agreement between the EU and Japan.