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22 December 2017 Japan and EU conclude negotiations on Economic Partnership Agreement On 8 December 2017, Japanese Prime Minister Abe Shinzo and European Commission President Jean-Claude Juncker confirmed the conclusion of negotiations on the Japan-European Union (EU) Economic Partnership Agreement (EPA). The EU and Japan will now start the "legal scrub" process to finalize the text of the agreement, after which both parties will initiate the signing and ratification procedures for enactment. The EPA covers a wide economic area consisting of a total population of 640 million people, approximately 28% of worldwide Gross Domestic Product, and approximately 37% of worldwide trade. The EPA covers not only trade in goods and services, but also a wide range of topics such as non-tariff measures, Geographical Indications (GI) and the protection of intellectual property rights. Accordingly, the ratification of this agreement is expected to significantly impact businesses in the EU and Japan. The announcement to reduce and eliminate tariffs was made in conjunction with the agreement in principal in July 2017;1 however, details regarding the rules of origin requirements that must be met in order for businesses to benefit from the tariff reduction/elimination available under the EPA were not previously available. The "Japan-EU Economic Partnership Agreement (EPA) Factsheet" updated 2 November 2017 by the Ministry of Foreign Affairs of Japan Economic Affairs Bureau and the draft rules of origin published by the European Commission contain details regarding: (i) accumulation (originating material produced in the other party's jurisdiction is considered to be wholly originating, and the originating content of non-originating material produced in the other party's jurisdiction is considered to be originating for the purposes of determining the originating status of the product manufactured from such material); and (ii) self-certification program - statement of origin issued by the exporter or the importer's knowledge that the product is originating – will be sufficient to demonstrate originating status at import. In addition, according to the EU announcement on 8 December 2017, practical discussions concerning the following topics were held after the July agreement in principle:
While negotiations regarding investment protection standards and investment protection dispute resolution will continue, the EU announcement indicates that it aims to bring the agreement into force in 2019. However, it is unclear whether this ambitious timeline can be met, since the EPA will require not only European Parliament approval, but most likely will require ratification in each EU Member State with respect to non-tariff matters with respect to which the EU does not have exclusive competence. If both the Japan-EU EPA and TPP-112 enters into force as early as 2019, EPAs will provide businesses with greater opportunities and benefits than ever before. At the same time, the introduction of a self-certification program shifts more of the burden of accurately managing country of origin to exporters and importers. In addition, the more liberal accumulation rules under the Japan-EU EPA means that exporters and importers will need to understand these rules and establish a stringent compliance structure to ensure that the calculation rules appropriate to the EPA being utilized are applied. Moreover, the increasing fluidity of the Brexit negotiations and NAFTA re-negotiations mean that the establishment of global supply chains with the flexibility to cope with such uncertainties will be an important key determinant of future competitiveness. 1 See EY Global Tax Alert, Japan and EU announce Agreement in Principle on Economic Partnership Agreement, dated 13 July 2017. 2 See EY Global Tax Alert, Trans-Pacific Partnership-11: Parties reach agreement in principle, dated 20 November 2017. Document ID: 2017-5072 |
