globaltaxnews.ey.comSign up for tax alert emailsForwardPrintDownload |
25 July 2018 The EU and Japan sign Economic Partnership Agreement The European Union (EU) and Japan signed, on 17 July 2018, the Economic Partnership Agreement (EPA). The main objective of this landmark trade deal is to facilitate trade and progressively liberalize trade in goods by eliminating trade barriers between the EU and Japan. Besides offering business opportunities to companies involved in supply chains between the EU and Japan, it also provides opportunities for businesses rendering services between the two countries. This Alert summarizes business opportunities arising from this trade deal and highlights how businesses could benefit from this agreement between the EU and Japan once the agreement provisionally enters into force at the beginning of 2019. The EU-Japan EPA is the world's largest bilateral trade deal, creating the world's largest liberalized trade zone. By signing the agreement, the EU Commissioner for Trade, Cecilia Malmström, stated: "Together with Japan, we are sending a strong signal to the world that two of its biggest economies still believe in open trade, opposing both unilateralism and protectionism."1 The scope of the EU-Japan EPA goes beyond a traditional free trade agreement, as it not only eliminates most customs duties for goods traded between the two countries, but it also liberalizes the trade in services and removes long-standing regulatory barriers. The EPA is expected to provisionally enter into force at the beginning of 2019. Tariffs on most goods traded between the EU and Japan are gradually eliminated by the EPA. Different business sectors will benefit from the agreement as customs duties for a wide range of products will gradually be removed. Products benefiting include wine, cheese, beef, and processed meat and fishery products. Furthermore, tariffs on industrial products such as chemicals, plastics, cosmetics, textiles and apparel will be eliminated. Another sector for which this trade deal creates significant opportunities is the automotive industry, as tariffs on cars will gradually be removed as well. The EU-Japan EPA also provides for the reciprocal liberalization of trade in services and investment and for cooperation on electronic commerce. It is expected that in particular businesses trading in financial services, computer/information services, and travel and air transportation services will benefit from EU-Japan EPA. Non-tariffs barriers are also addressed by the EU-Japan EPA, which facilitates the access of EU companies to the highly-regulated Japanese market and Japanese companies to the EU market as well. These non-tariffs barriers concern among others motor vehicles, medical devices, textile labelling, cosmetics and beers. The EU-Japan EPA will also protect over 200 European agricultural products from a specific geographical origin, also known as Geographical Indications (GIs). This will allow European products on the Japanese market to have the same level of protection as they have in the EU and vice versa. The EU-Japan EPA provides on a reciprocal and mutually advantageous basis benefits for companies involved in supply chains between the EU and Japan. To make use of these benefits – e.g., elimination of tariffs on goods – basically three conditions must be met: Benefitting from the preferential duty treatment essentially requires a business to bring into line its origin management with the conditions stated in the EU-Japan EPA. Accordingly, businesses should work with their local tax advisor to: 1. Assess whether goods subject to export from the EU to Japan or vice versa have obtained preferential origin. 2. Identify the different stakeholders for origin management in the current supply chain set-up, especially with regard to identifying who and how the required certificates of origin should be obtained. 3. Optimize the supply chain to enable use of the EU-Japan EPA (or other free trade agreements) by identifying potential opportunities for simplifications and standardization and also setting out a roadmap to implement these optimizations. Document ID: 2018-5902 |
