Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

April 23, 2024
2024-0847

Trade Talking Points | Latest insights from EY's Trade Strategy team (April 2024, no. 1)

This edition of Trade Talking Points includes updates on the United Kingdom’s (UK’s) consultation for a carbon border adjustment mechanism (CBAM), the European Union’s (EU’s) Free Trade Agreements, United States (US) trade remedies, the latest World Trade Organization (WTO) meetings, a new Chinese dispute with the US over electric vehicles subsidies, updates on the WTO’s global trade forecast and meeting on services trade, the UK’s Border Target Operating Model’s April deadlines, the sixth meeting of the US-EU Trade and Technology Council, EU trade defense and the finalization of the EU’s Ukraine autonomous measures.

UK CBAM consultation

The UK Government has launched a consultation on the scope, design and administration of the future UK CBAM regime, which is due to come into force from 1 January 2027. Businesses have until 13 June 2024 to respond. The main areas of the consultation include:

  • What the CBAM will apply to: Categories include the proposed sectoral and product scope, and exemptions. The UK Government has included a list of proposed HS codes covering aluminum, cement, ceramics, fertilizer, glass, hydrogen, iron and steel.
  • How the CBAM liability will be calculated: The UK Government has invited comments on principles they have set out for the calculation of embodied emissions and consideration of the price of carbon paid overseas.
  • How the CBAM will operate: This section addresses the administration, payment and compliance of the UK CBAM regime.

Updates on EU’s Free Trade Agreements (FTA)

The EU’s FTA agenda has seen several significant updates including:

  • Chile: The EU has concluded the internal ratification process of the Interim Agreement on Trade (ITA) with Chile, paving the way for its entry into force, while the broader Advanced Framework Agreement awaits ratification by the individual EU Member States. The ITA focuses on trade and investment liberalization and aims to strengthen political and economic relations between the jurisdictions. EU companies will benefit from the removal of 99.9% of Chilean tariffs, improved access to the Chile’s government procurement opportunities and equal treatment for investors.
  • New Zealand: Following the completion of New Zealand’s ratification process, the EU-New Zealand FTA is set to enter into force on 1 May 2024.
  • Philippines: The EU and the Philippines announced the resumption of FTA negotiations on 25 March, aiming to put sustainability at the center, in line with the EU’s ambition to conclude greener deals. The EU is seeking a comprehensive FTA, including ambitious market access commitments for goods, services, investment and government procurement and an enforceable sustainable development chapter, while removing barriers to digital trade and trade in energy and raw materials. A first round of resumed talks is expected later this year.
  • Switzerland: On 12 March 2024, the Council of the EU authorized the Commission to negotiate a broad package of measures with Switzerland as the basis for future EU-Switzerland relations, and further approved the corresponding directives. The Commission will now be able to engage in formal negotiations with Switzerland on this package of measures. Negotiations are expected to commence in the coming weeks.
  • Canada: On 21 March 2024, the Bill on the economic and trade aspects of the EU-Canada Comprehensive Economic and Trade Agreement (CETA) were rejected by a large majority of the French Senate. While the agreement has provisionally been in force since 2017, approval of all 27 EU Member States is required for CETA to be fully ratified for the investment-related aspects of CETA to enter into force.

Businesses will shortly be able to take advantage of the benefits and opportunities the EU-Chile ITA and the EU-New Zealand deal.

US trade remedies

On 25 March 2024, the US Commerce Department announced updates to its trade remedies regulations on Anti-Dumping and Countervailing Duties. The final regulations were announced following Commerce’s publication of proposed regulatory changes in the Federal Register in May 2023 and the evaluation of subsequent stakeholder comments.

The updated regulations, taking effect on 24 April 2024, include modifications to:

  • Strengthen the Commerce Department’s ability to counter transnational subsidies
  • Address additional market distortions
  • Include measures to address labor, environmental, human rights or intellectual property protection concerns of US producers

How the regulatory amendment will be reflected in the US trade remedy policy and operational approach to investigations is yet to be determined. Businesses trading with goods frequently subject to remedies (e.g., steel, aluminum, products produced thereof, or technology enabled hardware) should consider how a potential increase in trade remedy related US tariffs could impact their operations and supply chains.

Updates on the World Trade Organization (WTO)

At the formal meeting of the WTO’s General Council on 21 March 2024, WTO Director General Ngozi Okonjo-Iweala urged Members to continue work on the long list of issues that were left unfinished at the 13th Ministerial Conference of WTO (MC13) including on agriculture, WTO dispute settlement reform, fisheries subsidies, e-commerce work program and development.

Following MC13, during a meeting of the WTO Committee on Technical Barriers to Trade (TBT) on 13-15 March 2024, WTO members adopted guidelines to support regulators in the choice and design of conformity assessment procedures, which help determine whether products comply with relevant technical regulations or standards. Members further agreed guidelines to follow when notifying of any measures put in place to implement the TBT Agreement.

US-China electric vehicles WTO dispute

On 27 March 2024, China requested dispute consultations with the US concerning tax credits provided under the Inflation Reduction Act that aim to promote the production of electric vehicles and renewable energy in the US. China claims that the tax credits led to a breach of the US commitment to national treatment by discriminating against goods of Chinese origin, thus favoring domestic over imported products. The US Trade Representative Katherine Tai responded to say that the US Government is “carefully reviewing” the consultation request but that the US will “continue to work with allies and partners to address the PRC’s unfair, non-market policies and practices.”

WTO Global Trade Forecast and meeting on services trade

The WTO has published its Global Trade Outlook and Statistics report, forecasting an increase in global goods trade of 2.6% for 2024 and 3.3% for 2025 following the decline in world merchandise trade volume in 2023 by 1.2%. The forecast is caveated with potential downside risks resulting from geopolitical tensions and policy uncertainty. The consumption of manufactured goods is expected to increase as a result of inflationary pressures subsiding, particularly in advanced economies. The report predicts a mostly stable gross domestic product growth of 2.6% in 2024 and 2.7% in 2025.

WTO members met on 25 March 2024 to discuss the cost of cross-border remittance services, and on 27 March to explore the impact of COVID-19 on information and communication technology and digitally delivered services. Despite trade in services falling significantly during the COVID-19 pandemic, digitally delivered services had the fastest growth rate of all international trade segments.

Members also discussed the proposal to boost the participation of Least Developed Countries (LDCs) in services trade by putting the LDC Services Waiver into practice — this commitment was reaffirmed in the MC13 Declaration.

A new Global Services Trade Data Hub is available from the WTO, providing comprehensive services trade data via four separate WTO datasets covering digitally delivered services, trade in services by mode of supply, trade in commercial services, and the WTO-Organisation for Economic Co-operative Development (OECD) Balanced Trade in Services dataset. Further enhancements and additional features are expected to be added.

UK Border Target Operating Model — April deadlines

New post-Brexit border checks are set to be introduced from 30 April 2024 as part of the UK’s Border Target Operating Model (BTOM), which came into effect at the end of January 2024. From 30 April 2024, traders operating between the EU and Great Britain (GB) must consider the following:

  • Goods entering GB from the EU or European Free Trade Association (EFTA) must pass through an appropriate Border Control Post (BCP) or Control Point (CP) designated for the specific commodity type. Depending on the goods’ risk type, documentary, identity and physical checks may take place:
    • “Medium risk” animal and plant products (classified under sanitary and phytosanitary goods) entering the UK — which previously only required health and phytosanitary certificates — will be subject to documentary, identity and physical checks. “Medium risk” fruit and vegetables imported from the EU, Switzerland or Liechtenstein will continue to be exempt from plant health controls.
    • “High risk” products traders are required to notify the Import of Products, Animals, Food and Feed System(IPAFFS) before the goods arrive in GB. “High risk” food and feed of non-animal origin from the EU will be subject to documentary, identity and physical checks. Current inspections of “high risk” plants and plant products from the EU, Switzerland and Liechtenstein will move from Places of Destination (PoDs) to BCPs and CPs.

Imports from non-EU countries will begin to face simplifications, such as the removal of health certification and routine checks on low-risk animal products, plants, plant products and a reduction in physical and identity check levels on medium-risk animal products.

Businesses trading between the EU/EFTA and GB, particularly in the meat and dairy industries, should assess which risk category their products fall under and are advised to plan their trade routes via relevant BCPs or CPs, to ensure compliance with the new measures.

US-EU Trade and Technology Council ministerial meeting

On 4-5 April, Belgium hosted the sixth US-EU Trade and Technology Council (TTC) ministerial meeting.

In conjunction with the TTC meeting, the EU, United States and other Minerals Security Partnership (MSP) partners, joined by Kazakhstan, Namibia, Ukraine and Uzbekistan, announced the launch of the Minerals Security Partnership Forum. The MSP Forum will provide a new platform for global cooperation in the critical raw materials space, and will subsume the Critical Raw Materials Club previously announced by the European Commission. The MSP Forum’s project group will focus on accelerating the implementation of sustainable critical minerals projects. The Forum will further engage in a policy dialogue to boost sustainable production and capacity, fair competition, and environmental, social and governance standards in critical raw material supply chains.

The MSP currently has 15 partners and is seeking out prospective members to expand participation in the MSP Forum, which will be cochaired by the US and EU.

The publishing of the Joint EU-US Catalogue of Best Practices on Green Public Procurementwas also announced at the TTC meeting, aiming to promote an understanding of sustainability considerations in public procurement. Discussions further focused on accelerating bilateral collaboration in a range of areas including artificial intelligence (AI), quantum technologies, semiconductors, sustainable trade and critical minerals.

Update on the EU’s trade defense measures

On 10 April 2024, the European Commission published a report on state-induced distortions in China’s economy. The report examines recent Chinese legislative and regulatory developments, providing relevant information to EU industries that could help initiate trade remedy complaints against China. The report adds to what it considers to be distortions in sectors of telecom equipment, semiconductors, the rail industry, renewable energy and electric vehicles. It retains the steel, aluminum, chemicals and ceramics sectors of the initial 2017 report. In parallel, the European Commission (EC) has progressed investigations into Chinese imports against unfair trade practices:

  • Trade remedy investigation into Chinese PET

    On 3 April, the EC announced definitive anti-dumping duties on certain polyethylene terephthalate (PET) imports from China, which will be effective for five years and range from 6.6% to 24.2% depending on the exporting producer. Provisionally imposed on 27 November 2023, the duties have now been finalized and are expected to protect EU industry from the threat of Chinese dumping and subsequent undercutting EU industry prices.

  • Foreign Subsidy Investigation into Chinese wind turbines

    On 9 April, the EC announced an investigation into subsidies received by Chinese wind turbine suppliers under the EU’s Foreign Subsidies Regulation, which authorizes the EC to assess market distortions caused by foreign subsidies. The investigation will specifically focus on turbines being used for the development of wind farms in Spain, Greece, France, Romania and Bulgaria. The probe has been initiated amid concerns that the wind industry could be undercut by Chinese imports — similar to the European solar industry. The China Chamber of Commerce to the EU has stated that the action endorses protectionism and discrimination against Chinese businesses. The Chinese companies under investigation have not been named.

Finalization of the EU’s Ukraine autonomous measures

On 8 April, EU Member State representatives confirmed a deal between the Council presidency and the European Parliament to renew the suspension of import duties and quotas on goods exported from Ukraine to the EU until 5 June 2025 subject to additional protections for European farmers. This was endorsed by the European Parliament on 23 April. The measures will enter into force on 6 June 2024. The autonomous trade measures (ATMs) enable Ukraine to generate its own trade-related income from trade with the EU and forms part of the EU’s support to the Ukraine to assist its recovery.

* * * * * * * * * *
Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United Kingdom), London

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more