60 Second Guide toTrade Agreements

20 March 2013

Qualifying imports from countries with whom we have Trade Agreements benefit from lower or zero percent customs duties

  • Trade Agreements are either:
    • Reciprocal- in which case our exports can enter those overseas countries at reduced duty rates
    • Unilateral- in which case our exports are not given beneficial treatment but the overseas imports in to the EU do
  • The EU has Trade Agreements with over … countries throughout the world
  • The key Trade Agreements include:
    • General System of Preference (GSP) for imports from lesser developed countries
    • South Korea
    • South Africa
    • Mexico
    • EFTA (Norway, Switzerland, Iceland and Lichtenstein)
    • Euro-Med with many countries around the Mediterranean
    • Turkey
  • The EU is currently negotiating Trade Agreements with:
    • Canada
    • Japan
    • USA
    • Malaysia
    • Vietnam
    • Singapore
    • India
  • To qualify for preferential treatment the following conditions must be met:
    • The EU must have a signed Agreement with the overseas country
    • The imported goods must be listed within the Agreement
    • The goods must originate in the overseas country in accordance with very specific rules set out in the Agreement (e.g. a certain % of value or raw materials used in production must from that country)
    • The goods must not have been manipulated between export from that country and import in to the EU
    • An appropriate Origin Certificate must be presented to HM Revenue & Customs
  • The reduced or nil rate of duty is claimed on the import customs declaration, usually by the importers freight forwarder
  • It is important that the importer monitors their imports to ensure the benefit is claimed. Claims are often missed if the Certificate is not provided or arrives late
  • The benefit from Trade Agreements is subject to audit based control and there is a risk that any duty savings can be reversed going back up to three years
  • Any risks can be reduced by:
    • Understanding the conditions of Trade Agreements
    • Inserting indemnity clauses in overseas suppliers agreements
    • Carrying out checks that the exporter is meeting the necessary conditions
    • Making a provision in the accounts for any savings until the three year window is closed
  • The benefits and risks under Trade Agreements will increase significantly over the next few years with new countries joining up

Next Steps

We recommend you:

1.      Determine whether your imports could be benefiting under Trade Agreements

2.      If your imports could benefit then determine the amount of duty savings that are being made so you understand the materiality of any potential failures

3.      Determine whether controls are in place to ensure claims are being made on qualifying imports

4.      Determine whether controls are in place to mitigate the risks of any retrospective duty demands going back three years

We work with our clients to carry out the above checks and implement appropriate procedures to manage this potential benefit. If you would like to discuss this then call 01905 619229 or e-mail rob@internationaltradesolutions.co.uk

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