EU/USA Free Trade Agreement

20 January 2015

EU/USA Free Trade Agreement

Billed as the largest ever free trade agreement, TIPP could result in zero duty rates on US originating imports into the EU and vice versa. The average rate of customs duty on US imports is currently below 4% but some industries and specific products attract significantly higher rates (e.g. clothing 12%, slippers 26%, cars 8% etc.).

The Agreement also seeks to remove non-tariff barriers which typically add 10-20% to the cost of goods. These barriers include regulatory testing, licensing etc.

The target date for implementation is 2015 and, if successful, duty rates will drop to zero on most goods with immediate effect but with sensitive products having zero rates phased in over a short time (3-5 years).

There are a number of issues still under negotiation, including dispute over the potential gains under the Agreement, provisions allowing companies being able to bring legal actions directly against States (which could curtail State sovereignty), the relaxation of food standards etc. There is a growing resistance movement mobilising either side of the Atlantic fighting against the imposition of the Agreement.

To become law:

  • EU: needs agreement of EU Commission, Council, Parliament and National Member States;
  • US: needs Congress approval.

The Whitehouse is seeking approval to Fast Track the Agreement which would limit Congress to a yes/no vote rather than allowing amendments or other issues to be tagged on which could kill its progress.

If the Agreement becomes law then the following conditions will need to be met for imports to benefit:

  • The goods must originate in the US or EU in accordance with specific rules set out in the Agreement;
  • The goods must be transported directly between the two parties or remain under customs control if routed through other countries;
  • The goods must be presented with the necessary proof of origin.

The application of these rules has proved difficult for importers under other Trade Agreements. All imports are subject to audit based control so failures to comply with these conditions can give rise to significant duty liabilities and penalties.

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