What Ratification of this Landmark Free Trade Agreement (FTA) Could Mean for Importers, Exporters and Others

In the works for over 10 years, the Trans-Pacific Partnership is one of the largest Free Trade Agreements (FTAs) in history and has the potential to significantly change many facets of global trade. When ratified, the agreement may reduce tariffs on certain goods and services, minimize trade barriers and synchronize a number of regulations.

Covering Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam; the deal aims to deepen economic ties between participants and to boost the economies of members. The agreement places the complexities of duties, tariffs, Rules of Origin (ROOs) and more on center stage as each country ratifies the initiative and hammers out details at a national level.

With the TPP representing 40% of the world’s economic output a ratified TPP may have a substantial influence on product sourcing, macro and micro trade patterns as well as on operational procedures. However, the ratification process is expected to take some time as each country individually reviews its potential effect. In the meantime, many businesses in the automotive, agricultural, technology, textile, pharmaceutical and other sectors are weighing-in on the implications to their respective industry segments.
 

What Does TPP Mean to the Average Importer/Exporter?

At a practical level, the key question is how the TPP may affect shippers as well as brokers, forwarders and consultants who assist and advise on the implementation and utilization of FTAs. Simply stated, when the full details of the agreement are revealed, it is anticipated that many businesses will need to conduct an exhaustive review to evaluate if the TPP applies to their commodities. This is not a small endeavor when considering the volume of goods exchanged between participating countries.

If the TPP follows the pattern of some previous FTAs, qualifying for preferential treatment may be complex. Standardized processes for origin determination, the correct completion of solicited certificates, calculation procedures, recordkeeping and more will need to be established.

However, unlike some previous FTAs, the Trans-Pacific Partnership involves several nations that already have trade agreements in place. Stakeholders are keeping a close watch on whether the TPP will supersede other accords, such as NAFTA and other FTAs, or if multiple Rules of Origin will exist simultaneously with the TPP as one of multiple options.

How to Prepare for the TPP?

Compliance professionals are accustomed to changing Free Trade Agreements, however the scope of the TPP is sweeping and may impact a large number of products. Leading companies often use regulatory changes as a springboard to reevaluate operational processes and supporting systems, such as technology. In regard to the TPP, it is likely that there may be a period of intense scrutiny of TPP claims following ratification. For this reason, some businesses may view this transitional period as a significant call-to-action, and to ask questions such as:

  • Do you have access to the Harmonized System (HS) codes for all of the TPP-participating countries within a centralized system?
  • How are Certificate of Origin (COO) details currently being saved and maintained? Can documents be produced easily on-demand?
  • Is there a system in place that includes checks and balances when preferential tariff treatments are claimed?
  • What Rules of Origin apply to which products and could the TPP impact strategic sourcing? For example, if production is moved to or from one of the participating nations, what are the additional savings gained or costs incurred?

With a sizable database of over 6-million reference documents, Descartes CustomsInfo™ is the world’s leading source of global trade information. Descartes CustomsInfo unites systems and people with the trade information they need to make better classification decisions, streamline communication and adapt to changing Free Trade Agreements. Once ratified, Descartes CustomsInfo will help to prepare you for the impact of the TPP.

To see how we can help you comply with current FTAs, Register for a Free 14-day Trial of our web-based Descartes CustomsInfo™ Reference solution, a cross-referenced and searchable database of duty rates, customs rulings, regulations, World Customs Organization (WCO) Explanatory Notes, WCO Opinions and more.

Trans-Pacific Partnership (TPP) Participating Countries 

* http://fas.org/sgp/crs/row/R42344.pdf 

Written by Preston Barton

Vice President of Sales, Content Business at Descartes