Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK - Trade Competitiveness Briefing Paper - Evious K Zgovu
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ISSN 2520-291X
2021/05
Trade Competitiveness Briefing Paper
Impact of Post-Brexit
Procedural Rules for Pacific
Exports into the UK
Evious K Zgovu
Trade Competitiveness Briefing Paper 2021/05
ISSN 2520-291X
© Commonwealth Secretariat 2021
Consultant: Evious K Zgovu.
The author wishes to acknowledge and express gratitude for the technical guidance and support
provided by Mr Paulo Salesi Kautoke, former ACP Assistant Secretary General and current
Senior Director in the Trade, Oceans and Natural Resources Directorate, Mr Qazi Yawar
Naeem, Adviser, and Anamta Afsar, Assistant Research Officer, Trade Competitiveness Section
in the Trade, Oceans and Natural Resources Directorate; and Mrs Yvonne Chileshe, Expert,
Commodities and Value Chains Development, in the Structural Economic Transformation
and Trade Department of Organisation of African, Caribbean and Pacific States (OACPS).
The author also acknowledges and appreciates invaluable information and feedback from
stakeholders, including the Pacific Islands Private Sector Organization (PIPSO). Last but not
least, the author extends special thanks to Mr Viliame ‘Bill’ Raikuna and Mr Saba Villupuram for
research support.
Please cite this paper as: Zgovu, E K (2021), ‘Impact of Post-Brexit Procedural Rules for Pacific
Exports into the UK’, Trade Competitiveness Briefing Paper 2021/05, Commonwealth Secretariat,
London.
The Trade Competitiveness Briefing Paper series provides evaluative and strategic research
on new and emerging trade issues of relevance to the Commonwealth member countries.
The series focuses on the practicalities of addressing these new issues as well as long existing
(but still very current) policy challenges in a time-bound, targeted and effective manner;
taking into account both opportunities and challenges that emerge due to changes in global
trade landscape. The views expressed here are those of the author(s) and do not necessarily
represent those of the Commonwealth Secretariat.
For more information, contact the Series Editor: Opeyemi Abebe, o.abebe@commonwealth.
int.
Abstract
On 1 January 2021, the UK reverted to being an independent trade and customs territory, with
its own trade policy and operational customs measures and procedures. Using secondary data
and information from the UK Government, WTO, ITC, World Bank, IMF, the Commonwealth
Secretariat and others; as well as consultations with key stakeholders, including the apex regional
Pacific Islands Private Sector Organization (PIPSO), this study assesses how the UK’s new trade
regulatory measures, specifically customs documentary and compliance rules and procedures,
and tariffs, affect Pacific exports to the UK.
JEL Classifications: F10, F40, O24
Keywords: Pacific, exports, Brexit, trade outlook, Commonwealth
Trade Competitiveness Briefing Paper 2021/05 3
Contents
Executive Summary 5
1. Introduction 9
2. Objectives of the study 10
3. Methodology 10
4. Study findings 11
4.1 New rules and customs regulations for Pacific exports to the UK 11
4.2 Key procedural changes to export requirements for the Pacific regions,
impact on regional trade agreements and trade preferences schemes
pre- and post-Brexit 29
4.3 The potential economic and developmental impact of the new customs rules 29
4.4 The impact of COVID-19 on Pacific states’ ability to adapt to UK–Pacific
EPA rules 30
4.5 Emerging bottlenecks and challenges affecting Pacific exports to the UK 32
4.6 Available options that could be considered to remove bottlenecks 39
4.7 Brexit and trade competitiveness of Pacific exports to the UK 40
4.8 Regions within Pacific and export sectors most affected 45
4.9 Impact on subregional trade agreements, like PACER Plus 57
4.10 Role of private sector institutions in supporting exporters with new
UK customs procedures 59
4.11 Key Pacific EPA states’ exports to the UK and the market access conditions 60
4.12 Likely impact of UK–Pacific EPAs rules of origin on products in the
Pacific–EU–UK triangular supply chain 67
5. Summary, conclusion and the way forward 68
Notes 71
References 72
Annex 1. Accessing Importing Requirements information in destination country 74
Annex 2. Protocol II – Originating products in the UK–Pacific EPA 76
Annex 3. Annex IX to Protocol II 78
4 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK
Abbreviations and Acronyms
ACP African, Caribbean and Pacific
ASEAN Association of Southeast Asian Nations
ATQ autonomous tariff quota
AUS Australia
CET Common External Tariff
DF-QF Duty-free quota-free
EBA Everything But Arms
EF Enhanced Framework
EORI economic operators registration identification (number)
EPA economic partnership agreement
ESWS Electronic Single Window System
EU European Union
FTA Free Trade Area
GATT General Agreement on Tariffs and Trade
GF General Framework
GSP Generalized System of Preferences
HMRC Her Majesty’s Revenue and Customs
HS Harmonized System (of commodity classification)
Incoterms international commercial terms
ITC International Trade Centre
LDC least developed country
LPI Logistics Performance Index
MFN Most-Favoured-Nation
NTB non-tariff barrier
NTM non-tariff measure
NZ New Zealand
OACPS Organisation of African, Caribbean and Pacific States
OCTs Overseas Countries and Territories
PACER Plus Pacific Agreement on Closer Economic Relations (PACER) Plus
PICTA Pacific Island Countries Trade Agreement
PIPSO Pacific Islands Private Sector Organization
RKC Revised Kyoto Convention
SPS sanitary and phytosanitary
TBT technical barriers to trade
TF trade facilitation
TFA Trade Facilitation Agreement (of the WTO)
UK United Kingdom
UKGT UK Global Tariff
UN/CEFACT United Nations Centre for Trade Facilitation and Electronic Business
WCO World Customs Organization
WTO World Trade Organization
Trade Competitiveness Briefing Paper 2021/05 5
Executive Summary
After more than four decades of membership carried out an extensive document review, data
to the European Union (EU) and its customs collection and analysis, and consultations with
union, the United Kingdom (UK) exited the EU stakeholders, including PIPSO, among others.
on 31 December 2020 (‘Brexit’). On 1 January The study was conducted offsite by the consul-
2021, the UK reverted to being an independent tant in March 2021.
trade and customs territory, with its own trade The key findings, conclusions and suggested
policy and operational customs measures and way forward are as follows:
procedures, among others. The new UK trade
and regulatory landscape could potentially i. The UK follows best practice customs
pose certain challenges for its trade partners. procedures governed by relevant interna-
For the Organisation of African, Caribbean and tional conventions at the World Customs
Pacific States (OACPS), whose members are Organization (WCO) and the WTO Trade
heterogeneous in terms of size, geographical Facilitation Agreement. The UK is one of
location and capacity to meet foreign market the ardent champions and at the front-end
access conditions, among others, there could of leading innovations in trade facilitation
be disproportionate consequences for specific that seek to reduce trade costs and improve
regions and sectors that are heavily reliant on trade competitiveness for sustainable
the UK market. Thus, it is important to assess growth and development, which are desper-
how the UK’s new trade regulatory measures, ately needed in least developed countries
specifically customs documentary and compli- (LDCs) and developing countries. In fact,
ance rules and procedures, and tariffs, affect the weak state of trade facilitation, includ-
Pacific exports to the UK. ing weak customs efficiency in the Pacific
The study that this paper is based upon was EPA states, has been and remains one of the
commissioned to: (a) to carry out an evaluation key obstacles to growth of their exports. It
of the new post-Brexit customs processes for is an area where Pacific EPA states need
Pacific exports to the UK; (b) identify the supply more support for improvements.
and/or value chains of Pacific products in the ii. The challenge with the UK customs proce-
EU and UK markets, to examine how logisti- dures at this point appears to be informa-
cal changes will affect Pacific exports; (c) exam- tion search costs that Pacific exporters are
ine the impact the new customs procedures incurring, to find complete sets of informa-
will have on the Pacific Agreement on Closer tion, documentation, forms, among oth-
Economic Relations (PACER) Plus; (d) iden- ers, from a myriad of weblinks at https://
tify the role of the private sector, particularly www.gov.uk/. Thus, having information
the Pacific Islands Private Sector Organization presented online in accordance with inter-
(PIPSO), in supporting Pacific exports with national agreements is not enough; it also
the new procedural rules; and (e) to enable matters how that information is organised
the Commonwealth’s Trade Competitiveness online to minimise information search
Section to provide trade facilitation assistance costs on the part of users of information.
to Pacific states, by mapping out new customs iii. In respect of customs rules, including such
processes involved in exporting to the UK. matters as rules of origin, the UK has largely
The study examined the provisions of the replicated EU rules of origin that it applied
UK–Pacific Economic Partnership Agreement before Brexit. However, UK EPAs contain
(EPA), which govern the new market access provisions that allow for parties to cumu-
conditions for exports from UK–Pacific EPA late materials in the EU27, although the
states, as well as the UK Global Tariff (UKGT) EU is not party to the UK EPAs. The UK
and non-discriminatory UK customs rules and argued that this was to avoid disruptions of
procedures that all UK imports must comply pre-existing business value chains that had
with to gain entry to the UK, as notified to been cumulating in the three regions before
the World Trade Organization (WTO). It also Brexit. The UK also calls it ‘continuity’ of
6 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK
trade relationships. However, those argu- (CET). It offers a more liberal trade policy
ments are not upheld in the UK–EU Trade stance than the EU CET, as it eliminates
Cooperation Agreement, which does not low ‘nuisance tariffs’, eliminates or lowers
provide for cumulating in any African, tariffs on products where the UK does not
Caribbean and Pacific (ACP) state by UK have domestic production, and creates tar-
and EU businesses. This leaves Pacific (and iff bands by rounding down some tariffs,
other ACP) states businesses shut out and among others. These actions amount to
potentially disrupt OACPS businesses sup- tariff liberalisation; hence, they effectively
plying materials to both the UK and EU. erode important export growth-enhanc-
Obviously, the strong value chains between ing preference margins enjoyed by Pacific
the UK and EU businesses are critical to EPA states, other UK EPAs with OACPS
the sustainability of the UK’s trade deals members and beneficiaries of the UK
with non-EU countries, hence, inclusion Generalized System of Preferences (GSP)
of the EU in UK EPAs. Similarly, Pacific schemes.
EPA states’ strong trade partners (Australia vii. The UK has introduced autonomous tar-
and New Zealand) should potentially be in iff quotas (ATQ), including one on sugar
the cumulation square in the UK-Pacific (260,000 MT per annum) which is open to
EPAs in the new era of trade relationships all countries in the world. This is of particu-
with the UK. This is a missed opportunity, lar concern to Fiji in the UK–Pacific EPA,
as it would have greatly assisted the small as it intensifies competition in the UK mar-
Pacific EPA states to cumulate and export ket with some of the world’s low-cost sugar
more under the UK–Pacific EPA than with- exporters, such as Brazil. The UK needs to
out their key trade partners. work with OACPS to explore ways in which
iv. Furthermore, Fiji and PNG should seek its demand for raw sugar for refinery in the
‘unconditional’ provisions for cumula- UK can be met, as there are members who
tion of materials from Australia and New are carrying excess capacity.
Zealand after each of the two countries viii. The UK has a GSP with three-tier frame-
have signed bilateral free trade area (FTA) works: GSP for LDCs, which mirrors the
agreements with the UK. This will follow EU’s ‘Everything But Arms’ (EBA) scheme;
the precedence where the UK (same as the a General Framework (GF) for lower-mid-
EU) allows Singapore to cumulate materials dle income countries; and an Enhanced
from fellow Association of Southeast Asian Framework (EF) for lower-middle income
Nations (ASEAN) comprising of Brunei countries that implement specified inter-
Darussalam, Myanmar/Burma, Cambodia, national agreements on human rights
Indonesia, Laos, Malaysia, Philippines, and good governance. The GF is clos-
Singapore, Thailand and Vietnam, pro- est to the Most-Favoured Nation (MFN)
vided the source ASEAN country has pref- UKGT, has more non-zero tariffs than the
erential trade agreement with the UK (EU). EF, and it reintroduces tariffs on products
Fiji and PNG have bilateral trade arrange- when competitiveness is assessed to have
ments with Australia and New Zealand. increased, among others. Non-trade issues
v. Cumulation in other ACP and Pacific conditioned on the EF should be addressed
states is also allowed under the UK–Pacific through other means and channels to allow
EPA. However, Fiji Islands and Papua New trade to prosper for the benefit of economic
Guinea (PNG) are net exporters to the other growth, development and poverty reduc-
Pacific states, so there is limited cumulating tion in the poor recipient communities in
from the small Pacific states. Nevertheless, ACP states.
if Fiji and PNG prosper under the agree- ix. The UK applies non-tariff measures
ment, which is expected to boost their (NTMs) like any other country and there
demand for exports of the other Pacific has been no significant change since Brexit.
states, this will be useful for trade and eco- Pacific businesses exporting to the UK must
nomic integration and development. comply with UK NTMs, by complying with
vi. The UK’s Global Tariff is a simplified ver- UK procedural rules and filling trade clear-
sion of the EU Common External Tariff ance forms, in addition to collaborating
Trade Competitiveness Briefing Paper 2021/05 7
with UK Sanitary and Phytosanitary (SPS) exported to the EU) now need to comply
and technical standards certification pro- with the EU documentary and border com-
cedures and processes, with the support of pliance requirements, including in SPS and
similar institutions in the exporting coun- technical standards, which they did not
tries. The biggest challenge concerning have to before Brexit.
complying with NTMs in export markets xii. Before Brexit, all EU28 member countries
such as the UK is with the Pacific EPA states were free to cumulate materials originating
not possessing adequate internationally from the ACP states under the EU EPAs.
accredited NTM compliance capacities to After Brexit, the UK and EU signed the
test and certify production processes, prod- UK–EU Trade Cooperation Agreement,
ucts and supply chains to the international which does not provide for cumulation
standards required in the export markets. of materials from third party countries,
As a result, Pacific states’ export expansion including ACP states. This means that
is hindered, leading to the Pacific states all Pacific products that are intermediate
not fully exploiting the trade opportuni- inputs in either UK or EU businesses are
ties from trade agreements and preference shut out, potentially causing a loss in trade
schemes. To this end, Pacific states should opportunities and export income for Pacific
seek more support, including from the UK, states. Pacific and the rest of the OACPS
to build their NTM complying capacities. members need to engage both the UK and
x. Small Pacific states have weak trade facilita- EU to allow continued cumulation of mate-
tion capacities that keep trade costs unsus- rials from the OACPS members in the con-
tainably high, hence undercutting export text of their Trade Cooperation Agreement,
growth and development. Progress has been at least with those OACPS members that
made to implement best practices in trade signed/sign EPAs with the UK and EU, as
facilitation, by the adoption and imple- it was before Brexit. A comprehensive busi-
mentation of some elements of the WCO ness survey is recommended to establish
Revised Kyoto Convention and the WTO the regions, sectors and industries that have
Trade Facilitation Agreement. However, been adversely affected by the lack of such
significant gaps remain that need immedi- cumulation provision in the UK–EU trade
ate attention to raise the efficiency of trade agreement, to chart the way forward.
facilitation within customs, SPS and tech- xiii. The COVID-19 pandemic has devastated
nical barriers to trade (TBT) administering Pacific states’ trade and economic activi-
agencies, among others. Expanded digi- ties, because of their significant reliance
talisation of the trade facilitation regimes, on suspended tourism and participation
for example, implementation of electronic in fractured global value chains. The cri-
single window systems, and regional co- sis has deprived and depleted island states
ordination and co-operation on the same, businesses and governments’ wherewithal
are some of the key areas of support to for recovery and adjustment to new trade
effect game-changing transformations and environments. External support is needed
contribute to cutting trade costs. to effect required changes, if they are to
xi. All products exported from the Pacific EPA be able to effectively transact and regulate
and non-EPA states need to comply with trade under the new trade agreement by, for
UK procedural and documentary require- example, introducing the necessary legisla-
ments. As the UK has largely rebranded the tion and regulations, information dissemi-
same procedural and documentary require- nation and awareness on the agreement,
ments it applied while part of the EU, there and targeted technical capacity building,
are no significant changes in the informa- among others.
tion, certifications and data requirements xiv. The private sector is a key player in the
needed to comply with market entry condi- realisation of benefits from trade agree-
tions into the UK. However, UK businesses ments. Private sector institutions like the
(both those that use or do not use Pacific Pacific Islands Private Sector Organization
exports imported into the UK as materials (PIPSO), an apex private sector organisa-
for onward transformation into products tion whose members are national private
8 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK
sector organisations, can play a catalytic capacitating with a targeted resource enve-
role in the implementation of UK–Pacific lope. PIPSO has a very lean staff, with no
EPA, for example, supporting awareness trade or customs expert staff on its payroll,
and sensitisation on the UK–Pacific EPA, and relies on membership fees and donor
providing targeted technical capacity support. Both sources of financial support
building on the operation and application have been affected by the COVID-19 crisis.
of post-Brexit UK customs procedures and There is a need for a comprehensive needs
rules of origin, promoting digitalisation assessment at PIPSO, to set out the scope of
for efficient trade facilitation and e-com- the capacity-building effort required within
merce with UK businesses, and supporting PIPSO and among member organisations
productive business-to-business relations and traders in order to support Pacific
between Pacific exporters and UK export- exporters to take full advantage of the UK–
ers, among others. However, PIPSO needs Pacific EPAs and increase exports.
Trade Competitiveness Briefing Paper 2021/05 9
1. Introduction
For more than four decades, African, Caribbean (LDCs) and developing countries. This includes
and Pacific (ACP) states exported to the United ACP states that consider the UK a strategic
Kingdom (UK) as part of the European Customs export market for specific sectors (for example,
Union Common External Tariff (CET) regime. sugar, bananas) and generally (Mohammad
This was until 31 December 2020, when the UK and Vickers 2016). For example, 74 per cent of
formally exited the European Union (EU) and its Tuvalu’s exports to the EU were destined for the
customs union (‘Brexit’) following a pro-Brexit UK, while the UK buys 48 per cent of Vanuatu’s
win of a referendum in June 2016. On 1 January and 46 per cent of Samoa’s exports.
2021, the UK introduced its trade policy with The UK concluded a Trade Cooperation
a Global Tariff (the UKGT) regime, which in Agreement with the EU that included pre-
some ways changes the terms and conditions of serving duty-free quota-free (DF-QF) market
accessing the UK domestic market by imports, access. Further, to replace the trade agreements
particularly from non-EU countries. The UKGT it had under the EU customs union, the UK has
mirrors the EU CET in certain areas but differs signed and is in some case engaged in nego-
in others, with simplifications in terms of tariff tiations for trade continuity agreements. For
banding involving rounding down tariffs, elimi- example, the UK has negotiated with OACPS
nation of so-called ‘nuisance tariffs’, and opening seven economic partnership agreements (EPAs)
(via lower or zero tariffs) the domestic market to that are at different stages of finalisation and
imports of products where the UK has little or implementation. The UK EPAs replicate in large
no production (but previously kept the non-zero parts the EU EPAs negotiated and agreed with
tariffs that protected EU producers). The new OACPS, for example, being DF-QF for all prod-
regime also raises or maintains tariffs to protect ucts except arms and ammunition. Yet there are
key sectors locally (and overseas with British important differences in terms of provisions for
investment interests), for example, floriculture Aid for Trade-related assistance, cumulation
and beef, among others, that would otherwise aspects of rules of origin, among others.
face strong competition from low-cost imports. Like with the EU EPAs, many OACPS are yet
For example, the UKGT on Fairtrade bananas to conclude negotiations and sign UK EPAs.
from Africa will amount to a £100,000 tax on The default market access terms and conditions
smallholder banana farmers (Independent 2021), for OACPS outside UK EPAs are either of the
a large percentage of whom live in poverty on UK’s three frameworks of Generalized System
less than US$1.90 (£1.34) per day. The UKGT of Preferences (GSP), depending on whether
also introduces a ‘first-come-first-served’ annual the OACPS is a least developed country, as clas-
autonomous tariff quota (ATQ) of 260,000 sified by the United Nations (UN), or one of the
metric tonnes of duty-free sugar open to all ‘low-income and lower-middle income coun-
countries in the world. This amounts to expos- tries’, a category formulated by the World Bank.
ing the equivalent of 42 per cent of members The former (LDCs) are granted DF-QF for all
of the Organisation of African, Caribbean and goods except arms and ammunitions, similar to
Pacific States (OACPS)’s sugar deliveries (ACP the EU’s ‘Everything But Arms’ (EBA) regime
Sugar 2021) to intense competition with (low- for LDCs. The latter, meanwhile, are granted
cost sugar exporter) heavyweights like Brazil, access under either the ‘General Framework’
Australia and India, a contest that small sugar (GF) or ‘Enhanced Framework’ (EF), depending
exports-dependent OACPS are unlikely to win. on the beneficiary country satisfying additional
The changes in the UK post-Brexit domestic qualifying conditions. The GF and EF offer
market access terms and conditions, and the DF-QF on several goods, but retain reduced or
attendant documentary and compliance proce- Most-Favoured Nation (MFN) UKGT rates on
dures and costs thereof, affect imports from all many goods as well, some of which (for exam-
countries. In the absence of comprehensive free ple, sugar, coffee and floricultural products) are
trade area (FTA) agreements with the UK, the of export interest to OACPS. This means that
costs associated with changes to market access non-LDC OACPS that are not party to EPAs
terms conditions could be particularly challeng- with the UK (or the EU for that matter) face
ing for exporters from least developed countries tariff barriers in the UK (EU) domestic market10 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK
concerning certain export goods that generate transparency and opacity, administration and
the much-needed export revenues for growth, the bureaucracy involved, among others, which
development and poverty reduction. tend to inflate compliance costs. It is now widely
In addition to the tariff regime, the UK also acknowledged that over time, the importance
applies a raft of non-tariff measures (NTMs) of NTBs has increased relative to import tariffs,
to regulate its trade. NTMs usually have best following successive rounds of tariff negotia-
policy intentions (for example, human, animal tions and subsequent liberalisation at the multi-
and environmental safety, technical standards, lateral level, regional and bilateral FTAs, as well
prevention of trade deflection, compliance as unilateral tariff liberalisation, for example,
with customs laws, among others). However, Papua New Guinea’s unilateral tariff liberalisa-
they can also translate into non-tariff barri- tion under its Tariff Reduction Program imple-
ers (NTBs), depending on their complexity, mented in phases during 1999–2018.
2. Objectives of the study
The new UK trade and regulatory landscape the rules and consequent impact on current and
could potentially pose challenges for its trade future exports for the Pacific region, along with
partners. For the OACPS, the question is how the potential impact on the PACER Plus agree-
will the UK’s new trade regulatory measures, ment; and (e) explore the role of private sector
specifically customs documentary and com- institutions, such as the Pacific Islands Private
pliance rules and procedures, and tariffs, the Sector Organization (PIPSO) post-Brexit.
focus of this study, affect their exports to the The study is intended to provide evidence-
UK domestic market? As OACPS are hetero- driven research on the impact of post-Brexit
geneous in terms of size, geographical location customs regulations, sanitary and phytos-
and capacity to meet foreign market access anitary measures, and/or technical barriers to
conditions, among others, there could be dis- trade for OACPS exporters, to inform the safe-
proportionate consequences for specific sectors guarding of OACPS trade flows into the UK.
and regions that are heavily reliant on the UK The deliverables of the study were an assess-
market. ment review report that covers all the issues
It was against this background that this study mentioned above for Pacific region, and a sum-
was commissioned, to: (a) investigate the direct mary document with a succinct compendium
and indirect impact of Brexit on the new pro- on the new rules and regulations for exports
cedural rules for exports from all the regions of into the UK from the region. The findings will
the OACPS into the UK; (b) examine whether also assist OACPS exporters to understand the
the new customs procedures will impact new customs procedures and determine how
subregional trade agreements, particularly, they can avoid losses to market access into the
the Pacific Agreement on Closer Economic UK. The study outputs will be consolidated into
Relations (PACER) Plus; (c) investigate poten- a compendium for the Trade Competitiveness
tially beneficial trade opportunities offered by Section of the Commonwealth Secretariat to
the new customs procedures and examine the provide trade facilitation assistance to Pacific
ways through which the Pacific region could states (by mapping out new customs processes
capitalise on them; (d) examine the changes in involved in exporting to the UK).
3. Methodology
The study that this paper is based upon mainly UK Government, the World Trade Organization
used secondary data and information gathered (WTO), International Trade Centre (ITC), the
from online repository resources, including the World Bank, the International Monetary FundTrade Competitiveness Briefing Paper 2021/05 11
(IMF), the Commonwealth Secretariat and factor against a wide range of topical issues to
others. Consultations were held with key stake- be addressed and those issues deserving useful
holders and regional contact points, including depth, and lack of data on two of the fourteen
the apex regional Pacific Islands Private Sector (14) investigation questions stated in the Terms
Organization (PIPSO), whose members are the of Reference (TORs). There were no readily avail-
various Pacific Forum islands national cham- able data on products from the Pacific that transit
bers of commerce and private sector organisa- through the UK and then on to the EU market
tions, and the Oceania Customs Organization and vice-versa, nor on Pacific products that are
(OCO) in Fiji. The OACPS Secretariat (Brussels) value-added in the EU market and then exported
actively participated, virtually, in the scheduled to the UK, and vice-versa. As a result, these issues
weekly reviews of work-in-progress. are not covered in this study. The study recom-
Qualitative and textual, as well as limited mends a customised business survey to gather
quantitative, methods were used to analyse the and analyse these data and inform Pacific states
information and data to generate useful insights accordingly on the implications of Brexit for orig-
and inferences upon which policy implications inating status of the products involved.
and the compendium of rules and procedures The study was conducted offsite by the con-
were developed. The key challenges faced by sultant over a 20-working day period in March
the study stemmed from the limited short time 2021.
4. Study findings
The study findings are organised and presented Following its exit from the EU, where the UK
around the key questions set out in the Terms participated in the EU customs union with a
of Reference. Some of the questions address common trade policy and customs rules with
similar and closely related issues. For example, 27 other member states, the UK re-established
issues concerning customs rules come across in its independent trade policy and customs ter-
several questions, so it was prudent to respond ritory, with its own customs laws, regulations
to the Terms of Reference by optimising the and procedures. This subsection identifies and
depth and coverage of analysis of issues along examines the relevant rules, customs proce-
major themes and avoiding repetition. The dures, what has changed and the implications
main findings of the study are given below. for trade and economic development of small
Pacific states that have entered into interim
4.1. New rules and customs regulations EPAs with the UK.
for Pacific exports to the UK
4.1.2. Customs procedures,
4.1.1. Introduction documentation and forms
This section covers UK rules and customs regula- The first thing to observe with regards to cus-
tions affecting Pacific exports under the interim toms procedures under the UK–Pacific EPAs
UK–Pacific EPA. Trade rules cover, among other is the expressed commitment of the two sides
things, tariff regimes such as the Most-Favoured- to draw upon best practice, as enshrined in
Nation (MFN) tariffs under the WTO provisions, the established relevant international conven-
preferential tariffs under trade agreements, tariffs tions on customs regulations and procedures.
under the Generalized System of Preferences Paragraph 1 of Article 28 of the UK-Pacific EPA
(GSP), rules for determining originating status of states that:
goods to be eligible for preferential treatment in
the importing country, and further market access The UK and the Pacific States agree that their
terms and conditions (for example, meeting tech- respective customs legislation, provisions
nical standards and sanitary and phytosanitary and procedures shall draw upon the interna-
measures) under the agreement. Customs rules tional instruments and standards applicable
and procedures operationalise trade and other in the field of customs and trade, includ-
fiscal policies, among other things. ing the substantive elements of the revised12 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK
Kyoto Convention on the Simplification and (including forms involved) applied in the UK.
Harmonization of Customs Procedures, the The third part tabulates some of the key proce-
WCO Framework of Standards to Secure dures, forms, guidance and sources (weblinks)
and Facilitate Global Trade, the WCO data of detailed information and documentation.
model and the International Convention on
the Harmonized Commodity Description Key trade rules and customs procedures
and Coding System. affecting Pacific EPA exports in the UK
Customs valuation
In doing so, the parties commit to apply Goods imported from the Pacific states will be
customs procedures that ensure the lowest valued in accordance with the provisions of
possible costs of complying with customs regu- ‘Article VII of the GATT [General Agreement
lations and procedures by the parties’ export- on Tariffs and Trade] 1994 and the Agreement
ers and importers doing business with each on the Implementation of Article VII of the
other. The commitment is in recognition of the GATT 1994 to trade in goods covered by Part
empirical evidence that customs procedures are II of this Agreement’. The UK followed the
often cited as one of the largest contributors to same approach as a member of the EU customs
reduced trade competitiveness. Later sections union. No change.
of this report show comparative states of trade
facilitation and related costs of doing business Rulings on customs matters
in the UK and some of the small Pacific states. The UK–Pacific EPA provides for obtain-
After leaving the EU, the UK has the resolve ing rulings on tariff classification and rules
to prove it can succeed and excel as an open of origin, before completing import transac-
and independent trade and customs territory. tions. Note that the Her Majesty’s Revenue and
Through its membership to the World Customs Customs (HMRC) cannot issue a ruling on an
Organization (WCO), the UK is one of the import transaction that has already been com-
countries that have spearheaded developments pleted. Hence, this system of ruling is known
and innovations in new customs procedures as ‘advance ruling’. A customs ruling is binding
and processes. The UK was also one of the lead- in nature and provides certainty to traders. No
ing architects of the WTO Trade Facilitation change.
Agreement, signed in Bali, Indonesia, in 2013.
Having said the above, the present study finds Post-release controls
that the UK has not introduced customs proce- Under the UK–Pacific EPA, the UK’s customs
dures that are at a tangent to or deviate from the procedures, among others, are based upon
best practice it sponsored in the formulation of ‘post-release controls’, just as they are in the EU
the relevant international conventions. Doing customs union. An important aspect that sup-
so would not only contradict its position, but ports faster clearance of goods at the border is
also undercut its trade facilitation regime and post-release controls. According to this method,
trade competitiveness. The key issue, therefore, goods are cleared on importation using risk
is identifying the rules and customs procedures management principles, with detailed checks
applicable and how exporters from small Pacific on entry carried out subsequently if needed.
states can deal with them, either by complying
with documentary requirements on their part Transit movements
and/or by supporting documentary compli- The UK–Pacific EPA also requires the UK to
ance on the part of their business partner (the facilitate transit movement of goods imported
importer) in the UK. Also, it is worth noting from the Pacific states through the EU. Pacific
that in accordance with the agreed Protocol EPA (UK) exporters can split a consignment in
on Ireland and Northern Ireland contained in the EU when exporting goods to the UK (Pacific
the Withdrawal Agreement, EU customs rules states), provided the goods comprising the con-
and procedures generally continue to apply to signment have not cleared customs in the EU.
goods entering and leaving Northern Ireland Goods transited through any other third coun-
(Gov.UK). try must remain under customs surveillance
The rest of this subsection is organised as fol- and should not undergo operations other than
lows. The next part presents overviews of some unloading, reloading or any operation designed
of the key trade rules and customs procedures to preserve them in good condition.Trade Competitiveness Briefing Paper 2021/05 13
Publication of fees and charges Phytosanitary Measures. The parties agreed to
The UK publicly publishes all legislation (for co-operate to facilitate and increase trade in
example, legislation relating to customs pro- goods between them, by identifying, preventing
cedures and tariff matters), fees and charges. and eliminating obstacles to trade arising from
The publications also include relevant notices TBT and SPS measures. The parties are required
of an administrative nature, including agency to co-operate to facilitate compliance with SPS
requirements and entry procedures, hours of measures applying to exports, while safeguard-
operation, operating procedures for customs ing human, animal and plant safety and health,
offices at ports and border crossing points, and in particular by building the capacity of the
points of contact for information enquiries. public and private sectors in the Pacific states
This study finds that while information is and assisting the Pacific states to improve their
provided on official websites, it is likely that regulatory frameworks and related institutions.
Pacific exporters face information-search costs,
Priority products
as the information on the official websites is
scattered across a myriad of websites rather Parties have defined a list of priority products
than being presented as one document online. for export from the Pacific to the UK and a list
of priority products for trade among the Pacific
Customs agents or brokers states. These lists are contained in Annex III A
There is no mandatory requirement in the UK– (Technical barriers to trade and sanitary and
Pacific EPA to use a customs agent or broker. phytosanitary measures, priority products for
However, most importers use customs brokers, exports from the Pacific states to the UK); and
because customs procedures and requirements Annex III B (Technical barriers to trade and
can be complicated. sanitary and phytosanitary measures, priority
products for trade among the Pacific states).
Tariffs and quotas These lists will be reviewed and may be modi-
Customs duties and quotas are governed by the fied by a decision of the Trade Committee
UK Global Tariff (UKGT), which is discussed established under the Agreement as and when
in greater detail in ensuing sections of the appropriate.
report. Suffice to observe that products origi-
nating from the Pacific EPA states receive duty- Rules of origin (based on Protocol II)
free quota-free (DF-QF) treatment, except for One of the main objectives of the UK–Pacific
some products indicated in Annex I of the EPA is to accord preferential tariff treatment to
agreement. goods that meet the stipulated origin criteria.
The UK–Pacific EPA contains the following pro-
Anti-dumping and countervailing measures visions on how a product can become originat-
UK–Pacific EPA parties retain the ability to ing in the country of export, how it can retain
impose anti-dumping and countervailing this until it reaches the importing party (UK),
duties. However, before imposing definitive and what kind of documents would be required
anti-dumping or countervailing duties, parties to verify origin from the exporting Pacific party.
should consider the possibility of constructive
remedies foreseen in the WTO agreements. • Originating products (based on Articles 3–7,
Anti-dumping and countervailing duties, if Protocol II)
required, will be based on the non-preferential A product can achieve originating sta-
rules of origin of the exporting Pacific state. tus in two ways: (i) it is wholly obtained
in the exporting UK–Pacific EPA state (for
Technical barriers to trade (TBT) and sanitary example, mineral products extracted from
and phytosanitary (SPS) measures the soil); and (ii) the finished product must
Chapter 5 of Part II (‘Trade in Goods’) of the go through sufficient working or processing
UK–Pacific EPA makes provisions for TBT and in the Pacific exporting party, if the product
SPS measures. The provisions shall apply to TBT has incorporated non-originating materials
measures as defined in the WTO Agreement from third parties as defined cumulation
on Technical Barriers to Trade, and accord- provisions of the agreement. Later sections
ing to SPS measures as defined in the WTO of this report examine cumulation provi-
Agreement on the Application of Sanitary and sions under the UK–Pacific EPA.14 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK • Cumulation of origin (based on Articles 4, one with the piece of equipment, machine, Protocol II) apparatus or vehicle in question. The exporting Pacific state can cumu- • Sets (based on Article 10, Protocol II) late origin when it manufactures the final A ‘set’ means two or more products product, incorporating materials originat- packed together and sold as one. These (as ing in the UK, the EU, in other ACP states, defined in General Rule 3 for the inter- in the Overseas Countries and Territories pretation of the Harmonized System) are (OCT) as defined in Annex VIII or in other regarded as originating when all compo- Pacific states. A condition to be met is that nent products are originating. However, the working or processing carried in that when a set is composed of originating and state should go beyond that of the ‘insuffi- non-originating products, the set as a whole cient working or processing’ (as defined in is regarded as originating, provided that the Article 7). However, it is not necessary for value of the non-originating products does such materials to have undergone sufficient not exceed 15 per cent of the ex-works price working or processing. of the set. • Insufficient working or processing (see Article • Neutral elements (based on Articles 11, 7, Protocol II) Protocol II) An operation of a kind listed in Article 7 Neutral elements (such as electricity, fuel, (for example, breaking-up and assembly of energy, plant, equipment, etc.) used in pro- packages, among others) performed in the ducing a product are not taken into consid- Pacific states is considered insufficient to eration in determining the originating status confer originating status. of the final product. This means the manu- • Unit of qualification (based on Article 8, facturer, for example, can use imported fuel Protocol II) (non-originating) and the imported fuel The unit of qualification for the applica- used will not affect the origin status. tion of the provision on ‘unit of qualification’ • Direct transport requirement (based on means the particular product which is con- Article 13, Protocol II) sidered as the basic unit when determining Transporting though other territories is classification using the nomenclature of the permitted provided certain conditions are Harmonized System (HS). This means that: met. These include that: (a) the consignment (a) when a product composed of a group remains under the surveillance of customs or assembly of articles is classified under authorities in the country of transit and the terms of the HS in a single heading, the the product does not undergo any process- whole constitutes the unit of qualification; ing other than certain minimal operations (b) when a consignment consists of a num- indicated, that is, unloading, reloading or ber of identical products classified under any operation designed to preserve them in the same heading of the HS, each product good condition; and (b) evidence showing must be taken individually when applying that no further processing was undertaking the provisions of this protocol. Note that while in transit may be required by HMRC. under General Rule 5 of the HS, packaging The evidence may include a single transport is included with the product for classifica- document covering the passage from the tion purposes, so it shall also be included for exporting country through the country of the purposes of determining origin. transit or a certificate issued by the customs • Accessories, spare parts and tools (based on authorities of the country of transit. Article 9, Protocol II) • Procedure for the issue of a movement cer- Accessories, spare parts and tools exported tificate EUR.1 (based on Articles 16–19, from a Pacific state to the UK will be treated Protocol II) in the following manner. Accessories, spare Issuance of a movement certificate is the parts and tools dispatched with a piece of responsibility of the exporting Pacific state’s equipment, machine, apparatus or vehicle, customs authority. For this purpose, an which are part of the normal equipment and application must be made by the exporter. included in the price thereof or which are In the event of theft, loss or destruction of not separately invoiced, shall be regarded as a movement certificate EUR.1, the exporter
Trade Competitiveness Briefing Paper 2021/05 15 may apply to the customs authority which total value of these products shall not exceed issued the certificate. The customs author- 500 euro in the case of small packages or ity would issue a duplicate made out on 1,200 euro in the case of products forming the basis of the export documents in their part of travellers’ personal luggage.1 possession. • Information procedure for cumulation pur- • Proof of origin (based on Title IV of poses (based on Article 26) Protocol II) One of the following documents will 1. When Articles 3(1) and 4(1) are applied, be required by HMRC to accord preferen- the evidence of originating status within tial tariff treatment to a product that has the meaning of this protocol of the mate- attained the originating status in a Pacific rials coming from a Pacific state, from the state: (a) a movement certificate (EUR.1, a UK, from the EU, from another ACP State specimen of which appears in Annex III); or [or from an Overseas Country or Territory, (b) in the cases specified in Article 20(1), a OCT] shall be given by a movement certifi- declaration, subsequently referred to as the cate EUR.1 or by the supplier’s declaration, ‘invoice declaration’, given by the exporter a specimen of which appears in Annex V on an invoice, a delivery note or any other A to this protocol, given by the exporter in commercial document which describes the the state from which the materials came. products concerned in sufficient detail to 2. When Articles 3(4) and 4(4) are applied, enable them to be identified (the text of the the evidence of the working or processing invoice declaration appears in Annex IV) carried out in a Pacific state, in the UK, in for determining origin. another ACP State [or in an OCT] shall be • Validity of proof origin (based on Article 22, given by the supplier’s declaration a speci- Protocol II) men of which appears in Annex V B to this A proof of origin is valid for ten (10) protocol, given by the exporter in the state months from the date of issue in the export- from which the materials came. ing country, and must be submitted within 3. A separate supplier’s declaration shall be the said period to the customs authorities made out by the supplier for each consign- of the importing country. In certain excep- ment of goods on the commercial invoice tional circumstances, HMRC may consider related to that shipment or in an annex to accepting that proof after the final date of that invoice, or on a delivery note or other submission. commercial document related to that ship- • Submission of proof or origin (based on ment which describes the materials con- Article 23) cerned in sufficient detail to enable them to Proof of origin needs to be submitted to be identified. the customs authorities of the importing 4. The supplier’s declaration may be made out country in accordance with the procedures on a pre-printed form. applicable in that country. The said authori- 5. The suppliers’ declarations shall bear the ties may require a translation of a proof of original signature of the supplier in manu- origin and may also require the import dec- script. However, where the invoice and the laration to be accompanied by a statement supplier’s declaration are established using from the importer to the effect that the electronic data-processing methods, the products meet the conditions required for supplier’s declaration need not be signed in the implementation of the agreement. manuscript provided the responsible offi- • Exemptions from proof of origin (based on cial in the supplying company is identified Article 25, Protocol II) to the satisfaction of the customs authori- For some products, proving origin is not ties in the state where the suppliers’ decla- required. Products sent as small packages rations are established. The said customs from private persons to private persons or authorities may lay down conditions for the forming part of travellers’ personal luggage implementation of this paragraph. will be admitted as originating products, pro- 6. The supplier’s declarations shall be sub- vided that such products are not imported mitted to the customs authorities in the by way of trade and have been declared as exporting country requested to issue the meeting the requirements. Furthermore, the movement certificate EUR.1.
16 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK
7. The supplier making out a declaration must goods concerned, contained for example in
be prepared to submit at any time, at the their accounts or internal bookkeeping;
request of the customs authorities of the b. documents proving the originating status
country where the declaration is made out, of materials used, issued or made out in
all appropriate documents proving that the a Pacific state, in the UK or in one of the
information given on this declaration is other countries or territories referred to in
correct. Articles 3 and 4, where these documents
8. Suppliers’ declarations made and informa- are used in accordance with national law;
tion certificates issued before the date of c. documents proving the working or pro-
entry into force of this protocol in accor- cessing of materials in a Pacific state, in the
dance with Article 26 of Protocol 1 to the UK or in one of the other countries or terri-
Cotonou Agreement shall remain valid. tories referred to in Articles 3 and 4, issued
or made out in a Pacific state, in the UK or
• Verification of proof of origin in one of the other countries or territories
Verifications of proof of origin, subse- referred to in Articles 3 and 4, where these
quent to submission, will be carried out documents are used in accordance with
based on risk analysis and at random or national law;
whenever the customs authorities of the d. movement certificates EUR.1 or invoice
importing country have reasonable doubts declarations proving the originating status
as to the authenticity of such documents, of materials used, issued or made out in
and/or the originating status of the prod- a Pacific state, in the UK or in one of the
ucts concerned. The customs authorities of other countries or territories referred to in
the importing country will return the move- Articles 3 and 4 and in accordance with this
ment certificate EUR.1 and the invoice, if it protocol.
has been submitted, the invoice declaration,
or a copy of these documents, to the cus- • Preservation of proof of origin and supporting
toms authorities of the exporting country documents (based on Article 28, Protocol II)
giving, where appropriate, the reasons for Exporter applicants, exporters who make
the request of verification. invoice declaration, suppliers who make the
Any documents and information obtained supplier’s declaration, the customs author-
suggesting that the information given on the ity of the exporting party and the customs
proof of origin is incorrect will be forwarded authority of the importing party must keep
in support of the request for verification. the proof of origin and supporting docu-
The verification will be carried out by the ments for at least three (3) years.
customs authorities of the exporting coun- • Discrepancies and formal errors (based on
try. For this purpose, they will have the right Article 29, Protocol II 9)
to call for any evidence and to carry out any Slight discrepancies between the state-
inspection of the exporter’s accounts or any ments made in the proof of origin and
other check considered appropriate. those made in the documents submitted to
• Supporting documents (based on Article 27) the customs office for the purpose of car-
The documents referred to in Articles rying out the formalities for importing the
16(3) and 20(3) used for the purpose of products shall not make the proof of ori-
proving that products covered by a move- gin null and void, if it is duly established
ment certificate EUR.1 or an invoice dec- that this document does correspond to the
laration can be considered as products products submitted. Further, obvious for-
originating in a Pacific state, in the UK or mal errors such as typing errors on a proof
in one of the other countries or territories of origin should not cause this document
referred to in Articles 3 and 4 and fulfil the to be rejected, if these errors are not such
other requirements of this protocol, may as to create doubts concerning the cor-
consist, among others, of the following: rectness of the statements made in this
document.
a. direct evidence of the processes carried out • Conditions for making out an invoice decla-
by the exporter or supplier to obtain the ration (based on Article 20)Trade Competitiveness Briefing Paper 2021/05 17
An invoice declaration as referred to in in such situations. Tables 1 and 2 summarises
Article 15(1)(b) may be made out: key customs procedures and forms, guidance,
notices and their sources for more detailed
1. by an approved exporter within the mean- information, as needed. A commentary on
ing of Article 21; or action by Pacific EPA exporters is also provided
2. by any exporter for any consignment con- to assist with understanding of the involve-
sisting of one or more packages contain- ment of Pacific exporters, whether directly or
ing originating products whose total value indirectly.
does not exceed 6,000 euros. Key findings and observations from the
3. An invoice declaration may be made out if available information show that:
the products concerned can be considered
as products originating in a Pacific state or a. Some of the key forms for suppliers
in the UK or in one of the other countries or exporters under the agreement are
or territories referred to in Articles 3 and explained and listed in the UK–Pacific
4 and fulfil the other requirements of this EPA. Specimens and guidance are provided
protocol. in the Annexes.
4. The exporter making out an invoice dec- b. Action by Pacific exporters in complying
laration shall be prepared to submit at any with UK customs procedures can take the
time, at the request of the customs authori- form of supplying information and docu-
ties of the exporting country, all appro- mentation to the UK importer or to HMRC
priate documents proving the originating (if required) to facilitate clearance of export
status of the products concerned, as well as products. An inexhaustive list of documents
the fulfilment of the other requirements of involved include: the Pacific exporter’s eco-
this protocol. nomic operators registration identification
(EORI) number from their home customs
• Approved exporter (based on Article 21, authority, supply contract and Incoterms, bill
Protocol II) of lading, bill of exchange, proof of origin,
The customs authorities of the exporting export licences and certificates where they
country, if satisfied that an exporter can be are required, movement certificate EUR.1,
authorised, may authorise such an exporter and an invoice declaration, among others.
who makes frequent shipments of products c. UK customs procedures and forms for doc-
under the agreement to make out invoice umenting required information follow best
declarations irrespective of the value of the practice, guided by international conven-
products concerned. tions of which the UK is a leading propo-
nent. Furthermore, while there are updates
4.1.3. List of procedures, forms, guidance to the procedures and forms, the majority
and sources of detailed information and were last published or updated well before
documentation Brexit and remain in use as at the time of
Pacific EPA state exporters must comply with the present study. Table 2 includes publica-
UK customs procedures, but in most of those tion dates; here it can be seen that most are
procedures, it is their UK business counterpart, in the years 2014 or 2015, while publica-
the UK importer, who plays a much bigger role. tions after Brexit do not concern or involve
This study carried out an extensive informa- little or no action by Pacific EPA states.
tion search covering more than 120 Gov.UK d. The UK closely adheres to the requirements
websites (including the following links on web- of the WTO Trade Facilitation Agreement
sites notified to the WTO under reference G/ (TFA), by publicly publishing online use-
TFA/N/GBR/2) and found guidance, notices, ful information on trade facilitation mea-
procedures, forms and relevant laws for use/ sures and notifying the same to the WTO
filling mostly by the UK importer. However, through document WTO G/TFA/N/GBR/2.
the UK importer must have co-operation and Information provided to the WTO pertains
information from exporters outside the UK to to notification under Articles 1.4, 10.4.3,
complete the import declarations. 10.6.2 and 12.2.2 of the WTO TFA, and are
The study identified and reports some of in support of certain provisions in the WCO
the key roles and actions for Pacific exporters Revised Kyoto Convention (RKC).You can also read
