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 market 10 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 Fund Trade 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 revised 12 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 Key trade rules and customs procedures the Harmonized Commodity Description affecting Pacific EPA exports in the UK and Coding System. 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- Rules of origin (based on Protocol II) nating from the Pacific EPA states receive duty- 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). Table 1. Key UK customs procedures, forms, guidance and sources 18

Procedure Type UK Pacific Action by Pacific exporter/ involvement/ for Source of more information on procedures, importer exporter awareness documentation or relevant laws action? involved? Some of the procedures and forms required are explained with specimens and guidance notes in the UK–Pacific EPA Import goods into the UK: step-by-step guide https://www.gov.uk/import-goods-into-uk • How to bring goods into the UK from any country, including how much tax and duty you’ll need to pay and whether you need to get a licence or certificate • Get an EORI number that starts Procedure & Yes Yes Obtain and send your EORI number, https://www.gov.uk/import-goods-into-uk with GB to import goods into documentation generated by your customs authority. EORI: England, Wales or Scotland economic operators registration and identification number. HMRC may use your EORI to contact the supplier’s customs

authority if necessary. Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK • Check the business sending you Procedure & Yes Yes Check if you need: (a) to make an export https://www.gov.uk/import-goods-into-uk the goods can export to the UK documentation declaration in your country; (b) licences or certificates to send goods to the UK. • Decide who will make customs Procedure & Yes Yes Involvement depends on contract and https://www.gov.uk/import-goods-into-uk declarations and transport the documentation international commercial terms (‘Incoterms’). goods – self or customs agent … e.g. where supplier’s responsibilities start and end. Consult transporter/shipper. • Find out the commodity code for Procedure & Yes Yes Ensure commodity classification code is https://www.gov.uk/import-goods-into-uk your goods documentation correct for applicable preferential market access terms and conditions. • Find out if you can delay or reduce Procedure & Yes Yes Have ready proof of origin documentation to https://www.gov.uk/import-goods-into-uk your duty payment documentation support UK importer on payment of duties. • Check if you need a licence or Procedure & Yes Yes Support UK importer to obtain required https://www.gov.uk/import-goods-into-uk certificate for your goods documentation licence or certificates from your country.For example, UK guidance states: To import regulated plants and plant products, you must get a plant certificate for each consignment from the plant health authority in the country where your supplier is located. A list of goods that are subject to licence or certificate requirements in the UK is available at website opposite. Trade Competitiveness BriefingPaper2021/05 • Check the labelling, marking and Procedure & Yes Yes Support UK importer with complete https://www.gov.uk/government/collections/ marketing rules documentation information. Further guidance available at marking-labelling-and-marketing-standards-for- website opposite. imports-and-exports • Detailed information on import, export and transit procedures • Import goods into the UK: step by See above See See See above. https://www.gov.uk/topic/business-tax/ step above above importexport • Trading and moving goods in and Guidance Yes N/A Responsibility of UK business partner. https://www.gov.uk/guidance/trading-and-moving- out of Northern Ireland goods-in-and-out-of-northern-ireland Get started • Get an EORI number Procedure & Yes Yes Send own EORI number generated by your https://www.gov.uk/eori documentation customs authority. See above. • Get someone to deal with Guidance Yes N/A Responsibility of UK business partner. https://www.gov.uk/eori customs for you International trade paperwork (contracts, licences, declarations and documents UK-based businesses may need to import https://www.gov.uk/guidance/international-trade- and export goods and services) paperwork-the-basics Key documentation for international trade: • Written contract between the Procedure & Yes Yes Support UK importer: Contract and relevant https://www.gov.uk/guidance/international-trade- buyer and seller, including details documentation information; use Incoterms; etc. paperwork-the-basics of where goods will be delivered • Specific documents (if required) Procedure & Yes Yes Support UK importer: Provide or support https://www.gov.uk/guidance/international-trade- to get the goods through documentation obtaining documents required from home paperwork-the-basics customs and to work out the right country, as requested by UK importer. duty and tax charges – there may be specific requirements for the country of export and the country of import • Documents to cover the Procedure & Yes Yes Submit original bill of lading, copy of commercial https://www.gov.uk/guidance/international-trade- transport of the goods and documentation invoice, insurance payment document etc. for paperwork-the-basics insurance during the journey shipping company to release goods. A ‘bill of lading’ is a legal document issued by a carrier to a shipper that details the type, quantity and destination of the goods being carried. A bill of lading also serves as a shipment receipt when the carrier delivers the goods at a predetermined destination. 19

(Continued) Table 1. Key UK customs procedures, forms, guidance and sources (Continued) 20

Procedure Type UK Pacific Action by Pacific exporter/ involvement/ for Source of more information on procedures, importer exporter awareness documentation or relevant laws action? involved? Some of the procedures and forms required are explained with specimens and guidance notes in the UK–Pacific EPA • International trade contracts and Procedure & Yes Yes Support UK importer: Be involved in setting/ https://www.gov.uk/guidance/international-trade- Incoterms documentation agree international trade contracts and paperwork-the-basics Incoterms. For trade in services, focus on defining what services are being provided and to what standards. • Import documentation Procedure & Yes Yes Support UK importer: Commercial invoice; https://www.gov.uk/guidance/international-trade- documentation documentary proof of origin; shipping paperwork-the-basics documents, such as an air waybill, bill of lading, post office notification delivery entry Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK (if by post), among others. • International transport Procedure & Yes Yes Submit original bill of lading, copy of https://www.gov.uk/guidance/international-trade- documentation documentation commercial invoice, insurance document etc. paperwork-the-basics for shipping company to release goods. Also check with local transporters/freight forwarders. • International trade documentation Procedure & Yes Yes A bill of exchange, stating how much is to be https://www.gov.uk/guidance/international-trade- and payments documentation paid and when. The customer accepts the bill paperwork-the-basics of exchange and is legally liable for payment. The exporter gives the customer the transport documents needed to take possession of the goods – usually through a bank in the overseas country. Procedure & Yes Yes For a documentary credit, the following steps https://www.gov.uk/guidance/international-trade- documentation are taken: The customer (e.g. UK importer) paperwork-the-basics arranges a letter of credit from their bank. The bank agrees to pay the (Pacific) exporter once all the right documentation is received – such as, transport documents showing the right goods have been despatched. The exporter must provide the required paperwork within the agreed time limit and with no discrepancies. Trade Competitiveness BriefingPaper2021/05

• International trade Guidance Yes Yes In some cases, international trade requires https://www.gov.uk/guidance/international-trade- documentation: special cases special documentation. If you have any doubts paperwork-the-basics about the documentation you need, you should ask for advice. Many businesses get help from freight forwarders or import agents. If you require support, the British International Freight Association (BIFA) may be able to identify a suitable freight forwarder for you. • Due diligence when making Guidance Yes Yes Just for information – on how to spot https://www.gov.uk/guidance/due-diligence-when- customs declarations potential supply chain fraud. making-customs-declarations • Import and export controls Guidance Yes Yes Important, exporter needs to be involved, for https://www.gov.uk/government/collections/import- example, when there are issues with product and-export-controls content; quality that may be subject to controls; and rules of origin issues if there are misunderstandings; among others. More information and documents concerning specific controls for various products are available online. Transit • Check if you can use transit to Guidance For information: Common transit is a https://www.gov.uk/guidance/check-if-you-can-use- move goods to the EU and customs procedure that allows the transit-to-move-goods-to-the-eu-and-common- common transit countries movement of goods to, from, through or transit-countries between the countries that have signed the Common Transit Convention without the need to: (a) complete customs declarations until they end their transit movement; or (b) pay customs duties and other charges on the goods until they end their transit movement. Applied rates of duties and taxes of any kind imposed on or in connection with importation or exportation • Trade Tariff look up tool HS and Duty Yes Yes For information and awareness. https://www.gov.uk/trade-tariff Tool • Importing goods covered by a Guidance Yes Yes For information and awareness. https://www.gov.uk/guidance/tariffs-on-goods- tariff-rate quota imported-into-the-uk#importing-goods-covered- by-a-tariff-rate-quota 21 (Continued) 22

Table 1. Key UK customs procedures, forms, guidance and sources (Continued)

Procedure Type UK Pacific Action by Pacific exporter/ involvement/ for Source of more information on procedures, importer exporter awareness documentation or relevant laws action? involved? Some of the procedures and forms required are explained with specimens and guidance notes in the UK–Pacific EPA • Reference documents for The Reference Yes Yes For information and awareness. https://www.gov.uk/government/publications/ Customs (Tariff Quotas) (EU Exit) documents reference-documents-for-the-customs-tariff- Regulations 2020 quotas-eu-exit-regulations-2020 Fees and charges imposed by or for governmental agencies on or in connection with importation, exportation or transit • Notice 112 – attendance and Notice Yes N/A For information and awareness. https://www.gov.uk/government/publications/ charges by HM Revenue & notice-112-attendance-and-charges-by-hm- Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK Customs revenue-and-customs/ notice-112-attendance-and-charges-by-hm- revenue-and-customs Rules for the classification or valuation of products for customs purposes • Tool to look up commodity codes, HS and Duty Yes Yes For information and awareness. https://www.gov.uk/trade-tariff duty and VAT rates Tool • Apply for a binding tariff Guidance Yes Yes In case you need to support the UK importer https://www.gov.uk/guidance/apply-for-a-binding- information decision by providing supporting information and tariff-information-decision documentation, for example, brochures, manuals, photographs and samples, where appropriate. • Apply for an advanced tariff ruling Guidance Yes Yes In case you need to support the UK importer https://www.gov.uk/guidance/apply-for-an-advance- by providing supporting information and tariff-ruling-that-can-be-used-from-1-january-2021 documentation, for example, brochures, manuals, photographs and samples, where appropriate. • Guidance on what is required to Guidance Yes Yes In case you need to support the UK importer https://www.gov.uk/guidance/check-what-youll-need- get a legally binding decision on a by providing supporting information and to-get-a-legally-binding-decision-on-a-commodity- commodity code documentation, for example, brochures, code manuals, photographs and samples, where appropriate. Trade Competitiveness BriefingPaper2021/05

• Finding commodity codes for HS and Duty Yes Yes In case help is needed with determining https://www.gov.uk/guidance/finding-commodity- imports into and exports out of Tool commodity codes that apply globally codes-for-imports-or-exports the UK • Notice 252: Valuation of imported Guidance / Yes Yes In case you need to support the UK importer https://www.gov.uk/government/publications/ goods for customs purposes, notice by providing supporting information and notice-252-valuation-of-imported-goods-for- VAT [value-added tax] and trade documentation, for example, when the customs-purposes-vat-and-trade-statistics/ statistics exporter is required to provide evidence on cost notice-252-valuation-of-imported-goods-for- of goods (production point), other information customs-purposes-vat-and-trade-statistics on prices and/or costs needed to inform valuation in the importing country. Laws, regulations and administrative rulings of general application relating to rules of origin • Guidance on applying for Guidance Yes Yes In case UK business partner needs https://www.gov.uk/guidance/apply-for-an-advance- advanced origin rulings supporting information and documentation. origin-ruling Otherwise, for information and awareness. • Binding origin rulings Guidance Yes Yes In case UK business partner needs https://www.gov.uk/guidance/apply-for-a-binding-origin- supporting information and documentation. information-decision Otherwise, for information and awareness. • Guidance on meeting the rules of Guidance Yes Yes In case UK business partner needs https://www.gov.uk/guidance/check-your-goods-meet- origin supporting information and documentation. the-rules-of-origin Otherwise, for information and awareness. • Guidance on the use of the Guidance Yes Yes In case UK business partner needs https://www.gov.uk/guidance/use-the-generalised-scheme- Generalized System of supporting information and documentation. of-preferences-to-import-and-export-goods Preferences to import goods Otherwise, for information and awareness. • Generalized System of Guidance Yes Yes In case UK business partner needs https://www.gov.uk/government/publications/ Preferences origin rules and their supporting information and documentation. check-your-goods-meet-the-generalised-scheme- corresponding notes Otherwise, for information and awareness. of-preference-rules-of-origin/notes-on-applying- the-origin-rules • Reciprocal preferential rules of Guidance Yes Yes In case UK business partner needs https://www.gov.uk/guidance/uk-trade-agreements- origin: trade agreements, supporting information and documentation. with-non-eu-countries including rules of origin legal text Otherwise, for information and awareness. • Notice to Traders Notices & https://www.gov.uk/government/collections/notice- guidance to-traders

(Continued) 23 24

Table 1. Key UK customs procedures, forms, guidance and sources (Continued)

Procedure Type UK Pacific Action by Pacific exporter/ involvement/ for Source of more information on procedures, importer exporter awareness documentation or relevant laws action? involved? Some of the procedures and forms required are explained with specimens and guidance notes in the UK–Pacific EPA These notices give information about trader schemes and explain any changes to procedures. For example: • Notice to Traders 15/21 – Imports Notices & Yes Yes For information and awareness. https://www.gov.uk/government/publications/ of Sugar guidance notice-to-traders-1521-imports-of-sugar Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK • Notice to Traders 13/21 – Import Notices & Yes Yes For information and awareness. https://www.gov.uk/government/publications/ of Frozen Beef and Veal Quota guidance notice-to-traders-1321-import-of-frozen-beef- (GATT) and-veal-quota-gatt • Notice made under Regulation Notices & Yes Yes For information and awareness, for example, https://www.gov.uk/government/publications/ 6(4) of the Customs (Tariff guidance autonomous tariff-quota on sugar. tariff-rate-quotas-interim-volumes-available-from- Quotas) (EU Exit) Regulations 1-january-2021/notice-made-under-regulation-64- 2020 of-the-customs-tariff-quotas-eu-exit- regulations-2020 Customs information papers • Customs information papers Notices & Yes Yes Keep up to date with developments/changes. https://www.gov.uk/government/collections/ guidance For example, suspension of Generalized customs-information-papers--2 System of Preferences (GSP) for certain beneficiary countries and sections (CIP 04); details available at: https://www.gov.uk/ guidance/suspension-of-generalised-system- of-preferences-gsp-for-certain-beneficiary- countries-and-sections-cip-04

Source: Author. Table 2. Key UK customs forms, guidance and sources Trade Competitiveness BriefingPaper2021/05

Use these forms if you import, export or move goods through the UK

Title Published Type Pacific exporter action, if any Source of more information on procedures, documentation or relevant laws Single Administrative Document, full 8-part set (C88 (1-8)) • Use form C88 to enable the exportation and 04/04/2014 Form Supply documentation to support https://www.gov.uk/government/publications/import-and- importation of goods UK importer as necessary; for export-single-administrative-document-full-8-part-set-c88- example, EORI, contract and 1-8 Incoterms, bill of lading, bill of A movement certificate EUR.1 is used to support claims for exchange, export licences, preferential (usually zero) rates of duty in the country of certificates, movement certificate importation. EUR.1/ proof of origin, invoice declaration, among others. Some of the information, procedures and forms required are explained, with specimens and guidance notes in the UK–Pacific EPA annexes • Use parts 2 and 3 of form C88 as proof of 04/04/2014 Form Supply documentation to support https://www.gov.uk/government/publications/import-and-export- authorisation to import or export for the UK importer, as necessary. single-administrative-document-parts-2-and-3-c88-2-3 country of dispatch and the consignor • Use part 6 of C88 as proof of authorisation to 04/04/2014 Form Supply documentation to support https://www.gov.uk/government/publications/import-and-export- import/export for the country of destination UK importer, as necessary. single-administrative-document-part-6-c88-6 • Use form C88 (EL) to provide a summary of 04/04/2014 Form Supply documentation to support https://www.gov.uk/government/publications/import-and-export- exports and a community transit loading list UK importer, as necessary. export-summary-community-transit-loading-list-c88-el • Use form C88 (status) as proof of 04/04/2014 Form Supply documentation to support https://www.gov.uk/government/publications/import-and-export- authorisation to import or export for the UK importer, as necessary. single-administrative-document-c88-status country of destination • Use form C88 (UK transit) if you want to 04/04/2014 Form Supply documentation to support https://www.gov.uk/government/publications/import-and-export- complete the parts of the C88 form that UK importer, as necessary. single-administrative-document-c88-uk-transit relate to UK transit only • Use form C88A as an alternative to form C88 04/04/2014 Form Supply documentation to support https://www.gov.uk/government/publications/ to enable the importation and exportation of UK importer, as necessary. import-and-export-single-administrative-document-c88a goods • Use form C88 exp-tran for the export or 04/04/2014 Form Supply documentation to support https://www.gov.uk/government/publications/ transit of goods UK importer, as necessary. import-and-export-single-administrative-document- 25 exporttransit-c88-exp-tran (Continued) 26

Table 2. Key UK customs forms, guidance and sources (Continued)

Use these forms if you import, export or move goods through the UK

Title Published Type Pacific exporter action, if any Source of more information on procedures, documentation or relevant laws Guarantee, payment and deferment forms for imports and exports Use these forms for payments, repayments, guarantees and deferments to and from HMRC • Guarantee deferment of payment to HMRC 02/03/2021 Online form N/A https://www.gov.uk/government/publications/import-and- (C1201) export-guarantee-deferment-of-payment-to-hmrc-c1201 • Notice of amendment to form C1201 – 30/04/2015 Online form N/A https://www.gov.uk/government/publications/import-and-export-

deferment guarantee (C1201A) amendment-to-form-c1201-deferment-guarantee-c1201a Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK • Amend a C1201 TAPS deferment guarantee 21/12/2014 Online form N/A https://www.gov.uk/government/publications/import-and-export- (C1201A TAPS) notice-of-amendment-to-c1201-taps-deferment-guarantee- c1201a-taps • Guarantee payments for hydrocarbon oils 04/07/2014 Online form N/A https://www.gov.uk/hmrc-internal-manuals/hydrocarbon-oils- duty payments (C1201HO) strategy/hcos3025#:~:text=Tied%20Oils%3A%20Tied%20 Oils%20scheme%3A%20background&text=Mineral%20 oils%20intended%20for%20use,(or%20Industrial%20 Reliefs)%20scheme. https://www.gov.uk/government/ publications/import-and-export-guarantee-payment-of- hydrocarbon-oils-payments-to-hmrc-c1201ho • Provide payment advice for Flexible 04/04/2014 Form N/A https://www.gov.uk/government/publications/import-and-export- Accounting System payments (C&E514) flexible-accounting-system-payment-advice-ce514 • Give joint contractual liability (JCL) for a 31/12/2020 Form N/A https://www.gov.uk/government/publications/ customs comprehensive guarantee for import-and-export-give-a-joint-contractual-liability-for- potential debts customs-comprehensive-guarantee-potential-debts-jcl Import and export authorisation and approval forms Use these forms to request authorisations and approvals from HMRC for import and export • Submit a retrospective notification of arrival 31/12/2020 Form Supply documentation to support https://www.gov.uk/government/publications/import-and-export- (C1603) UK importer, as necessary. notification-of-retrospective-arrival-c1603 Trade Competitiveness BriefingPaper2021/05

Clearance of goods forms Use these forms to request clearance of goods being imported to or exported from the UK • Apply for a manual release if the ALVS cannot 19/01/2015 Form N/A https://www.gov.uk/government/publications/import-and-export- process an automatic release (ALVS1) alvs-manual-release-form • Make a customs clearance request (C21) – to 08/10/2014 Online form N/A https://www.gov.uk/government/publications/import-and-export- request electronic release of goods at a customs-clearance-request-c21 location with an inventory system • Submit a notice of arrival of certain classes of 04/04/2014 Form N/A https://www.gov.uk/government/publications/import-and- goods (C27) export-notice-of-arrival-c27 • Apply to remove goods from a transit shed 31/12/2020 Form N/A https://www.gov.uk/government/publications/import-and- (C130) export-removal-note-c130 • Make a summary declaration of goods 31/12/2020 Online form N/A https://www.gov.uk/government/publications/import-and- arriving from non-UK countries (C1600) export-summary-declaration-goods-arrived-from-non-ec- countries-c1600 • Presentation of goods (C1600A) 31/12/2020 Online form N/A https://www.gov.uk/government/publications/import-and-export- presentation-of-third-country-goods-c1600a Declaration forms for imports and exports Use these forms to declare goods entering or leaving the UK • Change or cancel a simplified frontier 30/08/2019 Form N/A https://www.gov.uk/government/publications/ declaration import-and-export-change-or-cancel-a-customs-freight- simplified-procedures-simplified-frontier-declaration-sfd • Request partial entry print of import and 23/11/2011 Form N/A https://www.gov.uk/government/publications/ export data import-and-export-partial-entry-request • Tell HMRC about the temporary arrival of a 31/12/2020 Online form N/A https://www.gov.uk/government/publications/import-and-export- non-UK private motor vehicle for personal temporary-admission-notice-of-arrival-of-a-non-eu-private- use (C110) motor-vehicle-c110 • Declare re-importation of an unaccompanied 31/12/2020 Form N/A https://www.gov.uk/government/publications/import-and-export- private motor vehicle from outside the UK re-importation-of-an-unaccompanied-private-motor-vehicle- (C179B) from-outside-the-european-community-c179b • Declare any weapons on board an aircraft 04/04/2014 Form N/A https://www.gov.uk/government/publications/import-and-export- (C913) weapons-on-board-an-aircraft-declaration-c913

(Continued) 27 28

Table 2. Key UK customs forms, guidance and sources (Continued)

Use these forms if you import, export or move goods through the UK

Title Published Type Pacific exporter action, if any Source of more information on procedures, documentation or relevant laws • Declare imports of antiques that are over 100 04/04/2014 Form Supply documentation to support https://www.gov.uk/government/publications/import-and-export- years old (C920A) UK importer, as necessary. declaration-for-antiques-of-an-age-exceeding-100-years- c920a • Amend import or export licence declarations 01/10/2014 Online form N/A https://www.gov.uk/government/publications/import-and-export- (C1700) change-an-import-and-export-licence-declaration-c1700 Customs Handling of Import and Export Freight (CHIEF) forms Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK Use these forms to complete a manual Customs Handling of Import and Export Freight (CHIEF) declaration • Request entry or clearance during CHIEF or 17/11/2020 Form N/A https://www.gov.uk/government/publications/import-and-export- CDS downtime chief-direct-trader-input-short-term-fallback-c1402-f • Record CHIEF entries you changed or cleared 04/04/2014 Form N/A https://www.gov.uk/government/publications/import-and-export- before a system failure (C1403 (F)) chief-acp80-short-term-fallback-procedures-c1403-f • Ask for access to CHIEF through WEX 14/01/2021 Online form N/A https://www.gov.uk/government/publications/import-and-export- channels (PA7) trade-request-for-chief-access-via-wex-channels-pa7 Customs Declaration Service forms and guidance (HMRC is introducing Customs Declaration Service [CDS] gradually) Find out how to prepare for the Customs Declaration Service • Get your import VAT and duty adjustment 13/09/2019 Guidance N/A https://www.gov.uk/guidance/ statements get-your-import-vat-and-duty-adjustment-statements • Get copies of your duty deferment 09/08/2019 Guidance N/A https://www.gov.uk/guidance/ statements get-copies-of-your-duty-deferment-statements • Check how to get your import VAT certificate 09/06/2020 Guidance N/A https://www.gov.uk/guidance/get-your-import-vat-certificates (C79) • Manage your email address for the Customs 31/10/2019 Guidance N/A https://www.gov.uk/guidance/manage-your-email-address-for- Declaration Service the-customs-declaration-service

Source: Author. Trade Competitiveness Briefing Paper 2021/05 29

4.1.4. Further observation on the UK significantly changed) and the new trade rules making information available publicly (tariffs and non-tariff barriers) and customs and online procedures, generally, on utilisation of trade Putting information in the public domain is preference schemes and regional trade agree- one thing. Yet, how/where it is done is another ments are examined in the context of addressing thing altogether, because of the huge informa- the following questions: (a) emerging bottle- tion-search costs involved in time, resources necks that could reduce the volume of Pacific and frustration that traders have to go through exports to the UK; (b) Brexit and the trade following one weblink after another, often with competitiveness of Pacific exports to the UK; each such weblink leading to dozens or scores (c) assessment of regions within the Pacific and more before traders can find relevant informa- which export sectors will have the most impact; tion. In fact, the difficulty experienced by this (d) how Brexit will impact regional trade agree- study is the same faced by exporters, including ments like PACER Plus; (e) analysis of key those from the Pacific EPA states, and justified Pacific EPA states export products to the UK this study. and market access conditions in the UK; and This is a challenge that the UK trade facilita- (f) the likely impact of UK rules of origin on tion regime needs to address to reduce the cost the originating status of products that are part of doing trade with the UK – by compiling an of the Pacific–EU–UK triangular supply/value annotated list of all customs procedures, pro- chain. cesses, applicable regulations, among others, The next subsection therefore brings together into a single (split into smaller parts) down- findings and lessons from the analyses listed loadable document/manual. above, to present an overview of the potential economic and development impact of the cus- 4.2. Key procedural changes to export toms rules.2 requirements for the Pacific regions, impact on regional trade agreements 4.3. The potential economic and and trade preferences schemes developmental impact of the new pre- and post-Brexit customs rules The key procedural changes to exporting to The major customs rules changes introduced the UK for the Pacific regions mostly concern by the UK post-Brexit concern rules of ori- preferential market access terms and condi- gin, in particular cumulation of materials from tions under the agreement. Of less concern are countries and regions specified and not speci- UK customs procedures which, as alluded to fied in the relevant provisions of the UK–Pacific already, are based on international conventions EPA. This issue is examined in greater detail in of which the UK is one of the leading propo- the other subsections of the report, where vari- nents; the UK has not deviated from that stance ous aspects of rules of origin in the agreement since leaving the EU. The UK–Pacific EPA are analysed. Here, two important aspects are preferential market access terms (for example, addressed. tariffs and quotas, non-tariff measures) and The rules of origin under the UK–Pacific conditions (for example, rules of origin) have EPA provide for cumulation of materials from been updated to reflect the new UK’s position parties to the agreement, as well as other ACP as having an independent trade policy and cus- states or in the other Pacific states, subject to toms territory. meeting the specified conditions. Cumulation The implications for exports of Pacific EPA in other Pacific states is clearly beneficial to states, the effectiveness of trade preference the region, particularly the least developed schemes and regional trade agreements are countries (LDCs) and developing countries, analysed in detail in the contexts of closely as it boosts regional demand for their exports related subthemes throughout this report. For and through that channel, export revenues that example, examination of procedural changes to could support economic growth and develop- export requirements for Pacific exporters has ment. Currently, however, Fiji and PNG are net already been examined at length in the preced- exporters to the other Pacific states, but their ing subsection. The impacts of the new proce- EPA-induced income growth could translate dures (which the study does not find to have into increased demand for imports from other 30 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK small Pacific states. This assertion should be mortalities are low in the South Pacific region,3 moderated by the fact that such positive impacts the global negative trade and economic losses usually take time to take root and permeate have generated tsunami-like waves of eco- through domestic and regional economies. nomic hardship and crisis that have reached Cumulation in the EU provided for in the every corner of the globe, including the small rules of origin under the UK–Pacific EPA Pacific states. The ramifications will be felt for creates an interesting dimension worth not- some time to come. ing. The EU, which comprises 27 developed Figure 1 presents year-on-year comparisons countries, is the UK’s strongest trade partner. of monthly total trade for 2019 vis-à-vis 2020 Following Brexit, the UK is no longer legally before the pandemic and during the crisis in bound to include the EU in its trade deals, but 2020 for the two UK–Pacific EPA states (Fiji the EU is expressly included in the cumulation and Papua New Guinea) and two UK EPA aspir- provisions. Meanwhile, the Pacific EPA states ing Pacific states, Samoa and Solomon Islands. are not availed of an equivalent opportunity to With complete data for 2020, the devastation to cumulate in their strongest trade partners – for trade caused by the COVID-19 crisis in Fiji and example, Australia and New Zealand for Fiji Samoa is staggering. Total trade for each month and PNG. in 2020 in Fiji and Samoa (except February This is a missed opportunity for major eco- in Samoa, which was largely before COVID- nomic growth and development for the Pacific 19 was declared a pandemic) slumped below EPA states. The UK and Australia, and also the the respective months in 2019. Some of the UK and New Zealand, are already engaged in worst year-on-year monthly declines ranged bilateral FTA negotiations and their inclusion in between -55 and -18 per cent, with variations the UK–Pacific EPAs for cumulation purposes in between. The lower rates indicated signs of would be a major launchpad for export devel- failed rebounds, as the streams of trade rev- opment and economic growth for Fiji, PNG and enue, including tourism, remained dry under neighbouring small Pacific states. The question continuing suspension of international passen- is whether cumulation in the UK–Pacific EPA ger travel to the small Pacific states. Even with will be reviewed to include Australia and New limited data for 2020 (missing data are marked Zealand after their bilateral FTAs with the UK ‘2020 n.a.’ – not available), sharp declines in are agreed and signed. total trade are also discernible for Papua New Cumulation in other OACPS members (pro- Guinea and Solomon Islands. Available data vided for in the UK–Pacific EPA) is largely show imports (not reported here), most of inconsequential, given the limited trade and which come from China (the original epicen- value chain linkages that the small Pacific states tre of the pandemic), to be the main driver of have with the rest of the ACP states. the outcomes. Meanwhile, the small Pacific states have largely remained sealed off to inter- 4.4. The impact of COVID-19 on Pacific national passenger flows, and with that have states’ ability to adapt to UK–Pacific suffered substantial foreign exchange revenue EPA rules losses from key sectors like tourism. However, air and ocean cargo freight resumed for trade The COVID-19 outbreak that started in China in essential goods, including protective equip- in November 2019 was declared a pandemic ment and palliative medicines, among others. by the World Health Organization (WHO) on The issue for purposes of this study is how the 11 March 2020. By that date, some countries, COVID-19 crisis has affected the small Pacific including in the South Pacific, had already countries’ ability to adapt to the new rules of started taking preventive measures, such as trading with the UK. Even without the crisis, suspending international passenger travel, adapting to new rules costs resources in terms national lockdowns, social distancing and of information search and acquisition, develop- other measures. These controls had an imme- ing or updating relevant systems to meet the diate impact on production and trade, among new rules and requirements thereof, putting in others. As at March 2021, the COVID-19 place or adding new responsibilities and tech- pandemic has had devastating global impacts nical capacity, implementing the new/adjusted/ on human health, trade and economic activi- modified systems, and finance and time, among ties. Although the numbers of infections and others. Trade Competitiveness Briefing Paper 2021/05 31

Figure 1. Total trade for selected small Pacific states before and during the COVID-19 crisis (US$ millions)

Fiji Islands Samoa

385.0 Jan: –35% 251.0 33.1 Jan: –26% 24.4 245.1 Feb: –7% 228.4 26.6 Feb: +15% 30.5 259.5 Mar: –21% 205.2 39.1 Mar: –23% 30.3 276.4 Apr: –37% 175.2 30.6 Apr: –13% 26.6 295.7 May: –34% 195.7 40.5 May: –45% 22.2 246.6 Jun: –18% 202.3 37.7 Jun: –33% 25.1 2019 319.8 Jul: –38% 197.7 2020 2019 34.0 Jul: –11% 30.4 2020 287.2 Aug: –21% 127.3 39.5 Aug: –22% 31.0 330.1 Sep: –27% 240.3 33.8 Sep: –18% 27.5 289.1 Oct: –19% 235.2 40.2 Oct: –6% 37.6 455.8 Nov: –55% 204.2 41.4 Nov: –36% 26.7 422.7 Dec; 2020n.a. 41.5 Nov: –13% 36.2

Papua New Guinea Solomon Islands

979.0 Jan: +1% 989.9 111.2 Jan: –45% 60.6

874.6 Feb: +3% 901.0 47.1 Feb: +55% 73.1 1075.8 Mar: +1% 1089.3 102.6 Mar: –27% 75.0 1343.1 Apr: –45% 741.4 110.1 Apr: –28% 79.1 991.8 May; 2020n.a. 80.5 May; 2020n.a. 985.2 Jun; 2020n.a. 85.5 Jun; 2020n.a. 77.2 2019 1097.2 Jul; 2020n.a. 2020 2019 Jul; 2020n.a. 2020 1129.3 Aug; 2020n.a. 82.7 Aug; 2020n.a. 1093.2 Sep; 2020n.a. 58.0 Sep; 2020n.a. 930.6 Oct; 2020n.a. 70.5 Oct; 2020n.a. Nov; 2020n.a. 988.2 Nov; 2020n.a. 77.6 Dec; 2020n.a. 999.1 Dec; 2020n.a. 64.1

Source: Author. Data for Fiji and Samoa are from their Bureaus of Statistics; PNG and Solomon Islands data are from the IMF Direction of Trade Statistics.

The COVID-19 crisis has hit hard and, UK–Pacific EPA is in force, and they must in some cases, evaporated revenue streams adapt. Fortunately, there are not significant that businesses, traders and trade regulatory changes. However, for the areas where adapta- agencies need and rely on to adapt to change. tions are needed, sooner or later the question Figure 1 just shows a snapshot, from a trade is how can this be done when businesses are perspective, of the damage caused by the cri- still not earning at full/normal capacity, some sis to the small Pacific states’ trade, which is the face financial ruin, their creditworthiness has key source of revenues for economic growth, slipped, and there is still uncertainty about the among others. Like their counterparts across return to normality, even with vaccinations the globe, businesses in the small Pacific states, slowly coming to the shores. These are some of especially those that have not had the opportu- the difficult situations facing the small Pacific nity to transfer their activities and transactions states in this regard. (for example, tourism) to digital platforms and It is worth recognising that the needs of busi- other digital technologies, have had to make nesses and government trade regulating agen- difficult decisions of laying off staff, suspending cies will vary depending on their size, scale and investments and even closure. Governments the scope of adjustments to be made, among have had to divert fiscal resources from devel- other things. Some businesses and traders have opment programmes to anchoring their public adequate scope and a resource base for adjust- health systems, buying essential health provi- ment and resilience, while others do not. sions, including protective and medical equip- Where adjustment and support are needed, ment, social income transfer support, and so these will be in the form of implementing changes forth. Priorities have shifted for almost every needed to be able to effectively transact and reg- entity. ulate trade under the new rules and procedures, Adapting to new rules (for example, rules some of which are covered in this study. Some of of origin) coming within the same window the support needed will be for introducing the as the COVID-19 crisis is a reality that most necessary legislation and regulations to effect would wish was delayed; but the truth is the implementation, information dissemination and 32 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK awareness about the UK–Pacific EPA market non-zero, tariff peak and tariff escalation against access terms and conditions, trade opportunities semi-finished and final goods from the Pacific and rules of origin, among others. EPA and ACP states. The UK GSP frameworks The information and analysis provided in include, first, the framework for LDCs which this study provide a starting point to help the offers non-reciprocal DF-QF for all originating countries to adapt to the new rules and proce- products, except arms. This mirrors the EU’s dures. Other needs will be identified, and sup- ‘Everything But Arms’ (EBA) for LDCs and port sought, when the countries and businesses poses no tariff or quota bottlenecks for Pacific have fully assessed the impact of the COVID-19 LDC exports to the UK. Second, there is the crisis on their activities, the damage and recov- General Framework (GF) GSP for ‘low-income ery necessary to get back to normal, and the and lower-middle income countries’, as classi- extra resources and support required to adapt fied by the World Bank. This offers zero tariffs to the new rules and procedures. and reduced tariffs below the UKGT rates on certain listed goods, and UKGT terms for cer- 4.5. Emerging bottlenecks and tain goods and countries. GF-beneficiary ACP challenges affecting Pacific exports to states that are in transition to interim EPAs the UK with the UK are allowed special exemptions to continue receiving GSP.4 4.5.1. Introduction Third, there is the Enhanced Framework There is a wide range of possible bottlenecks, (EF) for countries that are in the ‘low-income including tariffs and non-tariff barriers, that and lower-middle income countries’ bracket could affect Pacific export volumes to the UK. and are ‘economically vulnerable due to a lack Specifically, the UK’s trade policy stance, as of export diversification and a low level of inte- expressed in its Global Tariff vis-à-vis the EU’s gration with the international trading system’. Common External Tariff (CET), plus the use of More importantly, eligibility for the EF scheme certain non-tariff measures pertaining to sani- is also conditioned on implementing 27 inter- tary and phytosanitary (SPS) concerns, tech- national conventions relating to human and nical standards, specifications and conformity labour rights, including fair treatment of work- assessments, among others, could potentially ers, the environment and good governance. The undermine effective market access for Pacific EF scheme lies between the GSP framework exports. On the tariff front, it is important to for LDCs and the GF for developing countries distinguish between the tariff regimes offered in terms of favourable market access. It has a to small Pacific states having a trade agree- shorter list of products excluded from duty- ment with the UK versus those that have no free access that are of particular export inter- such agreement. These regimes are: tariffs est to some developing countries, including under UK EPAs; tariffs under the three sets of those from the Pacific. For example, all but UK Generalized System of Preferences (GSP) two subheadings within HS 1701–1703 are not frameworks for least developed and develop- included in EFs, meaning they are subject to ing countries with no trade agreement with higher tariffs under the UKGT. the UK; and the UK Global (MFN) Tariffs for Further conditions of the UK GSP frame- the remainder of states. Subsection 4.8 of this works are that preferential rates are subject to report discusses the UK GSP frameworks in review and suspension for any specific product detail (relating to Pacific countries and sectors group that is already highly competitive without affected by Brexit), so only an overview is given trade preferences, a process termed ‘goods grad- here and more attention is paid to the use of UK uations’. The first list of graduated goods is valid Non-Tariff Measures, which could hinder full until the end of 2022, with the next taking effect market access for Pacific exporters. in 2023.5 The list will be reviewed every three years and published online. The idea of goods 4.5.2. Bottlenecks associated with tariffs graduation disincentivises growing competi- where they exist tiveness if the costs of being graduated exceed The UK EPAs offer duty-free quota-free (DF- the benefits from retaining some low level of QF) treatment for all products, except for arms competitiveness to continue trading on prefer- and related products under HS Chapter 93. ential rates. Hence, it penalises progress rather Thus, there are no tariff bottlenecks, as in high than rewarding it and is best reconsidered. Trade Competitiveness Briefing Paper 2021/05 33

A snapshot of tariff treatment for a handful 4.5.3. Bottlenecks due to non-tariff of products under various market access terms measures is given in Table 3. For the selected products Tariff barriers are only one part of impediments and others of export interest to the Pacific states to free trade and have, over successive rounds in similar situations, the GSP schemes (which of multilateral tariff negotiations, diminished in are ‘second-best’ to DF-QF) offer better market importance as effective trade barriers. Instead, access and fewer bottlenecks, than the UKGT. non-tariff measures (NTMs) of various forms, The default scheme for developing Pacific states scope and opacity have assumed greater signifi- not party to the UK–Pacific EPA is the GF, with cance, as their tariff equivalents often exceed an upgrade to the EF. import tariffs several times over. Table 4 reports The UKGT, especially where there are tar- a wide range of NTMs applied by the UK and iff peaks and tariff escalation against higher the rest of the EU member states in 2018.7 value-added semi-finished and final goods that The UK is likely to maintain the same NTM compete against UK-produced goods, repre- regime because of the human, animal, environ- sents a bottleneck for exports from non-LDC ment and standards considerations. Deviations and non-developing ACP states with no trade might be expected in certain areas and situ- agreements with the UK. However, compared ations, for example, if the UK were to sign an to the EU CET regime, the UKGT offers some- FTA with the United States of America (USA), what different and softer market access condi- which could be the source of the EU-barred tions for these ACP states. The UK Government and domestically (UK) much-opposed chlori- (2020) observes that the UKGT: nated chickens, being chicken dipped in water containing chlorine dioxide intended to kill almost doubles the number of products that E-coli, campylobacter, Salmonella and other are tariff free, relative to what is currently harmful organisms. applied, with 47% of products now zero, It is interesting to note in Table 4 that prod- compared to 27% in the Common External ucts of export interest to the OACPS faced Tariff. The UK Global Tariff ensures that many SPS and technical barriers to trade (TBT) 60% of trade will come into the UK tariff compared to other products. For example, free on WTO terms or through existing more than 93 per cent of vegetable and food preferential access from January 2021. £10 products were subject to SPS measures and billion worth of imports that have little to about 99 per cent were subjected to TBT mea- no UK production are now tariff free, low- sures (compared to 57% of minerals and 64% of ering the cost pressures for UK consum- fuels). One of the main challenges with NTMs ers. Where tariffs have been kept, the UK is when exporters do not have requisite capac- Global Tariff reduces over 3,500 products, ity to comply with the requirements, some of increasing market access and improving which are imposed/need to be met through- transparency for traders. out the various stages and nodes of the value chain. The costs involved in complying with The changes in the UKGT are summarised NTMs invariably inflate trade costs, which in Table 8 in Section 4.7, where the UKGT is undermines trade competitiveness. When this analysed further. exceeds critical margins, it disincentivises and It is clear that export products from non- curtails importation and exportation, even EPA Pacific states affected by these simplifica- where preferential tariff treatment is granted tions have better market access terms to the under the trade agreements. The EU–ACP UK than before when trading under the EU EPAs, negotiated over a much longer timeframe CET. However, the tariff simplifications above than UK–ACP EPAs, come with clear addition- effectively amount to tariff liberalisation, which ality of ‘Aid for Trade’ capacity development erodes preference margins enjoyed by export as an integral element of the trade agreement products of UK–Pacific EPA states. Preference over and above its development aid support. margins are important sources of ‘income The EU, using targeted trade-related assistance transfer’ for some of the poor ACP states, even (TRA) programmes – as it has, for example, in when the levels of utilisation are considered PNG for the past 12 years – supports its EPA (Milner Morrissey and Zgovu, 2010). partners to build NTM compliance capacities. 34

Table 3. UK tariff treatment of a select products of export interest to the Pacific countries

HS code Commodity Description LDCs Framework Enhanced General UK Global Tariff tariff Framework tariff Framework tariff 03034190 Frozen albacore or longfinned tunas "Thunnus alalunga" (excl. for industrial 0% 0% 16.5% 20.0% processing or preservation) 03034290 Frozen yellowfin tunas "Thunnus albacares" (excl. for industrial manufacture of 0% 0% 16.5% 20.0% products of 1604) 03034390 Frozen skipjack or stripe-bellied bonito "Euthynnus -Katsuwonus- pelamis" 0% 0% 16.5% 20.0% (excl. for industrial processing or preservation) 03034490 Frozen bigeye tunas "Thunnus obesus" (excl. for industrial processing or 0% 0% 16.5% 20.0%

preservation) Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK 03034518 Frozen Atlantic bluefin tuna "Thunnus thynnus" (excl. for industrial processing 0% 0% 16.5% 20.0% or preservation) 03034599 Frozen Pacific bluefin tuna "Thunnus orientalis" (excl. for industrial processing 0% 0% 16.5% 20.0% or preservation) 03034690 Frozen Southern bluefin tunas "Thunnus maccoyii" (excl. for industrial 0% 0% 16.5% 20.0% processing or preservation) 03034985 Frozen tunas of the genus "Thunnus" (excl. tunas for industrial processing or 0% 0% 16.5% 20.0% preservation and Thunnus alalunga, Thunnus albacares, Thunnus obesus, Thunnus thynnus, Thunnus orientalis and Thunnus maccoyii) 03038929 Frozen fish of the genus Euthynnus (excl. skipjack or stripe-bellied bonito and 0% 0% 16.5% 20.0% Kawakawa, and fish for industrial processing or preservation) 03039190 Frozen fish livers, roes and milt (excl. hard and soft roes for the manufacture of 0% 0% 3.5% 10.0% deoxyribonucleic acid or protamine sulphate) 03044990 Fresh or chilled fillets of fish, n.e.s. 0% 0% 14.5% 18.0% 03045100 Fresh or chilled meat, whether or not minced, of tilapia "Oreochromis spp.”, 0% 0% 4.5% 8.0% catfish “Pangasius spp., Silurus spp., Clarias spp., Ictalurus spp.”, carp “Cyprinus spp., Carassius spp., Ctenopharyngodon idellus, Hypophthalmichthys spp., Cirrhinus spp., Mylopharyngodon piceus, Catla catla, Labeo spp., Osteochilus hasselti, Leptobarbus hoeveni, Megalobrama spp.”, eels “Ang Trade Competitiveness BriefingPaper2021/05

03045910 Fresh or chilled meat of freshwater fish, whether or not minced (excl. all fillets, 0% 0% 4.5% 8.0% tilapias, catfish, carp, eels, Nile perch, snakeheads, salmonidae, swordfish, toothfish and fish of the families Bregmacerotidae, Euclichthyidae, Gadidae, Macrouridae, Melanonidae, Merlucciidae, Moridae and Muraenolepididae) 09011200 Decaffeinated coffee (excl. roasted) 0% 0% 4.5% 8.0% 09012100 Roasted coffee (excl. decaffeinated) 0% 0% 2.5% 6.0% 09012200 Roasted, decaffeinated coffee 0% 0% 3.1% 8.0% 09019090 Coffee substitutes containing coffee in any proportion 0% 0% 6.5% 10.0% 09051000 Vanilla, neither crushed nor ground 0% 0% 2.1% 6.0% 15111010 Crude palm oil, for technical or industrial uses (excl. for manufacture of 0% not included in EF not included in GF 0% foodstuffs) 17011310 Raw cane sugar for refining, in solid form, not containing added flavouring or 0% not included in EF not included in GF 28.00 GBP/100kg std qual colouring matter, obtained without centrifugation, with sucrose content 69° to 93°, containing only natural anhedral microcrystals [see subheading note 2.] 17011390 Raw cane sugar, in solid form, not containing added flavouring or colouring 0% not included in EF not included in GF 35.00 GBP/100kg matter, obtained without centrifugation, with sucrose content 69° to 93°, containing only natural anhedral microcrystals [see subheading note 2.] (excl. for refining) 17011410 Raw cane sugar for refining, in solid form, not containing added flavouring or 0% not included in EF not included in GF 28.00 GBP/100kg std qual colouring matter (excl. cane sugar of 1701 13) 17011490 Raw cane sugar, in solid form, not containing added flavouring or colouring 0% not included in EF not included in GF 35.00 GBP/100kg matter (excl. for refining, and cane sugar of 1701 13) 17019100 Refined cane or beet sugar, containing added flavouring or colouring, in solid 0% not included in EF not included in GF 35.00 GBP/100kg form 17019910 White sugar, containing in dry state>= 99,5% sucrose (excl. flavoured or 0% not included in EF not included in GF 35.00 GBP/100kg coloured) 17019990 Cane or beet sugar and chemically pure sucrose, in solid form (excl. cane and 0% not included in EF not included in GF 35.00 GBP/100kg beet sugar containing added flavouring or colouring, raw sugar and white sugar)

Source: Author, using data from www.Gov.UK.6 35 36 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

Table 4. Share of products subject to NTMs (frequency ratio) applied by the UK and EU in 2018

Non-tariff measures applied Animal Vegetable Food products Minerals Fuels Chemicals & clothing Textiles

Count: 21 27 29 23 13 35 22 Overall: 95.7 93.4 93.7 20 50 42.3 99.09 1 A-Sanitary and phytosanitary measures 99.7 94.9 91.5 9.52 2.56 31.1 4.52 2 A190-Prohibitions/restrictions of importsfor SPS 0.93 58.2 11.9 0.95 2.56 0.77 0.25 reasons n.e.s. 3 A210-Tolerance limits for residues of or contamination 99.4 78.7 73.5 0.95 -- 2.56 2.26 by certain (non-microbiological) substances 4 A220-Restricted use of certain substances in foods 13.4 83 70.1 0.95 -- 0.64 2.01 and feeds and their contact materials 5 A310-Labelling requirements 84.5 86.1 90.5 0.95 -- 1.53 -- 6 A320-Marking requirements 8.7 33 11.9 -- -- 0.64 -- 7 A330-Packaging requirements 55.9 83.5 84.4 0.95 -- 0.64 -- 8 A410-Microbiological criteria of the final product 55.9 83.8 84.4 0.95 -- 0.64 -- 9 A630-Food and feed processing 32.3 86.1 77.3 0.95 -- 2.56 2.26 10 A820-Testing requirement 91 4.55 31.8 -- -- 1.92 -- 11 A830-Certification requirement 99.7 59.7 30.3 0.95 2.56 2.3 2.51 12 A840-Inspection requirement 99.7 51.7 27.5 8.57 2.56 2.3 2.51 13 A850-Traceability requirements 87.9 78.1 84.4 0.95 -- 2.56 2.26 14 A851-Origin of materials and parts -- 74.7 62.6 0.95 -- 0.64 -- 15 B-Technical barriers to trade 97.5 98.6 99.1 57.1 64.1 96.3 100 16 B110-Prohibition for TBT reasons 50.6 17.1 22.3 29.5 61.5 91.6 16.96 17 B150-Registration requirement for importers for TBT -- 16.8 9.95 29.5 61.5 94.3 -- reasons 18 B220-Restricted use of certain substances -- -- 3.32 -- -- 3.07 96.23 19 B310-Labelling requirements 97.5 98.6 99.1 29.5 61.5 95.1 99.12 20 B320-Marking requirements 8.7 18.2 -- 7.62 -- 0.13 98.99 21 B330-Packaging requirements 57.8 16.8 29.9 29.5 61.5 94.8 -- 22 B420-TBT regulations on transport and storage ------7.62 -- 8.7 0.75 23 B600-Product identity requirement -- -- 1.9 5.71 -- 6.91 -- 24 B700-Product quality or performance requirement -- 45.2 1.9 43.8 12.8 8.57 28.64 25 B810-Product registration requirement -- 3.69 0.95 -- -- 2.05 -- 26 B820-Testing requirement -- 4.55 4.27 -- -- 4.35 98.99 27 B830-Certification requirement 47.5 0.57 6.64 43.8 18 18.5 41.08 28 B840-Inspection requirement -- 34.1 9.48 29.5 61.5 91.9 26.13 29 B850-Traceability information requirements -- -- 3.32 -- -- 0.9 -- 30 E-Licences, quotas, prohibitions and other quantity 9.94 7.39 10.9 -- -- 3.2 24.62 control measures

Source: Author, using data from World Integrated Trade Solution (WITS), maintained by the WTO and World Bank.

The UK EPAs are yet to be packaged this way. support provided to LDC and developing coun- Instead, the UK has pointed to its existing gov- try trade partners as the support available for ernment development aid commitments and trade development. Trade Competitiveness Briefing Paper 2021/05 37

4.5.4. Bottlenecks due to weak trade In this regard, the study noted that most small facilitation in small Pacific states Pacific states were yet to start fully implement- An important bottleneck facing Pacific export- ing the 2013 Bali World Trade Organization ers is the fragile state of trade facilitation (TF). (WTO) Trade Facilitation Agreement (TFA), The World Bank regularly collects data and and customs best practices espoused by the publishes estimates of Logistics Performance World Customs Organization (WCO) in its Indices (LPIs), which measure the quality of various conventions, including the Revised trade facilitation by country and by measure. Kyoto Convention (RKC), among others. For Estimates of LPIs show the Pacific region (here example, despite the well-known and appre- represented by Fiji, PNG and Solomon Islands) ciated trade cost savings (and significant has rather weak LPI metrics (average score of 2.4 improvements/increase in customs revenue out of 5, ranked rank of 128 in the world) vis-à- collection, among others) it brings, Vanuatu vis the neighbouring Association of Southeast (Raikuna et al. 2014) is the only country among Asian Nations (ASEAN) region (average score small Pacific states that has implemented an 3.0, rank 62) and selected global markets (score electronic single window system (ESWS).8 This 3.9, rank 13). See Table 5. To illustrate the gap has been recommended in both the WCO RKC with the best performers in this regard, Pacific and WTO TFA, and also by the United Nations states need to improve their TF profile to match Centre for Trade Facilitation and Electronic the best performer country (Germany, ranked Business (UN/CEFACT). The larger regional 1) by 57.3 per cent (column c). Columns (d) trading economies of Fiji and PNG completed to (i) report specific TF aspects, including cus- ESWS feasibility studies in 2013 and 2016, toms efficiency in trade clearance, quality of respectively, but were at the time of writing yet trade, transport infrastructure and others. Here to implement the system. An ESWS could easily it is also seen that Pacific states lag well behind contribute to increased customs efficiency and their competitors, with only two metrics at and reduced costs of doing trade by Pacific states. above the half-mark LPI score of 2.5. Also, some customs administrations in the small Pacific states are scarcely computer- ised for electronic trade facilitation to process import and export documentation and clear- ance, as well as for generation of trade statistics for planning; others have spreadsheet-based systems operable on a single computer or net- worked. Another illustration of outstanding issues in modernising trade facilitation is that, as at 1 October 2020, the majority of small Pacific states as listed below were not contract- ing parties to the WCO Harmonized System Convention, although they apply it with vary- ing levels of competence. This often causes Weak TF regimes create avoidable costs of commodity classification problems for trad- doing trade for traders which, in the case of the ers: Cook Islands, Kiribati, Marshall Islands, small Pacific states, compounds their already Federated States of Micronesia (FSM), Niue, high trade costs caused by high freight and Palau, Samoa, Solomon Islands, Tonga and logistics costs. These high costs are because Tuvalu. 9 of their underdeveloped port facilities, low Even where small Pacific states have signed trade volumes and remote geographical loca- the WCO RKC and WTO TFA, the levels of tion from most other major global trade play- implementation of the provisions of these inter- ers including China, USA, EU and UK, among national conventions in customs administration others. This means that every opportunity for and trade facilitation varies greatly from state to minimising trade costs, including improving state. This means their trade facilitation is yet trade facilitation, must be availed of to expand to be optimal or to deliver the lowest possible gainful trade and maximise trade opportunities trade facilitation costs and support trade com- from preferential trade agreements. petitiveness, other things remaining the same. Table 5. Trade facilitation in Pacific states as measured by LPI (1= low to 5 = high) in 2018 38

Country/region LPI rank in Overall % Gap to Efficiency of Quality of trade and Ease of arranging Trade logistics Tracking and Frequency with which the world LPI highest customs trade transport- related competitively quality and tracing shipments reach score performer clearance process infrastructure priced shipments competence consignments consignee within scheduled time (a) (b) (c ) (d) (e ) (f) (g) (h) (i) Pacific States Fiji 133 2.4 58 2.4 2.4 2.2 2.3 2.3 2.5 Papua New Guinea 148 2.2 63 2.3 2.0 2.1 1.9 2.3 2.4 Solomon Islands 104 2.6 51 2.8 2.2 2.2 2.7 2.4 3.1 Average 128 2.4 57 2.5 2.2 2.2 2.3 2.3 2.7 Select major markets Germany 1 4.2 0 4.1 4.4 3.9 4.3 4.2 4.4 Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK Belgium 3 4.0 5 3.7 4.0 4.0 4.1 4.1 4.4 Netherlands 6 4.0 6 3.9 4.2 3.7 4.1 4.0 4.3 United Kingdom 9 4.0 7 3.8 4.0 3.7 4.0 4.1 4.3 New Zealand 15 3.9 10 3.7 4.0 3.4 4.0 3.9 4.3 Australia 18 3.8 14 3.9 4.0 3.2 3.7 3.8 4.0 Average 9 4.0 7 3.8 4.1 3.6 4.1 3.9 4.3 ASEAN countries Singapore 7 4.0 6 3.9 4.1 3.6 4.1 4.1 4.3 Thailand 32 3.4 25 3.1 3.1 3.5 3.4 3.5 3.8 Vietnam 39 3.3 29 3.0 3.0 3.2 3.4 3.4 3.7 Malaysia 41 3.2 31 2.9 3.1 3.3 3.3 3.1 3.5 Indonesia 46 3.2 33 2.7 2.9 3.2 3.1 3.3 3.7 Philippines 60 2.9 41 2.5 2.7 3.3 2.8 3.1 3.0 Brunei 80 2.7 47 2.6 2.5 2.5 2.7 2.7 3.2 Lao PDR 82 2.7 47 2.6 2.4 2.7 2.6 2.9 2.8 Cambodia 98 2.6 51 2.4 2.1 2.8 2.4 2.5 3.2 Myanmar 137 2.3 59 2.2 2.0 2.2 2.3 2.2 2.9 Average 62 3.0 37 2.8 2.8 3.0 3.0 3.1 3.4

Source: Author, using data from the World Bank, Doing Business project (doingbusiness.org). Trade Competitiveness Briefing Paper 2021/05 39

Small Pacific states need to do more in terms through avenues other than trade, which gen- of modernising trade facilitation to contribute erates incomes for poverty reduction among to gaining more from trade agreements and smallholder farming communities involved in preferential schemes. Often lack of resources to the production of GSP-dependent exports. The modernise means that they continue to under- condition represents a trade barrier against perform, remain less engaged in the global poor countries with weak governance insti- trading system and underdeliver gains from tutional frameworks; these need resources trade. ‘Aid for Trade’ support to modernise the to improve, some of which come from hav- small Pacific states’ trade facilitation regimes ing the best preferential market access, rather is therefore an area of intervention that would than being blocked. Besides, there are many significantly raise the prospects for the states to other avenues for dealing with such non-trade effectively exploit the gains from participating issues through, among others, diplomatic and in global trade. political bilateral, regional and multilateral engagements to promote positive change. Thus, 4.6. Available options that could be instead of a three-tier GSP regime, there should considered to remove bottlenecks be only two categories: the LDC and Enhanced Frameworks, without conditions that do not The preceding subsection identified three key relate to trade as currently being applied. areas of bottlenecks and challenges affecting Pacific exports to the UK, namely: GSP tariffs 4.6.2. Dealing with complying with NTMs in under the General Framework and Enhanced the UK Framework on a wide range of products of spe- It is recognised that NTMs are an integral cific export interest for non-EPA, non-LDC part of regulating and managing international Pacific states; NTMs, which require elaborate trade. However, LDCs and developing coun- technical capacity and equipment in produc- tries often have limited capacity to comply with tion and processing through the value chains; some NTMs that require significant resources and weak capacities in trade facilitation and and technical capacity (skills, equipment) in logistics in the Pacific states. Options for deal- standards specification, testing, conformity ing with these challenges are considered in the assessment and certification, among others. following paragraphs. Paragraph 1 of Article 37 of the UK–Pacific EPA, states: The parties recognise the impor- 4.6.1. Dealing with tariffs issues under the tance of making operational the provisions of agreement Article 4 of the SPS Agreement and enabling the The UK’s position of graduating products Pacific States to have the equivalence of their because of an increase in competitiveness does SPS measures recognised by developed import- not sit well with the GSP recipients’ ambitions ing countries. The small Pacific states still need for sustainable export growth and develop- to develop their SPS capacities to a level where ment. As argued in the preceding subsection, equivalence in most if not all areas can be via- increased competitiveness and efficiencyble. Both PNG and Fiji have received some Aid should be rewarded and allowed to grow fur- for Trade from the EU under EPAs to develop ther, not penalised by withdrawing preferential their SPS and standards regimes. Other simi- market access. As the UK grants preferential lar support has been received from Australia, access to ACP sugar that competes with home- New Zealand and other development partners. grown (UK) beet sugar, a similar allowance However, there is still need for more support to should also be made for products from ACP develop NTM compliance capacities in these that show promise (stemming from increased and other small Pacific states. The UK–Pacific competitiveness) for export diversification and EPA provides an opportunity for the UK to growth, and thereby support poverty reduction contribute to developing NTM compliance and growth in GSP recipient countries. capacities in small Pacific states, essentially Similarly, the UK’s three-tier GSP system continuing the trade-related assistance it pro- needs reconsideration. Improvements in non- vided to EU–Pacific EPA states, when it was trade issues of human rights and governance, part of the EU. This would not be an entirely upon which access to the Enhanced Framework new phenomenon, rather it would be a ‘con- is conditioned, can and should be addressed tinuity’ of the trade-related assistance the UK 40 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK used to provide as part of the EU. This trade- second EU-funded Trade-Related Assistance related assistance was in addition (‘additional- programme. The next step is supporting Fiji ity’) to other development assistance that the and PNG to identify mechanisms for funding EU provided to ACP states. That is the standard full implementation of their national ESWS, that the UK should maintain or better, rather including the use of public–private partner- than going backwards – as is the current stance. ships (PPPs). 4.6.3. Dealing with trade facilitation in the Targeted support to improve trade facilita- Pacific EPA states tion in UK–Pacific EPA states will bridge the resource gaps and help the latter to achieve Efficient trade facilitation and logistics for lower costs of doing trade, raise trade competi- export and import (for example, intermediate tiveness and increase Pacific exports to the UK. inputs that become inputs in export produc- tion) play a key role in trade development, as 4.7. Brexit and trade competitiveness they keep trade costs low and support trade of Pacific exports to the UK competitiveness. It has been shown in the pre- ceding subsection that Pacific states have a gap 4.7.1. Introduction (more than 50%) to close if they are to attain Brexit can affect trade competitiveness of Pacific competitive levels of trade facilitation, as in EPA states’ exports in several ways, including if some of their global trading countries. it results in: (a) raising (lowering) landed unit Due to the time constraints faced by the prices in the UK of Pacific EPA states’ exports present study, there was no opportunity for a vis-à-vis the EU during Brexit, other things thorough situation assessment of specific chal- remaining the same; (b) the UK’s trade policy lenges and needs. However, some missing facil- stance eroding Pacific exports’ preference mar- ities, infrastructure and equipment that would gins in the UK, as the UK enters into more improve the situation are well known from and deeper FTAs with new trade partners that previous analyses and have been alluded to in did not have FTAs with the EU; or (c) the UK this study. For example, Fiji and PNG could unilaterally opening up its domestic market significantly improve ‘efficiency of customs to third parties, by lowering tariffs and rais- trade clearance processes’ and the state of their ing non-tariff measures (for example, quotas, trade facilitation by stepping up implementa- as in the case of the ATQ on sugar discussed tion of the WTO TFA in outstanding areas. already), among others. Post-Brexit landed This could be done, for instance, via further export unit prices are a function of cost-raising digitalisation of customs and trade clearance market access conditions and barriers (due to procedures and processes through implemen- tariffs, burdensome non-tariff measures and tation of national electronic single window non-tariff barriers, new UK customs proce- systems (ESWS). These could then be intercon- dures and processes for documentary and bor- nected at the regional level to build a regional der compliance, among others) faced by Pacific ESWS for improved customs co-ordination and EPA exports in the UK vis-à-vis the EU (see co-operation, which are also promoted as best previous sections and below), unfavourable UK practices in trade facilitation (see Article 10(4) exchange rates since Brexit, the cost of trans- of the WTO TFA). ferring from EU law-based supply contracts There is ample evidence showing that coun- to UK laws (a one-time action for some com- tries that implement ESWS have seen significant modities), among others. The paragraphs below improvements in revenue collection efficiency consider the role of documentary and border and amounts, while also drastically reducing the compliance and exchange rates. The UK’s trade cost of doing business and doing trade (OECD policy stance (with respect to tariffs and non- 2001; Claypole 2013; UNCTAD and Economic tariff measures) and preference erosion were Commission for Europe undated; Raikuna et covered in the preceding sections. al. 2013 and 2014). Vanuatu is the only small 4.7.2. Effects of documentary and border Pacific state implementing an ESWS, following compliance a feasibility study by Raikuna et al. in 2014. Fiji completed a similar feasibility study in 2013 New UK customs procedures and processes (Raikuna et al. 2013), while PNG had its sec- under Brexit would mean that exporters have to ond ESWS feasibility study in 2017 under the adapt their documentation, compliance systems Trade Competitiveness Briefing Paper 2021/05 41 and processes, including obtaining transit trade additional time and costs, though by some lim- clearances at their own cost, both in terms ited margins considering that the UK has largely of time completing the documentation and adopted similar customs procedures and forms compliance formalities, information search, to those used in the EU customs union. These resources and money, among others. However, costs could be even smaller if trade clearance in to the extent that no significant changes in cus- the UK involves less ‘red tape’ than in the EU. toms procedures have been introduced follow- 4.7.3. Effect of exchange rate movement ing Brexit (as at the time of this study), there are few Brexit-induced documentary and bor- Ever since the ‘Brexit referendum promise’ was der compliance costs (apart from the challenge made in the manifesto of the winners of the of information-search costs, discussed already, May 2015 UK general election and the June and time spent trying to change international 2016 referendum, the UK pound sterling cur- compliance systems). But it is also important rency (£) has steadily lost its value against the to show the baseline, current situation, upon euro, Fiji Islands dollar (F$) and PNG kina (K) which developments in documentary and bor- (see also their corresponding downward slop- der compliance requirements will pile; other- ing linear trendlines). See Figure 2. A fall in the wise, these also act as areas that need improving value of the UK pound sterling relative to the to increase the prospects of the small Pacific currencies of trade partners makes UK exports states benefiting from the UK–Pacific EPA and relatively cheaper, and UK imports (other coun- other trade agreements. tries’ exports) relatively expensive, other things Available evidence shows that exporters in remaining the same. The substitution and Fiji, PNG, Solomon Islands and other small income effects involved lead to UK businesses Pacific states face some of the longest and high- and consumers choosing potentially cheaper est documentation and compliance times and domestically produced goods over imported costs, respectively. Table 6 shows that export- goods and raw materials. The strong correla- ers in Fiji, PNG and Solomon Islands on aver- tion (but not causation) between Brexit and loss age spend six times longer (124 hours) and of value of the pound sterling suggests possible pay more than twice as much in documentary loss of trade competitiveness for Pacific export- and border compliance costs (US$684.90/ con- ers and other trade partners, more so where the tainer), compared to some of the world’s global latter two use limited imports originating from best trade facilitation performers and ASEAN the UK as they do not benefit from the cheaper countries. UK goods. To the extent that Pacific states also import goods/raw materials for further processing and 4.7.4. Effect of UKGT, preference erosion value addition, documentary and border com- and Quotas pliance times and costs concerning imports The UK has said the UKGT balances its stra- are also important determinants of export and tegic trade objectives, including the delivery trade competitiveness. Available evidence also of the UK’s trade ambitions and FTA trade shows that Fiji, PNG and Solomon Islands agenda, while maintaining its commitment to importers face some of the longest times and developing countries to reduce poverty through highest costs for import documentary and bor- trade –via preferential low-tariff market access der compliance (see Table 7). The trade costs (UK Government 2020). The UKGT presents associated with these weak documentary and a liberal trade policy stance: there is a higher border compliance regimes undermine the percentage of tariff-free products in the UKGT trade competitiveness of small Pacific states vis- (47%, against 27% in the CET) and due to the à-vis competitors in the UK and other markets. average UKGT tariff (5.7%, against 7.2% in the In some cases (for example, merchandise tran- CET). See Table 8. The UKGT: eliminates tar- siting through the EU), Pacific EPA states now iffs on key inputs to production and on prod- need to fill out and comply with UK customs, ucts where the UK has zero or limited domestic in addition to complying with EU customs production; removes tariffs on ‘green goods’ union transit regulations; this was not neces- (for example, on imports of turbine parts, waste sary when the UK was part of the EU customs containers and trees) to deliver upon the gov- union. Extra/new UK documentation and bor- ernment’s green ambitions; eliminates com- der compliance requirements will translate into paratively low tariffs (also known as ‘nuisance 42 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

Table 6. Trade facilitation in Pacific states measured by time and cost of exporting in 2019

Country/region Time and cost to export

Documentary Border Total Documentary Border Total compliance compliance compliance compliance compliance compliance time (hours) time (hours) time (hours) cost (US$) cost (US$) cost (US$) (a) (b) (c ) (d) (e ) (f) Pacific states Fiji 56 56 112 76.00 316.70 392.70 Papua New Guinea 48 42 90 75.00 700.00 775.00 Solomon Islands 60 110 170 257.00 630.00 887.00 Average 55 69 124 136.00 548.90 684.90 Global mkts ÷ Pacific 17.7 3.8 5.9 2.2 2.2 2.2 Select global markets Germany 1 36 37 45.00 345.00 390.00 Belgium 1 0 1 0.00 0.00 0.00 Netherlands 1 0 1 0.00 0.00 0.00 United Kingdom 4 24 28 25.00 280.00 305.00 USA 2 2 3 60.00 175.00 235.00 New Zealand 3 37 40 67.00 337.00 404.00 Australia 7 36 43 264.00 766.00 1,030.00 China 9 21 29 73.60 256.20 329.80 European Union 2 7 9 16.66 79.65 96.30 Average 3 18 21 61.25 248.76 310.01 ASEAN countries Singapore 2 10 12 37.00 335.00 372.00 Thailand 11 44 55 96.90 222.60 319.50 Vietnam 50 55 105 139.20 290.00 429.20 Malaysia 10 28 38 35.00 212.50 247.50 Indonesia ------Philippines ------Brunei ------Lao PDR 60 9 69 235.00 140.00 375.00 Cambodia 132 48 180 100.00 375.00 475.00 Myanmar 144 142 286 140.00 431.70 571.70 Average 58 48 106 111.87 286.69 398.56

Source: Author, using data from the World Bank, Doing Business project (doingbusiness.org). tariffs’) of 2.5% or less with a view to reduce the which in effect gave DF-QF Pacific exports a administrative burden on UK businesses and competitive edge over rivals. government collection costs; and rounds tariffs Tariff banding in the UKGT: Tariffs below down to the nearest standardised band, among 20 per cent are rounded down to the nearest others.10 multiple of 2 per cent; tariffs between 20 and The implicit tariff liberalisation in the above 50 per cent are rounded down to the nearest measures hurts export preference-receiving multiple of 5 per cent; and tariffs above 50 per small Pacific states, as they suddenly find them- cent have been rounded down to the nearest selves having to compete directly with the multiple of 10 per cent. For Pacific and other exports of competitors in the UK market. The OACPS EPA states that have DF-QF market competitors previously (before Brexit) faced access to the UK, the ‘liberal’ rounding down non-zero or higher tariffs on competing goods, of the UKGT erodes their preference margins Trade Competitiveness Briefing Paper 2021/05 43

Table 7. Trade facilitation in Pacific states measured by time and cost of importing in 2019

Country/region Time and cost to import

Documentary Border Total Documentary Border Total compliance compliance compliance compliance compliance compliance time (hours) time (hours) time (hours) cost (US$) cost (US$) cost (US$) (a) (b) (c ) (d) (e ) (f) Pacific States Fiji 34 35 69 57.50 319.80 377.30 Papua New Guinea 48 72 120 85.00 940.00 1,025.00 Solomon Islands 37 108 145 215.00 740.00 955.00 Average 39 72 111 119.17 666.60 785.77 Global mkts ÷ Pacific 12.2 6.1 7.4 3.0 4.4 4.1 Select global markets Germany 1 0 1 0.00 0.00 0.00 Belgium 1 0 1 0.00 0.00 0.00 Netherlands 1 0 1 0.00 0.00 0.00 United Kingdom 2 3 5 0.00 0.00 0.00 USA 8 2 9 100.00 175.00 275.00 New Zealand 1 25 26 80.00 366.50 446.50 Australia 4 39 43 100.00 539.00 639.00 China 13 36 49 77.30 241.30 318.60 European Union 1 2 2 4.63 30.30 34.93 Average 3 12 15 40.21 150.23 190.45 ASEAN countries Singapore 3 33 36 40.00 220.00 260.00 Thailand 4 50 54 43.50 232.50 276.00 Vietnam 76 56 132 182.50 373.00 555.50 Malaysia 7 36 43 60.00 212.50 272.50 Indonesia ------Philippines ------Brunei ------Lao PDR 60 11 71 115.00 223.50 338.50 Cambodia 132 8 140 120.00 240.00 360.00 Myanmar 48 230 278 210.00 456.70 666.70 Average 47 60 108 110.14 279.74 389.89

Source: Author using data from the World Bank, Doing Business project (doingbusiness.org). over competitors. This intensifies competition quota (ATQ) for raw cane sugar, which is open in the UK domestic market on products of to all countries. The ATQ is set at 260,000 export interest, despite assurances by the UK tonnes per annum, with an in-quota tariff government that the UKGT safeguards prefer- rate of 0 per cent and out-of-quota tariff rate ence margins for least developed countries and and quota volumes of £28/100kg/net, all sub- developing countries. Of course, what is also ject to further review in line with existing and key here is potential and actual Pacific (ACP) future tariff suspensions. See Table 9. The ATQ states’ exports to the UK in the affected prod- being ‘open to all countries’ means LDC and ucts; otherwise, there is no considerable loss of developing ACP states sugar exporters face preference advantage elsewhere. increased competition for the UK sugar market Pacific EPA states’ trade competitiveness from some of the world’s low-cost and major is also affected by the UK’s autonomous tariff sugar producers and exporters, such as Brazil, 44 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

Figure 2. Monthly UK pound sterling, euro, Fiji dollar and PNG kina real effective exchange rates

1.40 Conservative Party wins with Referendum: UK EU referendum manifesto votes for Brexit 1.30 1.322 1.295 1.20 1.163 1.121 1.068 1.100 1.10 1.024 1.00 1.029 1.003

0.90

0.80

0.70

0.60

0.50 l l l l l l l r r r r r r r y v y v y v y v y v y v y v n n n n n n p p p p p p p Ju Ju Ju Ju Ju Ju Ju Ja Ja Ja Ja Ja Ja Jan Ma Ma Ma Ma Ma Ma Ma Se Se Se Se Se Se Se Ma Ma Ma Ma Ma Ma Ma No No No No No No No ------14 19 15 16 17 18 20 16 18 20 15 17 19 14 14 15 17 19 16 18 20 15 17 20 14 16 18 19 16 18 20 14 15 17 19 14 16 18 20 15 17 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 UK £ / Euro € UK £ / Fiji Dollar UK £ / PNG Kina Linear (UK £ / Euro €) Linear (UK £ / Fiji Dollar) Linear (UK £ / PNG Kina)

Source: Author, using data from the International Monetary Fund (IMF) International Financial Statistics (IFS).

Table 8. Overview of UK Global Tariffs compared to the EU CET and UKGT bands

UK Global Common Banding UK Global Tariff Tariff External Tariff applied Bands Tariff free tariff lines (%) 47% 27% 2% Banding 2% Agriculture 23% 18% Applied 4% Fish 8% 8% 6% Processed Agricultural Products 41% 29% 8% Industrial Goods 57% 31% 10% Average Tariff (%) 5.7% 7.2% 12% Agriculture 16.1% 18.3% 14% Fish 11.0% 11.7% 16% Processed Agricultural products 10.6% 15.9% 18% Industrial Goods 2.5% 3.7% 20% 5% Banding 25% Applied 30% 35% 40% 45% 10% Banding 50% Applied 60% 70% Source: UK government (2020). Trade Competitiveness Briefing Paper 2021/05 45

Box 1. Contrasting views about the UK ATQ

National Farmers Uniion (NFU) British Sugar ACP Sugar The UK NFU reacted to the We simply do not understand how this Every tonne of new access introduction of the ATQ with policy squares wish stated trade granted through FTAs or ATQs ‘serious concerns’, and suggested objectives. This decision places the UK competes directly with and that such imports were grown to best sugar industry and developing displaces ACP/LDC sugar and production standards that would countries at a disadvantage, while indeed EU domestically be illegal in the UK, and would benefitting the only refiner that produced sugar.‘ACP Sugar ‘undermine thousands’ of UK imports raw cane sugar to teh UK. It will urges the UK government to sugar best growers’, and simply mean zero tariff access and a review the 260,000-metric ton ‘seriously jeopardize the viability subsidy for cane sugar from countries ATQ before 1 January 2022 on of the home-grown crop’ where there are heavy subsidies for the basis of an independent domestic industries, which we belive will impact assessment of its effects seriously damage the sugar industries on the trade in ACP sugar’ in the many countries that currently use preferential access to the UK to drive local development opportunities. The UK Governments argues the ATQ with this volume would ‘support’ the UK’s raw cane sugar refining capacity, and ‘promote consumer choice and competition’ in the UK Sugar market. “This, in turn, will ensure the UK can act as a reliable marget for raw cane sugar from developing counries and support free trade agreement negotitations.” Sources: NFU: https://www.farminguk.com/news/government-presses-ahead-with-damaging-sugar- import-quota_57226.html#:~:text=An%20ATQ%20of%20260%2C000%20tonnes,Global%20 Tariff%2C%20the%20department%20confirmed.&text=The%20NFU%20has%20reacted%20to,be%20 illegal%20in%20the%20UK. British Sugar: https://www.britishsugar.co.uk/media/ news/2020-12-21-british-sugars-response-to-the-atq-for-raw-cane-sugar-imports ACP Sugar: https://acpsugar.org/

Australia and India. A snapshot of contrasting demands in the UK and other countries, while views on the sugar ATQ is reported in Box 1. also contributing to poverty reduction. Brazil was forecast to export a 12-year record- busting total of 32 million tonnes of sugar in 4.8. Regions within Pacific and export 2020/2021, after a low of 19,300,000 tonnes in sectors most affected the 2019/2020 marketing year;11 in both cases, these figures far exceed ATQ of 260,000 tonnes. 4.8.1. Introduction In 2019, Fiji exported 183,090 tonnes12 of raw To understand the implications of Brexit for the cane sugar (HS Code: 170114), of which 57,000 Pacific region and export sectors, the study has tonnes was sold to the UK. considered, among other things, trade arrange- The ATQ needs to be reconsidered to preserve ments with the UK before and after Brexit, devel- the fullest possible preferential market share opment status (which determines access to UK for least developed and developing countries, GSP schemes), and the trade policy stance of some of whose sugar exports (including to the the UK vis-à-vis the EU after Brexit. Significant UK) account for overwhelming proportions of impacts of Brexit are expected where there were their total exports and have important local and particularly strong trade relations with the UK regional value chains supporting livelihoods of pre-Brexit and the new UK–EU trade co-oper- scores of millions of smallholder farmers and ation is such that it significantly disturbs pre- households. Given the right support to develop existing bilateral trade flows in the absence of sugar production and export capacity (includ- a new trade continuity agreement (EPA) with ing meeting all ethical, environmental and the UK. Pacific states that did not have a trade compliance issues), these countries could eas- agreement with the EU pre-Brexit should not in ily use their large untapped potential to expand principle see any difference, except in instances supply and exports to meet the sugar refinery where the UK has taken a more protectionist 46

Table 9. UK customs sugar tariff quotas, version 2.0, 29 December 202013

Quota No. HS Code Origin country Quota duty rate Quota volume Opening date Closing date 2021 quota volume Part A: ‘First-Come First-Served’ Quotas 05.0053 1704 00 00 00 Countries other 35% 44,000 (kg) 01 July 30 June Quota volume than EU member minus allocated states quantity 05.7713 1701 13 10 In-quota tariff rate: 0% 260,000,000 01 January 31 December n/a 1701 14 10 Out-of-quota tariff rate and quota volumes: £28/100kg/net (kg) (EU CET: €33.90/100kg/net)

Part C: Licence Managed Quotas Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK 05.4321 1701 00 00 00 India Zero 4,159,000 (kg) 01 October 30 September Quota volume minus allocated quantity 05.4317 1701 13 10 0014 Australia £82.01/ 1,000kg. Where the polarimetric reading of the 4,964,000 (kg) 01 October 30 September Quota volume 1701 14 10 0015 imported raw sugar departs from 96 degrees, the rate of minus allocated £82.01/ 1,000kg shall be increased or reduced, as quantity appropriate, by 0.14% per tenth of a degree difference established 05.4318 1701 13 10 00 Brazil £82.01/ 1,000kg. Where the polarimetric reading of the 29,670,000 (kg) 01 October 30 September Quota volume 1701 14 10 00 imported raw sugar departs from 96 degrees, the rate of minus allocated £82.01/ 1,000kg shall be increased or reduced, as quantity appropriate, by 0.14% per tenth of a degree difference established 05.4320 1701 13 10 00 Countries other £82.01/ 1,000kg. Where the polarimetric reading of the 31,416,000 (kg) 01 October 30 September Quota volume 1701 14 10 00 than EU member imported raw sugar departs from 96 degrees, the rate of minus allocated states £82.01/ 1,000kg shall be increased or reduced, as quantity appropriate, by 0.14% per tenth of a degree difference established

Source: UK Government, Customs Tariff (Preferential Trade Arrangements and Tariff Quotas) (Amendment) (EU Exit) Regulations 2020s, London. Trade Competitiveness Briefing Paper 2021/05 47 stance than the EU’s customs union that harms ‘Least Developed Countries Framework’ for their exports to the UK. In many instances, the Generalized System of Preferences (GSP) for UK has taken a more liberal, open, trade policy countries that the UN classifies as LDCs. stance than the EU, as seen in the elimination The UK GSP framework for LDCs16 is equiv- of nuisance duty rates and the rounding down alent to the EU’s EBA for LDCs, where all prod- of tariffs to create simplified tariff banding, as ucts except arms/weapons originating from shown in the preceding subsection, among oth- beneficiary LDCs are granted, with no legal ers. This means that those Pacific states stand to obligation on the granter, non-reciprocal tariff- benefit from improved terms and conditions of free and quota-free (DF-QF) entry into the UK export to the UK post-Brexit. and EU domestic markets. Other Pacific LDCs – Kiribati, Timor-Leste, Tuvalu and Vanuatu – 4.8.2. Pacific countries most affected are listed as qualifying for the UKGSP frame- work for LDCs. Samoa graduated from the UN LDC category to developing country status in January 2014, and is therefore is ineligible for the UK GSP framework for LDCs. Vanuatu also graduated from the LDC status on 4 December 2020,17 so it is expected that it will be removed from the list of countries eligible for the UK GSP for LDCs. The UK has two more GSP frameworks, the General Framework and the Enhanced Framework. The General Framework GSP is for low-income and lower-middle income countries, as classified by the World Bank, and grants, with no legal obligation on the UK, reduced import tariffs on certain goods listed in the UK GSP tariff rates. The General Framework withdraws preferential tariffs from goods from For Fiji and PNG, the Interim EPA they signed certain countries when they are considered with the UK is intended to ensure trade con- internationally competitive, such they do not tinuity and cushion against Brexit shocks. In require preferential market access: the UK the short to medium term, there will be adjust- Global Tariff will then apply instead. Countries ment costs for Pacific EPA UK and EU export- eligible for the UK GSP General Framework are ers, mostly relating to implementing changes, listed as: Algeria, Congo, Cook Islands, Ghana, if any, in documentation and border compli- India, Indonesia, Jordan, Kenya, Micronesia, ance procedures and systems, and supporting Nigeria, Niue, Syria, Tajikistan, Uzbekistan legislation, and logistics costs associated with and Vietnam. These are all largely developing transiting goods through the EU (UK) to the countries, according to UN classification 2020. UK (EU), which were not there before Brexit, Developing countries that have signed trade among others. Samoa and Solomon Islands agreements with the UK (Kenya, Ghana, Jordan signed Interim EPAs with the EU in 2018 and and Vietnam) are allowed to still receive GSP 2020, respectively. The two have shown interest General Framework market access during the in joining the UK–Pacific EPA. In the absence transition to their new trade arrangement. of any other opportunities for equivalent pref- The UK GSP Enhanced Framework is erential market access to the UK post-Brexit, granted to countries that the World Bank clas- the two are expected to be adversely affected sifies as ‘low-income and lower-middle income by the loss of the preferential market access countries’ and ‘economically vulnerable due to to the UK they enjoyed under the Interim a lack of export diversification and a low level EU–Pacific EPA, which also involved the UK of integration with the international trading before 1 January 2021. However, consider- system’. The Enhanced Framework grants, with ing that Solomon Islands is a least developed no legal obligation on the UK, duty-free and country (LDC), it retains some preferential lower-tariff market access on an extended list market access to the UK in the form of the of goods (hence, ‘enhanced’) than the General 48 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

Framework, as outlined in the UK GSP tar- 4.8.3.1. Products affected by UK tariffs and iff rates. The World Bank classifies Samoa as quotas an ‘upper-middle’ income country, hence, it is As alluded to already, under the UK–Pacific ineligible for any of the UK GSP frameworks. In EPA, all products, except arms and ammuni- this sense, Samoa’s exports to the UK are sub- tion, originating from Pacific EPA states are ject to MFN tariffs under the UK Global Tariff granted preferential DF-QF treatment. This is schedule. Other Pacific states similar to Samoa similar treatment granted by the UK as part also face higher tariff barriers than Pacific states of the EU before Brexit. Product import tariffs that are party to an interim EPA with the UK or under the EPAs are contained in the respective eligible for the GSP frameworks. Schedules of Tariff Commitments and are also EPAs provide better preferential trade deals available online from the International Trade than the general and UK GSPs, as well as the Centre (ITC). The ITC website presents MFN EU’s EBA scheme, since EPAs are contractual tariffs, effectively applied tariffs which match and legally binding; this means preferential the tariff rates specified in the Schedules of treatment cannot be unilaterally withdrawn on Tariff Commitments, and the preference mar- the whim of one party. EPAs also usually come gin (which is the difference between MFN and with provisions for Aid for Trade and have effectively applied tariffs), among others.18 better market access terms and conditions, Pacific non-EPA states receive different tar- including simpler and more development- iff treatment depending on their development friendly rules of origin, for example, regional status. Exports of LDC Pacific non-EPA states cumulation or cumulation with other develop- to the UK receive DF-QF treatment, except for ing countries, in addition to cumulation with arms and ammunitions, under the UK GSP parties to the agreement. The UK GSP GF and for LDCs. Arms and ammunitions are subject EF offer even more limited preferential duty- to non-zero duties. Kiribati, Solomon Islands, free access, as they exclude certain goods – Tuvalu and Vanuatu are beneficiaries of the UK including those assessed to have increased in GSP for LDCs, meaning that all their export competitiveness. These goods could be of sig- goods to the UK remain unaffected by Brexit, nificant export interest to the beneficiary coun- as they continue to receive the same EBA-like tries. For example, although Kenya has access tariff treatment as was the case when the UK to the UK GSP General Framework, some of was part of the EU. its important exports of floricultural products Exports of non-LDC Pacific non-EPA states under HS Codes 0601, 0602, 0603 and 0604, are subject to either the UK GSP GF, the UK are among the goods exempted from duty- GSP EF or full MFN (UKGT) treatment. All free access in the GF and should, by design of products from Pacific non-EPA low-income the GF, pay the high MFN UK Global Tariffs and lower-middle income states receive the intended to protect the UK’s floriculture sec- UK GSP GF tariff treatment. Thus, at the time tor. DF-QF treatment will be granted to Kenya of writing, all goods exported from the three under the UK–Kenya Interim EPA when it Pacific non-EPA states, namely, Cook Islands, comes into force. Micronesia and Niue, are eligible for the UK GSP GF.19 As noted earlier, the UK GSP GF 4.8.3. Pacific exports (and states) most offers zero or lower-duty rates for some products affected than the UKGT. The EU also has the GSP and Pacific exports will be affected by changes in GSP+ (a special incentive arrangement for sus- the UK procedural rules and market access tainable development and good governances)20 terms and conditions, depending on whether frameworks, which offer better duty rates than the Pacific exporting country has signed an the EU MFN rates. The UK GSP frameworks EPA with the UK, its country development are replicas of the EU GSP schemes, with simi- status, among others. The next sections con- lar product graduation principles. Pacific LDCs sider the products affected by UK tariffs (pref- receive DF-QF treatment under the EU EBA erential or MFN), UK quotas, specifically the scheme for LDCs. Exports of goods from Cook ATQs, and procedural rules such as cumula- Islands, Micronesia, Nauru, Niue, Samoa and tion under rules of origin and NTMs applied Tonga receive the EU Standard GSP.21 Three by the UK. Pacific states, Nauru, Samoa and Tonga, are not Trade Competitiveness Briefing Paper 2021/05 49 listed as eligible for any of the three UK GSP from LDC status on 4 December 2020), are frameworks. Therefore, all goods exported by subject to MFN tariffs. these Pacific states are subject to the higher The lower part of Table 10 shows the differ- MFN UKGT rates. This makes them worse off ences in the number of tariff lines within each when exporting to the UK under Brexit than selected tariff bracket. Compared to the EU, they were before Brexit. the UK eliminated (liberalised) MFN tariffs The UK introduced an ATQ on sugar which, on a total of 1,341 tariff lines after leaving the as discussed already, increases competition with EU. Of the 1,341 liberalised tariff lines, 828 had globally competitive (low-cost) sugar produc- tariffs between 0.1 and 5 per cent (incl.); 411 ers and exporters such as Brazil, Australia and had tariffs between 5.01 and 10 per cent (incl.); India, to mention a few strong competitors. The 80 had tariffs between 10.01 and 20 per cent ATQ undermines the sugar preference margins (incl.); 2 had tariffs between 20.01 and 30 per for Fiji and other Pacific EPA sugar exporters to cent (incl.); and 20 had tariffs greater than 30 the UK. The next paragraphs take a closer look per cent. All but arms and ammunitions from at the changes in tariffs affecting products (tar- UK–Pacific EPA states enter the UK duty free. iff lines) exported from Pacific states. The change in the tariff exposure of Samoa’s Table 10 reports the distribution of tariff exports to the UK after Brexit is interesting. lines across different arbitrary ranges of effec- Before Brexit, although Samoa is a non-LDC, tively applied import tariffs by the UK and EU all of its exports (except those in Table 11) to on exports of the selected Pacific EPA and non- the EU (including the UK) received DF-QF. EPA states. Pacific states that have signed EPAs However, since the UK left the EU and Samoa with the UK (Fiji and PNG) and the EU (Fiji, has not signed an EPA with the UK, this has PNG, Samoa and Solomon Islands) have a sim- exposed Samoa’s exports to the UK to the UK’s ilar distribution of tariff lines across effectively MFN tariffs. As a result, a total of 2,638 prod- applied tariffs in the UK and EU, with all but ucts are now subject to non-zero UK MFN arms and ammunitions products (tariff lines) (UKGT) tariffs, as follows: 1,000 products originating from the Pacific EPA states being (HS6) now attract UKGT between 0.1 and 5 subject to duty-free (zero duties) entry into the per cent (incl.); 1,032 products are subject to UK and EU domestic markets. UKGT between 5.01 and 10 per cent (incl.); 499 The difference between UK and EU EPA products attract UKGT between 10.01 and 20 tariff lines are wine tariff lines, where the EU per cent (incl.), 55 attract UKGT between 20.01 maintains non-zero tariffs but with above-zero and 30 per cent (incl.), and 52 attract UKGT preference margins and for which there are greater than 30 per cent. The fortunes of Samoa currently no exports to the EU from the Pacific contrast markedly with those of fellow non- states. See Table 11. The remaining 13 non-zero LDCs Nauru and Tonga, as Samoa is worse off tariff lines are arms and ammunition products, than non-LDCs. The reason for this, is because for which neither the UK nor the EU accord Samoa’s initial position has gone from having preferential tariff treatment under the EPAs DF-QF with the UK under the EU to MFN and their respective GSP schemes. treatment. As alluded to already, exports of Pacific states that have not signed an EPA with the UK are 4.8.3.2 Products affected by preference subject to import tariffs that depend on the erosion due to FTAs and quotas development status of the Pacific states. Thus, The UK is entering more and more FTA agree- LDCs such as Kiribati, Solomon Islands and ments with third parties, which in essence Tuvalu are subject to DF-QF for all products, diminishes the number of competitors over except arms and ammunition, and four prod- which Pacific EPA states enjoy preference ucts of wheat (with zero preferential margin), advantage. As the UK argument for Brexit was ‘other made-up articles including dress pat- to enter FTAs with a larger number of countries terns’ and ‘other articles of plastics and articles than it had under the EU, it is fair to expect that of other materials …’. See Table 12. All export preference margins in the UK post-Brexit will products from non-LDC Pacific states without be much lower than they were before Brexit. an EPA with the UK, such as Samoa, Nauru and The erosion of preference margins in the UK Tonga (and soon Vanuatu, which graduated will affect all trade partners that enter into FTAs 50

Table 10. Distribution of tariff lines by selected arbitrary import tariff brackets in the UK and EU

EPAs with UK & EU EPA with EU only No EPA with UK or EU

MFN Fiji Papua New Solomon Samoa Kiribati Tuvalu Vanuatu Nauru Tonga Guinea Islands (LDC) (non-LDC) (LDC) (LDC) (non-LDC)* (non-LDC) (non-LDC) UK tariff lines 0% 2,732 5,374 5,374 5,370 2,732 5,370 5,370 5,370 2,732 2,732 0.1% - 5% 1,017 13 13 16 1,017 16 16 16 1,017 1,017 5.01% - 10% 1,032 0 0 0 1,032 0 0 0 1,032 1,032 10.01% - 20% 499 0 0 0 499 0 0 0 499 499 20.01% - 30% 55 0 0 1 55 1 1 1 55 55

Above 30% 52 0 0 0 52 0 0 0 52 52 Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK Total 5,387 5,387 5,387 5,387 5,387 5,387 5,387 5,387 5,387 5,387 EU tariff lines 0% 1,391 5,370 5,370 5,370 5,370 5,370 5,370 5,370 1,391 1,391 0.1% - 5% 1,845 17 17 17 17 17 17 17 1,845 1,845 5.01% - 10% 1,443 0 0 0 0 0 0 0 1,443 1,443 10.01% - 20% 579 0 0 0 0 0 0 0 579 579 20.01% - 30% 57 0 0 0 0 0 0 0 57 57 Above 30% 72 0 0 0 0 0 0 0 72 72 Total 5,387 5,387 5,387 5,387 5,387 5,387 5,387 5,387 5,387 5,387 Difference: UK-EU 0% 1,341 4 4 0 −2,638 0 0 0 1,341 1,341 0.1% - 5% −828 −4 −4 −1 1,000 −1 −1 −1 −828 −828 5.01% - 10% −411 0 0 0 1,032 0 0 0 −411 −411 10.01% - 20% −80 0 0 0 499 0 0 0 −80 −80 20.01% - 30% −2 0 0 1 55 1 1 1 −2 −2 Above 30% −20 0 0 0 52 0 0 0 −20 −20

Source: Author, using tariff data from ITC. A positive figure means the UK has more tariff lines than the EU within a given tariff bracket; a negative figure means the UK has fewer than the EU. Trade Competitiveness Briefing Paper 2021/05 51

Table 11. Non-arms and ammunition products where the EU maintains non-zero import tariffs under its EPAs and GSPs

HS Code Product description MFN Effectively Preference tariffs applied tariff margin 220421 Wine of fresh grapes, including fortified wines; grape must 3.17% 1.57% 1.60% other than that of heading 2009: Other wine; grape must with fermentation prevented or arrested by the addition of alcohol: In containers holding 2  litres or less 220422 Wine of fresh grapes, including fortified wines; grape must 8.52% 3.65% 4.87% other than that of heading 2009: Other wine; grape must with fermentation prevented or arrested by the addition of alcohol: In containers holding more than 2 litres but not more than 10 litres 220429 Wine of fresh grapes, including fortified wines; grape must 12.04% 4.29% 7.75% other than that of heading 2009: Other wine; grape must with fermentation prevented or arrested by the addition of alcohol: Other

Source: Author, using data from ITC.

Table 12. Non-arms and ammunition products where the UK maintains non-zero import tariffs under its GSP for LDCs

HS Code Product description MFN Effectively Preference tariffs applied tariff margin 100199 Wheat and meslin: Other: Other 30% 30% 0% 100191 Wheat and meslin: Other: Seed 9% 3% 5.6% 630790 Other made-up articles, including dress patterns: Other 7% 2% 5.0% 392690 Other articles of plastics and articles of other materials of 5% 0.43% 4.7% headings 3901 to 3914: Other

Source: Author, using data from ITC. with it. Also, the ATQ on sugar undermines the already in Section 4.5.3. (‘Bottlenecks due to quota-free advantage for Fiji’s sugar, which is a Non-Tariff Measures’), depending on the strin- key export product for Fiji in the context of its gency and complexity of the compliance require- Fiji–UK EPA. ments, NTMs potentially raise trade costs. This The UK as a sovereign nation is at liberty impairs trade competitiveness, frustrates export to engage in as many FTAs as it likes, mean- growth and inhibits full exploitation of trade ing preference erosion is something its trade opportunities offered in trade agreements. The partners must learn to live with. Pacific EPA ITC publishes, among other things, informa- states could perhaps engage the UK to review tion on regulatory import requirements in each and introduce in the UK–Pacific EPAs specific export market, data availability permitting, to and additional commitments for trade capacity inform and support trade development, espe- development, akin to the specific Aid-for-Trade cially among small countries, LDCs and devel- arrangements in the EU–Pacific EPAs. This oping countries. Such information is useful to would help Pacific EPA traders to reduce trade inform Pacific EPA states exporters and policy- costs, so that their goods to remain competitive makers as to the market access entry conditions vis-à-vis competitors in the UK. that their goods exported to the UK will be sub- ject to. Given the large volume of information 4.8.3.3 Products affected by UK NTMs on import requirements concerning individual In addition to tariff treatment (preferential products and for capacity building, this paper or otherwise), exports of goods to the UK are refers the reader to Annex 1. Here exhibits A, also subject to import regulatory requirements B and C guide exporters and policy-makers on within the framework of NTMs. As alluded to how to find information on the specific import 52 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK requirements in any export destination mar- (column d) is unrealised export potential in a ket (where ITC has information). Annex 1 also specific product or target market.24 Available illustrates the case of product HS 170113: Cane information shows that Fiji has untapped or beet sugar and chemically pure sucrose, in export potential worth US$19.289 million, rep- solid form: Raw sugar not containing added fla- resenting 84 per cent of its total export potential vouring or colouring matter. Here, there are 33 to the UK. PNG has 12 per cent and Samoa 96 measures or import requirements which can- per cent untapped export potential to the UK not all be covered here. under the prevailing market access conditions, among other factors. An EPA with the UK for 4.8.3.4 Products affected by UK procedural Samoa could expand potential exports to the and documentary compliance requirements UK, while improved productive export supply All goods exported to the UK will have to conditions in PNG could increase its potential comply with procedural and documentary and actual exports to the UK and other destina- requirements to enter the UK domestic mar- tions (Zgovu 2017). ket. See subsection 4.1. For some products, Columns (e) to (i) show how Fiji’s export requirements will be fulfilled in the exporting products are affected by the UK’s new proce- country (for example, where there is need for dural rules and preferential tariff treatment. As licenses), in the transit countries (for example, alluded to already, all but arms and ammuni- in transit via EU countries – a measure that was tion exports originating from Fiji (Table 13) not necessary before Brexit), and import pro- and PNG (Table 14) receive DF-QF under the cedures and documentation upon entry into Fiji–UK EPA, otherwise they would be sub- the UK. The preceding subsection highlights ject to non-zero import tariffs when entering the large number of NTMs, hence, the large the UK – as is the case with Samoa’s exports number of procedures and/or documents that (Table 14). The ATQ on sugar is shown to affect Pacific exporters have to comply with when Fiji’s sugar exports to the UK, because of the exporting to the UK. As by and large the UK increased competition with global sugar pro- is using similar procedural and documentary ducers and exporters that the ATQ introduces compliance requirements, this will have lim- in the UK domestic market. Column (g) reports ited material impact on export products to the how demand for Pacific exports for cumulation UK – other than the fact that most of the docu- in the UK and EU are affected by the UK–EU ments have to be UK-labelled documents. This Trade Cooperation Agreement. Under the does not mean that this will remain the same UK–EU Trade Cooperation Agreement, prod- in the times ahead, as the UK is still in the pro- uct materials imported from outside the UK cess of change and it is possible that some of or EU cannot be recognised by either party as these requirements might be adjusted in line originating from the other party. Thus, whereas with its core trade policy objectives just as it has before Brexit, UK imports from Fiji (Table 13) simplified its UKGT vis-à-vis the EU Common and PNG and Samoa (Table 14) would be rec- External Tariff. ognised by the EU as originating in the Pacific EPA states, this is no longer possible as the UK 4.8.3.5 Illustration of affected export and the EU have restricted cumulation between products using examples from Fiji, PNG and themselves. In fact, the limitation in column (g) Samoa applies to all UK and EU imports from OACPS A summary explanation of the key Pacific members. exports affected by changes in the market The last two columns (h) and (i) indicate access conditions and UK procedural rules is that all exports of Pacific states to the UK will presented in Table 13 using the case of Fiji, with be affected by UK customs documentary com- PNG and Samoa in Table 14. According to the pliance, as well as NTMs applied when access- ITC, potential exports22 (column c): ‘identi- ing the UK domestic market. These measures fies the potential export value for any exporter have not changed significantly since the UK left in a given product and target market based on the EU, but this may change in the times ahead an economic model that combines the exporter’s as the UK builds and finalises its trade regula- supply with the target market’s demand, market tory framework and instruments. Examples of access conditions and the bilateral links between NTMs that may apply are reported in Table 4. the two countries’.23 Untapped export potential For lack of space, description of NTMs for each Trade Competitiveness BriefingPaper2021/05 Table 13. Pacific exports affected by the new UK trade measures, illustrated using top-25 Fijian products of export potential to the UK, 2019

Product Potential Actual Untapped Effectively Affected UK and EU using the UK Customs NTMs Exports to UK exports to Export Applied by UK product as material documentary (US$ ’000) UK (US$ Potential in tariff Quotas cumulated in Pacific and border ’000) UK (US$ EPA states for bilateral compliance ’000) preferential trading under the UK-EU FTA (a) (b) (c ) (d) (e ) (f) (g) (h) (i) 1 HS 160414, Prepared or preserved tunas 11,100.000 0 11,100.000 0%, DF-QF Unaffected No longer possible, UK forms & Similar to EU cumulation in/with ACP procedures, NTMs. Also see states not provided for largely as Subsection 4.8.3.3 in UK-EU FTA before of this paper. Fill UK forms, as applicable 2 HS 1701XX, Raw cane sugar 3,100.000 20,000.000 - 0%, DF-QF ATQ " " " 3 HS 220190, Ordinary natural water 2,100.000 0 2,100.000 0%, DF-QF Unaffected " " " 4 HS 0304Xb, Fish fillets, frozen 1,000.000 0 1,000.000 0%, DF-QF " " " " 5 HS 170310, Cane molasses from sugar 1,000.000 0 1,000.000 0%, DF-QF " " " " refining 6 HS 0714XX, Roots & tubers nes, sago pith 733.100 0 733.100 0%, DF-QF " " " " 7 HS 200600, Edible parts of plants 538.400 7.400 531.000 0%, DF-QF " " " " preserved by sugar 8 HS 620343, Men’s trousers & shorts of 301.100 0 301.100 0%, DF-QF " " " " synthetic fibres 9 HS 1211XX, Medicinal plants, herbs, etc., 283.900 0 282.900 0%, DF-QF " " " " nes 10 HS 611420, Garments for professional, 276.100 0 276.100 0%, DF-QF " " " " sporting, other purpo 11 HS 220110, Mineral waters & aerated 265.100 3,300.000 - 0%, DF-QF " " " " waters 12 HS 611030, Jerseys & similar of man- 257.500 17.900 239.600 0%, DF-QF " " " " made fibres, knit/croc 53 (Continued) 54

Table 13. Pacific exports affected by the new UK trade measures, illustrated using top-25 Fijian products of export potential to the UK, 2019 (Continued)

Product Potential Actual Untapped Effectively Affected UK and EU using the UK Customs NTMs Exports to UK exports to Export Applied by UK product as material documentary (US$ ’000) UK (US$ Potential in tariff Quotas cumulated in Pacific and border ’000) UK (US$ EPA states for bilateral compliance ’000) preferential trading under the UK-EU FTA 13 HS 611430, Garments for professional, 248.100 0 248.100 0%, DF-QF " " " " sporting, other purpo 14 HS 620443, Women’s dresses of 213.400 0 213.400 0%, DF-QF " " " " synthetic fibres

15 HS 610443, Women’s dresses of 169.300 9.600 159.700 0%, DF-QF " " " " Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK synthetic fibres, knit/croche 16 HS 0709XX, Vegetables, fresh or chilled 165.200 1.600 163.600 0%, DF-QF " " " " 17 HS 620342, Men’s trousers & shorts of 160.200 116.900 43.300 0%, DF-QF " " " " cotton 18 HS 610442, Women’s dresses of cotton, 157.600 0 157.600 0%, DF-QF " " " " knit/crochet 19 HS 620463, Women’s trousers & shorts 143.900 0 143.900 0%, DF-QF " " " " of synthetic fibres 20 HS 621133, Men’s garments, nes of 133.600 22.300 111.300 0%, DF-QF " " " " man-made fibres 21 HS 621132, Men’s garments, nes of 128.800 0 128.800 0%, DF-QF " " " " cotton 22 HS 620453, Women’s skirts of synthetic 128.600 0 128.600 0%, DF-QF " " " " fibres 23 HS 0301Xa, Ornamental fish 123.900 209.500 - 0%, DF-QF " " " " 24 HS 630720, Life jackets & life belts 122.000 200.000 121.800 0%, DF-QF " " " " 25 HS 091030, Turmeric "curcuma" 105.300 0 105.300 0%, DF-QF " " " " Total 22,955.100 23,885.200 19,289.200

Source: Author, also using export data from ITC Export Potential Maps. Trade Competitiveness BriefingPaper2021/05

Table 14. Pacific exports affected by the new UK trade measures, illustrated using top-10 PNG and Samoan products of export potential to the UK, 2019

Product Potential Actual Untapped Effectively UK and EU using the UK Customs NTMs Exports to exports to Export Applied tariff product as material documentary UK (US$ UK (US$ Potential in cumulated in Pacific and border ’000) ’000) UK (US$ EPA states for bilateral compliance ’000) preferential trading under the UK-EU FTA (a) (b) (c ) (d) (e ) (g) (h) (i) PAPUA NEW GUINEA 1 HS 750120, Nickel oxide sinters 101,600 0 101.600 0%, DF-QF No longer possible, UK forms & Similar to EU NTMs. cumulation in/with ACP procedures, Also see Subsection states not provided for largely as 4.8.3.3 of this paper. Fill in UK-EU FTA before UK forms, as applicable 2 HS 160414, Prepared or preserved tunas 14,100.000 11,700.000 2,400.000 0%, DF-QF " " " 3 HS 710692, Silver, semi-manufactured 8,200.000 0 8,200.000 0%, DF-QF " " " 4 HS 090111, Coffee, not roasted, not 6,000.000 1,200.000 4,900.000 0%, DF-QF " " " decaffeinated 5 HS 151110, Crude palm oil 4,100.000 43,200.000 - 0%, DF-QF " " " 6 HS 151321, Crude palm kernel & babassu oil 897.400 1,700.000 - 0%, DF-QF " " " 7 HS 180100, Cocoa beans 849.900 18.100 831.800 0%, DF-QF " " " 8 HS 151190, Palm oil (excl crude) & fractions 790.100 56,800.000 - 0%, DF-QF " " " 9 HS 0905, Vanilla 531.700 905.300 - 0%, DF-QF " " " 10 HS 4403Xc, Wood in the rough, nes 711.400 0 711.400 0%, DF-QF " " " Total 137,780.500 115,523.400 17,144.800 SAMOA 1 HS 854430, (Ignition) wiring sets for vehicles 42.300 0 42.300 1.71%, MFN tariff " " " 2 HS 220300, Beer made from malt 42.000 0 42.000 0%, MFN tariff " " " (Continued) 55 56

Table 14. Pacific exports affected by the new UK trade measures, illustrated using top-10 PNG and Samoan products of export potential to the UK, 2019 (Continued)

Product Potential Actual Untapped Effectively UK and EU using the UK Customs NTMs Exports to exports to Export Applied tariff product as material documentary UK (US$ UK (US$ Potential in cumulated in Pacific and border ’000) ’000) UK (US$ EPA states for bilateral compliance ’000) preferential trading

under the UK-EU FTA Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK 3 HS 071490, Roots & tubers nes, sago pith 23.100 0 23.100 4.4%, MFN tariff " " " 4 HS 200989, Juice of fruit or vegetables, 12.800 0 12.800 25.92%, MFN tariff " " " unfermented 5 HS 080119, Coconuts, fresh 4.300 0 4.300 0%, MFN tariff " " " 6 HS 151311, Crude coconut oil 3.600 35.700 - 5.5%, MFN tariff " " " 7 HS 85XXXc, Parts of telephone sets & 2.100 0 2.100 MFN tariff>0% " " " other transmiss 8 HS 611241, Women’s swimwear of 2.000 0 2.000 10.0%, MFN tariff " " " synthetic fibres, kn 9 HS 940320, Metal furniture, nes 1.600 39.100 - 0%, MFN tariff " " " 10 HS 854442, Electric conductors 1.400 0 1.400 1.78%, MFN tariff " " " <=1.000V, fitted with c Total 135.200 74.800 130.000

Source: Author, also using export data from ITC Export Potential Maps. Trade Competitiveness Briefing Paper 2021/05 57 of the products in Table 13 and Table 14 can be introducing animals into EU countries from found by following the guidance in subsection non-EU countries and, therefore, like any 4.8.3.3 on how to go about checking the specific other ‘third country’, must present accompa- import regulatory requirements in any market, nying health certificates within the context including the UK and EU. For example, subsec- of SPS requirements set out in specific EU tion 4.8.3.3 uses the case of import regulatory Commission Decisions. These decisions lay requirements (NTMs) for raw cane sugar (HS down health certificates that must accompany 170113), which has a wide range of NTMs that each consignment of animal imports. The guid- cannot be fitted onto Table 13 for Fiji. ance (in part) is that: ‘health certificates must be signed by an official veterinarian of the compe- 4.8.3.6 UK exports to the EU and tent authority of the exporting non-EU country implications for Pacific exporters in triangular guaranteeing that the conditions for import into value chains the EU have been met. On arrival in the EU, the It is worth noting that just as UK-originating animals and the accompanying certificates must exports to the EU now face EU NTMs, any be verified and checked by EU official veterinari- Pacific originating or materials cumulated by ans at a designated Border Control Post (BCP)’.25 the UK from the Pacific will also be subject This has proved a challenge for some particu- to EU NTMs (which they did not face before larly small-scale UK businesses to the EU, as for Brexit when they were channelled through the first time they have to invest in expertise, the UK). After leaving the EU, UK businesses time and money in ‘form-filling’ which they did exporting live animals to the EU are viewed as not do before Brexit.

Pacific businesses that exported to the EU the EU, and customs will iron out the contra- through the UK (transit or value addition) dictions to provide consistent trade clearance must now comply with procedures and docu- services at the borders. mentation when goods move between the UK 4.9. Impact on subregional trade and EU, and similarly from the EU to UK– even though the EU and UK procedures and docu- agreements, like PACER Plus mentation have not changed.26 In time, UK One can describe trade dynamics in the South businesses will adjust to the procedural and Pacific as involving a collection/constellation documentary requirements when exporting to of ‘moons’, comprising small Pacific states, 58 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK orbiting two middle-sized ‘planets’ (Australia negotiated with another region or country. This [AUS] and New Zealand [NZ]), under a strong would effectively undercut regional integra- gravitational pull explained by relative market tion, particularly in the context of the Pacific sizes, short trade distances between the small Island Countries Trade Agreement (PICTA) states and AUS and NZ, strong shared cultural and the Melanesian Spearhead Group (MSG) and colonial links, budgetary support and other Free Trade Area Agreement, with a skills move- aid flows, including for trade facilitation and ment scheme to facilitate movement of workers trade development from AUS and NZ, among within the subregion, between Fiji, Papua New others. The UK and EU are even bigger ‘planets’, Guinea, Vanuatu and Solomon Islands (Zgovu but as they are located halfway around the globe 2017). they exert a relatively weaker trade gravitational Both Fiji and PNG are also active participants pull than AUS and NZ.27 In between are other in PICTA, which involves 14 Pacific Forum giants such as China, the USA, the group of island states.28 PICTA was signed in 2001, with ASEAN countries. Because of their small mar- implementation commencing in 2007 by only ket size and the pull of AUS and NZ, it is a diffi- 7 countries, namely, Cook Islands, Fiji, Niue, cult task for the UK to dislodge the small Pacific Samoa, Solomon Islands, Tuvalu and Vanuatu. states from the strong gravitational influence of In addition to supporting its EU–Pacific EPAs, AUS and NZ – despite the importance of the the EU is also heavily involved in rejuvenating UK as a key export market for certain products PICTA, which is a wider/larger regional inte- originating from the region. Similarly, the UK gration initiative. PNG maintains preferential is not expected to make a large impression on market access to Australia under the Papua New the trade agreements between the small Pacific Guinea and Australia Trade and Commercial states and AUS and NZ, despite lack of solid Relations Agreement (PATCRA)29, a bilateral modern trade agreements between AUS and FTA with variable geometry in tariff liberalisa- NZ and the leading two small Pacific states, Fiji tion. In the mix of this, AUS and NZ are going and PNG. ahead with PACER Plus and have introduced On the specific question of whether the UK more support facilities for trade capacity devel- having EPAs with two small Pacific states, Fiji opment, including developing the small Pacific and PNG, will have an impact on the PACER states’ institutional frameworks and trade facil- Plus Agreement, which came into force on 13 itation for implementing the agreement. AUS December 2020, it is worth noting that Fiji and and NZ continue to engage both Fiji and PNG PNG are not signatory parties to the agreement, to join PACER Plus. having dropped out of negotiations early on. As mentioned already, the UK–Pacific EPA For Fiji and PNG, the largest economic power- is unlikely to create seismic stresses on regional houses among the small Pacific states, AUS and trade agreements such as PACER Plus. The issue NZ represent formidable trade opponents, just of concern for the prospects of PACER Plus, as they are arch-rivals in the region’s favourite among others, is the fact that Fiji and PNG, sport, rugby. Fiji and PNG have their stron- the largest economic powerhouses among the gest trade and supply chain links with AUS small Pacific states, are not party to the agree- and NZ, but it appears that a completely open ment, which undermines achievement of any trade space would represent a major threat to major Pacific trade and economic integration Fiji and PNG’s comparatively underdeveloped and development. In essence, their absence domestic sectors producing import-competing undermines the importance of PACER Plus and goods originating from AUS and NZ. That level foreign direct investment in the region. Due of threat is not foreseen from FTAs with par- to their economic size, Fiji and PNG are the ties (for example, the EU, UK, among others) two most attractive markets for investments, located halfway around the world, despite major excluding for AUS and NZ. global developments in freight and logistics The small Pacific states subregion presents an chains and digitalisation, which have reduced interesting sphere of interacting and counter- international shipment costs, among others. acting trade influences, brought about by three Fiji and PNG have also been concerned with or more global economic superpowers all vying the most-favoured nation clause in the PACER to retain the upper hand in trade relations, even Plus; the clause would require of small Pacific if they differ in the strength of their trade and states to extend to AUS and NZ similar terms economic gravitational pull on the subregion. Trade Competitiveness Briefing Paper 2021/05 59

The EU is involved in the region, with its EPAs 3. Promoting adoption of more digitalisa- capturing in its trade orbit some of the lead- tion for businesses and traders’ efficiency, ing small Pacific states of Fiji, PNG, Samoa and through effective participation in the mod- Solomon Islands. The EU is also providing Aid ern trade facilitation environment of the for Trade support for PICTA to flourish, which electronic single windows and single sub- puts it in a good position to build deeper eco- mission portals,30 pre-arrival clearing, risk nomic relations with the subregion. Following management, and e-payment for taxes and Brexit and in less than two years of negotia- charges due, and so forth. Digitalisation tions, the UK just concluded EPAs with Fiji and will also enable traders to have easy access PNG, with Samoa and Solomon Islands waiting. to useful data and information from trade Meanwhile, the subregion’s key trade partners, portals31 in trade partner countries, as well AUS and NZ, have for more than a decade tried as to run their own trade portals or e-mar- and still ‘wait’ to sign comprehensive FTAs with ketplace, where they can virtually showcase Fiji and PNG which, along the way, decided to and e-trade their merchandise to a global open up their domestic markets to competing audience of prospective foreign buyers EU and UK exports. All these developments (importers). PIPSO should also encourage make for interesting international trade rela- businesses and traders to adopt new busi- tions dynamics and tensions in the subregion. ness and trading practices to align with global best practice in trade facilitation. 4.10. Role of private sector institutions PIPSO should develop and operate its own in supporting exporters with new UK trade portal, for easy access to informa- tion and data covering important aspects customs procedures (including customs procedures) under The challenges facing exporters from Pacific various trade agreements involving Pacific EPA states in understanding and comply- states. ing with the relevant customs and other trade 4. Supporting the growth of business-to-busi- facilitation procedures and processes under ness relations between Pacific exporters the UK–Pacific EPA invite the attention of and and UK exporters, to share of experiences support from various stakeholders, including dealing with Brexit customs procedures the private sector organisations, to help smooth and exchange information on trade oppor- the implementation of the agreement. At the tunities, among other areas of common regional level, apex private sector organisa- interest. tions such as the Pacific Islands Private Sector 5. Advocating for full, or at least advanced, Organization (PIPSO) can use their scale implementation of trade cost-reducing economies in resource mobilisation and tech- and trade supply chain security-enhanc- nical capacity to muscle together a harmonised ing international conventions and agree- voice and programmes of initiatives to support ments in trade facilitation, such as the exporters to deepen and sharpen their knowl- WCO Revised Kyoto Convention, SAFE edge and understanding of Brexit customs Framework of Standards to Secure and procedures, among others. For the purposes of Facilitate Global Trade, the WTO Trade helping with implementation of the UK–Pacific Facilitation Agreement, etc. In this regard, EPA customs procedures and related aspects, PIPSO and national private sector institu- PIPSO can be instrumental in several ways. tions should intensify engagement with These include the following: their respective governments to commit to and/or implement these conventions. For 1. Undertaking awareness and sensitisation example, Fiji and Vanuatu conducted fea- on the UK–Pacific EPA, including on trade sibility studies on implementation of the opportunities and benefits to the econo- electronic single window systems (ESWS) mies, market access conditions and liber- in October 2013 and February 2014, alisation schedules, customs procedures, respectively. However, only Vanuatu has among others. since implemented a fully national ESWS; 2. Targeted technical capacity building on the it is the only small Pacific state to have operation and application of post-Brexit UK ESWS. PNG conducted an ESWS feasibility customs procedures, including rules of origin. study in April 2017, but is yet to implement 60 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

the system. The UK is developing its ESWS, processed/other), palm oil, mineral water, rum which will ease traders’ interaction and and other liquors, beer, cocoa, coffee, vanilla, trade facilitation costs in dealing with cus- garments, kava, spices, squash, Noni, ginger, toms and other trade regulatory agencies. ‘ready to eat’ food, timber, and extractive sec- 6. Collecting and sharing data and informa- tor commodities such as gold, copper, liquified tion on Pacific EPA states’ trade patterns natural gas, other metals, among others. The and experiences with trade facilitation top-three products (defined at HS commod- (including customs procedures and pro- ity heading level) exported to the UK during cesses) between the parties. This will sup- 2017–19 by the current and aspiring Pacific port the Pacific private sector in having an EPA states are reported in Table 15. The leading independent evidence-based evaluation five export products from the region are palm of the Pacific EPA, from which they can oil (HS 1511, chiefly from PNG and Solomon strategise the best course of action, includ- Islands, worth US$97.4 million and US$10.7 ing constructive engagement with respec- million per annum, respectively); sugar (HS tive governments to influence favourable 1701, Fiji, US$18.3 million); prepared or pre- policy direction. These actions will support served fish (HS 1604, PNG and Solomon PIPSO in meeting its strategic goals, which Islands, US$11.9 million and US$0.049 million, include: to facilitate and build private sec- respectively); and natural waters (HS 2201, Fiji, tor business, trade and competitiveness; US$3.5 million) and coffee (HS 0901, PNG, and to strengthen private sector involve- US$1.1 million). ment in national and regional policy devel- 4.11.2. Rules of origin and customs opment and support implementations, procedures facing Pacific states’ top-three among others.32 export products 7. PIPSO will need capacitating in these activ- ities, under a targeted Aid for Trade sup- Of greater importance for purposes of this port resource envelope. PIPSO has a very study, however, are the market access terms and lean staff, with no trade or customs expert conditions and likely customs procedures that staff on its payroll to analyse complex trade these ten commodity HS headings and related agreements and communicate the same to products face in the UK post-Brexit. Table 16 members and exporters. It relies on mem- summarises some of the main market access bership fees and donor support, with both and customs procedures in this case. All top- these sources of financial support affected ten Pacific states’ export products (2017–19) are by the COVID-19 crisis. A comprehensive subject to DF-QF and to various origin crite- needs assessment is needed at PIPSO, to set ria, including ‘Cumulation in the Pacific States’ out the scope of the capacity-building effort (Article 4), ‘Cumulation with neighbouring within PIPSO and among member organ- developing countries’ (Article 4 bis), ‘Wholly isations and traders, to support Pacific obtained products’ (Article 5) and ‘Sufficiently exporters to increase exports and take full worked or processed products’ (Article 6, advantage of the UK–Pacific EPAs. together with Annex II).33 8. Further discussions with PIPSO are needed There are additional rules of origin condi- to strategise the support, including setting tions that must be met, including ‘Territorial out the scope and scale of the capacity- Requirements’ (Article 12–14),34 such as building effort, among others. ‘direct transport rule’ as qualified (Article 13), ‘Arrangements for Administrative Cooperation’ 4.11. Key Pacific EPA states’ exports to (Article 31–39)35 and ‘Special conditions’ the UK and the market access (Article 40), excluding Ceuta and Melilla as conditions part of the EU for purposes of rules of origin. 4.11.1. Top-3 export products of current 4.11.3. Market access condition: further and aspiring Pacific EPA states consideration of cumulation in the UK EPAs Pacific exports to the UK and the rest of the Cumulation38 is an important aspect of rules world comprise a wide range of traditional of origin and trade development, particularly and region-specific products, including sugar, for ACP states entering into EPAs with both fish and seafood products (chilled/frozen/ the UK and EU. An interesting feature of the Table 15. Top-three export products to the UK from current and aspiring Pacific EPA states, 2017–19 Trade Competitiveness BriefingPaper2021/05

Rank HS Code Commodity description Annual Share % Cumulative exports (US$) shares FIJI Grand Total (All Fiji exports to the UK) 23,567,489 100.0 1 1701 Cane or beet sugar and chemically pure sucrose, in solid form 18,272,617 77.53 77.53 2 2201 Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening 3,481,849 14.77 92.31 matter nor flavoured; ice and snow 3 8411 Turbo-jets, turbo-propellers and other gas turbines 222,324 0.94 93.25 PNG Grand total (all Papua New Guinea exports to the UK) 112,803,180 100.0 1 1511 Palm oil and its fractions, whether or not refined, but not chemically modified 97,444,944 86.38 86.38 2 1604 Prepared or preserved fish; caviar and caviar substitutes prepared from fish eggs 11,892,071 10.54 96.93 3 0901 Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any 1,068,003 0.95 97.87 proportion SOLOMON ISL. Grand total (all Solomon Islands exports to the UK) 10,962,893 100.0 1 1511 Palm oil and its fractions, whether or not refined, but not chemically modified 10,723,413 97.82 97.82 2 1604 Prepared or preserved fish; caviar and caviar substitutes prepared from fish eggs 49,834 0.45 98.27 3 6204 Women’s or girls’ suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches 45,172 0.41 98.68 and shorts (other than swimwear) SAMOA Grand total (all Samoa exports to the UK) 1,438,141 100.0 1 8521 Video recording or reproducing apparatus, whether or not incorporating a video tuner 643,298 44.73 44.73 2 9506 Articles and equipment for general physical exercise, gymnastics, athletics, other sports (including table tennis) or outdoor 576,379 40.08 84.81 games, not specified or included elsewhere in this Chapter; swimming pools and paddling pools 3 8518 Microphones and stands therefor; loudspeakers, whether or not mounted in their enclosures; headphones, earphones and 77,360 5.38 90.19 combined with a microphone sets consisting of a microphone and one or more loudspeakers, audio-frequency electric amplifiers; electric sound amplifier sets VANUATU Grand total (all Vanuatu exports to the UK) 395,721 100.0 1 7404 Copper waste and scrap 215,407 54.43 54.43 2 9706 Antiques of an age exceeding one hundred years 33,905 8.57 63.00 3 3004 Medicaments (excluding goods of Heading 30.02, 30.05 or 30.06) consisting of mixed or unmixed products for therapeutic 29,120 7.36 70.36 or prophylactic uses, put up in measured doses or in forms or packings for retail sale

Sources: Author, using data from ITC calculations based on UN COMTRADE statistics. 61 62

Table 16. Customs rules and procedures for key Pacific EPA states’ export commodities in the UK

HS Code Commodity description Terms Applicable product-specific rules of origin Documentation 0901 Coffee, whether or not roasted or decaffeinated; coffee DF-QF Manufacture from materials of any heading Proof of origin (Art. 15–30)36; husks and skins; coffee substitutes containing coffee in Customs forms (see Tables 1 any proportion and 2) 1511 Palm oil and its fractions, whether or not refined, but not DF-QF Manufacture in which all the materials used are classified within a ditto chemically modified. heading other than that of the product 1604 Prepared or preserved fish; caviar and caviar substitutes DF-QF Manufacture in which the value of any materials of Chapter 3 used ditto

prepared from fish eggs does not exceed 15% of the ex-works price of the product Impact ofPost-Brexit Procedural Rulesfor PacificExportsinto theUK 1701 Cane or beet sugar and chemically pure sucrose, in solid DF, ATQ37 Manufacture in which the value of any materials of Chapter 17 used ditto form does not exceed 30% of the ex-works price of the product 2201 Waters, including natural or artificial mineral waters and DF-QF ditto aerated waters, not containing added sugar or other sweetening matter nor flavoured; ice and snow 3004 Medicaments (excluding goods of Heading 30.02, 30.05 DF-QF Manufacture in which: ditto or 30.06) consisting of mixed or unmixed products for – all the materials used are classified within a heading other than therapeutic or prophylactic uses, put up in measured that of the product. However, materials of heading No 3003 or doses or in forms or packings for retail sale 3004 may be used provided their value, taken together, does not exceed 20% of the ex-works price of the product; – the value of all the materials used does not exceed 50% of the ex-works price of the product 6204 Women’s or girls’ suits, ensembles, jackets, blazers, DF-QF Manufacture from fabric ditto dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear) 7404 Copper waste and scrap DF-QF Manufacture in which all the materials used are classified within a ditto heading other than that of the product Trade Competitiveness BriefingPaper2021/05

8411 Turbo-jets, turbo-propellers and other gas turbines DF-QF Manufacture in which: ditto – all the materials used are classified within a heading other than that of the product; – the value of all the materials used does not exceed 40% of the ex-works price of the product OR Manufacture in which the value of all the materials used does not exceed 25% of the ex-works price of the product 8518 Microphones and stands therefor; loudspeakers, whether DF-QF Manufacture: ditto or not mounted in their enclosures; headphones, – in which the value of all the materials used does not exceed 40% earphones and combined with a microphone sets of the ex-works price of the product; consisting of a microphone and one or more – where the value of all the non-originating materials used does loudspeakers, audio-frequency electric amplifiers; electric not exceed the value of the originating materials used sound amplifier sets 8521 Video recording or reproducing apparatus, whether or not DF-QF Manufacture: ditto incorporating a video tuner – in which the value of all the materials used does not exceed 40% of the ex-works price of the product; – where the value of all the non-originating materials used does not exceed the value of the originating materials used OR Manufacture in which the value of all the materials used does not exceed 30% of the ex-works price of the product 9506 Articles and equipment for general physical exercise, DF-QF Manufacture in which all the materials used are classified within a ditto gymnastics, athletics, other sports (including table tennis) heading other than that of the product. However, roughly shaped or outdoor games, not specified or included elsewhere in blocks for making golf club heads may be used this Chapter; swimming pools and paddling pools 9706 Antiques of an age exceeding one hundred years DF-QF Form C920A. Declaration for antiques older than 100 years

Source: Author. 63 64 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

UK–Pacific EPA, is the provision that both See Table 17. The UK government presented UK and Pacific EPA states can cumulate using arguments for including the EU in its EPAs to materials from the EU to produce originating the UK House of Commons (parliament) in products into each other’s domestic markets. March 2019, saying, among other things:

s64. As a member of the EU, all UK content is currently considered as originating in the EU and UK exports are designated as being of EU origins. This means that materials from, and processing in, the UK and the rest of the EU can be used interchangeably in bilateral trade with existing EU trade agreement partners. This will no longer be the case when existing EU trade agreements stop applying to the UK. At this point, the designation of UK exports will shift from EU originating to UK originating and EU content will (unless specific provision is made in new agreements) no longer count towards meeting the origin requirements for preferential treatment for either party. This would have implications for goods traded between the UK, EU and the Pacific States. 65. To address these implications and to provide maximum continuity for business, it has been agreed in the Pacific states EPA that EU content and processing can be recognised (i.e. cumulated) in UK and Pacific states’ exports to one another. The cumulation arrangements are set out in detail in the Title II (Definition of the concept of ‘originating products’) of the Rules of Origin Protocol and subject to satisfying the conditions specified in the agreement.

Impact s66. If cumulation of EU content for the UK and the Pacific states were not permitted under the Pacific states EPA, some UK- and Pacific states-based exporters might find themselves unable to access preferences, as they are currently able to under the existing EPA. UK exporters to the Pacific states who rely on EU content might have to revert to paying Most Favoured Nation (MFN) tariff rates, if they continued using EU content, or they might have to review and reassess their existing supply and value chains as a result of this change. The impact would, of course, vary across sectors. 67. The Pacific states EPA provides only for trade between the UK and Pacific states and does not provide for either Party’s direct trade with the EU, including, for example, where UK and Pacific states based exporters use content from each other in exports to the EU.

Source: UK Government 2019b.

The UK’s argument in favour of having the an importing Pacific EPA state subject to the EU in its EPAs with Pacific states is to protect conditions outlined in Article 3 (see Table 17). UK and Pacific businesses with value supply Similarly, Pacific EPA states can obtain materi- links in the EU. The problem is that the interests als from the EU (blue line) and those materi- of Pacific- (in fact, OACPS) based exporters are als will also be considered as originating in the not considered in the post-Brexit trade agree- Pacific EPA states and count towards eligibility ment the UK has with the EU, the UK–EU Trade for preferential tariff treatment in the UK sub- Cooperation Agreement. See Article ORIG.4, ject to conditions in Article 4 (see Table 17). also reported in Table 17. There is no provision Before Brexit, under the interim EU EPAs with in the UK–EU Trade Cooperation Agreement Fiji and PNG, both the UK and the EU cumu- (TCA) for cumulation in the OACPS. See lated materials from Fiji and PNG and the con- Article ORIG.4 of the UK-EU TCA, also cerned materials were considered as originating reported in Table 17 and its implications rep- in the UK or the EU and counted towards the resented in Figure 3. The exclusion of OACPS determination of eligibility for duty-free treat- in the cumulation provisions in the UK-EU ment of the UK (EU) export products to the TCA has potential important disruptive effects EU (UK) using the concerned materials. Post- on businesses in the Pacific EPA states. From Brexit, under the UK-EU TCA the UK and EU Figure 3, under the UK-Pacific EPA, the UK can only cumulate materials from each other. can obtain materials from the EU (thicker yel- This means that materials obtained from the low line indicating existing heavy value chains Pacific EPA states (Fiji and PNG), or any other between the UK and EU), and those materials third party, by UK and EU businesses are no are considered as originating in the UK. Such longer considered as originating in the UK nor materials count in the determination of eligibil- the EU, and as a result do not count in the deter- ity of the UK exports for duty-free treatment in mination of eligibility for duty-free treatment of Trade Competitiveness BriefingPaper2021/05

Table 17. Cumulation in the EU–Pacific EPAs, UK–Pacific EPAs and new UK–EU Trade Agreement

EU-Pacific Interim EPA UK—EU Trade UK-Pacific Interim EPA Cooperation Agreeiiieul

Article 3 Article 4 Article ORIG 4 Article 3 Article 4

Cumulation in the European Community Cumulation in the Pacific states Cumulatiori of origin Cumulation in the UK Cumulation in the Pacific States 1. Without prejudice to the provisions of 1. Without prejudice to the provisions 1. A product 1. Without prejudice to the 1. Without prejudice to the Article 2(1) products shall be of Article 2(2) products shall be originating in a Party provisions of Article 2(1) Provisions of Article 2(2), considered as originating in the considered as originating in a shall be considered products shall be considered products shall be considered as European Community if they are Pacific State if they are obtained as originating in the as originating in the UK if they originating in a Pacific State if obtained there, incorporating there incorporating materials other Party if that are obtained there they are obtained there, materials originating in a Pacific State originating in the European product is used as a incorporating materials incorporating materials in the other ACP States or in the OCTs, Community, in the other ACP material in the originating in a Pacific State, in originating in the UK, in the other provided the working or processing States in the OCT or in the other production of the EU, in the other ACP States ACP States, in the [OCT] or in the carried out in the European Pacific States provided the working another product in or in the OCTs, provided the other Pacific States, provided the Community goes beyond the or processing carried out in that that other Party. working or processing carried working or processing carried out operations referred to in Article 7. It Pacific State goes beyond that of out in the UK goes beyond the in that Pacific State goes beyond shall not be necessary for such the operations referred to in Article operations referred to in Article that of the operaions referred to materials to have undergone sufficient 7. It shall not be necessary for such 7. It shall not be necessary for in Article 7. It shall not be working or processing. materials to have undergone such materials to have necessary for such materials to sufficient working or processing. undergone sufficient working have undergone sufficient or processing. working or processing.

Source: Compilation by author. 65 66 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

Figure 3. Key part of cumulation in the UK EPAs with Pacific states, with EU27 present

United Kingdom EU 27 Member Countries Population 67.6 mn, 2021 est. Population: 447.7 mn 2020 est. GDP: US$2.8 trillion GDP: US$18.3 trillion

Papua NEW Guinea Fiji Islands Population: 9.1 million, 2021 Population: 0.9 million, 2021 est. GDP: US$24.8 billion GDP: US$5.5 billion

Source: Author. the affected UK (EU) exports to the EU (UK). The UK is currently negotiating bilateral Hence, the ‘cancelled’ brown arrows in Figure 3. FTAs with both AUS and NZ. When the agree- The discontinuation of cumulation from ments are concluded Fiji and PNG may wish to the Pacific and OACPS EPA states potentially review the UK-Pacific EPA cumulation provi- disrupts affected Pacific EPA states’ and the sion to allow them to cumulate materials from rest of OACPS’ businesses that supplied mate- AUS and NZ that would in any case enter the rials to the UK and the EU businesses before UK duty-free under the UK-AUS and UK-NZ Brexit. The UK argued this potential disrup- FTAs. This would boost Pacific EPA exports to tion to UK businesses is the main reason for the UK (and to the EU if the EU were to allow including the EU in its EPAs with the Pacific such cumulation). States and other OACPS; however, the UK did Pacific EPA states could also ask the UK and not uphold the same argument in its trade EU to be allowed to cumulate with AUS and cooperation agreement with the EU. It is in NZ on the basis of the precedence that both the the best business interests of the OACPS to UK and EU have set in the UK-Singapore and seek restoration of the discontinued cumula- EU-Singapore FTAs, where Singapore is allowed tion from the OACPS EPA states by the UK to cumulate materials from ASEAN countries and EU businesses post-Brexit under the provided those countries have a preferential UK-EU trade cooperation. agreement with the EU or UK. Paragraph 6 of One of the many useful lessons from what Article 3 of the Protocol (on rules of origin) in happened here is that it is critical for a coun- the UK-Singapore FTA states: “6. Materials origi- try to have its strongest value chain partners nating in an ASEAN country, which is applying included in its trade agreements for cumulation with the UK a preferential agreement in accor- and maximise trade opportunities under the dance with Article XXIV of the GATT 1994, shall agreement. Thus, since the UK has introduced be considered as materials originating in a Party the EU, its strongest trade and value chain part- when incorporated in a product obtained in that ner for cumulation in its Pacific EPAs, Pacific Party, provided that they have undergone work- EPA states too would immensely benefit from ing or processing in that Party which goes beyond having their strongest value chain partners, the operations referred to in Article 6 (Insufficient Australia (AUS) and New Zealand (NZ), intro- Working or Processing)” (UK Government- duced in the agreement for cumulation. Singapore, 2020). The UK replicated the wording Trade Competitiveness Briefing Paper 2021/05 67 of paragraph 2 of Article 3 of Protocol 1 of the Pacific EPA state (producer) must ensure that EU-Singapore FTA (EU-Singapore, 2019). Thus, the value they add to the product is greater than Singapore is allowed to cumulate with other the value of the materials used originating any members of the Association of South East one of these countries: the UK, EU, other ACP Asian Nations (ASEAN) comprising of Brunei states, in the [OCT] and other Pacific states. Darussalam, Myanmar/Burma, Cambodia, Paragraph 6 sets out the conditions under Indonesia, Laos, Malaysia, Philippines, which cumulation set out in Article 4 may be Singapore, Thailand and Vietnam provided the allowed. For example, that ‘countries involved member country have preferential agreement in the acquisition of the originating status and with the UK or EU. Similarly, Fiji and PNG could the country of destination have concluded an ask that they should also be allowed to cumulate agreement on administrative co-operation which materials from AUS and NZ when the two coun- ensures a correct implementation of this Article’. tries enter FTAs with the UK, and also with the Agreement on administrative co-operation EU following the precedence in the foregoing. between the Pacific EPA states and the UK is provided for in Article 68, establishing the 4.12. Likely impact of UK–Pacific EPAs ‘Trade Committee’. The Trade Committee is rules of origin on products in the mandated to delegate specific implementing Pacific–EU–UK triangular supply chain decision-making powers to the special com- mittees, as provided for in the relevant provi- Under the UK–Pacific EPA, Pacific states’ sions of the agreement, in particular the Special products exported to the UK are recognised as Committee on Customs Cooperation and Rules originating from a Pacific state (for example, of Origin. Fiji or PNG) if they meet any of the following Further, that ‘Pacific States will provide the qualifying criteria, as set out in Protocol II of UK with details of agreements on administra- the UK–Pacific EPA (parts of which are taken tive co-operation with the other countries or ter- from UK Government [2019a] and reproduced ritories referred to in this Article’, and that ‘This in Appendix 2): Article shall not apply to products of Annex XI originating in South Africa. The cumulation pro- 1. That the product is ‘wholly obtained’ in a vided for in this Article shall apply to the prod- Pacific state (Fiji or PNG), within the mean- ucts originating in South Africa listed in Annex ing of Article 5 of Protocol II concerning XIIs’. 39 the definition of the concept of ‘originating Thus, the originating status of products that products’ and methods of administrative are part of the triangular supply/value chain co-operation of the UK–Pacific EPA. involving the Pacific EPA states, the UK and EU 2. That materials (intermediate inputs)is not affected by the cumulation provision in imported from third parties have under- the UK–Pacific EPA. Pacific EPA states can con- gone ‘sufficient working or processing’ in tinue to source materials from the EU, or carry that Pacific state (Fiji or PNG) within the out value addition in the EU, before exporting meaning of Article 6 of Protocol II. to the UK, and products from this cumulation 3. That, as per Article 4, the product may or value chain will be considered as originating incorporate materials originating in the from Pacific EPA states. Stated simply, it is as if UK, in the EU, in the other ACP states, in the UK were still part of the EU, as this cumula- the [OCT] or in the other Pacific states, tion arrangement existed before Brexit. provided the working or processing car- In respect of the products that qualify for ried out in that Pacific state (Fiji or PNG) cumulation as per Article 4 of Protocol II, goes beyond that of the operations referred paragraph 7 of Article 4 states that cumulation to in Article 7. It shall not be necessary may only be applied for the products listed in for such materials [used in cumulation] Annex IX and for rice of tariff heading 1006 to have undergone sufficient working or respectively, when the materials used in the processing. manufacture of such products are originating, or the working or processing is carried out, in If the working or processing carried out in a Pacific state or in another ACP state member the Pacific EPA state (Fiji or PNG) does not go of an EPA. Annex IX to Protocol II is reported beyond operations stated in Article 7, then the in Annex 3. 68 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

Pacific EPA export products to the UK that, states undergoes value addition in the EU, and or need to, undergo value addition in the EU, this product is not initially included in Annex but are not covered by Annex IX to Protocol II, IX to Protocol II, products for which the cumu- will be negatively affected by the cumulation lation provisions referred to in Article 4(7) provisions. This is because they will be subject apply, then the Pacific EPA state concerned may to more demanding criteria under Article 2(2) bring it to the attention of the Trade Committee (a) and 2(2)(b) ‘General requirements’, and set (established under Article 68 of the UK–Pacific out in detail in Article 5 (‘wholly obtaining’) EPA) to revise/amend Annex IX, as provided and Article 6 (‘substantial transformation’). for in Article 41, ‘Revision and application of If for one reason or another a product (exist- rules of origins’. ing or new) of export interest to the Pacific EPA

5. Summary, conclusion and the way forward

The study on which this paper is based, exam- to find complete sets of information, documen- ined the range and implications for Pacific tation and forms, among others, as while these exports of customs rules, procedures and tariffs are published online by the UK, they are not introduced by the UK as an independent trade organised in one document file or ‘Tool’ that and customs territory, following its departure exporters can readily access. It is this difficulty from the European Union and its customs that led to the commissioning of this study to union. The study examined the provisions of the support Pacific exporters. It is expected that UK–Pacific Economic Partnership Agreement, this challenge will be addressed in due course, which govern the new market access conditions as the UK is still undergoing transition after for exports from Pacific states that have signed exiting the EU customs union. the UK–Pacific EPA, as well as the UKGT and In respect of customs rules, including such non-discriminatory UK customs rules and pro- matters as rules of origin, the study has found cedures that all UK imports must comply with that the UK has largely replicated the EU rules to gain entry to the UK. The main insights, of origin that it applied before Brexit. However, conclusions and way forward are summarised the set up involves cumulating in the 27 devel- below. oped EU member countries, which are obvi- In respect of customs procedures, the study ously the UK’s top trade partners as a bloc. has found that the UK follows best practices Meanwhile, Pacific EPA states are not afforded governed by relevant international conventions a similar opportunity of having their top trade at the WCO and the WTO Trade Facilitation partners (Australia and New Zealand) involved Agreement. The UK is a dedicated champion in cumulation under the agreement. This is a and at the front-end of leading innovation in missed opportunity, as it would greatly assist the trade facilitation measures that seek to reduce small Pacific EPA states to cumulate and export trade costs and improve trade competitiveness. more under the UK–Pacific EPA than they are This in turn supports economic growth and able to do without their key trade partners. Like development, which are desperately needed by the UK, Pacific EPA states can cumulate in the LDCs and developing countries. The study has EU, as provided for in the UK–Pacific EPA, but shown that it is the weak state of trade facilita- the reality is that this is on a very small scale tion, including weak customs efficiency, in the due to small trade volumes between Pacific and Pacific EPA states that has been and remains a EU, hence, it is inconsequential. key obstacle to the growth and development of Cumulation in other ACP and Pacific states their exports. This is an area that needs support is also allowed under the UK–Pacific EPA. to improve. Fiji and PNG are net exporters to the other The challenge with UK customs procedures Pacific states, so there is limited cumulation at this point appears to be the information- within the small Pacific states. Nevertheless, search costs that Pacific exporters are incurring if Fiji and PNG prosper under the agreement, Trade Competitiveness Briefing Paper 2021/05 69 which is expected to boost their demand for the EF and reintroduces tariffs on products when exports of the other Pacific states, this will be competitiveness is assessed to have increased, useful for trade and economic integration and among others. Non-trade issues conditioned development. on the EF should be addressed through other Another missed opportunity for increased means and channels, to allow trade to prosper exports from the Pacific and other OACPS for the benefit of economic growth, develop- members, is the non-involvement of OACPS ment and poverty reduction in poor recipient for cumulation provisions of the UK–EU Trade communities in ACP states. Cooperation Agreement, when the EU has a The UK applies NTMs like any other coun- large presence in the cumulation provisions try and there has been no significant change under the UK–Pacific EPA. The non-involve- yet since Brexit. Pacific businesses exporting to ment of OACPS in this case means that neither the UK must comply with UK NTMs, by con- the UK nor the EU can cumulate materials in forming with UK procedural rules and filling the OACPS, as such materials will not contrib- trade clearance forms, in addition to collabo- ute to originating status. This is an issue that the rating with UK SPS and technical standards OACPS may wish to engage on with both the certification procedures and processes with the UK and EU, given the long trade and economic support of similar institutions in the export- co-operation arrangements and agreements ing countries. The biggest challenge concern- between the previously two, now three, sides. ing complying with NTMs in export markets With respect to tariffs, the UK has intro- such as the UK, is with the Pacific EPA states duced the UKGT, which is a simplified ver- not possessing adequate internationally accred- sion of the EU Common External Tariff and ited NTM compliance capacity to test and cer- offers a more liberal trade policy stance than tify production processes, products and supply the EU CET. For example, the UKGT elimi- chains to the international standards required nates low ‘nuisance tariffs’, eliminates and in in those export markets. As a result, Pacific other cases lowers tariffs on products where states’ export expansion is hindered, leading the UK has limited domestic production, cre- to them not fully exploiting the trade oppor- ates tariff bands by rounding down some tar- tunities from trade agreements and preference iffs, among others. Tariff liberalisation in the schemes. To this end, Pacific states should seek foregoing actions effectively erodes important more support, including from the UK, to build export growth-enhancing preference margins their NTM complying capacity. enjoyed by OACPS members and other prefer- All products exported from the Pacific EPA ence recipients in the UK, even when prefer- and non-EPA states need to comply with UK ence utilisation challenges are considered. procedural and documentary requirements. As The UK has also introduced autonomous tar- the UK has largely rebranded the same proce- iff quotas (ATQs). The ATQ on sugar (260,000 dural and documentary requirements it applied MT per annum) is open to all countries in the while part of the EU, there are no significant world. For this reason, it is of particular con- changes in the information, certifications and cern to Fiji in the UK–Pacific EPA, as it intensi- data requirements needed to comply with mar- fies competition in the UK market from some ket entry conditions into the UK. However, UK of the world’s low-cost sugar exporters, such as businesses (both those that use or do not use Brazil. The UK needs to work with OACPS to Pacific exports imported into the UK as mate- explore ways in which its demand for raw sugar rials for onward transformation into products for refinery in the UK can be met, as there are exported to the EU) now need to comply with members carrying excess capacity. the EU documentary and border compliance The UK has GSP frameworks, namely, requirements, including in SPS and technical the GSP for LDCs, which mirrors the EU’s standards, which they did not have to comply EBA scheme; the General Framework (GF) with before Brexit. for lower-middle income countries; and the Before Brexit, all EU28 member countries Enhanced Framework (EF) for lower-middle were free to cumulate materials originat- income countries that implement specified ing from the ACP states under the EU EPAs. international agreements on human rights and Following Brexit, the UK and EU signed the good governance. The GF GSP is closest to the UK–EU Trade Cooperation Agreement, which MFN UKGT, has more non-zero tariffs than the does not provide for cumulation of materials 70 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK from third party countries – including ACP agreement. Such support is required, for exam- states. This means all Pacific products that are ple, for introducing the necessary legislation intermediate inputs in either the UK or EU and regulations to effect implementation, and businesses are shut out, potentially causing a information dissemination and awareness on loss in trade opportunities and export income the agreement (market access terms and condi- for Pacific states. Pacific and the rest of the tions, trade opportunities), among others. OACPS members need to engage with both the The private sector is a key player in the reali- UK and EU to allow continued cumulation of sation of the benefits from trade agreements. materials from OACPS members in the context Private sector institutions like the Pacific of their Trade Cooperation Agreement, at least Islands Private Sector Organization (PIPSO) with those OACPS members that have signed can play catalytic roles in the implementation or sign EPAs with the UK and EU, as was the of the UK–Pacific EPA customs procedures case before Brexit. A comprehensive business and related aspects, including: by supporting assessment is recommended to establish the awareness and sensitisation on the UK–Pacific regions, sectors and industries that have been EPA; targeted technical capacity building on adversely affected by the lack of such cumula- the operation and application of post-Brexit tion provision in the UK–EU trade agreement, UK customs procedures, including rules of and chart a way forward. origin; promoting digitalisation for efficient Small Pacific states have weak trade facilita- trade facilitation and e-commerce with UK tion capacity, which keeps trade costs unsustain- businesses; supporting productive business- ably high and hence, undercuts export growth to-business relations between Pacific exporters and development. Progress has been made and UK exporters; advancing implementation applying best practice in trade facilitation by the of trade cost-reducing and trade supply chain adoption and implementation of some elements security-enhancing international conventions of the WCO Revised Kyoto Convention and and agreements in trade facilitation; and col- WTO Trade Facilitation Agreement. However, lecting and sharing data and information on there is a lot more that is yet to be implemented Pacific EPA states’ trade patterns and experi- to raise efficiency in trade facilitation among ences, which will also support independent agencies involved in trade clearance, including evidence-based evaluation of the Pacific EPAs customs, SPS and technical barriers to trade to strategise constructive pro-trade engage- (TBT) administering agencies, among others. ments with the respective governments. To be Further digitalisation of the trade facilitation able to do this, PIPSO needs capacitating with regimes, for example, implementation of elec- a targeted Aid for Trade resource envelope. tronic single window systems, and regional co- Further discussions with PIPSO are needed to ordination and co-operation on the same, are strategise the support, including setting out the some of the key areas of support needed to effect scope and scale of the capacity-building effort, game-changing transformations and contribute among others. to cutting trade costs. The study on which this paper is based has The trade and economic activities of small attempted to analyse products from the Pacific Pacific states have been severely damaged by the transiting through the UK, and then to the EU COVID-19 crisis, even given that the number market and vice-versa – transhipment and/or of infection cases and fatalities have been much bulk breaking only, and Pacific products that smaller by global comparisons. Suspension and are value-added in the EU market, and then bans on international passengers to control exported to the UK, and vice-versa. However, the spread of COVID-19 into the island states such data are not readily and publicly avail- have brought to a standstill the largest foreign able. As a result, these issues are not covered in exchange earner for most states. The crisis has this study. The study recommends that a cus- deprived and depleted island states businesses tomised business survey should be undertaken and governments’ wherewithal for recovery involving exporting businesses in the Pacific and adjustment to new trade environments. EPA states, to gather and analyse these data and Thus, external support is needed to effect the inform Pacific states accordingly on the impli- necessary changes to be able to effectively cations of Brexit for the originating status of the transact and regulate trade under the new trade products involved. Trade Competitiveness Briefing Paper 2021/05 71

Notes

1 Paragraph 1 under Article 30, Protocol II states: ‘For 13 Full table available at: https://www.gov.uk/govern- the application of the provisions of Article 20(1)(b) and ment/publications/reference-documents-for-the-­ Article 25(3) in cases where products are invoiced in a customs-tariff-quotas-eu-exit-regulations-2020 currency other than the euro, amounts in the national (accessed 6 March 2021). currencies of a Pacific State, of the UK, and of the other 14 HS 1701 13 10: Raw cane sugar for refining, in solid countries or territories referred to in Articles 3 and 4 form, not containing added flavouring or colouring equivalents to the amounts expressed in euro shall be matter, obtained without centrifugation, with sucrose fixed annually by each of the countries concerned’. content 69° to 93°, containing only natural anhedral 2 Assessment of the ‘potential economic and develop- microcrystals. ment impact of the new customs rules’ would best 15 HS 1701 14 10: Raw cane sugar for refining, in solid come towards the end of the paper. However, it is form, not containing added flavouring or colouring retained in this position to align with the arrangement matter (excl. cane sugar of HS 1701 13). of the Terms of Reference, for ease of reference. 16 See list of UKGSP eligible countries, available at: https:// 3 As of 19 March 2021, 3:25PM GMT: PNG (2,658 www.gov.uk/government/publications/trading- infection cases, 36 mortalities); Fiji (67, 2); Solomon with-developing-nations (accessed 8 March 2021). Islands (18, 0); Samoa (3, 0); Vanuatu (3, 0); Federated 17 See: https://www.un.org/ohrlls/news/vanuatu-­ States of Micronesia (1, 0); World (121,958,304 cases, graduates-least-developed-country-status (accessed 8 2,693,889 mortalities). See https://coronavirus.jhu. March 2021). edu/map.html (accessed 19 March 2021). 18 For example, effectively applied tariffs on goods origi- 4 See: https://www.gov.uk/government/publications/ nating from Fiji imported into the UK can be accessed, trading-with-developing-nations (accessed 10 March and downloaded, from https://www.macmap.org/en/ 2021). query/compare-product?reporter=826&partner=242 5 See: https://www.gov.uk/government/publications/uk- &product=All&level=6 (accessed 10 April 2021). generalised-scheme-of-preferences-gsp-graduated- 19 See: https://www.gov.uk/government/publications/ goods (accessed 10 March 2021). trading-with-developing-nations (accessed 8 March 6 See: https://www.gov.uk/government/publications/ 2021). trading-with-developing-nations (accessed 10 March 20 Regulation (EU) No 978/2012 of the European 2021). Parliament and of the Council of 25 October 2012, 7 The latest available NTMs data are for 2018; hence, applying a scheme of generalised tariff preferences there was no UK-specific data on NTMs on the World and repealing Council Regulation (EC) No 732/2008, Integrated Trade Solution (WITS) database at the time available at: https://eur-lex.europa.eu/legal-content/ writing. EN/TXT/PDF/?uri=CELEX:32012R0978&from=EN 8 UN/CEFACT Recommendation 33: ‘Single Window is (accessed 10 April 2021). a facility that allows parties involved in trade and trans- 21 See: https://trade.ec.europa.eu/doclib/docs/2019/ port to lodge standardized information and documents may/tradoc_157889.pdf (accessed 10 April 2021). with a single-entry point to fulfil all import, export, and 22 The methodology (with limitations) for estimating transit-related regulatory requirements. If information potential exports and other related measures is avail- is electronic, individual data elements should only be able at: https://umbraco.exportpotential.intracen.org/ submitted once. …. It may provide facilities for payment media/1089/epa-methodology_141216.pdf (accessed of relevant duties, taxes and fees. In practical terms, it 8 March 2021). aims to expedite and simplify information flows between 23 See: https://exportpotential.intracen.org/en/about trade and government and to bring meaningful gains to (accessed 8 March 2021). all parties involved in cross-border trade,. See: https:// 24 ITC: The estimated dollar value serves as a benchmark unece.org/trade/uncefact/tf_recommendations for comparison with actual exports and should not be 9 See: http://www.wcoomd.org/-/media/wco/public/ interpreted as a ceiling value. In reality, actual exports global/pdf/topics/nomenclature/overview/hs-­ may be higher or lower than the expected potential contracting-parties/list-of-countries/countries_­ value. When actual exports exceed potential exports, applying_hs.pdf?db=web (accessed 10 March 2021). this can be driven by an exporter’s exceptional export 10 See: https://www.gov.uk/government/news/the-uk- performance in some markets while neglecting others. has-announced-its-new-tariff-regime-the-uk-global- Conversely, the untapped potential value signals room tariff-ukgt-on-19-may-2020 (accessed 15 March for export growth if frictions, for example, in the form 2021). of regulations or buyer-seller mismatches, can be over- 11 See: https://www.statista.com/statistics/249646/ come. Source: https://exportpotential.intracen.org/en/ exported-amount-of-sugar-from-brazil/#:~:text= resources/learning/glossary (accessed 8 March 2021). Brazilian%20sugar%20exports%20amounted%20 25 See, for a summary: https://ec.europa.eu/food/ to,at%20some%2032%20million%20tons (accessed 7 animals/live_animals_en#:~:text=Regarding%20 March 2021). intra%2DUnion%20trade%2C%20the,in%20the%20 12 See: https://www.tridge.com/intelligences/sugar/FJ relevant%20Council%20Directives (accessed 2 April (accessed 7 March 2021). 2021). 72 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

26 Data on the scope and scale of triangular value addi- 32 Summary strategic goals are listed at: http://www. tion involving businesses in the Pacific states, UK and pipso.org.fj/about-us/what-we-do/ (accessed 26 EU were not readily available to comment further on February 2021). the range of products and value involved. This paper 33 UK–Pacific EPA, PROTOCOL II, Annex II: List of has recommended a business survey to collect such working or processing required to be carried out on and other relevant data to inform further policy analy- non-originating materials in order that the product sis and decisions. manufactured can obtain originating status. 27 These assertions are botha priori and easily verifiable 34 UK–Pacific EPA, PROTOCOL II, Title III: Territorial empirically via, among others, gravity modelling of Requirements. bilateral trade flows between the small Pacific states 35 Ibid. and AUS and NZ, and other trade partners. 36 UK–Pacific EPA, PROTOCOL II. 28 PICTA membership comprises: Cook Islands, 37 The UK announced an autonomous tariff quota (ATQ) of Federated States of Micronesia (FSM), Fiji, Kiribati, 260,000 tonnes of raw cane sugar to apply from 1 January Nauru, Niue, Republic of Marshall Islands (RMI), 2021 as part of the UKGT. The quota would apply for 12 Palau, PNG, Samoa, Solomon Islands, Tonga, Tuvalu months, with an in-quota rate of 0 per cent and the vol- and Vanuatu. ume will reset each year on the 1 January, subject to any 29 See: http://www.austlii.edu.au/au/other/dfat/trea- future review. Once the quota threshold is met, the out- ties/1991/37.html (accessed 15 March 2021). of-quota tariff rate of £28.00/100kg will apply. 30 This is Recommendation 37 of the UN/CEFACT. 38 The European Commission defines ‘cumulation’ as a: Single Submission Portals (SSPs) are private-sector ‘system that allows originating products of country A to driven initiatives that can help economic operators to be further processed or added to products originating not only fulfil their declarative obligations through a in country B, just as if they had originated in country single portal, but also propose information exchange B. The resulting product would have the origin of coun- between economic operators creating a seamless use try B. See: https://ec.europa.eu/taxation_customs/ of information along the entire supply chain. UNECE business/calculation-customs-duties/rules-origin/ trade facilitation recommendations reflect best prac- (accessed 7 March 2021). tices in trade procedures and data and documentary 39 For ease of reference, Annex XI and Annex XII to requirements. See: https://unece.org/trade/uncefact/ Protocol II are found on pages 700–721 and 722–739, tf_recommendations (accessed 27 February 2021). respectively, of the UK–Pacific EPA reported in UK 31 A Trade Portal reports a country’s import, export and Government (2019a). transit procedures and other useful information (rel- 40 ITC: https://www.macmap.org/en/query/regulatory- evant legislation) and data. It fulfils Article 1 of the requirement?reporter=918&partner=242&product=1 WTO Bali Agreement on Trade Facilitation. 70113&level=6&rtype=I (accessed 10 April 2021).

References

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& Policy, 19 May, Department for International Trade, World Bank (2020), World Development Indicators London. 2020, available at: https://datatopics.worldbank.org/ UK Government – Singapore (2020), UK-Singapore world-development-indicators/ Trade Agreement, available at https://www.gov.uk/ World Customs Organization (undated), ‘WCO guide- government/collections/uk-singapore-trade- lines for PPP’, available at: www.microsoft.com/ agreement public-private-partnerships UN Conference on Trade and Development (UNCTAD) Raikuna, V, EK Zgovu, J Wambati and W Rauicava (2013), (2009), ‘Public and Private Partnerships for the Feasibility study on implementing a Single Window Development of Infrastructure to Facilitate Trade and System for Trade Facilitation in the Republic of Fiji Transport’, Note TD/B/C.I/MEM.1/5 for Multiyear Islands. Final Report, October, submitted to Oceania Expert Meeting on Transport and Trade Facilitation, Customs Organisation (OCO) and Fiji Revenue and Geneva. Customs Authority (FRCA), Suva. UNCTAD (2016), The Least Developed Countries Report Raikuna, V, EK Zgovu, S Toyota and W Rauicava (2014), 2016. UNCTAD, Geneva. Feasibility study on implementing an Electronic Single UNCTAD (undated), ‘Guidelines on for creating PPP’, Window System in the Republic of Vanuatu. Final available at: www.unctad.info/upload/TAB Report, February, submitted to Oceania Customs UNCTAD and Economic Commission for Europe Organisation (OCO) and Department of Customs (undated), Case Studies on Implementing a Single and Inland Revenue, The Government of the Republic Window systems, UN/CEFACT), available at: www. of Vanuatu, Port Vila. unece.org/trade and www.unece.org/cefact Zgovu, EK (2017), Cost-Benefit Analysis of Papua New Wilson, JS, CL Mann and T Otsuki (2003), ‘Trade Guinea’s Trade Agreements. Final Report, Trade Facilitation and Economic Development: Measuring Division, Department of Trade, Commerce and the Impact’, World Bank Policy Research Working Industry, Government of Papua New Guinea. Port Paper 2988, March, World Bank, Washington, DC. Moresby. 74 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

Annex 1. Accessing Importing Requirements information in destination country

Exhibits A, B and C illustrate how one can Exhibit A is a screenshot of the upper part use the ITC website to access information of the page from the ITC website.40 From on import requirements in the destination the ITC website, select either ‘Requirement export market. Here we use product HS6 of Importing country’ or ‘Requirement of 170113 – Cane or beet sugar and chemically Exporting country’, select ‘Destination country’, pure sucrose, in solid form: Raw sugar not con- select ‘Exporting country’, provide the Product taining added flavouring or colouring matter HS6 codes – clicking on ‘Advanced product … as an example. At the time of writing, the search’ takes one to a window/screen where you UK was not shown in the list of ‘Destination are assisted with product code search. Clicking country’; hence, the EU is selected as the best on ‘SEARCH’ produces a likeness of Exhibit B, proxy, as the UK was part of the EU until 31 which has an expandable list of import require- December 2020 and is likely maintaining the ments / measures. Exhibit C shows information same NTM architecture for the foreseeable under measures A13 and A15, after clicking on future. dropdown icons next to numbers ‘2’.

Exhibit A Trade Competitiveness Briefing Paper 2021/05 75

Exhibit B

Exhibit C 76 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

Annex 2. Protocol II – Originating products in the UK–Pacific EPA

Concerning the definition of the concept of which accounts for the highest value of ‘originating products’ and methods of admin- originating materials used in the manufac- istrative co-operation ture in that Pacific State. 3. Products originating in one of the countries TITLE II or territories referred to in paragraphs 1 DEFINITION OF THE CONCEPT OF and 2 of this Article, which do not undergo ‘ORIGINATING PRODUCTS’ any working or processing in the Pacific Article 2 State, retain their origin if exported into General requirements one of these countries or territories. 2. For the purpose of the Agreement, the fol- 4. For the purpose of implementing Article lowing products shall be considered as 2(2)(b), working or processing carried out originating in a Pacific State: in the UK, in the EU, in the other Pacific a. products wholly obtained in a Pacific States, in the other ACP States or in the State within the meaning of Article 5 of OCT shall be considered as having been this Protocol; carried out in a Pacific State when the prod- b. products obtained in a Pacific State ucts obtained undergo subsequent working incorporating materials which have or processing in this Pacific State. Where not been wholly obtained there, pro- pursuant to this provision the originating vided that such materials have under- products are obtained in two or more of gone sufficient working or processing the countries or territories concerned, they in that Pacific State within the meaning shall be considered as originating in this of Article 6. Pacific State only if the working or process- ing goes beyond the operations referred to Article 4 in Article 7. Cumulation in the Pacific States 5. Where the working or processing carried out in the Pacific State does not go beyond 1. Without prejudice to the provisions of the operations referred to in Article 7, the Article 2(2), products shall be considered product obtained shall be considered as as originating in a Pacific State if they are originating in that Pacific State only where obtained there, incorporating materials the value added there is greater than the originating in the UK, in the EU, in the value of the materials used in any one of other ACP States, in the [OCT] or in the the other countries or territories referred to other Pacific States, provided the working in paragraph 4. If this is not so, the product or processing carried out in that Pacific obtained shall be considered as originating State goes beyond that of the operations in the country or territory which accounts referred to in Article 7. It shall not be nec- for the highest value of materials used in essary for such materials to have undergone the manufacture. sufficient working or processing. 6. The cumulation provided in this Article 2. Where the working or processing carried may only be applied provided that: out in the Pacific State does not go beyond a. the countries involved in the acquisi- the operations referred to in Article 7, the tion of the originating status and the product obtained shall be considered as country of destination have concluded originating in that Pacific State only where an agreement on administrative coop- the value added there is greater than the eration which ensures a correct imple- value of the materials used originating in mentation of this Article; any one of the other countries or territories b. materials and products have acquired referred to in paragraph 1. If this is not so, originating status by the application the product obtained shall be considered of the rules of origin identical to those as originating in the country or territory given in this Protocol; Trade Competitiveness Briefing Paper 2021/05 77

c. the Pacific States will provide the UK in Annex IX and for rice of tariff heading with details of agreements on admin- 1006 respectively, when the materials used istrative cooperation with the other in the manufacture of such products are countries or territories referred to in originating, or the working or processing is this Article. The UK and the Pacific carried out in a Pacific State or in another States shall publish, according to their ACP State member of an Economic own procedures, the date on which the Partnership Agreement (EPA). cumulation provided for in this Article 8. This Article shall not apply to products of may be applied with those countries Annex XI originating in South Africa. The or territories listed in this Article cumulation provided for in this Article which have fulfilled the necessary shall apply to the products originating in requirements. South Africa listed in Annex XII. 7. The cumulation provided for in this Article may only be applied for the products listed Source: UK Government, 2019a, pages 580–581. 78 Impact of Post-Brexit Procedural Rules for Pacific Exports into the UK

Annex 3. Annex IX to Protocol II

Products for which the cumulation provisions referred to in Article 4(7) apply

HS/CN-code Description 1701 Cane or beet sugar and chemically pure sucrose, in solid form 1702 Sugars, including chemically pure lactose, maltose, glucose and fructose, in solid form; sugar syrups not containing added flavouring or colouring matter; artificial honey, whether or not mixed with natural honey; caramel (excl. cane or beet sugar and chemically pure sucrose) ex 1704 90 Sugar confectionery, not containing cocoa (excl. chewing gum; liquorice extract containing corresponding more than 10% by weight of sucrose but not containing other added substances; white to 1704 90 99 chocolate; pastes, including marzipan, in immediate packings of a net content of 1 kg or more; throat pastilles and cough drops; sugar-coated (panned) goods; gum confectionery and jelly confectionery, including fruit pastes in the form of sugar confectionery; boiled sweets; toffees, caramels and similar sweet; compressed tablets) ex 1806 10 Cocoa powder, containing 65% or more but less than 80% by weight of sucrose (including corresponding invert sugar expressed as sucrose) or isoglucose expressed as sucrose to 1806 10 30 ex 1806 10 Cocoa powder, containing 80% or more by weight of sucrose (including invert sugar expressed corresponding as sucrose) or isoglucose expressed as sucrose to 1806 10 90 ex 1806 20 Food preparations containing cocoa in blocks, slabs or bars weighing more than 2 kg or in corresponding liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a to 1806 20 95 content exceeding 2 kg (excl. cocoa powder, preparations containing 18% or more by weight of cocoa butter or containing a combined weight of 25% or more of cocoa butter and milkfat; chocolate milk crumb; chocolate flavour coating; chocolate and chocolate products; sugar confectionery and substitutes therefor made from sugar substitution products, containing cocoa; spreads containing cocoa; preparations containing cocoa for making beverages) ex 1901 90 Food preparations of flour, groats, meal, starch or malt extract, not containing cocoa or corresponding containing less than 40% by weight of cocoa calculated on a totally defatted basis, not to 1901 90 99 elsewhere specified or included; food preparations of goods of headings 0401 to 0404, not containing cocoa or containing less than 5% by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included (excl. food preparations containing no or less than 1.5% milkfat, 5% sucrose (including invert sugar) or isoglucose, 5% glucose or starch; food preparations in powder form of goods of headings 0401 to 0404; preparations for infant use, put up for retail sale; mixes and doughs for the preparation of bakers’ wares of heading 1905) ex 2101 12 Preparations with a basis of coffee (excl. extracts, essences and concentrates of coffee and corresponding preparations with a basis of these extracts, essences or concentrates) to 2101 12 98 ex 2101 20 Preparations with a basis of tea or mate (excl. extracts, essences and concentrates of tea or corresponding maté and preparations with a basis of these extracts, essences or concentrates) to 2101 20 98 ex 2106 90 Flavoured or coloured sugar syrups (excl. isoglucose syrups, lactose syrup, glucose syrup and corresponding maltodextrine syrup) to 2106 90 59 ex 2106 90 Food preparations not elsewhere specified or included (excl. protein concentrates and corresponding textured protein substances; compound alcoholic preparations, other than those based on to 2106 90 98 odoriferous substances, of a kind used for the manufacture of beverages; flavoured or coloured sugar syrups; preparations containing no or less than 1.5% milkfat, 5% sucrose or isoglucose, 5% glucose or starch) ex 3302 10 Preparations based on odoriferous substances, of a kind used in the drink industries, corresponding containing all flavouring agents characterising a beverage and with an actual alcoholic strength to 3302 10 29 by volume not exceeding 0.5% (excl. preparations containing no or less than 1.5% milkfat, 5% sucrose or isoglucose, 5% glucose or starch)

Source: UK Government, 2019a, pp 696–697.