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