On 1 January 2021, the Japan-UK Comprehensive Economic Partnership Agreement (Japan-UK CEPA) came into force, after only a few months of intense negotiations. Japan and the UK embarked on formal negotiations on 9 June 2020 and reached an agreement in principle on the deal on 11 September 2020. This remarkably speedy achievement reflected enormous pressure from business leaders to have a deal in place before the end of the UK-EU transition period on 31 December 2020, at which point the UK was to lose coverage under the existing Japan-EU Economic Partnership Agreement (EPA) in light of Brexit.
The Japan-UK CEPA, essentially a “rollover” of the prior Japan-EU EPA, ensures that business between the two countries avoided falling back onto minimum WTO trading terms. Indeed, early data suggest the Japan-UK CEPA accomplished its goal: according to a survey conducted by the Japan External Trade Organization in early 2021, roughly 10% of survey participants already rely on the terms of the Japan-UK CEPA. Moreover, over 80% of other survey participants are considering relying on CEPA in the future.
To fully benefit from the Japan-UK CEPA, importers as well as exporters of goods need to understand how and when they can claim preferential tariff treatment. Once preferential tariff treatment is granted, customs duties will be reduced or eliminated completely on originating goods.