At midnight on 31 May 2023, the two new UK trade agreements will come into force. These are the Free Trade Agreements (FTA) with Australia and New Zealand.

Both agreements also provide the preferential duty to be claimed at import using importer’s knowledge. This is not as straightforward as it might sound. The importer must hold all production and manufacturing records for the goods imported. As most of this information is commercially confidential, it may not be possible to use this option. 

Trade Agreements cover many areas, including preferential access to both markets for UK goods and similar access to the UK for goods made in Australia and New Zealand. The qualification rules of origin – known as Product Specific Rules (PSR) – are more flexible than other UK FTAs, including the Trade Cooperation Agreement (TCA) between the UK and the European Union. These flexible rules of origin mean manufacturing businesses can use some imported parts and ingredients and still qualify for the new 0% preferential tariffs, but companies hoping to benefit from these trade deals must still ensure they check and understand the rules.

The UK-Australia and UK-New Zealand deals also include tariff-rate quotas (TRQ) that will last for several years (e.g. ten years); depending on the product, these will apply higher tariffs to imports above a certain volume threshold (the quota level). There are also safeguard mechanisms within the agreements to provide a temporary safety net for UK producers threatened with serious injury from increased imports due to tariff liberalisation under the FTA. There are intended to be robust protections for British farmers, especially with the staging of tariff liberalisation for sensitive goods over time. For example, in the UK-New Zealand FTA, the tariff-rate quotas and product-specific safeguards apply to a range of the most sensitive agricultural products, including beef, sheep meat, cheese, butter and apples. These measures will limit the volume of duty-free imports permitted into the UK and, in the case of beef and sheep meat, will be in place for 15 years.

The Rules of Origin permit the use of material (i.e. “a good that is used in the production of another good”) from a wide sourcing area, the key being that the final production process occurs in the exporting country party to the agreements. To quote from the UK-New Zealand FTA, the 3^rd-way goods may qualify for preference is when it “is produced entirely in the territory of one or both of the Parties using non-originating materials, provided the good satisfies all applicable requirements of Annex 4B (Product-Specific Rules”).

The Product Specific Rules (PSR) - Annex 3A (118 pages) UK-New Zealand FTA / Annex 4B (273 pages) UK-Australia FTA – are not necessarily the same within each FTA for the same goods. There are four types of PSRs in each agreement:

1.     “CC” means that all non-originating materials used in the production of the good have undergone a change in tariff classification at the two-digit level;

2.     “CTH” means that all non-originating materials used in the production of the good have undergone a change in tariff classification at the four-digit level;

3.     “CTSH” means that all non-originating materials used in the production of the good have undergone a change in tariff classification at the six-digit level;

4.    “RVC(X)” means that the good must have a regional value content (similar to originating material) as calculated under Rules of Origin and Origin Procedures of not less than (X) per cent whether using the build-up method or build-down method.

The UK-Australia FTA has a 5^th option for certain fabrics (covered by Chapters 51, 52, 54, 55, 58 and 60 “FF”. “FF” means that the goods must undergo a change from fabric that is constructed but not further prepared or finished, provided that it is dyed or printed and undergoes at least one preparatory or finishing process in the territory of one or both Parties to render it directly usable. This usually is an alternative rule alongside the PSR “CC” – the exporter/ importer must choose the rule for which they hold evidence.

Here are some examples: 

Both trade deals are expected to drive economic growth and innovation across the UK. Removal of UK import tariffs on the majority of goods from Australia and New Zealand, reducing prices for UK consumers on favourites such as wine and manuka honey and lowering costs on machinery parts for UK manufacturers. 

Removal of UK import tariffs on goods from Australia and New Zealand, including favourites such as wine, swimwear, surfboards, boots, manuka honey and kiwi fruits, are seen as paving the way for UK consumers to get more choice, quality products and lower prices, but also it means cheaper access to ingredients, materials and components from Australia and New Zealand for UK manufacturers – such as hydraulic power engines and pressure reducing valves from Australia and make-up and biscuit ingredients from New Zealand.

While you are here you may be interested in some Strong & Herd LLP training courses & live clinics related to this topic:

Understanding Origin & Preference

Understanding Free Trade Agreements