UK-Japan Trade: A Comprehensive Guide

The relationship between the United Kingdom and Japan has long been one of mutual respect and shared economic ambition. Following the UK's departure from the European Union, forging robust, independent trade agreements became paramount. Among these, the Comprehensive Economic Partnership Agreement (CEPA) with Japan stands out as a landmark achievement, designed not only to maintain but enhance the benefits previously enjoyed under the EU-Japan Economic Partnership Agreement. This detailed guide explores the intricacies of the CEPA, offering UK businesses and individuals a clear understanding of how this vital agreement shapes trade, investment, and mobility between these two global economic powerhouses.

The Cornerstone: UK-Japan Comprehensive Economic Partnership Agreement (CEPA)

Signed on 23 October 2020, the UK-Japan Comprehensive Economic Partnership Agreement (CEPA) is more than just a trade deal; it's a statement of intent for a deep and forward-looking partnership. It serves as the new framework for trade between the UK and Japan, building upon the foundations of the EU-Japan EPA while introducing significant enhancements in areas of mutual interest. For UK businesses, this agreement provides a stable and predictable environment for engaging with the Japanese market, ensuring continued preferential access and opening new avenues for growth.

Key Pillars of the CEPA

• Goods Trade: Streamlined access for a vast array of products.
• Services: Enhanced market access and fair treatment for service providers.
• Digital Trade: Cutting-edge provisions for the digital economy.
• Business Mobility: Facilitating the movement of skilled professionals.
• Intellectual Property: Robust protection for innovations and unique products.
• Government Procurement: Expanded opportunities for UK businesses in Japan's public sector.

Navigating Tariffs and Quotas: What Businesses Need to Know

One of the most immediate benefits of any trade agreement is the reduction or elimination of tariffs, and the CEPA delivers significantly in this regard. Commitments on tariffs for the vast majority of products traded between the UK and Japan have been seamlessly transitioned into the CEPA. In fact, for some products, the tariff rates are even lower than those under the previous EU-Japan EPA.

Tariff Eliminations and Reductions

The CEPA has eliminated duties on 21 industrial goods, providing immediate cost savings for exporters and importers. Notably, tariffs on two specific tariff lines covering electrical control units, commonly used in cars, have also been removed. Looking ahead, Japan's tariff schedule will see duties eliminated on nine tariff lines covering certain leathers and hides by 2026, further opening up these markets. Additionally, one tariff line covering industrial ethanol has already become duty-free.

Tariff Rate Quotas (TRQs)

Access to products covered by Tariff Rate Quotas (TRQs) also sees continuity and specific arrangements under the CEPA. The UK maintains preferential tariff rates for 10 key TRQs, including:

• Wheat products
• Mixes and doughs, and cake mixes
• Food preparations made primarily of wheat
• Food preparations of barley
• Coffee, tea mixes, food preparations and doughs
• General food preparations
• Food preparations containing more than 50% sucrose, and cocoa powder
• Food preparations containing cocoa (two categories)
• Cheeses

For British products, the quota available to Japanese importers will be the entirety of any unutilised EU quota in a given year, providing a substantial opportunity. For malt, the UK continues to enjoy duty-free access to Japan's market via the existing Global TRQ.

The Before Permit (BP) Scheme

A notable feature of the CEPA arrangement is the use of Japan’s Before Permit (BP) scheme. This innovative system temporarily suspends the need to pay tariffs at the border, requiring the importer to provide a guarantee to the customs authority, often via a Banker’s Guarantee. This means Japanese importers only need to register the import under the BP scheme at the point of import, streamlining the process significantly.

Importing Goods from Japan: Duties, Procedures, and Car Imports

Understanding the practicalities of importing goods into the UK from Japan is crucial for businesses and individuals alike. This includes navigating import duties, customs procedures, and specific requirements for larger items like vehicles.

Paying Import Duty from Japan

If you are importing goods from Japan into the UK, you will be contacted by Royal Mail or your chosen courier if import duty is due. They will provide instructions on how to pay. You typically have around three weeks to settle any charges before your parcel might be returned to the sender. As Japan is outside the EU, you may be charged Value Added Tax (VAT) or excise duty. Customs duty may also apply, particularly for gifts or other goods exceeding a certain value.

To calculate the exact rate due, you'll need the correct tariff or HS (Harmonised System) code for your goods. If VAT is also applicable, it will be charged on the total value of your goods, which includes the import duty. Staying organised and responsive to notifications from your courier is key to a smooth import process.

Can I Import a Car from Japan to the UK?

Yes, importing a car from Japan to the UK is certainly possible and can be a straightforward process if the correct steps are followed. Upon your car's arrival in the UK, you must pay VAT (currently 20%) and any applicable import duty (typically 10%) before the vehicle can be released from customs. These are significant costs to factor into your budget.

Beyond the financial aspects, the car must pass a safety inspection – either an Individual Vehicle Approval (IVA) or a standard MOT, depending on its age and type. This inspection ensures the vehicle meets UK road safety standards. Finally, before you can legally drive your imported car on UK roads, it must be registered with the Driver and Vehicle Licensing Agency (DVLA). Careful planning and adherence to these steps will ensure a successful car import.

Rules of Origin and Customs Procedures

To claim preferential treatment under the CEPA, your goods must meet the relevant rules of origin. This means they must either be "wholly obtained" in the UK or Japan, or "sufficiently processed" to meet a specific Product Specific Rule (PSR). PSRs are based on the 2017 Harmonised System (HS) nomenclature. A claim for preferential rates can be based on a statement of origin by the exporter or the importer’s knowledge that the product is originating.

For smaller consignments, a statement of origin is not required if the value is below £1,000 when entering the UK from Japan, or below 200,000 yen when entering Japan from the UK. Furthermore, the CEPA includes provisions allowing for the use of EU materials and processing in your exports to Japan, provided the UK working or processing goes beyond minimal operations. Goods transited through third countries, including the EU, can still benefit from preferential treatment, provided they remain under customs surveillance and undergo no more than unloading, reloading, or preservation operations.

For detailed information on Japan’s customs procedures, the Japan Customs Agency provides comprehensive guidance. Businesses may also consider using customs clearance services to streamline the process.

Beyond Goods: Services, Digital Trade, and Business Mobility

The CEPA extends far beyond the movement of physical goods, encompassing vital sectors such as services, the burgeoning digital economy, and the crucial aspect of business mobility.

Trade in Services

The CEPA replicates and reinforces commitments for preferential guaranteed market access and fair treatment for services suppliers and investors, mirroring the high standards set by the EU-Japan EPA. UK businesses looking to provide services in Japan must, however, be mindful of local regulations. This includes obtaining necessary authorisations or licences, complying with specific local business regulations, and understanding any Japanese nationality requirements that might impact service provision in certain sectors. Seeking advice from an English-speaking lawyer in Japan or your local chamber of commerce is highly recommended.

Digital Trade: A Forward-Looking Framework

One of the most modern and comprehensive aspects of the CEPA is its robust framework for digital trade. These measures are designed to foster a secure and open digital environment, supporting e-commerce and innovation between the two nations. Key provisions include:

• Prohibition of Customs Duties: No customs duties applied to electronic transmissions and their contents.
• No Forced Source Code Transfer: Preventing the forced transfer of source code as a condition of market access.
• Protection of Electronic Contracts and Signatures: Upholding the legal effect and validity of electronic contracts and signatures.
• Data Flow Protection: Banning unjustified impediments to the free flow of data between the UK and Japan, while maintaining the highest data protection standards and upholding robust data protection laws for individuals’ personal data.
• No Data Localisation Requirements: Prohibiting unjustified data localisation requirements.
• Consumer Protection: Measures to protect consumers online from fraudulent and deceptive commercial activities, and from unsolicited commercial electronic messages (spam).

These provisions ensure that the digital economy can thrive without unnecessary barriers, fostering innovation and secure data exchange.

Business Mobility: Facilitating Professional Movement

The CEPA significantly enhances opportunities for business mobility, building upon the commitments in the EU-Japan EPA. This is particularly beneficial for highly skilled professionals. The agreement provides for the availability of visas for these professionals to work in Japan. For instance, an employee transferring from their UK headquarters to a Tokyo office can bring their spouse and dependents and stay for up to five years, providing stability and support for families.

Furthermore, the UK's definition of an investor now focuses on investment in UK industry and jobs, rather than solely on the amount of capital, making it more accessible. Japan has also expanded the scope of their intra-corporate transferee category. Both countries are committed to ensuring that visa application processes are clear, transparent, and with an ambitious aim for processing within 90 days, significantly improving predictability for businesses planning international transfers.

Financial Services

The CEPA maintains the level of market access for financial services suppliers as granted under the EU-Japan EPA. Crucially, it also introduces enhancements to strengthen commitments on cross-border financial data flows, prohibiting financial data localisation, and improving the ability to supply new financial services. The agreement also establishes an annual dialogue between His Majesty’s Treasury, UK financial regulators, and the Japanese Financial Services Agency (FSA) to continuously explore ways to reduce regulatory friction.

Protecting Unique Products: Geographical Indications (GIs)

A key aspect of the CEPA is the protection of Geographical Indications (GIs), which safeguard the geographical names of distinctive food, drink, and agricultural products. This recognition prevents misrepresentation and ensures that consumers can trust the origin and quality of these cherished items.

Protected UK GIs in Japan

The CEPA provides protection for a comprehensive list of UK GIs, ensuring their unique identities are preserved in the Japanese market. These include a wide array of renowned products, highlighting the rich culinary and agricultural heritage of the UK.

This protection provides a significant advantage for UK producers, allowing them to market their authentic products in Japan with greater confidence and consumer recognition.

Government Procurement and Business Opportunities

The CEPA retains robust guarantees on non-discriminatory access to the Japanese government procurement market, extending beyond Japan’s commitments under the WTO Agreement on Government Procurement (GPA). This means UK businesses now have expanded opportunities to bid for public contracts in Japan, fostering greater competition and transparency.

Key benefits for UK businesses in the Japanese market include access to regional level procurement opportunities, including those by Core Cities, and access to contracts across a wide range of services such as business services, insurance, telecoms, and specialist design. The agreement also commits to improved standards for the publication of procurement opportunities and ensures that the 'Keishin' business evaluation procedure will not be used to discriminate against UK businesses.

Frequently Asked Questions (FAQs)

Q: How do I pay import duty on goods from Japan?

A: When you import goods from Japan, your courier (e.g., Royal Mail) will contact you if import duty, VAT, or excise duty is due. They will provide instructions on how to pay. You typically have around three weeks to settle these charges before the parcel may be returned. It's helpful to know the correct tariff (HS) code for your goods to estimate potential charges, as VAT is charged on the total value, including import duty.

Q: Can I import a car from Japan to the UK?

A: Yes, you can import a car from Japan to the UK. However, be prepared to pay VAT (20%) and any applicable import duty (10%) upon its arrival. After customs clearance, the car must pass a safety inspection (IVA or MOT) to ensure it meets UK standards. Finally, you must register the vehicle with the DVLA before it can be legally driven on UK roads. Following these steps carefully will ensure a smooth import process.

Conclusion

The UK-Japan Comprehensive Economic Partnership Agreement (CEPA) represents a significant milestone in the ongoing development of the relationship between these two nations. It offers a modern, ambitious, and comprehensive framework that facilitates trade in goods and services, embraces the digital economy, and supports the mobility of skilled professionals. For UK businesses, the CEPA provides a wealth of opportunities, from reduced tariffs and streamlined customs procedures to enhanced market access in key sectors and robust protection for unique products. By understanding and leveraging the provisions of this agreement, businesses can confidently explore and expand their presence in the dynamic Japanese market, fostering continued economic growth and strengthening the deep ties that bind the United Kingdom and Japan.

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