UK-Japan Comprehensive Economic Partnership Agreement (CEPA)

Author - Tom Kennedy

Date published:

Effective: 01/01/2021

The agreement dictates the terms of trade between the UK and Japan, replacing the agreement that the UK benefitted from as members of the European Union. The CEPA also goes further in some key areas.

Trading Relationship

Total trade in goods and services between the UK and Japan was £23.9bn in the four quarters to the end of Q1 2021.

  • Total UK exports to Japan = £12.2bn
  • Total UK imports from Japan = £11.6bn
  • Japan was the UK’s 11th largest trading partner in this period.
  • In 2020, the North East exported £400 million worth of goods to Japan. 7.5% of the total of UK goods exports to Japan.
  • The North East also imported £600 million of goods from Japan. 8.0% of the total of Japanese goods imports to the UK.

The UK Government have produced a document outlining a number of benefits of this agreement, which is available here.

Tariffs

Tariffs on the majority of goods traded between the UK and Japan have been carried over from the agreement between the EU and Japan, but some have been reduced further. There are also plans to gradually reduce tariffs over time, as part of the agreement, such as tariffs on textiles and handbags which are set to be reduced to 0% by 2028 and 2033 respectively.

There are a number of Tariff Rate Quotas (TRQs), that limit the quantity of products that qualify for reduced tariff access, that continue to apply to UK exporters. They are listed here.

You can check tariffs and customs procedures for exporting to Japan here.

You can check tariffs and customs procedures for importing goods to the UK here

Rules of Origin

In order to gain preferential access to the Japanese markets, goods will need to be proven to be of UK origin.

Guidance on product-specific rules of origin can be found here.

The UK agreement with Japan has slightly more liberal rules for some food and textile products than the agreement between Japan and the EU. Approximately £88.2 million more of UK exports are set to receive preferential than under the EU-Japan agreement.

The requirements for claiming preferential origin have remained unchanged. A clam should be based upon a statement of origin by the exporter that the product is originating in the UK, or the importer’s knowledge that the product is originating.

Goods do not require a statement of origin if they are:

                Entering Japan and are below 200,000 yen in value

                Entering the UK and are below £1,000 in value

Trade in Services

In addition to granting service firms access to each other’s markets, the agreement goes beyond the agreement signed between Japan and the EU, in areas of service trade, in a number of ways. This includes the ability for UK financial firms to not have to store financial data in Japan and saving business costs.

The agreement also includes a streamlined process for UK companies applying for licenses to operate in Japan and greater mobility for people travelling to Japan for business. For example, VISA applications will be accelerated and spouses of people on business trips will now be allowed to enter the labour market in Japan.

Consumption Tax

‘Consumption tax’ is Japan’s version of VAT and is charged at every point in a sales chain, including upon import. Guidance on Japanese consumption tax is available here.

The consumption tax is currently set at 10%, with a reduced rate of 8% for some products, mostly foodstuffs.

An international, non-resident trader will be required to appoint a Japanese resident tax agent who is responsible for all communications between the company and the Japanese tax authorities.

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