Global Year-End Review of Import/Export/Trade Compliance Developments

VIRTUAL

November 16-18, 2021

Speakers

Key International Trade Developments with Major Trading Partners

November 18, 202112:00 pm – 1:15 pm PST

Jenny RevisPartnerLondon, UK

* Trench Rossi Watanabe and Baker McKenzie have executed

a strategic cooperation agreement for consulting on foreign law.

John McKenziePartnerSan Francisco, US

John CowleyPartnerChicago, US

Paul BurnsPartnerToronto, Canada

Vladimir Efremov PartnerMoscow, Russia

Adriana Ibarra-FernandezPartnerMexico City, Mexico

Ivy TanSenior AssociateSingapore

Alessandra MachadoOf Counsel, Trench Rossi Watanabe*Sao Paulo, Brazil

Virusha SubbanPartnerJohannesburg, South Africa

Housekeeping

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Canada and Mexico: USMCA Developments

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Automotive sector:RVC gradually increases to 75% + additional requirementsLabor related requirement 40% (cars) and 45% (trucks) of value generated in facility with wages over 16 US dollars per hourSpecific rules for auto parts and depending on use to be given (i.e. by OEM in manufacture or as spare parts)70% of aluminum and 70% of steel originating under stiffer rule7 core parts must be originating

Steel intensive, Titanium Products and Optical Fiber: main material must be originating

Chemical sector to recognize specific processes to confer origin

USMCA Rules of Origin

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Most rules of origin remained the same as NAFTA rules. However, there are new

opportunities for taking advantage of the rules even if they didn’t change.

Rules that changed:

Special Rules

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Intermediate Materials

De Minimis

Recovery of originating content

Accumulation

Indirect Materials

Fungible Goods and Materials

Accessories, Spare Parts …

Packaging Materials and Containers for Retail Sales

Packing Materials and Containers for Shipment

Sets, Kits

Transit and Transshipment

Non-qualifying operations

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De Minimis Value Courier Imports

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Canada - goods exported from the United States or Mexico to Canada via courier,

regardless of their origin (provided the goods have entered into the commerce of

the United States or Mexico prior to exportation to Canada), may be imported into

Canada duty-free if the value for duty does not exceed CDN $150, free of

GST/HST if the value for duty does not exceed CDN $40, and certain

requirements are met.

Mexico - goods exported from the United States or Canada to Mexico via courier,

regardless of their origin (provided the goods have entered into the commerce of

the United States or Canada prior to exportation to Mexico), may be imported into

Mexico duty and VAT free if the value of the goods per consignee does not

exceed USD $50 and duty-free if the value does not exceed USD $117, and

certain other requirements are met.

Contact details for producer, exporter and/or importer (with exceptions)

Which of these parties is the "certifier"

Which origin criteria applies

Specify individual shipment or Blanket Period (up to 12 months)

Signature

Certification of Origin

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NAFTA Certificates of Origin are no longer acceptable

USMCA requires a Certification of Origin, in no prescribed format, but covering

nine data elements which will establish:

As with NAFTA, a certification of origin must be in the importer's possession at the

time the USMCA preference claim is made

Prove It

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An exporter or a producer in its territory that completes and signs a Certificate of Origin shall maintain in its territory, for five years after the date on which the Certificate was signed or for such longer period as the Party may specify, all records relating to the origin of a good for which preferential tariff treatment was claimed in the territory of another Party, includingrecords associated with

i. the purchase of, cost of, value of, and payment for, the good that is exported from its territory,

ii. the purchase of, cost of, value of, and payment for, all materials, including indirect materials, used in the production of the good that is exported from its territory, and

iii. the production of the good in the form in which the good is exported from its territory; and

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Under local law, obligation to maintain all records to demonstrate status as originating for 5

years (US and Mexico) and 6 years (Canada) from Certification.

Any party that completes a USMCA Certification of Origin, must possess "all records

necessary to demonstrate that the good is originating".

Records can be kept electronically, provided they can be promptly retrieved and printed.

Prove It, Practically

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What sort of records should be maintained?

Flow-charts, technical specifications and other

documents explaining manufacturing process

A plain language explanation of how the good

meets the ROO

Bill of materials showing classification, origin

and cost of each material

Certifications or affidavits from the producer of

each originating material attesting to the country

of manufacture and originating status

Prove It, Practically

What sort of records should be maintained?

Production records showing receipt in inventory and use in manufacturing process

Documentation pertaining to assists,inventory management methods, indirect materials

Raw materials purchase orders, invoices and proof of payment

Export documents and bills of lading

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USMCA Rules of Origin - Common Mistakes

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Certification of origin issued by someone without knowledge of the origin of the goods

Not carrying out the origin analysis

Not renewing the origin analysis at least once a year

Not keeping supporting records

Difficulty in retrieving old records (must be kept 5 or 6 years)

Not updating bills of materials when sourcing or specs change

Combining free trade agreements to confer origin or applying the wrong agreement

UK and the European Union: Update on the Free Trade Agreement

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Post Brexit – what's changed?

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Customs controls apply to Great Britain (GB)/EU movements

due to hard customs border – full declarations apply from 1

January 2022

Tariff and quota free access to products that 'originate' in the

EU or the UK, subject to proof of origin

Continued friction between UK and EU over

implementation of the Northern Ireland Protocol

UK and EU – key policy developments

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UK Trade Remedies Authority became

functional in June, and began its first fully

independent investigation shortly afterward

EU, UK and US reached (separate)

agreements to suspend tariffs in the Airbus-

Boeing dispute for five years

EU and US have reached an agreement re

steel safeguard measures imposed by the

Trump Administration (and retained by Biden).

The UK has not yet

Comprehensive and Progressive Agreement for Trans-Pacific Partnership

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CPTPPSignatories

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Chile*

Peru

Mexico

Canada

Japan

Singapore

Brunei*

New Zealand

Australia

Malaysia*

Vietnam

*Not yet entered into force as of 18 November 2021

Update on CPTPP

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Ratified: Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam, Peru

Not yet ratified: Brunei, Chile, Malaysia

In June 2021, UK officially began the accession process to join the CPTPP upon receiving nod

of approval from the existing CPTPP members.

China formally applied to join the CPTPP on 16 September 2021.

Taiwan subsequently applied to join the CPTPP on 22 September 2021.

These developments have triggered renewed interest and re-evaluation of the CPTPP,

encourage new entrants to join or existing members to expedite ratification.

What does this mean to the US?

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Current status of ratification

Expansion of the CPTPP

Rest of the World Developments

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Brazili

Key International Trade Developments

Comply with sustainable development standards / Paris Climate Agreement;

Improve and develop local industry to gain efficiency and competitiveness.

Brazil and the other Mercosur members have been discussing reductions of import duty rates under the

Common External Tariff

Brazil enacted an unilateral Resolution implementing a 10% temporary reduction on import duties applicable to

84% of the tariff items Resolution GECEX 269/2021). The reduced rates apply until December 31, 2022

Mercosur has several FTAs with LATAM countries: Colombia, Peru, Ecuador, Mexico, Chile, among others

Most relevant FTAs with non-LATAM countries: Angola, Egypt, India, Israel.

Mercosur – EU: after 20 years of negotiation, Mercosur signed a FTA with the European Union in 2019.

However, the Agreement still needs to be ratified by the European Union and Mercosur member States to

become effective.

Challenges for Brazil

Other FTAs under discussion: USA; Canada; South Korea; Singapore; EFTA

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Brazil

Key International Trade DevelopmentsBrazil

Brazil has the authorization from Mercosur to unilaterally reduce to 0% or 2% the

Import Duty (TEC) applicable for Capital Goods (BK) and IT and

Telecommunication Goods (BIT) for products that do not have a national similar

(ex-tarifario program). The authorization is valid until December 31, 2021 and, so

far, the deadline has not been extended by Mercosur

The Brazilian Government informed to companies that currently have ex-tarifarios

valid until December 31, 2021, that it is likely that they will be automatically

extended, as long as Mercosur authorizes the maintenance of the program

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Africaii

Developments and TrendsPre-Covid

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Africa

■ New taxes

■ Environmental taxes, Carbon tax,

Sugar tax, “Health promotion” tax;

additional Tobacco Levies

■ Increased use of technology at points of

export and import

■ Trade blocks and co-operation

■ Targeting of multi-nationals

■ Audits focused on transfer pricing

and customs valuation

South Africa

■ Amending its laws to be in line with the

WCO Safe Framework of Standards

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Development and TrendsPost-Covid

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Recent developments in tax and trade across Africa point to a growing collaboration amongst African tax

authorities to more effectively target multinationals for potential tax revenue

Africa tax authorities are also increasing investment in revenue collection skills development and the hiring of

experienced tax experts

There is also an expanding focus on the implementation of indirect taxes, such as health promotion and

environmental levies, as well as new types of digital taxation, and electronic services VAT, especially

regarding how this applies to the cross-border movement of goods

The increasing cross-border cooperation and capacity building among tax authorities to bolster revenue, has

made it more difficult for companies to manage their trade, tax and reputational risks in Africa

To adapt, companies must revisit their structure and operations and seek to mitigate these risks

Specialized tax advisors with hands-on experience in international, customs and excise and cross-border

trade and litigation are invaluable to multinationals as they negotiate the myriad of trade and customs laws

and regulations affecting businesses operating in Africa

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The African Continental Free Trade Area

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1 January 2021

It aims to bring continent-wide

free trade to 1.3 billion people in

a $3.4 trillion economic bloc.

A key element of the AfCFTA is

the removal of cross-border

tariffs on 90% of goods by 2030.

It is estimated to grow intra-

African trade by more than 50%,

promoting industrialisation,

economic growth and reducing

unemployment.

Fragmented trade policies across the

continent need to be harmonised.

The challenges that AfCFTA needs to address relate to lowering tariff

barriers and addressing non-tariff barriers to intra-regional trade.

Investment in utility

infrastructure.

Attracting foreign direct

investment.

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Challenges

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54 individual, but very diverse and complex

markets

Red tape, existing Regional Economic

Communities ("RECs")

Reforming non-tariff and trade facilitation

measures.

Liberalisation

A lack of consistent and reliable infrastructure /

mobility and infrastructure development

Uneven financial resources or liquidity shortages

and the inability to repatriate profits; corruption,

political instability

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Challenges

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The impact of Covid-19 will provide further

impetus for African governments to overhaul

regulation relating to tariffs, bilateral trade, cross-

border initiatives as well as capital flows.

Trade in Africa continues to rely on physical

documentation.

Digital transactions

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Development and Trends

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The African Continental Free Trade Area (AfCFTA) agreement

An active member and a participant in the negotiation meetings

The tariff management system enhanced

The declaration system has been enhanced

SARS is currently completing various administrative arrangements

Commitment to implementing the agreement is key

Impact on SARS legislation, systems, Customs operations and training of officers

The free trade area is of considerable economic interest

Once concluded the African Continent will provide a market of over 1 billion people with a GDP of over US$2.6

trillion

South Africa

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Development and Trends

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African Growth and Opportunity Act (AGOA)

The non-reciprocal African Growth and Opportunity Act (AGOA), which allows duty- and quota-

free exports from eligible African countries into the US, is due to expire in 2025

On 2 November 2021, President Biden announced that three African countries would be

terminated from the AGOA trade preference programme, unless they took urgent action to

meet statutory eligibility criteria by 1 January 2022

The three countries listed were Guinea, Mali and Ethiopia

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SACUM EPA with the UK and N Ireland

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The Economic Partnership Agreement (EPA) between the

Southern African Customs Union (SACU) and the UK and

Northern Ireland wef 1 January 2021

Establishes free trade area between the SACU and Mozambique

(SACUM) and the UK, and the continuity of trade between the UK

and the SACUM following BREXIT

The UK is South Africa’s fifth largest trading partner

Solidifies strong trade relations and partnership between the

parties, reflects the commitment to maintain a strong trading

relationship as the UK develops its independent trade policy

Almost identical to the EU-SADC EPA, but there are some

changes with respect to tariff rate quotas (TRQs)

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ASEANiii

ASEAN - Regional Comprehensive Economic Partnership

- Members of RCEP

RCEP signed on 15 November 2020

RCEP consists of 20 chapters covering topics relating to

trade in goods and services, investment, intellectual

property (IP), e-commerce, competition and government

procurement, amongst others.

RCEP will enter into force 60 days after at least:

6 ASEAN member states; and

3 non-ASEAN member states,

have ratified the agreement and deposited

their ratification instrument.

Member states that have completed the ratification

process include:

ASEAN - Singapore, Brunei, Cambodia, Laos,

Thailand, Vietnam

Non-ASEAN - China, Japan, Australia, New

Zealand.

RCEP will come into force 1 January 2022.

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Russiaiv

New restrictions on public procurementsGovernmental Decree No. 1432 of 28 August 2021

To participate in public procurements, they will have to include their products in the Register of Russian

Industrial Products or in the Unified Register of Russian Radio-electronic Products

This rule applies to the goods listed in Governmental

Decree No. 878, which has been significantly expanded EAEUnon-

EAEU

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Suppliers of certain imported radio-electronic products (integrated circuits, smart cards,

computers, various digital computing machines and lighting devices) are prohibited from

participating in public procurements

Other radio-electronic products, as well as certain medical devices, are now subject to the

"two is a crowd" rule, under which the customer must reject bids with an offer of imported

radio electronics if there is at least one bid with products originating from Russia or the

Eurasian Economic Union (EAEU)

New trends on additional customs value surcharges

Recently, the customs authorities have been demonstrating an

extremely aggressive approach on additional customs value surcharges

The Russian courts are actively supporting customs in all customs lawsuits

The Russian customs authorities strictly control the inclusion in the customs value of the following types of payments:

Inclusion of additional payments in the customs value

License fees for locally produced

products from imported

components

Cases: Wienerberger 2017, Uventa 2020,

PPG 2020, IKEA 2021, etc.Cases: Oriflame 2013, Mary Kay

2013, IKEA 2021, Bershka 2021, etc.Cases: EPK-Brenco 2018, Pramo-Electro

2019, Devon Spring 2020, etc.

Cases: EPK-Brenco 2018, Pramo-Electro

2019, etc.

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TrademarksMarketing knowhow

(support of local sales/

operation, IT, advertising)

Manufacturing

knowhow

VAT on license payments Dividends

Ministry of Finance letter No. 27-01-

01/39242 dated 21 May 2021

Cases: EPK-Brenco 2018, Pramo-Electro

2019, Bershka 2021, Chanel 2021, etc.

Practical developments in encryption regulations

General practical developments:

The Federal Security Service (FSS) changed the

submission practice and it now requires only one hard

copy of the notification

Previously, documents on the registration of notifications

could be submitted in person (by courier) or by

post. Currently, due to COVID-19, the FSS accepts only

postal submissions, which takes an additional two to

three weeks

It became difficult to contact the responsible officer to

clarify the status of its registration (i.e., whether or not it

was approved for registration)

12th exemption category

(B2C products that do not fall under the first to 11th

exemption categories, e.g., SSD cards, wireless

hotspots, etc.):

The 12th category is different from the others, since

it includes several specific criteria, one of which is

the availability of the products on the Russian

market

Previously, the practical application of the 12th

category was complicated in Russia, since the FSS

required the importer to obtain an import license for

the first shipment of products before applying for

the registration of the notification

Obtaining an import license for the first shipment of

products is no longer required

Notifications submission practice

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Questions

Next and last session

Supply Chain-related Trade Risks and Regulatory Developments

November 18, 2021 l 3:00 pm – 4:15 pm PST

Aleesha Fowler

Associate

Washington, DC, US

Maria Piontkovska

Associate

Los Angeles, US

Alison Stafford Powell

Partner

Palo Alto, US

Kerry Contini

Partner

Washington, DC, US

Brian Cacic

Partner

Toronto, Canada

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