Unlocking opportunities: is your business ready for the NZ-UK free trade agreement?

The New Zealand-United Kingdom Free Trade Agreement (NZ-UK FTA) presents an excellent opportunity for New Zealand businesses engaged in trade with, or looking to expand into, the UK market. This landmark agreement, effective from 31 May 2023, has resulted in the elimination of tariffs on 99.5% of goods traded between the two countries. Over time, the UK will completely remove all customs duties on New Zealand exports.

With the UK being our seventh-largest trading partner and a crucial market for key exports, the NZ-UK FTA offers significant advantages. Immediate savings of approximately $37 million per year can be expected for New Zealand exporters, solely due to the elimination of tariffs. Furthermore, this agreement is projected to boost New Zealand's goods exports to the UK by over 50%.

If your business already conducts trade with the UK, you can benefit from reduced costs and improved business efficiency between the two countries. For those currently not engaged in UK trade, now is a favourable time to consider incorporating the UK into your market or supply chain.

Snapshot of our goods trade with the UK

Our goods trade with the UK allows us to capitalise on different sector strengths. Notable New Zealand goods exports to the UK include wine, meat, fruit, machinery, eggs, honey, and wool, with a total value of NZ$1.5 billion. The UK, being a prominent global importer of food products, benefits greatly from New Zealand's counter-seasonal production of fresh produce and protein.

Conversely, New Zealand imports goods from the UK such as vehicles and parts, machinery, equipment, and pharmaceuticals, totalling NZ$1.8 billion. The UK serves as a leading supplier of vehicles, turbines and engines, and pharmaceutical products to New Zealand, further illustrating the mutually beneficial nature of the trade relationship.

Several key exports poised to thrive under the NZ-UK FTA from the reduced trade barriers and improved market access includes:

• Meat and dairy exports – removal of high tariffs and restricted quota access;

• Wine - removal of £10-26 per hectolitre tariff;

• Honey – removal of 16% tariff;

• Seafood products – removal of up to 20% tariffs; and

• Onions, kiwifruit and (at certain times of the year) apples – removal of 8% tariffs.

Harnessing the benefits of the NZ-UK FTA

While the NZ-UK FTA offers immense potential, businesses need to take specific measures to fully capitalise on the advantages as the agreement does not automatically apply. Each consignment must comply with the FTA's requirements, and proper notification must be made to the relevant authorities. Here are some essential considerations for New Zealand businesses aiming to take advantage of the trade agreement:

• Accurately determine the appropriate tariff classification for goods to qualify for the preferential tariff treatment under the NZ-UK FTA.

• Satisfy the relevant rules of origin under the NZ-UKA FTA, which may involve complexities. For example, goods sourced from countries other than New Zealand, or the UK may still be eligible if they undergo production processes within either country. Conversely, goods sourced solely from New Zealand and/or the UK may not qualify if they transit through another nation with additional operations performed.

• Consider seeking advance rulings from the customs authority of the importing country to obtain certainty about the origin of specific goods or their tariff classification. These advance rulings remain effective for up to three years unless modified or revoked.

• Comply with the declaration of origin rules, either through self-declaration from the producer or exporter or by providing documentation supporting the importer's knowledge of the goods' origin.

• Evaluate the need to renegotiate contracts with UK counterparts to address relevant matters such as origin-related obligations and entitlements in case the authorities challenge the goods' origin.
  

The NZ-UK FTA offers a great opportunity for New Zealand businesses to grow and expand their operations. We can help in various ways to ensure that your business can leverage this agreement effectively, whatever the stage of your business. If you are interested in exploring how you can benefit from the NZ-UK FTA further, please don't hesitate to get in touch with us.

June 2023 - Tax Alerts