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Free trade agreements

This section is not part of the standard

The content in this section is only included to help explain the standard, provide examples or make recommendations about use.

It does not contain requirements for complying with the standard and is not governed by the formal standards process.

The information may not have been updated to accurately reflect Government policy.

Trade agreements set out the rules that cover trade between 2 or more countries. Read about the UK’s trade agreements on GOV.UK.

What trade agreements contain

The core parts of a trade agreement are:

  • preferential tariffs (also known as tariff preferences)
  • tariff rate quotas

Preferential tariffs

Preferential tariffs allow traders to pay less or no duty on goods they import.

To claim a preferential tariff, traders must prove goods meet the rules of origin.

Rules of origin determine:

  • where goods originate from
  • which goods are covered in trade agreements

Read more about rules of origin on GOV.UK.

Tariff rate quotas

Tariff rate quotas (TRQs) are a form of preferential tariff.

They allow traders to import limited amounts of certain goods at lower or no rates of duty during a set period.

How traders choose between a preferential tariff rate and a tariff rate quota

Preferential tariffs and TRQs may exist on the same commodity code.

Whether the trader uses the preferential tariff or the TRQ in their declaration depends on:

  • whether there is a quota balance available
  • how they complete the customs declaration (known as the single administrative document or SAD)

Introducing the benefits of a trade agreement over time: staging

Usually preferential tariffs and tariff quotas are brought in over time.

This is achieved via a process called staging.

Staging is applied to preferential tariffs and TRQs in different ways.

Preferential tariff staging

Often, trade agreements agree to reduce duty rates over several years. This is to protect domestic producers.

For example, the following 2 images are fragments from a trade agreement.

The first image shows the complex legal text which explains that:

  • commodity codes covered by the agreement have been given a number to indicate which ‘staging category’ they are in
  • customs duties will be removed from these codes in a number of equal stages, depending on which staging category they are in

The second image shows:

  • a list of commodity codes and the ‘staging category’ they are in
  • the starting rate of duty, which will reduce over time

image

The following example illustrates a reduction in duty rates over 7 years. During this period, duty rates are reduced from the starting rate to zero.

When importing this product in 2013, the rate was 1.000 EUR per kg plus 24.000 EUR per 100kg.

The following year, the rate was 0.80 EUR per kg plus 20.60 EUR per 100kg.

This reduced steadily over the next 6 years until in 2020 the duty rate was zero.

image

Tariff rate quota staging

The volume of imported goods allowed into free circulation at a reduced rate goes up by a set amount per year.

For example, say there was staging of a tariff rate quota between 2013 and 2020.

In 2013, the volume of imported goods allowed into free circulation at a reduced rate was 2,334,000 kgm.

In 2014, there was a big jump up to 6,160,000 kgm.

Between 2015 and 2020 the volume of imported goods allowed into free circulation increased by 560,000 kgm each year.

In the final year of staging (2020), the volume of imported goods allowed into free circulation was 9,520,000 kgm.

Assigning tariff preference measures in the Tariff

Assign tariff preference measures to commodities using measure types:

  • 142 - Tariff preference
  • 145 - Preference under end-use (authorised use)

Read about the components which make up a measure.

Integrating preferential quota measures in the Tariff

To integrate preferential tariff measures use the measure types:

  • 143 - Preferential tariff quota
  • 146 - Preferential tariff quota under end use

Read about what makes up a quota.