Free trade agreement (FTA) country graduation: Vietnam and Samoa
Published 24 November 2022
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Introduction
Low income and lower middle-income countries graduate from UK trade preferences when they enter into a free trade agreement (FTA) with the UK. As set out in the explanatory memorandum (PDF, 85KB) to The Trade Preference Scheme (EU Exit) Regulations 2020, UK policy is to provide a transition period for low income and lower-middle income countries when the UK implements a new preferential trade arrangement with a country. During this transition period, a low income or lower-middle income country can either trade with the UK on the terms of the FTA or under UK trade preferences. At the end of this transition period, the country migrates to trading solely on the terms of the FTA.
The current UK trade preferences scheme is the UK Generalised Scheme of Preferences (GSP). The UK intends to introduce a new trade preferences scheme to replace the UK GSP in early 2023. The new scheme is called the Developing Countries Trading Scheme (DCTS). For more details on the new scheme, view the DCTS government policy response.
The UK implemented a new preferential trade arrangement with Vietnam in December 2020. Vietnam then entered into a transition period during which time Vietnam was permitted to trade on both the terms of the UK – Vietnam FTA and the UK GSP. In the interests of continuity, Vietnam will remain in the UK GSP until the new DCTS comes into force in early 2023. From that point, Vietnam will trade on UK-Vietnam FTA terms only and will no longer be eligible for UK trade preferences. For more information on the agreement, view the trade with Vietnam page.
Samoa acceded to the UK-Pacific States Economic Partnership Agreement (EPA) in March 2022. Samoa then entered into a transition period during which time Samoa was permitted to trade on both the terms of the UK-Pacific States EPA and the UK GSP. Samoa will remain in the UK GSP until the new DCTS comes into force in early 2023. From that point, Samoa will trade on UK-Pacific States EPA terms only and will no longer be eligible for UK trade preferences. For more information on the agreement, view the trade with Pacific States page.
Who should read this notice
You should read this notice if you are a:
- business based in the UK and import goods from Vietnam and Samoa
- business based in Vietnam or Samoa and export goods to the UK
- business based in the UK or South East Asia and benefit from intra-regional cumulation with Vietnam
Retained benefits: Intra-regional cumulation in the DCTS
Countries that benefit from intra-regional cumulation as set out in UK trade preferences legislation, that have ratified an FTA with the UK and that have completed a transition period will be permitted to remain in intra-regional cumulation groups in the DCTS. Countries that meet this criteria will be eligible to remain in intra-regional cumulation groups until they cease to be classified by the World Bank as either a low income or lower-middle income country.
As a result, Cambodia, Indonesia, Laos, Myanmar and Philippines will continue to be able to cumulate with Vietnam under the DCTS until Vietnam is no longer classified by the World Bank as a low income or lower-middle income country. Vietnamese goods will be able to be cumulated by Cambodia, Indonesia, Laos, Myanmar and Philippines if they qualify for a nil rate of import duty when exported from Vietnam to the UK under the UK-Vietnam FTA. Cumulation of goods from countries in this regional group by Vietnam will be governed by the provisions of the UK-Vietnam FTA and not the DCTS, as would cumulation by Vietnam with any other country.
Legislation
Intra-regional cumulation provisions for the UK GSP are set out in Regulation 16, in the Customs (Origin of Chargeable Goods: Trade Preference Scheme) (EU Exit) Regulations 2020 (SI.2020/1436).
This legislation is in the process of being updated to reflect changes that will be made to UK trade preferences under the DCTS. Amended legislation will be published before the new scheme comes into force.