Asia-Pacific countries sign Regional Comprehensive Economic Partnership (RCEP) Agreement

Japan tax alert 24 November 2020

Executive summary

On 15 November 2020, 15 countries in Asia Pacific signed the Regional Comprehensive Economic Partnership (RCEP) Agreement at the fourth RCEP Summit. These countries include ASEAN member countries (i.e., Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) plus Australia, China, Japan, South Korea and New Zealand.

Once it enters into force, RCEP will be the world’s largest free trade agreement (FTA), which accounts for half of trade value of Japan and 30% of the global GDP. While ASEAN already has FTAs with the other 5 countries, it will be the first FTA available among China, Japan and South Korea. As China and South Korea are Japan's largest and third largest trading partners, respectively, and ASEAN and Australia are Japan’s primary trading partners, RCEP may be a catalyst for the post-COVID economy in the member countries.

Although India left the RCEP negotiation in 2019 for concerns over impact of tariff elimination on its domestic industries, the Agreement provides that RCEP is open for accession by India from the date of entry into force. Ministers’ Declaration on India’s Participation in RCEP was also published at the RCEP summit.

RCEP will enter into force 60 days after the date on which at least 6 ASEAN signatory countries and 3 non-ASEAN signatory countries have completed ratification and notified the Depositary. Although this process may require some time, businesses should check if their exports and imports can benefit from duty elimination/reduction under RCEP and if they satisfy the rules of origin. If it is beneficial, businesses should begin the necessary preparation for using RCEP from the date of entry into force.