OTTAWA – Cuts to tariffs and liberalized origin rules attached to automotive products and parts traded between signatory countries of the Trans-Pacific Partnership should help exporters identify new market openings.

Manufacturers also will be able to pinpoint their vulnerability to new competition.

The agreement’s text has been published by the 12 signatory countries: the U.S., Japan, Canada, Australia, New Zealand, Mexico, Vietnam, Malaysia, Chile, Brunei, Singapore and Peru. It also has been released online by the individual governments; the U.S. version can be accessed here. (https://medium.com/the-trans-pacific-partnership).

The ultimate aim of the TPP is to make most of these trades duty-free. Once ratified by all parties, the pact could take effect as early as next year.

The agreement includes tariff-elimination schedules and detailed rules of origin for the automotive sector. The schedules list the current level of duties and how much time a government will take to scrap them for intra-TPP zone trades. It also details what proportion of an automobile or a part must be made in a TPP country for these duty reductions to apply.

As previously announced, this threshold is about 45% for autos and parts, although it varies by both product and the calculation method used to decide how much value within an auto or part has been sourced within the TPP zone.

The key area for automakers is the 8702 to 8705 tariff classifications which cover cars, vans, trucks, buses and special-purpose vehicles such as fire trucks and cranes. Here, 45% of value must come from TPP countries for the duty reductions to apply to TPP trades, if the origin calculation is made by the so-called net-cost method. It is 55% if the build-down method is used.

Net cost is the total cost of making an auto minus sales promotion, marketing and aftersales service costs, royalties, shipping and packing costs and certain interest costs. Build-down involves assessing the value of materials used to make a vehicle that have been imported from outside the TPP zone and dividing this by the value of the finished auto.