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Rules of Origin
Brexit deal analysis
What does the Free Trade Agreement say?
- The Free Trade Agreement eliminates all customs duties on goods which originate in the other party - representing the most extensive trade agreement on tariffs the EU has ever done.
- Like all EU Free Trade Agreements, the FTA provides comprehensive Rules of Origin to determine when and how goods originate in the UK or the EU.
- There is a provision for ‘full’ bilateral cumulation of origin, which allows traders to include the value of components originating and processing undertaken in either the UK or the EU when determining origin for the purposes of the FTA, thereby increasing the likelihood of qualification.
- There will be a six-year phase-in period for rules of origin for electric vehicles.
- The FTA contains features typical of the EU’s FTAs, but these features are generally set at a liberal level . This increases the likelihood of bestowing origin qualification on some borderline goods and provides more generous terms than under many other FTAs.
- Exporters will be able to self-certify the origin of the goods through a statement, e.g. on an invoice, thereby making it easier for importers to prove the origin of their products. Importers may also be able claim preference based on their own knowledge or information. A statement of origin can cover multiple identical shipments in a 12-month period.
- Importers will have up to three years from the date of importation to claim preferential tariff treatment.
How does this compare to what was expected?
The FTA offers immediate zero tariffs and quotas (subject to meeting Rules of Origin) which is unprecedented, but was a clear objective of both parties from the outset.
The FTA offers some features such as levels of tolerance, acceptance of drawback (subject to review) and application of the roll-up or absorption principle (once a product has obtained originating status, it is treated as such for any further manufacturing processes), which are more explicit, generous and/or trade facilitative than in average or older EU FTAs. The self-certification and small consignment provisions are also liberal.
What are the actions for business?
- Businesses seeking to import goods which would by default attract a positive rate of customs duty (under either the UK Global Tariff or the EU Common Customs Tariff) will need to determine whether their products meet the Rules of Origin in the FTA.
- Exporters will need to classify their goods, establish the origin rule applicable under the FTA, and then develop origin determination, calculation, certification and record-keeping processes.
- Importers will need to check that exporting suppliers understand the rules and provide evidence to support origin qualification. They will need to understand how to claim preference at import, to instruct their customs brokers accordingly and to keep records.
- The EU outlines in its Q&A on the FTA that businesses will benefit from additional flexibility in collecting documentary evidence during the first year of operation – allowing businesses greater time to obtain evidence of origin.