It’s November already, where has the year gone to?!
In the UK thoughts are turning to Bonfire Night on November 5th, where we celebrate a failed gunpowder plot to kill King James 1 in 1605 with fireworks and bonfires across the country.
Fireworks of a different kind are about to hit UK and EU exporters under the Trade and Cooperation Agreement’s clauses concerning Rules of Origin. From 1st January 2022 businesses will have to demonstrate they are compliant with the new rules and be able to prove the origin of their products.
Up to now, there has been a grace period where a simple statement of origin has sufficed, and the rules have not been strictly enforced. Whilst this has helped to smooth the EU exit transition, it has led to a false sense of security for many exporters as they have not been challenged on origin. From next year this may change, and they need to hold proof in order to continue to benefit from tariff-free trade. This applies equally to UK and EU exporters to the other’s territory.
Many businesses are reportedly underprepared and unaware of just how much evidence they’ll have to provide in order to gain tariff-free access.
The UK-EU Trade & Cooperation Agreement contains 50 pages on how rules of origin work following Brexit. Every business that exports need to be aware of these. There are different rules for different products, so it is not straightforward. Many do not have the manpower or expertise to fully evaluate the situation.
To claim UK or EU origin, a product must be made up of a certain amount of originating components or constituent parts. The level required varies by product, with many being around 50%. EU and UK parts can count towards the origin of the other, but only if they have been sufficiently worked in the other’s territory. This means if you are a UK manufacturer and you import components from the EU, you can only claim them towards UK origin if you have worked them sufficiently in the UK. Simple re-packaging does not count.
Marks & Spencer fell foul of this rule with their Percy Pig sweets which they import from Germany and then exported to Ireland without any change in the product. In this scenario, import duty becomes due on the product. There are ways around this, for example using Customs Special Procedures, which we can advise upon.
To claim UK or EU origin you must hold sufficient evidence to prove this. There can, and most likely will, be checks moving forward, particularly if the relationship between the UK and EU worsens, for example surrounding fishing rights or Northern Ireland.
In 2020 we presented a webinar calling Rules of Origin: the greatest Brexit challenge you’ve never heard of. That’s about to change as everyone becomes acutely aware of the challenges. Time is short, now is the time to act and gather the evidence you need to prove origin.
As a starting point, we have produced a free Rules of Origin Guide and Workbook which takes you through a step-by-step process on how to evaluate the true origin of your products. Download your copy here today.
Or contact us for further details and support on +44 (0)800 689 1423 and email firstname.lastname@example.org.