The Free Trade Agreement negotiated by the UK and EU (now known as the Trade & Cooperation Agreement or TCA) includes zero tariffs and zero quotas on traded goods. However, in order to be eligible for zero tariffs, businesses trading with the EU must be able to prove that their products ‘originate’ in the UK.
Rules of origin (RoO) set out the requirements for products to be originating. They may require a certain amount of the value of the product to be added in the UK (for example through UK manufacturing or UK-originating parts); a specific manufacturing process to be undertaken in the UK; or they may limit the amount of imported parts used in a product.
Product Specific Rules
Different rules (known as ‘Product Specific Rules’) are in place for different products. UK exporters to the EU will need to work out whether their products comply with these rules. The rules for finished vehicles and batteries are as follows:
- Transitional rules for all hybrids and electric vehicles (HEVs, PHEVs, EVs):
- 2021-23:40% UK/EU content (60% MaxNOM); and
- 2024-26:45% UK/EU content (55% MaxNOM)
- End-state rule for HEVs from 2027: 55% UK/EU Content (45% MaxNOM)
- End-state rule for PHEVs and EVs from 2027: 55% UK/EU Content (45% MaxNOM) and must have originating battery pack
- End-state rule for internal combustion engine vehicles from 2021 (no transition): 55% UK/EU Content (45% MaxNOM)
- Transitional rules for the battery cell and pack:
- 2021-23: CTH or 70% MaxNOM for the cell; and CTSH or MaxNOM 70% or ‘assembly of battery packs from non-originating battery cells or battery modules’ for the pack
- 2024-26: CTH (except from non-originating active cathode materials) or 50% MaxNOM for the cell; and CTH (except from non-originating active cathode materials) or 40% MaxNOM for the pack for 2024-2026
- End-state rules from 2027: CTH (except from non-originating active cathode materials) or 35% MaxNOM for the cell and CTH (except from non-originating active cathode materials) or 30% MaxNom for the pack from 2027 onwards
- Review clause allowing either Party to trigger a review of the end state rules before they come into force
Note that this is a summary explainer. Companies should check the relevant annexes in the full text of the TCA to confirm the product specific rules of origin applicable to their products.
Year 1 administrative easements
There are some easements for both UK and EU businesses that will simplify the process of complying with rules of origin for the first months of the agreement:
- UK importers may defer tariff payments on imports from the EU for up to six months from 1 Jan. This applies to all goods except controlled goods. For more information, please see here: Delaying Declarations and Border Operating Model.
- UK and EU exporters will have 12 months to source supplier’s declarations to prove products meet Rules of Origin and can access preferential tariffs. However, you still must be confident that your good meets the rule of origin. This simply provides more time to collect supporting evidence.
In addition, HMRC has published a new page on “How to Claim Preference” when trading with the EU. Details are available here
Resources and further information
- Importing and exporting goods using preference agreements (this page then links you to further guidance on classification, rules of origin, and which agreements are in place: https://www.gov.uk/guidance/import-and-export-goods-using-preference-agreements
- Tool for checking what tariffs and rules apply to goods (for all preferential trade): https://www.gov.uk/check-duties-customs-exporting
- How to claim preferential (zero) tariffs when trading with the EU https://www.gov.uk/guidance/claiming-preferential-rates-of-duty-between-the-uk-and-eu-from-1-january-2021
- Full guidance on Rules of Origin for trading with the EU: https://www.gov.uk/government/publications/rules-of-origin-for-goods-moving-between-the-uk-and-eu-from-1-january-2021
- HMRC importing/exporting helpline and contacts: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/customs-international-trade-and-excise-enquiries