Rules of Origin the greatest Brexit challenge that many firms are yet to tackle
The founder and CEO of a specialist export consultancy is urging UK businesses to get to grips with new Rules of Origin regulations sooner rather than later.
Mike Wilson, who’s consultancy firm Go Exporting supports businesses, trade associations and governments with export strategy - including Brexit advice and audits - says that Rules of Origin is ‘the greatest Brexit challenge you’ve never heard about’.
“Businesses have more than enough to content with right now, but Brexit won’t be delayed and the end of the Transition Period is less than 13 weeks away.
“There are still too many unanswered questions for UK companies, but Rules of Origin risks falling under the radar as something which any importing or exporting company needs to get to grips with as soon as possible.
“To maintain the current status quo on origin would require the Government to achieve a Free Trade Agreement with the EU which allows EU materials and components to count towards British origin as they do now.
“In addition, we would need to replicate EU trade agreements with other countries under exactly the same terms so that EU goods count as British.
“There are a lot of obstacles to achieving this and it is by no means certain it can be achieved. Tough negotiations lie ahead and time is short if British international trade is not to be significantly impacted.”
What are Rules of Origin?
Think of Origin as the ‘Economic’ nationality of your goods. It is their passport to the way they are dealt with in international trade in terms of duties, standards and compliance with relevant trade agreements. As such, Origin can have a profound effect on the viability of your product.
What impact will Brexit have?
As a member of the EU we have been party to its Free Trade Agreements with many other countries and Economic Pacts around the world. Now we have officially left the EU, when the current transition period ends on 31st December this year we will be trading under Non-Preferential Rules of Origin as part of WTO arrangements unless the Government is able to agree Free Trade Agreements not only with the EU itself but also non-EU countries around the world.
That much has been widely discussed in the press and on television news. What is not mentioned however is that either way Rules of Origin are going to have a potentially devastating impact in terms of confirming a product is British. It is estimated that associated administration and compliance costs could run from 4 – 15% of the good value. This is in effect a hidden duty.
Within the EU any materials or components sourced from another EU country are classed as ‘national’. In effect, this means that if a product has 70% of its components sourced from France or Germany for example and is then assembled in the UK, it has EU origin in the eyes of other EU countries and all other countries where the EU has a trade agreement. Consequently, it qualifies for preferential tariffs.
Once outside of the EU, typically FTAs require at least 50% local content in order to confer origin. In our example above, therefore, the product would not qualify as British, meaning it would fall under WTO Non-Preferential rules and tariffs.
About Go Exporting
Go Exporting is a specialist export consultancy that launches businesses into new international markets. One of their missions is to keep exporters informed about the challenges Brexit will bring and provide support services to help them along the journey.
Whether businesses have a single question or are looking for a full Brexit audit, Go Exporting offers cost-effective, flexible support.
For more details, visit https://goexporting.com/brexit-consultancy/