New EU Rules of Origin Have a £600m Impact on British Importers
In line with what we reported back in February 2021, the Chamber experienced a huge surge in queries from traders in the region with as many as 20% of those being related to rules of origin; and now, as per a recent article by The Guardian, we know that since the new rules came into effect under the EU-UK TCA, customs import duties rose from £1.6 to a record £2.2bn in the first semester of this year, meaning UK importers had to pay an added £600m on customs duties.
However, not only UK importers have been affected. Since the start of this year, the Chamber has dealt with queries from both exporters and importers, who have struggled with understanding their product-specific rules of origin and how to claim and provide proof of origin and faced the red-tape results of how some customs authorities in some EU State interpret the evidence of origin requirements.
As the famous case of Percy Pigs from Mark & Spencer showed, with closed knitted pan-European supply chains, many UK and EU businesses have soon realised that EU-UK trade not always will be tariff-free. Whilst the Rules of Origin under the TCA make a provision for bilateral cumulation meaning that UK/EU content is to be counted towards claiming UK/EU origin, we have cases where if goods are being exported to the EU or UK, with a view to being re-exported without undergoing any significant transformation or using a special customs procedure such as inward/outward processing or customs warehouse for instance, then those goods will effectively be subject to tariffs.
Many UK companies have had to re-think completely their business model, with many opting for establishing an operation in an EU country to minimise the impact of double or even triple duties being charged when goods are meant to be primarily distributed in the EU market.
UK business importers will have to pay taxes if the exporter cannot provide enough evidence of the EU origin of the goods under new trade and cooperation deal. Leaving companies and importers with lots of doubt in terms of future relationships with their exporters.
There is also confusion on the details of the rules. Fergus McReynolds, the director of EU and International Affairs at Make UK, which represents the manufacturers, told the Guardian, “Businesses are still grappling with rules of origin and what import duties are payable on."
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Sources: The Guardian, Institute of Export