Monday, 15th July, 2024
Monday, 15th July, 2024

Brexit deal’s ‘rules of origin’ spark trade confusion

Many British businesses are swiftly
discovering that they must now pay duties on exports bound for the European
Union, despite the breakthrough Brexit free trade deal clinched over

The development, which has already helped spark sliding freight traffic
to Ireland, is part of trade disruption that has become increasingly evident
this year after Britain’s Brexit divorce was finalised on December 31.

Trade has also been badly hampered by new Covid-19 border restrictions,
with the roll-out of testing for lorry drivers as Britain races to curb a
rampant variant of the deadly virus.

At the heart of the Brexit deal, which came into force on January 1, is
the so-called “rules of origin” condition applied to all goods crossing the

The rules of origin, a key aspect of all major trade deals, can rapidly
turn into a costly headache for businesses.

Under the Brexit provision, any good will be subject to a customs levy if
it arrives in Britain from abroad and is then exported back into the European

For example, if a British clothing retailer imports Chinese-made
textiles, then it would then have to pay a customs charge if it ex-exports
the items into a member nation of the EU’s single market and customs union.

Put simply, the rules therefore determine whether an export is considered
British or not.

– ‘Businesses blindsided’ –

“It is clear that many UK businesses exporting to the EU are going to be
hit by tariffs,” said Michelle Dale, senior manager at the Manchester office
of chartered accountants UHY Hacker Young.

“Businesses have also been completely blindsided by the ‘rule of origin’
part of the deal, which leaves them at a major competitive disadvantage when
selling in the EU.

“Unfortunately, not enough was done to prepare them for this. It takes
years to build an effective supply chain — and using non-EU suppliers is
often the best option both in terms of cost and quality.”

The Brexit agreement, which was sealed four and a half years after Britons
voted to leave the European Union, grants zero customs duties if at least
roughly 50 percent of an exported product is made in the UK.

That applies to the majority of UK exports — but certainly not all of

And the provision is all the more important because the EU accounts for
more than half of Britain’s trade.

The London-based Institute of Government think tank argues however that
the complexity of supply chains means that proof of origin can be difficult
for businesses to ascertain — and hard for authorities to assess.

A raft of British retailers are reportedly rushing to assess the impact
of critical deliveries to EU nations, including London’s top-end department
store Fortnum and Mason.

Collapsed UK high-street department store Debenhams has already shut its
online website in Ireland due to uncertainty over post-Brexit trade rules.

– ‘We need a solution’ –

“At least 50 of our members face potential tariffs for re-exporting goods
to the EU,” said William Bain, trade policy adviser at the British Retail
Consortium industry organisation.

“We are working with members on short-term options and are seeking
dialogue with the (UK) government and the EU on longer-term solutions to
mitigate the effects of new tariffs,” he added.

High-street retail giant Marks & Spencer warned Friday that the trade
deal would “significantly impact” business in the Czech Republic, Ireland and

The deal however removes tariffs for Britain’s largely foreign-owned
carmaking industry, which avoids customs duties for cars manufactured with
components made abroad.

Nissan has welcomed the agreement but has not yet indicated what will
happen to the Japanese carmaker’s largest plant in Europe which is based in
Sunderland, northeast England. It had previously warned that a no-deal
departure would threaten the factory’s future.

Prime Minister Boris Johnson’s Conservative government has yet to comment
on the precise impact of the rules of origin on the business community.

“We continue to work closely with businesses to help them to adapt to any
new trading requirements,” a government spokesman told AFP.

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