Following his appearance at an oral evidence session of the Treasury committee on 23 May, HMRC’s chief executive, Jon Thompson, has confirmed HMRC’s cost estimates in a letter to the committee chair, Nicky Morgan. The European Commission has also just published a new ‘notice to stakeholders’ on the impact of Brexit on preferential rules of origin.
Besides providing detail on the ‘highly streamlined customs arrangement’ and the ‘new customs partnership’ options, the letter looks at the need to comply with rules of origin for customs goods.
The letter states: ‘As I made clear in my evidence, there would also be burdens from complying with rules of origin and that several billion was a reasonable estimate of this. As set out in the prime minister’s Mansion House speech, the government does not want to see the introduction of any tariffs or quotas on trade in goods between the UK and the EU. However, to benefit from no tariffs or quotas under a highly streamlined customs arrangement, UK businesses will have to comply with rules of origin to prove they qualify.’
‘The impact on UK business of having to comply with rules of origin will vary across sectors and business models. However, the government is working closely with industry and trade bodies to fully understand the scope of these issues and address these accordingly.’
‘Looking at available evidence and academic literature on the cost of rules of origin suggests that compliance can add costs in the range of several percentage points of the value of trade which needs to meet rules of origin to qualify for preferential access under a free trade agreement. Applying such costs to the value of UK-EU trade in goods that could face non-zero most-favoured nation tariffs therefore suggests a reasonable estimate could be in the billions.’
The European Commission has published a note on rules of origin as the latest in its stakeholder series setting out the EU’s view of the impact of Brexit in the area of customs and taxation (see https://bit.ly/2DMHUtW).
For goods exported from the EU, this means:
EU FTA partner countries may consider that goods having an EU preferential origin before the withdrawal date no longer qualify at the moment of their importation in that third country, due to UK inputs not being considered as ‘EU content’; and
EU-27 exporters may, upon request from that third country, have to prove the EU origin of the goods taking into account that UK inputs no longer account as ‘EU content’.
The Commission note advises member states to:
treat any UK inputs as ‘non-originating’ when determining the EU preferential origin of their goods; and
take appropriate steps to be able to prove the EU preferential origin of their goods, in case of subsequent verification, without taking account of any UK inputs as ‘EU content’.
For goods imported into the EU:
UK inputs incorporated in goods obtained in third countries with which the EU has preferential trade arrangements and imported into the EU as of the withdrawal date will be ‘non-originating’, in particular in a context of cumulation of origin with the EU; and
exporters in third countries may have to prove the EU preferential origin of the imported goods.
In the context of imports, member states are advised to ensure that exporters are able to prove the EU preferential origin of the imported goods, taking account of the consequences of the UK’s withdrawal.
Following his appearance at an oral evidence session of the Treasury committee on 23 May, HMRC’s chief executive, Jon Thompson, has confirmed HMRC’s cost estimates in a letter to the committee chair, Nicky Morgan. The European Commission has also just published a new ‘notice to stakeholders’ on the impact of Brexit on preferential rules of origin.
Besides providing detail on the ‘highly streamlined customs arrangement’ and the ‘new customs partnership’ options, the letter looks at the need to comply with rules of origin for customs goods.
The letter states: ‘As I made clear in my evidence, there would also be burdens from complying with rules of origin and that several billion was a reasonable estimate of this. As set out in the prime minister’s Mansion House speech, the government does not want to see the introduction of any tariffs or quotas on trade in goods between the UK and the EU. However, to benefit from no tariffs or quotas under a highly streamlined customs arrangement, UK businesses will have to comply with rules of origin to prove they qualify.’
‘The impact on UK business of having to comply with rules of origin will vary across sectors and business models. However, the government is working closely with industry and trade bodies to fully understand the scope of these issues and address these accordingly.’
‘Looking at available evidence and academic literature on the cost of rules of origin suggests that compliance can add costs in the range of several percentage points of the value of trade which needs to meet rules of origin to qualify for preferential access under a free trade agreement. Applying such costs to the value of UK-EU trade in goods that could face non-zero most-favoured nation tariffs therefore suggests a reasonable estimate could be in the billions.’
The European Commission has published a note on rules of origin as the latest in its stakeholder series setting out the EU’s view of the impact of Brexit in the area of customs and taxation (see https://bit.ly/2DMHUtW).
For goods exported from the EU, this means:
EU FTA partner countries may consider that goods having an EU preferential origin before the withdrawal date no longer qualify at the moment of their importation in that third country, due to UK inputs not being considered as ‘EU content’; and
EU-27 exporters may, upon request from that third country, have to prove the EU origin of the goods taking into account that UK inputs no longer account as ‘EU content’.
The Commission note advises member states to:
treat any UK inputs as ‘non-originating’ when determining the EU preferential origin of their goods; and
take appropriate steps to be able to prove the EU preferential origin of their goods, in case of subsequent verification, without taking account of any UK inputs as ‘EU content’.
For goods imported into the EU:
UK inputs incorporated in goods obtained in third countries with which the EU has preferential trade arrangements and imported into the EU as of the withdrawal date will be ‘non-originating’, in particular in a context of cumulation of origin with the EU; and
exporters in third countries may have to prove the EU preferential origin of the imported goods.
In the context of imports, member states are advised to ensure that exporters are able to prove the EU preferential origin of the imported goods, taking account of the consequences of the UK’s withdrawal.
