The United Kingdom left the European Union on January 31, 2020, and has since been operating under a transition period that will end on December 31, 2020. During this transition period, the UK and the EU have been negotiating a free trade agreement, which will determine the terms of their future relationship, including trade rules, tariffs, and customs procedures.
One critical aspect of any trade agreement is the rules of origin. Rules of origin are the criteria used to determine the origin of the goods and whether they qualify for preferential treatment under a trade agreement. In the case of the EU-UK free trade agreement, the rules of origin will determine which products can be traded without tariffs or other trade barriers.
The EU-UK free trade agreement rules of origin will be based on the principle of substantial transformation. This means that for a product to qualify for preferential treatment, it must undergo a significant transformation in the country of export or production. The rules will also include product-specific rules that will determine precisely which operations are required to transform a product.
For example, let`s take a car produced in the UK with parts imported from the EU. Under the rules of origin, this car would qualify for preferential treatment if it meets the substantial transformation criteria. This may include the assembly of the car in the UK, the installation of the UK-produced engine, and other UK components that add significant value to the final product.
Another critical aspect of the EU-UK free trade agreement rules of origin is the cumulation provisions. Cumulation allows countries to use materials or components from other countries to qualify for preferential treatment under a trade agreement. In the case of the EU-UK free trade agreement, businesses in the UK and the EU will be able to use materials and components produced in each other`s countries to meet the rules of origin requirements.
The EU-UK free trade agreement rules of origin will also include administrative procedures to ensure compliance with the rules. Businesses will need to provide documentation, such as certificates of origin, to prove that their products meet the rules of origin requirements.
In conclusion, the EU-UK free trade agreement rules of origin will be essential for businesses trading between the two markets. Businesses will need to understand the rules to determine whether their products qualify for preferential treatment under the agreement. Failure to comply with the rules could result in additional costs, such as tariffs or other trade barriers, that could impact their competitiveness in the EU or UK markets.
