BREXIT - UK to become a Third Country and the Preferential Treatment of Goods

As of 29 March 2019 23:59h the UK would become a third country for the EU member states for trade purposes.


BACKGROUND ON PREFERENTIAL ORIGIN


As part of the EU common commercial policy, the EU has preferential trade arrangements with third countries, such as Free Trade Agreements (FTAs) and the Generalised Scheme of Preferences (GSP).


Goods exported from the EU may benefit from preferential tariff treatment in an EU FTA partner country when they have EU preferential origin, i.e. they are either ‘wholly obtained’ in the EU or they are manufactured in the EU totally or partially from materials which are subject to working or processing fulfilling certain requirements (‘product specific rules’).

Goods imported into the EU from third countries with which the EU has preferential trade arrangements receive preferential tariff treatment if they comply with preferential rules of origin. For the purpose of determining the preferential origin of goods manufactured in a third country with which the EU has a preferential trade arrangement, EU originating inputs (materials and, in some arrangements, processing operations) incorporated in those goods are deemed to be originating in that third country (cumulation of origin).


The rules and procedures for the determination of a preferential origin are contained in the respective preferential trade arrangements and may vary depending on these arrangements.

For the determination of preferential origin, the EU is considered as a single territory, no distinction being made between Member States. Therefore, United Kingdom inputs (materials or processing operations) currently account as ‘EU content’ for the determination of the EU preferential origin of goods.


The origin of the goods is certified either by governmental authorities (‘certificates of origin’) or by the exporters themselves (subject to prior authorisation or registration), through ‘declarations’ or ‘statements’ on origin made out on commercial documents. The origin of goods may be subject to verification by the exporting party, upon request from the importing party.


To provide evidence of compliance with origin requirements, the exporter obtains from its suppliers supporting documentation (such as ‘supplier’s declarations’) that allow for the traceability within the EU of the production processes and supplies of materials until the export of the final product.


CONSEQUENCES OF THE WITHDRAWAL OF THE UNITED KINGDOM


As of the withdrawal date, the United Kingdom becomes a third country to which the EU preferential trade arrangements with third countries cease to apply. United Kingdom inputs (materials or processing operations) are considered as ‘non-originating’ under a preferential trade arrangement, for the determination of the preferential origin of goods incorporating those inputs. This means the following:


Goods exported from the EU:


As of the withdrawal date, an EU FTA partner country 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 United Kingdom inputs not being considered as ‘EU content’.


As of the withdrawal date, in case of verification of the origin of goods exported to a third country under preferential treatment, the exporters in the EU-27 may, upon request from that third country, have to prove the EU origin of the goods taking into account that United Kingdom inputs no longer account as ‘EU content’.


Goods imported into the EU:


United Kingdom 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.

As of the withdrawal date, in case of verification of the origin of goods imported into the EU, exporters in third countries may have to prove the EU preferential origin of the imported goods.


ADVICE TO STAKEHOLDERS


Goods exported from the EU:


To address the abovementioned consequences, EU-27 exporters and producers, intending to claim preferential tariff treatment in an EU FTA partner country as from the withdrawal date, are advised by the Commission to:


− treat any United Kingdom 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 United Kingdom inputs as ‘EU content’.


Goods imported into the EU:


EU-27 importers are advised by the Commission to ensure that the exporter is able to prove the EU preferential origin of the imported goods, taking account of the consequences of the withdrawal of the United Kingdom.


Hammad Baig can assist with Origin, Preference and other cross border trade issues.