Leaving aside any transition period, the UK will withdraw from its membership of the EU on 29 March 2019.
At that point – or on whatever date is finally agreed between the two sides – it will become what the EU calls a “third country” (a non-member).
One of the consequences of that new status will be that UK businesses will no longer benefit from preferential trade arrangements agreed by the EU with other countries, as it presently does.
In particular, both importers and exporters will have to get to grips with Rules of Origin (ROO) requirements, explained by the European Commission in a recent notice.
Among the points made by the Commission are that UK materials or processing operations (aka “inputs”) will be considered as “non-originating” under a preferential trade arrangement for the purpose of determining whether the goods incorporating them are entitled to preferential tariff treatment.
For goods exported from the EU, an EU free trade agreement (FTA) partner country might consider that goods having an EU preferential origin before the UK’s withdrawal date no longer qualify, due to UK inputs no longer being considered as EU content.
Similarly, 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 considered non-originating.
Exporters in third countries might, therefore, have to prove the EU preferential origin of the goods they wish to send to the EU.
Is that a problem? This may sound very technical but the Dutch Government has already advised its manufacturers who buy components from the UK that they might want to start looking at suppliers from within the EU27 to ensure that they do not fall foul of ROO rules after Brexit.
In a useful article on Rules of Origin (ROO), Professor Catherine Barnard and Emilija Leinarte of the University of Cambridge suggest that the rules seem to place a big question mark next to the UK Government’s “frictionless trade” objective.
“Every exporter – small or large – will have to determine whether their goods originate in the UK or abroad according to the complex technical and legal rules,” they write.
Customs delays are likely to appear as the application of ROO will require checks – something that could become a hurdle to manufacturers who often work on a precise, and often last minute, schedule to avoid storage.
UK ports do not currently have technical infrastructure to ensure an efficient application of ROO, they warn, and the requirement will also impact on the Ireland/Northern Ireland border issue.
