As the UK has officially left the European Union, there have been many changes in trade policies between the two entities. One of the most significant changes is the rules of origin agreement between the EU and UK. This agreement determines how much of a product’s value must be from the UK or EU to qualify for tariff-free trade.
The rules of origin agreement is important because it prevents businesses from importing goods from other countries, slightly altering them, and then exporting them to the EU or UK as if they were originating from that country. With the new agreement in place, products must meet certain criteria to qualify for tariff-free trade.
The first rule of the origin agreement is the change in tariff classification. If the product is wholly obtained or produced in either the EU or UK, then the product is considered originating in that country and is eligible for tariff-free trade. However, if the product has non-originating materials, it must undergo a transformation process in the UK or EU to qualify.
The second rule of the origin agreement is the regional value content (RVC) rule. The RVC rule determines the percentage of the product’s value that must be derived from the UK or EU for it to be considered originating. For example, if the product’s value is primarily from the UK, then a certain percentage of the non-originating materials’ value must also be from the UK for it to be eligible for tariff-free trade.
The third rule of the origin agreement is the de minimis rule. This rule states that products with a specific value threshold of non-originating materials, given as a percentage of the product’s final value, can qualify for tariff-free trade.
The fourth rule of the origin agreement is the accumulation rule. This rule allows businesses to use non-originating materials from other EU or UK countries to qualify for tariff-free trade. The accumulation rule encourages businesses to source materials from within the EU or UK to promote regional trade.
In conclusion, the rules of origin agreement is a crucial component of trade policy between the EU and UK. It ensures fair trade and prevents businesses from taking advantage of loopholes and altering goods to avoid tariffs. With the new agreement in place, businesses must be aware of the rules to continue trading effectively between the EU and UK.