16 January 2018

Dr Peter Holmes Reader in Economics at the University of Sussex and Fellow of the UKTPO. Nick Jacob is a PhD Candidate in Economics at the University of Sussex.

The need for UK firms to comply with detailed Rules of Origin in a possible post-Brexit Free Trade Agreement with the EU has been widely reported. But the different procedures which firms could use to prove their compliance — and the costs to firms in time and money — have been mostly overlooked.

Rules of Origin are used by importing Customs authorities to determine if a product is eligible for preferential or MFN (Most Favoured Nation) rates of tariffs, and for statistical purposes, to check for quota, anti-dumping and related compliance. Documentary proof of origin is necessary in any Free Trade Area and requirements will be part of the negotiations.

Our new Briefing Paper, Certificates and Rules of Origin: The Experience of UK Firms by Dr Peter Holmes and Nick Jacob, draws on a study carried out with the support of the British Chambers of Commerce, to outline the current Certificates of Origin regime and the options for change after Brexit.

Based on interviews with UK exporters and a survey of Chamber of Commerce members, the paper shows that the while compliance is not as costly for firms in financial terms as some earlier commentators have implied, there are concerns over compliance, as a substantial minority of firms were found to be unsure of the rules.

Dr Peter Holmes said:

“Weak understanding of the current rules on the part of business could potentially present problems down the line. As the UK agrees to Rules of Origin with the EU (as well as with other countries in the future), many more firms will require education in this area, support with proving origin, as well as continuity in the existing options for demonstrating origin (such as via Certificates of Origin).”

All businesses are likely to have to rethink their compliance with Rules of Origin post-Brexit. The paper concludes that small- and medium- sized firms would benefit from support to help them navigate new rules that may come from an agreement with the European Union, and/or new Free Trade Agreements made between the UK and non-EU countries post-Brexit.

This would allow UK business to take advantage of any preferential tariff rates that might be negotiated both with the EU and with other countries post-Brexit, as well as to maintain continuity in the means by which firms declare origin.

Further information on this Briefing Paper (15) Certificates and Rules of Origin: The Experience of UK Firms, is available in the Online Appendix.

Disclaimer:

The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.