Rules of Origin: Government Wants Your Input for Trade Policy

As you know, ALFED prides itself on being the voice of the aluminium industry, and over the past few years have been working closely with Government and Parliament to represent your views on many issues.

The Advanced Engineering Show demonstrated the depth of that relationship. We hosted representatives from the Department of Business, Engineering and Industrial Strategy (BEIS) on our stand for Brexit Readiness Briefings – and had 2 busy days discussing issues like trade, compliance and financing. (Thanks to everyone who stopped by our stand – it was great to see so many members.)

A key takeaway from the show was this:

Government needs your input to get the best UK trade deals post-Brexit

This is something BEIS mentioned at our Members’ Briefing in September, and it came up many times at the Advanced Engineering Show.

Issues like Rules of Origin are complex. ALFED CEO Tom Jones has been working closely with BEIS on Rules of Origin for some time, but the department needs ongoing input from companies to put forward the most favourable position during future trade negotiations with the EU and other countries.

What is a Rule of Origin?

The BEIS defines Rules of Origin as follows:

“A Rule of Origin defines the ‘economic nationality’ of a good, ensuring it is ‘wholly obtained’ or there has been ‘sufficient processing’ carried out in order to qualify as UK ‘originating’. All products have a specific Rule of Origin which is negotiated as part of a joint schedule in a free trade agreement.”

Why do we need Rules of Origin?

Rules of Origin ensure that only goods from countries with a free trade agreement benefit from preferential tariffs.

Here’s a hypothetical example:

  • The UK and US don’t have a free trade agreement – which means there’s a 5% tariff on a US good coming into the UK
  • The US and EU have an agreement – which means American goods going into the EU only have to pay 2%
  • The UK and EU have an agreement – which sets tariffs at 0%
  • Let’s say a US good goes into the EU, and from there enters the UK. It could then end up on the UK market having paid only 2% at EU entry rather than the UK level of 5%. This can result in unfair competition for UK companies

Rules of Origin ensure this doesn’t happen by stipulating that in order to get the lower tariff, enough value has come from the partner country.

When you’re dealing in complex supply chains, clarity on this is important.

3 ways to claim origin in a country

  1. Value add – something has happened (for example, processing) that justifies achieving the origin
  2. Substantial transformation – the good has become something else in a country, which means its tariff code changes
  3. Specific processing – something specific is done to it in the country

Every single product manufactured in the UK needs a Rule of Origin associated with it, and it needs to be written in a way that UK companies can take most advantage.

That’s where your input comes in.

Consider your supply chain, processes and customer base

Whether a business meets a rule depends on the processing it carries out and where it sources its parts.

A key part of BEIS’ work is therefore getting a detailed understanding of how companies import, process and export. This boils down to 3 questions:

  1. Where do your inputs come from?
  2. What production processes do you undertake?
  3. Where do you export to?

The more companies that answer these questions, the better Government can represent the reality of UK business in future trade negotiations. Consultations have already started on trade agreements with the US, Australia and New Zealand, for example, and we need to ensure your interests are represented on this and other issues.

So please contribute on behalf of your company – directly to BEIS or via ALFED

Thanks again to everyone who stopped by at the Advanced Engineering Show, and we look forward to seeing you at future events.