REGULATION AND LEGISLATION
EU/UK Trade and Rules of Origin
David Wright, Director General, UKLA
The free trade agreement between the European Union (EU) and the United Kingdom (UK) came into effect on 1st January 2021. This allows goods to be exported to and imported from both the EU and the UK, free of any tariff or quota.
To benefit from the agreement, goods must have originated in either the UK or the EU under rules of origin which sets out the way in which goods are classified.
The free trade agreement also allows for goods having originated in one area as having originated in the other. Therefore goods produced in the EU could count as those produced in the United Kingdom, subject to processing.
This avoids the situation where raw materials could be imported from the EU into the UK for processing, and being subject to tariff when exported back to the EU as they had not originated from within the United Kingdom.
The two basic rules of origin are that the product has either been ‘wholly obtained’ from or has undergone ’substantial processing’ within a country or region. So base oil procured from a European base oil plant would count as having originated in the European Union as it has been wholly obtained. Base oil production also involves substantive processing of crude oil and so the second rule of origin would also have been met.
Base oil imported from outside the European Union in bulk and then simply repackaged into smaller quantities such as Intermediate Bulk Containers (IBCs), would not count as having originated in the European Union as simple repackaging does not count as substantive processing.
Assessing whether ‘substantive processing’ has taken
place is usually reflected in a change of four digit tariff code, such as taking additives in tariff class 3811 to produce a finished lubricant in class 2710.
Crude oil imported from Saudi Arabia into a European refinery and used to produce base oil would also count as substantive processing. The chemical composition of the product has been changed, the performance characteristics of base oil compared with crude oil are very different, and a new tariff code has been applied.
Similarly blending additives, a viscosity modifier, and a base oil together to form a finished lubricant also counts as substantive processing as additives, viscosity modifiers or base oil alone cannot achieve the performance characteristics of a finished lubricant, and substantive processing has taken place as the chemical formulation is different from any single given component.
Along with general rules, there are also product specific rules of origin relating to the economic value of a tariff class or commodity group that must be met in order to be treated as wholly originating. These product rules do allow for a percentage of the commodity group, by value, as being from non-originating material, sometimes as low as 10% or as high as 50% depending on the tariff class used, and the product could still be eligible as meeting the rules of origin criteria.
Rules of origin are contained within the European Union customs code as they relate to the EU, and within the Trade and Cooperation guidance on rules of origin in the United Kingdom.
LINK
www.gov.uk/government/publications/ rules-of-origin-for-goods-moving-between- the-uk-and-eu
LUBE MAGAZINE NO.161 FEBRUARY 2021
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