A thread on Rules of origin... let’s say a French company imports a widget. In order to decide the customs correct tariff to apply to the widget, France needs to know where the widget came from.
The company producing the widget needs a certificate to say where the widget comes from. These certificates can be fairly complicated to create or quite simple depending on whether the widget was made from imported bits or not.
Let’s say a widget is made in Brazil and all its components are from Brazil. Then it’s clearly Brazilian. But let’s say the widget is made in Brazil with components from Peru, South Africa and China. It’s a bit more complex to work out where the widget originated.
There are various ways of calculating this and different countries have different rules about it, although the WTO is working (slowly) towards standardising rules around rules of origin.
The reason this is a problem for us is that there are over 100,000 businesses in the UK that export but only to the EU. They have not had to certify origin before. Now they’ll have to do so for every good they export.
Some widgets will be made from a high percentage of imported components and they won’t be able to be certified as a UK widget under rules of origin, so they’ll not qualify for preferential tariffs, even with countries we manage to strike an FTA with.
Although that’s an issue, the really big issue is the bureaucracy involved in certificating even when the rules of origin calculation is simple and obvious.
Let’s say we have a carrot grown on a farm in Aberdeenshire. That carrot will need a certificate to say it has been grown in Aberdeenshire. Getting this certificate takes time and effort. This means productivity is reduced and profits are squeezed.
Being outside the EU’s customs union creates so much bureaucracy that, I would contend, it outweighs any potential increase in profits from reduction in tariffs we could achieve from trade deals. —ends—
