EU-UK TCA: Rules of Origin for Electic Vehicles EXPLAINED

EU-UK Rules of Origin in the EU and the UK electric vehicle trade decide if duty rates need to be paid. They are set to change, impacting EU-UK Vehicle trade. We look at the rules.

This blog provides a comprehensive overview of the rules of origin between the European Union (EU) and the United Kingdom (UK) for the trade of electric vehicles.

What are Rules of Origin?

The concept of rules of origin pertains to the criteria and regulations determining a product's national source or origin. To benefit from tariff preferences within the framework of free-trade agreements (FTAs) established by the European Union (EU) or the UK, exported goods must adhere to rules of origin (ROO).

What is the Rule of Origin for electric vehicles?

At present, electric vehicles are mandated to have a non-originating content (NOM) of either 40% or 45%. However, it is worth noting that the United Kingdom has been granted a temporary exemption from this regulation.

The value of a motor vehicle is greatly influenced by the type, size, and cost of its battery, which can account for up to 50% of its total worth. This presents a major hurdle for manufacturers and exporters, particularly if the battery is procured from an external source, as they must adhere to strict regulations at the vehicle level. Ensuring compliance with such regulations can be a daunting task, but it is essential to maintain the safety and reliability of the vehicle overall.

What is the current state of play as regards the use of the rules of origin in electric vehicles?

• If electric vehicles originating from the European Union fail to adhere to the rules of origin, it becomes necessary to pay export tariffs, which amount to 10% when exporting to the United Kingdom.

• In the present initial transitional phase of the UK Trade and Cooperation Agreement (TCA), the Rules of Origin (ROO) stipulate that batteries must undergo assembly within the European region.

• Under this arrangement, it can be stated that all batteries manufactured in Europe meet the criteria for European origin.

• This regulation will remain in effect until 31 December 2023, with an approximate adherence rate reaching 99%.

What events or developments are anticipated to occur starting in January 2024?

• A second transitional period, from 2024 to the conclusion of 2026, will be characterized by implementing considerably more stringent regulations.

• In January 2024, the Rules of Origin (ROO) will mandate that all battery components and specific battery materials must originate from the designated region.

• It is anticipated that the compliance rate will approximate 10% in the year 2024.

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