With just weeks to go until UK businesses have to demonstrate they are compliant with the new rules of origin, which come into force on 1 January 2022, Andrew Thurston, Customs Duty Consultant at MHA, warns businesses risk financial penalties and damaging customer relationships unless they are fully compliant with the updated rules.
“UK businesses that export into the EU can no longer afford to be complacent regarding rules of origin. From 1 January 2022, under the UK-EU Trade and Cooperation Agreement (TCA) exporters will need to provide clear and sufficient evidence to prove the true origin of their goods if they want to continue to qualify for tariff-free trade, or risk paying duties.
“While the terms of the TCA provided a valuable grace period throughout 2021 for businesses to prepare for the impending changes, many UK manufacturers have dangerously assumed that if they have purchased or manufactured their products in the UK this automatically means those products are of UK origin. However with today’s complex supply chains, many products do not meet the required threshold of 50% British or EU-sourced content to fully qualify for zero tariffs under the TCA. As a result many businesses risk being caught ill-prepared to meet the minimum origin requirements when facing HMRC audits or mutual verification requests in 2022.
“This presents serious ramification for business. Those unable to provide the relevant proof of origin risk providing an incorrect declaration, making them liable to potential penalty actions. Most alarmingly, those exporters that don’t qualify for the tariff-free trade face the daunting prospect of informing their EU customers, forcing them to amend all their import declarations and pay the necessary duty. Not only could this severely damage a UK business’s relationship with its EU partners, it could be the difference between its goods being sellable within the EU or not.
“As UK business have navigated through an extremely challenging year, with pressures from Covid-19, Brexit, inflation and supply chain issues, the full imposition of rules of origin regulation presents yet another potential headache they must overcome. For those that already ship their good under zero-tariff in the EU, it will be business as usual. However any business yet to fully review the new requirements coming in on 1 January is strongly advised to use the remaining month to ascertain if their goods qualify for tariff-free trade and ensure they have the required evidence to meet the new rules.”