EU carmakers urge compromise on Brexit rule of origin changes

Origin Calculation | | MIC Customs Solutions |

The European car industry has urged the EU to be more flexible on its rule of origin requirements for cars imported from the UK post-Brexit.

Carmakers in the EU have written to the European Commission urging the body's Brexit negotiators to reconsider their position on rule of origin requirements for the sector after talks came to an impasse in recent weeks.

Head of the European Automobile Manufacturers’ Association (ACEA) Mark Huitema warned chief negotiator Michel Barnier that the EU's current position "[does] not work for any motor vehicle manufacturer," according to a letter obtained by Politico.

At issue are conflicting views on what percentage of autos exported from the UK to the EU will be allowed to come from third countries without making the vehicle eligible for additional tariffs.

The British want a rule that would allow up to 70 per cent of parts to come from outside the UK or EU and still qualify for zero tariffs. The EU's position is that only 45 per cent of parts should be able to come from elsewhere before a tariff of ten per cent applies.

Mr Huitema argued that the EU's limit is not practical for electric vehicles, as most battery components that are essential to these cars are imported from the likes of China, Japan and South Korea.

As these high-value parts can make up anywhere between 30 and 50 per cent of the cost of a vehicle, any electric cars imported to the UK are likely to be over the threshold.

Mr Huitema therefore called on the EU to show greater flexibility in how it approaches rule of origin requirements for these vehicles.

The ACEA suggested a 50 per cent threshold for non-EU and non-UK parts for electric cars, with the possibility these rules may be adjusted in future.

"It is critical to ensure that motor vehicle exporters are not burdened by substantial tariffs on trade with the UK when there [are] no EU battery interests that would be compromised by a flexible approach," he wrote.

More than 80 per cent of vehicles made in the UK are destined for export, with around half of these heading for the EU, making it a critical point of negotiation for the post-Brexit trade talks. 

Politico noted manufacturers including Toyota, Nissan and BMW all have major plants in the UK and are increasingly turning to electric vehicle production to cut CO2 emissions and meet climate goals.