Plans To Allow Car Parts From Third Countries To Be Treated As British Stall

Following the EU rejecting a UK proposal to treat car parts from Japan as British, lawyers at Irwin Mitchell say the move is a reminder that business can’t expect the advantages of the single market and customs union following the Brexit transition period, even if a trade deal is agreed.

The rejection of the proposal follows the UK striking a historic £15.2bn trade deal with Japan and has led specialist lawyers to point out that the decision will impact not just the UK car industry, but other manufacturing firms who benefit from current ‘rules of origin’ on imports.

Under the proposal, car parts from Japan, South Korea and Turkey would have been treated as British under the rules of origin, but the EU decision means that all such exports will now face tariffs, unless the majority of their value originates from the UK or the EU.

The Brexit deal negotiated with the EU by former UK prime minister Teresa May aimed to minimise restrictions on rules of origin but finds no place in the current transition plan, which will see the UK leave the single market and the customs union on 31 December.

The car industry is estimated to be worth £18bn to the UK economy and employs hundreds of thousands both directly and indirectly and is a core employer in many parts of the UK, with the Nissan factory in the North East being just one example.

These developments also led to reports that both Nissan and Toyota would be likely to ask Britain to reimburse any additional customs charges in the event a trade deal is not secured with the EU.

A poll by Which? found other car brands, including Ford, Volkswagen and Vauxhall would likely pass the cost of WTO tariffs directly onto customers, which could increase the cost of a new car by as much as £1,800 in the event of no deal.

Expert Opinion

“Having freedom to negotiate trade deals like the one with Japan was always going to come at a price. It would have been a surprise if the EU had agreed to a move seeking customs union perks, with the UK committed to leaving this arrangement.

“The bloc is not going to give away such a big advantage to a soon be a competitor for new manufacturing business and while it may have been considered under the ‘softer’ Brexit envisioned by Teresa May, it has no place in the ‘hard’ version advocated by her successor.

“This news is another reminder that even if a trade deal with the EU is agreed, it will leave many businesses to confront the reality of being outside the customs union and single market and this will have an impact on other manufacturers who rely on exports and not just motor industry.

“Car makers have not confirmed that they would seek to recover any customs charges, but these stories and the Which? report all underline the difficulties no deal would present and the wider implications for business of a slower and more costly supply chain.

“Regardless of any trade deal, we can’t emphasise enough that businesses who rely on rules of origin or any other such arrangements should not assume all will continue unchanged post Brexit. Time is running out to seek advice on what the end of the transition period will mean for your business.” Dorrien Peters - Partner

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