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British Rubber & Polyurethane Products Association

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BREXIT

Posted on 17 July 2018

BRPPA give their view on BREXIT and how it will affect the industry.

CBI research on the need for regulatory convergence

The Confederation of British Industry (CBI) has published research on the regulatory needs of 23 UK industry sectors.  In over 100 pages, the Smooth Operations report is based on the views of thousands of UK businesses and aims to provide Ministers with an evidence-based approach to Brexit negotiations. An important finding of Smooth Operations is that changes to rules in one sector have knock on effects for companies in other business sectors and throughout supply chains. CBI concludes that where regulatory rules ‘are fundamental to the trade or transport of goods, the UK must negotiate on-going convergence’ post-Brexit.

Click here to read the CBI research (the Chemicals section is after page 41)

Standards: Future after Brexit

Since the UK voted to leave the EU in June 2016, the British Standards Institution (BSI), in its capacity as the UK’s National Standards Body, has consulted its members and stakeholders about the possible implications of Brexit for standards. As a result, BSI’s post-Brexit position is to continue to provide UK experts with the standards development framework to support trade in the UK, across Europe and globally. To enable this, their stakeholders are clear that BSI should remain a full member of the European Standards Organizations.

BSI has produced a paper setting out its position which is based in eight key principles. These principles are supported by statements from a range of BSI’s stakeholders, including industry associations and individual companies, consumer groups, users of standards and professional institutions. This can be found here.

REACH and Brexit

The UK’s ‘divorce’ from Europe also throws into question how legislation – much of which is stipulated by the European Union – will affect us if we are no longer a part of it. One of the major legislative regulations affecting our industry is REACH, which concerns the Registration, Evaluation, Authorisation and restriction of Chemicals. It exists to provide a high level of consumer health protection and safeguard the environment as well as driving innovation in the EU chemicals industry. Only Representatives (ORs) must be located in an EU member state to register chemicals under REACH.  After Brexit that means UK Companies exporting to the EU will need to create an office in a member state, if they do not already have one, unless a different arrangement can be negotiated.

The Government is considering on a contingency basis a bespoke UK system equivalent to REACH under which all imported chemicals must be registered in the UK. Underpinning it would need to be an IT system to enable registration and regulation of chemical substances placed on the UK market which is currently regulated by EU REACH. Work on this IT project is now in train so that, not only will this new system and function be in place for the beginning of a transition period, it will also be ready to use should the negotiations result in no deal with the EU.  This is a fall-back option only since the Government has expressed a strong preference to remain in as close an alignment with REACH as possible.

Rules of origin and Brexit

The application of rules of origin is one of the most complex challenges which companies will have to face if they trade into the EU and (as is the intention of the Government) the UK is not in a customs Union with the EU. The Department of Business, Energy and Industrial Strategy specific concerns which (BEIS) is consulting with individual sectors on particular issues and concerns that the latter may have and have invited us to participate if we wish to do so. If you have any concerns or indeed you would like to act as a case study for our sector please let John Dorken know. Read below for an extract from a BEIS paper which provides QAs on the main elements of the issue

What are rules of origin?

  • Rules of origin are the international criteria used to determine the economic nationality of a product (and preferential access for that product), as opposed to the geographic nationality of a product.
  • As the development of Free Trade Agreements (FTAs) between countries and trading blocs increased, the risk of trade diversion and the manipulation of product costs also began to increase.
  • To ensure that only signatories (e.g. EU and UK) to an FTA could benefit from preferential access to each other’s markets rules of origin were introduced.
  • Rules of origin are an integral part of all free trade agreements (FTA) as they are the ‘rules’ that determine whether a good that you are trading internationally meets the criteria for zero tariff rates (and preferential access to that market).
  • Outside of a customs union rules of origin will be included in any future trade deal (both EU and RoW) the UK concludes with partners.
  • This, however, is a complex area covering all 5206 product codes of the World Customs Organisation’s Harmonised System which requires very specific and detailed business evidence.

Why are they important?

  • The outcome we negotiate with the EU on rules of origin will shape all goods sectors’ ability to trade with both the EU and rest of the world. It will have a far reaching and lasting impact on the success of UK manufacturing.
  • When the UK concludes an FTA with the EU and future trading partners, UK businesses will be required to provide proof of origin to avoid the payment of tariffs and qualify for preferential access where applicable.
  • If your goods do not meet the rule agreed when trading with EU partners you will have to pay the EU’s external tariff upon entry into that market.

Why don’t I know about them / use them now?

  • (INTRA EU TRADE) As a member of the Customs Union, rules of origin are not required because all member states apply the same tariffs, checks and other requirements at the EU’s external border. This has removed the need for tariffs between EU member states and therefore rules of origin.
  • (Trade with EU FTAs) However rules of origin are currently applied to existing EU FTAs. As a member of the Customs Union the EU concludes trade deals with non-EU countries for all members of the Customs Union to utilise. For example, if you trade with South Korea, Switzerland, Tunisia, or Canada to name a few, rules of origin are applied to qualify for preferential (tariff free) access to each other’s markets.

What is the difference between preferential and non-preferential rules of origin?

  • Preferential rules apply when goods that are imported into or exported from the EU take advantage of a tariff preference (i.e. a tariff rate lower than the MFN rate, such as under an FTA).
  • Non-preferential rules are used for a variety of commercial policy measures.  In practice, for non-preferential purposes, the EU only requires that origin is indicated on the import declaration but does not typically require a proof of origin (like a certificate of origin used to qualify for preferential treatment under an FTA). This suggests additional impacts from non-preferential rules of origin are unlikely to be significant.

Will we remain in a customs union with the EU?

  • The PM has clearly stated that we will be leaving the Customs Union in previous speeches and in the House of Commons. By leaving the Customs Union and establishing a new and ambitious customs arrangement with the EU, we will be able to forge new trade relationships with our partners around the world.
  • This is a key objective for the Government.

Are customs arrangements, tariffs and rules of origin linked?

  • Our future customs arrangement with the EU is inextricably linked to our future tariff schedule and rules of origin agreement with the EU, as they all form part of the procedure for businesses to trade internationally.

How will rules of origin apply in future trading relationship?

  • The Government is currently considering a range of options for a future rules of origin regime with the EU and RoW.
  • Rules of origin are predominantly industry led, as they are sector and product specific. There is no ‘one size fits all’ approach to this issue as it must reflect the needs of industry to be successful.
  • This is why the Department for Business, Energy and Industrial Strategy is undertaking this programme of work to ensure that the negotiating strategy and approach matches what UK business require to continue to export freely to EU markets.

Does the Government have any objectives for a future rules of origin regime?

In a future agreement on rules of origin, the Government’s objective is to ensure:

a) UK goods can continue to qualify for preferential access to the EU market.

b) The continuation of robust enforcement mechanisms to prevent non-compliant goods entering the market.

c) Burdens placed on business are reduced as far as possible.

If this is industry led how does BEIS intend to engage with business?

BEIS has consulted with a wide mix of stakeholders to consider a range of tools and models to engage business on this issue.