Brussels, June 2, 2023 – A senior European Union (EU) official has called on Britain to join the European-wide Trade Agreement in an effort to mitigate the impact on the British car industry caused by post-Brexit tariffs. The recommendation aims to address the potential challenges posed by customs duties instead of seeking ways to delay or slow down the imposition of tariffs.
Starting from January 2024, electric cars traded between the UK and the EU will be subject to a requirement that at least 45% of the car’s components originate from both regions. Failure to meet this threshold will result in a 10% customs duty, in accordance with the “Rule of Origin” outlined in the post-Brexit trade deal.
However, an issue arises with the increased threshold of 60% for batteries, which play a crucial role in the value of electric cars. The UK and the EU heavily rely on battery imports from countries such as China, South Korea, and Japan, making it extremely challenging to meet the new requirement.
In response, Britain has requested the EU to postpone the imposition of tariffs until 2027. British and EU carmakers have warned that they lack the capacity to comply with the “Rules of Origin” by January next year, specifically in terms of battery production within Europe.
Nevertheless, two senior EU officials have expressed encouragement for Britain to become a signatory of an existing agreement that encompasses over 20 European, Middle Eastern, and North African countries. This agreement operates on the premise that goods manufactured in one country are deemed to be “originating” from parts produced in another country recognized as the exporting nation. Consequently, exporting countries can avoid various tariffs and quotas.
“The easiest way to resolve this issue is for Britain to join the Pan-Euro-Mediterranean Convention, which already exists,” stated one of the officials. The Pan-Euro-Mediterranean Convention (PEM) refers to a unified set of trade regulations. Since its withdrawal from the EU, the UK has not been a participant in the PEM.
As negotiations continue, both the EU and the UK are exploring potential solutions to ensure a smooth trade relationship in the post-Brexit era. The outcome of these discussions will have significant implications for various industries, including the British car sector, as they navigate the complexities of customs duties and trade regulations.