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Business needs to get to grips with new rules of origin

[ December 1, 2021   //   ]

With just one month until UK businesses have to demonstrate they are compliant with the new rules, which come into force on 1 January 2022, says accountancy network MHA.  Customs duty consultant Andrew Thurston warns that they risk financial penalties and damaging customer relationships unless they are fully compliant with the updated rules.

He said: “Under the UK-EU Trade and Cooperation Agreement 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.”

Those unable to provide proof of origin risk being liable to potential penalty actions. And those exporters that don’t qualify for 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,” says Andrew Thurston.

He concluded: “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.”

MHA partner Ginni Cooper meanwhile said that persistent supply chain issues are continuing to hamper and that the issue seems unlikely to improve before the end of the year. This has been exacerbated by production problems due to rising Covid-19 cases in other countries, causing greater lead times for UK manufacturers as they enter one of the busiest periods of the year.
She said: “Alongside the never-ending supply chain crisis, manufacturers continue to face shortages of materials and skills. The availability of key materials such as timber, steel and electrical components, to name but a few, have fluctuated since the beginning of the year and, as a result, prices have increased at a rapid rate with no signs of abating. In a landscape of rising energy prices, particularly as we head into winter, business owners in the sector have little choice but to pass price increases onto their customers.

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