Brexit deal 'rules of origin' create trade confusion 

The 'rules of origins' rules in post-Brexit trade deal are creating confusion as business deal are suddenly discovering that they must now pay duties on duties on exports bound for the European Union despite the deal having been struck. The trade has also been hampered due to COVID-19 restrictions.

At the heart of the Brexit deal, which came into force on January 1, is the so-called "rules of origin" condition applied to all goods crossing the border.

The rules of origin, a key aspect of all major trade deals, can rapidly turn into a costly headache for businesses.

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Under the Brexit provision, any good will be subject to a customs levy if it arrives in Britain from abroad and is then exported back into the European Union.

For example, if a British firm imports something from China and export the goods to a member of EU common market, the company will have to pay customs duty.

Hence, the rules determine whether an export is British or not.

"It is clear that many UK businesses exporting to the EU are going to be hit by tariffs," said Michelle Dale, senior manager at the Manchester office of chartered accountants UHY Hacker Young.

"Businesses have also been completely blindsided by the 'rule of origin' part of the deal, which leaves them at a major competitive disadvantage when selling in the EU.

"Unfortunately, not enough was done to prepare them for this. It takes years to build an effective supply chain -- and using non-EU suppliers is often the best option both in terms of cost and quality."

The Brexit agreement, which was sealed four and a half years after Britons voted to leave the European Union, grants zero customs duties if at least roughly 50 per cent of an exported product is made in the UK.

That applies to the majority of UK exports -- but certainly not all of them.

(With agency inputs)