Understanding Rules of Origin
When the UK-EU Trade and Cooperation Agreement (TCA) came into force in 2021, it included provisions for tariff-free trade in goods - but with an important caveat. To qualify for zero tariffs, products must meet "rules of origin" requirements proving they were substantially made in the UK or EU.
For electric vehicles, these rules relate primarily to the origin of the battery - the most valuable component. Initially, the TCA included relaxed thresholds to give manufacturers time to develop local battery supply chains. Those transitional arrangements are due to expire in 2027.
What Changes in 2027?
From January 2027, stricter rules take effect:
- Battery content threshold: A higher percentage of battery components must originate from the UK or EU.
- Cell-level requirements: New rules on where battery cells themselves are manufactured.
- Value calculations: Stricter methods for calculating the origin of components.
The core problem: many batteries used in UK-built EVs contain cells manufactured in Asia. Unless UK or EU battery production scales up dramatically, vehicles using these batteries won't qualify for tariff-free treatment.
Timeline of Changes
TCA takes effect with relaxed EV rules of origin
Original deadline extended by one year
Current transitional rules still in effect
Stricter battery content rules take effect
The Tariff Impact
EVs that don't meet the new rules of origin will face tariffs when exported to the EU:
- Cars: 10% tariff
- Vans and commercial vehicles: Up to 22% tariff
- Buses: 16% tariff
Meanwhile, petrol and diesel vehicles that meet existing rules of origin continue to trade at 0% - creating a perverse incentive that could undermine the transition to electric vehicles.
Industry Concerns
UK manufacturers have been vocal about the challenges:
- Battery gigafactory investments are progressing but may not be sufficient by 2027
- Supply chain transitions take years to complete
- Lack of clarity on technical definitions in the TCA
- Potential for UK-built EVs to become uncompetitive in their largest export market
The SMMT and other industry bodies have called for either an extension of transitional arrangements or revisions to the rules themselves. However, any changes would require agreement from both the UK and EU.
What This Means for Vehicle Exporters
For businesses and individuals exporting vehicles from the UK to the EU, the implications vary:
- New EVs: Commercial exports of new UK-built EVs could face tariffs from 2027 if rules aren't met.
- Used EVs: The rules primarily affect commercial manufacturing; private exports of used vehicles may be treated differently.
- Classic and ICE vehicles: Petrol and diesel vehicles continue under existing rules.
- Non-EU exports: Exports to the US, Australia, Middle East, and other markets are unaffected by EU rules of origin.
If you're planning to export a vehicle from the UK, understanding the specific requirements for your destination is essential. Our team can advise on the documentation and customs requirements for any export route.