Brexit and the EU–UK Free Trade Agreement : Do's and Don'ts When Drafting Rules of Origin

On 29 March 2019, the United Kingdom (UK) will formally withdraw from the European Union (EU). Although it is still not clear if the UK and the EU will reach an agreement to regulate several aspects of Brexit, ranging from the free circulation of citizens to financial matters, before that date, they do need, sooner or later, to find a solution to regulate their trade in goods relations. In fact, every good that nowadays is freely transferred from the UK to the EU and vice versa will be subject to customs controls and possibly to tariffs.Many corporations have expressed their deep concerns about Brexit. They are planning to relocate their production facilities as the reintroduction of customs borders and tariffs could negatively affect their margins and supply chain operations.In addition, UK goods would no longer be eligible for tariff preferences when exported to countries with whom the EU has concluded Free Trade Agreements (FTAs). Despite the fact that the largest part of UK GDP is based on services, its industrial and agricultural sectors may still benefit from preferential access in FTA partner markets. Moreover, FTAs tie links with allies and former colonies. Therefore, the UK might be willing to negotiate with third countries new FTAs allowing its goods to be imported at preferential rates.Moreover, Brexit will also affect EU exporters as UK goods, in the absence of cumulation clauses, would be treated as non-preferential for the calculation of preferential origin of goods manufactured in the EU. This may affect exports of EU producers towards FTA partner countries.This article will highlight the pros and cons of different models of the EU-style Rules of Origin (RoO) that could be chosen by negotiators for a future UK–EU FTA. It will also underline the impact that any choice would have on economic operators and certain criteria that should be evaluated before taking any decisions on the adoption of RoO