Why EU-rules of origin could lead to further trade disputes with the US
The various changes to customs regulations governing trade between the US and EU member states are posing challenges for importers and exporters. When calculating the selling prices of EU goods in the US, for example, companies should check whether the goods fall under the 15 per cent tariff cap and what changes may have resulted from the latest US tariff decisions, consultancy firm KPMG recommended during a webinar on Monday.
Furthermore, a new EU regulation has been in force since 1 July, through which the EU is implementing part of its obligations under the trade deal concluded a year ago in Turnberry, Scotland. The regulation removes EU tariffs on numerous US industrial goods, eliminates tariff components for certain agricultural products and foodstuffs, and introduces new tariff-preferred quotas for certain goods, such as seafood. Importers should carefully check which of their product groups are covered by the new regulation and whether they can benefit from the new quotas, said Mario Urso, a partner at KPMG in Munich.
The Volvo case highlights potential pitfalls
He pointed out that, for some goods subject to rules of origin under customs regulations, it could become important to be able to provide robust proof of origin. This issue is likely to become even more complex, as rules of origin are sometimes interpreted differently in the US and the EU. Urso cited the example of Volvo vehicles imported into the US. In this case, the Americans had decided that China should be regarded as the country of origin. Numerous components were manufactured and pre-assembled in China, including parts for the bodywork, engine, and axle modules.
The final assembly of the Volvo vehicles took place in Sweden. As this constituted the “last substantial working or processing”, Sweden should have been considered the country of origin according to the European interpretation. However, the US did not base its decision on any single criterion such as final assembly, the number, or the value of individual components. In KPMG’s view, where authorities can make different decisions, the documentation burden along the value chain increases. “Unfortunately, companies face political arbitrariness when determining origin,” said Stephan Freismuth, a partner at KPMG in Stuttgart.
EP trade policy expert calls for greater reliability
Bernd Lange, the SPD trade expert and Chair of the European Parliament’s Committee on International Trade, stated on the first anniversary of the Turnberry Agreement that the EU and the US must finally return to a stable situation. “The main objective of the agreement – to create reliability and predictability for our companies – has so far been clearly missed,” said Lange. “Instead of security and stability, it is still, above all, a political rollercoaster ride, characterised by constant threats of tariffs, ever-new investigations and attempts to interfere with the European Union’s regulatory independence or the national sovereignty of its Member States.” (fh)
