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Britain’s car industry hit by “Country of Origin” dispute

Car parts from countries such as Japan and Turkey used in the UK will not be treated as British, so some exports may see higher tariffs. In a letter, Britain’s chief Brexit negotiator says the UK has failed so far to get the car parts deal it wants, and “obviously cannot insist on it”.

In a letter to the UK car industry, chief negotiator Lord Frost says one of their key priorities – that parts and components from Japan and Turkey count as British in any deal – has been rejected by the European Commission. This risks some UK automotive production attracting taxes on trade when exported to the EU, even if there is a “zero tariff” trade deal struck with the EU. 

A separate draft legal text lists the UK’s request for manufacturing of electric cars, batteries, and bicycles to be treated leniently, and count as British, even if the majority of components come from elsewhere. The letter says: “I am sorry to say that so far they [EU negotiators] have neither been willing to discuss these nor share any proposed text with us”.

Both documents refer to the need, even in a deal, for UK manufacturers to prove that UK-exported goods are actually British-made, with a specified threshold of British parts, expected to be around a half. But the letter reveals the requirement for that to be extended to other partners of the UK and EU, in particular Japan and Turkey, is being refused.

Much UK manufacturing is below the required threshold, although the reverse is not the case for the European Union. The problem is particularly acute for electric vehicles where an even larger proportion of the value of the car is contained in the battery.

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