Rules of Origin for Future UK Trade Negotiations vFinal

Rules of Origin for Future UK Trade Negotiations Chapter 27 and other oils for UK Trade Agreements

Having left the EU on 31 st January 2020, the UK is now in a position to sign its own trade deals for the first time in 40 years. In order to provide improved market access through preferential tariffs, preferential Rules of Origin (ROO) in its future trade negotiations ought to be consistent, simplified where possible and are supportive to the UK’s manufacturing base. This paper assesses some of the options available to negotiators and sets out UKPIA’s view of which Rules of Origin are most important and practically work best in existing regimes, it is intended to assist negotiators. Rules of origin for petroleum products should be as flexible and simple as possible, and there are a number of existing trade agreements that can act as established and proven bases for future agreements. Please find below the approach for Rules of Origin petroleum products that UKPIA views will offer simplicity of administration alongside flexibility for prospective trade of petroleum products in and out of the UK. Specified Operations During Production should be the preferred mechanism for downstream oil products (covered principally by Chapter codes 2707-15) to have preferential Rules of Origin conferred. While specified operations during production for petroleum products mainly are covered in Chapter 27, the Rules of Origin outlined below may also apply to non- mineral oils, feedstocks and products when used in UK fuels-related operations. Such commodities include (but are not limited to): Oil seeds used as biofuel feedstocks – Chapter 12(12); Ethyl-alcohols that may later undergo specific operations during production – Chapter 22(07); Miscellaneous chemical products – Chapter 38 A comprehensive list of applicable specified operations is essential and should cover all specific operations identified below: (a) atmospheric distillation; (b) vacuum-distillation; (c) redistillation by a very thorough fractionation process; (d) cracking;

a. Thermal cracking b. Catalytic cracking

(e) coking; (f) reforming; (g) polymerisation; (h) alkylation; (i) isomerisation; (j) extraction by means of selective solvents;

(k) the process comprising all of the following operations: processing with concentrated sulphuric acid, oleum or sulphuric anhydride; neutralisation with

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alkaline agents; decolourisation and purification with naturally active earth, activated earth, activated charcoal or bauxite; (l) in respect of heavy oils of heading ex 2710 only, desulphurisation with hydrogen, resulting in a reduction of at least 85 % of the sulphur content of the products processed (ASTM D 1266-59 T method); (m) in respect of products of heading 2710 only, deparaffining by a process other than filtering; (n) in respect of heavy oils of heading ex 2710 only, treatment with hydrogen, at a pressure of more than 20 bar and a temperature of more than 250 °C, with the use of a catalyst, other than to effect desulphurisation, when the hydrogen constitutes an active element in a chemical reaction. The further treatment, with hydrogen, of lubricating oils of heading ex 2710 (e.g. hydrofinishing or decolourisation), in order, more especially, to improve colour or stability shall not, however, be deemed to be a specific process; (o) in respect of fuel oils of heading ex 2710 only, atmospheric distillation, on condition that less than 30 % of these products distils, by volume, including losses, at 300 °C, by the ASTM D 86 method; (p) in respect of heavy oils other than gas oils and fuel oils of heading ex 2710 only, treatment by means of a high-frequency electrical brush discharge; (q) in respect of crude products (other than petroleum jelly, ozokerite, lignite wax or peat wax, paraffin wax containing by weight less than 0.75 % of oil) of heading ex 2712 only, de-oiling by fractional crystallisation. For the purposes of headings excluding 2707, 2713 to 2715, simple operations, such as cleaning, decanting, desalting, water separation, filtering, colouring, marking, obtaining a sulphur content as a result of mixing products with different sulphur contents, or any combination of these operations or like operations, do not confer origin. “ Direct blending” may also be considered under the specific processing rules: Production of any good of heading 2710 as the result of direct blending*, provided that: i) the non-originating material is classified in Chapter 27 ii) no component of that non-originating material is classified under heading 22.07, and; iii) the non-originating material constitutes no more than 25 per cent by volume of the good. *For the purposes of 27.10, “direct blending” is a refinery process whereby various petroleum streams from processing units and petroleum components from holding/storage tanks combine to create a finished product, with pre-determined parameters, classified under heading 27.10, provided that the non-originating material constitutes no more than 25 per cent by volume of the good.

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Country of Origin Marking: Whether marking is optional or imposed by the regulation of the importing country, these above rules of origin have the preference to any other rule relating to the establishment of the country of origin. Accounting Segregation of Fungible materials: If originating and non-originating fungible materials are used in the production of a product, physical separation and identification of fungible materials is not required for materials specified in this paper where a suitable inventory management system is in place. Similarly, if originating and non-originating fungible products specified in this paper are physically combined or mixed in inventory before exportation, the origin of the fungible product does not need to be made through physical separation and identification but may be determined on the basis on the inventory management system. General Tolerance: Where not all goods are meet the Rules of Origin e.g. due to post specified operation blending, it may still be conferred on the whole good being traded so long as the non-conferred product makes up a maximum of <15% of the total volume. Records Retention: The UK and trade partner agree to fix the time period for records retention in the agreement to five years from the date of entry in the customs territory (import declaration date). Duty Drawback: Duty drawback and duty deferral rights should be allowed subject to the respective duty

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