How to Prepare for EU Rules of Origin Changes in 2027: A UK Manufacturer Guide

Why EU Rules of Origin Matter for Every UK Manufacturer

If you export goods to the European Union, rules of origin determine whether your products qualify for zero tariffs under the Trade and Cooperation Agreement (TCA). Get them wrong, and your customers face a tariff bill that makes your pricing uncompetitive overnight.

The EU remains the UK’s largest trading partner, accounting for 41% of all UK exports in 2024, according to the Office for National Statistics. For manufacturers, the proportion is often higher. If you are making things in Britain and selling them across the Channel, rules of origin compliance is not optional. It is fundamental to your commercial viability.

Yet a major shift is coming. From 1 January 2027, the transitional derogation that has shielded electric vehicle and battery manufacturers from the full force of TCA rules of origin will expire. The requirements will tighten significantly, and the ripple effects will extend well beyond the automotive sector.

This guide explains what is changing, who is affected, and what practical steps UK manufacturers should take now to prepare.

What Are Rules of Origin Under the TCA?

Rules of origin are the criteria that establish the “economic nationality” of a product. Under the TCA, goods traded between the UK and EU qualify for zero tariffs only if they can demonstrate sufficient UK or EU content. Products that fail to meet these thresholds face Most Favoured Nation (MFN) tariffs, which for many manufactured goods sit between 4% and 10%.

The TCA uses three main tests to determine origin:

• Value added (MaxNOM): The maximum percentage of non-originating materials in the ex-works price must not exceed a set threshold, typically 40% to 50% depending on the product.
• Change of tariff classification (CTC): Manufacturing must transform non-originating inputs enough to change the product’s tariff heading.
• Specific process rules: Certain sectors require specific manufacturing operations to confer origin.

Critically, the TCA allows for bilateral cumulation, meaning UK-originating materials count as EU-originating when used in EU production, and vice versa. This is a powerful tool that many manufacturers, particularly SMEs, are underusing.

The 2027 Tightening: What Changes and When

The most discussed change concerns electric vehicles and batteries. When the TCA was signed, both parties agreed to a phased approach, recognising that neither the UK nor the EU had sufficient battery manufacturing capacity to meet full origin requirements immediately.

The original schedule planned for progressive tightening in 2024, but supply chain disruption from COVID-19 and the war in Ukraine led to a one-off extension. The UK and EU agreed in December 2023 to cancel the planned 2024 increases, keeping the lowest thresholds in place until the end of 2026. The UK Government estimated this saved manufacturers and consumers up to £4.3 billion in additional costs.

From 1 January 2027, the final thresholds take effect:

Component	Current (to end 2026)	From January 2027
Electric vehicle (MaxNOM)	60% non-originating permitted	45% non-originating permitted
Battery pack (MaxNOM)	70% non-originating permitted	30% non-originating permitted
Battery cell (MaxNOM)	70% non-originating permitted	40% non-originating permitted

In practical terms, from 2027 an electric vehicle must contain at least 55% UK/EU content by value to qualify for zero tariffs. Battery packs must contain 70% UK/EU content. Products that miss these thresholds face a 10% tariff at the border.

There is also a critical change in tariff classification rules. For battery packs to qualify under the change of tariff heading route, the active cathode material (CAM) itself must originate in the UK or EU. As trade expert Sam Lowe of Flint Global has noted, “the main challenge is getting hold of locally sourced active cathode material. At the moment there isn’t enough supply in the EU or UK.”

Why This Goes Beyond Automotive

While the headlines focus on electric vehicles, the 2027 deadline sits within a broader compliance landscape that affects manufacturers across multiple sectors.

The HS2022 Update

In November 2024, the TCA’s product-specific rules of origin were updated to align with the Harmonised System (HS) 2022 tariff schedule. This means goods previously classified under one heading may now fall under another, potentially changing the applicable origin rules entirely.

For manufacturers in chemicals, textiles, food processing, and engineering, this is a quiet but significant disruption. Existing long-term supplier declarations may no longer align with the updated product-specific rules. HMRC and EU customs authorities are increasing post-clearance audits on TCA preference claims, and errors discovered retrospectively can result in substantial duty reclaims.

The Broader Audit Climate

Both HMRC and EU customs authorities have signalled a harder enforcement posture. Incorrect tariff classification following the HS2022 changes, over-reliance on unvalidated supplier declarations, and mixed-origin consignments are all flagged as high-risk areas. EU buyers are increasingly demanding that UK sellers absorb duty costs if preference claims are rejected on audit.

The TCA Review

The TCA contains a provision for a comprehensive review of implementation five years after entry into force. That review is due in 2026, coinciding with the UK Government’s broader reset of EU relations following the May 2025 UK-EU Summit. While the EU has indicated the review should focus on implementation rather than renegotiation, both parties are exploring sectoral arrangements that could affect how rules of origin operate in practice.

The UK Battery Capacity Question

Whether the UK automotive sector can meet the 2027 thresholds depends heavily on domestic battery manufacturing capacity, and the picture is mixed.

On the positive side, significant investments are now underway. AESC secured £1 billion for a new gigafactory in Sunderland, announced in May 2025, with capacity to power up to 100,000 electric vehicles per year, representing a six-fold increase on the UK’s previous capacity. Agratas, Tata Group’s battery business, is building a 40GWh facility at the Gravity Smart Campus near Bridgwater in Somerset, due to open in 2026, which will be one of the largest gigafactories in Europe and create up to 4,000 jobs. UK startup Volklec has announced plans for a separate £1 billion gigafactory, with a 1GWh production line targeted for installation by end of 2026.

However, the bottleneck is not just cell assembly. It is active cathode material production. Currently, only a handful of producers operate at automotive scale in the EU: Umicore in Poland and BASF/CATL in Germany. There is no significant CAM production in the UK. Without locally sourced CAM, batteries assembled in UK gigafactories may still fail to meet the 2027 origin requirements.

The European Commission has established a €3 billion instrument under the Innovation Fund to support the battery value chain. But whether this translates into sufficient CAM capacity before the deadline remains an open question.

Practical Steps for UK Manufacturers

Whether you produce electric vehicles, components, chemicals, textiles, or any goods exported to the EU, the following actions should be on your agenda now.

1. Audit Your Supply Chain for Origin Compliance

Map every material input in your EU-bound products. For each, determine:

• Where it originates (UK, EU, or third country)
• What percentage of your ex-works price it represents
• Whether it has changed since the HS2022 update

This is not a one-off exercise. Supply chains shift, and what qualified last year may not qualify next year if you have switched suppliers or your input costs have changed.

2. Refresh Supplier Declarations

If you rely on long-term supplier declarations to evidence the origin of your inputs, check whether they are still valid following the HS2022 tariff reclassification. Request updated declarations from every supplier whose products may have been affected by the HS code changes. Do not assume existing declarations remain accurate.

3. Understand and Use Bilateral Cumulation

The TCA’s bilateral cumulation provision is one of the most underused tools available to UK manufacturers. If you source materials from the EU and process them in the UK, the EU-originating content counts towards your product’s UK/EU origin. This can be the difference between meeting and missing a threshold.

Full bilateral cumulation goes further: even processing carried out on non-originating materials in either the UK or EU can be counted. Work with your customs advisor to model how cumulation applies to your specific product mix.

4. Run “What If” Scenarios for 2027 Thresholds

If you are in the automotive or battery supply chain, model your products against the 2027 thresholds now. Calculate:

• Can your products meet the 55% vehicle content requirement?
• Do your battery packs hit the 70% UK/EU content threshold?
• Where does your active cathode material come from, and is there a UK/EU alternative?

For manufacturers in other sectors, check whether the HS2022 changes have altered the product-specific rules that apply to your goods. A product that comfortably met origin requirements under the old codes may be borderline under the new ones.

5. Build Audit-Ready Documentation

HMRC can audit preference claims years after import. Ensure you maintain:

• Detailed bills of materials with origin evidence for every component
• Up-to-date supplier declarations aligned with current HS codes
• Statements of origin issued at the point of export
• Records of how you calculated originating and non-originating content

If an EU customer’s import claim is rejected on audit, the commercial fallout lands on the exporter. Robust documentation is your insurance policy.

6. Engage With Industry Bodies and Government Consultations

Make UK, the British Chambers of Commerce, and sector-specific trade associations are actively feeding into the TCA review process and the 2027 rules of origin discussions. If the thresholds are unworkable for your sector, your voice in these consultations matters. The December 2023 extension only happened because industry made a compelling, evidence-based case.

7. Consider Strategic Reshoring or Nearshoring

Research from Medius in 2024 found that 58% of UK manufacturing firms are reshoring their supply chains, and reshoring procurement enquiries increased by 24% in 2024 alone. Rules of origin compliance is now a legitimate factor in sourcing decisions. If switching from a third-country supplier to a UK or EU alternative narrows the cost gap when you factor in the tariff risk, the business case for reshoring strengthens considerably.

The Political Context: What Might Change

The 2026 TCA review creates a window for adjustment. The UK Government under Keir Starmer has signalled interest in sectoral deals to deepen single market access, and the British Chambers of Commerce has described closer EU trade ties as a “strategic necessity.” The Institute for Government has noted discussions around potential Swiss-style selective alignment arrangements.

On rules of origin specifically, there is growing recognition that the 2027 EV thresholds may need adjustment. Options being discussed include a further extension of the derogation, joint UK-EU tariffs on Chinese batteries and cathode materials, increased subsidies for domestic production, and industry commitments to accelerate local sourcing.

However, manufacturers should not plan on the basis that the deadline will be extended again. The December 2023 agreement explicitly included a clause making it legally impossible for the EU-UK Partnership Council to grant a further extension. Any change would require renegotiation, and the EU has shown limited appetite for reopening the TCA’s core provisions.

Key Takeaways

The 2027 rules of origin tightening is not a distant policy abstraction. It is a concrete commercial deadline with direct implications for pricing, supply chain structure, and market access.

For automotive and battery manufacturers, the maths is stark: products that fail the new thresholds face a 10% tariff, fundamentally altering the economics of UK-EU trade.

For manufacturers in all sectors, the HS2022 update and the heightened audit climate mean that rules of origin compliance deserves board-level attention, not just a tick-box exercise in the customs department.

The manufacturers who prepare now, auditing supply chains, refreshing documentation, modelling scenarios, and engaging with the policy process, will be the ones who maintain their competitive position when the rules change. Those who wait will find themselves scrambling, or paying tariffs that their competitors are not.

The clock is ticking. Twelve months is not as long as it sounds when supply chain restructuring is on the table.