Explanatory Memorandum to COM(2023)950 - EU position in the Partnership Council established by the Trade and Cooperation Agreement with the United Kingdom as regards the transitional product-specific rules for electric accumulators and electrified vehicles - Main contents
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| dossier | COM(2023)950 - EU position in the Partnership Council established by the Trade and Cooperation Agreement with the United Kingdom as regards ... |
|---|---|
| source | COM(2023)950 |
| date | 06-12-2023 |
1. Subject matter of the proposal
This proposal concerns the decision establishing the position to be taken on the Union's behalf in the Partnership Council established by the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part. The decision relates to the envisaged adoption of a decision to amend the transitional product-specific rules for electric accumulators and electrified vehicles in Annex 5 of the EU-UK Trade and Cooperation Agreement to extend the period of application of the product-specific rules in SECTION 1 of Annex 5 until 31 December 2026 and to cease the application of the product-specific rules in SECTION 2. In addition, the scope of Article 68 shall be changed to specify that this is a one-off extension of the product-specific rules as well as a one-off change to the substance of these rules for products covered by Annex 5.
2. Context of the proposal
2.1. The Trade and Cooperation Agreement between the European Union and the United Kingdom
The Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part (‘the EU-UK Trade and Cooperation Agreement’) establishes, among others, the rules governing trade between the Union and the United Kingdom. Those rules include rules of origin that specify how a product can be considered originating from the Union or the United Kingdom. Only products originating in a Party to the EU-UK Trade and Cooperation Agreement can benefit from the preferential regime established by the Agreement.
The Agreement entered into force on 1 May 2021.
2.2. The Partnership Council
The Partnership Council established by the EU-UK Trade and Cooperation Agreement oversees the attainment of the objectives of the Agreement and supervises and facilitates its implementation and application. It comprises representatives of the Union and the United Kingdom and adopts its decision by mutual consent.
Article 68 of the EU-UK Trade and Cooperation Agreement confers powers to the Partnership Council to amend provisions related to rules of origin.
2.3. The envisaged act of the Partnership Council
The Partnership Council is to adopt by written procedure a decision on rules of origin for electric accumulators and electrified vehicles (‘the envisaged act’).
The envisaged act modifies Annex 5 and Article 68 of the EU-UK Trade and Cooperation Agreement to ensure that:
- The application of transitional product-specific rules of origin for electric accumulators and electrified vehicles applicable until 31 December 2023 is extended to 31 December 2026; and
- the rules of origin for electric accumulators and electrified vehicles included in Annex 3 and Annex 5 of the EU-UK Trade and Cooperation Agreement cannot be modified again by the Partnership Council.
As provided for in Article 10 of the Agreement, the envisaged act will become binding on the Parties pursuant to: ‘The decisions adopted by the Partnership Council […] shall be binding on the Parties and on all the bodies set up under this Agreement and under any supplementing Agreement’.
3. Position to be taken on the Union's behalf
Annex 5 to the Trade and Cooperation Agreement provides for a phased-in entry into force of rules of origin for electric accumulators and electrified vehicles.
The global security, economic and trade context, including Russia’s aggression against Ukraine, the COVID pandemic, and the competition from international subsidy support schemes, and its consequences (soaring energy costs, high inflation) have led to the postponement of some investments in the European battery ecosystem. This led to an undersupply of electric batteries necessary for electric vehicles produced in the EU.
As a result, the EU industry has raised concerns that European automotive exports to the United Kingdom will not comply with the incoming rules on origin, foreseen to become applicable as of 1 January 2024, leading to tariffs imposed on those exports, followed by the loss of their competitiveness on the UK market.
The envisaged act aims to provide industry with a bridging mechanism, allowing the continuation of the application of the current, less strict rules of origin for electric accumulators and electrified vehicles until 31 December 2026.
However, the ultimate objective of these rules of origin is to incentivise the investment in a battery manufacturing capacity in the EU and in the United Kingdom. Therefore, from 1 January 2027 the product-specific rules of origin specified in Annex 3 to the Trade and Cooperation Agreement will apply, as originally envisaged.
Also, no further postponement of the incoming rules should take place. Therefore, the envisaged act removes the possibility to extend, through the same procedure, the interim product-specific rules of origin. Furthermore, the envisaged act removes the possibility to change the substance of the product-specific rules for electric accumulators and electrified vehicles.
4. Legal basis
4.1. Procedural legal basis
4.1.1. Principles
Article 218(9) of the Treaty on the Functioning of the European Union (TFEU) provides for decisions establishing ‘the positions to be adopted on the Union’s behalf in a body set up by an agreement, when that body is called upon to adopt acts having legal effects, with the exception of acts supplementing or amending the institutional framework of the agreement.’
The concept of ‘acts having legal effects’ includes acts that have legal effects by virtue of the rules of international law governing the body in question. It also includes instruments that do not have a binding effect under international law, but that are ‘capable of decisively influencing the content of the legislation adopted by the EU legislature’1.
4.1.2. Application to the present case
The Partnership Council is a body set up by an agreement, namely the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part.
The act which the Partnership Council is called upon to adopt constitutes an act having legal effects. The envisaged act will be binding on the Parties pursuant to Article 10 of the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part.
The envisaged act does not supplement or amend the institutional framework of the Agreement.
Therefore, the procedural legal basis for the proposed decision is Article 218(9) TFEU.
4.2. Substantive legal basis
4.2.1. Principles
The substantive legal basis for a decision under Article 218(9) TFEU depends primarily on the objective and content of the envisaged act in respect of which a position is taken on the Union's behalf. If the envisaged act pursues two aims or has two components and if one of those aims or components is identifiable as the main one, whereas the other is merely incidental, the decision under Article 218(9) TFEU must be founded on a single substantive legal basis, namely that required by the main or predominant aim or component.
4.2.2. Application to the present case
The main objective and content of the envisaged act relate to common commercial policy.
Therefore, the substantive legal basis of the proposed decision is Article 207 of the Treaty on the Functioning of the European Union.
4.3. Conclusion
The legal basis of the proposed decision should be Article 207 TFEU, in conjunction with Article 218(9) TFEU.
5. Publication of the envisaged act
As the act of the Partnership Council will amend Article 68 of the EU-UK Trade and Cooperation Agreement and Annex 5 (Transitional product-specific rules for electric accumulators and electrified vehicles) to the EU-UK Trade and Cooperation Agreement, it is appropriate to publish it in the Official Journal of the European Union after its adoption.