Considerations on 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 ... |
|---|---|
| document | COM(2023)950 |
| date | December 21, 2023 |
(2) Chapter 2 of Title 1 of Part 2 of the Agreement and Annexes 2 to 9 to the Agreement lay down provisions on the definition of originating products and methods of administrative cooperation.
(3) Pursuant to Articles 7 and 68 of the Agreement, the Partnership Council may amend Chapter 2 “Rules of origin” of Title I “Trade in Goods” of Part 2 “Trade, transport, fisheries and other arrangements”, and its annexes.
(4) It is appropriate to establish the position to be taken on the Union's behalf in the Partnership Council, as the Decision will be binding on the Union.
(5) The Trade and Cooperation Agreement, in its Annex 5, provides for a phased-in entry into force of product-specific rules of origin for electric accumulators and electrified vehicles.
(6) The global security, economic and trade context, including Russia’s aggression against Ukraine, the COVID pandemic, and the competition from new international subsidy support schemes, has led to the pausing or postponement of some investments in the European battery ecosystem, as well as a slower delivering of the significant investment plans that were maintained despite the overall conditions. The direct consequences of those external events such as soaring energy costs and high inflation rates have further hindered the development the battery ecosystem in the EU.
(7) This slower than expected development of the battery ecosystem has raised concerns of the EU industry that European automotive exports to the United Kingdom will not comply with the incoming product- specific rules on origin, leading to tariffs imposed on those exports and impacting negatively their competitiveness in the UK market.
(8) It is therefore appropriate to provide industry with a bridging mechanism. This mechanism should allow the battery industry to further scale-up and support a strong production base of electric vehicles in Europe that can compete internationally. This will ensure that European automotive exports to the United Kingdom can ultimately comply with the rules of origin under the Trade and Cooperation Agreement.
(9) This bridging mechanism will allow the continuation of the application of the current product-specific rules of origin for electric accumulators and electrified vehicles until 31 December 2026. From 1 January 2027 the product-specific rules of origin specified in Annex 3 of the Trade and Cooperation Agreement will apply.
(10) The aim of the rules of origin for electric accumulators and electrified vehicles set out in the Trade and Cooperation Agreement is to incentivise the investment in a battery manufacturing capacity in the EU and in the United Kingdom. No further postponement of the incoming rules is considered. Therefore, the possibility for further changes to the product-specific rules of origin for electric accumulators and electrified vehicles should be removed.
(11) The EU is committed to developing and strengthening EU supply chains and an ecosystem on batteries and electric vehicles. Therefore, a one-off extension of the currently applicable rules of origin should be accompanied by strategic support of the battery sector and more active engagement with the industry. In particular, it is important that the European automotive industry increases their investments along the entire battery value chain, concluding offtake agreements in view of meeting at least 70% of the demand for batteries through domestic sourcing, and contributing to the strengthening the sustainability, traceability and circularity of the battery in line with the existing acquis and notably Regulation (EU) 2023/1542 of the European Parliament and the Council of 12 July 2023 concerning batteries and waste batteries2.
(12) To further foster faster and more cost-efficient support for the manufacturing of the most sustainable batteries in Member States, the Commission will set up a dedicated instrument under the Innovation Fund3. This instrument, which will be launched in 2024, will provide funding of up to € three billion for the next three years, awarded, possibly as a fixed premium to manufactured battery capacity to European manufacturers of the most sustainable batteries creating important spill-over effects on the entire European battery value chain, notably its upstream segment. The mechanism should support CAPEX and OPEX, in conformity with the Treaties, and be cumulative to other forms of support received by eligible entities. The budget of the calls, the eligibility criteria and other terms and conditions for this instrument will be determined in 2024.
(13) The Commission will also extend this instrument to enable Member States to use their national budgets’ resources to award support to projects relevant for the development of EU capacities for sustainable manufacturing of batteries located on their territory, while relying on an EU-wide auction mechanism to identify the most competitive projects. This will avoid the fragmentation of the battery market in the EU and will save the administrative costs of developing different support schemes by Member States..
(14) The Commission will closely monitor the above-described engagement of the European automotive industry in the development of a European battery eco-system. In particular, the Commission will engage in semi-annual dialogues with the automotive and battery industries in order to constantly assess progress towards meeting the headline target of at least 70% of their demand for batteries through domestic sourcing, as well as industry’s preparedness for meeting the permanent TCA rules of origin applying as of 2027. Based on this assessment, the Commission will consider additional measures for better compliance, as appropriate.
(15) While this decision removes one step in the phasing in of stricter rules of origin under the EU-UK Trade and Cooperation Agreement, and therefore extends the current rules of origin until the end 2026, the EU remains committed to the rules that will enter into force in 2027. Accordingly, this decision excludes a possibility of further changes of product-specific rules of origin for electric accumulators and electrified vehicles through a decision of the Partnership Council. The Commission will re-evaluate the situation on global and European battery markets on a continuous basis.