Introduction to cumulation
The EU / UK Trade and Co-operation Agreement (TCA) allows for movement of “originating” goods between the two parties, without tariff or quota.
“Originating” goods are identified through use of Rules Of Origin (ROOs) – only goods which are compliant with the ROOs qualify for preferential treatment.
However, modern supply chains in many industries cross national boundaries – complex items such as cars may move through several countries before they are finally complete.
To accommodate this – and to provide flexibility to businesses - the TCA allows for “cumulation” (also sometimes called “accumulation”) in section ORIG 04 (page 28).
Cumulation is common in international trade deals and there are several different approaches - the one provided for in the TCA is “bi-lateral” cumulation, since there are only two parties to the TCA.
Bilateral cumulation means that goods produced in one country within the TCA may be treated as if they notionally originate in the other country … if sufficient further processing is carried out in the other country.
Processing must go beyond basic handling and simple procedures - a list of processes that do not qualify is provided in the TCA in section ORIG 07 (page 30).
Example of cumulation
For example, imagine that fresh tomatoes are grown and picked in Italy (an EU member), then sent to the UK (a non-EU member, but still within TCA territory).
No tariff is payable, since the fresh tomatoes were “wholly-obtained” within Italy, as specified in the Product Specific Rule in the TCA (page 423).
If, for some reason, the tomatoes were then sent immediately from the UK into France (ie: back into the EU), then a tariff would be payable, since the tomatoes were not wholly-obtained within the UK.
However, if the tomatoes were turned into soup in the UK (avoiding the “insufficient processing” rule), then they could be sent to France without attracting tariff since the tomatoes would now be counted as originating in the UK, via cumulation.
The Irish challenge
Some agri-food traders have encountered issues with the cumulation rules in the first weeks of 2021. In some supply chains, Great Britain acts as a “land bridge” between Ireland the rest of the EU.
Movement through GB could be handled via the Common Transit Convention (CTC), which allows goods to move through multiple territories en route to their final destination without attracting tariff at each border.
However, the CTC does not allow shipments to be offloaded or handled (except in specified ways) during a journey.
In practice some traders sending goods from the continental EU to Ireland offload, trans-ship and re-organise their goods within GB.
In these situations, goods entering GB are not subject to tariff (since they benefit from the TCA), but goods travelling on from GB to Ireland are tariffed.
This is because the simple sorting of loads within the UK is not considered to be “sufficient production” to create cumulation benefit. Goods therefore do not count as “originating” in the UK and tariffs are chargeable.
Unfortunately, it is not easy to see how this can be resolved without renegotiation, since it is a “feature” of the TCA rather than a “fault”.