Automotive sector: international trade regulations

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Introduction

This guide provides an overview of the automotive sector, the key regulations you will need to comply with as an exporter or importer, and selected sources of further help and support.

This guide also covers an overview of the market, including key automotive trends and drivers and the type-approval requirements that must be met before placing vehicles on the market.

It introduces the role of the UK Trade Tariff and correct classification of your goods, the taxes and duties that apply, reliefs that might be available for different products and circumstances, preferential trade agreements and where to go for more help and advice.

Key drivers in the automotive sector

Research and development to decarbonise cars, vehicles and the fuels they use is the single most important driver for the sector. This comes as countries and governments work towards reducing their carbon footprint by using new technologies and ever more stringent standards to reduce emissions and other environmental pollutants such as noise.

In the UK, a £150 million Low Carbon Vehicles Innovation Platform provides funds to develop low carbon cars and methods for charging ultra low carbon vehicles. Trials of low carbon vans in public fleets are also beneficiaries of this funding.

A new Low Carbon Economic Area for ultra low carbon vehicles in the North East taps into and brings together the various research and production strengths in the region. Cleaner engines, lighter cars, plug-in hybrids and components for electric vehicles are likely to be among their key projects.

The Department for Business, Innovation & Skills (BIS) provides incentives by investing in charging infrastructure, and making £230 million available from 2011 for consumer subsidies for the first major generation of ultra-low carbon cars.

The sector also benefits from government support for low-carbon vehicles including:

an exemption from company car tax for electric cars from 2010
a 100% first-year allowance for electric vans
a further £30 million investment in low-carbon transport projects

Global harmonisation and economies of scale are also key drivers. It is widely considered that the global car manufacturing industry has reached over capacity in traditional vehicles in existing markets. Manufacturers are now looking towards emerging economies under a system of type approval that will allow any vehicle to be sold in any market under a single set of harmonised global technical regulations. To this end, EU type approval regulations are being aligned with the global UN ECE agreements of 1958 and 1998 to ensure a single standard incorporating high levels of safety, environmental protection, energy efficiency and anti-theft mechanisms. For more information, see the following section.

General safety and personal protection - demands for higher standards in protecting both persons and property mean that investment in new and enhanced electronic devices makes up an increasing proportion of vehicle value.

Type approval of whole vehicles and automotive components

Within Europe there are two possible systems of type approval. One is based around EC Directives and provides for the approval of whole vehicles, vehicle systems, and separate components. The other is based around UN ECE regulations and provides for approval of vehicle systems and separate components, but not whole vehicles.

European Community Whole Vehicle Type Approval (EC WVTA)

EC WVTA is to ensure that new vehicles are safe to use on the road and have a lower impact on the environment, without having to inspect and test every single one. Businesses that manufacture, build, convert or sell passenger vehicles, commercial vehicles or trailers may also require type approval under legislation being phased in between 2009 and 2014 that will bring them into line with the car sector, which has been subject to similar legislation for more than ten years.

EC WVTA has created a single European market in trucks, buses and trailers. Self-certification of trailers is being phased out and replaced by two new statutory recording schemes - one for light trailers, the other for large trailers.

You must submit any new vehicle made, adapted or imported for sale in the UK or the EU to the approval authority for whole vehicle approval in a member state before you can sell it anywhere in the EU. However, once a vehicle has approval in any one member state, it will apply to all vehicles of that type throughout the EU.

You can find essential type approval certification requirements information on the Vehicle Certification Agency (VCA) website.

The UK’s four-track type approval system

Approval title	Application criteria	Scope and benefits
European Community Whole Vehicle Type Approval (EC WVTA)	Manufacturers of vehicles and bodywork producing large numbers of the same vehicle type or product each year. It can be applied to a design of chassis, design of body or a complete vehicle. There is no upper limit on quantity.	It allows the manufacturer to sell the product in any EU market without needing additional national tests in another EU member state.
EC Small Series Type Approval (ECSSTA)	Smaller manufacturers producing up to 1,000 passenger cars per type each year.	It allows sales anywhere in the EU, but has technical and administrative requirements adapted to smaller businesses.
National Small Series Type Approval (NSSTA)	A UK national scheme for low volume manufacturers who intend to sell only in the UK. It is limited to production of between 75 and 500 vehicles produced per type per year, subject to the category of vehicle.	A reduced Conformity of Production (CoP) requirement, and fewer administrative requirements. Once the design is approved, individual vehicles do not need to be tested.
Individual Vehicle Approval (IVA)	A UK national scheme intended for those manufacturing or importing single vehicles or very small numbers from third (non-EU) countries when there is no European vehicle type approval. These vehicles must be inspected by the Vehicle and Operator Services Agency in Great Britain.	There is no CoP requirement, but most bodybuilders and converters will work with manufacturers to ensure there is no warranty compromise. Approval is individual.

Key points to consider when planning your type approval application

To achieve type approval for a new model of vehicle you must first apply to the VCA in the UK or the equivalent body in another member state for an assessment of your production processes and other tests to determine that you have quality management standards in place.
Once you are awarded type approval for a vehicle you manufacture, you will be solely responsible for ensuring CoP remains valid for all vehicles you produce under that approval. You will then be able to issue a Certificate of Conformity for each vehicle of that type you produce.
You must have separate type approval for certain components, where previously it was optional. Items like engines, lights, tyres, mirrors and glass all have to have their own approvals. The installation of the equipment is covered by EC WVTA.
The UK national approval schemes will not be accepted automatically by other EU member states. Producers who want to export products with national certification will have to apply directly to the type approval authority in the country to which they wish to export. There are however processes in place to facilitate the mutual recognition of national type approvals.

United Nations Economic Community for Europe (UN ECE) regulation

Vehicle manufacturers increasingly opt for type approval through the global technical harmonisation of regulations relating to motor vehicles under the UN/ECE 1958 and 1998 agreements. This is because UN ECE approval allows access to markets outside the EU - eg Russia, South Africa and Japan. This trend made a number of EC Directives in the parallel vehicle type approval system redundant.

The EU is simplifying and harmonising requirements to facilitate the individual approval of vehicles imported from and exported to third countries. The intention is to establish a process for promoting the development of global technical regulations ensuring high levels of safety, environmental protection, energy efficiency and anti-theft performance of wheeled vehicles, equipment and parts which can be fitted and/or be used on wheeled vehicles.

When exporting, you need to consider which safety, construction and use regulations you need to comply with. These could cover the complete manufactured vehicle and/or any number of its component parts. Many countries and trading blocs have their own specific requirements for vehicles and components.

When importing, you will to check that vehicles and automotive components and sub-assemblies comply with UK legislation as all goods imported into the UK must comply with domestic business standards, including health and safety legislation. Find out how to comply with automotive regulations in the section on your business sector.

For more information, see global technical regulations for wheeled vehicles, equipment and parts which can be fitted and/or be used on wheeled vehicles from the Global Auto Regs website.

The Tariff, customs duty and restrictions and the automotive sector

Like all businesses engaging in import and/or export, those in the automotive sector must comply with a range of regulations relating to international trade.

Using the Integrated Tariff

The starting point to the smooth movement of goods in the EU is the common customs tariff in force across all EU countries to classify goods for import to or export from the EU.

Find commodity codes and other measures applying to imports and exports in the automotive sector by accessing the online trade tariff

For specific information on using the Tariff for vehicles and automotive products, see the guide on classifying vehicles.

Once you have identified the correct code, you will at a glance be able to see whether any import duties, taxes, tax rebates, reliefs, licences and special conditions such as prohibitions apply to your goods.

Licensing requirements

Although you will not normally need a licence to export automotive goods, you will need to consider whether your goods might be adapted and put to strategic or military use. Such products are considered to be dual-use goods and will require export licensing. To find out whether you need a licence to export your goods, you should first identify their commodity code.

When importing goods into the EU, you should also check whether a licensing requirement is in place because of the country of origin of the goods. In addition, motor vehicles and key components will have to meet specific safety, environmental and quality requirements before they can be imported into the UK.

If you are not sure whether the goods, software or technology you wish to export are controlled by UK or EU strategic export control legislation, register to use the Goods Checker on the Department for Business, Innovation & Skills (BIS) website.

To find out more about licensing controls applying to international trade, you can read the guides: export control licensing process and how to appeal and do you need an export or import licence?

Anti-dumping and countervailing duties

Anti-dumping duties and/or quotas may be permanently or temporarily in force to protect domestic producers from unfair competition from under-priced third country imports.

Countervailing duties can apply to imports that have been subsidised by the country from which they originate.

For more information, see the guide on anti-dumping and countervailing duties.

Intellectual property

You must make sure that goods you import do not breach intellectual property rights of other businesses. Infringing goods can be seized and destroyed by HM Revenue & Customs (HMRC).

If you have concerns that others might import counterfeit versions of your goods, you can ask HMRC to check incoming shipments for any goods you believe infringe on your intellectual property rights.

When exporting you should bear in mind that certain intellectual property rights are territorial and might only give protection in the countries where they are granted or registered. You can find advice on the Intellectual Property Office website.

Domestic business legislation and standards

All goods imported into the UK must comply with domestic business standards, including health and safety legislation. Find out how to comply with automotive regulations in the section on your business sector.

How customs reliefs facilitate and support international trade

HMRC runs a number of duty relief schemes that could benefit automotive businesses. Duty relief procedures can:

provide relief from or delay payment of duty and/or VAT
allow reduced or nil rates of duty to be applied on goods that are permanently or temporarily imported under specific conditions and/or imported to a specific use
provide relief from duty and/or VAT for goods, temporarily exported and returned from outside the European Community (EC)

Duty relief schemes include but are not limited to:

Inward Processing (IP) - IP enables you to obtain duty relief on goods you import from outside the EC for processing and re-export from the EC. Processing can be anything from repacking or sorting goods to the most complicated manufacturing. See the guide on inward processing.
Outward Processing Relief (OPR) - OPR allows you to export Community goods, for processing or for repair. The processing work can range from the very simple through to involved manufacturing. On reimport to the EC you will only have to account for duty on the value added to the goods by the processing outside the EC. See the guide on outward processing relief (OPR).
Customs warehousing - this storage procedure allows payment of import duty and/or VAT to be delayed when non-Community goods are stored in a defined location or under an inventory system authorised as a Customs warehouse. See the guide on customs warehousing.
End-use relief - this scheme promotes particular EC industries and trades, subject to certain criteria by allowing a reduced or zero rate of customs duty on goods used for prescribed purposes. For information on how to apply for an authorisation to use this relief, see the guide on end-use relief.
Free zones - these are designated areas where payment of duty and VAT can be delayed provided imported goods are not released to free circulation or used or consumed within the free zone. See the guide on free zones.

You can find out whether the goods you import are eligible for any of the above or other reliefs by referring to the relevant footnotes in the Tariff.

Customs Freight Simplified Procedures - while not defined as a relief, this optional electronic customs system - with its Simplified Declaration and Local Clearance Procedures can benefit businesses importing eligible goods from outside the EC. See the guide on Customs Freight Simplified Procedures.

How the automotive sector can benefit from duty relief schemes

IP and OPR, for example, are useful to manufacturers who need to import components for final manufacturing or assembly in the UK or for businesses wishing to use EC-produced items to be manufactured elsewhere.

You could also use end-use relief to receive certain goods at a reduced or nil rate of duty provided they are imported from outside the EC, put them to a prescribed use under Customs control and within a specified time limit.

End-use is deemed to be completed for vehicle parts used for assembly when assembly of the vehicle is complete and the vehicle has left the assembly line.

End-use relief does not extend to VAT, excise duty or anti-dumping duty. Where VAT is due, it must be paid unless any separate VAT relief applies. See the guide on end-use relief.

Preferential trade agreements and the automotive sector

Automotive businesses may find one or more of theEU’s preferential trade agreements with third countries or groupings of third countries beneficial to their business. To qualify for preferential treatment - ie elimination or partial elimination of the full rate of customs duty - the goods must meet the relevant origin rules. See the guide on rules of origin.

Preferential trade agreements

As a result of preferential trade agreements certain goods that you import or export may attract a lower or nil rate of duty. The main agreements include:

Free trade agreements (FTAs) - The EU has many bilateral FTAs with individual countries, whether with partners in the region - eg the Euro-Mediterranean Partnership, with central European countries, or beyond (Mexico, Chile, South Africa).
The Generalised System of Preferences (GSP) encourages developing countries to export by allowing their products preferential access to the markets of developed countries. You will need to support all preference claims with a valid proof of preferential origin. For more information, see the page on the Generalised System of Preferences and GSP+ in the guide on using trade preferences.
Economic Partnership Agreements or the preferential duty regime of the African, Caribbean and Pacific States (ACP) and the EU remove barriers to trade and enhance cooperation in all areas related to trade.

For detailed and country-specific information on Tariff preferences, see:

Key importing and exporting requirements and the automotive sector

The international trade section of this website fully covers every aspect of practical importing and exporting.

This page brings together key requirements to help automotive businesses cost-effectively and efficiently move goods between the UK, the EU, and/or third countries.

The common customs tariff in force across all EU countries is the single most important document when importing and/or exporting. You will need to refer to it to classify goods for import to or export from the EU.

Find commodity codes and other measures applying to imports and exports in the automotive sector by accessing the online trade tariff

For specific information on using the Tariff for vehicles and automotive products, see the guide on classifying vehicles.

Other key topics relevant to businesses in the automotive and related sectors are:

Economic Operator Registration and Identification Scheme (EORI) - you must have an EORI number if you are required to provide pre-arrival/pre-departure information for goods, or are involved in the import, export or movement of goods under a transit procedure. See the guide on the Economic Operator Registration and Identification (EORI) Scheme.
Authorised Economic Operator (AEO) - an AEO certificate is likely to be particularly relevant to this sector as it is an internationally recognised quality mark that proves your role in the international supply chain is secure and that your customs controls and procedures are efficient and compliant. You must have an EORI number in order to make an AEO application. See the guide on Authorised Economic Operators.
VAT, excise and duty in international trade - getting these requirements right will save you time and prevent delays in releasing your goods.
Customs handling of freight through the CHIEF system - CHIEF, the Customs Handling of Import and Export Freight system electronically records the movement of goods by land, sea and air. If you’re not yet using the system, find out how to register and use CHIEF in the guide on UK’s import and export processing system CHIEF.
Declarations and the Single Administrative Document (SAD) - you or your agent must use SAD or form C88 as it is known in the UK to declare imports, exports and transit and community status declarations on trade with third countries. You should use it to enter goods to and remove them from customs procedures. While it’s not necessary for trade within the EU single market, you will need it to move non-EU goods in the EU. See the guide on declarations and the SAD.

Intrastat, Supplementary Declarations and European Sales Lists (ESLs)

VAT-registered businesses that trade in goods with other EU member states are required to provide details of their transactions for use in collating EU trade statistics.

Intrastat is the system used to collect these statistics.

In addition to showing the total value of goods you dispatch to other EU member states in your VAT return, you must also submit monthly supplementary declarations (SDs) to HMRC if you trade in goods with other EU countries above annually-set Intrastat exemption thresholds.

VAT-registered businesses that supply goods or services to other VAT-registered businesses in the EU must also provide details of these transactions at prescribed intervals for use in the ESL.

For the detail on all the above requirements, see the section on supplementary declarations for Intrastat.

Sources of help and support in the automotive sector

As an importer or exporter in the automotive sector, you can turn to a range of bodies for help and information.

The VCA is the designated UK Approval Authority and Technical Service for type approval to all automotive EC Directives and the equivalent UN Economic Community for Europe (UN ECE) Regulations. Vehicle type approval is the confirmation that production samples of a design will meet specified performance standards. Find out about type approval and certification FAQs, presentations and guidance on the VCA website.

The Department for Business, Innovation & Skills (BIS) runs a number of support schemes within the automotive sector. You can find listings of automotive sector support schemes on the BIS website.

BIS also has teams that offer guidance and practical support for specific functions within the automotive industry. Read about direct support for the automotive industry on the BIS website.

UK Trade & Investment is the government organisation with primary responsibility for providing trade support. Find information on the services offered to exporters on the UK Trade & Investment (UKTI) website.

The UK Trade & Investment Automotive Team can provide knowledge, advice and practical support through a network of international specialists in the UK and in British Embassies and other diplomatic posts around the world, including:

support to build export capability
access to inward and outward market visits, seminars, opportunities and reports
sales leads and bespoke research services specific to market
assistance in exporting for the first time, including access to the Passport To Export programme

Find your local international trade team on the UKTI website or call the UKTI Automotive Sector Team on 0141 228 3654 for direct advice about this sector.

Read about partnership programmes offering business support to the automotive sector on the UKTI website.

For information on support services that can help you grow your export business, see the guide on government help for exporters.

The United Kingdom Automotive Council arose from a recommendation of the industry-led New Automotive Innovation and Growth Team to support the industry, develop its technologies as well as a stronger and more competitive automotive supply chain. You can find news, events and reports on and for the automotive sector on the UK Automotive Council website.

The Society of Motor Manufacturers and Traders Limited Industry Forum is a collaboration between international vehicle manufacturers and component suppliers. Created by the motor industry for the motor industry, Industry Forum has created a number of programmes based around a common approach which enable a company in any part of the supply chain to make measurable improvements in quality, cost and delivery, while also improving partnership with its customers. You can call the Industry Forum on 0121 717 6600 or read about the Industry Forum on the Industry Forum website.

Low Carbon Vehicle Partnership - LowCVP is an action and advisory group that takes the lead in accelerating the shift to clean, low carbon vehicles and fuels in the UK. It is a partnership of organisations from the automotive and fuel industries, academia, environmental non-governmental organisations and other stakeholders who are working together with the government. You can call LowCVP on 020 7304 7040 or find advice about low carbon vehicles and fuels on the LowCVP website.