LONDON -- Automakers with UK production will not be able to count components from countries such as Turkey and Japan toward a content threshold in a trade deal with the European Union, reports said.
Nissan and Toyota, which have car factories in England, likely will be affected by the decision.
The EU will not accept non-EU parts being combined with EU and British ones to meet a roughly 55 percent level for local content, a source, who spoke on condition of anonymity, told Reuters.
The BBC also reported the EU's stance. In a letter to the British car industry seen by the BBC, the UK's chief Brexit negotiator David Frost said the European Commission has rejected Britain's request for what is known as "third country cumulation" to raise the percentage of parts labeled as British in cars exported from the UK.
"The Commission has made it clear it will not agree third-part cumulation in any circumstances, which we regret but obviously can't insist on," Frost wrote in the letter.
The ruling means cars exported to the EU from the UK could face tariffs under rules of origin agreements, regardless of whether the UK agrees a free-trade deal with the EU.
Frost's letter singled out Turkey and Japan, two key countries outside of the EU that supply parts to the UK.
Japan was the fourth largest supplier of automotive parts and accessories to the UK by value in 2019, after the EU, U.S. and China. Parts from Japan totaled 458 million pounds in 2019, while those from Turkey reached 306 million, figures from UK industry association SMMT show.
By not allowing the UK to categorize foreign-supplied parts as British, the EU could then apply tariffs to UK cars on the basis that the rate of locally sourced content is too low. These so-called rules of origin are designed to avoid helping a third country.
The locally sourced parts content of UK built vehicles is around 44 percent according to 2017 data from the SMMT, although this figure is likely to be drastically reduced now as automakers are forced to look overseas for battery supplies for electrified vehicles.
Standard EU rules say that local content should reach 45 percent before vehicle can be imported tariff free in a free-trade agreement. The UK has been pushing for electric vehicles to be classified as British, but has also been rebuffed on that too, the BBC reported.