The EU-UK Trade and Cooperation Agreement (EU-UK TCA), signed on 24 December 2020, provides for preferential, tariff-free, trade in goods. In order to qualify for the preferential tariff under the trade deal, the goods must originate in the EU or the UK.
This note explains rules of origin as they apply to the EU-UK TCA and outlines what businesses need to do to satisfy this requirement.
Origin is the “economic nationality” of a product – i.e. where it was obtained or manufactured, rather than from where it was shipped. This can be easily identified where products are “wholly obtained” in a country, without inputs from elsewhere. However, where production involves complex supply chains and materials from more than one country, origin is determined by where the last “substantial transformation” took place. This could include an increase in value, change in commodity code or even specific manufacturing process.
The purpose of these provisions is to ensure that preferential tariffs are only afforded to goods that derive from the countries identified in a particular trade deal. The rules of origin provisions differ in each trade agreement. The ability to qualify for rules of origin provisions depends on the:
· commodity code (detailed guidance here);
· countries of import and export; and
· whether the goods meet the relevant rules of origin under the agreement.
Origin requirements in the EU-UK TCA can be found in the:
· rules outlined in Chapter 2 (these are the overall rules covering origin);
· product-specific rules in ANNEX ORIG-1 and ANNEX ORIG-2 (on the basis of commodity code);
· content for Supplier’s Declarations in ANNEX ORIG-3; and
· content for statement of origin in ANNEX ORIG-4.
To qualify for tariff-free trade under the EU-UK TCA, the product must originate in the EU or the UK.
If a product is wholly obtained in the EU or UK, or produced exclusively from originating materials, it will be considered as originating in the EU or UK.
Materials originating in one party to the Agreement can be used when producing goods in the other party (e.g. EU materials in the UK) and still count as originating. This is known as bilateral cumulation.
Products made using any non-originating materials will also need to meet product-specific rules of origin to be considered originating in the EU or UK. The production process will also need to go beyond minimal operations and should be more than simple packaging, assembly, or polishing (other examples of “insufficient production” are in Article ORIG-7).
The European Commission’s Rules of Origin Self-Assessment is a helpful tool to identify whether a particular product meets the EU-UK TCA rules of origin requirements. It provides:
To benefit from preferential rates of duty, the importer is required to claim this treatment at the point of import and hold evidence that the goods comply with the rules of origin. An importer can do so if it has either:
· a Statement on Origin (from the exporter), or
· knowledge (obtained and held by the importer) that the product is originating.
The exporter has an obligation to obtain a Supplier’s Declaration when they are not the producer of the goods. The Declaration describes the non-originating materials in sufficient detail to enable them to be identified.
The exporter can self-declare the origin of a product by completing a Statement on Origin.
For EU exporters:
· If the value of the consignment is less than €6,000, any EU exporter can self-declare that the product originates in the EU.
· If the value of the consignments is €6,000 and above, exporters in the EU need to be registered in the Registered Exporter System (REX) – Ireland here and Northern Ireland here – in order to self-declare that the product originates in the EU.
GB exporters do not require to hold an approved authorisation status to provide statements of origin, regardless of the value. They must include their EORI number in any Statement on Origin issued to their EU customer.
The Statement on Origin must be provided on an invoice or any other commercial document (excluding a bill of lading), describing the originating product in sufficient detail to enable its identification.
If the Statement on Origin is completed for multiple shipments of identical originating products the Statement on Origin should indicate the period for which it shall apply – a maximum of 12 months.
The text for a Statement on Origin (and guiding footnotes) can be found in Annex ORIG-4.
The exporter may need to obtain a Supplier’s Declaration (or equivalent document containing the same information) that describes the non-originating materials in sufficient detail to enable them to be identified. A supplier’s declaration may never be used as a document on origin for claiming preferential treatment at importation.
A Supplier’s Declaration should be made out for each consignment of products and annexed to the invoice (or other document describing the products concerned in sufficient detail to enable them to be identified).
Where a supplier regularly supplies a customer with products (for which the production carried out is expected to remain constant for a period of time), that supplier may provide a single Supplier’s Declaration to cover subsequent consignments (the ‘long-term Supplier’s Declaration’). It is normally valid for a period of up to two years.
NB – There is a grace period of 1 year (until 31 December 2021) for these Declarations. During this time exporters can self-declare the origin of the products even if the Supplier’s Declarations are not yet collected. Businesses may be asked to provide a Supplier’s Declaration after this date.
Content for Supplier’s Declaration (and guiding footnotes) can be found in Annex ORIG-3, Appendix 1)
Once a product has gained originating status, it is considered 100% originating. If it is subsequently incorporated in the creation of a further product, its full value is considered originating and no account is taken of non-originating materials within it.
However, please note section 7 below.
This is a non-mandatory process that allows businesses to identify the appropriate origin of their goods. It can be particularly helpful where there are complex supply chains, with inputs from around the world. Binding Origin Information decisions are legally binding in that Customs territory. The GB application process is here, Ireland here and the Northern Ireland here.
Goods that do not meet the rules of origin requirements will not qualify for tariff preferences and will have to pay the standard (‘Most Favoured Nation’) tariffs that each of the EU and UK apply to imports from countries with which they have no agreement.
While, for some goods these Most Favoured Nation tariffs will be zero or low, for many others they will be much higher. Companies will need to make commercial decisions about whether it’s in their interest to meet (and prove that they meet) the rules of origin.
Businesses should note that goods imported from the EU into GB without subsequent processing have been losing their EU status when returned to the EU (e.g. distribution businesses).
· Use the European Commission’s Rules of Origin Self-Assessment tool to establish if a product qualifies for tariff preferences.
· If claiming preferential origin, importers should ensure that the exporter’s Statement on Origin is attached to the commercial invoice (or other relevant document).
· Exporters should obtain a Supplier’s Declaration before end-2021.