Before we get started…
- On 24 December 2020, the European Union and the United Kingdom reached an agreement in principle on the EU-UK Trade and Cooperation Agreement and this provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin.
- In addition to this The Northern Ireland Protocol, agreed in December 2020, covers Trade in Goods and this means no customs paperwork for Cross-Border Traders. However if you have trade with GB there will be changes to the way you trade in goods and potential for additional paperwork requirements, depending on your trade route . It will be important that you map your supply chain and know about the journey of your goods and to consider if you can avail of preferential rates.
Rules of Origin…
- You should know that the practicalities of Rules of Origin can be complex. This bitesize guide will give you an overview but it’s a good idea to take expert advice to make sure that you are complying with them, whether you are an importer or an exporter . This guide will take you through key questions you will need to ask yourself, information on supporting documentation requirements, highlight some key actions and provide you with some useful links.
- EU-UK / UK-EU Trade and Cooperation Agreement provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin. In order to avail of these preferential rates you will need to learn about rules of origin and understand if you are able to claim preferential rates of duty.
- Rules of Origin are rules to establish the country of origin of imported and exported goods, not where they have been shipped from, but where they have been produced or manufactured.
- Rules of Origin help identify those goods which qualify for lower or nil customs.
Key Tip – Know your commodity codes, the origin of your goods and understand the grace period.
Let’s Begin...The rate of duty that must be paid on your goods will depend on three key questions:
The first need is to determine what good is being traded. To do this you’ll need a unique code called a commodity code. For the purposes of rules of origin, you may only need the first four digits of the commodity code. But it’s important to note length of the full code depends if the goods are imports or exports:
• Imports have a 10-digit commodity code
• Exports have an 8-digit commodity code
Getting the right commodity code is fundamental and it is the legal obligation of the trader. Invest the time needed to obtain the correct commodity code as getting the code wrong can be considered as fraud and can result in penalties. If you rely on the commodity code from a supplier, you’ll need to check it is accurate. This task can be complex, but there is help at hand to make sure you get the right code for your business needs. In order to find the correct commodity code for your goods, you’ll need to describe them accurately. For example, you must know:
• What the product is
• What it is made of
• What it’s used for
• How the product works/functions
• How it’s presented/packaged
• If it unassembled or unfinished
• Its technical specifications.
You’ve different ways of getting the commodity code. You can choose to find the commodity code by self-assessment. For more information please see the official websites for Ireland or Northern Ireland. Alternatively you can request a Binding Tariff Information (BTI) ruling. It’s not a legal requirement to have a BTI ruling, but it has advantages. It is the only option which gives you legal certainty for three years about the correct code for your goods. A BTI ruling is free, but you may have to pay the costs of laboratory analysis, expert advice and/or returning samples. For more information please see the official websites for Ireland or Northern Ireland.
Once you know this you’ll be able to determine what specific requirements are associated with that country.
There are two main categories of origin in the rules:
• Goods wholly obtained or produced in a single country, for example: If a product is wholly obtained or produced in a country, it will be deemed to have originated in that country;
• Goods whose production involved materials from more than one country, for example: for a product that has been produced in more than one country the product shall be determine where the last substantial transformation took place.
What are the rules and how do they fit with the EU-UK Trade and Cooperation Agreement?
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 event 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:
• a commodity code (detailed guidance here);
• countries of import and export; and
• whether the goods meet the relevant rules of origin under the agreement.
To qualify for tariff-free trade under the EU-UK TCA, the product must originate in the EU or the UK.
This section will first bring you to tools you can use to check the rules.
This section then follows on and explores what the origination of the product means. Understanding the origin of your product is crucial.
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 origins requirements. It provides:
• a check-list to see if a product meets the criteria for preferential treatment;
• a tailored self-assessment report based on the answers selected;
• an explanation of rules, terms and paperwork.
GOV.UK on the rules of origin requirements under the UK’s deal with the EU (the Trade and Cooperation Agreement) can be found here. This explains the most important provisions which businesses need to understand and comply with, in order to ensure that they pay zero tariffs when trading with the EU. This applies to both businesses that wish to export goods to the EU at zero tariffs, as well as businesses who wish to import goods from EU at zero tariffs.
Further detail can be found in the following sections of the EU-UK TCA here:-
• 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.
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).
You’re likely to need the following supporting documents:
• Commercial Invoice
• Packing List (if the Gross Weight is not shown on your Invoice)
• Full Names and Addresses of the manufacturers
See below for information on additional documents required, i.e. Supplier’s Declaration / Statement of Origin.
Documentation, Key Actions and Useful Links
Origin Documentation in the EU-UK TCA
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.
Key Tip – Understand the grace period – Until 31 December 2021, if you’re claiming preference on the basis of the importer’s knowledge or making out a statement on origin, you do not need to hold a supplier’s declaration at the time you’re claiming preference for goods imported from or to the EU. But the importer must be confident that the goods meet the rules of origin. You must make every effort to obtain suppliers declarations retrospectively.
See sample downloadable documents below.
Statement on Origin
The exporter can self-declare the origin of a product by completing a Statement of 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 them to be identified).
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.
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 or non-originating materials within it. However, please note section 6 (Goods that do not meet the EU-UK TCA’s Rules of Origin) 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).
Please see our section – Trade Routes – Customs Paperwork.
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.
- Rules of Origin Self-Assessment tool
- EU-UK Trade and Cooperation Agreement
- UK government guidance on “ Claiming Preferential Rates of Duty Between the UK and EU”
- European Commission guidance on the “ Statement on Origin
- European Commission guidance on the “ Supplier’s Declaration”.
- Sufficient Processing GOV.UK here
- Revenue helpful information here