Rules of Origin
Table of Contents
Rules of Origin: The Ultimate Guide
Rules of Origin & Country of Origin
If you want to better understand ‘Rules of Origin’, ‘Country of Origin’ and check that your goods meet the rules of origin, you have come to the right place.
Rules of Origin are very important if you are a UK trading business importing or exporting with the European Union (EU) or other international countries.
Every year, more than £12 trillion worth of goods are traded amongst the world’s nations in nearly every language on the globe.
How do customs and regulatory authorities know where the goods are coming from in order to impose the applicable duty or product standards?
“Origin” can be understood as the economic nationality of the goods.
All internationally traded goods are required to have an origin when they are declared to customs at the point of import and at the time of export.
The question “where are your products from?” seems simple at first glance, but what does it really mean? Is it where the goods were produced, or where they were shipped from? And if the goods were manufactured in several different countries, where is the cut-off point?
Rules of origin enable customs to answer similar questions and enable them to determine the origin of goods.
What Is ‘Origin’?
Country of Origin
If you are importing goods into the UK or exporting goods outside of the UK, you may be looking for the answer to the question ‘what is origin’?
Origin is the economic nationality of the product. Each product traded internationally needs to have an Origin. Rules of Origin help us to understand where that product comes from, in the world, and basically where it originated.
How Does ‘Origin’ Impact Importers and Exporters?
For businesses trading internationally, either importing into the UK or exporting out of the UK, there are two different types of origin;
- Non-preferential origin – which is used for statistical purposes as well as to apply other trade policy measures.
- Preferential origin – which is connected to trade agreements and helps to establish whether or not your product or goods are eligible for a preferential tariff.
What are Rules of Origin?
Businesses up and down the country have been struggling to make sense of the new arrangements for exporting inside and outside of the EU.
With new processes and new paperwork, shipments are being held up and there are increasing concerns about the impact on the economy.
The problems experienced centre around new rules which describe which goods can be counted as being made in the UK, meaning they benefit financially from these new agreements.
However, UK exporters from a variety of sectors are actually finding that goods which they thought were classified as being made in the UK, which they could export tariff- and quota-free, don’t actually meet these new origin rules, putting their goods at a disadvantage compared to their EU competitors.
The rules vary but in general, if at least 50% of the price of the product is considered as being made in the UK, then the entire product would be considered to be of UK origin.*
However, with modern supply chains, parts come from all over the world, leaving UK exporters struggling to understand what tariffs are payable and to even complete the relevant paperwork.
ChamberCustoms and your local Chamber of Commerce can help.
You can use ChamberCustoms as your Customs Broker or Customs Clearance Agent to keep you right with rules of origin or speak to our expert advisors.
‘Rules of origin’ will determine where the goods originally came from; i.e. this is where they have been produced or manufactured – and not where they have been shipped from.
Once you know where the goods have originated, you can see if the goods qualify for a preferential tariff under the Trace & Cooperation Agreement (TCA).
What is the Free Trade Agreement?
On the 1st of January 2021, the UK started trading on a new Free Trade Agreement between the UK and the EU this was called the ‘Trade and Cooperation Agreement’, often referred to as TCA.
Preferential zero tariffs only apply to goods that are manufactured in the UK or in the EU.
This means you don’t have to pay Customs Duty if you import goods from the EU into the UK (i.e. goods that originate in the EU) or if you export goods to the EU that originate in the UK – as long as the goods meet the stipulations in the Trade and Cooperation Agreement (TCA).
If you need help checking the origin of your goods, ChamberCustoms customs brokers can help.
Please note: the preferential zero-tariff can only be applied to goods that meet the ‘rules of origin’.
Why Are Rules of Origin So Important?
The rules of importing and exporting are getting stricter, you’ll also need to better understand the increased requirements for import declarations, export declarations and also the documentation that supports your proof of origin.
New requirements for supplier declarations from 1 January 2022
For some goods, the exporter may also need to hold supplier declarations.
Supplier declarations are documents that your supplier provides to you, that help you establish whether the goods you’re exporting meet the product-specific rules of origin. These are needed as supporting evidence to confirm the origin of the goods when the manufacture alone is not enough to meet the product-specific rules of origin.
From 1 January 2022, if you make statements on origin for goods you export to the EU, you must have supplier declarations (where needed) at the time you export your goods.
If you cannot provide a supplier declaration, or other suitable evidence, to confirm the UK origin of goods you exported to the EU between 1 January and 31 December 2021, you must let your EU customer know.
If you’re asked to verify the origin of your goods and you can’t provide this supporting evidence:
• Your EU customer will be liable to pay the full (non-preferential) rate of Customs Duty,
• You may be charged a penalty, and,
• You may be excluded from using preferential tariffs going forward.
Our helpful team can help you when using your supplier’s declaration to support your proof of origin documentation.
How Can I Claim a Zero Tariff for My Goods?
There are three steps you need to follow to claim a zero tariff on goods:
Your Customs Broker can support you when correctly classifying your goods. Commodity codes will classify your goods for import or for exporting goods – this way you can check if there is duty and VAT to pay. Your customs broker or adviser can help you identify if there are any discounts or duty relief that you can take advantage of, to lower the duties owed.
Your customs broker will also need to complete customs declarations for you, either an import declaration or an export declaration.
You can visit our UK import duties calculator here to find out how much duty is to be paid for your specific import.
If you are looking for a Customs Broker or bespoke Customs Advice, ChamberCustoms can help.
Your Customs Broker will help you here. It’s worth remembering that different goods have different rules of origin with varying ‘product-specific rules’ (PSRs). You are responsible for checking the rules for your specific goods. The Trade and Cooperation Agreement (TCA) outlines the product-specific rules for your goods.
This is especially important if you are claiming zero tariffs. You will need to show that your goods comply with the Rules of Origin. This proof can be garnered from the seller or exporter (via an Exporter statement of origin alongside the invoice, the exporter’s EORI Number and Registered Exporter number) or through evidence that the supplying business has about how the goods meet a specific rule in the rules of origin. We have outlined some examples of rules below.
If you are a UK-based business importing goods from Northern Ireland or exporting goods to Northern Ireland (NI) you should also check the origin of the goods, i.e. where they were produced or manufactured.
If you are looking for bespoke Customs Advice, ChamberCustoms can help.
What Are Product-Specific Rules (PSPs) of Origin?
There are a few different types of Product-Specific Rules which your customs broker can help you to navigate for your imported or exported goods:
Wholly obtained means goods that are fully born, grown or extracted from the UK – these goods, such as UK-grown vegetables, are likely to be eligible for preferential treatment (i.e. zero-rated duties). If the goods require other inputs to grow, then all of the inputs (and their origins) need to be classified separately too. These goods may be subject to a change in tariff code rule, which you can talk through with our customs brokers.
Value-added / percentage rule means that a certain amount of the value of the finished product or goods must be generated in the UK, or in the EU – this is called ‘maximum level of non-originated material’ (MaxNOM)
Specified processes refer to operations that happen in the UK which means that the goods may be considered as originating in the UK. This is usually common in textiles, clothing for example – like products being processed or woven in the UK.
Rules of Origin and How to Use Preferential Tariffs for Trade Between the UK and EU
Rules of Origin are one of the most important trading requirements you need to understand and meet if your business buys or sells goods internationally.
If you are looking for a customs broker that can take care of your import declarations, transit documents and ensure you are compliant with your rules of origin documentation, you have come to the right place.
Rules of Origin Explainer Video
Join Liam Smyth, Managing Director at ChamberCustoms as he discusses Rules of Origin.
If you are new to this website, ChamberCustoms offer Customs Clearance, Customs Consultancy and Customs Training for businesses trading internationally. If you are importing and exporting goods in or out of the UK – ChamberCustoms can offer you compliant and efficient digital customs clearance on the new CDS system with expert and experienced customs clearance agents.
Liam explains the Rules of Origin and why they matter – defining the origin of a product. Every item has a definite country of origin – regardless of the product. Origin is the basis for imposing rates of duties and taxes. All goods need a confirmed origin when entering or leaving the country.
Understanding rules of origin is crucial to trading internationally – importing and exporting.
This is one of a series of videos designed to help small businesses like yours understand how to trade internationally:
Rules of Origin and Why They Matter
Here we focus on a vital part of importing and exporting goods – the ‘Rules of Origin’. First, let’s define the origin of a product. Every year, more than 12 trillion pounds of goods are traded amongst the world’s nations. Whether it’s a mattress or mascara, textiles or wall tiles, machine oil or massage oil, every item has a definite country of origin.
Authorities rely on the origin of the goods, which means their economic nationality, to keep track of what is being brought into their country. It’s the basis for imposing their duty rate or taxes as all goods traded abroad need an origin when they are declared to customs on entering or leaving a country. So the question you need to answer is ‘where are your products from?’.
It seems simple at first glance, but what does it mean? Is it where the goods were produced or where they were shipped from? and if the goods were manufactured in several different countries, which applies?
The rules of origin enable you to answer these questions to help the authorities determine where the goods have come from. If your business is importing or exporting goods, you need to know which country they have come from. That is because certain originating countries attract lower rates of duty than others. So it’s important to know that you will not pay too much or too little in duty. How do you do this? There are two ways of working out which country goods have originated from.
The first sort of origin is a non-preferential rate of origin. This is used to decide which of the destination country’s trade policy measures would apply to imported goods, what contributes to a country’s trade statistics, or what labelling regulations apply. Each country establishes its own rules based on two main principles. Either wholly obtained, where products are entirely from one country, or last substantial transformation. This applies where more than one country was involved in producing the goods. The country where the last substantial transformation took place is usually determined as the origin of the goods.
The second sort of origin is the preferential rule of origin, which applies when products have originated from countries with which we have signed a trade agreement. This helps establish whether a preferential tariff can be applied to the product, benefitting from a reduced duty rate – usually zero per cent, under a specific trade deal.
The origin of a product affects your business because this needs to be declared on a customs declaration each time you import or export goods to the UK. It’s important to declare the correct origin of goods when importing them as it will define the rate of duty you will pay. For example, when there’s a preferential trade deal, the preferential origin can be declared, resulting in a reduced duty rate. However, if there’s no trade deal, the non-preferential origin must be declared to ensure that the correct trade policy measures are applied.
Declaring an incorrect country of origin may mean non-compliance with the customs authority and be considered fraud.
So how do you get your goods certified before importing or exporting them? Well, it depends on where they originate from. For non-preferential origin, this can be confirmed by a certificate of origin obtained by Chambers of Commerce across the UK or from the national chamber in the export country. For preferential origin, it can be certified for export in several ways. Either by self-declaring the origin of goods correctly on your invoice or by obtaining a preferential certificate from a local Chamber of Commerce. You should submit this as evidence of origin to customs at the point of import so that you can benefit from preferential duty rates. If the invoice, declaration or certificate is rejected, the full duty rate will need to be paid at import.
Now the UK has left the EU; there’s an additional step when it comes to importing and exporting. This is before, for some goods, the exporter may also need to have what is called ‘Supplier declarations’. A supplier provides documents formally declaring the origin of the goods and that they meet the product-specific rules of origin. You must let your customers know if you sell into the EU and can’t provide a supplier declaration. Your EU customers will be liable to pay the full non-preferential rate of customs duty. It may be helpful to seek specialist advice when you want to use supplier declarations to support your proof of origin documentation.
Understanding where your goods originated is a crucial part of international trading. There are two main origin rules: the non-preferential and the preferential origin. For more detailed information, please visit our Rules of Origin content hub.
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