Last reviewed 28 April 2022
A lot of things have changed since the UK left the European Union. Even though there is a trade agreement in place, British companies who buy or sell to EU countries have to understand and follow new procedures and observe responsibilities that didn’t apply before.
While the UK was part of the Customs Union, there were no import tariffs to pay provided the goods were in free circulation. That meant that the goods being moved were either made in an EU country or had been imported from outside the EU and duty had already been paid. Wholly made or duty paid, that was all a buyer or seller needed to know.
Since January 2021, goods moving between mainland Britain and the EU are subject to customs controls. (Different arrangements are currently in place for Northern Ireland, which remains in a Customs Union with the EU). Part of the new procedure involves not just one but two rules on the origin of the goods.
All customs declarations need a declaration of the non-preferential origin. There’s no getting around this one. It is needed for customs control measures, particularly at import. For example, some trade is subject to quotas, and the importing country will need to record information on the origin of imports so they can ensure the quota isn’t exceeded. Essentially, the country of non-preferential origin is the country where the last, substantial, economically justified process took place.
It ispreferential origin that is relevant to rules about import tariffs. The countries of the EU, like all countries, are prepared to offer entry to goods duty free provided they don’t originate in a country with which they haven’t agreed preferential trade terms. In other words, the agreement between the UK and EU isn’t just about where the goods are arriving from, it’s where they originated. Neither the UK nor the EU wants a trade agreement to be used as a kind of trojan horse that opens the way for goods from a low-wage economy (for example) to enter their market.
Preferential rules of origin tend to be a bit more complex than non-preferential rules. And the only reason to make a declaration about preferential origin is so that the importer can avoid paying import duties. An exporter doesn’t have to make such a declaration and must not do so unless they are sure that their product meets the rules.
What are the rules
This is where things get a little bit more complicated because different products are subject to different rules. In this article, we’re only considering trade between the UK and the EU, but bear in mind that the UK has secured more than 40 trade agreements, and each one comes with its own unique set of rules about preferential origin.
The vital piece of information we need to discover the appropriate rule is the tariff number (sometimes called the commodity code, product code or HS number.) We need this information anyway, in order to export or import a product.
While a significant amount of goods are often of pure origin of one country (for example fruit, live animals or raw meat), most of the time, things aren’t going to be that simple. Manufactured goods may use materials or components from a number of different countries. But goods don’t usually have to be of pure origin of one country in order to satisfy preferential origin rules. In some cases, a process that results in a change to the tariff number will be all that’s needed. The rule will specify the level at which the change must occur, it isn’t usually the case that a change to just the seventh or eighth digit will be enough.
For some goods however, the change of heading isn’t enough in itself. The rule will specify a maximum content of non-originating material. When trading with the EU, materials of UK or EU origin can be counted as originating material, but those originating from outside of the UK or EU might not. The exporter needs to collect information about the value of the materials that are used, and the origin or each item. Bear in mind that the origin might not be the country where it was bought. If an exporter is using materials or components sourced from another supplier, they must check with the supplier about the country of origin for each item.
The EU website Access2Markets has a valuable interactive tool for this purpose called ROSA (Rules of Origin Self-Assessment). This enables traders to find out whether their goods meet the origin rule, or whether they need more information. This only helps for exports to EU countries, however. The UK Government website https://www.gov.uk/check-duties-customs-exporting provides information for trade with the rest of the world, but doesn’t provide an equivalent to the ROSA assessment tool.
The need to make the statement
When an exporter is considering a preferential origin statement, it is always worth considering whether there’s actually any need to make a statement at all. Almost 50% of EU imports, and 60% of UK imports aren’t subject to any duty anyway. If your product falls into that category, an origin statement is irrelevant and a waste of time.
If you are confused by the rules, or uncertain about how the correct classification applies, there is help available. In England, Scotland and Wales, an exporter can request an Advance Origin Ruling from HMRC. Because Northern Ireland is within the European Customs Union, different rules apply, which can be found here.
The most important thing to remember about preferential origin is that there is no legal requirement to provide a declaration, and an exporter should never make a declaration unless they are satisfied that it is correct, and they have the appropriate evidence to support their statement. The statement must follow the text set out in the trade agreement and must include the exporter’s EORI number. The statement must be provided on an invoice, or any other document, including commercial document (excluding a bill of lading), describing the originating product in sufficient detail to enable its identification.
New trade agreements with Australia and New Zealand are expected to come into effect soon, and these will specify their own rules of origin, as will any further trade agreements that are secured in the future. Remember that just because your goods met the rules or origin for one country, it does not automatically follow that they will meet the rules under another agreement. Never make a preferential origin statement that you cannot justify, and remember to check the rate of duty that applies without an origin statement. If it’s zero, as is often the case, there’s nothing to be gained by an origin statement.