Rules of Origin
Rules of Origin determine the ‘economic nationality’ of a good and are a standard part of free trade agreements (FTAs). Rules of Origin ensure that only goods produced in the countries party to the FTA (the UK or the EU) benefit from zero tariffs.
Contents
1. General Clauses, Official Guidance and Useful Links
1.1. Guidance Video
1.2 RoW-origin Goods
1.3 EU-origin Goods
2. Complying with Rules of Origin
2.1 Step 1: Classifying Your Goods
2.2. Step 2: Understanding whether or not your good meets the applicable Rules of Origin
2.2.1 The Four Types of Rule a Product May Need to Meet
2.2.2 Eligibility for Zero Tariff Trade
2.2.3 Product specific rules of origin for Chapter 39 (Plastic and Articles Thereof)
2.2.3.1 HS 3901-3915: Plastics in Primary Forums
2.2.3.2 HS 3916-3926: Plastics in Secondary Forms
2.2.3.3 Relevant Codes of Chapter 39
2.2.3.4 Key and Further Explanation
2.2.3.5 Cumulation
3 Step 3: Prove to the Customs Authority That Your Good Qualifies
4 Importing: How to Comply with Rules of Origin
5 Useful Links
6 Frequently Asked Questions
1. General Clauses and Official Guidance
Companies should read the general clauses on Rules of Origin, alongside the product-specific rules and the GOV.UK guidance to ensure that they have fully understood the rules and can therefore make a legal declaration.
It is important that companies do more than take the product-specific rules and therefore make declarations off the back of those without checking the Agreement text fully.
Detailed guidance on rules of origin in the UK-EU deal is available HERE. This document provides detailed guidance on the rules of origin requirements under the UK’s deal with the EU (the Trade and Cooperation Agreement). It 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.
Some useful documents and frequently asked questions can be downloaded below...
- Rules of Origin Special Procedures (February 2021)
- Tariffs And Rules Of Origin (RoO) In The UK-EU Trade And Cooperation Agreement FAQs
- Chemicals Rules of Origin (RoO) Sessions Q&A
1.1. Guidance Video
You can view a short 12 minute video explaining Rules of Origin by clicking HERE or the image below...
1.2 RoW-origin Goods
RoW-origin goods that are released into free circulation (i.e. customs cleared) in the EU or UK, if they are then sent to the other party without further processing that would meet the product-specific rules of origin in the UK-EU Trade and Cooperation Agreement (TCA), will have tariffs applied to them no matter what length of time they spend in one territory, unless they are kept under customs supervision while there. To avoid paying duties on the initial import, the first option that would be available if a company is holding on to the goods in the UK or EU for any significant length of time ahead of re-exporting them, would be to apply to either run yourself or store the goods in another customs warehouse and use the Transit procedure on shipping goods to it, so the goods would effectively never clear customs in the first place.
1.3 EU-origin Goods
EU-origin goods that are released into free circulation (i.e. customs cleared) in the UK, if they are then sent back to the EU without any significant processing (see below for definitions of what is not enough), will have tariffs applied to them as well. This is also the case for EU-origin goods which are being moved from Great Britain to Northern Ireland and are considered ‘at risk’ of entering the EU.
2. Complying with Rules of Origin
2.1 Step 1: Classifying Your Goods
For the purposes of international trade, all goods are classified under the Harmonised System, an internationally standardised system of descriptions and numbers to identify goods.
There are rules for different products (known as Product Specific Rules). You will need to work out whether your products comply, using the classification from step 1.
2.2.1 The Four Types of Rule a Product May Need to Meet
2.2.2 Eligibility for Zero Tariff Trade
To be eligible for zero tariff trade using the UK-EU TCA, there would need to have been some processing in the UK before exporting to the EU, or vice versa. The processing that must take place must be more significant than the following operations (which are taken from Article ORIG-7 of the UK-EU TCA [on page 30]):
- preserving operations such as drying, freezing, keeping in brine and other similar operations where their sole purpose is to ensure that the products remain in good condition during transport and storage;
- breaking-up or assembly of packages;
- washing, cleaning; removal of dust, oxide, oil, paint or other coverings;
- simple painting and polishing operations;
- sharpening, simple grinding or simple cutting;
- sifting, screening, sorting, classifying, grading, matching including the making-up of sets of articles;
- simple placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards and all other simple packaging operations;
- affixing or printing marks, labels, logos and other like distinguishing signs on products or their packaging;
- simple mixing of products, whether or not of different kinds; mixing of sugar with any material;
- simple addition of water or dilution with water or another substance that does not materially alter the characteristics of the product, or dehydration or denaturation of products;
- simple assembly of parts of articles to constitute a complete article or disassembly of products into parts;
(Operations shall be considered simple if neither special skills nor machines, apparatus or equipment especially produced or installed are needed for carrying out those operations.)
If you are distributing EU-origin goods back to the EU and you have not carried out significant processing on them in the UK, the thing to check is whether the person importing the goods back into the EU could use Returned Goods Relief to avoid paying a tariff. Procedures for using this Relief differ across EU Member States (though the underlying rules are the same) but I have included the Irish guidance here as an example. The goods must be re-imported in an unaltered state, apart from any work that may have been carried out to maintain the goods in working order, and the goods cannot have been upgraded to increase their value.
Where there is a preferential trading arrangement in place between the EU or the UK and the third country where the RoW good originates from (e.g. Japan), businesses could check the ‘Direct Transport’ or ‘Non-Alteration’ clause of the relevant agreement to determine the conditions under which RoW-origin goods could transit through the UK or the EU and still be imported tariff-free into the final destination. However, these clauses often stipulate that the goods must remain under customs supervision in the middle country in the chain.
2.2.3 Product specific rules of origin for Chapter 39 (Plastic and Articles Thereof)
The below is the product specific rules of origin for Chapter 39 (Plastic and Articles Thereof) extracted from p434 of the Trade and Cooperation Agreement (including Annexes and Protocols). (Note: More information on Classifying plastics for import and export can be found HERE)
|
Harmonised System classification (2017) including specific description
|
Product-specific rule of origin |
| Chapter 39 (Plastic and articles thereof) | |
| 39.01-39.15 |
CTSH; A chemical reaction, purification, mixing and blending, production of standard materials, a change in particle size, isomer separation, or biotechnological processing is undergone; or MaxNOM 50 % (EXW). |
| 39.16-39.19 | CTH; or MaxNOM 50 % (EXW) |
| 39.20 | CTSH; or MaxNOM 50 % (EXW) |
| 39.21-39.22 | CTH; or MaxNOM 50 % (EXW) |
| 3923.10-3923.50 | CTSH; or MaxNOM 50 % (EXW) |
| 3923.90-3925.90 | CTH; or MaxNOM 50 % (EXW) |
| 39.26 | CTSH; or MaxNOM 50 % (EXW) |
2.2.3.1 HS 3901-3915: Plastics in Primary Forums
- Primary plastics (HS 3901 to 3915 inclusive) have an option of whether to use a Change in Tariff code rule, a Value-Added rule, or a Specific Processing Rule.
- The specific options available (as listed in the Product Specific Rules annex) are:
- CTSH (Change in tariff subheading) – this means that any non-originating inputs must come from a different 6-digit classification code to that of the final product.
- 50% MaxNOM – this means that the non-originating content used in the manufacture of a product must account for under 50% of it’s ex works (factory floor) price.
- A variety of specific processing rules – each product has a variety of processing-based rules to choose from, the most common of which are the ‘chemical reaction’, ‘purification’ and ‘mixing and blending’ rules.
2.2.3.2 HS 3916-3926: Plastics in Secondary Forms
Most secondary plastic products (HS 3916 to 3926 inclusive) have an option of whether to use a Change in Tariff code rule or a Value-Added rule:
- CTH (Change in tariff heading) – this means that any non-originating inputs must come from a different 4-digit classification code to that of the final product.
- 50% MaxNOM – this means that the non-originating content used in the manufacture of a product must account for under 50% of it’s ex works (factory floor) price.
2.2.3.3 Relevant Codes of Chapter 39...
| 3901 | Polymers of ethylene, in primary forms |
| 3902 | Polymers of propylene or of other olefins, in primary forms |
| 3903 | Polymers of styrene, in primary forms |
| 3904 | Polymers of vinyl chloride or of other halogenated olefins, in primary forms |
| 3905 | Polymers of vinyl acetate or of other vinyl esters, in primary forms; other vinyl polymers in primary forms |
| 3906 | Acrylic polymers in primary forms |
| 3907 | Polyacetals, other polyethers and epoxide resins, in primary forms; polycarbonates, alkyd resins, polyallyl esters and other polyesters, in primary forms |
| 3908 | Polyamides in primary forms |
| 3909 | Amino-resins, phenolic resins and polyurethanes, in primary forms |
| 3910 | Silicones in primary forms |
| 3911 | Petroleum resins, coumarone-indene resins, polyterpenes, polysulphides, polysulphones and other products specified in note 3 to this chapter, not elsewhere specified or included, in primary forms |
| 3912 | Cellulose and its chemical derivatives, not elsewhere specified or included, in primary forms |
| 3913 | Natural polymers (for example, alginic acid) and modified natural polymers (for example, hardened proteins, chemical derivatives of natural rubber), not elsewhere specified or included, in primary forms |
| 3914 | Ion-exchangers based on polymers of headings 3901 to 3913, in primary forms |
| 3915 | Waste, parings and scrap, of plastics |
| 3916 | Monofilament of which any cross-sectional dimension exceeds 1 mm, rods, sticks and profile shapes, whether or not surface-worked but not otherwise worked, of plastics |
| 3917 | Tubes, pipes and hoses, and fittings therefor (for example, joints, elbows, flanges), of plastics |
| 3918 | Floor coverings of plastics, whether or not self-adhesive, in rolls or in the form of tiles; wall or ceiling coverings of plastics, as defined in note 9 to this chapter |
| 3919 | Self-adhesive plates, sheets, film, foil, tape, strip and other flat shapes, of plastics, whether or not in rolls |
| 3920 | Other plates, sheets, film, foil and strip, of plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other materials |
| 3921 | Other plates, sheets, film, foil and strip, of plastics |
| 3922 | Baths, shower-baths, sinks, washbasins, bidets, lavatory pans, seats and covers, flushing cisterns and similar sanitary ware, of plastics |
| 3923 | Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics |
| 392310 | Boxes, cases, crates and similar articles for the conveyance or packaging of goods, of plastics |
| 392329 | Sacks and bags, incl. cones, of plastics (excl. those of polymers of ethylene) |
| 392330 | Carboys, bottles, flasks and similar articles for the conveyance or packaging of goods, of plastics |
| 392340 | Spools, cops, bobbins and similar supports, of plastics |
| 392350 | Stoppers, lids, caps and other closures, of plastics |
| 392390 | Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics Other |
| 3924 | Tableware, kitchenware, other household articles and hygienic or toilet articles, of plastics |
| 392490 | Plastics; household articles and hygienic or toilet articles |
| 3925 | Builders' ware of plastics, not elsewhere specified or included |
| 392590 | Building elements for the manufacture of floors, walls, partition walls, ceilings, roofs, etc., of plastics; gutters and accessories of plastics; railings, fences and similar barriers, of plastics; large shelves, for assembly and permanent installation in shops, workshops, etc., of plastics; architectural ornaments, e.g. friezes, of plastics; fittings and similar products for permanent mounting on buildings, of plastics |
| 3926 | Other articles of plastics and articles of other materials of headings 3901 to 3914 |
2.2.3.4 Key and Further Explanation:
Applicable to 39.01-39.15 (extracted from P418-419 Trade and Cooperation Agreement (including Annexes and Protocols)...
‘chemical reaction’ means a process (including a biochemical processing) which results in a molecule with a new structure by breaking intramolecular bonds and by forming new intramolecular bonds, or by altering the spatial arrangement of atoms in a molecule, with the exception of the following, which are not considered to be chemical reactions for the purpose of this definition:
(i) dissolving in water or other solvents;
(ii) the elimination of solvents including solvent water; or
(iii) the addition or elimination of water of crystallisation;
‘purification’ means a process which results in the elimination of at least 80 % of the content of existing impurities or the reduction or elimination of impurities resulting in a good suitable for one or more of the following applications: (i) pharmaceutical, medical, cosmetic, veterinary or food grade substances; (ii) chemical products and reagents for analytical, diagnostic or laboratory uses; (iii) elements and components for use in micro-electronics; (iv) specialised optical uses; (v) biotechnical use, for example, in cell culturing, in genetic technology or as a catalyst; (vi) carriers used in a separation process; or (vii) nuclear grade uses.
‘mixing and blending’ means the deliberate and proportionally controlled mixing or blending (including dispersing) of materials, other than the addition of diluents, only to conform to predetermined specifications which results in the production of a product having physical or chemical characteristics that are relevant to the purposes or uses of the product and are different from the input materials;
‘production of standard materials’ (including standard solutions) means a production of a preparation suitable for analytical, calibrating or referencing uses with precise degrees of purity or proportions certified by the producer;
‘change in particle size’ means the deliberate and controlled modification in particle size of a product, other than by merely crushing or pressing, resulting in a product with a defined particle size, defined particle size distribution or defined surface area, which is relevant to the purposes of the resulting product and with physical or chemical characteristics different from those of the input materials;
‘isomer separation’ means the isolation or separation of isomers from a mixture of isomers;
‘biotechnological processing’ means:
(i) biological or biotechnological culturing (including cell culture), hybridisation or genetic modification of micro- organisms (bacteria, viruses (including phages) etc.) or human, animal or plant cells; and
(ii) production, isolation or purification of cellular or intercellular structures (such as isolated genes, gene fragments and plasmids), or fermentation;
The below is taken from (see page 416-417 Trade and Cooperation Agreement (including Annexes and Protocols)...
"EXW" or "ex-works price" means: (i) the price of the product paid or payable to the producer in whose undertaking the last working or processing is carried out, provided that the price includes the value of all the materials used and all other costs incurred in the production of the product, minus any internal taxes which are, or may be, repaid when the product obtained is exported; or (ii) if there is no price paid or payable or if the actual price paid does not reflect all costs related to the production of the product which are actually incurred in the production of the product, the value of all the materials used and all other costs incurred in the production of the product in the exporting Party: (A) including selling, general and administrative expenses, as well as profit, that can reasonably be allocated to the product; and (B) excluding the cost of freight, insurance, all other costs incurred in transporting the product and any internal taxes of the exporting Party which are, or may be, repaid when the product obtained is exported. (iii) For the purposes of point (i), where the last production has been contracted to a producer, the term ‘producer’ in point (i) refers to the person who has employed the subcontractor (see page 417)
"MaxNOM" means the maximum value of non-originating materials expressed as a percentage and shall be calculated according to the following formula:
"VNM" means the value of the non-originating materials used in the production of the product, which is its customs value at the time of importation, including freight, insurance if appropriate, packing and all other costs incurred in transporting the materials to the importation port in the Party where the producer of the product is located; where the value of the non-originating materials is not known and cannot be ascertained, the first ascertainable price paid for the nonoriginating materials in the Union or in the United Kingdom is used; the value of the nonoriginating materials used in the production of the product may be calculated on the basis of the weighted average value formula or other inventory valuation method under accounting principles which are generally accepted in the Party.
‘CC’ means production from non-originating materials of any Chapter, except that of the product; this means that any non-originating material used in the production of the product must be classified in a Chapter (2-digit level of the Harmonised System) other than that of the product (i.e. a change in Chapter);
‘CTH’ means production from non-originating materials of any heading, except that of the product; this means that any non-originating material used in the production of the product must be classified in a heading (4-digit level of the Harmonised System) other than that of the product (i.e. a change in heading);
‘CTSH’ means production from non-originating materials of any subheading, except that of the product; this means that any non-originating material used in the production of the product must be classified in a subheading (6-digit level of the Harmonised System) other than that of the product (i.e. a change in sub-heading).
2.2.3.5 Cumulation
Bilateral cumulation allows you to use both UK and EU content to meet a rule of origin
3 Step 3: Prove to the Customs Authority That Your Good Qualifies
- You must have evidence to prove your goods meet rules of origin.
- You may also require evidence of origin from your supplier, such as a supplier declaration.
- If an importer wants to claim preference (which means indicate they wish to benefit from zero tariffs) on your goods, you must ensure that your goods meet the Product Specific Rules of Origin (PSR) and have evidence to support this. Guidance & further information on this can be found here.
- The TCA allows importers to claim preference based on importer’s knowledge, rather than through a statement on origin therefore you can self-declare that your goods meet the Rules by making out a statement on origin and sending this to your customer with your export Your customer can use this as the basis of their claim for zero tariffs. The template text for the statement on origin can be found in the TCA.
- Importers can alternatively claim for zero tariffs based on importer’s knowledge. Where this option is used, you do not need to provide your customer with a statement on origin, though they may ask you to provide other information about the goods to support their claim for zero tariffs.
- Until 31 December 2021, UK and EU exporters do not need supplier’s declarations in place when the goods are exported, but they must be confident that the exported goods meet the Rules of Origin requirements. Businesses may be asked to retrospectively provide a supplier’s declaration after this date.
4 Importing: How to Comply with Rules of Origin
- To access zero tariffs when importing into the UK from the EU, you will need to claim preference on your customs declaration. You will need to hold proof that the goods you are importing meet the Rules of Origin.
- Under the TCA, preference is claimed either with a statement on origin or using importer’s knowledge that the goods are originating. You can choose which option to use.
- A statement on origin should be provided to you by the exporter on a commercial document.
- To use importer’s knowledge, you will need to obtain sufficient evidence that the goods meet Rules of Origin. This may involve the exporter providing a range of supporting documentation.
- The UK is taking a staged approach to customs controls. This allows traders to make a record in their own commercial records at the point of entry of goods into GB and submit a customs declaration and any claim for preference to HMRC within six months of the point of import. This easement is only for UK companies importing from the EU.
5 Useful Links
- How to claim preferential (zero) tariffs when trading with the EU
- Full guidance on Rules of Origin when trading with the EU
- Trade Tariff tool to classify your goods
- Online tool to check which Rules of Origin apply to your exports
- Online tool to check which Rules of Origin apply to your imports
- For help on importing & exporting, contact HMRC using the guidance
- Information on staged customs controls when importing into the UK
6 Frequently Asked Questions
We import thermoplastic granules from Europe. If, for example, our EU suppliers invoice states the commodity code and that the Country of Origin is NL or DE, for example, is that in itself, sufficient for us to then use our ‘Importers Knowledge’ to claim the preferential rate of tariff ie. Zero ?
- Article ORIG.4 (page 28) Cumulation of origin
- Article ORIG.21 (page 35) Importer’s knowledge
- Article ORIG.20 (page 35) Discrepancies
- Article ORIG.22 (page 35) Record-keeping requirements
- Article ORIG.26 (page 39) Denial of preferential Tariff treatment
- the HS code of the product and origin criteria used
- a brief description of the production process
- if the origin criterion was based on a specific production process, a specific description of that process
- if applicable, a description of the originating and non-originating materials used in the production process
- if the origin criterion was ‘wholly obtained’, the applicable category (such as harvesting, mining, or fishing; and the place of production)
- if the origin criterion was based on a value method, the value of the product as well as the value of all the non-originating and/or originating materials used in the production
- if the origin criterion was based on weight, the weight of the product as well as the weight of the relevant non-originating and/or originating materials used in the product
- if the origin criterion was based on a change in tariff classification, a list of all the non-originating materials including their tariff classification number under the Harmonized System (in 2, 4 or 6-digit format depending on the origin criteria); or
- the information relating to the compliance with the provision on non-alteration (if applicable), for example a certificate of non-manipulation from the Customs Authority in the country of transit
Can I export tariff free under the new UK-EU trade deal?
As of 1 January 2021, goods exported to the EU are eligible for zero tariffs if the goods meet the Rules of Origin requirements set out in the Agreement and have the right documentation. If not, the goods may be subject to EU tariffs.
The same applies for imports to the UK from the EU.
How do I comply with Rules of Origin?
First, traders need to understand whether their good meets the applicable rules. To do this they need to classify the good to find its Harmonized System Code and then consider the relevant rules for that good. Traders can do this using this online tool: https://www.gov.uk/check-duties-customs-exporting
Second, traders need to understand how to demonstrate origin to the customs authorities and what paperwork they need to include with the good when exported. Traders can self-declare goods meet the rules by making out a statement on origin. Alternatively, the importer can use importer’s knowledge, and traders may need to provide other information. Traders should look at the origin procedures in the text of the Agreement
What if I am importing goods into GB and then (re-)exporting them to the EU?
The UK is no longer part of the EU Customs Union. This means that goods imported into GB cannot move freely between GB and EU Member States or vice versa. To be eligible for zero tariff export to the EU, these goods still need to comply with Rules of Origin. This means there must be some production in the UK. This applies to EU origin goods as well as to goods from the rest of world.
If traders move goods through GB from one EU Member State to another without the goods entering UK customs territory (i.e. without entering free circulation in GB), the goods may not need to meet Rules of Origin.
Can I use a customs agent to help me with Rules of Origin?
Yes. There is guidance available on how to find a customs agent
Compliance remains ultimately the responsibility of the exporter.
Do I need a declaration from my supplier?
If the goods you are exporting incorporate originating materials from a supplier, you may need a declaration from your supplier to meet Rules of Origin requirements.
Until 31 December 2021, exporters may make out statements on origin based on supplier’s declarations even if they do not have all the relevant supplier’s declarations in hand at the time they make the statement on origin. Exporters must be confident that the exported goods meet the Rules of Origin requirements and may be asked to retrospectively provide a supplier’s declaration after this date.
Where can I go for more information?
For full Rules of Origin guidance on trading with the EU go HERE
Some downloadable FAQs on ROO can be found below...
- Tariffs And Rules Of Origin (RoO) In The UK-EU Trade And Cooperation Agreement FAQs
- Chemicals Rules of Origin (RoO) Sessions Q&A
