Quick guide to working with rules of origin
Rules of origin – why do we need them?
Rules of origin are an essential part of EU trade agreements. Because the agreements often apply lower tariffs to goods coming from partner countries, it is essential to know your product’s origin.
Rules of origin determine in which country a product was sourced or made - its ‘economic nationality’ – and help ensure that customs authorities apply lower duties correctly so that businesses benefit from them.
To qualify for a lower tariff under an EU trade agreement your product must comply with the agreement’s specific origin rules.
It’s as easy as 1, 2, 3!
A trade agreement’s rules of origin can look daunting at first glance but once you understand the basics, it is easy.
Three steps to paying lower customs duties:
Start benefitting from lower customs duties for your imports or exports!
See if your product qualifies
How to find out if your product qualifies for lower customs duties
Each trade agreement sets out specific rules of origin for each product.
You can find the rules in My Trade Assistant.
ROSA – the Rules of Origin Self-Assessment tool – will help you find out if your product qualifies.
Does your product comply with the basic product specific rules?
First, determine if your product is wholly obtained in the country concerned. If so, it could qualify for lower customs duties. Being wholly obtained is mostly relevant for live animals and agricultural produce.
If your product is not wholly obtained in the country concerned, it will have to comply with other product-specific rules. If there are alternative rules, your product needs only comply with one of them.
Typically, these are the rules
- detail the criteria for sufficient production or transformation where the product is made of so-called non-originating materials
- define which products can be considered eligible if made exclusively from originating materials
Examples of basic product-specific rules
- value-added rule – the value of all non-originating materials used cannot exceed a given percentage of the product’s ex-works price
- change of tariff classification – the production process results in a change of tariff classification between the non-originating materials and the final product. For example, production of paper (Harmonised System Chapter 48) from non-originating pulp (Harmonised System Chapter 47)
- specific operations – a specific production process is required. For example, spinning fibres into yarns. Such rules are mostly used in the textile and clothing, and chemical sectors
Tips to help you comply with the product specific rules
If your product does not comply with the basic product specific rules directly, an additional set of rules may still help your product qualify for originating status.
- the tolerance rule allows the use of non-originating materials that are normally prohibited by the product-specific rule up to a certain percentage – usually 10% or 15% – of the product’s ex-works price
- you cannot use this tolerance to exceed the value threshold of the allowed maximum of non-originating materials listed in the product-specific rules
- cumulation allows you to consider as originating in your country or carried out in your country
- any non-originating materials used
- processing done in another country
There are three main types of cumulation
- bilateral cumulation (two partners) - materials originating in the partner country may be used as materials originating in your country (and vice versa). This cumulation applies to all EU preferential regimes
- diagonal cumulation (more than two partners applying identical rules of origin) - materials originating in a defined third country (mentioned in the relevant provision on cumulation) may be used as materials originating in your country
- full cumulation - processes carried out in any EU country or any other defined country (mentioned in the relevant provision on cumulation) may be considered as carried out in your country
- special derogations may also apply - check the trade agreement
If your product complies with all rules, you then have to consider a number of additional requirements.
Does your product also satisfy all other applicable requirements?
The product has to meet all other applicable requirements, such as minimal operations (sufficient working or processing) and rules on direct transport.
Minimal operations - sufficient working or processing
- you must verify that the working or processing done in your country goes beyond the minimal operations required
- the minimal operations are listed in the rules of origin of the trade agreement. They can include operations such as
- simple cutting
- simple assembling
- simple mixing
- ironing or pressing of textiles
- painting or polishing operations
- if the production performed in your country is one of those listed and nothing else was made there, meaning no material was produced or transformed, the product cannot be considered as originating, even if the product-specific rules of origin were satisfied
Direct transport rule or transport through a third country
- even if your product counts as ‘originating’, you will still have to ensure that the product was sent from the exporting country and arrived in the destination country without being manipulated in any other country, apart from operations needed to keep the product in good conditions
- each trade agreement sets out the specific conditions
- typically, trans-shipment or temporary warehousing in a third country is allowed if the products remain under the surveillance of the customs authorities and do not undergo operations other than
- any operation designed to keep them in good condition
- please note you will have to prove to the customs authorities of the importing country that your product was transported directly
Some trade agreements allow a duty drawback.
This means that if you pay duties on non-originating materials that you use to make a product which you then export under a preferential tariff, you can apply for a refund of those duties.
Who can help determine if your product qualifies?
- use ROSA to help you assess if your product satisfies the rules. Go to My Trade Assistant and select your product and market to reach this assistance
- if you want to be legally certain that you are applying the correct product code to your goods in advance, you can apply for a Binding Tariff Information (BTI) decision
- if you are unsure about the origin of your goods, you can also apply for Binding Origin Information (BOI). A BOI decision certifies the origin of your goods and is binding in the European Union. Please note a BOI does not exempt you from providing proof of origin according to the rules of the relevant trade agreement.
If your product is ‘originating’
Once you know your product qualifies for lower customs duties (your product counts as ‘originating’), the next step is to prove its originating status to the customs authorities of the country of destination. Only then, will you be able to pay lower customs duties.
Proving your product’s origin
Each trade agreement sets out specific rules on origin procedures. You can look them up in the Markets section or in the search results of My Trade Assistant. The rules specify how you can prove your product’s origin.
Proof of origin
There are different types of proof of origin depending on the trade agreement. Typically they can be either
- an official origin certificate issued by the exporting country’s customs authorities (such as the ‘Movement certificate EUR.1’)
- a self-declaration by the exporter (often referred to as an ‘origin declaration’ or an ‘invoice declaration’
For official origin certificates, the trade agreement
- includes an example
- gives instructions on how to complete it
For self-declarations, the trade agreement
- indicates what text to include on the invoice or on other documents identifying the products
Proof of origin is valid for a specified number of months from the date of issue.
Normally, no proof of origin is required for products of low value.
An exporter applying for an origin certificate should be prepared to submit documents proving the originating status of the products concerned.
To be able to self-declare the origin, the exporter must usually be pre-authorised by the customs authorities with ‘Approved Exporter’ status.
Present your products and documents for customs clearance
Once you have all the necessary documents for customs clearance, including the correct proof of origin for your product, you are ready to present your claim to pay lower customs duties to the customs authorities in the country of destination.
Each trade agreement’s rules of origin describe the ways customs authorities may verify a product’s origin.
Customs authorities may verify whether an imported product is indeed originating or fulfils other origin requirements. Verification is usually based on
- administrative cooperation between customs authorities of the importing and the exporting country
- checks done by local customs authorities
Start benefitting from lower customs duties for your imports or exports!
What happens if your product does not fulfil the requirements?
If your product does not comply with the rules of origin of the trade agreement, normal customs duties will apply.
- for countries that are members of the World Trade Organization, most-favoured nation rates (MFN duty rates) will apply
- for other countries the general rate (GEN duty rates) will apply
- ROSA helps you find the rules of origin for your product