Quick guide to rules of origin

Rules of origin – why do we need them?   

Preferential rules of origin are an essential part of EU preferential trade arrangements, such as free trade agreements (FTAs), Economic Partnership Agreements (EPAs), and the Generalised Scheme of Preferences (GSP). To benefit from reduced or zero tariffs under these arrangements, products must comply with the specific rules of origin set out in the relevant arrangement.

Rules of origin determine in which country a product was made and help ensure that customs authorities apply lower preferential duties correctly. A product must either be wholly obtained in the country, including products such as agricultural goods, fish, minerals, and waste and scrap obtained entirely there, for example through agriculture, fishing, or mining. Alternatively, if products incorporate materials or components from a third country, they must undergo sufficient working or processing in the country. This required working or processing varies by product and is defined in the product-specific rules of origin. While harmonising those rules specific for each product across different EU trade agreements was a priority, they may still vary depending on the applicable trade agreement.
 

How to find out if your product qualifies for lower customs duties

To help you to determine whether a product imported from or exported to a given country fulfils the applicable rules of origin in a specific trade arrangement and therefore qualifies for preferential tariff treatment, consult the interactive "Rules of Origin Self-Assessment tool (ROSA)" in My Trade Assistant which appears once you check the applicable tariff for a particular product you want to import or export. This tool explains also how to prepare the correct proof of origin. Instructions on how to use ROSA are available here.

An overview of the general principles for determining origin under EU preferential trade arrangements is provided in the section below.

In general, a product qualifies as originating if it is either:

• Wholly obtained in the EU or the partner country, which typically includes agricultural products, fish, minerals, and waste and scrap obtained entirely in one party, for example through agriculture, fishing, or mining, including products made from such materials; or
• Sufficiently worked or processed there in accordance with the applicable product-specific rules of origin defined in each preferential trade arrangement for each product based on its tariff classification. These rules typically require a change in tariff classification, a value-added threshold, and/or the specific processing operations.

Provisions facilitating compliance with rules of origin

If your product does not directly meet the basic product-specific rules, an additional set of ‘flexibility’ provisions may still enable it to qualify for originating status. These flexibility provisions typically relate to tolerance and cumulation. Trade arrangements may also include specific derogations to provide further exceptions.

• General tolerance rule

The general tolerance rule allows the use of non-originating materials that are normally prohibited by the product-specific rule up to a certain percentage – typically 10% – of the product’s ex-works price or the final product’s weight.

The tolerance cannot be used to exceed the maximum value or weight threshold of non-originating materials allowed under the applicable product-specific rules.

• Cumulation 

Cumulation is a facilitation that allows materials originating in one country that is party to a preferential trade arrangement to be used in the subsequent production in another country that is a party to such an arrangement. In this case the originating materials of the first country can be treated as if they were originating in the latter country for the purpose of determining the origin of the final product.

There are three main types of cumulation: bilateral cumulation , diagonal cumulation and full cumulation.

Does your product also satisfy all other applicable requirements?

To benefit from preferential treatment, the product must also satisfy all other applicable provisions of the preferential trade arrangement, including requirements such as exceeding insufficient operations, complying with the transport rules (either direct transport rules or ensuring non-alteration of the originating status).

• Insufficient operations

To prevent products from acquiring originating status through only relatively simple operations, all preferential trade arrangements include a provision specifying types of working or processing that are considered insufficient to confer origin, even if the product-specific rule is otherwise satisfied.

Insufficient operations typically include operations such as preserving operations, packaging, simple cutting, simple assembling, simple mixing, ironing or pressing of textiles, painting or polishing operations. Carrying out more than insufficient operations alone does not confer originating status; the relevant product-specific rule must also still be satisfied.

• Principle of territoriality

The principle of territoriality means that the working or processing that confers origin must be carried out in the territories of the parties. In principle, originating products leaving the territories covered by the preferential trade arrangement lose their originating status.

• Prohibition of duty drawback

Some trade arrangements include provisions that prohibit using duty exemption or drawback on raw materials imported from third countries when those materials are subsequently incorporated into finished products exported under preferential tariff treatment to free trade partners. This principle is called prohibition of duty drawback.

• Direct transport or non-alteration rule

To benefit from preferences, originating products must be transported directly from the exporting party to the EU (and vice versa) without passing through any third country. The purpose of this rule is to ensure that the products imported are the same as those exported. However, products may transit through third countries if they remain under customs supervision.

In the most recent EU trade arrangements, the transport rule is defined as a “non-manipulation” or “non-alteration” rule, allowing additional operations when transiting in a third country, such as adding labels or splitting consignments.

Support for determining whether your product qualifies

Use the rules of origin self-assessment tool ROSA to help you assess if your product satisfies the rules. To access this tool, go to My Trade Assistant and select your product and market .

If you are unsure about the origin of your products, you can also apply for Binding Origin Information (BOI). A BOI decision certifies the origin 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 preferential trade arrangement.

More information on preferential rules of origin, including guidance documents, is also available on DG TAXUD’s website, which you can access here.

How to document the origin of your product

Once you know your product qualifies as originating, the next step is to prove its originating status to the customs authorities of the country of destination. Only then preferential tariff treatment can be claimed.

• Proving your product’s origin

Each preferential trade arrangement sets out specific administrative procedures to prove your product’s origin and claim preference. You can look them up in the Markets section or in My Trade Assistant in ROSA or in the section “Origin documentation and verification”.

• Proof of origin

In the country of destination, a claim for preferential tariff treatment must be supported by a proof of origin, to be presented to the customs authority of the importing country upon request, or by importer’s knowledge.

The type of proof of origin depends on the applicable preferential arrangement. Typically, they can be either:

• A self-declaration by the exporter (often referred to as a statement on origin, an origin declaration or an invoice declaration) who must usually be pre-authorised by the customs authorities with ‘Approved Exporter’ or ‘Registered Exporter’ status.
• An official origin certificate issued by the exporting country’s customs authorities (such as the ‘Movement certificate EUR.1’).
• Based on the Importer’s knowledge, which is the option for an importer to claim preference based on their own documented knowledge that the products satisfy the relevant rules of origin.

More information on the types of proofs of origin can be found here.

Verifying origin

Customs authorities may verify whether an imported product is indeed originating and fulfils all origin requirements. Verification may be carried out through random or risk-based checks by customs authorities and involves cooperation between the parties to the preferential trade arrangement.

What if your product does not fulfil the rules of origin requirements?

If your product doesn’t meet the rules of origin for a preferential trade agreement, standard customs duties will apply. For countries that are members of the World Trade Organization (WTO), most-favoured-nation (MFN) duty rates apply, while for other countries, the general (GEN) duty rates apply. You can use the Access2Markets portal to check the applicable MFN duty rates.