Making Sense of the Brexit Rules of Origin
As part of the Brexit trade deal, the UK and EU agreed on a Rules of Origin Free Trade Agreement. This means that goods originating in the UK and exported to the EU, or originating in the EU and exported to the UK will be exempt from tariffs and quotas.
Rules of Origin are a standard feature in trade agreements, and while the UK and EU's agreement sounds great on the surface, many companies are facing issues with red tape due to complexity of the rules and the deeply interconnected nature of UK-EU supply chains and logistics networks.
Covered in this article
- What does a good need to qualify
- How do you declare rules of origin
- What counts as proof
The preferential rate of duty only applies to 'qualifying goods' where you can accurately document and prove origin. Different products and materials are subject to different minimum percentages of origin, measured by value or weight and some processes incur exclusions while others do not. Additionally, Processed and manufactured goods often contain components and materials from around the world making this even more complicated and requiring substantial paperwork.
Goods do not have to wholly originate from the UK or EU to qualify for the rule of origin. Products manufactured in the UK or EU using some materials and components imported from around the world can still qualify. The rules for qualification depend on the product and its components.
Even if your goods meet the rules of origin requirements, but you do not have the correct paperwork to prove it, you will still need to pay customs duty. It is worth noting that low value consignments below £135/€150 going between the UK and EU are exempt from customs duty and do not have to comply with the rules of origin.
The rules of origin apply to goods being exported from the area that they classify as originating. For example a company whos products comply with the rules of origin for originating in the EU, can export their goods to the UK tariff-free. However, the goods cannot then be re-exported to the EU without paying tariffs – unless they have undergone sufficient processing in the UK. This is causing a major problem for some businesses, and many believe it is an oversight from the rushed agreement.
1 Year Waiver
To reduce the pressure on businesses and reduce the disruption to trade, the Government introduced a waiver that means, until the end of 2021, businesses can claim the rules of origin preferential duty rates for goods imported from the EU to the UK and vise versa without needing to hold a supplier’s declaration at the time you are claiming preference for goods . But the importer must be confident that the goods meet the rules of origin, and you must make every effort to obtain supplier’s declarations retrospectively.
What does a good need to qualify
- In general products with at least 50% of their value created in the UK or EU are exempt from customs import duty.
- The general tolerance rule lets manufacturers use non-originating materials up to a specific weight or percentage value of the ex-works price depending on the classification of the product.
- To claim preferential rates of duty, your product must originate in the EU or UK (as the exporting country)
- Rules of Origin are product specific so differ based on the product classification. You can find the list of goods and their rules here
How do you declare rules of origin
The Importer has to declare they hold proof that the goods comply with the rules of origin, this proof can either be:
- A statement on origin from the exporter that the product is originating
- The importer’s knowledge that the product is originating, this must be evidence in the importer's possession about the originating status in the form of supporting documents or records which may be provided by the exporter or producer.
If the importer is making a claim using their own knowledge, no statement on origin has to be provided by the exporter or producer.
What counts as proof
The statement on origin must be provided on an invoice, or any other commercial document (excluding a bill of lading), and describe the originating product in sufficient detail to enable its identification.
- The template text for a statement on origin is in Annex ORIG-4 of the Trade and Cooperation Agreement.
- If exporting a consignment over €6,000 from the EU to the UK, the EU exporter must have a Registered Exporter (REX) number and include it in the statement of origin.
- When exporting from the UK to the EU you must include your EORI number in any statement you issue.
- You can claim preference for multiple goods on the same document.
- A statement will be valid for 2 years from the date it was made out on imports into the UK and 12 months for imports into the EU
To declare importers knowledge you will need to hold documents that cover:
- the commodity code
- a brief description of the production process and origin of the goods used
- if the origin is ‘wholly obtained’, you need the category for the goods
- if the origin is ‘sufficiently worked or processed’ give one of the following:
- the value of the product as well as the value of all the originating and relevant non-originating materials used in the production.
- the weight of the product as well as the weight of the originating and relevant non-originating materials used in the product.
- a list of all the non-originating materials including their commodity code
- whether the goods have been altered or transformed
- Sometimes additional information will be requested to help verify the origin
More advice & information
Have you read our full guide for post-Brexit e-commerce? Download it here
We recommend that you seek professional advice for claiming preferential rates for your business. There are some great companies that specialise in handling rules of origin requirements for businesses.
You can also find the government guidance:
- on claiming preferential rates here
- checking your goods meet the rules of origin here
- the list of goods and their rules here
- a list of origin conditions here
- a glossary of terms here
- The full Trade and Cooperation Agreement is here