What is origin and why does it matter?
In order to complete customs documentation when shipping goods across international borders, origin must be established. The rules of origin are important as they determine whether; duty, tariffs or quotas apply to a shipment. Goods can have either preferential or non-preferential origin.
Non-preferential origin applies when a country wishes to identify the origin of goods for trade control (quotas), statistical or political purposes (tariffs).
Preferential origin is established in order to decide whether a reduced or nil customs duty applies to a shipment. A Free Trade Agreement between countries will set out the circumstances where reduced duty rates apply, e.g. The Brexit trade deal between the EU and the United Kingdom (UK).
Generally, the origin of goods is where they have been grown, produced, or manufactured. This may not be the same country as where the goods are shipped or bought from.
Establishing the country of origin (Preferential Origin)
Firstly, it is important to establish if the goods being transported are made using materials originating in one country, or different countries.
Products made using materials exclusively originating from one country covered by a trading agreement are ‘wholly obtained’. This makes the country of origin easier to confirm. A list of wholly obtained products can be found on the HM Revenue and Customs (HMRCs) website.
It is common that products could be made or processed using materials from lots of different countries. Determining the country of origin can be extremely complicated in this scenario and requires specialist knowledge of the relevant customs rules and reviewing international treaties.
If the origin of your goods is not straightforward you can apply for an origin ruling from HMRC. This is a ruling that confirms the origin of specific goods and is valid for 3 years.
We would strongly recommend that you seek advice from a customs agent, such as Tudor International Freight, in order to establish the country of origin.
As a guide, materials need to be ‘sufficiently worked or processed’ in a country to qualify as originating from that country. A guide to establishing whether goods have been ‘sufficiently worked or processed’ can be found on HMRCs website.
There are specific rules for determining ‘sufficiently worked or processed’ that apply to:
- Both imports and exports
- Imports only
- Exports only
Proof of origin
To benefit from preferential tariffs when importing goods, the importer will need to declare they hold proof that the goods comply with the rules of origin.
To claim the preferential rate of duty you should have either:
- A statement on origin that the product is originating made out by the exporter
- The importer’s knowledge that the product is originating
More detailed information outlining the paperwork used to provide proof of origin can be found on HMRCs website.
EU/GB trade and the rules of origin
As a result of Brexit, and the UK’s departure from the EU customs union, customs checks are now required, and customs paperwork must be completed and submitted whenever goods move between GB and the EU. Customs duties may now also apply.
The Brexit trade deal between the EU and UK, allows for reduced or nil (preferential) rates of customs duty in specific circumstances.
To qualify for duty preference when shipping goods between the EU and GB, your product must originate in the EU or UK to benefit from the reduced duty rates within the Brexit trade deal.
If your goods do not meet the rules of origin requirements (or if you cannot prove that the goods meet them) you will need to pay customs duty.
If duty is payable on exports to the EU, this will be under the Common External Tariff. If duty is payable on imports to the UK, this will be under the UK Global Tariff.
Businesses trading goods between the EU and GB will need to be prepared for the different customs rules and regulations that apply.
Determining the origin of goods is complex and the rules of origin must be applied correctly to establish whether reduced customs duty rates are applicable.
About Us - Tudor International Freight
Established in Horsforth, Leeds, back in 1991, we are a logistics company who are experts in road, air and sea freight. We transport goods to most major cities, towns and suburbs across all 6 continents. We go over and above to ensure that our client’s products, goods and cargo are transported around the world safely and successfully. We are a family business, who are still based in Horsforth, Leeds, West Yorkshire.