Getting to grips with the product-specific rules of origin in a free trade agreement is essential to claim zero duty, argues Arne Mielken of Customs Manager Ltd.
Jessica A., Buying Manager, and valued ongoing support subscriber is checking compliance with rules of origin in a trade agreement. After studying Customs Manager's hub on rules of origin, she has a follow-up question where to find the rules of origin in trade agreements. This is what we replied.
Answer by Arne Mielken, Jessica's personal Customs Manager:
Thank you for your question and your interest in rules of origin.
Rules of origin determine where goods originate, i.e. not where they have been shipped from, but where they have been produced or manufactured.
As such, the ‘origin’ is the 'economic nationality' of goods traded in commerce.
Besides the tariff classification and value, it is the origin of a good that is a determining factor based on which the customs tariff treatment is applied. This is the same in all trade agreements around the globe.
Preferential rules of origin determine whether goods qualify as originating from certain countries, for which special arrangements and agreements apply.
Where all the requirements are met, goods with preferential origin are eligible to be imported with lower duty rates or at zero rate, depending on the preferential tariff treatment provided.
Intro into product-specific rules of origin
Each trade agreement has an annex containing the product-specific rules, in the form of a list. This list shows the working or processing required to be carried out on non-originating materials (or "foreign" materials - raw materials or components not from your partner country) in order that the product manufactured can obtain originating status.
To use this "list of working or processing" it is necessary to first identify the tariff heading of the finished product. Secondly, it must be checked whether the finished product has complied with the qualifying process listed for the finished product of that heading.
Where to find the product-specific rules of origin
Unfortunately, these rules are buried deep in the FTAs. For example, in the EU-UK Trade and Cooperation Agreement, these rules are listed in ANNEX ORIG-2 [Product-specific rules of origin], roughly around the Page 500 mark.
Download the entire agreement here:
To read these correctly, it is necessary to first identify the tariff heading of the finished product. Then, you must be checked whether the finished product has complied with the qualifying process listed next to that heading. If this is not the case, a product may still be originating, please contact us to discuss options.
Example: HS 1602 under the EU-UK TCA
For example, assume your product was in Heading 1602. The relevant RoO would be:
"Production in which all the materials of Chapters 1, 2, 3 and 16 used are wholly
You now need to check if this rule applies to your product. This starts with understanding each term:
Production = More than minimal working/processing operations
Materials = raw materials/ingredients to make this product, in a party of the Agreement.
Wholly obtained = That means that it occurs naturally.
A plant that is grown and harvested in the EU or UK
An animal that is born and raised in the EU or UK.
Water from the source in the EU or UK.
The specific conditions for materials (ingredients) to be considered wholly obtained can be found in Article ORIG.5 of the EU-UK Trade and Cooperation Agreement. You probably need to evidence that you meet these rules.
Chapters 1, 2, 3 and 16:
1. Live animals
2. Meat and edible meat offal
3. Fish and crustaceans, molluscs and other aquatic invertebrates
16. Preparations of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates.
Once you understood what it means the fun bit starts, assessing if you meet these rules. But don't worry. With your ongoing support subscription, you have a personal Customs Manager in your corner, me :-), ready to help you out. Let's arrange for a call to go through it.
Free Webinar on Rules of Origin:
10 Questions to Zero Duty
Jessica, also remember that we offer a free webinar on rules of origin, live and on-demand that you can watch. It spells out the 10 questions you need to ask yourself to get to zero duty under the EU-UK TCA. Book for free at www.customsmanager.org/booking.
I look forward to seeing you there.
Customs Manager Ltd.