Breaking Down the EU-UK Trade and Cooperation Agreement: Rules of Origin Explained

The EU-UK Trade and Cooperation Agreement (EU-UK TCA) provides for zero tariffs and zero quotas on all trade of EU and UK goods that comply with the appropriate rules of origin.

Because of the UK leaving the EU Single Market and Customs Union, the way businesses in Great Britain trade goods with the EU has changed in 2021. To export goods to the EU a UK business now needs to comply with customs procedures of any non-EU member, including UK export declarations and import requirements on entry to EU Member States. For importing goods into the UK, border controls with full customs checks have been applied since January 2022.

The EU-UK Trade and Cooperation Agreement (TCA)

The EU and the UK signed the EU-UK Trade and Cooperation Agreement (TCA) on December 24th, 2020. The Eu-UK TCA ensures that goods moving between the EU and UK do not have to pay any tariffs or quotas, as long as they meet the preferential rules of origin (RoO).

Introduction to the Rules of origin of the EU-UK Trade and Cooperation Agreement

Rules of origin are a crucial aspect of any free trade agreement, such as the TCA, because they ensure that zero-tariff trade can be guaranteed for the exchange of EU and UK goods. Although claiming preferential treatment can be complex, it is necessary to comply with the requirements and procedures to receive tariff-free trade. Preferential rules of origin apply to goods from countries that meet certain criteria, and only goods that meet these criteria will receive tariff-free trade.

The "economic nationality" of a good is determined by RoO, which is based on the origin of the products or materials used in its production. This prevents goods manufactured in third countries from being routed through the UK or the EU to avoid paying third-country tariffs.

The rules are straightforward:

• If goods are imported into the UK and "originate" in the EU or vice versa, they will be entitled to preferential treatment.

• Goods that are mainly manufactured in a non-EU country or have had insufficient processing in the EU or the UK will be subject to tariffs in the importing country.

To remember:

You can continue to import and export goods tariff and quota-free, provided that those goods meet the ‘Rules of Origin’ requirements set out EU-UK Trade and Cooperation Agreement (TCA).

What goods can be considered as “originating”?

To claim preferential treatment and avoid paying duties under the TCA, the product should either originate from the EU or the UK.

In order to comply with the origin criteria, the goods must be manufactured from raw materials or components grown or produced in the beneficiary country (i.e. wholly obtained), or undergo a specific amount of production in the beneficiary country (i.e. sufficient processing) if they are not wholly obtained.

Goods that meet these criteria are considered "originating" from the EU or the UK and can benefit from tariff-free trade under the EU-UK TCA.

What should you do for my products to benefit from the preferences?

To ensure that goods exported from the EU or the UK can benefit from preferential tariff treatment in the UK or EU, there are a few things to consider.

1. Firstly, the product needs to be originating in the EU or UK, which means that it must be wholly obtained or produced within the EU/UK while satisfying a list of requirements.

2. Secondly, the product must be sent directly to the UK without alteration.

3. Thirdly, the UK importer may require a statement of origin from you to confirm that your product originates in the EU.

This statement should include the necessary information as per the EU-UK TCA Agreement (Annex 7 TCA (ex-Annex ORIG-4)), and it should appear on an invoice or any other document that describes the product well enough for it to be identified.

How do you know if your product is originating?

If you are an exporter from the EU or UK and an importer asks for a statement of origin, it is your responsibility to determine whether your product is originating or not. Similarly, if you are an importer from the EU or UK and you are claiming origin based on your knowledge, you need to assess if your product is originating. However, if you are importing based on a statement on origin, you will rely on the statement made by the EU or UK exporter respectively.

To qualify as originating, the product you export or import should be wholly obtained in the EU or UK, or meet the requirements set out in the Product-specific rules of origin. If you need help to assess whether your product satisfies the requirements of the Product-specific rules of origin, you can contact Customs Manager Ltd. All you need to do is tell us the classification code of your product, and we will guide you through the process, giving you all the necessary information.

Alternatively, you can use this trade intelligence service to find out:

• The rules of origin for your product under the TCA

• A step-by-step checklist to see if your product meets the criteria for preferential rules of origin treatment

• An explanation of rules of origin requirements and terms

• Practical examples

• Direct access to legal texts

• A tailored self-assessment report based on your answers that you can download or print

• An overview of rules of origin procedures

When determining whether your product is originating, there are other relevant elements to consider, such as tolerances, cumulation, list of insufficient operations, the use of drawback, etc. You can find a short explanation of these additional elements later.

How to claim preferential tariff treatment in the EU or in the UK

The importer can claim preferential tariff treatment in either the EU or the UK in two ways:

The first way is by using a statement on origin, and the second way is by using 'importer's knowledge'.

A statement on origin is made by the exporter of the goods. According to the TCA, a statement on origin can be created "in an invoice or on any other document that describes the originating product in sufficient detail to enable the identification of that product." Therefore, any document that meets this condition is acceptable to create a statement on origin.

It is the exporter's responsibility to make sure that they have the necessary information to create the statement on origin and to ensure that the information provided is correct. The exporter can use any relevant source of information to determine the origin of the products, such as supplier's declarations, which provide a description and the value of the non-originating materials used.

Statement on origin

To declare the origin of a shipment, you can create a Statement on Origin for either a single shipment of one or more products or for multiple shipments of identical products imported within a specified period of time (maximum of 12 months). The exporter's signature is not required; their name is sufficient.

If you are an EU exporter, you must first register in the EU Registered Exporter System (REX) to create a valid statement on EU origin for products exported to the UK. You will need to include your REX number in the Statement on Origin. To register, you need to complete an application form and submit it to your national authorities who will assign you a registered exporter number. The assigned number will then be entered into the REX system. For more information on the REX system, please visit the provided link.

For small consignments of less than EUR 6,000, you don't need to register in REX to create a valid statement of origin. Hence, there's no need to include any number in the statement.

If you're a UK exporter, the Statement on Origin should include an EORI number that begins with "GB" when exporting to the EU under preferences, regardless of the consignment's value. For more information on GB EORI, please contact us.

When to make out a statement on origin

My company is exporting goods to Northern Ireland from an EU Member State. Should you complete a statement on origin?

No. From 1 January 2021, the Protocol on Ireland and Northern Ireland applies. EU goods brought from an EU Member State to Northern Ireland, or vice versa, will be treated as an intra-Union transaction. There will be no customs formalities and therefore no statement on origin is required. These questions and answers are presented here for illustrative purposes, a more detailed and comprehensive list of questions and answers is available here.

⇉ Do I need to complete a statement of origin for small consignments being moved from the UK to the EU as part of my personal luggage?

Small consignments as part of personal luggage not being imported by way of trade are exempted from the requirement to have a statement of origin. Their total value must not exceed EUR 1 200.

⇉ Do I need to complete a statement of origin for goods sent in small packages as gifts from the UK to the EU?

No, small consignments sent from a private person to a private person as a gift or otherwise, and which is not dispatched by way of trade, does not need a statement of origin. For the parcel to qualify as a "small package" it must however not exceed EUR 500 in value.

⇉ What about for online purchases? Do I need a statement on origin for these parcels?

It depends on whether you are a consumer based in the EU or in the UK.

• For EU importers:

If you buy goods from UK online stores that are then sent to the EU, a statement of origin will be required.

• For UK importers:

The UK exempts goods sent from a private person in the EU to a private person in the UK, as well as other small consignments brought from the EU into the UK, if their value is below GBP 1,000. In the case of shipments between the EU and the UK, a preferential tariff treatment can be claimed based on either a statement of origin made out by the exporter or the importer's knowledge that the product is originating. Originally, the origin was declared based on the importer's knowledge.

⇉ Can I change my declaration to be based on a statement of origin?

Importers originally claiming preferential treatment based on importer’s knowledge may subsequently change their claim and base it on a statement of origin only within the possibilities provided in the UCC to modify the import declaration and provided that they have a statement on origin issued before the claim.

Importer’s knowledge

If an importer wants preferential treatment for their product, they can claim it based on their own knowledge. This is only possible if they already have the information required to prove that the product is originating. The importer can use any supporting documents or records provided by the exporter or manufacturer to prove the product's origin. However, the importer should only make the claim if they have all the necessary information needed to prove the origin of the product.

Making the claim

When claiming preferential treatment, the importer must choose between two options: statement on origin or importer's knowledge. It is important to note that once the choice has been made, it cannot be changed. For example, if a claim for preference is made using importer's knowledge but the importer cannot provide sufficient evidence to support the claim, they cannot switch to a statement on origin. The only way to amend the claim is by modifying the import declaration in accordance with customs legislation (the Union Customs Code and its implementing provisions). To do so, the importer must have a valid statement on origin issued by the exporter.

Retrospective claims

If an importer has imported goods and not yet claimed preference, they can still claim for preferential treatment up to three years after the importation. This will allow them to get a refund or remission of the duties that were initially paid at the time of importation. This provision applies to both EU imports from the UK and UK imports from the EU. The importer can make a retrospective claim based on a statement on origin or their own knowledge.

Origin information to include in your customs declaration

The code to be supplied in the customs declaration will vary depending on the basis of the claim. In case of a claim made because of a statement on origin, you may use the code U116 in the EU or U110 in the UK. However, if the claim is based on the importer’s knowledge, please consider using the code U117 in the UK. For statements on origin for multiple shipments of identical products, please consider using the code U118 in the EU. Please check the latest rules or get in touch for any updates.

Verification of origin

Once an importer has claimed preferential treatment, the relevant authorities in the EU or the UK will assess whether the products comply with the rules of origin and whether they are eligible for preferential treatment.

In cases where there is uncertainty about the origin of the goods, the relevant customs authorities may request verification from either the importer or the customs authorities of export, depending on the basis on which the origin was claimed.

If the importer has knowledge of the origin, verification will only be addressed to the importer. In this case, the importer must provide all relevant information to demonstrate that the product is originating. If the importing customs authorities are not satisfied with the information provided, the preference may be denied.

If the origin is claimed based on a statement of origin, the verification may be addressed to the importer, but the importer is only required to submit the statement of origin. In this case, the customs cannot deny the preference, and the importing customs will continue the verification process by requesting the necessary information from the exporting customs to determine the origin of the product.

Small consignments

For non-commercial small consignments, statement of origin or importer's knowledge is not required. A 'small consignment' in EU is one which has a value of less than EUR 500 for products sent in small packages from one private person to another, or less than EUR 1,200 for products contained within a traveler's personal luggage entering the EU. However, these exemptions do not release traders and individuals from the responsibility of fulfilling their obligations regarding rules of origin, which means ensuring that the product is originating in the UE or the UK to receive zero duty treatment. If the importing authorities doubt the veracity of the declaration, duties could apply.

For small consignments going from the EU into the UK, the exemption from the requirement to have a statement of origin or importer's knowledge applies if the total value of the product does not exceed GBP 1,000. This applies to all low-value consignments, including products that are a part of a traveler's luggage, small consignments sent from one private person to another or other low-value consignments.

This exemption does not apply to imports into the EU from UK online stores. EU consumers who order goods by small consignment from online retailers based in the UK should be aware that they may be liable for import VAT and for customs duties if the product is not originating or if the origin is not proven.

Record-keeping

Importers must possess origin statements made by exporters or maintain records that demonstrate that the products meet the criteria for obtaining originating status for at least three years, if the claim for preferential treatment was based on a statement on origin or importer's knowledge, respectively. Exporters must retain a copy of the statement and all other relevant records for a minimum of four years. If you imported small consignments, you are not required to keep records.

Further key elements of rules of origin

Tolerances

The tolerance is an instrument to further facilitate the acquisition of origin. The general tolerance rule permits manufacturers to use non-originating materials - which in principle cannot be used at all - up to a specific percentage of the ex-works price of the product or up to a specific weight. However, should the product specific rule already allows the use of nonoriginating materials up to a certain percentage, the tolerance cannot be used to exceed that percentage. For example, a product specific rule for a machine provides that the value of non-originating materials should not exceed 50% of the ex-works price of the machine. The tolerance for industrial products, including machines is of 10% in value. However, the product cannot contain 60% of non-originating materials (50+10), but 50% only, as the maximum will always be that allowed by the product specific rule (50% in this case). The percentage of the tolerance allowed by the rules of the TCA can be found in Article 42 (ex Article ORIG.6) and Annex 2 (ex Annex ORIG-1) (Specific tolerance rules applied to textile goods of Chapters 50 to 63).

Cumulation

Cumulation is the term used to describe a system that allows materials originating or transformed in country A to be considered as originating or transformed in country B when further processed in country B. This system can be used to facilitate the acquisition of origin of the product in country B that incorporates those materials from country A. 14 An important point to remember is that in the case of cumulation, the production carried out in each partner country on the products of the other country needs to go beyond so-called 'insufficient operations’, i.e. a list of minimal processing such as labelling, simple packing, etc. (see below). The EU and the UK have agreed to bilateral full cumulation. This means that not only originating materials but also materials processed in one Party (without being yet originating there) can be used in the other Party for cumulation purposes, as provided in Article 40 (ex Article ORIG.4). However, the EU-UK TCA does not allow the use of materials from third countries for cumulation purposes.

Insufficient operations

Insufficient operations are those listed in Article 43 (ex Article ORIG.7). They refer to operations implying a low degree of processing. If in a Party no more than one or more of those insufficient operations is carried out, the resulting product cannot be considered originating, even if the Product Specific Rule was satisfied. For example, if the product specific rule for a machine provides that the value of non-originating materials does not exceed 50% of the ex-works price of the machine and this was satisfied, but the only processing carried out in the Party was a “simple assembling” of the parts (one of the operations listed as insufficient) the machine does not obtain origin. Furthermore, in the case of cumulation, if the Party using the materials of the other Party only performs one or more of those insufficient operations on the materials of the other Party, cumulation cannot be activated and the Party cannot grant its origin to the product.

Duty drawback

The term ‘drawback’ refers to the refunding of duties paid on imported goods that are used in the production of goods that are exported. A ‘no drawback’ provision is included in some EU FTAs to prohibit this from happening when the goods are exported under the preferences provided by the FTA. In the context of the EU-UK TCA, duty drawback is allowed for at least the first two years of application of the agreement.

Accounting segregation

Originating and non-originating materials used in the production of a product that is going to benefit from preferences need to be kept separately. However, in the case of fungible materials, originating and non-originating materials may be stored together under the conditions provided in Article 50 (ex Article 14), as far as there is an accounting method in place. This method must ensure that the quantity of finished products which are considered originating during a certain period is no more than that quantity that would have been obtained if there had been a physical segregation of those fungible materials. 1 Guidance on insufficient operations including a list of illustrative examples is under preparation. 15 Averaging In the case that the Product Specific Rule applicable to your product is based on a maximum percentage of non-originating materials that can be used in the production of the originating product, Note 4 of Annex 2 (ex Annex ORIG-1) of the TCA introduces a facility for the application of the rule. The value of the nonoriginating materials used in the production of the product may be calculated on the basis of the weighted average value formula or other inventory valuation method under accounting principles which are generally accepted in the EU or in the UK.

Download Official Guide

On December 24th, 2020, the European Union (EU) and the United Kingdom (UK) signed the EU-UK Trade and Cooperation Agreement (TCA). This agreement ensures that goods transported between the EU and UK are exempted from tariffs or quotas, as long as they meet the preferential rules of origin (RoO). For anyone who needs to understand the rules of origin, an introductory guide is available for traders to master the RoO of the EU-UK TCA. You can download the guide by clicking on the link below.

introductory_guide_tca_rules_of_origin.pdf

Download PDF • 719KB

Training on Rules Of Origin

We offer a wide range of practical training courses on rules of origin that you can explore and that you can book here: www.customsmanager.org/events

Updates to all the Rules of Origin

We continue to offer ongoing updates on all matters of rules of origin and how to make sure that your products originate under the terms of the agreement. Please review the latest updates here: https://www.customsmanager.info/all-news/categories/rules-of-origin

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