Many exporters or importers forget that the tolerance rule can help your product count as originating. Find out how it works
The general tolerance rule permits manufacturers to use non-originating materials up to a specific percentage value of the ex-works price.
However, should the specific working or processing rule already allow the use of non-originating materials, the tolerance cannot be used to exceed the percentage amount specified in the list rule.
The maximum will always be that allowed by the specific rule. The percentage of the tolerance allowed varies from one preferential regime to another.
The general tolerance rule does not apply to textile goods of Chapters 50 to 63 (inclusive).
Specific tolerance rules for textiles are included in the introductory notes to the list rules.
EXAMPLE: EU-UK Trade Agreement
Article ORIG.6 ("Tolerances") of the EU-UK Trade and Cooperation Agreement
The tolerance thresholds are:
15 % of the weight of the product for agricultural products classified in Chapters 2 and 4 to 24 of the Harmonised System, other than processed fishery products of Chapter 16.
10% of the ex-works price of the product for industrial products other than textiles and clothing
for textiles and clothing classified under Chapters 50 to 63 of the Harmonized System special tolerances apply as set out in Notes 7 and8 of Annex ORIG.1 (“Tolerances for textiles and clothing”),
you cannot apply the tolerance to products for which product specific rules set out the maximum percentage of non-originating materials expressed in value or weight,
the tolerance does not apply to products wholly obtained in the EU or the United Kingdom.
The tolerance rule allows you, under certain circumstances, to use some limited percentage of 'non-originating materials' in your product that normally would not be allowed by product-specific rules and for it still to qualify as 'originating'.
Where a product-specific rule is expressed as a change of tariff classification (e.g. change of Chapter, tariff heading or sub-heading) the tolerance allows the use of non-originating materials that have the same tariff classification as the product as long as the value of these materials does not exceed the tolerance threshold.
Example of how to apply tolerance
A doll (HS heading 95.03) is produced in the EU from:
non-originating plastic pellets (HS Chapter 39),
baby's garments (HS Chapter 62) and
plastic eyes (HS heading 95.03).
The product-specific rule for a doll is:"Manufacture from [non-originating] materials of any heading except that of the product".
We notice that plastic eyes are classified under the same HS heading as the doll. The product-specific rule does not allow using non-originating materials of the same heading as the product. But under the tolerance rule, the doll could still fulfil the product-specific rule if the value of the doll’s eyes does not exceed 10 % of the ex-works price of the doll.
Where a product-specific rule includes a percentage of the maximum value/weight of non-originating materials, you cannot use the tolerance to increase the percentage threshold. The maximum content of non-originating materials will always be the percentage indicated in the product-specific rules.
If the product-specific rule allows a maximum of 40% of non-originating materials of the product’s ex-works price, this is the limit that applies and not 40% + 10% (tolerance).
Tolerance does not apply to wholly obtained products (e.g. tomatoes) but it does apply to products produced from wholly obtained materials (e.g. tomatoes used to produce ketchup).
In the latter case, the tolerance applies to all non-originating materials that normally are not allowed by the product-specific rules (e.g. 10% of the tomatoes used can be non-originating).