Arne Mielken
- Sep 27, 2021
- 9 min read

10 Questions on Rules of Origin Compliance under the UK-VietNam Free Trade Agreement

We answer the 10 most important importer/exporter questions on Rules of Origin for duty-free trade under the UK-VietNam FTA.

The UK-Viet Nam Free Trade Agreement entered into force in May 20021. It secures access to staged tariff reductions between the UK and Viet Nam. The deal locks in the 65% of all tariffs that have already been eliminated on UK-Viet Nam trade. This will increase to 99% of tariffs after six years. This includes eliminating tariffs for UK exporters of machinery, mechanical appliances, and pharmaceutical products. The preferential tariffs of the FTA will provide an identical opportunity for Viet Nam to increase exports of key products such as phones and components, garments, footwear, and fish to the UK. Viet Nam continues to receive duty-free tariff quotas for its 14 products, including rice, with improved market access.

Rules of Origin

In order to qualify for the lower or zero preferential tariffs under the UK-Viet nam Free Trade Agreement, your or your business partner's must originate in the UK or Vietnam.

To help you, this page can be used by both exporters/producers and their suppliers to assess whether this product fulfils the rules of origin and can therefore be considered as originating.

General remarks

Please note that the GSP preferences may also apply and it is worthwhile checking
Product-specific rules are based on the Harmonized System,
You do not need to apply for a preferential tariff (or comply with preferential rules of origin) if the MFN duty for your product is zero.
For MFN duties, anti-dumping, anti-subsidies or safeguard measures, origin marking, non-preferential rules of origin apply.

QUESTION 1: Where do I need to look to understand if my product is originating?

Preferential origin is conferred on goods from particular countries, which have fulfilled certain criteria allowing preferential rates of duty to be claimed. If your product has been produced using any non-originating materials, the product has to fulfil the following product-specific rule to be considered originating in the UK or Vietnam (if there are alternative rules, your product needs to comply with only one of them). Each individual arrangement has its own legal base. First, you need to download the Rules of Origin as contained in the Reference Documents for The Customs Tariff (Preferential Trade Arrangements and Tariff Quotas) (Amendment) (EU Exit) Regulations 2020 part 4. For your ease of reference, download this here:

UK-Vietnam Rules of Origin 2021 by Custo

Download • 514KB

QUESTION 2: Do I meet any of the knock-out criteria, and don't need to bother any further?

Before you start looking at the Product specific rules you need to understand if you may be disqualified for the start

1. Minimal working or processing

You must also ensure the working or processing you do in the UK goes beyond the minimal operations listed in the agreement and that the other relevant conditions are met. For example, you cannot simply package or label a product from a third country and export it to Vietnam as a good originating in the UK. See the list of minimal operations in Article 6 of the Rules of Origin Protocol in the UK-Vietnam agreement text. Such operations include simple packaging operations, simple assembly, ironing or pressing of textiles, painting or polishing operations.

2. Principle of territoriality

The principle of territoriality means that the working or processing must be carried out in the territories of the parties. So, production of your product must take place in the territory of the UK or in Vietnam, without any processing outside those territories. This is called the territoriality principle. To get originating status, the production must take place in the territory of the EU or in the territory of the country or countries covered by the preferential trade arrangement, and cannot be partially done outside that territory.

If originating goods exported to another country outside the preferential trade area are used, altered, worked or processed there, they will be considered as non-originating when they return to the exporting country.

3. Direct transport rule

Originating products transported from the UK to Vietnam (and vice-versa) cannot be further processed in a third country.

The purpose of direct transport is to ensure that the goods arriving in the country of import are the same as those which left the country of export. Preferential arrangements contain rules concerning the transportation of preferential goods from one party's territory to another. The purpose of direct transport is to ensure that the goods arriving in the country of import are the same as those which left the country of export. However, if for any reason the goods pass through or stop-over in, the territory of a third country provided that they stay under the customs supervision, the conditions of direct transport are considered to have been fulfilled. So, some operations such as preserving products in good conditions, storage, splitting of consignments can be conducted in a third country if the products are kept under customs supervision. This is set out by the non-alteration rule.

Proof of compliance with the direct transport rule may be given by a single transport document covering the passage of the goods through the country of transit or, for example, a "non-manipulation certificate" issued by the authorities of that country.

4. Separation

You need to physically separate originating and non-originating materials during storage. However, fungible materials may be stored together using accounting segregation for fungible materials under certain conditions. Fungible materials means materials that are of the same kind and commercial quality, with the same technical and physical characteristics. For example, refined sugar or certain chemicals. By an accounting system, the accounting segregation must ensure that the quantity of products, which can be considered as originating in the UK is the same that what would have been if there had been physical segregation of the materials used. It must be applied in line with the generally accepted accounting principles of a Party.

QUESTION 3: What does the list of Working or Processing Require me to do?

Each arrangement has an annexe containing the list of working or processing required to be carried out on non-originating materials in order that the product manufactured can obtain originating status (often known as the "list rules") and is preceded by an annex containing introductory notes to the list rules.

Here, ANNEX II holds the LIST OF REQUIRED WORKING OR PROCESSING

This list of working or processing is based on the HS and contains for each position the appropriate condition(s). A position can be all products of a chapter, a heading or a group of headings or just a specific selection of these products (so-called "ex" position).

Step 1: Tariff classification

Therefore, to use the list of working or processing it is necessary to first identify the tariff heading of the finished product.

Step 2: What's the product-specific rule?

Secondly, it must be checked whether the finished product has complied with the qualifying process listed in the column for the finished product of that heading. (If this is not the case, a product may still be originating if the value of the non-originating materials does not exceed the general tolerance rule, where applicable)

Examples of types of rules you may find

There are several types of rules but the most common (see table of examples) are:

that only wholly obtained materials can be used
that non-originating materials from certain positions can be used in or are excluded from the working or processing
that a specific working or processing operation must be carried out
that a certain percentage of value is added or cannot be exceeded in the production process
a combination of different rules
that a choice between different rules is given

Explanation of the rules:

"Manufacture from materials of any heading, except that of the product and of heading xxx"

A product complies with the rule when all non-originating materials used in its production are classified in a different HS heading than the product, with the exception of the specific non-originating materials mentioned in the rule, which cannot be used. The use of non-originating materials at an earlier stage of processing than those excluded by the rule is allowed but the use of non-originating materials that have been further processed is not. While the provisions of the individual arrangements may vary in certain details, most preferential origin arrangements have a number of common provisions.

Manufacture in which the value of all the materials used does not exceed xxx % of the ex-works price of the product.

A product complies with the rule when the value of all non-originating materials (or specifically mentioned heading(s) or subheading(s)) used in the production does not exceed a given percentage of the ex-works price of the product.

Wholly obtained

Don't forget! If your product is wholly obtained in the UK or Vietnam, it will be considered originating in the UK or Vietnam. This is applicable mainly to agricultural products, fish, minerals, waste and scrap. For example, to be considered as “wholly obtained” animals need to be born and raised in the UK or a partner country of a trade arrangement; products from animals (e.g. milk) need to come from animals raised there; plants need to be grown or harvested there.

Please note that in determining whether a product is wholly obtained, you should in practice disregard the origin of:

neutral elements, meaning factors of production, such as fuel, tools or machines used to produce your product,
packing materials and containers for shipment used during transportation,
packaging materials used for retail sale when classified with the product,
accessories, spare parts, tools and information materials if they are delivered and invoiced with the product.

QUESTION 4: Can I leverage the flexibility in the agreement to help me comply with the rules?

Cannot quite make it? There is certain flexibility allowed to help you comply with the rules. Does that help?

If in the production of a product you use materials that have already obtained originating status, you can count them as 100% originating (even if those materials were produced using non-originating materials). This is called the absorption principle.
Tolerance rules allow you to use a limited quantity of non-originating materials that are normally prohibited by the product-specific rule.
The ability to consider materials from or processing carried out in, another country as originating when incorporated into your product is called cumulation.  If materials originating in Vietnam have been used in the production of your product in the UK, you can count them as originating in the UK (and vice versa). This is called bilateral cumulation.
If your product is a set, you can apply an additional tolerance.

QUESTION 5: How do I prove that I meet the rules of origin?

To benefit from preference, originating products need to be accompanied by the appropriate proof of origin confirming their origin. When goods are claimed to have a particular preferential origin, the customs authorities of the importing country must be satisfied that the claim is correct and thus a proof of that origin is required. The different preferential arrangements require specific proofs of origin relevant to specific arrangements.

Importers and exporters are advised to check which particular proof of origin is required to substantiate their claims to preferential origin. Declaration on certain commercial documents (an invoice, a delivery note or any other commercial document which describes the products concerned in sufficient detail to enable them to be identified - the so-called "invoice declaration") can often replace the specific proof of origin. This is subject to prior authorisation by the customs authorities granted to approved exporters. Additionally, most arrangements allow the use of "invoice declarations" made out by the exporter for any consignment under a certain value.

QUESTION 6: How can a business claim for a preferential tariff at import?

In the UK-Vietnam Free Trade Agreement, importers in the UK can claim preferential tariff treatment based on either:

a certificate of origin made out in accordance with Articles 16 (Procedure for the Issuance of a Certificate of Origin) to 18 (Issuance of a Duplicate Certificate of Origin);
an origin declaration made out in accordance with Article 19 (Conditions for Making out an Origin Declaration) by: an approved exporter within the meaning of Article 20 (Approved Exporter) for any consignment regardless of its value; or any exporter for consignments the total value of which does not exceed EUR 6 000;
a statement of origin made out by exporters registered in an electronic database in accordance with the relevant legislation of the UK after the UK has notified to Viet Nam that such legislation applies to its exporters.

QUESTION 7: How do the customs authorities verify the origin of the product?

The customs authorities may verify whether a product imported is indeed originating or fulfils other origin requirements. The UK-Vietnam Free Trade Agreement is based on the following principles:

Verification is based on administrative cooperation between customs authorities of the importing and the exporting Party.
Checks on the origin of the products are done by local customs meaning visits of the importing Party to the exporter are not allowed.
The importing Party makes the final determination of origin.

QUESTION 8: What should exporter and importer do if they are not sure about the origin?

Advanced Origin Ruling

If you are unsure about the origin of your products or simply want legal certainty,

for goods imported to the UK you may apply for an Advanced Origin Ruling

Applications should be made to HMRC: The authorities have 120 days from the date they registered the application to make a decision. AORs are binding on the holder and on the UK customs authorities. The condition is that the goods and the circumstances described when applying for AOR are identical in every respect. They are normally valid for three years from the date of issue. Note that the existence of an AOR does not exempt you from the requirement to provide proof of origin.

QUESTION 9: Where do I find the legal texts?

UK-Vietnam FTA

.pdf

Download PDF • 898KB

UK-Vietnam FTA - Explanations