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Rules of Origin

Rules of Origin have been in the news a lot recently. Businesses up and down the country have been struggling to make sense of the new arrangements for exporting inside and outside of the EU.

With new processes and new paperwork, shipments are being held up and there are increasing concerns about the impact on the economy.

The problems centre around new rules which describe which goods can be counted as being made in the UK, meaning they benefit financially from these new agreements.

However, UK exporters from a variety of sectors are actually finding that goods which they thought were classified as being made in the UK, which they could export tariff- and quota- free, don’t actually meet these new origin rules, putting their goods at a disadvantage compared to their EU competitors.

The rules vary but in general, if at least 50% of the price of the product is considered as being made in the UK, then the entire product would be considered to be of UK origin. However with modern supply chains, parts come from all over the world, leaving UK exporters struggling to understand what tariffs are payable, and to even complete the relevant paperwork.

Your local Chamber can help. Read on for more information and to find out how to get in touch.

More Information

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Liam Smyth, Director, ChamberCustoms, explains Rules of Origin in more detail.

Although we now have an agreement with the EU for tariff-free trade, this hasn’t removed a need for businesses to have the right documentation to send shipments to Europe and beyond.

When we were part of the EU’s internal market there was no need for rules of origin as all goods were moving around the single market.  Now if companies want to avoid paying any duties on goods, they must show proof of where they were made.

The rules have changed for many products because of this and it’s a new situation for a lot of companies. This issue was highlighted recently by M&S and its Percy Pigs – because they are made in Germany, then come into the mainland UK before going on to the Republic of Ireland (ROI), they are now subject to import tariffs for the second leg of that journey. If they were exported from Germany directly to ROI they would be tariff free.

But this is an area of trade that our network has a huge amount of experience in as we’ve been issuing certificates or origin for exports to countries outside of the EU for a long time. Last year we issued 575,000 for businesses exporting £20billion of goods outside of the EU.

We can also help businesses to remain competitive through the use of preferential tariffs and by pushing government for interim arrangements for traders where full agreements are not yet in place, like we did recently with Vietnam.

We have been speaking to the Department for International Trade and the HRMC for the last three years to make sure that whatever the outcome of Brexit we would be in a position to supply the paperwork that businesses need.

Rules of Origin explained for SMEs

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What are Rules of Origin?

Rules of Origin determine the economic nationality of a good under a Free Trade Agreement (FTA). Businesses need to know about them because the UK-EU Trade and Cooperation Agreement (TCA) means they can trade with the EU without paying tariffs – but only if their product meets the relevant Rules of Origin.

How do Rules of Origin impact my business?

To export tariff-free into the EU, traders must check their goods meet the Rules of Origin requirements set out in the UK-EU Trade and Cooperation Agreement and have the right documentation. If your goods do not meet the Rules of Origin, they may face a tariff upon export to the EU.

What action do I need to take?

Watch the new on on demand video which summarise Rules of Origin processes for businesses.

Then, if you are a UK exporter and your EU importer wants to claim zero tariffs on your goods, there are 3 key steps to work out whether your goods comply with rules of origin:

1. Classify your good – every good has a commodity code and a list is available on gov.uk

2. Understand whether your good meets the applicable rule of origin from the TCA (Chapter 2 as well as Annexes ORIG-1 to ORIG-4 will be most useful). You can also use the export checker tool to find out what rule of origin applies to your exports.

3. Understand how to demonstrate origin to the customs authorities.

For help in working out whether your goods comply and how to demonstrate this to customs authorities, read the Rules of Origin Guidance on trading with the EU.

You may choose to use a customs agent to help you with Rules of Origin and there is guidance available here on how to find one.

To view the full short explainer document, click here.

Frequently Asked Questions

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Why are Rules of Origin (RoO) in the news at the moment?

Despite the headlines of ‘tariff free trade for goods’ when the deal was agreed, the stark reality of the deal is now dawning on businesses. The UK’s agreement with the EU only allows goods of UK Origin to move tariff and quota-free. Many UK exporters are finding that goods they thought they could export tariff and quota free do not meet the origin rules, putting their goods at a disadvantage compared to their EU competitors.

These new rules define which goods can be counted as ‘originating’ in the UK and that will therefore benefit from the treaty.

So, why do we have RoO?

RoO are written into all trade agreements to protect a countries core production from low cost imports and to ensure that reduced tariffs covered by the agreement are only available to goods originating in the countries that have signed the agreement. For example, a US company might want to export to the EU, but the US and the EU don’t have a trade deal. Without RoO the US company could export the goods to the UK and then move them into the EU, taking advantage of the UK:EU trade deal.

When the UK was part of the single market, goods produced in the UK could have components manufactured elsewhere in the EU. The finished product then conferred EU Origin status and benefitted from tariff-free entry into countries with which the EU had signed a trade agreement.

What if the goods are made up of parts from different countries?

The rules vary for each commodity code, but generally speaking, if 50% of the price is considered as originating in the UK, then the goods would be considered to be of UK origin. For goods wholly originating in the UK, such as agricultural products, this isn’t an issue, but with modern supply chains, parts come from all over the world and some traders are finding that their products don’t meet the threshold for conferring UK Origin on their products for export to the EU.

What if my goods come from overseas but are processed in the UK?

When we were a member of the EU, parts from EU counties counted towards the origin of the goods and in some agreements they still can, as long as they are subjected to ‘substantial processing in the UK. This is called cumulation and is included in some format in most trade agreements.

Can you show me an example of how cumulation works?

For example, if you import Rice of EU Origin, produced in Italy, and then re-export the rice in the same condition as it arrived to a customer in Germany, you can’t claim UK Origin for the purposed of benefitting from preferential tariff rates. There is no ‘cumulation’. It doesn’t matter that the rice is being re-imported back to the EU. If you then process the rice in some way, adding UK origin inputs and repackage as a ready meal then the rice will have been subject to substantial transformation, will have changed its tariff heading and may then be able to enter the EU tariff free.

I am repackaging my imported goods here in the UK – does this count as ‘processing’?

There is a set list of processes which are seen as minimal and which do not change the origin of the goods, and repackaging is one of them. For example, if Norwegian salmon is imported into the UK and then repackaged for the consumer market, then repackaging is considered a minimal process which does not confer origin, so the goods remain of Norwegian origin. If the same Norwegian salmon is imported into the UK and is smoked and then repackaged for the consumer market, then the salmon can be considered of UK origin.

What documents do I now need to export my goods from the UK?

One of the main documents needed to export from the UK is a certificate of origin, which confirms where the goods and their components originate from. Without this you cannot export to many markets around the world. Another document which businesses may need is a UK EUR1 preference certificate – this allows goods to be exported to countries where we have a trade agreement in place and avoids having to pay any tariff or duty at the importing border.

I don’t know how to do this - can my local Chamber help?

Yes. This is an area of trade that the Chamber of Commerce Network has a huge amount of experience. They have been issuing certificates of origin for exports to countries outside of the EU for a long time. For example, last year they issued 575,000 for businesses exporting over £20billion of goods to other markets.

For more information contact your local Chamber

How to find help

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"I am struggling with these new rules - can my local Chamber help?"

Yes.

This is an area of trade that the Chamber of Commerce Network has a huge amount of experience. They have been issuing certificates or origin for exports to countries outside of the EU for a long time. For example, last year they issued 575,000 for businesses exporting £20billion of goods outside of the EU.

We can also help businesses to remain competitive through the use of preferential tariffs and by pushing government for interim arrangements for traders where full agreements are not yet in place, like we did recently with Vietnam.

We have been speaking to the Department for International Trade and the HRMC for the last three years to make sure that whatever the outcome of Brexit we would be in a position to supply the paperwork that businesses need.

Find your local Chamber today