Rules of Origin – A Barrier to Trade?
Updated: Feb 9, 2021
Rules of Origin are causing disruption to UK traders who are having to re-think their business models and are finding out that the recently signed EU-UK Trade Cooperation Agreement (TCA) is not necessarily helping them to avoid import duties and taxes on some of the goods the exported to or imported from the EU.
The New EU-UK TCA allows for goods to move tariff and quota free if they qualify under the Rules of Origin in the agreement. The TCA allows also for full bilateral cumulation which means materials originating from the EU, as well as production carried out within the EU on non-originating materials, may be considered as originating in the UK (and vice versa).
Why are Rules of Origin used?
Rules of Origin are applied to ensure that only goods originating in the countries that have signed the agreement benefit from reduced tariffs and other non-trade barriers covered by the agreement. If these rules were not applied, companies could simply import goods into a country that has a trade deal in place with the country they want to export the goods to, and then just export the goods even though the country of origin does not have a deal with that country.
Rules of Origin can also apply when there are no trade agreements and to enable non-preferential access, in cases where importing countries require the monitoring of certain goods due to quotas, sanctions or anti-dumping rules.
How do they work?
Rules of Origin and cumulation principles tend to vary from trade agreement to trade agreement and from commodity code to commodity code.
If at least 50% of the commodity is considered as originating in the UK, then the goods would be considered of UK origin. Naturally, this is not an issue for goods wholly originating in the UK. However, in modern supply chains parts come from countries all around the world. When the UK was a member of the EU, parts from EU countries counted towards the origin of the goods. However, although this is still possible in some agreements, it is only possible if the goods are processed in some way in the UK. This is called cumulation and is included in most trade agreements, however it only applies if the goods are processed beyond the list of minimal processes which do not change the origin of the goods. For example, repackaging a good is considered a minimal process which does not affect origin.
Rules of Origin are now an added trade barrier that UK exporters did not need to consider before. Therefore, it is important to understand how these rules work to be able to know which goods can benefit from the agreement.
Where can you find what Rules of Origin apply to your goods?
The UK Government has launched two new online tools that can help you identify what rules apply to your specific commodity codes:
What constitutes proof or origin?
Each Trade Agreement the UK now signs will have provisions for what Rules of Origin will govern such agreement and this will include what type of proof of origin you need to consider when exporting or importing. Proof of origin can include:
EUR1 or EUR-MED movement certificate
origin declaration by the exporter which can be added on a commercial invoice, packing list or delivery note.
Generalised Scheme of Preferences form A
The length of time proof of origin will be valid for depends on the preference agreement and the type of proof.
Need help with Rules of Origin?
If you would like to acquire more in-depth knowledge on Rules of Origin, why not join us on our upcoming Rules of Origin training course which will be delivered on the 12th of February
Need UK EUR1s? Take a look how the Chamber can help here
Check our Brexit Hub and all the useful guidance we have compiled on Rules of Origin
Check our FAQ section as we are adding more Q&As related to Rules of Origin
Have more specific questions regarding Rules of Origin which require expert advice, please use our Bespoke Service and either a member of our in-house team or GMCC associate can help you clarify doubts.
Sources: British Chambers of Commerce, HMRC