Rules of origin for imported and exported goods
The European Community (EC) has rules for establishing the country of origin of imported and exported goods. You will need them to classify goods manufactured in more than one country.
As a customs union, the EC applies a common customs duty to goods imported from outside the EC. However, in practice, trade agreements between the EC and third countries, regional trade blocs and free trade areas determine the rate of duty and customs conditions. Some goods imported from or exported to certain countries will qualify for preferential treatment - eg lower or nil customs duty, whereas others will have non-preferential status and attract full excise.
This guide provides information on rules of origin and preferential trade agreements. It will help you prepare customs declarations to smooth the delivery and payment of goods and excise, as applicable.
Defining the origin of goods
The rate of duty that must be paid on your goods will depend on three elements - the type of goods, the country the goods are being imported into and where they are judged to have 'originated' from. The first step is to clarify the origin of the goods.
The European Community (EC) has trading agreements with certain non-EC countries and regional trading blocs or free trade areas. Once you have determined origin, you will be on your way to classifying your goods and establishing whether an agreement is in place with the country or countries with which you wish to trade. Where an agreement exists, you will need to check whether your goods qualify for any preferential treatment - eg reduced or nil rate of duty, which that agreement might allow.
Defining the origin
There are two main categories of origin in the rules:
goods wholly obtained or produced in a single country
goods whose production involved materials from more than one country
This second category is the more complex as there are several criteria to consider - eg the origins of the materials, the country in which the final substantial production phase took place and the value the working and processing in each country has added.
If a product is manufactured entirely in the European Union (EU) and is exported to a country with which there is a preferential arrangement, it may attract lower or nil rates of duty when it is imported into the destination country.
However, if some of the components are manufactured in the EU, but components are added and the product is assembled in another country, it may be judged that the product originates from the country where it is assembled. The duty requirement will depend on the arrangements between the country in which the product was assembled and the country into which it will be imported.
If you are importing goods, you can contact the HMRC VAT Helpline on Tel 0300 200 3700.
If you are exporting goods, you should check with your customer, the customs authorities in your customer's country or the Invest NI overseas trade division.
Once you have clarified the origin of the goods you're exporting or importing, you can find out if they qualify for preferential treatment under a tariff preference scheme.
There are two types of scheme:
- autonomous or non-reciprocal schemes are only for imports into the European Community (EC) under the Generalised System of Preferences (GSP)
- reciprocal schemes applying to both imports to the EC and exports from it
Read more about managing certification for preferential origin.
Ultimately, any preferential rate of duty will depend on there being preferential coverage for goods of that type between the importing and exporting countries - or between the EC and a third country - and the product:
- meeting its relevant rule of origin
- being wholly produced in the preference country or substantially manufactured there according to particular rules
- not being subject to a quota which would limit the quantity of the product that can be brought in under preference
Once you have established the origin of the goods, you can check their customs classification, which will show you if the goods qualify for a preference scheme.
You can find an alphabetical list of all the countries that benefit from preferential treatment in Volume 1, Part 7 of the Tariff.
The UK Trade Tariff is the most up-to-date source of information on preferential agreements and the Commodity Code. It will also show if your product is liable to trade protection measures, such as anti-dumping duties or Common Agricultural Policy charges, which are often determined by the product's origin.
If you're an exporter, check with your customers and the customs authorities in the customer's market. You must also comply with general export procedures. Read more about exporting your goods outside the EU and dispatching your goods within the EU.
If you're an importer, you should check with HM Revenue & Customs. It is the importer's responsibility to ensure that the correct amount of duty is paid. You'll be liable for any unpaid or incorrectly paid duty for up to three years after the product has been imported.
Proving goods of preferential origin
If the goods you're exporting have preferential origin, they are likely to attract reduced or nil rates of duty when they enter your customer's country. As an exporter, it is your responsibility to ensure that the rules of preferential origin have been followed correctly.
If you're exporting, you should check with the customs authorities in the country you are selling to and find out what preferences are available.
If you're importing goods of preferential origin, you are likely to pay duty on the goods at a reduced or nil rate. However you must be sure that the paperwork has been correctly processed. You can be liable for unpaid or incorrectly paid duty for up to three years.
You'll need to prove to Customs that you are entitled to claim preference for the goods that are being exported or imported. The type of proof needed depends on the type of goods and the country to which they're being exported.
In particular, you should check if the preference scheme is autonomous or reciprocal - that is, whether it applies to imports only or to both imports and exports. This will determine which type of certification you will require. Read more about managing certification for preferential origin.
If you're regularly exporting or importing, you could consider applying for Binding Origin Information (BOI). This is a legally binding document from customs that clarifies the origin of your goods and can save time and money for regular exporters and importers. It is recognised and legally valid across the European Union.
Binding Origin Information
If you're regularly exporting or importing goods, you may find it useful to obtain Binding Origin Information (BOI) for the goods.
BOI is a written decision by a customs authority that confirms the origin of specific goods. It is valid for three years and is legally recognised across the European Union (EU).
Advantages of holding BOI for exports and imports
A BOI is legally binding across all EU member states, so if your goods move within the EU before they reach their destination, holding BOI can minimise the chance of local customs challenging the origin of the goods while in transit.
The rules of origin can be complex. If the origin of your goods is not straightforward, holding BOI can prevent you from having to prove the origin of the goods repeatedly during trading. If any change in EU law makes your BOI invalid, you can still continue to fulfil existing contracts for up to six months.
You can hold a BOI whether you're exporting or importing goods. However, only the owner of the BOI can use it. For example, if you hold a BOI for goods you export, your customers cannot use it unless they've obtained one themselves.
How to obtain BOI
You can apply to HM Revenue & Customs (HMRC) for BOI. There is no charge for issuing a BOI, although you may have to pay any costs for specialist analysis of goods or expert advice if HMRC need it to make a decision. Find information about BOI in Notice 831.
Managing certification for preferential origin
Goods of preferential origin (attracting reduced or nil duty) must be certified before they leave the exporting country. Retrospective certificates can be issued under exceptional circumstances.
The certification needed depends on whether the preference scheme in the destination country is an autonomous one (applying to imports only) or reciprocal (applies to both imports and exports between the two countries).
Check with customs authorities in the goods' destination country or the Invest NI overseas trade division. Find out how to get help and advice on rules of origin.
It's the exporter's responsibility to ensure that all paperwork relating to each consignment of goods is accurate and authentic.
You must ensure the goods you want to import are covered by a GSP (generalised system of preferences) Form A.
This is a certificate of preferential origin and must be stamped and signed by the customs authority in the exporting country. Each consignment of goods you import needs a separate certificate, and each certificate is valid for ten months from the date of issue.
Most commonly, goods are covered by Form EUR1 provided by the exporter and stamped and signed by the customs authorities in the exporting country.
In most cases, each form or declaration must only be used for one consignment of goods, and is valid for four, five, or ten months from the date of issue, depending on the country to which the goods are being exported.
Alternatively, the exporter can use a legally approved form of words to declare on the invoice that the goods qualify for preferential origin status. There is a value limit on such exports - unless the exporter is approved by HMRC.
For both schemes, you still need to use classification codes on the customs paperwork that accompanies the shipment as they are also used to collate international trade statistics.
Help for regular exporters
If you are a regular exporter you can apply to HMRC to become an Approved Exporter. This entitles you to put the required preference declaration on the invoice and removes the requirement for an EUR1 Certificate. You can call the HMRC VAT Helpline on Tel 0300 200 3700 for further information.
You may be able to speed regular shipments of identical goods through customs by using Binding Origin Information.
If you are taking your first steps as an importer or exporter, be aware that you have to be registered as such. Read more about Economic Operator Registration and Identification (EORI) Scheme.
European Community Certificates of Origin (non-preferential origin) are issued by local Chambers of Commerce which are authorised by BIS on recommendation by the British Chambers of Commerce (BCC). This service is available to all businesses in the UK. Exporters can also apply online for an e-Cert (an electronic Certificate of Origin) through the BCC website.
HMRC regularly monitors goods that are being imported or exported under preference.
You must keep all relevant paperwork for up to three years. If you can't prove the origin of any goods you have exported under preference in the past three years, your customer may have to pay the full rate of duty on them. In this case, the customer may expect you to repay the duty to them.
If you're found to be exporting goods under preference incorrectly you could face customs seizures and penalties.
Get help and advice on rules of origin
The practicalities of rules of origin can be complex and it's a good idea to take expert advice to make sure that you are complying with them, whether you are an importer or an exporter.
Getting advice from HM Revenue and Customs (HMRC)
HMRC can provide comprehensive guidance on preference schemes for importers and exporters. You can call the HMRC VAT Helpline on Tel 0300 200 3700.
Guidance on exporting to specific countries
You can get help on exporting under preference from the Invest NI overseas trade division.
HMRC also offers guidance on the rules of origin for specific countries.