New UK Rules of Origin Explained

Are you struggling to get to grips with the new UK rules of origin?

Don’t worry, you are definitely not alone and we have received more enquiries about this recently then anything else.

This is why we wanted to try and explain in simple terms the main points that came out of the Trade & Co-operation Agreement (TCA) so that you have a better understanding going forward.

Purpose of the Rules of Origin

Their purpose is to ensure that preferential tariffs are only given to goods that originate in the UK or EU and not from third countries (i.e. those apart from UK and the EU Member States).

How to be considered originating

There are two ways in which a product can be considered ‘originating’:

1 – It can be ‘wholly obtained’.  These are goods that have been exclusively obtained or produced in the territory of one country, without using materials from any other country. The goods must not have been manipulated or changed in another country, apart from certain minimal processes to keep them in good condition. Examples of wholly obtained goods include minerals extracted from the soil of a single country, live animals born and raised in a single country or goods produced in a single country from materials sourced exclusively from there, i.e. all materials used in a product are wholly obtained.

2 – It has been substantially transformed in line with the relevant Product-Specific Rule (PSR). There are three basic rules used to decide if goods have been sufficiently transformed:

1. the ad-valorem, or ‘value added’ rule
2. the change of tariff classification manufacture from certain products or
3. through specific processes

In the TCA, 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). This mechanism is known as bilateral cumulation.

Cumulation in the TCA

Cumulation is an important facilitation found in modern free trade agreements, which – at the most basic level – provides a system that allows originating products from one party to be treated as if they are originating in another when determining whether a good is able to meet a Product-Specific Rule.

For example, this means products or materials originating in the EU can be considered as originating in the UK if those products are further processed in the UK or incorporated into another product prior to re-export to the EU.

Once originating status has been gained

Once a product has gained originating status, it is considered 100% originating. This means that if that product is incorporated in the production of a further product, its full value is considered originating and no account is taken of non-originating materials within it.

For example, if a UK-manufactured engine contains 30% non-originating content but meets its rule of origin, if that engine is used in the production of a car in the UK or EU, 100% of the value of that engine can be counted towards the originating content of the car.  

Claiming preferential treatment under the TCA

From 1st January 2021, in order for business to benefit from preferential tariffs when importing into the UK or EU, they will need to claim preference on their customs declaration and declare they hold proof that the goods meet the rules of origin.

A proof of origin is used by the importer to demonstrate that the goods qualify as originating and are eligible to claim preference. In the TCA this proof can take the form of:

• a Statement on origin completed by the exporter on a commercial document, or
• knowledge obtained and held by the importer that the goods are originating.

What must importers do to claim preference?

Have proof of the originating status of the product before claiming preference.  This may be:

1. A Statement on origin provided by the exporter on a commercial invoice or other commercial document that describes the goods. The text of the Statement would be included in the agreement. This is known as an invoice or origin declaration;
2. Supporting documents and records if you are claiming preference using your “importers knowledge”. If using importer knowledge, you must obtain sufficient evidence that the goods qualify as originating. This may involve the exporter providing a range of supporting documentation. If you cannot obtain that evidence, then the exporter may be able to provide a Statement on origin. 
3. Claim for preference by completing the relevant part and declaring the proof of origin on your customs import declaration.
4. If requested by the customs authorities, provide the proof of origin to the customs authorities. 
5. Maintain records for at least 4 years.

What must exporters do to claim preference?

1. Hold evidence that the goods meet the relevant rules of origin before issuing a Statement on origin. 
2. Understand whether a declaration from your supplier needs to be obtained. See here for information. For UK-EU trade, until 31 December 2021, businesses do not need supplier’s declarations from business suppliers in place when the goods are exported. Businesses may be asked to retrospectively provide a supplier’s declaration after this date.

You must also provide your customer, the importer, with one of the following: 

1. A Statement on origin on a commercial invoice or other commercial document that describes the goods. The text of the Statement would be included in the agreement. This is known as an invoice or origin declaration;
2. Supporting documents and records if your customer is claiming preference using their “importer’s knowledge”.
3. Maintain records for at least 4 years.

For further details, please also refer to ‘The Trade and Co-operation Agreement (TCA) detailed guidance on the rules of origin here:

• Rules of origin for goods moving between the UK and EU – GOV.UK (www.gov.uk)