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 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 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 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 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.

Useful Resources

For any further queries or general business advice you can contact BEIS’ dedicated business support helplines or ask customs and tax related queries and other border related queries on one of our forums. There is specific guidance and training on moving goods into, out of, or through Northern Ireland on gov.uk. You can also use the Brexit Checker tool on gov.uk/transition, which will provide you with a personalised list of the most up to date actions that your business needs to take.

– An updated slide deck on Rules of Origin (RoO) with additional sector-specific examples. (This is correct as of Wednesday 17th February 2021)

FREQUENTLY ASKED QUESTIONS: General Questions on Rules of Origin

 1. Can I export tariff free under the new UK-EU trade deal?

As of 1 January 2021, goods exported to the EU are eligible for zero tariffs if the goods meet the Rules of Origin requirements set out in the Trade and Cooperation Agreement (TCA) and have the right documentation. If not, the goods may be subject to EU tariffs.

The same applies for imports to the UK from the EU.

 2. What are Rules of Origin?

Rules of Origin determine the ‘economic nationality’ of a good. They are a standard part of free trade agreements (FTAs).

Rules of Origin require a qualifying level of manufacturing in the country of export to access zero tariffs. This ensures only goods produced in the countries party to the FTA (the UK or the EU) benefit from zero tariffs.

3. How do I comply with Rules of Origin?

First, traders need to understand whether their good meets the applicable rules. To do this they need to classify the good to find its Harmonized System Code and then consider the relevant rules for that good. Traders can do this using this online tool

Second, traders need to understand how to demonstrate origin to the customs authorities and what paperwork they need to include with the good when exported. Traders can self-declare goods meet the rules by making out a statement on origin. Alternatively, the importer can use importer’s knowledge. Traders should look at the origin procedures in the text of the Agreement.

4. What if I am importing goods into GB and then (re-)exporting them to the EU?

 The UK is no longer part of the EU Customs Union. This means that goods imported into GB cannot move freely between GB and EU Member States or vice versa. To be eligible for zero tariff export to the EU, these goods still need to comply with Rules of Origin. This means there must be some production in the UK. This applies to EU origin goods as well as to goods from the rest of world.

If traders move goods through GB from one EU Member State to another without the goods entering UK customs territory (i.e., without entering free circulation in GB), the goods may not need to meet Rules of Origin. Traders should consider whether they are able to use special customs procedures, such as the Transit Procedure (where the goods are moving through UK customs territory) or Returned Goods Relief procedure (for goods re-exported to the EU).

5. If I import goods from a third country, e.g., China and then re-export them to the EU, can I avoid tariffs?

If a good is exported from China to the UK, it will face a tariff upon import into the UK as it falls outside the scope of the TCA or any other UK Free Trade Agreement.

The TCA provides for tariff-free trade export for goods from the UK to EU that meet the Rules of Origin. So, the goods from China must meet the TCA Rules of Origin in the exporting country, in this case the UK, in order to avoid paying a tariff upon export to the EU.

 6. If a product is manufactured in the UK using EU-sourced materials, does that qualify towards meeting Rules of Origin?

The UK and EU negotiated full bilateral cumulation in the TCA. This means that any EU-originating materials and processing will be treated the same as UK sourced material for the purposes of Rules of Origin (and vice-versa).

To be eligible for cumulation, materials must be EU or UK originating (so not just sourced in the UK/EU but originating there).

And while EU-originating materials can count towards meeting Rules of Origin, importantly, the processing or manufacturing done in the UK must go beyond insufficient processing in order for the goods to attain originating status.

Guidance on rules of origin in the UK-EU TCA, including what Rule of Origin applies to your products, can be found here.  The full list of processes which do not confer origin can be found in Article ORIG.7 Insufficient Production, in the TCA.

7. What counts as insufficient processing?

The full list of processes which do not confer originating status is available in Article ORIG.7 Insufficient Production in the TCA. Completion of one or any combination of the included processes is insufficient to confer originating status.

For example, ‘simple painting and polishing operations’ or ‘peeling, stoning and shelling, of fruits, nuts and vegetables’ are not considered to be significant manufacturing and as such do not confer originating status by themselves.

You should always check the relevant Product Specific Rule of Origin for each product you wish to export. If the Rule for your product indicates an allowed percentage of non-originating materials (NOM), your product must meet this Product Specific Rule AND go beyond insufficient processing.

8.  Will I face a tariff if I send goods to the EU for repair?  

Businesses can apply for Outward Processing Relief which allows a business to pay less customs duty & VAT when goods re-enter the UK after being sent elsewhere for repair or processing.

Both the UK and the EU will be retaining their existing Outward Processing Relief regimes. The use of the procedure is subject to the authorisation of the respective customs authority. Information on the UK’s scheme can be found here.

You can also use inward processing relief to pay less customs duty & VAT when bringing goods into the UK for processing or repair. Information on the UK’s scheme can be found here.

 9.  Is the 6-month easement on duty only for imports?

Yes, the 6-month staged import controls and associated deferral of customs declarations and duties (in effect from 1 Jan 2021) are only for imports into the UK from the EU.

Any duties that are payable are required to be paid after from 1 July 2021.

 10.  For items originating from the EU – what impact does Rules of Origin have for onward trade to NI?

If you are sending EU origin goods from Great Britain to Northern Ireland, you must first determine if the goods are considered ‘at risk’ (of entering the EU). If they are not ‘at risk’ or you can declare the good not ‘at risk’ through the UK Trader Scheme, no tariff will be due.

Traders could consider using customs procedures to mitigate the tariffs due on entry to NI for ‘at risk’ goods. These procedures include the Transit Procedure (where the goods are moving through UK customs territory), Customs Warehousing (where goods are stored in duty suspension in a designated warehouse under customs control) or Returned Goods Relief procedure (for goods re-exported to the EU).

Traders should also consider claiming a waiver of the tariff, subject to state aid de minimis limits. In future, traders could consider claiming a reimbursement of the tariff, if goods could later be shown to have remained in NI/returned to GB. The reimbursement scheme is currently in development.

The new Trader Support Service (TSS) can help you to understand the options available to mitigate the risk of paying any tariffs when moving goods into Northern Ireland from Great Britain but cannot make the decision which option if best for you and your businesses unique business practices.

If your EU goods undergo further production in the UK which goes beyond the list of operations in Article ORIG. 7 “Insufficient Production” then these goods will become UK origin under the TCA, and you can apply zero tariffs if you have the necessary supporting paperwork.

Detailed guidance on moving goods into, out of, or through Northern Ireland is available here.

11.  What if our supply chain cannot trace the precise location of their raw materials because they are sourced from all over the world?

Goods are typically considered to be non-originating unless proven otherwise. However, you need to check the product-specific rules for the product in question – tracing of materials would only be needed if you could not meet a process based rule through the activity you carry out in the UK.

If, for example, you can use a Change of Tariff Subheading (CTSH) rule and the inputs that are used are in a different 6-digit customs classification (subheading) to that of the product, the origin of the inputs is irrelevant as you would have met the rule in your own processing.

As with any Product Specific Rule, the processing or manufacturing done in the UK must go beyond insufficient processing (see Article ORIG.7 Insufficient Production in the TCA).

12. Is the maximum allowed percentage of non-originating materials (MaxNOM) the same for all products under the TCA?

No. You should always check the relevant Product Specific Rule of Origin for each product you wish to export, as there are different rules for different products, including any maximum allowed percentage of non-originating materials (MaxNOM).

If the Rule for your product includes a percentage of MaxNOM, your product must meet this Product Specific Rule AND go beyond insufficient processing.

13.  Do these Rules of Origin also apply to other countries with which the UK has a free trade agreement?

All FTAs will have Rules of Origin, but these are specific to each trade agreement. You can find guidance on the UK’s other Free Trade Agreements here, to understand which Rules of Origin apply to trade with that country.

 FREQUENTLY ASKED QUESTIONS: On demonstrating goods comply with Rules of Origin

 1. Can I use a customs agent to help me with Rules of Origin?

 Yes. There is guidance available on how to find a customs agent:

https://www.gov.uk/guidance/appoint–someone–to–deal–with–customs–on–your–behalf  

Compliance remains the responsibility of the importer and exporter.

2. What text do I need to use for origin statements?

The statement on origin must be provided on an invoice or on any other document that describes the originating product in sufficient detail to enable the identification of that product.

The statement on origin must take the form of the text found in Annex ORIG-4 of the UK-EU TCA (pg. 482).

In the UK, the Exporter Reference Number will be the Economic Operator Registration and Identification (EORI) number.

If the statement on origin is completed for multiple shipments of identical originating products within the meaning of point (b) of Article ORIG.19(4) [Statement on Origin] of the TCA, indicate the period for which the statement on origin is to apply. That period shall not exceed 12 months. Importations of the product must occur within the period indicated. If a period is not applicable, the field may be left blank.

3.  Do I need a declaration from my supplier?

 If the goods you are exporting incorporate originating materials from a supplier, you may need a declaration from your supplier to meet Rules of Origin requirements.

Until 31 December 2021, exporters may make out statements on origin based on supplier’s declarations even if they do not have all the relevant supplier’s declarations in hand at the time they make the statement on origin. Exporters must be confident that the exported goods meet the Rules of Origin requirements and may be asked to retrospectively provide a supplier’s declaration after this date.

4. What does the ‘supporting documentation’ from suppliers need to look like for proving origin?

If you are exporting goods you may need to get a suppliers’ declaration to prove the origin of materials used in the manufacture process. The declaration must use the exact form of words indicated in the UK-EU TCA (page 479).

Suppliers’ declarations can be made on the invoice for the goods supplied, on a bill of materials, or on any commercial document that fully identifies the goods.  A supplier’s declaration may be made out to cover a single supply or to cover regular supplies made over a period of time (a long-term supplier’s declaration).

A supplier’s declaration is not always required. For information on when a supplier’s declaration is and isn’t required, and for the wording to use, see the guidance here.

5. What evidence is needed to prove ‘importers knowledge’ of origin?

To use ‘importer’s knowledge’ to claim preference (zero tariffs), the importer may need to have information about the product including:

• the HS code of the product and origin criteria used
• a brief description of the production process
• if the origin criterion was based on a specific production process, a specific description of that process
• if applicable, a description of the originating and non-originating materials used in the production process
• if the origin criterion was ‘wholly obtained’, the applicable category (such as harvesting, mining, or fishing; and the place of production)
• if the origin criterion was based on a value method, the value of the product as well as the value of all the non-originating and/or originating materials used in the production
• if the origin criterion was based on weight, the weight of the product as well as the weight of the relevant non-originating and/or originating materials used in the product
• if the origin criterion was based on a change in tariff classification, a list of all the non-originating materials including their tariff classification number under the Harmonized System (in 2, 4 or 6-digit format depending on the origin criteria); or
• the information relating to the compliance with the provision on non-alteration

(if applicable), for example a certificate of non-manipulation from the Customs Authority in the country of transit

Further guidance on importer’s knowledge can be found here.

6. Do I need to include an EORI number or REX registration number on a declaration of origin?

A UK exporter should use their UK EORI number on declarations of origin. If you don’t yet have an EORI number, find out how to get one here.

For consignments of a value above €6000 (currently £5700), an EU exporter must have a Registered Exporter (REX) number and include it on the statement of origin, in addition to their EU EORI code.

7. Where can I go for more information?

For full Rules of Origin guidance on trading with the EU, go to: https://www.gov.uk/government/publications/rules–of–origin–for–goods–movingbetween–the–uk–and–eu–

As lockdown starts to ease, we look at what the guidance is for non-site-based work in the sector. Whilst the overall National effort and the flexibility shown by individuals has been nothing short of amazing, concerns are being raised that it is difficult to do many roles and drive programmes as efficiently remotely.

The Situation in England:

Step 1:  Earliest from 8 March

As before, people can leave home for work if they cannot work from home and to escape illness, injury or risk of harm, including domestic abuse.

In England, the guidance is essentially unchanged at the start of Step 1, if you can work from home, you must do so.  Exceptions include where you need access to systems or cannot work from home for mental health reasons.

Earliest from 29 March

Guidance will set out that people should continue to work from home where they can. People should continue to minimise travel wherever possible and should not be staying away from home overnight at this stage (see letter prepared by Build UK to support essential workers in need of overnight accommodation).

Here the language starts to ease with “must” being replaced by “should”, but Government is being careful not to encourage a mass return and is keen to keep pressure off the transport network.

Step 2:  Earliest from 12 April

People should continue to work from home where they can, and minimise domestic travel where they can.

As before the assertion is that individuals should work from home if practicable, but the language around travel is also starting to soften, we should “minimise” rather than avoid travel.

Step 3: Earliest from 17 May

The Government will continue to advise the public to work from home where they can.

There is no change to guidance in Step 3, but we are advised that ahead of Step 4, as more is understood about the impact of vaccines on transmission and a far greater proportion of the population has been vaccinated, the Government have committed to a review of social distancing measures and other long-term measures that have been put in place to limit transmission.

The results of the review will help inform decisions on the timing and circumstances under which rules on 1m+, face masks and other measures may be lifted. The review will also inform guidance on working from home.

Step 4: Earliest from 21 June

Whilst the headline suggests that “normality” will resume and the guidance points to the importance of – people should continue to work from home where they can until this review is complete.

Workplace testing and vaccine policy is anticipated to play a part.

How does the situation differ around the UK

In Scotland the First Minister this week announced ‘stay at home’ restrictions could be lifted on 5 April at the earliest, with further restrictions easing on 26 April.  The Scottish government intends to publish a further document in mid-March giving more detail on the sequencing of re-opening the economy from late April onwards.

The Wales Coronavirus Control Plan: Alert Levels in Wales – Coming out of Lockdown plan identifies the end of April (linked to the rollout of the vaccine to the next five priority groups) will be a clear milestone against which the intention is re-evaluate easing to alert level 3 based on the latest evidence.

Plans for the phasing out of Lockdown in Northern Ireland are due to be published on Monday

So what should you do as an employer about home working

When home working is not possible the CIPD recommends three key tests before bringing people back to the workplace: is it essential; is it sufficiently safe; and is it mutually agreed. Many factors must be considered, including the size and nature of the workplace, the number of vulnerable staff or those who live with vulnerable people, caring responsibilities, public transport dependency, as well as local and wider outbreaks. So, an employer with a large premises and car park may be able to fully implement social distancing and minimise employees’ local transport use, while an employer with smaller premises may feel social distancing is impossible in the workplace.

• CIPD Guide COVID-19: returning to the workplace – This guide will help you plan your organisation’s eventual return to the workplace as lockdown restrictions continue to evolve
• The CICV Forum has produced a unique homeworking guidance document and homeworking checklist to support employers and staff.
• England – National Lockdown Guidance
• Offices and contact centres – Government Guidance for people who work in or run offices, contact centres and similar indoor environments.
• FIS COVID-19 Hub

Finishes and Interiors Sector CEO, Iain McIlwee, has written to the chancellor ahead of budget supporting the CLC submission and seeking additional support to manage Reverse Charge VAT implementation and flexibility in Apprenticeship funding.  The full text of the letter is available below.

Dear Chancellor,

I write on behalf of the Finishes and Interiors Sector, which accounts for around £10 billion of UK Construction work and over 200,000 workers.  Our community do the refurbishment, fit-out and finishing work to buildings of all types (homes, hospitals, offices etc), constructing internal walls, ceilings and adding the fixtures – over the lifetime of a building, there is typically upwards of 30 re-fits.  We support the work of the Construction Leadership Council (CLC) and have had input into and support the Budget submission already made by the CLC.

Since the New Year, pressure on our sector has become even more palpable as we adapt to the Reverse Charge VAT introduction, off-payroll working, changes to the CIS and new immigration policies.  I have outlined below two critical areas where Treasury could help us to avoid insolvencies and encourage investment in new jobs.

Extension of the VAT Deferral Scheme

The Domestic Reverse Charge (DRC) creates an immediate working capital impact on many of our members who operate as sub-contractors.  We are already working less productively in the wake of COVID, facing additional costs associated with logistics of Brexit and shortages of materials like timber and steel and are staring in the face of potentially severe labour shortages (which is driving up rates and will necessitate additional investment in training).

Example:

I am a the Financial Director of XX a construction business employing around 70 people through PAYE, CIS and which includes two young trainees. I write to express my concern that the government is pressing ahead with implementation of the Domestic Reverse Charge VAT for construction.  Our turnover is around £5 million and we estimate the cash cost to the business will be around £156,250.

With many contracts stalled, working capital is tight and this kind of dent to our cash position will limit our ability to adapt, scale up and invest as the market recovers.  We had hoped for a delay, but failing that, extending the VAT Deferral Scheme to support construction companies who may be struggling to pay as a result of the DRC would be a potential life safer.  The process already exists with the COVID scheme (giving those that deferred in March to June 2020 even more time), but it is not open to new entrants.  If we allowed construction companies to access deferral to get over the hump of cash flow problems this would undoubtedly limit the worst of the impact.

The Impact of Immigration Policy and English Apprentice Vouchers

The nature of our work and construction procurement practices, means many in our community undertake relatively large projects with relatively short lead times that involve the deployment of large numbers of people with a variety of trade skills that work in controlled sequence.  As a result we have always relied on a flexible workforce (historically through the “cards”, latterly leaning on the labour only sub-contractor model).  This enables firms to manage risk and individuals to optimise worktime by moving between projects and companies.  The make-up of our workforce was, pre-COVID, over 40% EU worker.  As a consequence of changes to the immigration system and the relative high dependence on EU work, our Annual Recruitment Target from the UK labour pool has virtually doubled this year.  For every 5% of migrant workers that do not return post COVID or decide not to settle beyond the summer, the target doubles again. This necessitates a major overhaul of how we recruit and train.

We are working with CITB and engaged through the Construction Leadership Council in optimising the Plan for Jobs, as an organisation we have schemes in place to support unemployed workers into construction (pre-COVID, our BuildBack programme had delivered 440 unemployed people into sustained employment over a c2 year period), we are a Kickstart Gateway and we are working hard with employers and providers to build apprentice provision.  Our Apprenticeship Standard is new (completed in 2019) and we are doing all we can (in a difficult environment for training) to help build demand and provision.  Delivery requires capital investment in materials, tools and space as well as investment in trainers, assessors and materials.  We would urge Treasury to consider ringfencing and relaxing the criteria for trading of English Apprentice Vouchers and, where businesses paying cannot utilise directly, vouchers are not just cascaded to support non-levy payers in the supply chain but, where this is not feasible or practical, redirected to investment in the training centres and resources needed to support the delivery of apprentices.  In this way large businesses will be incentivised to get involved to help drive change, work with providers and develop those vital links between industry and skills provision.  We need this engagement to support businesses and FE colleges in making the investment to run programmes that lead to jobs and to reward progression to employment rather than simply focus on completing courses.

These are vital times for our economy and the construction sector has done all we can to keep building through the pandemic, showing, at times amazing flexibility, inspiring innovation and humbling resilience.  The suggestions above are vital keys to help us to unlock the power of this industry to help build our way to a better future, support the much needed investment in digitisation and net zero and ensure that the UK Construction sector is truly the world leader that we have the potential to be.

Yours faithfully,

Iain

Iain McIlwee
CEO, Finishes and Interiors Sector (FIS)

Find out more about the FIS Three Steps to Rebuilding Construction.