The rule of origins for goods moving between the UK and EU after Brexit is a complex topic that’s for sure. It affects many businesses and traders who want to benefit from the preferential tariff treatment under the UK-EU Trade and Cooperation Agreement (TCA). According to the Government, there are specific rules for different types of products, which you can find in the TCA text or the UK government guidance. There are potential updates to rules of origin post brexit.
Preferential origin rules of origin post-Brexit are the rules that determine the economic nationality of a good under a free trade agreement (FTA) between the UK and the EU. They are important for businesses that want to trade between the UK and the EU without paying tariffs, as they need to prove that their goods originate in either the UK or the EU, and not from other countries, according to the Finishes & Interiors Sector.
The preferential origin rules of origin post-Brexit are based on where the products or materials used in their production come from, and the level of processing or production process that took place in the country of export. To claim preferential treatment under the TCA, you need to provide a statement of origin that declares that your goods meet the rules of origin. You also need to keep records and evidence to support your claim, according to the Government website.
Although the TCA allows for some flexibility in meeting the rules of origin, such as cumulation, tolerance, and insufficient production. These concepts allow you to use some raw materials, or processing from outside the UK or EU, or from each other, without losing the preferential status of your goods.
The UK and EU have agreed to some temporary easements to help businesses adjust to the new rules. For example, UK exporters do not have to complete paperwork certifying that their goods are locally made until 2022, according to Customs Declarations. However, these easements may not last forever, so it’s always best to prepare for the full implementation of the rules as soon as possible.
Non-tariff barriers to trade
Non-tariff barriers to trade are ways of restricting trade that do not involve tariffs, which are taxes on imports or exports. Some examples of non-tariff barriers to international trade are quotas, embargoes, sanctions, and licenses. These barriers can affect the quantity, quality, price, or distribution of goods and services traded between countries. They can also have political, economic, social, or environmental impacts on the countries involved, according to Investopedia.
According to some sources, non-tariff barriers have become more popular than tariffs in recent years, as developed countries have other sources of income and can use non-tariff barriers to support weak industries or influence interest groups. A 2019 report by UNCTAD found that trade costs associated with non-tariff barriers were more than double those of traditional tariffs.
Investopedia also explains some of the types of non-tariff barriers in more detail. For example, licenses are permits that allow certain businesses to import goods that are otherwise restricted. Quotas are limits on the amount of goods or services that can be imported or exported in a given period. Embargoes are bans on trade with a specific country or group of countries, usually for political reasons. Sanctions are measures that restrict trade or financial transactions with a country or entity that is deemed to violate international law or human rights.
Post Brexit: why the origin of goods rules are vital for customs duty
The origin of goods rules is part of the TCA that was signed by the UK and the EU in December 2020, after the UK left the EU single market and customs union. The rules determine whether goods can benefit from zero tariffs or preferential rates of customs duty when they are imported or exported between the UK and the EU.
The rules of origin are essential because they ensure that only goods that originate in the UK or the EU can enjoy preferential treatment under the TCA. This means that goods that are wholly obtained or sufficiently processed in the UK or the EU can be traded without paying customs duty, as long as they meet certain criteria and conditions. However, goods that are imported from third countries and only undergo minimal operations or processing in the UK or the EU cannot benefit from the preferential treatment and will be subject to the normal tariffs.
Businesses that want to claim preferential treatment on customs duties for their goods need to understand how to determine the origin of their products, how to prove it to the customs authorities, and how to comply with the relevant documentation and record-keeping obligations, according to the Government. Failure to do so may result in paying higher tariffs, facing delays or penalties, or losing market access.
Preferential Rules of Origin: Five steps process
Preferential rules of origin are the criteria that determine whether a product can benefit from lower or zero tariffs when traded under a preferential trade agreement. They are important to ensure that only products originating in the countries that are parties to the agreement can enjoy preferential treatment. There are different types of preferential rules of origin, depending on the trade agreement and the product category.
According to a guide by HM Revenue & Customs, there are five steps to follow when applying preferential rules of origin:
Check if your product is covered by a trade agreement and classify it using the appropriate commodity code.
Check if your product meets the rules of origin for the specific trade agreement and product category. The rules of origin can vary depending on whether your product is wholly obtained, sufficiently worked or processed, or produced using materials from different countries.
Get proof of origin for your product, such as a statement of origin, a movement certificate, or a supplier’s declaration. The type and format of proof of origin may differ depending on the trade agreement and the value of the shipment.
Claim preferential treatment when you import or export your product, by declaring the proof of origin and the relevant code on your customs declaration.
Keep records of your trade documents and proof of origin for at least 4 years, in case you need to provide evidence or verify the origin of your product.
Proving originating status and claiming a reduced rate of Customs Duty for trade between the UK and EU
According to the Government website, proving originating status is a way of showing where your goods come from, and whether they qualify for preferential tariffs under the TCA between the UK and the EU, says Solar Tech. Preferential tariffs are reduced or zero rates of Customs Duty that apply to goods that meet certain rules of origin requirements.
To benefit from preferential tariffs when importing into the UK or EU, you will need to claim preference on your customs declaration and declare that you hold proof that the imported goods will meet the rules of origin. You can use one of the following proofs of origin:
a statement on the origin that the product is originating, made out by the exporter
importer’s knowledge that the product is originating
To be considered as non originating materials, and qualify for a reduced rate of Customs Duty, products must be sufficiently worked or processed within the countries in the agreement. Non-originating materials are materials imported from countries outside of the UK and EU.
You can find more details about how to get proof of origin for your goods on the Government website. You can also use the trade tariff tool to check which type of proof of origin you need for your specific goods.