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For e-commerce businesses who ship internationally from the UK or import to the UK, understanding the rules of origin and preferential duty is vital. Both the rules of origin and preferential duty are additional customs processes that were introduced when shipping to EU countries as a result of Brexit. All UK businesses need to be familiar with them.  Making sure you follow all the right processes can save you time and money and helps ensure your shipments clear customs quickly and that they arrive on time and in good condition. 

From getting to grips with the different terminologies to making sure you understand and honour your responsibilities, this guide will help you navigate these important shipping processes. Read on to find out all you need to know about the rules of origin and preferential duty. We’ll answer all of the following questions: 

Brexit has bought lots of changes to the process needed for shipping to Europe. Make sure to download our Post-Brexit Shipping Checklist to check off everything you need for a smooth, hassle-free shipping experience.

What are the rules of origin?

The rules of origin are a customs process that was introduced to mitigate the impact of Brexit on UK businesses that export to the EU. The rules of origin were a key focus during the Brexit trade talks. Understandably, UK negotiators were keen to avoid disrupting UK industries, particularly those with complex supply chains. 

The rules of origin are used to determine the national source, country or territory of origin of an imported or exported product. Rather than determining where the goods are being shipped from, rules of origin refer to where the products were manufactured or produced. Rules of origin are used to identify goods that qualify for lower or no customs duty. If products originate from outside the UK they may face certain duties.

It is very important for e-commerce retailers to understand how to determine where their products fall within the rules of origin. Failing to do so means you may have to pay unnecessary duties and could result in delays at customs. 

Unless the specific customer agreement you’re honouring states you do not need a proof of origin, you’ll need to either prove to HMRC that you can claim preference for goods you are importing. Or you’ll need to give the person receiving your goods evidence of their origin so they can claim preference. 

rules of origin

How do the rules of origin apply when shipping to the EU?

As mentioned above, both the rules of origin and preferential duty are new customs procedures that were introduced as a result of Brexit. All UK businesses shipping to Europe from the UK will need to have a good understanding of all the rules and procedures. They must also know how to honour their obligations and be able to complete all the correct documentation. Getting a good grasp of the rules of origin and preferential duty can save you time and money. Failure to do so could result in delays at customs or additional costs or fines. 

The rules of origin sit under the Trade and Cooperation Agreement (TCA). The TCA is a trade agreement between the European Union, the European Atomic Energy Community and the United Kingdom. The TCA was signed on 30th December 2020 and has been applied provisionally since 1st January 2021, when the Brexit transition period ended. The TCA was agreed to provide UK businesses with a year’s grace period for certifying the origin of components that make up their manufactured goods. The TCA is in place until 31st December 2021. 

Businesses who want to take advantage of the preferential tariff treatment negotiated under the TCA, must comply with the rules of origin. Providing they meet certain criteria, UK businesses can qualify for zero tariffs when exporting from the UK to the EU. We will go into more detail on these criteria in later sections of the guide. 

Where are the rules of origins used?

As mentioned above, the rules of origin are used to clarify any part of trade policy or law that will require goods to be treated differently due to the country or territory they originate from.

Here are some of the main circumstances and situations where the rules of origin are used: 

  1. To help determine whether imported products receive most-favoured-nation (MFN) treatment or preferential treatment. 
  2. To monitor and administer commercial policies such as controls on dumping and other safeguarding and environmental measures. 
  3. For the purpose of trade statistics. 
  4. To support government procurement processes and protocols. 
  5. For applying labelling and marking requirements. 

Note: The rules of origins aren’t needed to fill out any of your customs declarations, or your commercial invoice. They are simply a set of trading rules you will need to comply with to be able to claim preferential duty rates. 

What is the difference between preferential and non-preferential rules of origin?

Rules of origin are split into two categories; preferential origin and non-preferential origin. This helps customs to process imported and exported goods efficiently and accurately.

Preferential rule of origin refers to whether the goods are being sent from countries where special arrangements or agreements have been established. As long as all the necessary customs and duties requirements have been met, goods that are identified as preferential origin can be imported at zero or reduced rates of duty. The amount of duty depends on the type of preferential tariff the goods come under. 

Non-preferential origin status is used to refer to a variety of non-preferential commercial policy measures. This could include anti-dumping duties, trade embargoes, countervailing duties (also known as anti-subsidy duties), safeguard measures, government procurement and trade statistics. Non-preferential origin applies when the goods are “wholly obtained” in one country or territory. It also applies when two or more countries are involved in the manufacture of the product. 

Remember: The way EU VAT is now processed has also changed. This is important to understand alongside the introduction of duties and tariffs, so make sure to read up on it.

How does preferential and non-preferential status fit in with shipping to the EU, post-Brexit?

We mentioned in a previous section about the trade deal negotiated between the UK and the EU. But how does this affect preferential and non-preferential status? Following protracted negotiations, the UK Government announced that they had secured a “tariff-free trade deal” which wasn’t entirely accurate. The actual agreement was the rules or origin. So, when UK businesses can provide evidence that their products originate, or were most recently or significantly changed in the UK they can qualify for preferential status. This means they won’t be charged tariffs. Non-preferential status will apply if the products were sourced or manufactured outside of the UK.  

Important: Something else you’ll need for shipping to Europe after Brexit is an EORI number

How can I tell if my goods qualify in the rules of origin for preferential origin or non-preferential origin?

Every product, at its source, is treated as of non-preferential origin. This could be different to its preferential origin. If this sounds confusing, please don’t worry. This guide will cover all you need to know.

The first step to finding out if your goods qualify for preferential origin or non-preferential origin is to work out which tariff heading they come under. Your tariff heading is a four-digit code. This can be obtained from the HMRC Trade Tariff database. You will also need to refer to the HMRC Customs Notice 828 document. This document helps importers establish whether their goods qualify for preferential treatment. It also helps exporters and manufacturers ascertain which rules their goods must adhere to qualify for preferential treatment. 

If you are certain that your goods are wholly produced or manufactured in one country, with no involvement from another country, you can go ahead and determine if it is considered to be preferential or non-preferential origin. If two or more countries were involved in the production or manufacturing process, the goods will be considered to have originated in the last country or territory where they were last substantially worked or processed. If you are unsure about how to gauge this, don’t worry. You can find out more on the UK Government rules of origin webpages

Rules of origin: Which products can benefit from preferential duty?

The rules of origin your products sit under will depend on which country or territory your goods originate from and which goods are covered in preference agreements. Remember, it is not simply where you are shipping from. Preferential duty and rules of origin relate to where your product was manufactured or produced. So how can you tell which products can benefit from preferential duty?

The first step is to check the specific rules of origin that apply to your goods. You can do this by visiting the UK Government’s trade agreement webpage. This webpage gives up to date information on the trade agreements that the UK Government has already signed and those they are currently negotiating. This area of the site will also give details of any preference agreements that are in place for the country you are trading with. 

The next step is checking that your goods meet the Generalised Scheme of Preference rule of origin. If your shipments come under non-preferential goods, you will need to check if they need to follow specific rules of origin. 

Important note: some goods that are produced outside the EU can be imported into the EU with reduced or zero customs duty. This is offered on a first-come-first-served basis and is only available during a specific time period. Only a finite amount of goods can be imported. Once this is exceeded the usual customs rates apply. You can find out more about exceptions to tariff quotes on the UK Government webpage. You should also check the tariff quotas to see if there is a different rule of origin that has been agreed.

rules of origin europe

How can I claim the preferential tariff-free rates of duty between the UK and the EU?

As you will doubtless be aware, the UK left the EU on the 31st December 2020. From 1st January 2021 UK businesses may be able to claim preferential rates of duty when importing from the UK to the EU or importing from the EU into the UK. This means you will either not have to pay customs duty, or pay reduced duty on your goods. It’s important to note that these preferential rates only apply if your goods originate in the UK or the EU. So, how do you claim preferential rates of duty between the UK and the EU? 

The process you use to claim preferential duty differs depending on which system you are using to make an import declaration. There are two systems available for claiming preferential duty. Using the Customs Handling of Import and Export Freight (CHIEF) system and the Customs Declaration Service (CDS). 

Claiming preferential duty using the Customs Handling of Import and Export Freight (CHIEF) system

Box number What you must include
Box 36 must include a preference code in the 300 series.
Box 47c Field 1 Must be coded ‘A’.
Box 44 Must include one of the following codes, as appropriate:

• U110 – if the claim is based on a ‘statement on origin’ for a single shipment

• U111 – if the claim is based on a ‘statement on origin’ for multiple shipments of identical products to cover a 12-month

• U112 – if the claim is based on importers knowledge (this must be declared with status code JP)

U110 and U111 must be declared with one of these status codes AE, AF, AG, AP, AS, AT, GE, GP, HP, JE, JP, LE, LP, UA, UE, UP, US, XA, XB and the commercial document reference number.

Claiming preferential duty when using the Customs Declaration Service (CDS)

Data Element (DE) What you must include
DE 4/17 Must include a preference code in the 300 series.
DE 2/3 Must include one of the following codes, as appropriate:

• U110 – if the claim is based on a ‘statement on origin’ for a single shipment

• U111 – if the claim is based on a ‘statement on origin’ for multiple shipments of identical products to cover a 12-month

• U112 – if the claim is based on importers knowledge (this must be declared with status code JP)

U110 and U111 must be declared with one of these status codes AE, AF, AG, AP, AS, AT, GE, GP, HP, JE, JP, LE, LP, UA, UE, UP, US, XA, XB and the commercial document reference number.

With the rules of origin, how can I tell which type of proof of origin I need?

It’s important for e-commerce businesses to understand which types of proof of origin they need. This helps to speed up customs processes and helps to ensure your shipments arrive on time and in good condition.   

The type of proof you need depends on the type of goods and where they’re being imported from, or exported to

Firstly, you should check the preference agreement or the Generalised Scheme of Preferences to check which duties apply for your specific import/export situation. Doing so means you can make sure you provide the right type of evidence. The evidence could include:

  • EUR1 or EUR-MED movement certificate
  • Origin declaration
  • Importers knowledge
  • Generalised Scheme of Preferences form A. 

Important note: Obtaining proof of origin does not apply indefinitely. The length of time a proof of origin will be valid depends on the type of agreement between countries or territories, and the type of proof you need to supply. You will need to note your proof of origin on your customs declaration into free circulation as well as a custom special procedure, if you use one. If you are an e-commerce business that uses customs warehousing, the subsequent release to free circulation must be within two years in order to claim preference.

In some cases HMRC will conduct a verification process to make sure everything is compliant and in order. If this happens you will need to show supporting evidence that you were correct when making out a proof of origin. This evidence could include production records, invoices, accounting details and declarations from suppliers. So, make sure all of your paperwork is completed correctly and stored securely.

Rules of origin: What is a EUR1 or EUR-MED movement certificate?

In the previous section we mentioned that you might need a EUR1 or EUR-MED movement certificate when obtaining a proof of origin. So, what is a EUR1 or EUR-MED movement certificate? EUR1 or EUR-MED movement forms are used to claim preferential duty rates with countries that have a trading agreement with the EU that includes preferential rates. They are also used to record preferential trade between the UK and participating counties. Participating countries are those within the Pan-Euro-Med cumulation. If you’re not familiar with that term, you are not alone! Countries within the Pan-Euro-Med cumulation include: 

  • The EU
  • The EFTA States (Switzerland, Norway, Iceland and Liechtenstein)
  • The Faroe Islands
  • the participants in the Barcelona Process (Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestine, Syria, Tunisia and Turkey)
  • The participants in the EU’s Stabilisation and Association Process (Albania, Bosnia and Herzegovina, the Republic of North Macedonia, Montenegro, Serbia and Kosovo)
  • The Republic of Moldova.

EUR1 or EUR-MED movement certificates and Brexit – what you need to know

In a nutshell, EUR1 or EUR-MED movement certificates are used to claim preferential duty when exporting to the EU from a country or territory with a preferential agreement. The UK Government was able to secure a preferential deal during the Brexit trade negotiations. Therefore UK businesses exporting from the UK to the EU are now required to complete and submit EUR1 OR EUR-MED movement certificates.  

How do I get a EUR1 or EUR-MED movement certificate?

To be able to get an EUR1 or EUR-MED movement certificate you need to be a resident in the UK or the Isle of Mann, or representing a company in either of these places. To get a hard copy of a EUR1 or EUR-MED movement certificate you can contact either your local Chambers of Commerce or the Institute of Chartered Shipbrokers. Please note that they may charge a fee for this service. 

While the world is dealing with the impact of COVID-19 HMRC is unable to issue original hard copy movement certificates. Online forms are available on the UK Government website. Once the documents are completed, attach and send the form as an email to NCH.Movements.Digital@hmrc.gov.uk, including the subject line that applies to your application. This will be one of the following: 

  • ‘EUR1 endorsement’
  • ‘A.TR endorsement’
  • ‘EUR-MED endorsement’

In order to receive a timely response you must include your company’s email address on the form. HMRC will check and verify your application and send it back to your company’s email address within 48 hours.

Can I obtain a EUR1 or EUR-MED certificate retrospectively?

In some circumstances you may need to obtain a EUR1 or EUR-MED form retrospectively. This could be because the form wasn’t issued at the time due to an error, an oversight, technical difficulties or special circumstance such as the preferential rate of duty only becoming available for the products from a retrospective date.

What do I do if my EUR1 or EUR-MED form is lost or stolen?

If your EUR1 or EUR-MED form is lost or stolen you can ask for a duplicate of the certificate from the place where you originally applied. When you present a duplicate certificate you must declare in writing that you don’t have the original but will surrender it immediately if it becomes available in the future. 

Please note, in some circumstances, EUR1 or EUR-MED certificates that are pre-printed with ‘duplicate’ or ‘copy’ are issued at the same time as the original. These cannot be used to replace an original certificate.

claim preferential duty

What is an origin declaration for the rules of origin?

An origin declaration is also known as an invoice declaration, certificate of origin or statement on origin. It is an important international trade document demonstrating that goods in a shipment are wholly obtained, produced, manufactured or processed in a particular territory or country. Completing a declaration of origin form helps customs to determine if the goods meet any preferential agreements and can therefore be subject to reduced or zero duties. Most importers or buyers worldwide require an origin declaration to meet customs, quota or banking requirements, or for other official and commercial reasons.  

The origin declaration is used during the import or export process to state where the goods were manufactured. All declarations of origin must be presented within two years of your goods being imported.

How do I make an origin declaration?

Put simply, your origin declaration can be any commercial document that contains sufficient detail to identify the origin of the goods. This could include an invoice, delivery note or packing list. Please note that letter headed paper on its own is not an acceptable commercial document. If your document does not have enough space for all the information you can include it on a separate headed paper and demonstrate that you have done this i.e numbering the papers 1/2, 2/2 etc. 

How can I tell how long an origin declaration will remain valid?

The validity of origin declarations varies depending on the country you are exporting to or importing from. It also depends on what customs agreements are in place. You can check how long an origin declaration will remain valid on the UK Government webpage.

What do I do if the preference agreement says I must be an approved exporter?

Depending on the preference agreement that applies to your shipment, you may have to qualify as an ‘approved exporter’. To be eligible you must export or intend to export on a regular basis. Your goods must also adhere to the relevant rules of origin. To apply for approved exporter status, visit the UK Government website.

Rules of origin in Summary

We hope this complete guide to rules of origin and preferential duty has been helpful and informative. The business of exporting and importing can seem like a never-ending sea of bureaucracy, but trust us, it’ll all become second nature to you in no time at all. Just take your time, check your forms and documents over carefully and you’ll be exporting and importing like a pro before you know it! 

As we have mentioned throughout, there is plenty of additional guidance on the UK Government website so, if you feel stuck or confused at any point, don’t worry. E-commerce businesses of all shapes and sizes are feeling overwhelmed right now. Brexit, and the impact of COVID-19 have added layers of complexity and worry to our businesses and it is only natural that you might be feeling the pressure. Luckily there are plenty of people and organisations out there to support e-commerce businesses and help them navigate these challenging times. For example, the team at Sendcloud are always here to help. We aim to share knowledge on each part of international shipping, including Incoterms to HS codes. Make sure to leave a comment if you have any questions, and we’ll get back to you soon.

Need help shipping to a particular country?

Check out the following guides for more specific advice on shipping to a particular nation:

One Comment

  • Andy Thomas says:

    Hi,
    thanks for spelling this out much more clearly than the government website – however its still a complete headache. If we sign up with sendcloud do you talk us through this stuff cause we are struggling to understand the process? We have an EORI number but it looks like we have to apply for certificate of origin. Is this something we do once and get some kind of code – or for every item we export?
    We need to catch up with this as clients are getting charged randomly high amounts on their purchases.

    thanks

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