Rules of origin? Requirements and options under the new UK-EU trade agreement
Brexit progress

Rules of origin? Requirements and options under the new UK-EU trade agreement

What's behind the rules of origin for zero tariffs under the new UK-EU TCA? What are businesses required to do and how can you minimize costs and efforts?

After 4.5 years, the UK and the EU have finally agreed a Trade and Cooperation Agreement (TCA) on Christmas Eve. It is a 1,246-page document and both sides agree that it goes beyond traditional free trade agreements and provides a solid basis for continued friendship and cooperation between the UK and the EU.

One central detail of this new TCA was received with great relief all around: It provides for zero tariffs and zero quotas on all goods traded between the UK and the EU – if they comply with the appropriate rules of origin.

This new basis for trade does not, however, eliminate the need for customs declarations for EU trade across UK borders – one of the most widespread and persistent misperceptions across business communities.

For many companies that did not prepare for customs procedures starting January 2021, it was a rude awakening when this inconvenient truth has finally sunk in.

In this article, we highlight a few notable requirements for traders under the new rules of origin now that Brexit is finally “done”.

Duty or no duty? Rules of origin – details and exceptions

As always, the devil is in the detail. And while “zero tariffs and zero quotas” sounds great, quite a bit of red tape is involved for importers and exporters to achieve this. Because you can only claim this preferential rate of duty if you move “qualifying goods”, and if you accurately document and prove it. What this involves is explained in the following sections. 

Rules of origin

To claim preferential rates of duty, your product must originate in the EU or UK (as the exporting country) as detailed in the rules of origin and the product-specific rules of origin in the Trade and Cooperation Agreement (see chapter 2 and Annex ORIG-2). To correctly work with this, you will need to know how to accurately classify your goods.

If your goods do not meet the rules of origin requirements or if you cannot prove that they do, you will still need to pay customs duty. And to determine the rate of duty that will apply in this case, you will also need to accurately classify your goods.

Smart solutions are available to support you in this area – learn more about Product Classification software from AEB.

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Proof of origin and statement on origin

To benefit from preferential tariffs when importing into the UK from the EU or importing into the EU from the UK, the importer will be required to declare they have proof that the goods comply with the rules of origin. You will be entitled to such zero tariffs if you have either:

  • A statement on origin that the product is originating made out by the exporter
  • The importer’s knowledge that the product is originating

The text for a statement on origin is in Annex ORIG-4 of the TCA and the following framework applies:

  • When exporting from the EU to the UK, a statement on origin can be made out by any exporter if the value of the consignment is €6,000 (currently £5,700) or less. If the value is higher, the EU exporter must have a Registered Exporter (REX) number and include it in the statement.
  • When exporting from the UK to the EU, the exporter must include the EORI number in any statement issued to the EU customer, regardless of the consignment’s value.
  • The statement on origin must be provided on an invoice, or any other commercial document, describing the originating product in sufficient detail to enable its identification. Statements on bills of lading are not acceptable.
  • The statement on origin will be valid for 2 years from the date it was made out on for imports into the UK and 12 months for imports into the EU.
  • No statement on origin must be provided by the exporter or producer when working with the “importer’s knowledge” option. This allows the importer to claim preferential tariff treatment based on evidence they have obtained about the originating status of imported products. This evidence must be in the importer’s possession – and be readily available in case of official audits.

Acquiring the necessary proofs and reliably assessing the preferential status of your products and those you purchase is no small task – learn more about AEB’s software Origin & Preferences to simplify things.

Up to 100% automation for managing preferences

The software Origin & Preferences from AEB helps you to tap the benefits and realize the opportunities of free trade agreements. 

Supplier’s declarations

Until the end of 2021, whether you are claiming preferential duty rates based on the importer’s knowledge or on statements on origin, you do not need to hold a supplier’s declaration at the time you are claiming preference for goods imported from or to the EU. But the importer must be confident that the goods meet the rules of origin. And: You must make every effort to obtain supplier’s declarations retrospectively.

It can be a great hassle to request and administer supplier’s declarations – learn more about Supplier Declaration Exchange software from AEB to make your life easier.

Exception: Low value

Low value consignments below £135 imported into the UK from the EU are not subject to customs duty. The same applies to low value consignments under €150 imported into the EU from the UK. However, VAT will be levied on both sides. You can find more information on low value consignment UK VAT processes here and EU VAT processes here.

Hassle-free supplier's declaration management saves you time and money

Administrating your goods' originating status forms the basis for preferential treatment and duty savings. AEB's Supplier Declaration Exchange makes life easy for you.

Import, export, rules of origin? Benefits of end-to-end approach

It is important for traders to get organized now to ensure they benefit from the new TCA between the UK and the EU. Tapping the benefits under the rules of origin to realize zero tariffs is crucial. Customs management clearly goes beyond the mere management of import and export declarations. Product classification, origin and preferences, and supplier’s declarations have now moved into the spotlight as well.

Any of these tasks require administrative effort and due diligence. The better your IT systems and processes are integrated, the more time and money you can save. Contact us to discuss your individual customs management requirements – and also consider customs integration into your ERP such as SAP® to achieve utmost efficiency.

Customs Management Software

Managing Customs directly in SAP®

Companies already well versed in import and export procedures are also aware that Brexit has not only resulted in impacts on their customs operations. Trade compliance and logistics processes are equally affected. Read more about end-to-end supply chain considerations in this article to streamline your operation.