Guidance

Check your goods meet the rules of origin

Rules to establish the country of origin of imported and exported goods and to help identify goods which qualify for lower or no Customs Duty.

Rules of origin determine where your goods originate from and which goods are covered in trade agreements.

You’ll need to understand the rules of origin to:

  • claim tariff preference
  • prove the origin of goods you’re exporting

Working out the country where your goods are treated as originating from can be complicated. Find out how to get someone to deal with customs for you.

The origin of the goods:

Preferential and non-preferential rules of origin may both apply.

You should also check the tariff quotas to see if there is a different rule of origin that has been agreed.

To work out the country where your goods are treated as originating from, you need to know if the goods are made using goods from one, or more than one country.

Products you make using goods originating from one country

Your goods are normally classed as ‘wholly obtained’ if they’re natural products, or products manufactured entirely from them that completely originate from the country or territory covered in trade agreements.

Wholly obtained includes products such as:

  • mineral products extracted or taken from its soil or from its seabed
  • live animals born and raised there
  • products obtained by hunting or fishing conducted there
  • products produced there exclusively from the products that are wholly obtained.

Products you make using materials from different countries

Your goods are classed as “sufficiently worked or processed’ if they’ve either been produced using materials or were partially processed in countries outside the originating country or territory.

If 2 or more countries are involved in the production, the goods are deemed to have originated in the country or territory where they were last substantially worked or processed.

Each agreement will set out the rules that goods must comply with to be considered substantially worked or processed. This will include:

  • the product classification heading or chapter number
  • a detailed description of the goods
  • a description of how non-originating materials must be worked or processed to get originating status

Working out if your goods are sufficiently worked or processed

There are rules to help you decide if goods are sufficiently worked or processed.

These rules apply to both imports and exports.

You can find more information about these rules and how they apply to your goods in either the:

The ‘value added’ rule (known as the ‘ad-valorum’ rule)

This rule sets a limit on the value of non-originating materials which can be used before a finished product is considered as not originating from another country.

You will need to work out the ‘ex-works value’ of your goods to use this rule. This is the price you paid for the product when it left the factory. It includes the materials used to make it and any other non-material costs related to its manufacture.

You should deduct any internal taxes which may be due or you paid when the product was exported.

Some trade agreements use the ex-works price as the value of the goods, so you must check the relevant country’s trade agreement to see if the rule applies to your goods. If the rule applies, the agreement will say:

‘Manufacture in which the value of all the materials used do not exceed [X]% of the ex-work price of the product’.

You’ll also need to know how much it cost to make the finished product. You should include costs for things like:

  • labour
  • profit, research and development
  • any overheads, including:
    • power
    • fuel
    • catalysts
    • solvents
    • plant equipment, machinery and tools

The product will meet the origin rule if the percentage of the costs to make the finished product are not more than the ex-work price mentioned in the trade agreement, for example:

The trade agreement says ‘Manufacture in which the value of all the non-originating materials used does not exceed 60% of the ex-work price of the product.’.

The ex-work price of the product is £1,000.

The costs to make the finished product are £550.

To get the percentage figure:

  1. Divide the costs to make the product by the ex-work price:
    550 ÷ 1,000 = 0.55
  2. Multiply that figure by 100:
    0.55 x 100 = 55
    The percentage of the costs to make the product is 55%. The product meets the origin rule, as this is less than the 60% figure in the trade agreement .

If the costs to make the finished product are not enough by themselves to meet the origin rule, you’ll need to prove that enough of the materials used to make it are originating to meet the rule.

For example, if the agreement says the non-originating materials to make the finished product must not exceed 40% and the figure for your product was 45% you will need to prove that at least 5% of those materials are originating to meet the rule.

The customs value is the value of the non-originating material declared to the customs authority of the country where they are used to produce the final goods.

The change of tariff classification rule

Your goods cannot have the same tariff classification as any of the non-originating materials used to make the final goods.

If this rule applies to your goods, it will state ‘Manufacture from materials of any heading except that of the product.’ Other tariff classifications can also be specified.

In this case, you must compare the tariff classification of:

  • all non-originating materials used
  • your end-product

If the tariff classifications meet the requirements in the agreement, the rule has been met.

Manufacture from certain products or through specific processes rule

This rule defines either which specific:

  • non-originating materials may be used in the manufacture of your goods (the originating status for your end-product will be retained)
  • processes which need to have taken place in order to get originating status

If this rule applies to your goods, it will state ‘Manufacture from [yarn] [meat], and so on.’

You may also be eligible to import the material in an earlier state of production (such as loose fibres imported from another country to produce yarn).

However, you may not import a material in a later state of production (for example, you may not import fabric from another country to produce yarn).

Processing goods which do not affect originating status

Minimal operations are processes that, when carried out either individually or in combination, are considered as being of little importance so do not affect originating status.

Manufacturing and processing operations must be more than simple operations or processes, and must need special skills, machines, apparatus or equipment especially produced or installed to carry out the manufacture or process.

The list of minimal operations can vary by agreement so you should check the relevant agreement.

Some of the listed operations can be clearly identified as insufficient operations, such as the affixing of a label on the product. However, there are also some operations that need to be assessed further as they contain the term ‘simple’, for example ‘simple assembly’.

‘Simple’ usually describes activities which do not need special skills, machines, apparatus, or equipment especially produced or installed for carrying out the activity. This term may be further defined so that the skills, machines, apparatus, or tools used must also contribute to the product’s essential characteristics or properties.

Using non-originating materials to make a product

The general tolerance rule lets manufacturers use non-originating materials up to a specific weight or percentage value of the ex-works price, depending on the classification of the product.

If the specific list rule already allows the use of non-originating materials, the tolerance cannot be used to exceed the percentage amount specified in the list rule. The maximum tolerance will always be that allowed by the specific list rule.

Treating accessories, spare parts, packaging and tools as a single product

Accessories, spare parts and tools which are supplied with a finished product are treated as being a single product, if they:

  • make up the standard equipment usually included in the sale of such items
  • are included in the price of the item or are not separately invoiced
  • are classified with the item in the tariff of the importing country

Packaging of a kind which do not have to be classified under the Tariff separately from their contents are also covered by the preference documents for the contents.

Goods used in production but are not part of the final product

These are elements that are used in the production of a product which do not form part of the finished product so are not considered when determining the origin of a product.

Neutral elements include:

  • fuel, energy, catalysts, and solvents
  • equipment, plant, devices, and supplies used to test or inspect the product
  • gloves, glasses, footwear, clothing, safety equipment, and supplies
  • machines, tools, dies, and moulds
  • spare parts and materials used in the maintenance of equipment and buildings
  • lubricants, greases, compounding materials, and other materials used in production or used to operate equipment and buildings

It can also include any other material that does not enter the final product if both:

  • the material is not intended to enter the final product
  • you can demonstrate that the material use was only used in the production process

When you can treat products as originating from different country

Cumulation is the term used to describe a system that allows originating products of country A to be further processed or added to products originating in country B, just as if they had originated in country B. The resulting product would have the origin of country B.

With cumulation the working or processing carried out in each partner country on originating products does not have to be ‘sufficient working or processing’ as set out in the list rules although it should be beyond minimal processing.

There are 4 types of cumulation:

  • bilateral
  • diagonal
  • regional
  • full

Bilateral cumulation

Bilateral cumulation operates between 2 countries where a trade agreement contains a provision allowing them to cumulate origin. Materials originating in either country in the trade agreement will be considered as materials covered by the rule of origin.

If the value-added rule applies, cumulation allows the value of materials originating in the in the UK or in the other country to be excluded from the percentage maximum threshold.

If the change of tariff classification rule applies, there is no need to check if there was change of tariff classification of any materials originating in the UK or in the other country.

If the manufacture from certain products rule applies, there is no need to check if the materials originating in the UK or in the other country meet the stated requirements.

Diagonal cumulation

Diagonal cumulation operates between more than 2 countries. Materials originating in a defined country or countries, may be used as materials originating in the country of export, when used in an export to a country not in the agreement.

Diagonal cumulation will be set out in the trade agreement if it applies.

If the value-added rule applies, cumulation allows the value of materials originating in the in the UK or in the other country to be excluded from the percentage maximum threshold.

If the change of tariff classification rule applies, there is no need to check if there was change of tariff classification of any materials originating in the UK or in the other country.

If the manufacture from certain products rule applies, there is no need to check if the materials originating in the UK or in the other country meet the stated requirements.

Regional cumulation is a form of diagonal cumulation, which only exists under the Generalised Scheme of Preferences.

Full cumulation

Full cumulation allows for the working or processing undertaken on non-originating products. Processes carried out in another country or countries may be considered as carried out in the UK. This means that if your goods have been worked or processed in a country not in the agreement you may be able to consider them as originating.

If the value-added rule applies, cumulation means that the value added to non-originating materials in another country does not have to be included in the percentage maximum threshold.

If the manufacture from certain products rule applies, working or processing undertaken on non-originating materials can be counted towards any conditions which must be met.

Claiming back duty when using inward processing

The no drawback rule mean you cannot claim back duties applicable to a country not included in the agreement. However, some agreements allow for partial drawback for a limited period.

It means that all customs duties and equivalent charges must be paid on any materials, components or parts imported to manufacture a finished product on which preference will be claimed.

You must decide if you should either:

  • claim the reduced amount of Customs Duty on any imported materials used in manufacturing the goods
  • pay any duties due and issue a preference document so your customer to claim preference

Storing similar goods together

When using both originating and non-originating materials in the production of products, the producer must make sure their physical segregation - otherwise all materials stored together would be considered as non-originating.

Fungible materials mean materials that are of the same kind and commercial quality, with the same technical and physical characteristics, and which cannot be distinguished from one another once they are incorporated into the finished product.

You can use accounting segregation to store originating and non-originating fungible materials together if it would be difficult for you to do this because:

  • of the cost
  • it’s not practicable

Accounting segregation means the originating materials will not lose their originating status.

This method must make sure that the quantity of finished products obtained, which are originating, is no more than that which would have been obtained if there had been a physical segregation of the materials used.

Using accounting segregation, the origin of the materials that will be physically used in the production process does not matter. At the date of determining the origin of the product, the producer must hold enough quantities of originating materials, as reflected in the stock records, to produce that originating product.

Your records must follow a stock management method using accounting principles. This is so that the customs authorities can make sure that no more final products receive originating status than would have been the case if the materials had been physically segregated.

Exporting goods to a country not included in the agreement during production

You normally have to carry out processing or works on a product in the country included in the trade agreement. This is known as the ‘principle of territoriality’.

However, due to modern manufacturing processes it’s not always possible to do this. Some agreements may let you carry out processing or works in a country not included in the agreement.

You will have to follow the specific conditions to be able to claim preference. If you do not, the returning product will be treated as non-originating.

If your goods are returned

These are goods with originating status which have been exported to a country not included in the agreement but have been returned to the UK.

Returned goods keep their originating status if you can show they have not undergone any operation beyond keeping them in good condition.

Goods re-imported after working or processing outside the territory of a partner country

There is limited scope for operations to be carried out in countries not included in the agreement using outward processing but only if all following requirements are met the:

  • total added value acquired in the country not in the agreement does not exceed a set percentage of the ex-works price of the product
  • total value of the non-originating materials incorporated in a country in the agreement, taken together with the total added value acquired outside that country in the agreement, does not exceed the value allowed in accordance with the annex containing the list rules
  • person exporting the goods must give all the documentation needed to check the total value acquired in the country not in the agreement

‘Total added value’ means all the costs arising, including transport costs and the value of non-originating materials incorporated there.

Goods imported from exhibitions

Goods originating in a preference country and consigned to the UK from an officially approved exhibition in a non-preference country may be imported under preference if you produce the following:

  • preference document showing the name and address of the exhibition
  • copy invoice for the purchase of the goods, bearing the statement ‘These products were consigned to you from (name and place of exhibition)’ given by the preference country exporter who consigned them to the exhibition
  • certificate signed by the customs authority under whose control the goods remained during the exhibition confirming consignment from the preference country to the exhibition before consignment to the UK

If the goods are split, combined or changed after they’ve left the exporting country

Originating goods must be the same as those which left the country of export. Goods can move through or be stored in countries not in the agreement. If consignments are split or domestic legal requirements (such as labelling) are carried out, the goods must remain under customs supervision.

The importer may be required to submit evidence, for example:

  • a single transport document
  • a certificate of non-manipulation issued by the customs authorities of the country of transit
  • factual or concrete evidence based on marking or numbering of packages

If the goods were transported from a feeder vessel and then consolidated with other consignments in a seaport, then there should be a transport document (for example, a bill of lading) for each leg of the journey.

Split consignments when importing large machinery or plant

When importing large machinery or plant (for example a car assembly line or a power station) it can be unrealistic to import the goods in a single consignment.

You should present the proof of origin with the first import declaration with a written statement explaining that further consignments are to follow. The import declarations for subsequent instalments should quote the number and date of the first import declaration.

Read more about split consignments and classifying goods.

How to get proof of origin

You must give evidence to show the origin of your goods.

If you need an origin ruling

If the origin of your goods is not straight forward and you need a ruling, you can apply for an origin ruling. This is a ruling that confirms the origin of specific goods. It is valid for 3 years.

Published 1 December 2020