Trade preference agreements: import and export
High level trade agreements between countries mean importers and exporters can pay less or no duty on certain goods traded with these countries.
International trade under preference allows you to import and/or export goods at a lower or nil rate of customs duty and/or levy charge. The rate of duty payable depends on the type of goods, whether you’re importing or exporting, where the goods are deemed to have come from - the ‘originating’ country - and their destination. The preference agreements that apply in the UK are applicable across the EU.
Trade preference agreements are principally, but not exclusively, designed to enable developing countries to have greater access to export markets such as the EU.
If you’re importing or exporting under preference, it’s essential that you keep up to date with developments in the EU and the originating or destination country. This guide shows you how to find advice on the preference agreements with those countries or regions of the world that are most appropriate for your business.
What preferences are and how they work
EU member states have multiple Free Trade Agreements (FTAs) or Economic Partnership Agreements (EPAs) in place with third countries and with blocs of countries acting together under bilateral or regional agreements of their own.
In general, agreements enable preferential importing and/or exporting conditions to be placed on goods that meet prescribed rules of origin and other criteria.
FTAs and EPAs are constantly evolving, with countries graduating from one scheme to another, being de-graduated and/or products being removed or added to the list of preferences and/or being restricted under temporary or permanent limits or tariff quotas. As a result, those whose businesses are likely to be affected are advised to keep abreast of developments.
The following agreements relate only to goods being imported into the EU:
- The Generalised System of Preferences (GSP) under which the EU - and other developed countries - offer developing countries lower tariffs on their exports into the EU
- GSP+ extends even lower tariffs to 15 vulnerable countries that implement certain labour and human rights agreements
- Everything But Arms (EBA) gives exports from Least Developed Countries (LDCs) - classified as such by stringent LDC criteria - duty and quota-free access to the EU for most goods, excluding armaments
To be eligible for preferences under any of these agreements, you must:
- show that the goods have met prescribed rules of origin - see the guide on rules of origin
- produce valid preference documentation
- ensure the goods satisfy rules about transportation
There are also several EPAs in place between the EU and blocs of countries in certain regions. You can read about regional trading policies on the European Commission Trade website.
Before you attempt to use any preference, the first step is to check the classification codes for your products in the UK Integrated Tariff - these codes contain key information on preferences.
Find commodity codes and other measures applying to imports and exports by accessing the online UK Trade Tariff tool.
Once you have the correct Tariff classification for your goods and their destination, you can complete paperwork to ensure that the right rates of duty are paid.
You should note that trade preferences can be withdrawn once countries reach a given level of development and competitiveness in a specific sector (graduation) or for all products (exclusion). Also, countries may opt to operate under a different agreement. For example, some LDCs in the African, Caribbean and Pacific region opted in 2008 to trade under GSP EBA instead of signing up to new EPAs.
Eligibility for import preferences
If you import goods, you must be clear on where the products have ‘originated’ in order to manage duty and customs requirements effectively.
The origin of your goods is either where they have been wholly obtained or produced or where the last significant work essential to the manufacture was undertaken.
Every stage of the supply chain can have a significant effect on whether you can import the goods using preferences. If goods are manufactured entirely in one country, you would expect their origin to be that country. However, if components are made in one country then assembled in another non-EU country, in combination with other components, the country of origin may be where the goods are assembled. See the guide on rules of origin.
You can use preferences for goods coming into the EU that ‘originate’ from many countries, the following being a list of the main countries:
- Norway, Iceland, Switzerland and Liechtenstein
- the Faroe Islands
- Andorra - only for specific goods as outlined in the Tariff
- Algeria, Morocco and Tunisia
- Ceuta and Melilla
- Egypt, Jordan, Lebanon and Syria
- the West Bank and Gaza Strip
- the Balkan countries of Albania, Bosnia-Herzegovina, Serbia and Kosovo
- African, Caribbean and Pacific States (ACP) - included within the EU-ACP Economic Partnership Agreements
- Overseas Countries and Territories (OCTs) of European Community (EC) member states - eg Aruba, an OCT of the Netherlands, the Falkland Islands, a British OCT, or French Polynesia, an OCT of the French Republic
- Mexico - you can find the detail on rules of origin for preferential trade with Mexico in Notice 832
- South Africa
- Turkey - you can find details of EC preferences for trade with Turkey in Notice 812
You can find a more complete list of countries - and the preferences that apply - in Volume 1 Part 7 of the HMRC printed Tariff. However, if your business requires that you keep abreast of detailed changes on an EPA, country-by-country or product-by-product basis, you are advised to check the list of Customs Information Papers.
Preferences with these countries are normally part of bilateral treaties - the individual treaties with each of these countries.
GSP allows goods from developing countries easier access to EU markets through reduced rates of duty. GSP in contrast to the list above are autonomous, ie the rules apply to imports into the EU only.
Once you’re sure about the origin of your goods, you can manage the process of importing them under preference.
Generalised System of Preferences and GSP+
GSP allows originating products from a range of countries to be imported into the EU at a reduced or zero rate of duty. For more information on how to determine whether a product is an originating one, read Notice 830 tariff preference: new GSP rules of origin.
GSP+ is an extension to the GSP system - it includes developing countries which have proved their commitment to sustainable development and good governance. Most duty rates are ‘zero’ under this part of the scheme. Read about GSP on the European Commission website.
Under GSP, preferences are ‘non-reciprocal’. This means that goods imported into the EU from a number of developing countries are liable to reduced or nil rates of duty. The GSP system does not apply to exports from the EU.
However, if you’re exporting goods to a GSP country that are going to be processed there, and the finished products will then be imported into the EU under preference, your supplier may be able to count them as originating in that country under a procedure called donor country content. Find out about donor country content in Notice 827.
Some GSP countries are grouped together so that goods can be processed in countries within the group and still be eligible for import into the EU under GSP. This is known as regional cumulation.
The groups are:
|Group||Countries in the group|
|1||Cambodia, Indonesia, Laos, Myanmar/Burma, Philippines, Vietnam|
|2||Bolivia, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Peru|
|3||Bangladesh, Bhutan, India, Nepal, Pakistan, Sri Lanka|
Managing import preferences
Once you have confirmed the goods you want to import, you must manage the import process carefully by completing and submitting the right paperwork and paying the correct duty.
You must obtain the correct Tariff classification code for the goods you intend to import. This code indicates the rate of duty you must pay on the product and whether it will be imported under preference.
If a product is changed or processed significantly during the manufacturing process, this could mean a change in its Tariff classification code and the rate of duty that applies to it when it’s imported. See the guide on rules of origin.
It can save you time to begin classifying your goods for preferences with a Harmonised System (HS) number, which comprises the first four digits of a Tariff classification number. Many non EU countries share HS codes.
Once you have established the correct Tariff Code, then the rule of origin for the product must be checked to see if the product qualifies for preference.
The paperwork required depends on where the goods are being imported from - it must be stamped and authorised by the customs authority in the exporting country. Form EUR1 is the main certificate used for goods imported from outside the EU. Find a specimen form C1299.
If you’re importing goods covered by the EU’s Autonomous GSP arrangements, you need to use GSP Form A.
If you import goods from Turkey, use the ATR form. You can find details of EC preferences for trade with Turkey in Notice 812.
When you import under GSP, a GSP form A has to be completed in the country of origin (or an invoice declaration if the value is less than £4,830).
If you’re an exporter, and want to use the Donor Country content facility, then you must provide the GSP country with a Movement Certificate EUR1 or invoice declaration with your export so long as the goods qualify.
If you are authorised to do so by your customs authority, you can use invoice declarations in place of an EUR1 regardless of value. These are declarations on the commercial paperwork raised by the business from which you’re importing the goods - they don’t need to be stamped by customs in the EU.
Eligibility for export preferences
If you export goods, you can benefit from reduced or nil rates of duty on products destined for countries that have a preferential arrangement with the EU.
The first step is to check the requirements of the country to which you want to export. Most countries with export preference arrangements are covered in Notice 828.
You need to prove the EU ‘origin’ of your goods. This enables you to obtain the paperwork to prove to customs authorities in your destination country that the goods can be imported there under preference. See the guide on rules of origin.
If you’re importing materials from within the EU - and EU origin needs to be confirmed - you should obtain Supplier Declarations and clarify in contracts that suppliers must notify you if any supplied goods lose their EU origin. This should protect you against unexpected duty charges when you export.
If you’re unsure whether the origin of your goods qualifies you for preference, consider Binding Origin Information - an official and legally binding confirmation of origin.
Managing export preferences
If you’re exporting using preferences, you need to keep up to date with a number of paperwork requirements.
You must retain any proof of origin - such as full bills of materials or supplier declarations for at least 3 years.
Customs authorities in the destination country require documentation to allow entry of goods imported using preferences. The documents you need depend on the country to which you’re exporting. You also need to complete paperwork to allow the exports to leave the European Union.
For most countries, an EUR1 certificate is required, see Notice 827. If you fill out an EUR1, it must be stamped by the HMRC Central Processing Unit in Salford, your local Chamber of Commerce, or the Chartered Institute of Shipbrokers. The authorised EUR1 proves that the goods qualify for preferential duty status and is used at customs points to ensure the preference duty rate is charged.
Slightly different rules apply to exports under preference to Mexico. You can read about exporting under preference to Mexico in Notice 832.
Turkey also has separate paperwork requirements. You can find details of EC preferences for trade with Turkey in Notice 812.
If you’re an approved exporter, you can consider using invoice declarations, by inserting on the invoice or other commercial documents such as the delivery note or packing list, in which the origin of your goods is declared. Using an invoice declaration instead of a separate preference certificate is only permitted for preference countries that are able to benefit from simplified arrangements. You can:
- find simplified preference document information in section 11 of Notice 826 on Tariff Preferences: Imports
- find invoice declarations examples in section 12 of Notice 826 on Tariff Preferences: Imports
Suppliers’ Declarations for exporters
Suppliers’ Declarations are used to provide evidence that goods supplied to the ultimate exporter satisfy the origin criteria, so they can be considered to be of EU origin in their own right. Exporters use Suppliers’ Declarations to prove the originating status of components and materials used to make goods for buying or re-export. Suppliers use them to prove the originating status of the goods for their customers. You can read about the rules that apply to the use of Suppliers’ Declarations in Notice 827.
Using the UK integrated Tariff for preferences
If you’re an importer or exporter, the Tariff has an important role in establishing the rates of duty for your goods.
If you import goods, you must use the Tariff to establish whether preferences are available on imports to the EU, what the rates of duty are, and if there are quotas.
The Tariff uses commodity codes to identify products. 8 digit numbers are used for the movement of goods within the EU, and 10 digit numbers for imports from outside the EU. These codes are an essential part of your importing paperwork and duty calculations.
If you have specific classification queries, you can contact the Tariff Classification Service Enquiry Line. You can get a maximum of 3 classification codes per call, so make sure you have got as much information as possible about your product before you telephone.
If you’re an exporter, remember that you must check with your customer to ensure a preferential rate of duty is available in that country.
Where to get help with import and export preferences
Export and import preferences can be complex, and there are a number of organisations that can give you practical advice.
Your first port of call should be the HMRC National Advice Service, which can help with general and specific queries on preferences throughout the import and export process. You can also call the HMRC VAT: general enquiries Helpline.
Correctly classifying your goods is essential before you can generate paperwork for importing or exporting goods using preferences. You can call the HMRC Tariff Classification Service Enquiry Line for help on classification codes.
Find commodity codes and other measures applying to imports and exports by accessing the online UK Trade Tariff tool.
If you’re an importer or exporter, local Chambers of Commerce can provide practical business support. They can also check and stamp EUR1 movement certificates for exporters. You can find your local Chamber of Commerce on the British Chambers of Commerce website.
If you have a complaint about how duty and preference issues have been handled by HMRC and cannot resolve them directly, you can raise the problem with the Adjudicator’s Office - they will examine all issues fairly and impartially. You can find out how to make a complaint about HMRC on the Adjudicator’s Office website.
Adjudicator’s Office Enquiry Line
0300 057 1111
British Chambers of Commerce
024 7669 4484
Binding Origin Information in Notice 831
Electronic Binding Tariff Information decision application in Notice 600)
Published: 2 August 2012
Updated: 13 June 2013
- Fixing references to specialist guides
- First published.
From: HM Revenue & Customs
Related guides: Regional Trade Agreements (part 2) Regional Trade Agreements (part 1) Anti-dumping duty, 'countervailing' and other trade defence measures The World Trade Organization and trading with developing countries Exporting military goods to the United States Removing trade barriers for UK exporters