What are rules of origin?
Rules of origin (ROO) determine the ‘economic nationality’ of goods being exported and imported.
They're used to judge how much of that product originated from a specific nation, and how much value was added to it during the manufacturing process.
ROO can be found in trade agreements and other pieces of legislation in effect between countries.
How ROO affect your business
The country of origin of a product can dictate how much duty is paid on it, and sometimes whether it can be exported to a particular country at all.
For example, the UK has signed trade agreements with several countries which guarantee preferential (that is, lower or nil) tariff rates and fewer export restrictions to products of UK origin. But you have to be able to demonstrate your product's UK origins to benefit from these.
By using ROO to accurately detail your product's origins, you could enable your importer to pay a lower - or zero - tariff. That’s potentially a win-win situation, as it lowers their costs and is likely to make your exports more competitive.
For this to happen, you’ll need to demonstrate to the customs authority that you’ve met certain ROO requirements, as laid out in trade agreements.
This means you should include proof of origin with the goods you’re exporting. This will be checked by customs officials at the border.
If you apply ROO incorrectly, your products could be charged higher rates of duty, or be stuck at a border due to export restrictions.
When to consider ROO in export planning
ROO now apply to exports from the UK to the EU as well as to some of the other countries that the UK has trade agreements with. You can check the UK’s trade agreements on GOV.UK.
You’ll apply ROO to your products when filling out customs declarations. But it’s recommended that you understand the requirements for ROO as part of your export planning. This will help you assess the best markets to export to – and also help you avoid any unforeseen delays at customs, when shipping goods to your customers.
The key to ROO is asking the right questions about your products. It takes a bit of drilling down to understand. But if your product qualifies, your importer might be able to claim zero customs duty – meaning it’ll cost you less to export.
International trade adviser
Guidance on GOV.UK Applying ROO
ROO requirements and preferential rates can vary, depending on where you’re exporting to. Check the UK’s trade agreement with that country.
Exporting to the EU
As part of the Trade and Cooperation agreement, UK goods heading for EU markets may be able to avoid tariffs or benefit from a preferential, that is lower or nil, rate. To claim these preferences, your exports will have to be classified as having UK origin. The 2 criteria for this are:
- your product is wholly obtained from the UK or EU – for example, apples grown in Kent, or
- enough of your product has been sufficiently worked or processed in the UK or EU
What sufficiently worked or processed means
There are 3 rules that help you decide if your exports have been sufficiently worked or processed:
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Rule: Change of commodity code
Actions carried out in the UK during the manufacture of your product may have changed its commodity code. If the code for your end product is different from the codes of the non-originating materials that went into it, you may meet this rule.
For example, if components sourced from outside the EU or UK are used in assembly that takes place in the UK, the finished product could have a different code. The product might then be classified as being of UK origin.
You can check the commodity codes using the tool on GOV.UK.
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Rule: Value added/ MaxNOM
NOM refers to Non-Originating Materials, that is, those coming from a different country to the one in which they’re used for production. If the cost of non-originating materials is less than 50% of your Incoterm Ex Works cost, your product might meet this rule.
You’ll need to check the MaxNOM (Maximum Non-Originating Materials) percentage that’s specific to your product. You can do this using GOV.UK's checking tool.
For example, by using the online tool you might find that the MaxNOM for exporting children’s bicycles to country X in the EU is 45%. That means your bikes meet the rule if the cost of your non-originating materials is less than 45% of your Ex Works cost. Therefore enough value was added in the UK to your bikes to claim their origin as being from the UK.
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Rule: Sufficient processing
If you’ve processed components from the EU within the UK – in a way that substantially transforms your product – and you then export that product back to the EU, you may meet this rule.
For example, if cotton from country X in the EU is woven into fabric, then dyed with dye from country Y in the EU, and finally made into a shirt in the UK, this might count as sufficient processing when exporting back to the EU. The product could then claim UK origin.
Exporting to non-EU markets
Outside the EU, ROO requirements will differ between countries. Make sure you check if the UK has a trade agreement with the nation you plan to export to, and any ROO requirements contained within the agreement.
Checklist – does your product qualify for UK origin?
To see if your product can be classified as being of UK origin, ask yourself these 4 questions:
- Was this product grown in the UK?
- Has this product’s commodity code changed due to manufacturing actions carried out to it in the UK?
- Does the cost of my non-UK materials meet the MaxNOM rule for this product?
- Have I sufficiently processed components from the EU within the UK – with the goal to export back to the EU?
If the answer to any of these is ‘yes’, you may be able to claim UK origin for your product.
Where to get help
Rules of origin can be complex. Speaking to a local International trade adviser is a good first step – they should be able to offer some clarity on ROO and how to apply them to your products.
You can also contact your local chamber of commerce or the Institute of Export and International Trade for guidance, training and support.
Freight forwarders may be able to support you with the completion of ROO paperwork.
However, be aware that the final responsibility to get it right will always lie with your business – wherever you go for advice and support.
