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What Does Rules of Origin Mean In Import and Export?

It’s fair to say that the UK’s status as a ‘third country’ when it comes to international trade has changed many rules and processes around the UK’s trade position. As we’ve covered in our Brexit Jargon Buster, there’s a fair bit of jargon floating around the process of both Brexit and international freight both from – and to – the UK. ‘Rules of Origin’ is one such legislative term  – so if you’re figuring out what they are, and how they apply to your export or import post-Brexit – keep reading!

In this guide to Rules of Origin, Speedy Freight gets to grips with all things shipping, trading, and classification.

What are Rules of Origin?

With the UK’s status as a third country in regards to the free movement of goods, duties can be applicable on goods that do not originate from either the UK or EU.

Rules of Origin determine where your goods originate from and which goods are covered in preference agreements. The rules of origin requirements are some of the most important provisions that your business needs to understand and comply with, under the UK’s deal with the EU. However, a number of companies end up lost when it comes to rules of origin – so we’re here to help!

How Do Rules Of Origin Work?

Let’s look at an example to work out how rules of origin function and operate. Imagine that an item was originally imported to Spain from China, to then be sent on to the UK, the goods would originate in the country of production (and not that of dispatch). With China also holding the status of a 3rd to the EU country, import duties would be applicable on the goods.

Such duties apply for goods shipped from the UK to the EU that have not been produced in the UK or the EU, the import duties would then be applicable for the buyer of the goods. It is then, of course, vitally important to then check on the incoterms that have been agreed between seller and the buyer, as this will reflect who will be responsible for these duties.

 

What Do Rules Of Origin Mean For Me?

There are, of course, current Rules of Origin in operation. For goods imported from the EU to GB (but not vice-versa).

This means that the origin is the economic nationality of goods being imported and exported (where they have been produced or manufactured). This applies to all goods, whether they’re covered by preference agreements, the Generalised Scheme of Preferences, or not (non-preferential).

To help, let’s look at a couple of examples:

Cotton Shirts

Rule: Weaving combined with making-up including cutting of fabric.

The rule requires the specific processes set out (weaving, as well as making-up including cutting of fabric) to be carried out in the UK. However, with cumulation of processing, these processes can be divided between the UK and EU. For example, the weaving of the fabric could be done in the EU, whilst the making-up of the shirt could be done in the UK. The final product can then be exported back to the EU tariff-free as an ‘originating’ product.

 

Wool jumper

Rule: Customs tariff 61, 17

Wool from Wales, weaved in China, assembled in Portugal, and imported to the UK, would be subject to 20% VAT and 12% duty, due to the weaving taking place in a third country, China. This applies to all goods, whether they’re covered by preference agreements, the Generalised Scheme of Preferences, or not (non-preferential).

 

Commodity Codes and Rules Of Origin

Volume II of the UK Trade Tariff covers Commodity Codes. There are 97 chapters; with the higher the chapter the more processed the commodity. Within the chapters, there are further sub sections.

The first 6 digits are based on the Harmonized System set out by the WCO (World Customs Organization), with exports from the UK using 8 digits and imports to the UK using 10 digits.

It is a customer’s responsibility to provide a commodity code that covers the goods they are wishing to move, this will also cover items that are classed as personal effects.

 

If you cannot find a commodity code, it’s important to seek government help. Clients should contact classification.enquiries@hmrc.gov.uk who will be able to assist further based on description and technical specification (documents may be requested). If a legally binding answer is required, customers should request ATar (Advanced Tariff Ruling) from HMRC. Customers will have to provide a sample of the product, with lead times currently at 4weeks.

 

How Can A Courier Help Me With Rules Of Origin?

Speedy Freight is proud to be an experienced courier when it comes to export and import post-Brexit. We can support our clients with exporting goods from the UK as well as importing goods into the UK, and can assist in the relevant documentation and required certifications / licenses, commodity codes and Rules of Origin. Simply get in touch with your local branch – or contact our friendly administrative teams for more info.

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