Since January the 1st, 2021, UK retailers are trading under a new Free Trade Agreement (FTA) called the Trade and Cooperation Agreement (TCA) between the UK and the EU.
To benefit under the TCA, goods will have to be of UK or EU origin. This means they must meet the UK-EU preferential rules of origin. These rules are set out in the TCA and determine the origin of goods based on where the products or materials used in their production originate.
The purpose of these rules is to ensure that preferential tariffs are only given to goods that originate in the UK or EU and not from third countries.
Goods that do not meet the rules of origin will not benefit from preference under the TCA and may have to pay the standard tariffs that the EU and UK apply to imports from third countries. For exports to the EU, this will be the Common External Tariff. Likewise, for exports to the UK, this will be the UK Global Tariff.
Rules of Origin under the TCA
There are two types of rules of origin in the TCA:
General Provisions: These are rules that apply to all products being traded under preference.
Product-specific rules of origin (PSRs): These are the specific rules that set out the requirements for a product to be considered ‘originating’. PSRs are based on the product’s Harmonized System (HS) code.
What are ‘originating’ products
Products that are sufficiently worked or processed within the UK or the EU are considered as ‘originating’. By contrast, ‘non-originating’ materials are materials imported from third countries. ‘Non-originating’ may also refer to materials whose origin is unknown or not possible to determine.
A product can be classified as ‘originating’ if it is ‘wholly obtained’ or substantially transformed in line with the relevant Product-Specific Rule (PSR).
‘Wholly obtained’ goods are the ones that have been exclusively obtained or produced in the UK or the EU, without using materials from any third country. The goods must not have been manipulated or changed in another country, apart from specific minimal processes.
For every product traded, there is also a corresponding product-specific rule (PSR) that must be met to demonstrate the product originates in the free trade area and qualifies for preferential tariff treatment. Each rule describes the nature or value of processing that must be carried out on any non-originating materials so that the final product meets the origin requirements.
In the TCA, materials originating from the EU and production carried out within the EU on non-originating materials may be considered originating in the UK and vice versa. This mechanism is known as bilateral cumulation.
If you want to claim preference for goods eligible for tariff-free trade under the TCA you will need to include a statement of origin on the commercial invoice.
Fortunately, there are temporary easements in place available to businesses. Most specifically, for both goods imported from the EU to the UK and goods imported from the UK to the EU, until December the 31st, 2021, traders do not need supplier’s declarations from business suppliers when the goods are exported. Nevertheless, businesses may be asked to provide a supplier’s declaration after this date retrospectively.
You can find more detailed guidance on the rules of origin here.
Additionally, for detailed information covering all customs related issues for trading with the EU, and links to official guidance, follow this link.
If you have any questions regarding how the rules of origin or the Trade and Cooperation Agreement (TCA) might affect your current shipping process, please do not hesitate to reach out to the Shiptheory support team.