Everything you need to know about Rules of Origin
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The UK leaving the EU single market entails a whole new game on trade, as the origin of goods must be proved in order to avoid ‘most favoured nation treatment’. As a result, rules of origin are often seen in Free Trade Agreements as the result of balance in a difficult negotiation. This can impact market access opportunities and disrupt supply chains and so traders must understand rules of origin in order to benefit from the EU-UK Trade and Cooperation Agreement.
To understand rules of origin, it is very important to understand the harmonised system. You need to find your product in this universe of goods developed by the World Customs Organisation. This comprises more than 5,000 commodity groups which act as a basis for rules of origin and trade commitments.
How this plays out under the Trade and Cooperation Agreement (TCA) between the EU and UK, is that any originating products could apply for the preferential tariff treatment if they fall under three criteria to check if a good complies with the rule of origin:
• Wholly obtained
• Products produced exclusively from originating materials
• Produced using non-originating materials provided they comply with requirements
Regarding all non-originating materials, these are classified in different headings than that of the final good.
However, the rules are not written in stone.
The UK and the EU may modify rules of origin, which would be a Council decision as opposed to involving the European Parliament. For this process to change the rules of origin, both parties have to agree on the specific changes.
Additionally, changes in harmonised system nomenclature will result in a new set of rules of origin to reflect the changes agreed in the World Customs Organisation, however, no changes in substance will occur from this.
Moreover, once the UK gets involved in the negotiations, the CPTPP will imply bilateral negotiations in market access, but no opportunity to change rules of origin. When any new member joins the CPTPP it is expected that the rules of origin will remain as originally negotiated. However, there are side letters which can deviate from the original agreement, such as different methodologies calculating Regional Value Content and special rules of cumulation of origin.
Exporters must therefore assess their situation to identify potential improvements in FTAs for current agreements and future negotiations.
If you would like more information on how rules of origin apply to your business, on the new web platform of the Commission ‘Access2market’ there is a tool called Rosa that helps to determine the origin of your goods: https://trade.ec.europa.eu/access-to-markets/en/content/rules-origin-access2markets