Rules of Origin – A New Year's day headache in store for business



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As part of the UK/EU Trade and Cooperation Agreement (TCA) goods moved between the two parties will face zero tariffs as long as they meet the associated Rules of Origin (RoO) – i.e. if they are considered to have been produced in the UK or EU. This is to avoid goods being imported from a third country into the UK or EU and then sold into the other party, potentially bypassing tariffs. 

When the TCA was agreed the EU announced they would put in place a specific measure for RoO, delaying the full burden of proving origin until 2022. With the end of this measure now looming, businesses need to be prepared to fully meet the RoO requirements for exports to the EU under the TCA.

What are Rules of Origin?

Every product being moved between the UK and EU will need to declare its origin to determine if it faces any tariffs. The TCA includes detailed schedules which set out the product specific RoO. There are two ways in which goods can qualify as ‘originating’ in the UK or EU and therefore qualify for preferential zero tariff rate (Government guidance on this can be found here) :

• Wholly obtained – where goods have been solely sourced from UK or EU.

• Sufficiently worked or processed – where goods have been sufficiently altered in the UK or EU. The TCA sets out the levels of processing which need to take place for a product to meet this threshold.

How do you prove origin?

Under the TCA there are two ways origin can be proven (further detail can be found here):

• A statement on origin completed by the exporter on an invoice, or any other document including a commercial document.

• Knowledge obtained and held by the importer that the goods are originating.

What is going to change and why does it matter?

Under the measure the EU put in place, until 31 December 2021, for any statement of origin issued to claim a zero rate on imports into the EU there does not need to be a supplier’s declaration held at the time the statement is issued. The supplier’s declaration, where required, is often the source of the relevant information regarding specific RoO since the supplier is in possession of the detailed knowledge and information regarding the inputs and production of the good. 

This has therefore significantly simplified the process and allowed many exporting to the EU to assert origin without necessarily having all the relevant information or documentation in place. 

The end of the measure is relevant for businesses in two ways:

1. Going forward they will need to have a supplier’s declaration in place when the statement of origin is issued. If this is not in place, it could cause complications or hold ups at the border when moving goods into the EU. 

2. For any statements of origin issued for goods moved into the EU in 2021 the supplier’s declarations will now need to be kept on file, even if they weren’t in place at the time the statement was issued. These can be checked retrospectively and if they are not in place the full tariff duty might have to be paid on the good as it will be assumed to not have met the origin requirements. 

What should businesses do now to be prepared?

Given the change is going to be in place soon, it is important that businesses start reviewing their statements of origin and associated supplier declarations. They should make sure they have them on file for any goods moved into the EU in 2021 and begin discussions with suppliers to ensure they are in place for any goods likely to be moved in early 2022. 

The Government has recently published comprehensive advice on RoO here, with associated case studies here.  For more detailed help contact Deloitte’s trade and customs team here.