Fulfilling and proving origin
Rules of origin are the criteria needed to determine the nationality of a product. It is important because your product may have a reduced or no tariff, depending on the trade agreement your country has with the EU.
Rules of origin provide a direct benefit to companies – tariff reductions. So when exporting products to Europe – or anywhere else for that matter – you must ask yourself if your product originates from your country. This is how you go about it:
- Classify your product according to the HS system.
- Find the correct rule of origin rulefor your specific product. These can be found in the annexes of the free trade agreement or GSP agreement between the EU and your country.
- Explore whether your product has undergone substantial transformation. Read more about this below.
- See to that you can provide a proof of origin with your product.
Applying rules of origin does not always save costs
It is not always worth exporting with a certificate of origin. Sometimes the general tariff already is 0%. So always look up the general tariff for your specific product before proceeding. If the general tariff is 0% it is not worth using rules of origin and obtaining a certificate of origin.
Defining rules of origin
There are two main types of origin criteria that can be used to determine the origin of a product: wholly obtained or substantially transformed.
Wholly obtained is rather straightforward. As long as the product is grown, fished or extracted in one country, it originates from that country. This is for example vegetables, fruit or other food products or products made from wood that has grown in your country.
Substantially transformed is more complex. In today's world, most products are manufactured with parts that are imported. It is extremely rare that all components of a product originate in one country. The question is then what transformations made on the imported raw material for example that are substantial enough to confer origin to the product you want to export.
There are three methods for assessing if a product has been substantially transformed to be able to say it has its origin in one country. These methods are described for each line of products according to classification is a list of rules attached to each free trade agreement.
- The value-added rule
A certain percentage of value must be added to the product in the country of export. This means that the value of all the materials used cannot exceed a certain percentage of the price of the product. The percentage depends on the product and the free trade agreement.
- Change of tariff classification
A product has, during manufacture, changed classification in the HS system from the heading the materials had from the beginning. For example, straw baskets (heading 4602) made of imported straw (heading 1401).
- Manufacture from certain products
This rule refers to specific processes that need to be completed in order to decide origin. It specifically outlines what process or input must be used in the making of a specific product. This rule is often associated with steel, textile and apparel goods.
Cumulation allows you to claim originating status for components that do not originate in your country, but are used in the production process in your country. It applies when the components come from either the EU or regional partners. The components have to go through more than minimal processing in your country.
There are three types of cumulation:
- Bilateral cumulation
Materials originating in the EU may be used as materials originating in your country. This cumulation applies to all EU preferential trade agreements.
- Diagonal cumulation
Some agreements allow for diagonal cumulation. It can be applied when a product has been processed in another country within the free trade area except sending and receiving country. For example, in the EU free trade agreement with Ecuador, Peru, and Colombia, components from any of these countries may be used as materials originating in another of these countries.
- Full cumulation
Processes carried out in the EU or a defined country (mentioned in the relevant provision on cumulation) may be considered as carried out in your country. Not all free trade agreements have full cumulation.
Contrary to bilateral or diagonal cumulation, full cumulation permits you to consider materials that are not yet originating in the EU or your country. This means that, under full cumulation, there are more materials imported from the EU or your country that you can use for cumulation purposes.
Proof of origin
Even if a product is originating from the exporting country, its origin still needs to be verified in order to get reduced or fully removed tariff. This can be done with a document called certificate of origin. The relevant authority in the exporting country issues this document. Many countries have implemented the Registered Exporter System, REX, which is a systemwhere producers make a self-certification of origin of their goods. This system makes the process for the exporter easier; instead of asking your national authority for a proof of origin, you can issue it yourself through this system.
Get further support
Feel free to contact us at Open Trade Gate Sweden for more information about rules of origin for the trade agreement between the EU and your country. Please, include as much information as possible about your product (including how it is produced, the country where it is produced, the country where should be exported).