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Preferential Rules of Origin

Check the rules of origin applying to your product in the tariff section of the MADB. The result of your search will show the preferential tariff (EU tariff) and also, on the same line, the rules of origin (RoO) applied to your product

1. What are the EU preferential Rules of Origin?

They are the instruments used to determine if a product exported from the EU may be considered as sufficiently linked to EU and therefore originating there for the purposes of receiving from the partner country the tariff preference granted by it, through the implementation of a free trade agreement.

If you are intending to export from the EU to a third country under a preferential regime, it is not enough that the product is exported from the EU. The product needs to be originating in the EU. The rules of origin will tell you if indeed your product may be considered originating in the EU and therefore receive the preference when entering the market of the partner country.

2. Where can I find the EU preferential Rules of origin?

Be aware that the rules of origin applied to each partner country are not identical in all cases. Each preferential regime has a specific set of rules of origin attached. You need to consult the rules of origin related to the preferential regime granted in which you are interested.

List of arrangements

3. General concepts of Rules of Origin

Even if you will find a specific set of rules of origin for each partner country, the same basic principles and structure applies to all of them. Here you have the most relevant elements to be considered:

3.1. Wholly obtained goods / sufficiently transformed goods

The preferential rules of origin included in the EU FTAs distinguish between:

a. Goods wholly obtained in the EU.

These are goods whose production doesn't involve any relation with any other country outside the EU, i.e. the product is obtained by processing carried out only in the EU and without incorporating materials of any other country outside the EU.

It is the case of plants, minerals, live animals, etc. In these cases it is understood that the vegetables are originating in the EU if they were harvested there; the animal is originating in the EU if it was born and raised there, the mineral is originating in the EU if it was extracted there, etc.

In the case of fish products the EU rules of origin make a distinction between fish captured within the territorial seas of the EU and fish captured beyond. In the first case, the product will be considered as originating without additional conditions. In the second, the product will be considered as originating only if it was captured by a vessel:

  • Flying the flag of an EU country,
  • Registered in that an EU country,
  • Owned by a national of the EU or a company having its main place of business and owned 50% as a minimum by nationals of the EU, and
  • In some case it is also required that the 50% as a minimum of the crew are also nationals of the EU

For a complete list see the specific provision on wholly obtained products included in the set of rules of origin attached to each preferential agreement or preferential regime.

b. Goods sufficiently transformed in beneficiary/partner country.

We are referring here to any product whose production involves countries outside the EU i.e. the product was produced by using materials of third countries or was partially processed abroad.

In these cases, the rules of origin included in EU FTAs contain a long list which establishes, for each product defined by its tariff classification[1] and its description[2], the needed processing to be carried out in the EU to consider the product as originating[3]. In some cases you may find another processing[4]. If it is the case, you may choose at your convenience which rule to fulfil[5]

  1. [1] See column 1 of Annex II to the Protocol on Rules of Origin of the relevant agreement
  2. [2] See column 2 of Annex II to the Protocol on Rules of Origin of the relevant agreement
  3. [3] See column 3 of Annex II to the Protocol on Rules of Origin of the relevant agreement
  4. [4] See column 4 of Annex II to the Protocol on Rules of Origin of the relevant agreement
  5. [5] See column 3 or of column 4 of Annex II to the Protocol on Rules of Origin of the relevant agreement

There are three basic criteria used in these lists (column 3 and 4) to determine if a product was sufficiently transformed in the EU:

i. A value added rule. You may find that for your product a rule drafted as

manufacture in which the value of all the materials used do not exceed [X% of the ex work price of the product.

In this case you need to compare the customs value of all the non-originating materials used in the production of your good (i.e. the value declared in the EU customs for those materials when imported there) with the ex work price of your final good (i.e. the value of your good when going out of the facility where it was produced). If the value of the materials does not exceed the threshold fixed by the rule, then the rule is succeeded.

ii. A change of tariff classification. You may find that for your product a rule drafted as

manufacture from materials of any heading except that of the product

In this case you need to compare the tariff classification of the non-originating materials used (4 digits) with the tariff classification of your good. If indeed the tariff classification of both does not the same then the rule is succeeded.

iii. You may find also that for your product a rule is drafted as

manufacture from [yarn] [meat], etc

In these cases the rules permits you to use the quoted non-originating material, i.e. you may import yarn, you may also import the material in a previous state of production, i.e. you may import fibres, but you may not import a material in a later state of production i.e. you may not import fabric.

For the complete list see Annex II to the relevant Protocol on origin or Annex on origin. Be aware that in some cases the rule may be a combination of criteria i), ii) and/or iii).

You will also notice that, in some FTAs, there is also an Annex IIa which could provide for an alternative rule, more flexible, for some products, sometimes under quotas.

If there are indeed quotas in force for the country of interest for your export, their utilization rates could be followed there

3.2. Minimal operations

Additionally to the specific rule of origin attributed to your product (see 3.1) you need to verify that the operation that was carried out in the EU goes beyond the minimal operations listed in the specific set of rules of origin related to the EU.

In all the sets on rules of origin there is a provision listing a series of operations (i.e. packaging, simple cutting, simple assembling, simple mixing, etc). If the production carried out in the EU is one of those listed and nothing else was made there (i.e. no material was produced or transformed) then the product cannot be considered as originating even if the rule of origin attributed to your product (see 3.1) was succeeded.

3.3. Cumulation

a. Bilateral

Materials originating in the partner country may be used as materials originating in the EU. This cumulation exists in all preferential regimes

How does it work exactly?

If the rule attributed to your good is as that described in 3.1.b) i), (manufacture in which the value of all the materials used do not exceed [X% of the ex work price of the product), cumulation permits you not to account the value of the materials originating in the partner country in the[X]% maximum threshold.

If the rule attributed to your good is as that described in 3.1.b) ii), (manufacture from materials of any heading except that of the product), because of cumulation you do not need to verify if there was change of tariff classification of the materials originating in the partner country.

If the rule attributed to your good is as that described in 3.1.b) iii) (manufacture from [yarn] [meat], etc), because of cumulation you do not need to verify if the materials originating in the partner country refer to a later state of production or not.

b. Diagonal

Materials originating in a concrete country mentioned in the relevant provision on cumulation may be used as materials originating in the EU.

How does it work exactly?

If the rule attributed to your good is as that described in 3.1.b) i), (manufacture in which the value of all the materials used do not exceed [X% of the ex work price of the product), cumulation permits you not to account the value of the materials originating in that country in the[X]% maximum threshold.

If the rule attributed to your good is as that described in 3.1.b) ii), (manufacture from materials of any heading except that of the product), because of cumulation you do not need to verify if there was change of tariff classification of the materials originating in that country.

If the rule attributed to your good is as that described in 3.1.b) iii) (manufacture from [yarn] [meat], etc), because of cumulation you do not need to verify if the materials originating in that country refer to a later state of production (i.e. fabric) or not.

c. Full cumulation

Processes carried out in the a partner country mentioned in the relevant provision on cumulation may be considered as carried out in the EU.

Contrary to bilateral or diagonal cumulation, full cumulation permits you to consider materials that are not yet originating in the partner country. This implies that there are more materials imported from the partner country that you can use for cumulation purposes under this specific type of cumulation.

How does it work exactly?

If the rule attributed to your good is as that described in 3.1.b) i), (manufacture in which the value of all the materials used do not exceed [X% of the ex work price of the product), cumulation permits you not to account the value of the materials imported from that country in the[X]% maximum threshold.

If the rule attributed to your good is as that described in 3.1.b) ii), (manufacture from materials of any heading except that of the product), because of cumulation you do not need to verify if there was change of tariff classification of the materials imported from that country.

If the rule attributed to your good is as that described in 3.1.b) iii) (manufacture from [yarn] [meat], etc), because of cumulation you do not need to verify if the materials you imported from that country refer to a later state of production (i.e. fabric) or not.

Finally, you need to have in mind that if the processing carried out in the beneficiary/partner country is only one of the operations carried out in the list of minimal operations (see 3.2) then cumulation cannot be applied.

3.4. Tolerance or de minimis

In case the rule of origin attributed to your product is not succeeded (see 3.1), still the product may be considered as originating if the value of the non-originating materials that did not manage to fulfil the rule does not exceed a concrete threshold specified in each set of rules of origin (normally 10% or 15% of the ex work price of your good).

How does it work exactly?

If the rule attributed to your good is as that described in 3.1.b) ii), (manufacture from materials of any heading except that of the product), the tolerance permits you to use non-originating materials which has the same tariff heading than the final value provided that the value of these materials do not exceed the tolerance threshold specified in the relevant set of rules of origin.

If the rule attributed to your good is as that described in 3.1.b) iii) (manufacture from [yarn] [meat]), etc, because of cumulation the tolerance permits you to use non-originating materials that represent a later stage of production provided that their value does not exceed the tolerance threshold specified in the relevant set of rules of origin.

If the rule attributed to your good is as that described in 3.1.b) i), (manufacture in which the value of all the materials used do not exceed [X% of the ex work price of the product), note that you cannot use the tolerance as the threshold of the specific rule of origin attributed to your product [x]% cannot be exceeded in any case.

3.5. Direct transport rule or non-manipulation rule

Even if your product is originating (i.e. your product is wholly obtained or sufficiently transformed by considering the elements specified in 3.1; 3.2; 3.3 and 3.4 ) you need still to verify the product was sent from the EU to the partner country without being manipulated in a third country, apart from the mere operations needed for keeping the product in good conditions.

You need to verify the specific conditions on this issue and documents needed to demonstrate the fulfilment of this rule contained in the relevant set of rules of origin.

3.6. Prohibition of Duty drawbacks

In some sets of rules of origin there is a provision which impedes to use duty drawbacks systems on the materials imported in the EU that are used in the production of a good intended to receive preferential treatment into a partner country.

Duty drawback systems are all those mechanisms that permits not to pay at import or to recover the duties paid at import on the materials that are used for further processing while final good using those materials is exported.

You need to verify the specific conditions on this issue and documents needed to demonstrate the fulfilment of this rule contained in the relevant set of rules of origin.

4. Proofs of origin

Even if your product is originating (i.e. your product is wholly obtained or sufficiently transformed by considering the elements specified in 3.1; 3.2; 3.3 and 3.4 and other conditions are also fulfilled (see 3.5 and 3.6) the exporter from the EU needs to proof that the good is originating at import into the partner country in order to claim the tariff preference

There are different types of proof of origin depending on the specific set of rules of origin. In general terms, you may proof the originating status of the goods by:

a. Certificate issued by the EU customs administration.

In order to get this certificate the exporter needs to address the customs administration or public authority of the EU applying for one of these certificates (it may be FORM A (for GSP regime), EUR MED (for some concrete cases in the PanEuromed system) or EUR 1 (all the rest of the cases).

b. Invoices declarations made out by the exporter in the EU.

This may be the case for consignments up to 6000 Euros. In some cases invoices declarations or origin declarations may also be made out by the exporter in the EU country for consignments beyond 6000 Euros, but the exporter will need to be an approved exporter.

5. General information

General information on the EU preferential Rules of Origin can be found on TAXUD.