Preferential rules of origin are a set of rules that determine the country of origin of goods. These rules confer tariff benefits (entry at reduced or zero duty) on goods traded between countries which have agreed to such an arrangement or where one side has granted it unilaterally.
Preferential rules of origin are an essential part of EU trade agreements and unilateral trade arrangements. To qualify for a lower or zero tariff, a product must fulfil the relevant conditions laid down in the origin protocol to a trade agreement or autonomous arrangement.
In effect, goods must either:
- be ‘wholly obtained’, that means manufactured from raw materials or components grown or produced in the EU or in the beneficiary country, or
- undergo sufficient working or processing in the EU or in the beneficiary country in compliance with the product specific rules set out in the origin Protocol.
Goods that fulfil the above criteria are considered ‘originating’ goods.
To check whether a product complies with the rules of origin and therefore qualifies for preferential treatment, consult the Rules of Origin Self-Assessment (ROSA) tool.
If you want legal certainty that you are applying the correct product code to your goods, you can apply for a Binding Tariff Information (BTI) decision. If you are unsure about the origin of your goods, you can also apply for a Binding Origin Information (BOI) decision.
Goods manufactured from non-originating materials or components must undergo ‘specific working or processing’ to obtain originating status.
To check whether your product has undergone sufficient working or processing according to a trade agreement, check its compliance with the product-specific rules set out in the origin protocol. See also its introductory notes. Furthermore, the protocol can provide origin quotas and alternative product-specific rules for certain products.
Examples of product-specific rules in EU trade agreements:
- the value-added rule – the value of all non-originating materials used cannot exceed a certain percentage of the ex-works price of the product
- the change of tariff classification – the production process results in a change of tariff classification between the non-originating materials and the final product (for instance production of paper (Harmonised System Chapter 48) from non-originating pulp (Harmonised System Chapter 47)
- specific operations – a specific production process is required, for example spinning of fibres for yarns. Such rules are mostly used in the textile, clothing and chemical sectors
A combination of these different rules is possible with the different rules being fulfilled alternatively or in combination.
The agreement provides additional flexibility to help you comply with the product specific rules, such as tolerances or cumulation:
- The tolerance rule allows the producer to use non-originating materials that are normally prohibited by the product specific rule up to x% of the product's ex-works price. This tolerance cannot be used to exceed any maximum-value threshold of non-originating materials listed in the product-specific rules. Specific tolerances apply to textiles and clothing classified in HS Chapters 50 to 63, as well as agricultural goods.
- The cumulation rule allows originating products of country A to be further processed or added to products originating in country B, just as if they had originated in country B. The resulting product would have the origin of country B. It can only be applied between countries operating with identical origin rules. There are four types of cumulation: bilateral, diagonal, regional and full.
This ‘specific working or processing' is often referred to as ‘list rules’ are the minimum required for non-originating materials to obtain originating status.
The structure of the list rules is based on the Harmonized System (HS) nomenclature. Thus, it is necessary to identify a product’s HS classification before consulting the list rules. More detailed information on tariff classification is available under Common Customs Tariff (CCT).
Each arrangement has an annex containing the list of working or processing required to be carried out on non-originating materials in order that the product manufactured can obtain originating status ("The list rules") and is preceded by an annex containing introductory notes to the list rules.
This list of working or processing is based on the HS and contains for each position the appropriate condition(s). A position can be all products of a chapter, a heading or a group of headings or just a specific selection of these products (so-called "ex" position). In the case of an ex-position the rule applies only to the product as described in column 2.
Therefore, to use the list of working or processing it is necessary to first identify the tariff heading of the finished product. Secondly it must be checked whether the finished product has complied with the qualifying process listed in column 3 or 4 for the finished product of that heading. If this is not the case, a product may still be originating if the value of the non-originating materials does not exceed the general tolerance rule, here applicable.
There are several types of rules but the most common (see table of examples) are:
- that only wholly obtained materials can be used (a);
- that non-originating materials from certain positions can be used in or are excluded from the working or processing (b);
- that a specific working or processing operation must be carried out (c);
- that a certain percentage of value is added or cannot be exceeded in the production process (d);
- a combination of different rules (e)
- that a choice between different rules is given (f)
Where, for the entry in the first two columns, a rule is specified in both columns 3 and 4, the exporter may opt to apply either the rule set out in column 3 or the one set out in column 4 ( g). If no rule is given in column 4, the rule set out in column 3 must be applied.
For example:
| Type of Rule | (1) HS-heading | (2) Description of product | (3) Working or processing, carried out on non-originating materials, which confers originating status | (4) Working or processing, carried out on non-originating materials, which confers originating status |
|---|---|---|---|---|
| a | Chapter 2 | Meat and edible meat offal | Manufacture in which all the materials of Chapters 1 and 2 used are wholly obtained | ... |
| b | ex 2104 | Soups and broths and preparations thereof | Manufacture from materials of any heading, except prepared or preserved vegetables of headings 2002 to 2005 | ... |
| c | ex 4407 | Wood sawn or chipped lengthwise, sliced or peeled, of a thickness exceeding 6 mm, planed, sanded or end-jointed | Planing, sanding or end-jointing | ... |
| d | Chapter 92 | Musical instruments; parts and accessories of such articles | Manufacture in which the value of all the materials used does not exceed 40 % of the ex-works price of the product | ... |
| e | 2202 | Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of heading 2009 | Manufacture: - from materials of any heading, except that of the product, - in which the value of all the materials of Chapter 17 used does not exceed 30 % of the ex-works price of the product, and - in which all the fruit juice used (except that of pineapple, lime or grapefruit) is originating | ... |
| f | 7013 | Glassware of a kind used for table, kitchen, toilet, office, indoor decoration or similar purposes (other than that of heading 7010 or 7018) | Manufacture from materials of any heading, except that of the product or Cutting of glassware, provided that the total value of the uncut glassware used does not exceed 50 % of the ex-works price of the product or Hand decoration (except silk-screen printing) of hand-blown glassware, provided that the total value of the hand-blown glassware used does not exceed 50 % of the ex-works price of the product | ... |
| g | 8411 | Turbo-jets, turbo-propellers and other gas turbines | Manufacture: - from materials of any heading, except that of the product, and | Manufacture in which the value of all the materials used does not exceed 25 % of the ex-works price of the product |
However there are other rules or combinations of conditions possible and it is therefore necessary always to check the annex to see which rule is applicable.
For an overview of the arrangements with their respective lists, it is recommended to consult first the appropriate legal framework as mentioned in each sector or enter through the list of all arrangements.
Legal framework
Each individual preferential arrangement has its own legal basis in the form of a preferential agreement or a special provision in Commission Implementing Regulation No 2015/2447. Information on individual arrangements per country or region, as well as guidance documents can be found on the page International affairs. Some of arrangements are also presented here below.
Consult the comprehensive guidance document
Preferential trade: Guidance on the Rules of origin
- The Pan-Euro-Mediterranean cumulation and the PEM Convention
- The Countries of Africa, the Caribbean and the Pacific (ACP)
- Overseas Countries and Territories (OCTs)
- South Africa
- Latin America
- Ceuta and Melilla
- Canada
Common provisions
While the provisions of the individual arrangements may vary in detail, most preferential origin arrangements have a number of common provisions. For more information on each provision, refer to the Guidance on the Rules of origin.
The principal common provisions are:
Products have originating status if they are either:
- Wholly obtained – applies mainly to natural products from the beneficiary country and to goods made entirely from them. This means that a product cannot contain imported non-originating elements.
- Sufficiently worked or processed – non-originating materials or components must be sufficiently worked in order to obtain origin. Sufficiently worked means sufficiently worked according to the specifications of the list rules.
This applies to all preferential origin arrangements.
Cumulation is the term used to describe a system that allows originating products of country A to be further processed or added to products originating in country B, just as if they had originated in country B. The resulting product would have the origin of country B. It can only be applied between countries operating with identical origin rules.
There are four types of cumulation: bilateral, diagonal, regional and full.
Minimal operations are operations that when carried out either individually or in combination are regarded as being of such minor importance that they never confer originating status.
The general tolerance rule permits manufacturers to use non-originating materials up to a specific percentage value of the ex-works price.
Originating products must be transported from the EU to the beneficiary country (and vice-versa) without being further processed in a third country. The following operations can be conducted in a third country if the products remain under customs supervision:
- unloading
- reloading
- any other operation necessary to preserve products in good condition or to transport the product
- splitting consignments
The customs authority may require an importer to demonstrate that a product for which the importer claims preferential tariff treatment was shipped in compliance with the transport rules.
The term drawback means refunding duties paid on imported goods and the "no drawback" provision where provided for prohibits this. This rule ensures that duties applicable to third country materials are paid.
The principle of territoriality means that the working or processing must be carried out in the territories of the parties.
The purpose of direct transport is to ensure that the goods arriving in the country of import are the same as those which left the country of export.
Proof of origin is a document that certifies where a product was made. It is essential for claiming preferential treatment under trade arrangements, such as reduced or zero tariffs.
An approved exporter is an exporter who has met certain conditions imposed by the customs authorities and who is allowed to make out invoice declarations.
Administrative cooperation is common to all origin arrangements. It is the framework for cooperation between the competent authorities of partner countries, enabling them to check that the rules are being properly applied.
On the one hand, partners must provide each other with impressions of the stamps they use to authenticate certificates of origin. On the other hand, it allows customs administrations to make post-import checks on the authenticity and accuracy of proofs of origin.
Operators should note that if it transpires that the goods are or were not actually entitled to preferential origin, preferential treatment will be refused and any duty not paid may be recovered. It is therefore in the interest of importers to check all information concerning proof of origin and the goods covered by it before importing.
Notices to importers
In accordance with Point 3(1) of the Communication from the Commission No 2012/C 332/01, the Commission publishes notices to importers in the Official Journal (OJ) of the European Union. This is to inform EU economic operators (importers) of reasonable doubts as to the origin of goods covered by preferential tariff arrangements.
As mentioned in the Communication, the list of notices attached to the Communication is to be updated, but only in its website version. This means that the list annexed to the Communication published in the OJ may become obsolete. For this reason, please refer to the relevant country/region page under International affairs.
Guidance per topic
The following guidance documents, also relevant for Preferential rules of origin, are available:
- Guidance for Registered Exporter System (REX)
- Guidance for the EU Generalised Scheme of Preferences (GSP)
- Guidance on approved exporters
- Guidance on supplier’s declaration
- Guidance on Binding Origin Information (BOI)
- Guidance on Rules of origin self-assessment (ROSA)
Value limits
Value limits expressed in Euros and corresponding amounts in national currencies.