Does your product meet the requirements for preferential origin?

In this context, ‘preferential’ means that your products have a privileged position. ‘Origin’ refers to where a product was made. In this article, you will find an explanation of the preferential rules of origin, and how to check whether your product complies with these rules. This means that if you send an EUR.1 or invoice declaration with your delivery, you will pay lower import duties or none at all.

Preferential rules of origin

You pay lower import duties on products of preferential origin. The EU agrees on the conditions for this with the countries with which it has trade agreements. These conditions are set out in the preferential origin rules. You will need the commodity code for your product to use these rules of origin. 

Checking preferential rules of origin

You can find the preferential rules of origin for your product in the EU trade agreements. You can use the European Commission’s ROSA tool to check whether your product meets the rules. First, read the explanation of the preferential rules of origin below to understand how this works.

Preferential rules of origin are divided into 'wholly obtained' and ‘specific working or processing’.

Wholly obtained

Origin is the land where a product is extracted from the ground, grown and harvested, caught, or born. Think of minerals, crops, or animals. This is called 'wholly obtained'. You can easily determine the origin of wholly obtained products.

Under trade agreements, some products must meet additional conditions before they are considered wholly obtained. To check this, view the rules in the trade agreement with the country with which you are going to do business.

Example: origin of apples

Apples are granted preferential EU origin status if they have been picked from apple trees located in an EU country.

Specific working or processing rules

Do you make products in which you process raw materials and parts from different countries? In that case, you determine the preferential origin of a product in a different way. A finished product is granted preferential EU origin if you ‘thoroughly process’ EU raw materials and parts, such as semi-finished products, into a new product. This new product can be granted preferential EU origin in 4 ways:

1. The value-added rule
2. The change of tariff classification
3. Specific operations
4. A combination of the above methods

1. The value-added rule 

A final product may contain raw materials and components that do not have preferential EU origin. This is often up to a maximum percentage of the price or weight of the final product. When it comes to price, this means the price that a product has when it leaves your workshop or factory, excluding transport and insurance costs. This is called the Ex Works price.

Example

In the trade agreement between the EU and Egypt, the following requirement applies to outboard engines with a cylinder capacity of less than 325 cm³ (commodity code 8407 21): 'manufacturing where the value of all the materials used does not exceed 50% of the Ex Works price of the product'. This means you may use parts from outside the EU, if the value of those parts does not exceed 50% of the Ex Works price.

The import duty on these outboard motors in Egypt is 10%. You do not pay any import duties with a preferential proof of origin.

2. The change of tariff classification

The ‘change of tariff classification’ rule of origin means that you process a product in such a way that it shifts from one classification to another. The first 4 digits of a commodity code are known as the heading.

Example

For artificial flowers (commodity code 6702 10 00), the EU-Serbia Trade Agreement requires: 'Manufacture from materials of any heading, except materials of the same heading as the product'. This refers to a change in heading. It does not matter where the raw materials and parts come from, as long as they fall under a heading other than 6702. For example, heading 5007 for the silk that is used in artificial flowers.

The import duty on these artificial flowers in Serbia is 20%. With a proof of preferential origin this is 0%.

3. Specific operations

Sometimes a specific production process is required for a product to be of preferential EU origin.

Example

In the trade agreement between the EU and Tunisia (PEM country), the origin requirement for wooden pallets (commodity code 4415 20 20) is: ‘manufacture from planks not cut to size’. This means that you must cut the planks you use to size or have them cut to size in the EU or in another PEM agreement country.

The import duty on wooden pallets in Tunisia is 30%. With preferential proof of origin, this is 0%.

4. A combination of the above methods

For some products, you use a combination of the above rules of origin. The product then gets preferential EU origin through, for example, a change of heading, together with the use of specific components up to a maximum percentage.

Example

The trade agreement between the EU and Norway contains a combined rule of origin for chocolate bars (commodity code 1806 32 10). The bar is granted preferential EU origin if all the ingredients used fall under a heading other than 1806. In addition, an extra rule applies to raw materials from Chapter 17. These are the ingredients sugar and sugar confectionery. These may be of non-preferential EU origin, up to a maximum value. In this case, a maximum of 40% of the weight of the finished product, or a maximum of 30% of the Ex Works price.

The import duty on chocolate bars in Norway is 7.69 Norwegian kroner (€0.72) per kilogram. With a preferential certificate of origin, you pay no import duties.

Summary

In summary: a product is granted preferential origin status when it meets the rules of origin set out in the trade agreement. This is usually achieved through value addition, a change in tariff heading, a specific process, or a combination of these.

More than ‘insufficient’ processing

Any processing you carry out must go beyond what is considered ‘insufficient’. This means that there must be a production process within the EU. Just assembling something, for example, is insufficient and is not seen as a production process. Lists of insufficient processing operations can be found in the trade agreements.

Supplementary rules

Sometimes a product just fails to meet the requirements for preferential origin. In that case, you can apply supplementary rules. These rules are set out in the articles of the trade agreement with the partner country. Your product may still qualify for preferential origin in this way. For example, through cumulation or tolerance.

Cumulation

In the case of cumulation, for example, you may also use raw materials that have preferential origin status of the country to which you are exporting. The other raw materials must, however, have preferential EU origin. KVK can assess on your behalf whether a product qualifies for preferential origin status through cumulation.

Tolerance

Under the tolerance rule, you may use a raw material of non-preferential origin. You may do so, for example, up to a certain percentage of the Ex Works price. KVK can also assess this for you if you are unsure.

Get help from KVK

When exporting to countries outside the EU, you regularly need to establish the preferential origin of products. The rules governing this are complex and often vary from country to country. As a result, you may sometimes apply the wrong preferential origin. An importer may then still have to pay import duties, making the delivery more expensive for them than expected.

Preferential origin checks by KVK

As an exporter or supplier, you can have declarations about the preferential origin of products checked and confirmed by KVK. This helps ensure that your statement is correct. For supplier's declarations of preferential origin, the supplier must be established in the Netherlands.

KVK’s Export documents department can help

• Export documents region West
• Telephone: 088 585 18 87.
• Export documents region East/South
• Telephone: 088 585 18 89