Reduce import duties with EUR.1 and EUR-MED
- Marco van Hagen
- 19 Sept 2023
- Edited 1 Jan 2023
- 8 min
- Managing and growing
Are the goods you supply of preferential origin? Then you may be eligible for paying fewer import duties, if you have an EUR.1 or EUR-MED certificate.
The EU has trade agreements with several partner countries on lowering import duties and preferential origin. If you conduct trade with buyers or sellers in one of these countries, it literally pays to apply for an EUR.1 or EUR-MED. These certificates give you a reduction or exemption from import duties, on the condition that the goods you supply are of preferential origin. In this article you can read what you need a EUR.1 and EUR-MED for, what preferential origin is and how to determine the preferential origin of a product.
What are EUR.1 and EUR-MED certificates?
The official names for EUR.1 and EUR-MED are "Movement certificate EUR.1" and "Movement certificate EUR-MED". These certificates are both proof of preferential origin. EUR.1 and EUR-MED certificates contain the description and preferential origin of your products, as well as the name and address details of the exporter and customer. In the Netherlands, the Netherlands Chamber of Commerce KVK confirms the origin on a EUR.1 and EUR-MED with a digital stamp and signature. After that, Dutch Customs will validate these export documents.
What do you need a EUR.1 or EUR-MED for?
EUR.1 and EUR-MED are not mandatory documents. You can import and export goods without EUR.1 and EUR-MED. You only request them for products that are of preferential origin and for which you receive a discount or exemption on import duties.
An EUR.1 or EUR-MED benefits you or your customer, because it gives you a reduction or exemption from import duties. When you import products from a contracting country, a country with which the EU has a trade agreement, ask your supplier to send an EUR.1 or EUR-MED with the shipment. If you are exporting to a contracting country, you can request an EUR.1 or EUR-MED from KVK. KVK checks whether the goods you export are of preferential origin. Make sure before your export shipment leaves whether your shipment qualifies for an EUR.1 or EUR-MED.
Difference between EUR.1 and EUR-MED
You use an EUR.1 certificate for most countries with which the EU has a trade agreement. An EUR-MED certificate is a variant of the EUR.1. It is only valid when trading with countries covered by the Pan-Euro-Mediterranean (PEM). This agreement allows raw materials and products of preferential origin from several countries to count towards the determination of origin through so-called "cumulation". In this case, cumulation means that a product is made in different countries. You add up all those production steps and thus arrive at 1 preferential origin of a product. On an EUR-MED you have the option to name the countries where part of the production process took place. You do not have this option with the EUR.1 document.
What is preferential origin?
"Preferential" in this context means that your products have a privileged position. You pay fewer or no import duties for a product of preferential origin. This is subject to conditions that the EU agrees with its contracting countries, the rules of origin for preferential origin. To apply these rules of , you first need the HS code or commodity code of your product. An HS code (Harmonized System code) is a code that customs worldwide use to classify products. Each product has a different HS code. Preferential rules of origin are divided into "wholly obtained" and "product-specific operation rules."
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.
In trade agreements, some products must meet additional conditions before they are 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 sea fish
For sea fish to acquire preferential EU origin, it must have been caught within EU territorial waters. When you catch the fish outside these waters, you must meet these additional conditions:
- The ship must sail under the flag of an EU Member State.
- The ship must be registered in an EU Member State.
- At least 50% of the ship's owners must be based in the EU.
- The number of persons on board must consist of at least 50% EU-residents (this last rule does not appear in all agreements).
Product-specific processing rules
If you make products in which you process raw materials and components from different countries, you determine the preferential origin of a product in a different way. An end product acquires 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 obtain preferential EU origin in 4 ways. This can be done by:
- value addition;
- change in heading;
- specific manufacturing or processing operations;
- a combination of the above methods.
1. Value addition
A final product may contain raw materials and components that do not have a preferential EU origin, often up to a maximum percentage. This can be a percentage of the price or of the weight of the final product. When it comes to price, you mean the price that a product has when it leaves your workshop or factory, without transport costs and insurance costs. This is called the Ex Works price.
In the trade agreement between the EU and , the following requirement applies to outboard engines with a cylinder capacity of less than 325 cm³ (HS code 8407 21 10 00): 'manufacturing where the value of all the materials used does not exceed 40% 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 40% of the Ex works price. The import duty on these outboard motors in Switzerland is 38 Swiss Francs (38.45 Euro) per 100 kilos of gross weight. You do not pay any import duties with a preferential proof of origin.
2. Change in heading
Headings are the first 4 digits of a commodity code (HS code). When you edit a product so that it shifts from one heading to another, the edit complies with the "change in heading" (CTH) origin rule. Within the EU we call this commodity code CN codes, which stands for Combined Nomenclature. The codes consist of 10 digits in total. The first 2 digits indicate the chapters of the CN.
For artificial flowers (HS code 6702 10 00 00), the EU-Serbia Trade 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. Within the EU, a "more than inadequate processing" must take place. This means that there is a production process within the EU. Mere assembling, for example, is insufficient and is not seen as a production process. The import duty on these artificial flowers in Serbia is 20%. With a proof of preferential origin this is 0%.
3. Specific processing rule
Some specific components of a product must be of preferential EU origin. In addition, headings or chapters, these are the first 2 digits of the CN code, determine the preferential origin.
In the free trade agreement between the EU and (PEM country), the origin requirement for wooden pallets (HS code 4415 20 20 00) is "manufactured from boards not cut to size". This means that the planks you use must be cut to size within the EU or in another PEM agreement country. The import duty on wooden pallets in Tunisia is 30%. With a preferential proof of origin this is 0%.
4. A combination of the above
There are products for which a combination of the rules of origin mentioned above applies. The product acquires preferential EU origin if you comply with change of heading and you also use specific raw materials up to a maximum percentage.
In the trade agreement between the EU and , the combined rule of origin for chocolate bars applies (HS code 1806 32 10 00). The bar gets preferential EU origin if all raw materials you use 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 confectionery. You may use sugar or confectionery of non-preferential EU origin, up to a maximum value. In this case a maximum of 30% of the Ex works price. The import duty on chocolate bars in Norway is 7.69 Norwegian Kroner (€ 0.77) per kilogram. You do not pay any import duties with proof preferential of origin.
If your product does not meet the requirements for preferential origin, you can apply additional rules, in addition to the rules of origin described for the CN codes. These are contained in the articles of the free trade agreement. There may be a few remedies that will give your product preferential origin. Such as the cumulation rule and tolerance rule.
Cumulation means that you use raw materials of preferential EU origin as well as other raw materials. For example, raw materials that have the preferential origin of the country to which you are exporting.
With tolerance, you may use a raw material of non-preferential origin up to a value of 15% of the Ex-works price.
Regulations preferential origin
You need regulations to assess the preferential origin of products. You will find the rules of origin that apply to your product in the trade agreements of the . Use the European Commission's ROSA to assess whether your product meets the preferential origin rules.
As an exporter or supplier, you can now have exporters’ invoice statements and suppliers' preferential supplier statements checked by KVK to confirm the preferential origin of products. This way, you can be sure that a statement is correct. For preferential supplier statements, the supplier must be established in the Netherlands. This trial project, called Genesis, will last until 1 April 2023.
When exporting to countries outside the EU, you regularly need the preferential origin of products. The rules for this are complicated and often differ per country. The correct preferential origin is not always listed. As a result, an importer may still pay import duties and the shipment becomes more expensive than they expected.
How do you apply for an EUR.1 or EUR-MED?
Y ou request an EUR.1 or EUR-MED digitally from KVK for each export shipment. You have 2 options for your digital application. You arrange this online through an intermediary or you engage a logistics service provider.
What do you need with your application?
You can apply for an EUR.1 or EUR-MED certificate digitally if you are a producer, trader or logistics service provider. You demonstrate the preferential origin with specific supporting documents.
- If you are a producer, you must demonstrate that your product meets the conditions in the trade agreement with the exporting country. To do so, please contact KVK. Make sure you have the correct commodity/HS code for your product at hand.
- If you are a trader, you can request a supplier's declaration of preferential 2015/2447 from your supplier. You can also provide the purchase and sales invoice to KVK.
- If you are a logistics service provider, the burden of proof is the same as for the producer or trader for whom you handle the shipment. Also provide an authorisation from your client.
When KVK ratifies the EUR.1 or EUR-MED, you will receive 2 copies back. 1 copy for Dutch Customs that validates the document, and 1 original. The original, including customs endorsement, will be sent with your shipment. Consult with your logistics service provider who arranges the validation at customs.
Alternative to EUR.1 or EUR-MED
In specific cases, you can also get a reduction or exemption from import duties without EUR.1 or EUR-MED. There are countries that do not use EUR.1 or EUR-MED, but only an invoice declaration. You add these preferential origin declarations, or invoice declarations, to your own sales invoice.
What does an EUR.1 or EUR-MED cost?
The costs for an EUR.1 or EUR-MED consist of different components. Depending on the chosen application method, KVK will send you a monthly collective invoice for the issue costs, the so-called fees. In the tariff overview you will find the costs. In addition, an intermediary or logistics service provider charges costs for their services.