The companies doing business with the EU and UK must understand and comply with TCA rules of origin to ensure they pay zero tariffs. This applies both to companies that want to export goods to the EU and to companies that want to import goods from the EU at zero tariffs.
Product-specific rules
For every product sold under a free trade agreement, there is an associated product-specific rule (PSR) that must be met to demonstrate that the product comes from a free trade agreement and is eligible for a preferential tariff treatment. Each rule describes the nature or value of processing that must be carried out on non-originating materials to ensure that the final product complies with the origin requirements.
There are four types of rules that a product must meet (alone or in combination) to determine its origin.
The types of rules are as follows:
- wholly obtained;
- change of tariff code;
- value-added/percentage rule;
- specified processes.
Once a product has been granted originating status, it is considered 100% originating. This means that if this product is further used in the manufacture of another product, its full value is considered as the originating and no account is taken of non-originating materials within it.
For example, if a UK-manufactured engine has 30% non-originating content, but complies with the rule of origin, and the engine is used in a vehicle in the UK or the EU, 100% of that engine's value can be counted among the originating contents of the vehicle.
Product-specific rule types in TCA
Wholly obtained requirement
If a product's rule of origin requires that the product is wholly obtained, the product must only come from the UK (or EU materials undergoing further processing).
Change in tariff classification (HS Code)
If the rule of origin for a particular product requires a change to a chapter, heading or subheading, all non-originating material used in the manufacture of the product must be assigned to a chapter, heading or subheading other than that of the finished product. There is no limit to the amount of originating material that the company can use, regardless of their HS code.
Manufacture from materials of any heading, including other materials of the same heading
If the rule of origin for a given product allows the production of any heading from non-originating materials, the product may comprise non-originating materials of the same heading. This means that a change of heading does not need to take place. The originating materials from all sections can also be used.
Value and weight limit for non-originating materials
Under the value limitation rule, the value of materials produced outside the UK or the EU cannot exceed a certain percentage of the product's retail price. Sometimes the limitation may only apply to the cost of certain types of materials for a product. If the use of an ingredient, material or component is limited in value, the tolerance rule cannot be relied upon in addition to the threshold.
Applying the rules
This is a small scope of TCA and how to proceed to get zero tariffs. If you are currently trading between the UK and EU or use products from the EU then you might require a consultation on how to cut the costs. Please contact Persona Finance for the consultation (enquiries@personafinance.co.uk).
