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Rules Of Origin

The country of origin of goods is a factor in determining the amount of duty payable. It can be very simple if a product is wholly grown or manufactured and assembled primarily in one country. However, when a finished product includes components that originate in many countries, determining origin can be more complex. Rules of origin can be very detailed and specific, and vary from agreement to agreement and from product to product.

In international trade, the rules of origin are the criteria used by national governments and international trade agreements and treaties to help determine and detect the national source of the imported and exported goods. It is an attempt to harmonise the rules of origin for different countries. These rules are important because restrictions and tariffs applied on the products depend on the country of origin. However, the rules of origin vary from country to country and agreement to agreement.

They are essential to determining the amounts of customs duties and taxes to apply on goods, in parallel with customs classification and assessment.

Declaring origin will be particularly important when importing goods. When there is a preferential trade deal in place, the preferential origin is declared to obtain a reduced rate of duty. In the absence of a trade agreement, the non-preferential origin needs to be declared to ensure that appropriate trade policy measures are applied.

2 Types Of Rules Of Origin:

Non-preferential origin rules - are used for a number of purposes such as determining what trade

policy measures apply to imported goods. Non-preferential rules of origin are applied where there are no trade preferences.

Each country establishes its own non-preferential rules and these are based on two main principles:

· Wholly obtained: products obtained entirely in the territory of one country without the addition of any non-originating materials.

· Last substantial transformation: in a case where more than one country was involved in the production of the goods, the country where the last substantial transformation took place determines the origin of the goods.

Preferential origin rules - Refers to the origin policy formulated by a country in order to implement national preferential policies. The specific criteria for determining the origin of goods shall follow the corresponding preferential trade agreements.

Preferential rules of origin are designated to ensure that free trade agreements and trade preference programs benefit only the intended countries. They are used under trade agreements to determine whether the goods are eligible for preferential discounted tariffs or under trade agreements. It categorises whether the trade goods qualify as ‘originating products’ under the preferential system or under preferential agreements and whether they benefit from the tariff preferences of the Generalised System of Preferences (GSP) in favour of developing countries or those of free trade agreements.

At Image International Freight we can assist you with navigating importing or exporting your goods for your business and determining the Rule Of Origin, contact us today!


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