What’s been happening …
In 2020 the total value of goods imported to the UK was approx. $631.2 billion, that is a huge amount and gives the us a continuing trade deficit year on year. However, a year ago, I wrote an article talking about the state of shock that the business community found itself in after Brexit. Looking back over this past year I thought it would be good to look at what has changed.
One big change has been that many businesses have either turned their backs completely on exporting to the EU or are moth-balling exports for the time being. Understandable as this is, let’s hope we can change things in 2022.
Reshoring or re-sourcing ….
So, what are those still active doing? Looking at alternative markets and trying to assess the potential to engage with the Commonwealth or South America? No, – at least not as many as there should be. Instead, they appear to be in the early stages of investigating reshoring options and re-evaluating sources of raw materials. This is a good thing, especially, as margins tighten. Understanding the costs incurred in our global supply chain, and the possible implication of duties into the UK makes sense as each Trade Agreement has slightly differing approaches origination or Rules of Origin.
Rules of Origin …..
At the end of 2021, Rules of Origin that impact on imports and exports alike, became mandatory to follow, if you want to claim reduced or preferential tariffs as outlined in a Trade Agreement. Ironically these are often called Free Trade Agreements; however, we all recognise there is nothing free about them. To claim the preferential tariffs on offer, you need to evidence the origin of your goods. This can be as easy as calling your supplier and asking for a Long-Term Supplier Declaration or it could mean reverse engineering your product and looking at each component. And is all takes time.
Originate isn’t necessarily where it’s been bought….
But what does originate really mean? Rules of Origin determine where goods originate, which can be different from where they have been shipped from or bought. It is where the goods were ‘born’ or where they have been produced or manufactured. ‘Origin’ is the ‘economic nationality’ of goods traded in commerce.
Duties/charges, or any other customs restrictions or obligations applicable to goods, will depend on their origin as well as its identity. The origin of goods will determine whether they can benefit from trade agreement preferential tariffs and can also affect the level of perceived risk, checking, and certification required. If we’re thinking of the EU, once goods are cleared for free circulation, their origin ceases to matter much, unless they are being re-exported.
The origin of goods is usually the country where they last underwent a significant transformation. For example, if a car part from Japan is incorporated into a car in Spain, the origin of car is likely to be Spain. Or electronic components imported from the UK which are connected into a box and sold as an alarm system – the origin of the alarm is either the UK or ‘mixed.’
The extent of ‘transformation’ is often measured by ‘added value’, but there must also be a demonstrated change in the product. Rules vary by product type and there are three main areas, importers and exporters alike need to be aware of:
- The Harmonised Code that covers your product
- Valuation of the goods.
You also need to complete the origin even if it does not attract a preferential tariff rate as your products need to be looked at in terms of sanctions, anti-dumping duty or embargoes. There is a lot to consider although well researched checklists developed for your industry, with careful notations about where the information was found, help ensure you stay current and up-to-date on these regulations. We are happy to help with this.
The rules that we use in world trade are agreed and registered under the World Trade Organisation whose remit is to support all countries to trade fairly and to stamp out protectionism wherever possible. Although this all may sound hard, it really is exactly as the advertisers always say, it’s easy when you know how!
Come and join us to find out the context and details of how trade works and where you can use the preferential tariffs agreed in a Trade Agreement.
Visit www.exportbootcamps.com for details of our courses.