All you need to know about preferential origin and reduced rates of duty
Preferential origin is an agreement that confers imported goods a reduced or zero rate of duty. Through this arrangement, products imported from a third country (outside the European Union) can benefit from the preferential agreements.
Preferential origin is established through free trade contracts or economic and financial partnerships between the EU and third countries. Each agreement is governed by a protocol specifying the conditions that determine whether goods have preferential origin. A crucial point is to consider all the steps that lead to the acquisition of the final product, as well as the countries involved at each manufacturing stage. Indeed, if preferential origin is advantageous for the importer, it is not a given for all imported goods.
The benefits for a European manufacturer
Preferential origin allows a European manufacturer to claim a reduced or zero rate of duty on all eligible imports. These preferential import rates constitute a significant competitive advantage for a European company. Reduced duty on imports automatically enables a company to make higher profit margins than another which does not avail itself of this arrangement and pays the full rate of duties.
In addition, once preferential origin has been determined, the European importer will be able to claim the preferential rate for each new import from the partner country. This effectively gives the European importer a lasting competitive edge.
What goods are eligible?
Only goods originating from a beneficiary country are eligible for this preferential rate. Imported products must also fulfil the conditions laid out in the agreement negotiated between the EU and the exporting country. Accordingly, imported goods must be manufactured from raw materials originating from a beneficiary country. If that is not the case, the goods must have undergone some working or processing in the beneficiary country.
A set of rules specifies the various transformations that a manufactured product must have undergone to be considered “originating”. The “list rules” set the amount of working or processing required on non-originating materials for them to obtain originating status.
List of beneficiary countries
Preferential origin is available to countries or country groups that have concluded preferential agreements with the European Union. These customs union agreements give rise to a reduced or nil rate of duty.
Here are a few countries benefiting from the preferential agreement:
- The UK
- EFTA (European Free Trade Association) countries, the Faroe Islands, the EEA (European Economic Area)
- Mediterranean countries/Euromed: Tunisia, Morocco, Algeria…
- Eastern Partnership countries
- Western Balkan countries
- GSP (Generalised Scheme of Preference) countries
- The Americas: Canada, Mexico…
- African, Caribbean and Pacific (ACP) countries
- Asia: South Korea, Japan, Singapore, Vietnam…
Where to obtain further information
To find out if you are eligible for reduced duty on your imports, you’ll need to make an enquiry with customs.
Some useful links:
- European Commission (Preferential origin/Introduction)
- European Commission (General aspects of preferential origin)
- Gov.uk (Check your goods meet the rules of origin)
About the author:
Air Time Critical® is a forwarder specialising in emergency airfreight for the European industry. Air Time Critical® is more than just a transport provider; we assist our customers with procedures and offer them turnkey solutions, such as door-to-door shipments, customs clearance, expert advice, foreign supplier liaison, and real-time tracking information. The Air Time Critical® teams are ready to advise you and handle your urgent shipment requirements from your suppliers or to your clients abroad.