Import and preferential origin

What is a trade agreement?

When countries close a trade agreement, they often agree to award each other’s products preferential origin status. This means that countries give each other a discount, or even an exemption, on import duties when there is mutual import of goods. Lower import tax means cheaper products: you can sell your product at a lower price. And you can sell more in that country. Or buy at a lower price.

A trade agreement specifies exactly which requirements must be met when manufacturing a product to make use of the lower import tax. The EU has preferential origin agreements with many countries, such as Switzerland, South Korea, Norway, Japan, and the UK.

What is set out in a preferential trade agreement?

A preferential agreement says that, in principle, trade in goods of preferential origin between the EU and the other country will take place without tariffs. To qualify for this tariff exemption, companies must prove that their goods meet the rules of origin. These rules of origin are set out in the agreement.

What is preferential origin?

To benefit from a preferential trade agreement, the products being imported must have preferential origin status. This means that goods must either be manufactured from raw materials or components which have been grown or produced in the beneficiary country. This is called 'wholly obtained'. If that is not the case, the product must at least undergo a certain amount of work or processing in the beneficiary country. Such goods are considered to be ‘originating’ as well.

You will find the rules of origin that apply to the product you import in the trade agreements of the EU. Use the European Commission's ROSA tool to assess whether a product meets the preferential origin rules.

A practical example of preferential origin for import

Suppose your Dutch company imports felt bowler hats. If you import from countries outside the EU, which the EU does not have a trade agreement, you will pay the normal import tariff of 2.7% (HS code 6501). If you import from a trade agreement country, and the product and all its material is from that country, you pay lower or no import duties.

This is the case if you import your hats from, for example, Japan, Mexico, Mozambique, the UK, or Canada, or other countries the EU has a trade agreement with. You do not have to pay any import duties provided it can be shown that the products originate or were sufficiently processed in the selling country.

What steps do you need to take to prove origin?

It is up to the importer to request preferential tariff treatment. The importer can request a declaration on origin from the selling party. For example, an EUR1 or EUR-Med document.

The importer is responsible for the correctness of the request for preferential tariff treatment and compliance with the conditions. A request for preferential tariff treatment can be based on:

• an origin declaration stating that the product originates from the exporting country. This is issued by your exporter; or
• information known to the importer that the product originates from the exporting country. This is called "importer's knowledge". The importer's knowledge must be based on information showing where the product originates from, and also meets the conditions of the agreement.
• the importer must keep the following information for 7 years:

  • if the request was based on an origin declaration, drawn up by the exporter; or
  • if the request was based on importer’s knowledge, all data showing that the product meets the conditions for obtaining origin.

Customs declaration

If you import products from non-EU countries, they have to be declared to customs. The import declaration contains information about the shipment, such as a description of the goods. On this form is a field ‘tariff preference’ when you import your product from a country with which the EU has a trade agreement. As a result, you usually pay less or no import duties. The products must be shipped directly from the treaty country to qualify for tariff preference.

In short, when importing bowler hats, prove that these hats meet the requirements of origin. Either with a declaration on origin drawn up by the seller or with importers knowledge. Then you will receive an exemption from import duties. This means you can offer your bowler hats more cheaply in the Netherlands.