Rules of Origin and Invoices
Rules of Origin and Invoices
Origin can be a complex issue. By equal measure, it is essential that all exporters and importers are fully aware of how the rules governing origin may impact any shipments sent or received by them.
For many items, the country of origin will be easily identifiable. If the items are manufactured wholly in one territory, using materials manufactured in that same territory, the origin is clear.
In some other circumstances, there are complexities, which must be addressed before cargoes are shipped.
The official text on the governing rules can be found at https://www.gov.uk/guidance/check-your-goods-meet-the-rules-of-origin
An example of how origin is defined may, as an example be:
The graphic above, is designed to convey a potential scenario, whereby origin can be altered. It is however extremely important that each supply of goods is viewed individually, and a decision made based on the unique circumstances which relate to the manufacturing process.
Why origin is important.
The Trade deal between the United Kingdom and the EU and also the other trade agreements with other countries, permit the free trade of most types of goods between those territories. The opposite may apply to trade with other countries.
By establishing origin, in particular on trade with the EU, it is probable that duty can be avoided.
For some categories of goods, for example some food items, additional documentary controls may exist for goods sourced from one territory, but do not apply to another territory. The costs of getting it wrong, often far outweigh the cost of using your resources to thoroughly research prior to shipping goods.
EU Registered Exporter scheme
All invoices used in international transactions, must include details of the origin, or indeed origins of the cargo.
For exports from the EU, shippers of goods which exceed €6000 or £5500 in value, must register with the EU Registered Exporter scheme (REX). Only REX traders are permitted to claim EU preferential origin in their invoice declarations.
The potential consequence for a UK importer, trading with a non-REX overseas business, will be the requirement to pay the Third Country duty rate, regardless of the actual origin. That is because the supplier is no able to authenticate the preferential origin.
Importing businesses are strongly advised to verify to REX qualification of any potential supplier, prior to entering into an agreement to purchase any products.
Exporting from the UK to Europe
The principal of origin for export consignments, remains the same as for imported goods.
Once the origin has been established, the information must be included in the shipping invoice.
Using the same thresholds of £5500 or €6000 value, at the lower end the sender will simply declare the origin anywhere within the invoice document. However, for goods priced in excess of the threshold the declaration must be authenticated by including the shipper’s EORI number in the declaration.
A suggested declaration may look like this:
The exporter of the products covered by this document (EORI GBxxxxxxxxxxxx) declares that, except where otherwise clearly indicated, these products are of United Kingdom preferential origin.
The invoice should then be signed and dated by a person authorised by the business to do so.
As should be obvious from the above, this declaration can only be used in cases where UK origin can be proven. UK origin when traded with an EU Member state, will usually allow entitlement to importation without duty being applied.
Invoices for Export consignments
There are several minimum requirements, which must be adhered to, plus some sensible additional items of information which will assist the clearance process.
It is essential that all invoices contain all of the following:
- Shipper’s name, address, EORI number
- Consignee’s name, address and EORI number.
- Although not obligatory, it is strongly advised that the importers contact information, in the form of a telephone number, email address and known contact person are included. The import customs broker will usually need to make contact in order to complete the import into the EU.
- A date
- An invoice number
- The applicable INCO Terms (see Resources for a link to the list of terms and their application). Note that certain Inco Terms also require the final destination to which those terms apply, to be inserted. For example, DAP Barcelona.
- Number of packages
- Description of the cargo
- Commodity code for each type of goods being shipped. (See Resources for a link to the United Kingdom tariff).
- Gross and nett weight for each commodity code being shipped
- Value for each commodity code being shipped.
- Total invoice value
- Origin declaration if all of the goods are United Kingdom origin, or a clear reference to any alternative origin for each item which has a different origin. See above for more guidance if needed.
- If above the value threshold, a signature and date per the guidance above.
- It is also sensible that additional supporting information is supplied. This would include a statement on why the goods are being shipped. That may be permanent export for example, or perhaps for repair and return. Those statements are represented by CPC codes, which can be viewed via the link listed in our Resources tab.
DDP selling terms
DDP is a term which places the entire fiscal responsibility onto the shipper.
Under this term, the shipper will pay the import VAT and any local duty which may apply.
To achieve a DDP shipment, the following processes will have to be addressed.
- Obtain an EORI in both the UK and an EU member state.
- Be ready to make a payment to either the customs authority in the importing state, or to the customs broker, who may make the payment on behalf of the customer. If that happens, it is likely that they will add their administration fee to the cost. Note that when making a payment to an overseas customs authority, they must receive the full and exact amount of the charges payable. In other words, all banking fees in both countries must be accepted by the payee. Any delay in the international money transfer, may also have an impact on the completion of the customs clearance.
- Regular shippers under DDP, may find that it is beneficial for them to establish a formal business registration in the country of consumption. This may further lead to registration for an EORI, VAT account and opening of a bank account.
The DDP INCO Term is a far more complex one than any of the alternative options. For this reason, any shipper considering using this term must prepare fully and correctly, as well as having a full appreciation of the scope of their responsibilities.