Declaration of preferential origin: meaning and regulations
Obtaining the status of preferential origin for your products is key for exporting companies that wish to take advantage of the benefits that can be obtained from this condition. In general, the origin of your products, i.e. their “economic nationality”, is a fundamental concept to understand when it comes to customs and duty rates as it influences the amount of taxes due upon entering a country and allows you to avoid possible penalties. Here is a detailed explanation of what “preferential origin” means.
What is preferential origin?
Preferential origin is a status granted to goods originating from certain countries and that have fulfilled certain criteria, granting these goods the right to preferential tariff treatment. This status allows the sender to obtain:
– A reduction or exemption of the amounts due for customs duties
– The abolition of quantitative bans or quotas
Declaring preferential origin is certainly an advantage to be exploited when exporting and/or importing, but it is a complex and delicate process. The rules for acquiring preferential origin in EU agreements are set out in Article 64 UNCRC and the Generalised System of Preferences (GSP), a non-reciprocal, non-discriminatory system through which developing countries can gain preferential access to EU markets.
In order to benefit from these preferential agreements, goods must meet specific requirements, which vary depending on the product and the individual agreements between the EU and each foreign country.
The conditions for determining preferential origin
One of the factors determining the preferential origin of a product is whether it has been produced with raw materials originating entirely from its country of production. If this is not the case, to enjoy the benefits of preferential origin, goods must undergo sufficient working or processing in said country.
Alternatively, preferential origin can be obtained if the product meets the “added value” criterion, which can be reached through two possible means:
– if the value of the non-originating components used to make the product is lower than a certain percentage, which is established according to the invoice price of the product
– if the value of the non-originating components used to make the product is higher than the previously mentioned percentage, but remains lower than the value of the originating components.
For each type origin protocol there is a specific list of rules, i.e. all the working operations that must be considered sufficient, and that must be followed in order to confer preferential origin to the product. In addition, all the processes that would immediately disqualify a product from obtaining preferential certification are also listed.
Declaration of preferential origin: certificates and standards
Once you have verified that you meet the necessary conditions to obtain preferential origin status, you can proceed with your application. Until March 2022, preferential origin was guaranteed by the EUR1 pre-validation form for relations between the EU and countries with specific trade agreements. Since April, however, the European Customs Agency has decided that the pre-validation procedure is no longer necessary, favouring a digitalised procedure via the AIDA portal for requesting certificates. This solution aims to streamline the process and improve control.
Another simple solution is self-certification by the exporter, but this possibility is limited to goods with a maximum value of €6,000. Furthermore, this declaration must be completed according to specific wording provided by the customs authorities and presented with an original stamp and signature.
The regional convention on preferential PEM rules of origin
The regional Convention on Pan-Euro-Mediterranean (PEM) preferential rules of origin provides common rules of origin among more than 20 EU partner countries to facilitate trade in the pan-Euro-Mediterranean free trade area. Since 2012, a modernisation process has been taking place and some countries have decided to temporarily apply the revised rules. As of September 1st, 2021, these changes are applicable in trade between the EU and Albania, the Faroe Islands, Georgia, Iceland, Jordan, Norway, Switzerland, Palestine, and North Macedonia.