For every product traded under a free trade agreement there is a corresponding product-specific rule (PSR) that must be met to demonstrate the product originates in the free trade area and qualifies for preferential tariff treatment. Each rule describes the nature or value of processing that must be carried out on any non-originating materials so that the final product meets the origin requirements. The rules agreed by the UK and the EU are set out in ANNEX ORIG-2 (Product-specific rules of Origin) of the TCA.
There are four types of rule that a product may be required to meet (on their own or in combination) in order to confer origin.
The types of rule are as follows:
change of tariff code
value added/percentage rule; and
Businesses should determine the correct tariff code for the exported product to find the relevant rule in the TCA product-specific rules list.
Once a product has gained originating status, it is considered 100% originating. This means that if that product is further used in the production of a further product, its full value is considered originating and no account is taken of non-originating materials within it.
For example, if a UK-manufactured engine contains 30% non-originating content but meets its rule of origin, if that engine is used in the production of a car in the UK or EU, 100% of the value of that engine can be counted towards the originating content of the car.
Note that many product specific rules, including for products used below as illustrative examples, provide manufacturers with the choice of several different rules. It is the decision of the manufacturer to select which rule to apply to their exported product.
4.2 Types of product-specific rules in TCA
4.2.1 Wholly obtained requirement
If a product-specific rule of origin requires that a product is wholly obtained, the product must be made only from UK (or EU materials that are further processed).
Agri-food examplesHS code: 10
Rule: Production in which all the materials of Chapter 10 used are wholly obtained.
If barley is grown and harvested in the UK, then the product is ‘originating’.
HS code: 0203
Rule: Production in which all the materials of Chapters 1 and 2 used are wholly obtained.
If meat is produced from animals born, raised and slaughtered in the UK, then the product is ‘originating’.
4.2.2 Change in tariff classification (HS Code)
If a product-specific rule of origin requires a change from any other chapter (2-digit level of the Harmonized System), heading (4-digit level of the Harmonized System) or subheading (6-digit level of the Harmonized System), any non-non-originating material used in the production of the product must be classified in a chapter, heading or subheading other than that of the final product. There are no limits on the amount of originating material businesses can use, regardless of their HS code.
To demonstrate the rule has been met, businesses will need to know the HS code of their exported product, all of its inputs, and the origin of the inputs.
22.214.171.124 Change of chapter (CC)
Any non-UK or non-EU originating materials or components used in the product must be classified in a different HS chapter (2-digit HS code).
Agri-food exampleHS code: 160419
Product: Prepared or preserved trout (Oncorhynchus mykiss)
The rule can be fulfilled if prepared or preserved trout is manufactured from non-originating trout from HS Chapter 3. This is because the non-originating materials used are not classified under HS Chapter 16.
Manufactured goods exampleHS code: 8903
The rule is fulfilled if a yacht is manufactured from non-originating parts from chapters other than HS Chapter 89 (ships, boats and floating structures). For example, unlimited non-originating parts of steel (HS Chapters 72 and 73) or glass (HS Chapter 70) could be used, regardless of their value, as they are classified in a different Chapter to the final product. But the rule would not be met by a yacht imported from a third country with only fitting-out work carried out in the UK before being exported to the EU, because the finally exported yacht would remain in the same HS chapter as one of the inputs.
126.96.36.199 Change of tariff heading
Any non-UK or non-EU originating materials or components used in the product must be classified in a different HS heading (4-digit HS code).
The rule can be fulfilled if a Television is manufactured from non-originating parts provided they are all from any heading (4-digit HS codes) other than HS 8528.
For example, unlimited non-originating ‘parts suitable for use….with the apparatus of headings 8525 to 8528’ i.e. television parts (HS 8529) may be used, regardless of their value, as they are classified in a different HS heading to the final product.
188.8.131.52 Change of tariff subheading
Any non-UK or non-EU originating materials or components used in the product must be classified in a different HS subheading (6-digit HS code).
The rule can be fulfilled if sunflower-seed oil is manufactured from non-originating crude sunflower oil of HS subheading 152111. This is because the non-originating materials used are not classified under HS subheading 151219.
Manufactured goods exampleHS code: 392330
Product: Plastic carboys, bottles, flasks and similar articles
The rule can be fulfilled if a plastic flask is manufactured from non-originating parts from any HS subheadings (6-digit HS codes) other than HS 392330. For example, unlimited non-originating ‘stoppers, lids, caps and other closures’ (HS 392390) may be used, because they are classified in a different HS subheading to the final product.
4.2.3 Manufacture from materials of any heading, including other materials of the same heading
If a product-specific rule of origin allows production from non-originating materials of any heading, the product can include non-originating materials of the same heading. This means that a change of heading does not need to take place. Originating materials of any heading can also be used. To satisfy this rule, there must be some level of processing by the exporting party. This must go beyond the processes listed in the ‘Insufficient Production’ clause.
Agri-food exampleHS code: 090412
Product: Crushed or ground pepper
Rule: Production from non-originating materials of any heading.
Pepper and ground/crushed pepper are classified in the same heading. If crushing or grinding takes place the rule is fulfilled regardless of the originating status of the pepper, as the processing goes beyond ‘insufficient operations.’
Manufactured goods exampleHS code: 2701
Product: Coal briquettes
Rule: Production from non-originating materials of any heading
Coal and briquettes of coal dust are classified in the same heading. The process to transform coal into briquettes (including applying intense pressure) goes beyond the processes listed in ‘insufficient processing’ and so the briquettes can be considered ‘UK originating’ regardless of the originating status of the coal used to produce the briquettes.
4.2.4 Value and weight limit for non-originating materials
Under a value limitation rule, the value non-UK or non-EU originating materials may not exceed a given percentage of the ex-works price of the product. Sometimes, the limit might apply only to the value of specific types of inputs to a product. If the use of an ingredient, material or component is limited by value, the rule concerning tolerance cannot be relied upon in addition to the threshold.
Note 4 of Annex ORIG-1 (Introductory Notes to Product Specific Rules of Origin) sets out the definition of ‘ex-works price’.
The rule states that the product must contain a maximum of 50% (of the ex-works value) material that does not originate in the UK or EU. This means that if a grand piano has an ex-works value of £1000, no more than £500 worth of non-originating parts may be used in its manufacture.
Average pricing rules
The value of the non-originating materials used in production may be calculated on the basis of the weighted-average value formula, or other inventory valuation method under generally accepted accounting principles in the UK. This only applies to the price paid for the materials. The accounting method utilised for determining the average value of input non-originating materials may be different to the accounting principles adopted by the business for its general accounting purposes.
For some agricultural products, limitations on non-originating materials can apply by weight, by value or there can be choice of meeting either criteria in certain instances.
Agri-food exampleHS code: 17049030
Product: White chocolate
Rule: CTH, provided that a) all the materials of Chapter 4 used are wholly obtained and b) either:
i) the total weight of non-originating materials of headings 17.01 and 17.02 used does not exceed 40% of the weight of the product
ii) the total value of non-originating materials of 17.01 and 17.02 does not exceed 30% of the ex-works price of the product
Part (a) of the rule is explained in section 3.2.2 (Wholly obtained) above. In relation to part (b), if the manufacturer uses non-originating sugar (HS heading 1701) with a weight of 22.2g in a white chocolate bar that has a net weight of 60g then part (b)(i) of the rule can be met as the non-originating sugar only makes up 37% of the net weight of the product.
Alternatively, the manufacturer could use non-originating sugar that has a value of £0.20 in a white chocolate bar that has an ex-works price of £0.80. This would allow part (b)(ii) of the rule to be met as the value of non-originating sugar only makes up 25% of the ex-works price of the product. Read more about combinations of several rules.
Applying the rules
If a product-specific rule specifically excludes certain non-originating material or provides that the value or weight of a specified non-originating material shall not exceed a specific threshold (see below), these conditions do not apply to non-originating materials classified elsewhere in the Harmonized System.
ExampleWhen the rule for heading 35.05 (dextrins and other modified starches; glues based on starches etc.) requires ‘Change in Tariff Heading except from non-originating heading 11.08’ then the use of non-originating materials classified elsewhere than 11.08, such as materials of Chapter 10 (Cereals is not limited.)
4.2.5 Specified operations
Specified operations are particular to certain specialised industries or products. Rules may include the re-treading of tyres to take place in the UK for a tyre to be originating, or a chemical reaction to take place for chemical products. As well as the chemicals sector, such rules are common in textiles and clothing and may specify that the weaving and cutting of fabric to make garments must take place in the free trade area for the product to be originating.
4.2.6 Combinations of several rules
Different product-specific rules can be combined to make a rule whereby all the listed conditions must be fulfilled.
Agri-food exampleHS code: 18069011
Product: Milk chocolate bar
Rule: CTH, provided that a) all the materials of Chapter 4 used are wholly obtained and b) either:
i) The total weight of non-originating materials of headings 17.01 and 17.02 used does not exceed 40% of the weight of the product
ii) or the total value of non-originating materials of 17.01 and 17.02 does not exceed 30% of the ex-works price of the product
The manufacturer could use non-originating cocoa paste from HS heading 1803, non- originating cocoa butter of HS heading 1804 and palm oil of HS heading 1511 and would meet the CTH (Change of tariff heading) part of the rule. These headings are all different to that of the final product (1806).
To meet part (a) any materials from chapter 4, which includes milk and milk powders, would need to be obtained in the UK or alternatively from the EU (using bilateral cumulation). For milk, this would mean from a live animal raised in either the UK or EU.
A product-specific rule may include a restriction on certain materials and components being used in the production of a product.
Agri-food exampleHS code: 2204
Product: Wine of fresh grapes
Rule: CTH, except from non-originating materials of headings 22.07 and 22.08, provided that:
all the materials of subheadings 0806.10, 2009.61, 2009.69 used are wholly obtained
all the materials of Chapter 4 used are wholly obtained
the total weight of non-originating materials of headings 17.01 and 17.02 used does not exceed 20% of the weight of the product
If wine of fresh grapes is produced from non-originating fresh grapes of HS subheading 080610 then it is not considered ‘originating’ as in the production of this final product material from the 5 excluded headings and subheadings was used.
Manufactured goods exampleHS code: 2710
Product: Petroleum oils and oils obtained from bituminous minerals, other than crude
Rule: CTH except from non-originating biodiesel of subheading 382499 or 382600
If biodiesel of HS subheadings 382499 or 382600 is used in the production of an oil of HS heading 2710, the oil will not be considered originating even if all the non-originating inputs change tariff heading (CTH) as the rule requires any biodiesel of these subheadings used in the product to be originating.
4.2.8 Treatment of packaging materials
Packaging materials are generally not considered when determining the origin of your product. See Article ORIG.10 (page 31) (Packaging materials and containers for retail sale) of the TCA.
There are limited exceptions, for example if a product specific rule limits a non-originating material by value of the final product or value tolerance is applied, the value of originating packaging materials can be taken into account when determining the value of the good.