Rules of Origin in International Trade: Legal Foundations, Applications, and Business Challenges

Author: Derin Ozeren

Introduction

Rules of origin (RoO) are the legal criteria used to determine the “economic nationality” of goods in international trade. They define the country in which a product is considered to originate, which is essential for the administration of customs duties, preferential tariff treatment, quotas, anti-dumping measures, origin labelling, and statistical purposes. Without them, trade agreements could not function effectively, and customs authorities would be unable to prevent trade circumvention. ¹

Non-preferential Rules of Origin
Non-preferential RoO apply under the World Trade Organization (WTO) framework, particularly in the context of the most-favoured-nation (MFN) principle. They are used to determine the origin of goods for:

• application of MFN tariffs and quotas,
• administration of trade remedies (anti-dumping and countervailing duties),
• labelling requirements (e.g., “Made in UK”), and
• compilation of accurate trade statistics. ²

Preferential Rules of Origin
Preferential rules of origin apply under the UK’s free trade agreements (FTAs) and unilateral preference schemes, including the Developing Countries Trading Scheme (DCTS), which came into effect in 2023.

How FTAs Differ on Rules of Origin

Who can certify origin and how

UK-EU Trade and Cooperation Agreement (TCA): Under Article ORIG.18 of the UK–EU Trade and Cooperation Agreement (TCA), an importer may claim preferential tariff treatment on the basis of their own knowledge that a product qualifies as “originating.”¹ This claim must be substantiated by evidence demonstrating that the product satisfies all applicable origin criteria under the Agreement. ²⁰

Such evidence may include product classification and description (including the relevant HS code), details of the production process, identifying where substantial transformation occurred, origin and value data for both originating and non-originating materials, and supporting records such as supplier declarations, invoices, or production statements. ²¹

Where the importer cannot reasonably obtain sufficient evidence — for example, where an exporter withholds commercially sensitive production details — the claim may instead be supported by a statement on origin issued by the exporter. ²¹

All importers are legally obliged to retain evidence of the claim for a minimum of four years, in line with UK customs regulations. ²² Failure to provide this documentation during verification may result in the withdrawal of preferential treatment, recovery of underpaid duties, and potential administrative penalties. ²²

CPTPP: Under Article 3.20 of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a claim for preferential tariff treatment may be made by the importer, exporter, or producer. ²³ Unlike older trade agreements, the CPTPP does not require a prescribed certificate of origin; instead, the claim must include all minimum data elements listed in Annex 3-B and be supported by documentary evidence. ²³ These data elements typically include the exporter, importer, or producer details, a clear description of the goods and the corresponding HS code, the origin criterion that the goods satisfy, the certification date and period, and the authorised signature or confirmation of the certifier. ²³

For example, when exporting a leather jacket under HS code 4203 1000 00 from the UK to Japan, an exporter may self-certify origin by including these minimum data elements in a commercial invoice or separate declaration. However, they must also maintain production records, bills of materials, or supplier declarations that prove the jacket meets the regional value content (RVC) thresholds or other applicable origin criteria. ²⁴

All parties making a claim must retain supporting records for at least five years, as required under the CPTPP, and present them upon request during post-clearance verification. Failure to do so may result in withdrawal of the preferential treatment and recovery of duties. ²⁵

Developing Countries Tariff Scheme (DCTS)

Also, the DCTS replaced the EU’s Generalised Scheme of Preferences (GSP) following Brexit and is tailored to the UK’s trade priorities. ³ This shift, alongside the UK’s accession to CPTPP, highlights the country’s broader strategy to diversify its trade relationships and integrate more deeply into global value chains.

The scheme covers around 65 developing countries and is divided into three tiers:

• Comprehensive Preferences – for Least Developed Countries (LDCs), granting duty-free, quota-free access on most goods.
• Enhanced Preferences – for low- and lower-middle income countries meeting specific criteria on trade and governance, offering reduced tariffs on thousands of products.
• Standard Preferences – a baseline level of tariff reductions for other eligible developing countries.

For businesses, the DCTS provides opportunities to import inputs and finished goods at reduced or zero tariffs, provided that the relevant RoO criteria are satisfied. Compared with the EU’s GSP, the DCTS is designed to be simpler and more generous, including:

• broader product coverage
• more flexible rules of origin (e.g., higher tolerance thresholds for non-originating content)
• easier graduation rules, reducing uncertainty for exporters ³

This UK-specific scheme highlights how rules of origin are not only a technical trade requirement but also a policy tool, shaping supply chains and encouraging trade with developing economies. ³

Transit Rule

Most modern UK agreements (incl. TCA) use non-alteration rather than strict direct transport—allowing splitting/storage under customs control in third countries. Modern transit rule can be found in UK-EU TCA and UK’s many newer FTAs (Australia, CPTPP, New Zealand), which is goods can transit through third countries, including splitting or storage, provided that:

• They stay under customs supervision,
• They are not altered or transformed, except for activities like unloading, reloading, repackaging, or preserving condition. ¹⁴

Proof is usually given by customs documents (e.g. a certificate of non-manipulation or a transport document showing the route).

Product Specific Rules and Tolerances

Mixtures of CTH/CTSH, RVC, and specific processes; often special regimes for textiles and chemicals. GOV.UK’s tomatoes example (TCA) shows CTH + cumulation in practice; UK-NZ/AU guidance gives worked CTH/CTSH examples. ¹⁵

Which FTAs are used most frequently by UK businesses?

The UK government tracks preference utilisation—i.e., the share of eligible trade where firms claim FTA preferences. The latest full official breakdown (for 2022) shows:

• UK-EU TCA: By far the most significant FTA. Preference was used on approximately 80% of eligible EU exports to GB and 77% of UK exports to the EU. ¹⁶

• Top non-EU partners by usage/value (goods):
  • Turkey – The most heavily utilised non-EU partner for UK imports, reflecting long-standing supply chains (notably in automotive and textiles).
  • South Korea – the largest value of UK exports eligible for preference among non-EU partners in 2022.
  • Switzerland – among the highest utilisation rates on UK imports.
  • Also significant: Japan and Vietnam feature prominently in eligible trade/usage tables.

• The Comprehensive and Progressive Agreement for Trans-Pacific Partnership

The UK acceded to CPTPP on 15 Dec 2024 (trading under CPTPP terms with most parties from 15 Dec 2024; Australia from 24 Dec 2024). ¹⁷ CPTPP’s modern rules of origin and flexible self-certification system are designed to facilitate supply chain integration across member states, which is expected to drive future utilisation rates as UK businesses become more familiar with its provisions. ¹⁸ In strategic terms, CPTPP membership enhances the UK’s positioning in the Indo-Pacific region, offering diversification away from reliance on EU trade and creating opportunities to participate in deeper regional value chains. ¹⁹

Validation of Rules of Origin and International Frameworks

Supplier Declarations

Under the UK–EU Trade and Cooperation Agreement (TCA), supplier declarations are a fundamental mechanism for substantiating origin, particularly when applying bilateral cumulation under Article ORIG.40. ¹¹ Where an exporter’s product incorporates materials or processing undertaken in the other Party, the exporter may only treat those inputs as “originating” if supported by a valid supplier declaration. ¹² This declaration must include sufficient detail to identify the goods supplied, describe any non-originating components, and confirm the origin status of the materials, thereby enabling the exporter to determine whether the final product meets the relevant origin criteria. ¹³

To standardise compliance, Annex ORIG-6 of the TCA provides model templates for both long-term and one-off supplier declarations. ²⁶ While use of the exact template is not mandatory, any alternative format must contain at least the same information to ensure equivalence and acceptability during verification checks. Exporters and importers are required to retain these records for at least four years in accordance with Article ORIG.24, enabling customs authorities to conduct post-clearance audits where necessary. ²⁶

In practice, accurate and timely supplier declarations are crucial for businesses seeking to maximise the preferential duty benefits available under the TCA, particularly where complex supply chains involve multiple sourcing and processing stages. Failure to obtain, maintain, or produce these declarations when requested may result in denial of preferential treatment, retroactive duty recovery, or administrative penalties. ²⁷

Wholly Obtained Products

Goods are deemed wholly obtained in a country when every element of their production takes place within that territory, without reliance on materials or processes carried out elsewhere. This category represents the clearest and least controversial form of origin determination, since there is no ambiguity about foreign value addition. It is used in trade law to establish a baseline: when goods are wholly obtained, their economic nationality coincides entirely with the country of production. The concept is significant because it marks the point of departure for more complex rules on “substantial transformation,” which apply once multiple jurisdictions are involved in the production process. ⁴

Substantial Transformation

For goods incorporating inputs from multiple countries, origin is assigned to the country where the last substantial transformation occurs. This concept identifies the point at which a product acquires a new economic identity through meaningful processing or assembly. The determination of substantial transformation can be made using several approaches:

• Change in tariff classification (CTC): If processing or assembly results in the product being classified under a different Harmonised System (HS) code, it is considered to have undergone a substantial transformation. This ensures that minor alterations or simple assembly do not confer origin.
• Value-added test: The country must contribute a specified proportion of the product’s final value. This prevents countries from claiming origin based on negligible local inputs, maintaining the integrity of preferential trade benefits.
• Specific processing rules: Certain sensitive sectors, like textiles or chemicals, require designated manufacturing steps—such as weaving, spinning, or chemical reactions—to be performed domestically to establish origin. These rules safeguard key economic activities within a country and prevent circumvention of origin requirements. ⁵

Cumulation

Cumulation allows producers to treat inputs from certain partner countries as if they originated domestically, helping them meet origin thresholds and support regional value chains. It can take three forms:

• Bilateral: Between two FTA partners, allowing materials from one partner to count as originating if they meet specified processing or value-added requirements. ⁶
• Diagonal: Allows inputs from multiple FTA partners to qualify as originating, but only when each bilateral agreement shares compatible product-specific rules and recognizes the same transformation criteria for cumulation purposes. ⁶
• Full: Across all partners in a regional agreement, recognizing materials processed in any member country as originating, provided they comply with the agreement’s rules of origin. ⁶

De Minimis Tolerance

The Trade and Cooperation Agreement (TCA) recognise a de minimis tolerance, which allows certain goods to retain originating status even if they contain a small proportion of non-originating materials. This mechanism provides flexibility where strict compliance with product-specific rules is difficult. The tolerances are set as follows:

• Foodstuffs (Chapters 2 and 4–24 of the HS, excluding processed fishery products in Chapter 16): Non-originating materials may not exceed 15% of the total weight of the final product.
• All other products (excluding textiles under Chapters 50–63): Non-originating materials may not exceed 10% of the ex-works price of the final product.
• Textiles and apparel (Chapters 50–63): Special tolerances apply, as provided in Notes 7 and 8 of Annex 2 to the TCA (Introductory Notes to the Product-Specific Rules of Origin). ⁷

However, these tolerances are subject to two important limitations:

1. They cannot override specific maximum thresholds for non-originating inputs already prescribed in Annex 3.
2. They do not apply to goods that must be “wholly obtained” under Article 41 TCA. ⁷

Certification and Verification

Exporters must usually provide proof of origin to benefit from preferential tariffs. Common approaches include:

• Certificates of origin issued by authorised bodies such as chambers of commerce.
• Origin declarations made by approved exporters on commercial documents.
• Self-certification systems under modern FTAs, which simplify procedures but increase exporters’ compliance responsibilities. ⁸

Customs authorities in importing countries may verify origin through audits or requests for supporting evidence. False claims may lead to penalties, back-payment of duties, and reputational harm. ⁸

Challenges for Businesses

Digital customs platforms, blockchain-based traceability, and greater regulatory harmonisation have eased compliance burdens to some extent. However, geopolitical tensions and proliferating trade blocs ensure that divergent RoO frameworks remain a significant obstacle ⁹. Also, document preparation, record-keeping, and compliance checks impose costs, disproportionately affecting small and medium-sized enterprises (SMEs). ¹⁰

How to Research Rules of Origin by Entering Commodity Codes

To locate whether preferential rules of origin specific to a trade agreement, visit the website https://www.trade-tariff.service.gov.uk/find_commodity and enter the commodity code of your product. After entering your 10-digit code, scroll down to find the “select a country” dropdown list. Please select the country to view their UK measures, and then select “origin” from the tabs. Below, you will find agreements, headings, descriptions, and product specific rules (CTH, 50% of EXW, etc.) for this specific product between UK and the selected country.

Conclusion

Rules of origin are a cornerstone of international trade law and practice. They underpin preferential agreements, prevent trade circumvention, and ensure accurate implementation of tariffs and quotas. Yet, they also impose complexity and compliance risks for businesses.

For policymakers, the challenge lies in striking a balance between protecting genuine domestic value addition and ensuring that rules remain usable and beneficial for firms. For businesses, success depends on careful supply chain planning, robust record-keeping, and close monitoring of the origin rules under each relevant trade agreement.

In particular, the differentiation between preferential and non-preferential rules of origin is becoming increasingly relevant, especially considering evolving U.S. trade policies and enforcement trends. For businesses operating in complex global supply chains, ensuring full compliance with preferential origin requirements is not only about avoiding penalties—it is also about securing competitive advantages and maximising tariff benefits.

Partnering with experienced customs consultants can help businesses interpret the nuances of origin rules, optimise supply chain structures, and maintain robust documentation systems, ensuring they remain both compliant and strategically positioned in international markets.

For further insight into claiming 0% import tariffs please visit: https://alineacustoms.com/five-recommendations-for-reducing-import-tariffs/

Alinea Customs provide customs consultancy addressing rules of origin compliance, accessing the benefits of free trade agreements, and supply chain mapping. Our team have extensive experience in matters of trade policy and regional compliance, and can support your business in managing regulatory shifts and preparing for future developments.

References:

1. World Trade Organization, Agreement on Rules of Origin (15 April 1994, entered into force 1 January 1995) art 1.
2. WTO, Agreement on Rules of Origin (n 1) art 2.
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