Origin of goods

What it means

The origin of goods is their economic nationality: the country where the goods were wholly obtained or underwent sufficient processing. It is not the country a consignment was dispatched from, nor the supplier’s seat, though those two are what people confuse it with.

Non-preferential origin is used for trade measures, anti-dumping duties and origin marking; preferential origin under free trade agreements reduces or removes the duty. Each agreement sets its own rules of origin, so one answer does not carry over to another.

Customs origin matters in trade with countries outside the Union, meaning on import and export. Goods moving between member states go through no customs clearance, and their origin does not change any duty. A Made in label on the packaging is a commercial marking and need not match the customs origin.

How it works in practice

In customs clearance three figures meet in one declaration: the classification under the combined nomenclature, the customs value and the origin. From them the customs office of the Financial Administration works out the duty and the import VAT base.

A preferential rate has to be proved: a movement certificate, a statement from a registered exporter, or a supplier’s declaration for goods moving inside the EU. The proofs are archived, because customs can verify them years after the goods were released.

A Slovak company that buys components in Asia and sells finished products to a country with an EU agreement has to be able to show on export that the processing in the EU met the rule of origin. The evidence is the product costing and a bill of materials with their origin, which have to be kept before the first shipment leaves.

What to watch out for

An importer claims a zero rate on the strength of an origin sentence in a foreign supplier’s invoice and never checks what stands behind it. If subsequent verification shows the goods did not meet the agreement, the duty and the VAT on the higher base are assessed against the importer, not the seller.

For goods subject to an anti-dumping customs duty, origin is sometimes disguised by transhipment through a third country. If customs establish the true origin, the duty and the VAT are assessed retrospectively against the importer, possibly with a penalty on top, even where the importer knew nothing of the circumvention.