Preferential origin

What it means

Preferential origin is the origin that, under an agreement between the European Union and a partner country, entitles goods to a reduced or zero rate of customs duty on import. Without proof of it the normal rate applies, even if the goods really were made there.

It differs from non-preferential origin of goods, which serves statistics, marking and trade measures. Preferential origin arises only by meeting the rules of the particular agreement: goods are either wholly obtained in the country or sufficiently processed there.

Preferential origin works both ways: on export a Slovak company needs it so its customer in the partner country pays less duty, and on import so that it pays less itself. It is not a permanent feature of the goods - the same product can have preferential origin under one agreement and not under another, because each has its own rules.

How it works in practice

The rules are tied to the tariff classification, so the combined nomenclature heading is settled first and only then is its rule looked up: a change of heading, a ceiling on the value of non-originating materials, or a prescribed operation.

Origin is proved by an EUR.1 certificate from the customs office or by the exporter’s statement on the invoice; for consignments above six thousand euros the exporter may make that statement out only as an approved exporter or as one registered in the REX system, whichever regime the agreement uses. Suppliers’ declarations have to be kept, because the customs office can come back to origin years after clearance.

For regular deliveries from the same supplier, a long-term supplier’s declaration covering a set period is used instead of a declaration for every consignment. Together with the customs representative we help the client keep a list of them with their validity dates, so that when issuing a proof of origin they know whether a valid declaration still covers it.

What to watch out for

An exporter signs a statement on origin for goods it merely bought and passed on, without a declaration from its own supplier. On subsequent verification the customs office cannot confirm the origin, the buyer abroad is charged the duty with interest, and the buyer recovers it from the exporter.

Another mistake is relying on a made-in label without checking the rule for the specific heading. If non-originating materials exceed the limit, or the processing is only minimal, such as packing or mixing, the right to the preference falls away and the customs debt is paid in arrears with interest.