In the realm of international trade, accurately indicating the origin of imported goods is crucial. This practice is not only essential for compliance with customs regulations but also for taking advantage of preferential trade treatments.
Rules of origin are used by governments to enforce commercial policies, determine eligibility for preferential treatment, and ensure compliance with labelling and marketing regulations. The origin of goods is defined by the place where a product was produced, not from where it was shipped. Correctly determining and declaring the origin of goods is therefore essential for businesses to avoid problems with customs authorities and potential legal and financial repercussions.
Misrepresentation of origin can lead to severe legal and financial consequences, as highlighted by recent cases in the European Union. The news coming from the United States about the announced tariffs on goods originating from different countries also highlights the importance of this topic.
What is the origin? What rules apply?
There are two main types of origin, namely preferential and non-preferential origin. Preferential origin rules are a result of the negotiations of free trade agreements between parties. Such origin determines whether goods qualify for special arrangements, such as reduced or zero customs duties, upon the import of goods into a country of a contracting party. It is a voluntary privilege, as exporters must first prove that the origin of their goods is eligible for preferential treatment in the country of production. Typically, in order to obtain preferential origin, certain manufacturing or processing steps must be conducted. There are several types of rules concerning processing, depending on HS classification. The most common rules require goods to be wholly obtained, to use or exclude non-originating materials from certain positions while processing, or to conduct specific working or processing operations. The fulfilment of these list rules allows the exporter to issue a proof of origin that entitles the importer to claim preferential treatment upon the import of the goods in the country of destination.
On the other hand, non-preferential origin is used for the determination of the country of origin of imported goods for the application of the most-favoured nation (MFN) treatment. Countries also apply it to impose unilateral local commercial measures on imported products, such as tariff quotas or antidumping and countervailing duties. Importers must meet all the requirements resulting from non-preferential origin, possibly set by the importing country, in order to legally import goods. Non-compliance with these rules can lead to penalties, fines, or seizure of goods.
Recent examples from the European Public Prosecutor’s Office
The European Public Prosecutor's Office (EPPO) has been increasingly conducting investigations into imported goods, resulting in the seizure of assets due to incorrect declaration of origin. In Italy, the EPPO recently issued a freezing order amounting to €950,000 against a company suspected of evading customs duties by falsely indicating the origin of stainless-steel coils.
The company had declared that the steel originated from South Korea, whereas, in reality, the product was of Chinese origin. This misrepresentation allowed the company to evade nearly €2.4 million in additional customs duties imposed under the EU's 2019 anti-dumping regulation.
Announced US Tariffs
In early February 2025, the U.S. administration announced significant tariff measures affecting imports from China, Canada, and Mexico. A 10% tariff on all goods from China, including Hong Kong, was implemented on 4 February 2025. This measure also suspended de minimis treatment, subjecting all shipments, regardless of value, to applicable duties.
Initially, a 25% tariff on all goods from Canada and Mexico was set to take effect on 4 February 2025, with a 10% tariff specifically on Canadian energy products. However, these tariffs were paused for 30 days following agreements to negotiate enhanced border security and other matters.
In response to the U.S. tariffs, China announced retaliatory measures, including a 15% tariff on U.S. coal and liquefied natural gas, and a 10% tariff on crude oil, agricultural machinery, and cars. China also imposed export controls on critical minerals such as tungsten, tellurium, bismuth, molybdenum, and indium, which are vital to various industries.
On 10 February 2025, President Donald Trump signed an executive order imposing a 25% tariff on all steel and aluminium imports, effective 12 March 2025. Notably, no countries have been granted exemptions from these tariffs.
On 13 February 2025, President Donald Trump issued a new memorandum outlining the procedure for implementing reciprocal tariffs on trading partners. Essentially, U.S. agencies should investigate plans to increase tariffs on a country’s exports to the U.S. in proportion to the tariff and non-tariff barriers that country imposes on U.S. goods. It is foreseen that these investigations will be completed by 1 April 2025.
These developments underscore the critical importance of accurately determining and documenting the country of origin for goods. Misclassification or incorrect declarations can lead to penalties, supply chain disruptions, and increased costs, especially amid evolving tariff measures. Businesses must stay informed and ensure compliance to navigate the shifting trade landscape effectively.
How can PwC support you?
PwC offers comprehensive services to help businesses navigate the complexities of global trade. Our Swiss team of customs experts is ready to assist you with:
- Preferential origin management and customs duty optimisation: We assist in managing preferential origin to benefit from reduced duty rates under various trade agreements and identifying opportunities to reduce overall import costs.
- Customs classification review: We support in reviewing and ensuring the correct classification of goods according to Harmonised System (HS) codes, which are crucial for determining applicable duties and compliance with import regulations.
- Customs valuation consulting: We provide expert advice on accurately valuing goods to ensure compliance with customs regulations, avoiding penalties, and ensuring smooth customs clearance.
Let’s talk
For a deeper discussion on your business’ compliance with the rules of origin, please contact:
