How Is the Origin of Goods Determined? Preferential and Non-Preferential Rules

Executive Summary

The origin of the goods is the economic nationality determined by the relevant rules of origin.

The evaluation of origin in the customs legislation is made through two basic systems:

1. non-preferential origin: Independently from the preferred tariff application, the determination of the origin of goods in the relevant legislation framework.
2. preferential origin: In order to meet the conditions prescribed in the relevant preferential trade arrangement, the determination of the preferential origin status of the goods.

The rules and results of these two systems can be different.

Goods originating in a particular country do not automatically qualify for preferential duty on every transaction with that country.

Basic control areas in terms of companies are the accuracy of production processes, origin of inputs, product-based rules, origin documents and supplier information.

1. What is the origin of the item?

The origin of the goods is the determination of which country is originated according to the criteria arranged in the relevant legislation.

The concept of origin should not be mixed with the country where the goods are located in the dispatch country or the seller.

For example, a product manufactured in China is sold to Turkey by a distributor in Germany, it does not mean that the product is only German originated because of its shipped from Germany.

Similarly, a product manufactured in Türkiye using parts sourced from several countries does not necessarily acquire Turkish origin.

The detection of origin requires evaluation of the relevant production processes and the rules of origin to be applied.

2. Why is Origin Important?

A variety of legal and financial results can lead to import and export operations.

Among them:

• preferred tariff applications,
• specific anti-damping and other trading policy measures,
• based import regulations,
• proof origin and document obligations,
• specific commercial restrictions

You can take place.

Each of these results depends on the scope of the relevant arrangement.

The knowledge of origin is not enough to determine all taxes or trade policy measures per single. The GTIP can also take care of the nature of the goods, the relevant country and the date of processing.

3. What Is Non-Preferential Origin?

Non-preferential origin is determined independently of any tariff advantages under preferential trade agreements.

The main frame of non-preferential origin rules in Turkey is regulated in the Customs Law and Customs Regulation No. 4458.

In general approach, two situations stand out.

Fully obtained or manufactured goods in a country

Specific products can be obtained or manufactured in a completely country with the conditions where the relevant legislation is predicted.

For example, grown in a country and harvested agricultural products, under the relevant conditions, it can be considered the country origin.

Manufactured in more than one country

The detection of origin becomes more complex if more than one country is located in the production of a goods.

In this case, the final based labor or transaction criteria prescribed in the relevant legislation are evaluated.

Every production activity does not change the origin of goods.

Specifically simple packaging, labeling or limited processes should be examined in the framework of the relevant provisions, which does not give origin.

4. What Is Preferential Origin?

preferential origin is to meet the necessary conditions of origin to benefit from the tariff advantage of goods under a specific preferential trade arrangement.

The rules of origin in this system are determined according to the provisions of the relevant agreement or regulation.

To gain a preferential origin of a product;

• fully obtained,
• adequate labor or processing,
• meet the relevant product-based rules of origin

It may be necessary to provide the appropriate ones from the conditions such as.

preferential origin rules are not the same in each agreement and in each group of products.

A product that qualifies as originating under one agreement should therefore be assessed separately under the rules of any other agreement.

5. Differences Between Preferential and Non-Preferential Origin

Determining the non-preferential origin of goods and determining whether they qualify as originating under a specific trade agreement are separate legal assessments.

6. What is Qualified Labor or Processing?

In the preferential origin systems, sufficient labor or processing criteria play an important role in productions where non- origin entries are used.

This criterion is determined according to the product-based rules of origin.

The main types of rules may be:

Tariff position change

In order classification of un originated inputs used in the production, the classification of the final product may be required to occur in the rules prescribed in the rule.

Value-based rules

You may need to remain in the limits prescribed in the relevant rule of the value or certain cost elements of non-signed inputs.

Specific production processes

The realization of certain production stages in some products can be conditional.

Mixed rules

Multiple criteria for specific products can be applied together or alternately.

Therefore, it is not enough to show that only the product is manufactured in Turkey, the preferential origin wins.

7. Is Simple Transactions Gain from Origin?

Some transactions in preferential origin arrangement can be considered insufficient to be derived alone.

Among examples according to the relevant agreement;

• simple packaging,
• labeling,
• simple splicing,
• extract,
• certain protection operations

can be found.

However, it should be judged according to the provisions of the agreement on which transactions are considered insufficient and how the rules apply.

For example, only repacking of a imported product, usually won’t be evaluated as a sufficient production activity that gains origin.

In turn, more comprehensive production processes depend on the meeting of the relevant product-based rule, which does not give and save the origin.

8. What is the Censification of Origin?

The cumulative of origin is a system that allows to be taken into account in the origin account of production or origin entries performed in other countries under the relevant conditions.

The rules of stimulation may vary depending on the regulations between the relevant agreement and the party countries.

For this reason, it is possible to apply chumulation;

• to be included in the coverage of the relevant countries,
• to meet the rules of origin to be applied,
• the required documents,
• Checking applicable regulations on the relevant date

may be required.

It is not a general right that can be applied automatically for all countries and products.

9. Is A.TR Certificate of Origin Certificate?

A.TR circulatory document is a document used for the free circulation status of goods under the Customs Union between Turkey and the European Union.

A.TR is not a document that proves the preferential origin of the goods.

This distinction is particularly important.

For example, a third country origin product may have entered the free circulation in the European Union by meeting the relevant conditions.

Shipping this product to Türkiye with an A.TR movement certificate does not in itself establish EU origin.

Therefore, the presence of A.TR document does not give the result that the origin-based trading policy measures will not be applied.

10. What Does EUR.1 Certificate Work?

EUR.1 circulatory document is one of the documents available for proof of origin in related preferably trade editing.

However, EUR.1 can be used in what transactions, depends on the provisions of the relevant agreement.

The document is regulated does not guarantee that all the preferred terms of origin are provided alone.

It is necessary to meet the rules of origin prescribed in the agreement of the relevant goods.

It may also be subject to EUR-MED, the statement of origin or different proof methods in some preferential trade regulations.

Therefore, it is important that companies determine the document type not only according to the shipping country, but according to the relevant trade arrangement.

11. Is the Personality of Origin Always enough?

The masterpiece of origin is one of the documents used in the masterpieces of the origin of goods in the relevant regulations.

However, the presence of this document does not mean that in any case it can be used in the preferred tariff application.

What document shall be accepted within the scope of the preferential trade, shall be determined according to the provisions of the relevant agreement and legislation.

Furthermore, the accuracy of the document is the subject of separate evaluation that the goods meet and meet the actual conditions of origin.

Therefore, companies need to focus not only on document supply, but also on the basis of origin detection.

12. Sample Application: Detection of Origin in Multi Country Production

The following example was prepared to show that the origin assessment will not only be performed by looking at the production country.

Let’s assume that a company produces an electronic product in Turkey.

It is not enough to do only the final assembly in Turkey to determine whether this product has won Turkish preferential origin.

First, the GTIP of the final product should be determined.

Then the product-based rule of origin should be examined in the relevant preferential trade arrangement.

Tariff classifications, origin status, values and production processes of inputs used should be evaluated.

As a result, it depends on the meeting of the relevant rule, which the product does not earn and win the preferential origin.

The result of a certain origin can not be removed only with the information given from this example.

13. Effect of Origin Errors to Companies

The wrong statement of origin can give different results according to the nature of the process.

Among them;

• rejection of the preferred tariff application,
• Evaluation of missing charged taxes,
• administrative sanctions in the relevant conditions,
• verification of origin documents after,
• Additional reviews in terms of trading policy measures

can be found.

However, every origin error does not give the same legal or financial result.

The relevant agreement should be evaluated together with the type of document, the date of processing, the actual origin of the goods and other conditions.

14. What Documents Are Important in Origin Controls?

According to the scope of the audit, the following documents may take importance:

1. proof documents and related declarations of origin.
2. Supplier declarations.
3. Production prescriptions and material lists.
4. GTIP information of inputs used.
5. Information of origin of the inputs.
6. Production and cost records.
7. Purchase invoices and supply contracts.
8. Technical documents showing production processes.
9. Recommended trade arrangement and product-based rules of origin.

It is also important that documents are not only available, but can be matched with related products and processes.

C-INSPEC Perspective

Risk of Origin is Non-Appliance Risk of Supply Chain

Origin is considered a document subject, which should be provided in the final stage of foreign trade.

Yet the status of origin can be shaped in much earlier stages of production and supply decisions.

The product is supplied from which country, which is produced by inputs, which processes pass and which can affect the evaluation of origin, which will be sold to the market.

Therefore, it is not enough to realize that the management of origin is prepared only for export or import declaration.

For example, changing the supplier of a input of the purchasing department can affect the preferential origin account of the final product.

Changes in the similar production process may require a re-evaluation of the product-based origin rule that has been previously met.

Therefore, in the C-INSPEC approach, the origin controls should be addressed with the supply chain and production processes beyond the document verification.

The sustainability of sustainable origin is provided not only to provide the right document, but to ensure the accuracy of the production and supply data based on that document.

15. Five Stages of Origin Control Program for Companies

Phase 1 — Product and supply chain inventory

Products, inputs, suppliers, production countries and related GTIP information are determined.

Step 2 — Detection of the rules of origin to be applied

It is determined to be according to which arrangement of preferred or non-preferential origin assessment.

Phase 3 — Production and input analysis

The rules of origin based on the product, the status of origin of inputs and the transactions performed are evaluated.

Step 4 — Certification and verification

Related documents, supplier statements and production records are checked.

Step 5 — Change management

The supplier regularly monitors the effect of product composition, production process and legislation changes in the origin.

This approach supports the detection of origin to turn into a continuous control process from one-time document preparation.

Frequently Asked Questions

Conclusion

The correct determination of the origin of the goods is an important legislation compliance requirement in import and export processes.

Preferred and non-preferential origin systems are different from each other, especially require detailed evaluation in multi-country production and supply chains.

A.TR is also important for the correct use of EUR.1 and other origin documents, the accuracy of the production and supply information based on these documents.

In order to manage the risks of origin of companies effectively, it is necessary to create a control system that evaluates product, supplier, production and foreign trade processes together.

The harmony of the origin is not only to know what country comes from, which country is considered to be considered legal and technical basis.

Legislation and Official Sources

1. 4458 No Customs Law — provisions on the origin of the property.
2. Customs Regulation — non-preferential origin and relevant regulations.
3. Free trade deals and origin protocols related to Turkey’s side.
4. Regulations in the scope of the Customs Union of Turkey–European Union.
5. Ministry of Commerce — Rules of origin, circulatory documents and resmî descriptions of preferential trade applications.