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The importance of rules of origin

Rules of origin are the criteria used to determine where a product originates from, in other words where the product was made.

Rules of origin are an important part of international trade rules, both at the WTO level as well as within free trade arrangements. These rules determine what import duty shall be paid, whether anti-dumping duties, countervailing measures or safeguard measures are applicable to product as well as determining which country may add to the label indicating where it was made. The rules therefore will allow you to either import the product at a cost or prevent you from importing and selling it.

The rules of origin have become increasingly more important given the global value chains where materials and labour from different countries are used in the production or manufacture of an end product. This becomes even more evident when trying to navigate the free trade arrangements that your product may benefit from as each of the free trade arrangements have different rules of origin and the rules of origin are not the same for all products. The rules of origin could for example require that you are only allowed to use a certain percentage of materials that do not originate from the country where you may want the product to originate from. The rules could also specify the type of processing that needs to be applied to non-originating materials in order that an end product may be deemed to originate from the country where you would like the product to come from. Such processing could require that the material you use must be classified under a different tariff heading than the tariff heading of the end product or prohibit the use of materials from certain tariff headings.

Failure to adhere hereto could result in unforeseen costs in the forms of duties, storage cost, re-shipment cost and penalties.

Rian Geldenhuys
© Trade Law Chambers 2019


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