Preferential Tariffs: From Theory to Practice. How to Benefit from Zero Rates in Trade with the UK

One of the biggest advantages of the trade agreement between the European Union and the United Kingdom is the possibility of applying zero customs duties. Many businesses assume that simply shipping goods from Poland to the UK (or vice versa) automatically means zero duty. Unfortunately, reality is more complex. The key to duty relief is proving the so-called preferential origin of the goods. What does this mean, and how can it be demonstrated in practice? Here’s a step-by-step guide.

1. What Are Preferential Tariffs? A Difference That Matters

Every product in the world has a standard customs rate (known as the “Most Favoured Nation” or MFN rate) that applies in trade with countries with which there are no special agreements.

Preferential tariffs are lower (often zero) rates resulting from free trade agreements—in this case, the EU-UK Trade and Cooperation Agreement (TCA). To benefit from them, goods must comply with the rules of origin defined in the agreement. This means it is not enough for the goods to be shipped from the EU; they must actually “originate” there.

2. The Key to Preferences: Rules of Origin

What does it mean for goods to “originate” from the EU or the UK? The TCA defines this in two main ways:

• Wholly Obtained Goods: Products that are entirely produced within the territory of one of the parties.
  Example: Vegetables grown and harvested in Poland; minerals extracted in the UK.
• Sufficiently Worked or Processed Goods: Products manufactured using materials from other countries (e.g., China) but processed in the EU or UK to a degree that changes their properties and character.
  Example: A table made in Poland from wood imported from Ukraine. The processes of cutting, assembling, and varnishing constitute sufficient processing for the table to acquire EU origin.

Important: Each product has detailed rules (e.g., tariff code changes or minimum percentage of originating materials).

Key Pitfall: Goods imported from China, then merely repackaged and shipped from a Polish warehouse to the UK, do not acquire EU origin and are subject to standard tariffs.

3. How to Prove Origin? Two Ways to Succeed

Once you know whether your goods qualify for preferential tariffs, you must prove this to customs authorities. There are two methods:

• Method 1: Statement on Origin
  This is the most common method. The exporter places a statement of origin on the commercial document (usually the invoice) in a precisely defined form. What must it include? The statement follows a standard format specified in the EU-UK agreement.
  • REX Number: If you are an EU exporter and the shipment exceeds €6,000, you must provide your registered exporter number (REX) in the statement. Registration in the REX system is done once through the national customs administration.
  • For UK exporters: The British equivalent is the EORI number.
• Method 2: Importer’s Knowledge
  This allows the importer to declare preferential origin based on the information and documents they possess proving that the goods meet the rules of origin. Who is it for? Importers with full knowledge of their supply chain and their supplier’s production process.
  Note: In the event of a customs audit, the importer bears the burden of proof and must present all documentation confirming origin.

4. Common Mistakes and How to Avoid Them

• Incorrect statement wording: Using an incorrect or incomplete declaration can invalidate it.
• Missing REX/EORI number: Forgetting to include it for shipments over €6,000 is a frequent error.
• Declaring origin for non-originating goods: This is the most serious mistake and can lead to fines and payment of back duties with interest.
• Lack of documentation: Both exporter and importer must retain origin documentation for several years in case of inspection.

Summary:
Preferential tariffs are a huge opportunity to reduce costs in trade with the UK, but they require careful action. Understanding the rules of origin and properly documenting the status of goods is not just bureaucratic formality—it is a key element of your trade strategy. Invest time in analyzing your products and processes, and you will avoid unpleasant surprises at the border.