23008_Nearshoring Report

RULES OF ORIGIN An important consideration for all international trade in manufactured goods is the rule of origin principle. Trade agreements in place between trading partners often include specific rules of origin to determine when a product is considered originating in the partner country; if products meet the criteria, they receive preferential tariff treatment. Rules of origin can be applied to primary products or processed goods and will be determined as having originated within one of the trade partners even when using non-originating materials if sufficient processing or transformation has taken place within one of the trade partner countries. For example, the cutting, stitching and finishing of a garment within an EU country made from textiles produced in another non-EU country would be considered as having been made in the EU because sufficient transformation of the textiles had taken place. Rules of origin are different for different products but the proportion of the final products (based on the ‘ex-works’ cost of the inputs before they were transformed into the final product) to contain materials considered non-originating. The proportions vary by product type; for example, under the Trade and Cooperation agreement between the EU and the UK, rates typically vary between 70% and 50% in content requiring to have originated from with the partner countries (although this is lower for some products).

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