Overview of EU Preference Systems
EUR1 – Invoice statements
A preference certificate is issued by UK exporters when the goods being exported qualify under a preferential trade agreement with specific countries. This certificate permits the goods to be imported into that country at a reduced rate of duty, in most cases zero duty. This means that the certificate or declaration on the invoice is very powerful. The exporter is legally bound to check the qualifying status of his equipment before issuing the preference certificate.
Some things the Certificate isn’t:
1) It is not just a certificate of origin.
2) It is certainly not ‘just a formality’.
3) It is not a declaration that the goods are “In Free Circulation within the EC”. *
4) It is not a legal requirement to issue this form when supply the countries listed below:
* ‘Free Circulation’ – goods wholly produced in the EC or imported into the EC import duty paid.
So, what is it?
- It is a SALES ADVANTAGE FOR EU QUALIFYING GOODS !!!!
- It is a declaration made on behalf of the company certifying to the customs authorities that the goods you are supplying qualify for preferential status under the terms of an international trade agreement.
- It is a legal undertaking that you have checked the ‘origin’ of the goods (and you have evidence to prove) that they do comply with the preferential trade agreement.
- It allows the goods to be imported into your customers’ countries at a reduced or nil import duty rate.
If you sign an EUR1 or sign the an invoice statement with regard to preferential trade and the goods do not qualify under the preferential trade agreement Customs can take legal action against the exporting company and/ or the person who has signed the declarations. This action can take the following lines:
- exporting company fined and warned. (Fines tend now to be a percentage of the value of orders incorrectly supplied accompanied by a preference certificate);
- customs in the importing country notified of the ‘error’ and the importer is retrospectively charged the import duty;
- legal action taken against the company and/ or individual (if they are seen to be acting knowingly) – up to 5 year prison sentence imposed.
Steps to take to research preference status:
1) Obtain a copy of the relevant Customs Public Notices:
Notice No. 827 – EC Preferences: Export Procedures
Notice No. 828 – Export Preferences: Rules of origin for specified countries
Notice No. 832 – Export Preference: Mexico
(Notice No. 829 – Export Preferences: Rules of origin (Syria only) is no longer being published, if you export to Syria and want to know the rules you must contact HMRC)
2) Classify your product(s) under the appropriate commodity code number (only the first 4 digits – HS Code – required).
3) Read and analyse the section in the public notice pertaining to the country(ies) and tariff number(s) involved. Need to know where the equipment originates and where any components/ raw materials, etc come from.
4) If you have problems deciding contact your local Customs office for guidance. Binding Origin Information Ruling (BOI) can be obtained.
5) If you buy the goods you export from another UK or EC country you must ask them to provide you with a “Supplier’s Declaration” stating that the goods do or do not qualify for preference.
When selling to an EC customer who subsequently will be exporting your materials outside the EC, you may be requested to complete an EC Information Certificate (INF4 – C1243). This will usually be as a result of the foreign Customs authorities to have any supplier’s declaration of origin verified.
The EUR1 is the main document but, to simplify trade, Customs Authorities allow the use of either an invoice declaration for (1) low value shipments that qualify for preference or (2) invoice declarations from Approved Exporters.
EUR Stamping procedure
In the UK, from 1.7.04 EUR1 Forms ceased to be stamped by Customs at the exit point from the UK/EC. Instead the form must be posted to Salford Customs (Custom House, Furness Quay, Salford Manchester M50 3XX) in advance of shipment so it can be posted back to the exporter.
As this is not always possible (wouldn’t life be wonderful if we did have the time to wait for posted document?) Chambers of Commerce and the offices of the Institute of Chartered Shipbrokers are able to stamp forms for “urgent” or out-of-hour requirements. The stamping of EUR1 forms by Chambers of Commerce around the UK has become standard and, although customs documents are always free forms, the stamping fee means that there is a fee for producing these certificates (between £12.50 – £25.00).
Many Chambers are also using the e-certificate procedures for EUR1 Forms as they do for certificate of origin (see below). Though many countries around the world accept electronic stamped EUR1 Form not all of them do. Be very careful if shipping to:
EUR1 documents for these countries can be processed using the e-Cert Standard Service and will then need to be manually signed and stamped. Your Chamber of Commerce will provide you with more information.
The aim (by 2015) is to phase out the use of the EUR1 document and work on the Approved Exporter system. The newest EU Bilateral Preferential Trade Agreement (PTA) – South Korea 1st July 2011 – has been set up under the Approved Exporter system and low value invoice declarations only, therefore EUR1 Forms do not apply to this PTA.
We recommend you use (1) low value declaration when applicable and look at becoming an (2) Approved Exporter.
(1): Low Value statements on the invoice
Most countries under the EUR preference agreement (and the GSP system for importers) allow the use of simplified documents to replace the full EUR1 form. Below a set level, Customs will accept as a declaration that the goods qualify for preference a statement on the invoice accompanying the goods as long as the invoice is originally signed. The invoice declaration varies slightly between the preference countries, following is the example taken from Public Notice 827:
“The exporter of the products covered by this document declares that, except where otherwise indicated, these products are of UK/EC preferential origin. (EEA origin when supplying Norway, Iceland or Liechtenstein).”
Place & Date:………………………..
Signature: ………………………… Print Name: …………………………
For shipments valued over the low value limit a EUR1 form or Approved Exporter Authorisation Number is required.
EUR2 Forms are no longer used.
2. Approved exporters
Since its introduction in 1999 the Approved Exporter authorisation of traders by HMRC has grown in number and become acceptable around the world with Bilateral PTA partner countries. This permits the use the invoice declaration for all qualifying supplies regardless of value. The invoice statement must include reference to theCustoms Authorisation Number.
Approved Exporter Declaration:
Approved Exporter Authorisation No.: XX123456
“We, the exporter of the products covered by this document declares that, except where otherwise indicated, these products are of UK/EC preferential origin. (EEA origin when supplying Norway, Iceland or Liechtenstein).”
Place & Date:………………………..
Signature: ………………………… Print Name: …………………………
Approval must be sought from HM Revenue & Customs in Leeds on the correct form (C1454). An understanding of the Rules of Preference Origin, specific knowledge of the rules that apply to your commodity code and confirmation that you hold evidence of preference origin is required prior to approval (eg Supplier Declarations – see below). The Approval system is free and once granted can be used for all preference countries though it is recommended that you send a copy of your approval letter to the overseas customer prior to first time use.
If you are already approved and wish to extend the use to S. Korea you must notify HMRC Leeds in advance but you can add more countries if only approved for S. Korea.
The aim is to remove the requirement for a EUR1 document from 2015 and move all preference agreements on to this Approved Exporter Status.