Preferential rules of origin: how RCEP and the AfCFTA decide whether you pay less duty

A trade agreement does not lower duties on everything that moves between its members, only on goods that originate in them. Buying from a supplier located inside a free trade area is not enough: the product has to meet the rules of origin and the importer has to prove it.

Origin is not the country the goods ship from

Preferential origin is the country where a product was wholly obtained or sufficiently transformed, under the agreement's rules. A product can ship from one country and originate in another, or originate nowhere in the agreement. In that case the normal duty applies, even if the supplier is inside the area.

RCEP: one set of rules for several countries

The Regional Comprehensive Economic Partnership (RCEP) entered into force on 1 January 2022 for the first parties. Korea followed on 1 February 2022, Malaysia on 18 March 2022, Indonesia on 2 January 2023 and the Philippines on 2 June 2023. Application dates are country by country, so confirm that the agreement already applies to both the origin and the destination country.

Chapter 3 sets the rules of origin. A central idea is cumulation: materials originating in one party and used in production in another are treated as originating in the latter (Article 3.4, unless otherwise provided). In practice a factory can combine components from several members and still obtain origin for the finished product.

Product-specific rules generally use criteria such as a change in tariff heading or a minimum regional value. Australia's DFAT guide gives an example with a 40% regional value threshold, but the exact criterion depends on the product's tariff code and must be read in the agreement's list.

AfCFTA: the continental African agreement

In the African Continental Free Trade Area, the rules of origin are in Annex 2 to the Protocol on Trade in Goods, and Appendix IV sets the product-specific rules. The Rules of Origin Manual explains how origin is determined and administered.

The Guided Trade Initiative was launched in Accra on 7 October 2022 as a pilot to test the legal and institutional framework in practice, with eight countries: Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia. The EU-WCO Origin Africa Programme supports the work. Anyone planning intra-African trade should confirm, product by product and country by country, whether the preference already applies.

What to check before you buy

• Does the agreement apply? Both countries must be applying it on the date of import.
• Correct tariff classification. The rule of origin depends on the Harmonized System code; a wrong code gives a wrong rule.
• Product composition. Ask the supplier for the bill of materials and the origin of the main components.
• Proof of origin. Each agreement defines the accepted document and who may issue it. Ask for it before shipment, not after.
• Records. Keep the documents that support origin: authorities may verify them after clearance.

Rules and product lists change. Always confirm the version in force with the customs authority of the importing country.

Cover photo: Irene Scott/AusAID, CC BY 2.0, Wikimedia Commons.