A product’s origin determines its economic “nationality,” which dictates whether it qualifies for lower preferential tariff rates under regional trade agreements.
Preferential vs. Non-Preferential Rules of Origin
- Non-Preferential Rules: Used for general purposes like trade statistics, anti-dumping duties, and trade embargoes.
- Preferential Rules: Applied under trade agreements (such as the African Continental Free Trade Area – AfCFTA or COMESA) to grant reduced or zero-rate import duties to member nations.
Criteria for Determining Origin
To qualify as originating from a specific treaty nation, goods must meet one of two criteria:
- Wholly Obtained Goods: Items naturally extracted or produced entirely within that country. Examples include agricultural crops harvested there, live animals born and raised there, or minerals extracted from its soil.
- Substantially Transformed Goods: If a product is made using raw materials from non-member countries, it must undergo substantial manufacturing within the treaty nation. This is measured by:
- Tariff Shift: The processing changes the product’s 4-digit HS heading classification.
- Value Admixture: The local value added during manufacturing exceeds a set percentage threshold (e.g., at least 35% local value added).
Documentation and Verification
Importers must present a valid Certificate of Origin stamped by the exporting country’s customs authority to claim preferential tariff rates. Customs can conduct post-clearance audits to verify that the goods were not simply routed through a treaty country without real local manufacturing.
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