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Origin of goods: whoever declares it must be able to prove it

In a customs declaration, origin is a statement the business makes and the authorities may ask it to substantiate. If the proof does not hold, the duty saved becomes payable again, together with import VAT and interest, and the claim may arrive up to three years after the transaction, or seven where the case has a criminal dimension.

Where an origin has been indicated in the customs declaration, the customs authorities may require the declarant to prove the origin of the goods: this is laid down in Article 61(1) of Regulation (EU) No 952/2013 laying down the Union Customs Code. It is not a formality. If the proof is missing or does not withstand verification, the import duty which the free trade agreement had eliminated or reduced again becomes payable, together with import VAT and interest, and the customs debt may be notified within three years of the date on which it was incurred. The importer’s good faith alone is not enough. For a business that buys and sells across borders, origin is therefore not merely a box on the customs declaration: it is a file, to be built before the transaction and kept afterwards.

Two origins, two purposes

Non-preferential origin is the origin of goods for general customs purposes: it governs the application of the Common Customs Tariff — expressly excluding, under Article 59 of the Code, the preferential tariff measures themselves — of measures other than tariff measures established by Union provisions governing specific fields relating to trade in goods, such as anti-dumping duties, quotas and prohibitions, and of other Union measures relating to origin. Preferential origin serves a single purpose: to obtain the preferential tariff treatment — a reduced or nil rate of duty — and the non-tariff preferential measures which a free trade agreement, or a preference granted unilaterally by the Union, reserves for products complying with its rules (Article 64). The two concepts do not overlap, and the same product may have non-preferential origin in a country and, at the same time, fail to acquire the preferential originating status required by the agreement concluded with that same country. Confusing them is the most common error, and the most expensive one, because it leads a business to claim a preference to which it is not entitled.

When goods become originating

For non-preferential origin the rule is in Article 60 of the Code. Goods wholly obtained in a single country or territory are regarded as originating in that country or territory. Goods the production of which involves more than one country are deemed to originate in the country where they underwent “their last, substantial, economically-justified processing or working, in an undertaking equipped for that purpose, resulting in the manufacture of a new product or representing an important stage of manufacture”. Every element of the definition carries weight: the processing must be substantial, it must have an economic justification of its own, and it must take place in premises genuinely equipped for it.

The detail, however, is not in the Code but in Delegated Regulation (EU) 2015/2446, a text too often overlooked. The list of goods wholly obtained is in its Article 31; the product-specific list rules are in Annex 22-01, referred to in Article 32. Article 33 provides that an operation is not economically justified where it is established, on the basis of the available facts, that the purpose of that operation was to avoid the application of the measures referred to in Article 59 of the Code, and adds that, for goods not covered by Annex 22-01, where the last working or processing is not economically justified origin shifts to the country from which the major portion of the materials originates. Article 34 then lists the minimal operations which do not confer origin, among them “simple assembly of parts of products to constitute a complete product” and “affixing of marks, labels or other distinguishing signs on the products or on their packaging”. This is the point of greatest concern to businesses that carry out assembly operations: in a customs control the test is applied to the bill of materials and the production cycle, not to the wording printed on the packaging.

Preferential origin lies in the agreement, not in the Code

Article 64(2) of the Code is explicit: for goods benefiting from preferential measures contained in agreements concluded by the Union, the rules on preferential origin “shall be laid down in those agreements”. The applicable rule — change of tariff heading, maximum content of non-originating materials, specific working or processing — must therefore be read in the protocol on rules of origin to the relevant agreement, product by product and heading by heading. The instrument used to declare origin also varies with the agreement: the movement certificate EUR.1, issued by the authorities of the exporting country; the origin declaration on the invoice which, above the value threshold set by the preferential arrangement — or, where the arrangement does not specify one, above the EUR 6,000 per consignment threshold laid down in Article 67(7) of Implementing Regulation (EU) 2015/2447 — may be made out only by an approved exporter; and the statement on origin, which Article 68 reserves to an exporter registered in the REX system above the threshold set by the preferential arrangement or, failing that, above the EUR 6,000 per consignment of its paragraph 4. Under the most recent agreements, moreover, the preference may rest not on a document from the seller but on the importer’s knowledge: an approach that shifts the entire burden of proof onto the importer and should be chosen in full awareness of what it entails.

The approved exporter’s declaration and the REX statement on origin are not freely interchangeable: where the agreement requires a declaration made out by an approved exporter — as in the pan-Euro-Mediterranean area — a REX number is of no use, and the converse is equally true. In every case these are authorisations and registrations to be obtained before shipment, not afterwards. An exporter who acts only once the goods have already been exported is left with whatever the agreement allows by way of exception: in the pan-Euro-Mediterranean area a EUR.1 certificate may be issued after exportation — within two years of it under the revised rules of the convention — and an origin declaration may be made out later, provided it is submitted in the importing country no more than two years after importation. These are narrowly defined remedies, however: they presuppose a file that is already complete, and they are no substitute for organising matters in advance.

The weak point is the supplier’s declaration

A business that does not manufacture itself, but assembles, packages or resells, must be able to demonstrate the originating status of what it has bought. The instrument is the supplier’s declaration: Article 61 of the Implementing Regulation requires a supplier who provides the exporter or trader with the information necessary to determine the preferential originating status of the goods to use such a declaration, a separate declaration being made out for each consignment, on the commercial invoice, on a delivery note or on any other commercial document which describes the goods concerned “in sufficient detail to enable them to be identified”; the declaration may be provided at any time, including after delivery of the goods. In trade with the pan-Euro-Mediterranean area the declaration must also state the legal framework under which origin was determined — the original or the revised rules of the convention — and the forms in Annexes 22-15 and 22-16 referred to in Article 63 have been rewritten accordingly: a form completed using the old template is, today, an incomplete form.

Where consignments are regular and all the goods are expected to have the same originating status, a long-term supplier’s declaration is used, covering several consignments. Under Article 62 as it now stands — replaced by Implementing Regulation (EU) 2017/989 — the declaration no longer has a single fixed duration but states three dates: the date on which it is made out, that is, the date of issue; the start date of the period covered, which may be neither more than twelve months before the date of issue nor more than six months after it; and the end date, which may be no more than twenty-four months after the start date. On this point the Italian version of the regulation refers the twenty-four months to the date of issue, whereas the English and French versions, and the note to Annex 22-16, refer them to the start date, the period covered being in any event capped at twenty-four months: that is the prudent reading. The supplier must immediately inform the exporter or trader where the declaration is not valid for some or all of the consignments. The customs authorities may request the exporter or trader to obtain from the supplier an Information Certificate INF 4 attesting to the accuracy and authenticity of the declaration, which the competent customs office issues to the supplier within 90 days of the application (Article 64); if that certificate is not produced within 120 days of the request, verification continues through cooperation between the customs authorities of the Member States and, in the absence of a reply within 150 days or where the reply does not contain sufficient information, the proof of origin made out on the basis of that declaration is invalidated (Article 66). This is where such files are typically found to be incomplete: the supplier has changed its production cycle, no longer replies, or is unable to substantiate what it declared years earlier.

What happens when the proof does not hold

Origin is normally checked after the declaration has been accepted — the post-release control of Article 48 of the Code — and, for preferential proofs, through a request for verification addressed to the authorities of the exporting country. If the reply does not confirm the originating status, or does not arrive within the period laid down in the agreement, preferential treatment is refused and the customs debt is notified, without the customs authorities having to establish what the actual origin of the goods was. The debtor is the declarant and, in the event of indirect representation, also the person on whose behalf the customs declaration is made; Article 77(3) of the Code adds that the debtor is also any person who provided the information required for the declaration, being information leading to the whole or partial non-collection of the duties due, and who knew, or ought reasonably to have known, that the information was false. Relying on a customs representative therefore affords no protection, and a supplier who makes a false declaration is not necessarily beyond the reach of the rule.

The time limit is three years from the date on which the debt was incurred, that is, from acceptance of the declaration; it is extended, within the range of five to ten years which the Code leaves to national law, where the debt arises from an act which, at the time it was committed, was liable to give rise to criminal court proceedings, and Italy has set that period at seven years in Article 48 of the national complementary provisions, Annex 1 to Legislative Decree No 141 of 26 September 2024. The period is also suspended where an appeal is lodged and following the communication by which the customs authorities inform the debtor of the grounds on which they intend to notify the customs debt (Article 22(6) and Article 103). Import VAT and interest are added to the duty: the additional import VAT assessed on review remains deductible by an importer who is the actual consignee of the goods. As to the time limit, the Italian Revenue Agency, in circular No 35/E of 17 December 2013, applies Article 60(7) of Presidential Decree No 633/1972 by analogy and admits the deduction, subject to payment of the tax, penalties and interest, at the latest in the return for the second year following the year of payment: this is an administrative position, not the ordinary and shorter time limit of Article 19(1).

As regards penalties, the national provisions complementing the Code apply, set out in Annex 1 to Legislative Decree No 141 of 26 September 2024 and amended more than once by corrective decrees. Declaring an origin which does not correspond to the findings may amount to smuggling by false declaration under Article 79, punishable by a fine of between 100 and 200 per cent of the duties due. That, however, is a criminal offence and requires intent: where the courts find no intent — the typical case of a business that relied on a supplier’s declaration — a reduced administrative penalty under Article 96(14) applies instead of the fine. The infringement then remains an administrative one only where no aggravating circumstance applies and neither of two thresholds is exceeded: EUR 10,000 for customs duty and EUR 100,000 for border duties other than customs duty, which include import VAT. Since recovery following a failure to substantiate origin generally affects both heads, each must be assessed separately.

Good faith is not a general defence

Article 119 of the Code allows repayment or remission where, “as a result of an error on the part of the competent authorities”, the amount corresponding to the customs debt initially notified was lower than the amount payable, but on two cumulative conditions: that the error could not reasonably have been detected by the debtor, and that the debtor acted in good faith. Paragraph 3 of the same article works clearly in the importer’s favour: where preferential treatment is granted under a system of administrative cooperation involving the authorities of a third country, the issue by those authorities of a certificate which proves to be incorrect constitutes, in itself, an error which could not reasonably have been detected. That rule gives way, however, where the certificate is based on an incorrect account of the facts provided by the exporter, unless it is evident that the issuing authorities knew, or ought reasonably to have known, that the goods did not qualify for the preference. The same paragraph adds two points that decide disputes: the debtor is deemed to have acted in good faith if able to demonstrate that, during the period of the trading operations concerned, it took due care to ensure that all the conditions for the preferential treatment had been fulfilled; and good faith may not be invoked where the Commission has published in the Official Journal of the European Union a notice to importers stating grounds for doubt concerning the proper application of the preferential arrangement by the beneficiary country.

An application for repayment or remission must be submitted within three years of the date of notification of the customs debt (Article 121(1)(a)); that period is extended where the applicant provides evidence of being prevented from applying by unforeseeable circumstances or force majeure (paragraph 1, second subparagraph), and is suspended for the duration of an appeal against the notification of the debt (paragraph 3).

In practice

The order of steps is as follows, and each has an owner and a deadline. First — the export sales office, before the next round of quotations: map the trade flows and, for each product and each agreement, identify the applicable rule of origin, reading it in the protocol to the agreement and in Annex 22-01 to the Delegated Regulation, not in company practice. Second — the purchasing office, by the expiry of each declaration in force: obtain written declarations from suppliers, preferring long-term ones, and keep a register of the dates of issue, the start dates and the end dates, because it is the consignment falling outside the period stated that is left without a declaration: for consignments dispatched within the period, the declaration remains effective even after that period has ended. Third — the technical office, for each article code: reconstruct and keep the origin calculation, with the bill of materials, the value of non-originating materials and the ex-works price, because it is the calculation, not the certificate, that is asked for during a control. Fourth — the shipping office, before the first consignment to each market: establish which proof is required and apply in good time for an approved exporter authorisation or for registration in the REX system.

Fifth — the finance department, on a standing basis: keep documents and information for at least three years from the end of the year in which the declaration was accepted, as Article 51 of the Code requires, bearing in mind that paragraph 2 of the same article extends retention by a further three years where a control shows that the entry in the accounts must be corrected, and until the proceedings are concluded where an appeal or court action is brought; since the national recovery period may run to seven years, aligning record retention with the longer period is a necessity rather than a precaution. Sixth — management, where the doubt is genuine and the transaction recurring: apply for a binding origin information decision under Article 33 of the Code, which fixes the customs authorities’ position before the transaction rather than after it. Seventh — the finance department, and this is the step that is worth most, where the error is discovered by the business itself: apply for revision of the declaration before becoming formally aware of any inspection, audit, verification or assessment activity. In that case the national complementary provisions exclude administrative penalties and confiscation, leaving only the additional duties and interest payable. That opportunity ends with the first act of control.

Frequently asked questions

Is a “Made in Italy” marking on the packaging sufficient to prove preferential origin?

No; the two concepts operate on different levels. Marking the origin on the packaging relates to non-preferential origin and to consumer information rules; preferential origin is a status acquired only by complying with the processing rule in the applicable agreement, and proved with the instrument that agreement provides for. Goods may lawfully bear an indication of Italian origin and still fail to qualify for preferential tariff treatment in a given market, where the non-originating materials incorporated exceed the maximum content permitted by the protocol.

My Italian supplier assures me orally that the goods are Italian: is that sufficient?

No. An oral assurance carries no weight in a verification: what is required is a supplier’s declaration in the form provided for in Article 61 of the Implementing Regulation and, where the relationship is a continuing one, the long-term supplier’s declaration provided for in Article 62. It is worth recalling that, under Article 15 of the Code, lodging a customs declaration makes the person concerned responsible for the accuracy and completeness of the information given in it and for the authenticity, accuracy and validity of any supporting document: responsibility towards the customs authorities remains with the exporter and the importer. That does not mean the supplier is always beyond reach: Article 77(3) also makes a debtor of any person who provided the information knowing, or having reason to know, that it was false. As a matter of civil law, any claim against a supplier whose declaration proves inaccurate should in any event be provided for in the supply agreement, alongside the duty of immediate notification which Article 62 already imposes on the supplier.

The customs authorities are challenging the origin of transactions carried out two years ago: what can still be done?

Recovery within the three-year period is lawful, but this does not preclude a defence. The control closes with a statement of findings; thirty days run from its notification for submitting observations and requests to the office conducting the revision of the declaration; that is the moment to produce the origin calculation, the supplier’s declarations and the documentation of the production cycle, and the period is short. Before the decision is notified, the communication of grounds provided for in Article 22(6) of the Code also applies. After notification, an appeal remains available and, where the conditions are met, an application for repayment or remission within three years. What cannot be recovered is time: if the origin file was not built at the time, it can seldom be rebuilt afterwards.

On the value added tax aspects of cross-border trade, see our article on the time limit for deducting VAT; on the obligations that now travel with goods at the border, our article on the carbon border adjustment mechanism; and on the documentary care to take in the event of a control, our guide to tax audits.

• Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code (OJ L 269, 10 October 2013) — Articles 15, 51, 59, 60, 61, 64, 77, 103, 119 and 121.
• Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 (OJ L 343, 29 December 2015) — Articles 57-59 (non-preferential origin) and Articles 61-68 (supplier’s declarations, long-term declaration, INF 4 information certificate, approved exporter, registered exporter), Annexes 22-15 and 22-16.
• Commission Delegated Regulation (EU) 2015/2446 of 28 July 2015 (OJ L 343, 29 December 2015) — definitions referred to in relation to preferential origin.
• Legislative Decree No 141 of 26 September 2024 — national provisions complementing the Union Customs Code and revision of the penalty regime (Official Gazette No 232 of 3 October 2024), in force since 4 October 2024.
• Commission Implementing Regulation (EU) 2017/989 of 8 June 2017 (OJ L 149, 13 June 2017) — replacement of Article 62 of Implementing Regulation (EU) 2015/2447.
• Regional Convention on pan-Euro-Mediterranean preferential rules of origin, Appendix I (OJ L 54, 26 February 2013); revised rules under Decision No 1/2023 of the Joint Committee (OJ L, 2024/390, 19 February 2024) — Articles 18 and 21.