Rules of origin under the India–UK CETA, explained plainly

Under the India–UK CETA, zero duty is only for goods that count as "originating" in India or the UK. "Made in India" on the carton is not the test. The test is set out in Chapter 3 of the agreement, and for most manufactured goods it comes down to one line in Annex 3A that applies to your product's code.

This note walks through that test in the agreement's own words, and points to the official text wherever the answer depends on your product.

Three ways a product can qualify

Article 3.2 says a good is originating if it is:

"(a) wholly obtained or produced entirely in the territory of one or both of the Parties ... (b) produced entirely in the territory of one or both of the Parties, exclusively from originating materials; or (c) produced entirely in the territory of one or both of the Parties using non-originating materials, provided the good satisfies all applicable requirements of Annex 3A".

UK–India CETA, Chapter 3, Article 3.2

The first route is for things grown, born, caught or mined here. Article 3.3 lists them: plants and fruit grown and harvested in India, live animals born and raised here, minerals extracted here, fish caught within India's territorial sea, and goods made only from those.

The second route covers products whose every material is itself originating. A garment sewn from Indian fabric woven from Indian yarn would be one example, but only if you can show the origin of each material, not just assume it.

The third route is where most manufactured exports land. You used some imported or unknown-origin inputs, and the question is whether your production changed them enough. That is what the product-specific rules decide.

All three routes end with the same condition: the good must also satisfy "all other applicable requirements of this Chapter". That brings in the list of operations that never count and the shipping rules, both covered below.

Finding the rule for your product

Annex 3A is a long table. Column 1 is an HS chapter, heading or subheading, Column 2 describes the goods, and Column 3 states the rule. When a code is preceded by "ex", the rule covers only part of it, as described in Column 2. Some sections of the table open with section notes, which the annex says "may impose further conditions on, or provide an alternative" rule, so read those as well as your line.

The rules are written in short codes, which the annex defines:

• WO: wholly obtained, as in Article 3.3.
• CC: every non-originating material has changed classification at the two-digit (chapter) level.
• CTH: the same, at the four-digit (heading) level.
• CTSH: the same, at the six-digit (subheading) level.
• QVC: a qualifying value content of not less than the percentage given in Column 3, by either the build-up or the build-down method.

Two more notes in the annex change how you read a line. If the rule gives alternatives, meeting any one of them is enough. If it combines several requirements, the product must meet all of them. And the annex is based on the 2022 edition of the Harmonized System, so if the code for your product has changed since then, look it up in the 2022 version too.

Change in tariff classification

A CC, CTH or CTSH rule asks a simple question of each non-originating material: after your processing, is the finished product classified under a different chapter, heading or subheading from that material? The annex is clear that this "applies only to non-originating materials". Originating inputs, including ones bought from Indian suppliers who can show they are originating, are not tested at all.

Some rules exclude certain codes. If a chapter, heading or subheading is excluded, non-originating materials from it "may not be used to meet the change in tariff classification rule", even though they do change classification. Those exclusions are written into the rule itself, so check the full wording of your line, not just the leading code.

Value content: build-down and build-up

A QVC rule measures how much of the product's value is originating. Article 3.5 gives the two formulas:

• Build-down: (value of the good − value of non-originating materials) ÷ value of the good × 100.
• Build-up: value of originating materials ÷ value of the good × 100.

Article 3.4 lets the value of the good be either the ex-works price or the FOB value, and defines each. Ex-works excludes costs after the good leaves the place of last production, such as transport and insurance. FOB is the price paid to the exporter when the good is loaded at the named port. Article 3.5 also sets how materials are valued: for an imported material, the price paid at the time of importation, including transport to the port or place of importation.

Where Column 3 says "Standard QVC", the annex defines it precisely. The good must reach a qualifying value content of not less than:

"(i) 40 percent of the ex-works price under the build-down method; (ii) 45 percent of the free-on-board value under the build-down method; or (iii) 35 percent of either the ex-works price or free-on-board value under the build-up method".

UK–India CETA, Annex 3A, headnote 9(f)

Other lines state their own percentage. Use the figure on your line, not a figure from another product.

One detail catches people out. The agreement defines non-originating materials as including "those of unprovable origin". A material you bought locally but cannot show to be originating counts against you in both kinds of rule. Written information from the supplier, which the agreement's own declaration form and record-keeping article both mention, is what lets you show that a local material is originating.

Tolerance: a small allowance

Article 3.9 lets a product pass a change-in-classification or wholly-obtained requirement it would otherwise narrowly fail, if the non-originating materials that cause the failure are small. The limits depend on the HS chapter of the finished good:

• Chapters 1 to 3, 5, 6, 10 and 14: those materials do not exceed 7.5% of the value of the good, or 7.5% of its net weight.
• Chapters 4, 7 to 9, 11 to 13 and 15 to 24: 12.5% of the value, or 12.5% of the net weight.
• Chapters 25 to 98: 12.5% of the value of the good.

Tolerance does not help with a value-content rule. Article 3.9 adds that if the good is also under a QVC requirement, the value of those materials still counts as non-originating in the QVC calculation.

Operations that never make a product originating

Article 3.7 lists operations that do not confer origin, "notwithstanding any provisions in this Chapter". The list includes, among others:

• changes of packaging, and breaking up and assembly of packages;
• for textiles, attaching accessory articles such as straps, bands, beads, cords, rings and eyelets, and ironing or pressing;
• affixing or printing marks, labels and logos;
• simple painting and polishing, sharpening, simple grinding or simple cutting;
• simple mixing, and simple assembly of parts to make a complete article;
• simple testing, calibration, inspection or certification.

"Simple" has a definition: an activity that "needs neither special skills nor machines, apparatus or equipment especially produced or installed to carry out the activity". A combination of these operations does not count either. If all that happens in India is repacking and labelling an imported product, it will not qualify, whatever the classification rule would otherwise say.

Cumulation, intermediate materials and other details

Under Article 3.8, an originating material from the UK used in your production "is considered to originate" in India. A UK-origin input therefore counts on your side of the calculation, provided it is itself originating under the agreement.

Article 3.6 deals with materials you make yourself or buy from someone who processed them. If a non-originating material is processed enough to become originating, it is treated as originating when you work out the origin of the final product. The Annex 3B form calls this the "roll up/absorption principle".

Articles 3.10 to 3.13 cover interchangeable stock, accessories sent with a good, packaging, and indirect materials such as fuel and tools. Check them if any apply to your product.

Getting the goods to the UK

Origin can be lost in transit. Article 3.14 says a good shipped through a third country keeps its originating status only if it stays under customs control there and is not released into free circulation, and does not undergo further production. Only listed operations such as unloading, reloading, splitting up loads, storing, labelling and marking are allowed on the way. If your goods tranship through a hub, your buyer may need documents showing this.

Putting it together for one product

For each product, keep a short file: the code and exact Annex 3A rule, every material with its code, value, supplier and origin evidence, the calculation if the rule uses value, and the processing done in India. The paperwork guide covers what happens to that file next.

This article is general information about the India–UK CETA rules of origin as published in the agreement text, current at the date above. It is not legal advice. The rule that applies depends on your product's classification and the exact wording of Annex 3A; check the official text, and take professional advice before making a claim.