Rules of origin are the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports. The rules of origin are mainly used under the following trade regimes:
- Customs Union (such as the EAC Customs Union)
- Free Trade Area (Such as the Africa Continental Free Trade Area (AfCFTA), EAC-EU Economic Partnership Agreement (EPA), Kenya-UK EPA
- Preferential Trade Area (Such as USA AGOA).
In each of these trade arrangements, the main objective is to encourage duty free trade between the countries that form a Customs Union or an FTA or to encourage duty free exports from countries that are eligible to export to country granting preferential tariff. The rules of origin are used define the origin of the goods for purposes of such goods being granted duty free access into the Customs Union, an FTA or the country granting preferential tariff.
The rules of origin criteria that are used to determine origin of goods are as follows:
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Rule |
Meaning/Interpretation |
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Wholly produced goods |
Products are regarded as wholly produced in a Partner State if only that Partner State has been involved in their production. The rules of origin always give a list of products that would qualify as wholly produced (refer the example below drawn from AfCFTA Rules of Origin) |
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Sufficient working or processing |
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Working or processing of certain wholly produced materials |
A product is considered as originating if all materials used in manufacture or processing of the finished product is wholly obtained from the country where the product is being produced |
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Working or processing where the value of all the non-originating materials used in manufacture does not exceed a certain maximum threshold |
A finished product that is manufactured through use of non-originating (i.e., imported raw material) qualifies for being exported to an FTA country on duty free basis, provided the value of the non-originating material does not exceed a certain maximum threshold of the ex-works price of the finished product (e.g., 70%) |
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Working or processing where the 4-‐digit Harmonized System heading or 6-‐digit Harmonized System sub-‐heading of the manufactured products becomes different from the 4-‐digit Harmonized System heading or 6-‐digit sub-‐heading respectively of the materials used |
Finished products that are manufactured from material that belong to a 4- or 6-digit HS classification different from the HS classification of the finished products qualify for being exported to an FTA country on duty free basis. |
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Specific working or processing operation |
This rule recognizes specific working or processing operations that are specified against a specific product as sufficient to confer a finished product origin status for purposes of being exported to any FTA country on duty free basis.
Example: Product: Sacks and bags of a kind used for packaging goods (HS 63.05) Specific process: Weaving or knitting and making-‐up (including cutting) Explanation: What this means is that sacks and bags of a kind used for packing of goods, classified as HS63.05 qualify for being exported to the EAC on duty free basis, provided they are made through weaving or knitting and making up (including cutting). In such a situation the origin of the material used for weaving or knitting does not matter. It could be from within the country where production takes place or imported from any country in the world. |
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Value added |
The value added resulting from the process of production accounts for a specified percentage (say 35%) of the ex-factory cost of the goods. This rule is applied in COMESA as well in USA AGOA |
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Cumulation of origin |
Cumulation is a flexibility in the rules of origin which allows a Partner State in a Customs Union or an FTA to use material from other countries, that the Rules of Origin consider as countries eligible for cumulation, for production of final goods for exports into the Customs Union or FTA on a duty-free basis. Examples of countries allowed for cumulations: -
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- Preferential Certificate of Origin - The origin of goods has a direct bearing on the rate of customs duty to be charged. The exporter is responsible for applying for preferential certification of origin with Kenya Revenue Authority (KRA), Rules of Origin Section and sharing this certification with importers who are members of the same customs union, regional economic community or free trade agreement (FTA). See examples below:
The COMESA certificate of origin is required for goods obtained, manufactured, produced or processed in Kenya, and are to be exported within the Common Market for Eastern and Southern Africa (COMESA) region. The certificate is issued per consignment.
The African Growth & Opportunity Act (AGOA) certificate of origin is required for goods obtained, manufactured, produced or processed in Kenya, and are to be exported to a country within the AGOA trade Act. The certificate is issued per consignment.
The Generalised System of Preferences (GSP) certificate of origin is required for goods obtained, manufactured, produced or processed in Kenya, and are to be exported to a member state. The certificate is issued per consignment.
The EAC certificate of origin is required for goods obtained, manufactured, produced or processed in Kenya, and are to be exported within the East African Community (EAC) region. The certificate is issued per consignment.
The European Union (EU) certificate of origin is required for goods obtained, manufactured, produced or processed in Kenya, and are to be exported within the European community. The certificate is issued per consignment.
- Non-preferential Certificate of origin/Ordinary certificate of Origin (COO) - This is an export document issued by the Kenya National Chamber of Commerce and Industry (KNCCI) to all exporters of goods originating from Kenya confirming the country of origin of goods being exported.