Penalties for Errors in UK Proof of Origin: Key Change for Exporters

Penalties for errors in UK Proof of Origin have been introduced in March 2024. These new customs regulations are adding an important update to the UK customs code for exporters.

Typically, the importer is responsible for ensuring the accuracy of the Proof of Origin. If the Proof of Origin is incorrect, the importer will be subject to the applicable import duties and possibly face penalties. This new UK regulation changes this principle by holding exporters accountable for their statements and establishing notification requirements and penalties.

Although the Regulations came into force in March 2024, many exporters have yet to fully integrate these requirements into their internal processes. Some are still unaware of the changes altogether. This article reminds exporters of their obligations with a quick overview of the reasons behind these new requirements, guidance on implementing them effectively, and a look at the trade agreements to which they apply.

What is the purpose of this new Proof of Origin requirement?

The UK introduced these regulations to fulfil obligations set out in its preferential trade agreements. These new Proof of Origin requirements are part of the UK’s new trade framework.

Overview of the New Customs Regulations

Regulation 3 requires exporters to inform importers of any material errors in the proof of origin for goods exported from the UK. Under this regulation, exporters are therefore now legally obligated to notify importers if they identify material errors in origin documentation. This measure aims to prevent importers from mistakenly receiving preferential duty treatment based on incorrect origin information.

Defining “Material Error” and Exporters’ Obligations

The definition of a “material error” is: “any error or deficiency in the origin documentation or the underlying information that could compromise the validity or accuracy of that document within the context of the trade arrangement.”

Trade Agreements Impacted by the New Regulations

The regulations only apply to specific trade agreements under which the UK grants preferential duty terms:

• UK-Canada Trade Continuity Agreement
• UK-Turkey Free Trade Agreement
• UK-Iceland, Liechtenstein, and Norway Free Trade Agreement
• UK-New Zealand Free Trade Agreement
• Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

What should the notifications contain?

Notifications required by regulation 4 must include:

• The name and EORI number of the person giving the notification and any person on whose behalf the notification is given.
• Details that identify each material error in the Proof of Origin that has been provided, including a statement confirming, for each material error as follows:
  • the date the Proof of Origin was originally provided to the importer and the identity of the importer;
  • the correct information;
  • the goods whose treatment under the relevant preferential trade arrangement is, or could be, affected by the material error;
  • how this material error could affect the accuracy or validity of the evidence of origin for the purposes of the relevant preferential trade arrangement;
  • the name of the preferential trade arrangement in respect of which this evidence of origin was provided to the evidence recipient.

Exporters must provide the notification in writing and date it. They should send it by post or email to the importers as soon as they become aware of or have reason to believe there is a material error.

What is the penalty?

Non-compliance with these obligations carries financial consequences. Under Regulation 7, exporters who fail to notify importers of material errors may face a penalty of up to £1,000.

Exceptions to liability to penalty

Regulation 8 states that an exporter is not liable for a penalty if they have a reasonable excuse for failing to comply with the obligation to notify. However, there isn’t any clarification of what types of circumstances are considered reasonable.

It does however, state that neither of the following is a reasonable excuse:

• Reliance was placed by the person on another person to perform any task;
• The failure is attributable wholly or partly to the conduct of another person on whom reliance was so placed.

In these circumstances, even if an exporter is acting in good faith—such as when they rely on a supplier to provide information about proof of preferential origin—they may still face a fine.

Alegrant Insights

• You should update your customs compliance processes. In particular, review and update your Origin process and procedures, and establish a clear protocol to notify importers if you identify any errors.
• You should document the classification process, including technical product information and specific details of the General Rules of Interpretation (GRI) used, and keep it on file.
• Additionally, you must record the decision-making process for determining Rules of Origin, along with any related calculations, manufacturing details, supplier documents, and origin analyses.
• If you’re looking for assistance with determining, maintaining, or managing your origin process, we’re here to help! Reach out to us so we can discuss your challenges and explore effective solutions together.
  

References

• Customs (Preferential Trade Arrangements: Error in Evidence of Origin) Regulations 2024