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    Continuing international trade disputes and the emergence of trade barriers affect all companies - including Daimler. However, the use of some effective instruments, such as free trade agreements, provide a remedy to these increasing trade challenges. Daimler and its suppliers can benefit from import and export tariff reductions or avoid additional duties. An essential requirement is the regular issuance of the preferential and the non-preferential origin for each delivered good.

    What is Non-Preferential Origin and how does it work? 

    The non-preferential origin, i.e. the origin in terms of commercial law, is often used as a trade policy and protectionist measure. For many receiving countries, the proof of commercial origin is a mandatory requirement for importation. For example, the non-preferential origin determines whether the product to be imported is subject to tariff quotas, compensatory duties or anti-dumping measures (additional duties). The non-preferential origin status of the good can be considered as the commercial "nationality" of the good since it is determined by the country in which it has undergone complete extraction or manufacture. When several countries participate in the manufacturing process, the product acquires the non-preferential origin status of the country in which the last substantial and economically necessary treatment and processing took place.

    What is Preferential Origin and how does it work?

    Unlike the non-preferential origin, the preferential origin does not serve the avoidance of trade policy measures, but the granting of preferential tariffs on the basis of so-called free trade agreements (FTAs). The EU has currently concluded free trade agreements with 46 states and groups of states (including Switzerland, Japan, Canada, South Korea).

    The preferential origin is based on the rules of the respective free trade agreements, which contain the product-specific rules of origin and processing and determine the local content (LC) share to qualify for preferential origin. Local content refers to the share of domestic (here EU) added value in the final product. Upon reaching the prescribed rules, a customs-reduced or duty-free import of the goods may take place. Upon missing the prescribed rules, the regular third country duty rates will incur. For vehicles, third country duty rates reach up to 25%. As a result, the goods lose competitiveness and sales opportunities at the very same time.

    How can I support as a Supplier?

    To ensure that opportunities for sales and competition are not left behind, Daimler and its suppliers need to work side by side. The regular issuance of the non-preferential origin leads to the avoidance/reduction of duties. The use of the preferential agreements and thus the use of the preferential origin requires the complete proof of the fulfillment of the rules for each delivered good. Within the EU, long-term supplier declarations (LTSD) are used as a proof of origin. With a LTSD, the supplier certifies Daimler a full or partial preferential origin of its shipment. The wording of the LTSD is prescribed by the free trade agreement. The issuance of a compliant LTSD is important for Daimler and all companies involved in the production of an asset in order to jointly make use of competitive advantages.

    Anna Marcinowski
    Senior Manager Local Content Compliance & Projects

    Erwin Diringer
    Local Content Compliance & Projects

    Importance of Preferential and the Non-Preferential Origin to Global Trade

    (0,47 MB) - 7.4.2019

    Preferential Agreement of the EU

    (0,17 MB) - 7.4.2019