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Summary:

While the provisions of the individual arrangements may vary in certain details, most preferential origin arrangements have a number of common provisions

Common provisions

While the objective of all preferential origin arrangements is the same, the provisions of those arrangements may vary in certain details. In order to have a complete picture, you therefore need to look both at the common provisions given in this section and at the specific provisions of each individual arrangement i.e. any instances where the rules of the particular arrangement differ from the common provisions, or where that information needs to be complemented.

The principal common provisions are the following:

  • Originating status
    Products must have originating status to get preferential treatment.
  • Cumulation
    Cumulation is a system that allows contracting parties to use originating products from each other.
  • Minimal operations
    They are either operations regarded as insufficient to confer origin or the minimal level of processing that has to be carried out in cumulation.
  • General tolerance rule
    This permits manufacturers to use non-originating materials up to a specific percentage.
  • No-drawback rule
    The term means the prohibition of refunding duties paid on imported goods.
  • Principle of territoriality
    The principle of territoriality means that the working or processing must be carried out in the territories of the parties.
  • Direct transport rule
    The purpose of direct transport is to ensure that the goods arriving in the country of import are the same as those which left the country of export.
  • Proof of origin
    When goods are claimed to have a particular preferential origin, that claim must be certified by a proof of that origin.
  • Approved exporter
    An approved exporter is an exporter who under certain conditions is allowed to make out proofs of origin.

Originating status

Products have originating status if they are either "wholly obtained" or sufficiently worked or processed. This applies to all preferential origin arrangements.

Wholly obtained

Wholly obtained applies mainly to natural products from the beneficiary country and to goods made entirely from them. This means that a product cannot contain imported non-originating elements.

Sufficiently worked or processed

Non-originating materials or components must be sufficiently worked in order to obtain origin. Sufficiently worked means sufficiently worked according to the specifications of the list rules.

Cumulation

Cumulation is the term used to describe a system that allows originating products of country A to be further processed or added to products originating in country B, just as if they had originated in country B. The resulting product would have the origin of country B. It can only be applied between countries operating with identical origin rules.

An important point to remember is that in the case of cumulation the working or processing carried out in each partner country on originating products does not have to be 'sufficient working or processing' as set out in the list rules.

There are four types of cumulation: bilateral, diagonal, regional and full.

Bilateral cumulation

Bilateral cumulation operates between two countries where a free trade agreement or autonomous arrangement contains a provision allowing them to cumulate origin. This is the basic type of cumulation and is common to all origin arrangements. Only originating products or materials can benefit from it.

Diagonal cumulation

Diagonal cumulation operates between more than two countries provided they have Free Trade Agreements containing identical origin rules and provision for cumulation between them. As with bilateral cumulation, only originating products or materials can benefit from diagonal cumulation.

Although more than two countries can be involved in the manufacture of a product it will have the origin of the country where the last working or processing operation took place, provided that it was more than a minimal operation. Diagonal cumulation operates between the Community and the countries of the so-called "pan-Euro-Mediterranean cumulation zone".

Regional cumulation

Regional cumulation is a form of diagonal cumulation, which only exists under the Generalised System of Preferences (GSP) and operates between members of a regional group of beneficiary countries (e.g. ASEAN).

Full cumulation

Full cumulation allows the parties to an agreement to carry out working or processing on non-originating products in the area formed by them. Full cumulation means that all operations carried out in the participating countries are taken into account. While other forms of cumulation require that the goods be originating before being exported from one party to another for further working or processing, this is not the case with full cumulation. Full cumulation simply demands that all the working or processing in the list rules must be carried out on non-originating materials in order for the final product to obtain origin.

Full cumulation is in operation between the Community and e.g. the countries of the EEA, Maghreb , OCT or ACP.

Minimal operations

Minimal operations are operations that when carried out either individually or in combination are regarded as being of such minor importance that they never confer originating status. All preferential origin rules contain an article, which defines the working or processing which is to be regarded as insufficient to confer origin. (e.g. Article 7 of Protocol No 4 of the Europe (Association) Agreement with Bulgaria ).

Working or processing carried out on a product that satisfies the list rule shall not result in the product obtaining origin if that working or processing is mentioned as a minimal operation set out in the relevant article.

On the other hand , when allocating origin within a cumulation system, any working or processing carried out must exceed the above-mentioned minimal operations but does not necessarily need to satisfy the relevant list rule of the arrangement.

General tolerance rule

The general tolerance rule permits manufacturers to use non-originating materials up to a specific percentage value of the ex-works price. However, should the specific working or processing rule already allow the use of non-originating materials the tolerance cannot be used to exceed the percentage amount specified in the list rule. The maximum will always be that allowed by the specific rule. The percentage of the tolerance allowed varies from one preferential regime to another.

The general tolerance rule does not apply to textile goods of Chapters 50 to 63 (inclusive). Specific tolerance rules for textiles are included in the introductory notes to the list rules.

"No drawback" rule

The term drawback means refunding duties paid on imported goods and the "no drawback" provision where provided for prohibits this. This rule ensures that duties applicable to third country materials are paid. The objective of this rule is to prevent unfair competition in national markets.

However, some agreements allow for partial drawback for a limited period. The reason for this derogation is because the customs duties applicable to non-originating materials in some countries are considerable higher than those applicable in the Community and by allowing a refund to a certain level the imbalance, which could be seen as favouring Community producers, is reduced.

Principle of territoriality

The principle of territoriality means that the working or processing must be carried out in the territories of the parties.

Due to modern manufacturing processes it is not always possible to fulfil this requirement. It may be necessary to do some processing in a country not party to the preferential arrangement. Some arrangements allow such external working or processing provided it conforms to certain specified conditions.

Failure to comply with the specified conditions will result in the returning product being treated as non-originating.

In most cases the derogation from the principle of territoriality does not apply to textile products of Chapters 50 to 63 (inclusive) and nor can a product benefit from both this derogation and the general tolerance rule at the same time.

When determining the origin of the final product, working or processing performed outside the territory of the contracting parties is not to be taken into account. However, when calculating the value added, the total added value of the working or processing done outside the territory of the contracting parties must be taken together with the value of the non-originating materials incorporated in the territory of the other contracting party.

The combined values (the value added outside the territory and the value of the non-originating materials) should not exceed the percentages stated in the relevant list rule.

Direct transport rule

Preferential arrangements contain rules concerning the transportation of preferential goods from one party's territory to another. The purpose of direct transport is to ensure that the goods arriving in the country of import are the same as those which left the country of export. However, if for any reason the goods pass through or stop-over in, the territory of a third country provided that they stay under customs supervision, the conditions of direct transport are considered to have been fulfilled.

Proof of compliance with the direct transport rule may be given by a single transport document covering the passage of the goods through the country of transit or, for example, a "non-manipulation certificate" issued by the authorities of that country.

Proof of origin

When goods are claimed to have a particular preferential origin, the customs authorities of the importing country must be satisfied that the claim is correct and thus a proof of that origin is required. The different preferential arrangements require specific proofs of origin relevant to specific arrangements. For example, the preferential arrangements the Community has with certain countries require a movement certificate EUR.1 or EUR-MED whereas under GSP a certificate of origin Form A is required. Traders are advised to check which particular proof of origin is required to substantiate their claims to preferential origin. Declaration on certain commercial documents (an invoice, a delivery note or any other commercial document which describes the products concerned in sufficient detail to enable them to be identified - the so-called "invoice declaration") can replace the specific proof of origin. This is subject to prior authorisation by the customs authorities granted to approved exporters. Additionally, most arrangements allow the use of "invoice declarations" made out by the exporter for any consignment under a certain value.

In limited circumstances proofs of origin can be issued retrospectively and in cases of loss or destruction the exporter can apply for a duplicate.

It is pointed out that both certificate of origin Form A and movement certificate EUR.1 or EUR-MED must comply with a number of specific technical requirements which are laid down in each arrangement. One of these requirements is that they must have a printed green guilloche pattern background. Here is an enlarged illustration of what is meant by a "green guilloche-pattern background".

Period of validity of proofs of origin

Documentary proofs of origin have a limited life span according to each arrangement. The period starts running as from the day the proof of origin is issued. However, there can be exceptional circumstances in which presentation of the proof of origin may be accepted after that time period. The Customs Code Committee has also agreed guidelines concerning the belated presentation of proofs for goods placed under a suspensive procedure PDF document . Finally, exporters are obliged to retain copies of all proofs of origin and documents related to them for a period of three years from the date of issue.

Exemptions from the requirement to present proof of origin

There are exemptions from the requirement to present a proof of origin, always provided that the goods are not imported by way of trade. Small packages sent from one private person to another up to a specified maximum value are permitted entry without proof of origin. Traveller's personal luggage also benefits from a similar concession up to a specified maximum value.

Administrative co-operation

Administrative cooperation is common to all origin arrangements. It is the framework for cooperation between the competent authorities of partner countries enabling them to check that the rules are being properly applied. On the one hand, partners must provide each other with impressions of the stamps they use to authenticate certificates of origin. On the other hand, it allows customs administrations to make post-import checks on the authenticity and the accuracy of proofs of origin.

Operators should note that if it transpires that the goods are or were not actually entitled to the preference, preferential treatment would be refused and any duty not paid may be recovered. It is therefore in importers' own interests to do what they can before import to check all the information concerning the proof of origin and the goods covered by it to find out if they are entitled to preference.

Approved exporter

An approved exporter is an exporter who has met certain conditions imposed by the customs authorities and who is allowed to make out invoice declarations. Just as the customs authorities can grant that status, they can also withdraw it if the exporter misuses or abuses the authorisation. The procedures attached to granting "approved exporter" status depend on national provisions.

Under certain conditions, a 'single authorisation' may be granted to an approved exporter, who is established in one Member State, where he keeps his records containing the evidence of origin, but whose products are exported from other Member States (see Article 8 of Council Regulation (EC) N 1207/2001 of 11 June 2001).