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Introduction

Summary:

Non-preferential rules are used for all kinds of commercial policy measures, like, for instance, anti-dumping duties and countervailing duties, trade embargoes, safeguard and retaliation measures, quantitative restrictions, but also for some tariff quotas, for trade statistics, for public tenders, for origin marking, and so on. In addition, the EU's export refunds in the framework of the Common Agricultural Policy are often based on non-preferential origin.

A) General aspects of non-preferential origin

Non-preferential rules are used for all kinds of commercial policy measures, like, for instance, anti-dumping duties and countervailing duties, trade embargoes, safeguard and retaliation measures, quantitative restrictions, but also for some tariff quotas, for trade statistics, for public tenders, for origin marking, and so on. In addition, the EU's export refunds in the framework of the Common Agricultural Policy are often based on non-preferential origin.

There are two basic concepts to determine the origin of goods namely 'wholly obtained' products and products having undergone a "last substantial transformation".

If only one country is involved the "wholly obtained" concept will be applied. In practice this will be restricted to mostly products obtained in their natural state and products derived from wholly obtained products.

If two or more countries are involved in the production of goods, the concept of "last, substantial transformation" determines the origin of the goods.

In general the criterion of last substantial transformation is expressed in three ways:

  • by a rule requiring a change of tariff (sub) heading in the HS nomenclature;
  • by a list of manufacturing or processing operations that do or do not confer on the goods the origin of the country in which these operations were carried out;
  • by a value added rule, where the increase of value due to assembly operations and incorporation of originating materials represents a specified level of the ex-works price of the product.

B) Legal framework for non-preferential origin

The legal basis for the non-preferential rules of origin is Articles 22 to 26 of Council Regulation No. 2913/92pdf (CC), Articles 35-65 and Annexes 9 to 11 of Commission Regulation No. 2454/93pdf (IPC).

Article 23 (2) CC contains the definition of "goods wholly obtained in a country".

Article 24 CC determines the origin of goods whose production involves more than one country.

The definition there is of a general nature but specific criteria are mentioned for determining the origin of textile products (Articles 36 to 38, Annexes 9 and 10 IPC) and of a limited number of other products (Annexes 9 and 11 IPC).

Article 25 CC contains an anti- circumvention provision. This provision applies in cases where the working or processing on a product is only carried out in order to circumvent provisions applicable to these products from certain countries.

Article 26 CC provides for the possibility in customs legislation or specific legislation to require a proof of origin.

Articles 35-40 IPC lay down specific provisions for applying the rule of last substantial transformation for textiles and a limited number of other products.

Articles 41-46 IPC contain specific provisions on origin relating to accessories, spare parts and tools that form part of the standard equipment of machines, apparatus or vehicles.

Articles 47-54 IPC contain provisions relating to the conditions that certificates of origin have to fulfil.

Articles 55-65 IPC contain specific provisions relating to certificates of origin for certain agricultural products that are subject to special import arrangements and provisions concerning administrative co-operation for these certificates.

C) Determination of the origin of a product

1) Products wholly obtained in a single country :

Goods wholly obtained in a single country in the sense of Article 23 of Council Regulation No 2913/92pdf (CC) are originating in this country.

2) Other products :

When two or more countries are involved in the production of a good, the origin of the good must be determined in accordance with Article 24 of Council Regulation No 2913/92pdf (CC).

Articles 24 CC states: "Goods whose production involved more than one country shall be deemed to originate in the country where they underwent their last, substantial, economically justified processing or working in an undertaking equipped for that purpose and resulting in the manufacture of a new product or representing an important stage of manufacture".

2.1) Products covered by specific provisions in IP :

It is not always easy to say when these criteria have been met. Thus in some cases for particular goods rules have been laid down in order to determine certain operations carried out on their own that do, or do not, confer non-preferential origin on a product. These rules have been decided upon over the years to clear up particular cases where there has been a need for additional clarity. For some products, other than textiles, the rules are found in Annexes 9 and 11 of Commission Regulation No 2454/93pdf (IPC). Annex 9 contains a description how to apply the rules of Annexes 10 and 11. Annex 11 of IPC contains rules in the form of specific working or processing, which must be fulfilled for the products mentioned in that annex.

For textiles and textile articles of Section XI of the Combined Nomenclature (CN) the general rule is that the working or processing carried out on the non-originating materials must result in a classification under another heading of the CN for the products obtained. This rule is known as "Change of Tariff Heading" (CTH) (Art. 37 IPC).

However, for certain textile products Annex 10 of IPC gives specific processes that must be fulfilled in order to obtain the non-preferential origin. This annex must be read in combination with Annex 9 of IPC describing how to apply the rules of Annex 10.

Furthermore, certain working or processes never confer non-preferential origin on a textile product obtained, even when the CTH rule is fulfilled. These are known as "minimal operations" (Art.38 IPC).

The list rules applicable to products covered by specific provisions in the IP are represented in green colour in the table of "list rules". List rules which are not in green colour in the table are subject to point 2.2) hereafter.

2.2) Products not covered by a specific rule in the IP :

It has been commonly agreed that the origin of a product not covered by a specific rule in the IP should be determined in accordance with the position taken by the EC in the negotiations under the Harmonisation Work Programme which defines the same concept of "last substantial transformation" (See Harmonisation of rules of origin), the legal basis remaining Article 24 of the CC.

In this respect, the definitions and the rules of the "introductory notes to the table of list rules" must apply. The "primary rules" applicable to these products are laid down in the table of "list rules". When a list rule is in green colour in the table, see point 2.1) here above.

2.3) Product covered by a specific rule, but where the application of the said rule has not allowed to determine its origin :

When the normal application of a list rule as indicated in points 2.1) or 2.2) does not allow to determine the country of origin, the so called "residual rules" in the "introductory notes to the table of list rules" must apply.