RULES OF ORIGIN IN THE FOREIGN TRADE  WITH THE EU and within CEFTA by Helmuth Berndt 03/2008
 
/ Pauza /
Reasons for rules of Origin 1.International division of labour =  - “ global outsourcing” by  - -  global sourcing of mate...
Positive Fallout of Rules  of  Origin <ul><li>Financial advantage : </li></ul><ul><li>Preferential tariffs in the EU/donor...
Who should know  about Rules of origin? <ul><li>The exporter </li></ul><ul><li>- origin is part of any foreign trade  </li...
<ul><ul><li>“ Seal of quality” for originating goods </li></ul></ul><ul><ul><ul><li>- Upgrading of the Serbian </li></ul><...
Intensity of EU-Preferences Complete integration: European Union Customs Union: With Turkey EU-EFTA Agreements: Norway, Ic...
System of Origin Preferential  definition Non-preferential definition Commercial  definition EU-system System of Other cou...
2% 3% 10% 7% 7% 7% 7% Japan Free Trade Association   Customs Union 4% Japan
Principles of Management   <ul><li>- Contractual accordance </li></ul><ul><li>- Documentation </li></ul><ul><li>- Exact bo...
What do you need for the  definition of the origin ? <ul><li>HS-heading of imported parts </li></ul><ul><li>HS-heading of ...
What should be the criterion for   the Origin   of goods?
Wholly  Obtainment or Sufficient Processing
What is “Wholly  Obtained” ??
Tomatoes 0702 :Processing Heading 2103 Tomatoes1 :EXPORT “ WHOLLY OBTAINED” ORIGIN BECAUSE EXPORT: ORIGIN, BECAUSE RAW MAT...
<ul><li>Mineral products </li></ul><ul><li>Extracted from the </li></ul><ul><li>Soil </li></ul><ul><li>= </li></ul><ul><ul...
4403 4407 9504 IS IT WHOLLY OBTAINED ? 4403 WHOLLY OBTAINMENT
Pencil Pos.: 9609 Wood in the rough Pos. 4403 Wood sliced, chopped lengthwise  Width: 10 cm, Length: 150 cm Pos.: 4407 Woo...
Example for Obligatory Wholly Obtainment <ul><li>Heading 1902, pasta </li></ul><ul><li>If the pasta contains 20 or less  %...
What is A  Sufficient  Processing?
Basic principles : <ul><ul><li>Change of the HS-heading </li></ul></ul><ul><ul><li>Percentage of used materials </li></ul>...
List of Processing: <ul><li>= </li></ul><ul><li>Annex to the  </li></ul><ul><li>Origin Protocol </li></ul><ul><li>Column 3...
What is  The HS???
The Structure of the HS 01 04 20 90 00 10 Chapter HS Heading HS Subheading HS Subheading National Statistic (Combined Nome...
The HS is divided into 21 SECTIONS 97 CHAPTERS 1241 HEADINGS 5016 SUBHEADINGS SECTION/CHAPTER NOTES SUBHEADING NOTES Gener...
Harmonized System <ul><ul><li>Legal Texts: </li></ul></ul><ul><ul><li>Section Notes </li></ul></ul><ul><ul><li>Chapter Not...
Not Legally Binding: <ul><li>Title of sections </li></ul><ul><li>Title of chapters </li></ul><ul><li>Explanatory  notes </...
HS-production Principle   (Example Textiles)   <ul><li>Raw materials </li></ul><ul><ul><li>Fiber, not prepared </li></ul><...
What Means <ul><li>“ Ex chapter 20 </li></ul><ul><li>And </li></ul><ul><li>“ Ex 2008” </li></ul><ul><li>??? </li></ul><ul>...
Example for change of headings:  Tomatoes IMPORT FROM EGYPT NON ORGINATING PROCESSING :EXPORT Tomatoes 2 Heading 2103 Head...
<ul><ul><li>Example for restriction of   used materials: </li></ul></ul><ul><ul><li>Heading 3822: &quot;Diagnostics…..“ </...
The percentage relates to the &quot; Ex-works Price &quot; of the finished goods.
<ul><li>The value of the used materials is their  customs value. </li></ul><ul><li>So:  Check the Customs value    careful...
Example  for change of heading and restriction for the used materials: Chapter 18 Cocoa and cocoa preparations Semi colon ...
Combined criteria - Medicine   <ul><li>HS headings 3003, 3004: </li></ul><ul><li>1. Tariff change of  all  used  materials...
<ul><li>40 % rule for imported parts </li></ul><ul><li>Restriction of the value for special  parts to the value of the ori...
Example for <ul><li>Exclusion of a heading,  </li></ul><ul><li>exclusion specific imported materials </li></ul><ul><li>and...
Example for minimum- input criteria: <ul><li>Heading ex 2008  ..Nuts.. </li></ul><ul><li>“ Manufacture, in which the value...
Other example for minimum- input of Serbian originating materials: <ul><li>HS-heading 2402,  </li></ul><ul><li>…  Cigarett...
Heading 2309,  preparations for animal  feeding <ul><li>All cereals, sugar, meat, milk must be originating products of  </...
Example for necessary  processing procedures: <ul><li>Headings: </li></ul><ul><li>ex 4415 </li></ul><ul><li>4816 </li></ul...
Example for Necessary Production Range:   1. Glass Mirrors of Heading 7009 : &quot;Manufacture from materials of heading  ...
<ul><ul><li>2. Clothes  and garments of chapter 61 and 62: </li></ul></ul><ul><ul><li>&quot;Manufacture from  yarn &quot; ...
<ul><ul><ul><li>&quot; Manufacture from  animals of chapter 1” </li></ul></ul></ul><ul><ul><li>3.  Preparations of meat </...
Rules for cotton products: <ul><li>1.Natural cotton fibers,  not  prepared for spinning  HS 5201 </li></ul>
<ul><li>2.   Cotton  yarn,  HS 5203  </li></ul>Manufacture from natural fibers, not prepared for spinning
3. Cotton Fabric  HS 5208  Manufactured from natural fibers, can be prepared for spinning
Jeans HS 6203 Manufactured from  YARN
Alternative 1/fabrics: <ul><li>Printing of the raw fabric in Serbia </li></ul><ul><li>(Plus at least two finishing steps) ...
Alternative  2/clothing: <ul><li>Embroidered clothing: </li></ul><ul><li>Manufacture from  un embroidered fabric with a va...
Sufficient working without a  change of heading <ul><li>Example: </li></ul><ul><li>Export of worked precious stones, headi...
Reason for the Rule: <ul><li>The working of a raw precious stones needs a high complex of processing input, esp. labor inp...
Why is a  minor processing  not  accepted as  origin???
Is  &quot;Mixing”  always a simple  operation ?? <ul><ul><li>When will the &quot;Mixing”be sufficient ?? </li></ul></ul>
Origin Rules for Sets : <ul><li>All components must be originating,  but </li></ul><ul><li>up to 15% </li></ul><ul><li>the...
Example for Sets <ul><li>Set of foodstuff for the preparation of spaghetti, containing: </li></ul><ul><li>Spaghetti </li><...
All this put up in a carton  goes to HS Heading 1902  as  Spaghetti because this is the material  which gives the  essenti...
When should you use the  alternative criterion??
Fertilizers    Ex - 3105 <ul><ul><li>Standard  rule  col. 3: </li></ul></ul><ul><ul><li>Manufacture, in which all material...
<ul><ul><li>And the value of all materials used does not exceed 50% of the ex-works price of the product </li></ul></ul><u...
Alternative  Rule  Col.4: <ul><li>Manufacture, in which the value of all the materials used does not exceed 40% of the ex-...
Example  Color Lakes <ul><ul><li>HS - heading 3205   Standard rules col.3 </li></ul></ul><ul><ul><li>Manufacture from   ma...
Alternative  Rule  Col. 4: <ul><li>Manufacture in which the value of all the materials used does not exceed 40% of the ex-...
Loudspeakers  <ul><li>HS heading ex  8518 </li></ul><ul><li>Standard  rule  col. 3: </li></ul><ul><li>Manufacture: </li></...
Alternative  Rule  Col. 4: <ul><li>Manufacture in which value of all the materials used does not exceed  25% of  the ex-wo...
Classification of Parts <ul><ul><li>1. The  heading  of the principle good contains parts (94.01) </li></ul></ul><ul><ul><...
<ul><ul><li>3. The  notes  rule the classification of parts (note 3 chapter 95 / note 2 chapter 90) </li></ul></ul><ul><ul...
The Use of Part s <ul><ul><li>If parts have the same HS-heading as the finished product, then there is no change of headin...
Example: <ul><li>Dolls ex chapter  9502 </li></ul><ul><li>Origin criteria : change of heading of the used materials.  </li...
Levels of co-production   <ul><li>1. Bilateral accumulation </li></ul><ul><li>-  needs originating products  </li></ul><ul...
Bilcum Bilateral Accumulation PREFERENCE AREA A CONTRACTING PARTY B
Conditions for bilateral accumulation   <ul><li>1. Origin of the materials to be documented  </li></ul><ul><li>2. Treatmen...
MULTI - LATERAL ACCUMULATION MULTILATACCUM PREFERENCE A AREA CONTRACTING B PARTY C CONTRACTING PARTY
Conditions for diagonal accumulation with EU   <ul><li>1. Agreement with the EU for diagonal accumulation </li></ul><ul><l...
Example for Diagonal  Accumulation  (Theoretically!)   <ul><li>Export product:  woven fabric of  wool, HS 5112, woven in  ...
Result:  The fabric Is  originating in Serbia <ul><li>Condition:   Croatia and BiH are contracting parties to the EU  and ...
Pan- European accumulation <ul><li>Origin in the EU Origin in partner state </li></ul><ul><li>1.  Processing of originatin...
Pan-European accumulation <ul><li>- Agreements between all partner states providing the  Pan-european accumulation / does ...
Pan-European accumulation Case 1- Use of originating materials - more than minor processing-  <ul><li>Yarn ( HS 5204) orig...
Pan- European Accumulation Case 2 – Minor processing   <ul><li>Jeans / Origin Serbia ( HS 6203) </li></ul><ul><li>with EUR...
Pan-european accumulation Case 3 –  actually not applied against EU <ul><li>Assembling of a ball point pen of HS 9608 </li...
<ul><li>Actually: „Donor content“ of the EU: </li></ul><ul><li>- Materials originating in the EU </li></ul><ul><ul><li>cou...
No Draw Back rule <ul><li>General background </li></ul><ul><li>Which goods are concerned? </li></ul><ul><li>Example: TV tu...
Clearing of the tube as <ul><li>1. Inward processing without levying of duties or </li></ul><ul><li>2. Levy of duties for ...
Export of the finished TV to EU with EUR.1     Consequences: <ul><li>1. Duty free access of the Korean TV tube  to the EU ...
Result :   <ul><li>No draw back for the paid duties or levy of duties for the tube in case of inward processing  in the mo...
Example  The Bagatelle Rule <ul><li>Principle:  Up to 10% of prohibited materials  are allowed. </li></ul><ul><li>Product:...
List condition: <ul><li>Change of heading for  all  used materials </li></ul><ul><li>But mechanical parts have the same he...
Impact  of  the rules of origin    on the  internal  structure of your  company :
C A L C U L A T I O N Calculation 1 Purchase Supplier Preference Section Planning Developing Production Storage of Materia...
Calculation 2 Purchase Production Calculation Case Worker Preferences Sales Marketing
<ul><li>Formal simplification: </li></ul><ul><li>- Invoice declaration for </li></ul><ul><ul><ul><li>all shipments up to 6...
Details  for the approved exporter:   <ul><li>- Legal base in the Agreement </li></ul><ul><li>- Irrespective of the value ...
<ul><li>Supplier‘s declaration: </li></ul><ul><li>- Simplification for the  </li></ul><ul><li>- - proof of origin of goods...
Selected Customs duties for textile products in the EU  (as per 2007/8) : <ul><li>Silk yarn 2,9 – 5% </li></ul><ul><li>Woo...
<ul><li>Thank you for the attention! </li></ul><ul><li>Helmuth Berndt  </li></ul><ul><li>Senior Customs Advisor </li></ul>...
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Rules Of Origin

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Rules Of Origin

  1. 1. RULES OF ORIGIN IN THE FOREIGN TRADE WITH THE EU and within CEFTA by Helmuth Berndt 03/2008
  2. 3. / Pauza /
  3. 4. Reasons for rules of Origin 1.International division of labour = - “ global outsourcing” by - - global sourcing of materials and - - global manufacturing of components 2. Worldwide trade facilitations - Customs preferences for free-trade partners in addition to the “ Most favoured nations rule” of the WTO-community 3. Multi-purpose apply for - Management of quotas, - National statistics - Anti-dumping measures
  4. 5. Positive Fallout of Rules of Origin <ul><li>Financial advantage : </li></ul><ul><li>Preferential tariffs in the EU/donor state (reduced rates or dismantled rates down to zero) </li></ul><ul><li>Economic impact: </li></ul><ul><li>National image, sustainable trade </li></ul><ul><li>relations </li></ul>
  5. 6. Who should know about Rules of origin? <ul><li>The exporter </li></ul><ul><li>- origin is part of any foreign trade </li></ul><ul><li>operation </li></ul><ul><li>- to benefit from Customs </li></ul><ul><li>preferences on international markets </li></ul><ul><li>The importer </li></ul><ul><li>- to benefit from bilateral preferences </li></ul><ul><li>for foreign goods ( i.e. EU, EFTA, US) </li></ul><ul><li>- for sale of the goods to a domestic </li></ul><ul><li>- manufacturer or dealer </li></ul><ul><li>The manufacturer </li></ul><ul><li>- for producing semi- finished or </li></ul><ul><li>finished goods </li></ul><ul><li>- for local sale </li></ul><ul><li>The dealer </li></ul><ul><li>- for sale of the goods to a local </li></ul><ul><li>manufacturer or another dealer </li></ul><ul><li>This means: Every businessman </li></ul>
  6. 7. <ul><ul><li>“ Seal of quality” for originating goods </li></ul></ul><ul><ul><ul><li>- Upgrading of the Serbian </li></ul></ul></ul><ul><ul><ul><li>competitiveness on the EU Market - </li></ul></ul></ul>
  7. 8. Intensity of EU-Preferences Complete integration: European Union Customs Union: With Turkey EU-EFTA Agreements: Norway, Iceland, Liechtenstein, Switzerland “ Europe Agreements”: No more countries (Bulgaria, Romania were the last) ACP - Convention: 74 states Mediterranean Agreements, :North Cyprus (Turkish part), Israel, PNA, 3 Maghreb states: Morocco, Tunisia, Algeria Mashrek group: Egypt, Jordan, Syria, Lebanon, PNA Stabilisation and Association Agreements with Croatia, Macedonia and Albania (as Interim Agreement) Abroad: South Africa, Mexico, Chile Autonomous and unilateral: 179 developing countries and West Balkan beneficiaries: BiH, S, CG, Kosovo/UNMIK
  8. 9. System of Origin Preferential definition Non-preferential definition Commercial definition EU-system System of Other countries EU- definition Worldwide definition General system of Preferences (UNCTAD) Regional definition (“intra-trade”) (CEFTA 2006) Rules for specified Products (textiles) or Rules for all the rest of products Actually in process Contains elements of the preferential Origin Made-in origin UK in 1887 Madrid-Agreement 1891 Madrid-Agreement 1958 National legislation Most import. aspect TRIPS WIPO-Geneva Border measures (confiscation) WTO mandate to WCO bilateral unilateral
  9. 10. 2% 3% 10% 7% 7% 7% 7% Japan Free Trade Association Customs Union 4% Japan
  10. 11. Principles of Management <ul><li>- Contractual accordance </li></ul><ul><li>- Documentation </li></ul><ul><li>- Exact bookkeeping </li></ul><ul><li>- Organizational impact </li></ul><ul><li>- Service providing </li></ul><ul><li>- Customs cooperation </li></ul>
  11. 12. What do you need for the definition of the origin ? <ul><li>HS-heading of imported parts </li></ul><ul><li>HS-heading of finished goods </li></ul><ul><li>ex-works-price of the product </li></ul><ul><li>Customs value of imported materials per unit cost </li></ul><ul><li>5 . Your share for the whole manufacturing process </li></ul><ul><li>- Wholly obtainment </li></ul><ul><li>- Sufficient processing </li></ul><ul><li>- Non-sufficient processing </li></ul><ul><li>- Minor treatment </li></ul><ul><li>Agreement to be applied </li></ul><ul><li>- Possibility of accumulation? </li></ul><ul><li>- - Which kind? </li></ul>
  12. 13. What should be the criterion for the Origin of goods?
  13. 14. Wholly Obtainment or Sufficient Processing
  14. 15. What is “Wholly Obtained” ??
  15. 16. Tomatoes 0702 :Processing Heading 2103 Tomatoes1 :EXPORT “ WHOLLY OBTAINED” ORIGIN BECAUSE EXPORT: ORIGIN, BECAUSE RAW MATERIAL IS ALREADY WHOLLY OBTAINED (spices?)
  16. 17. <ul><li>Mineral products </li></ul><ul><li>Extracted from the </li></ul><ul><li>Soil </li></ul><ul><li>= </li></ul><ul><ul><li>Originating </li></ul></ul><ul><ul><li>Products </li></ul></ul><ul><ul><li>=======!!! </li></ul></ul>
  17. 18. 4403 4407 9504 IS IT WHOLLY OBTAINED ? 4403 WHOLLY OBTAINMENT
  18. 19. Pencil Pos.: 9609 Wood in the rough Pos. 4403 Wood sliced, chopped lengthwise Width: 10 cm, Length: 150 cm Pos.: 4407 Wood lengthwise veneer sheets Width: 5 cm, Length: 150 cm Pos.: 4408 Live Tree Pos.: 0602 Wood Fuel Pos.: 4401 Wooden Box Pos.: 4415
  19. 20. Example for Obligatory Wholly Obtainment <ul><li>Heading 1902, pasta </li></ul><ul><li>If the pasta contains 20 or less % of meat, all the cereals must be wholly obtained, </li></ul><ul><li>If it contains more than 20% of meat , all cereals and all meat or fish (chapters 2 and 3) must be wholly obtained. </li></ul>
  20. 21. What is A Sufficient Processing?
  21. 22. Basic principles : <ul><ul><li>Change of the HS-heading </li></ul></ul><ul><ul><li>Percentage of used materials </li></ul></ul><ul><ul><li>Processing procedure </li></ul></ul>
  22. 23. List of Processing: <ul><li>= </li></ul><ul><li>Annex to the </li></ul><ul><li>Origin Protocol </li></ul><ul><li>Column 3 and 4 </li></ul><ul><li>Conditions only </li></ul><ul><li>refer to imported </li></ul><ul><li>materials </li></ul>
  23. 24. What is The HS???
  24. 25. The Structure of the HS 01 04 20 90 00 10 Chapter HS Heading HS Subheading HS Subheading National Statistic (Combined Nomenclature) National Internal National Internal
  25. 26. The HS is divided into 21 SECTIONS 97 CHAPTERS 1241 HEADINGS 5016 SUBHEADINGS SECTION/CHAPTER NOTES SUBHEADING NOTES General Rules I – V ----Changes of the system per 1.1.2007!---
  26. 27. Harmonized System <ul><ul><li>Legal Texts: </li></ul></ul><ul><ul><li>Section Notes </li></ul></ul><ul><ul><li>Chapter Notes </li></ul></ul><ul><ul><li>Subheading Notes </li></ul></ul><ul><ul><li>Text of the Headings </li></ul></ul><ul><ul><li>Text of the Subheadings </li></ul></ul>
  27. 28. Not Legally Binding: <ul><li>Title of sections </li></ul><ul><li>Title of chapters </li></ul><ul><li>Explanatory notes </li></ul><ul><li>But binding: </li></ul><ul><li>The “General Rules” </li></ul>
  28. 29. HS-production Principle (Example Textiles) <ul><li>Raw materials </li></ul><ul><ul><li>Fiber, not prepared </li></ul></ul><ul><li>First semi-product </li></ul><ul><ul><li> Yarn </li></ul></ul><ul><li>Second semi-product </li></ul><ul><ul><li>Fabric </li></ul></ul><ul><li>Finished product </li></ul><ul><ul><li>Textiles, clothes, apparel </li></ul></ul>
  29. 30. What Means <ul><li>“ Ex chapter 20 </li></ul><ul><li>And </li></ul><ul><li>“ Ex 2008” </li></ul><ul><li>??? </li></ul><ul><li>“ Ex chapter 48”? </li></ul><ul><li>And </li></ul><ul><li>“ Ex 4811”?? </li></ul>
  30. 31. Example for change of headings: Tomatoes IMPORT FROM EGYPT NON ORGINATING PROCESSING :EXPORT Tomatoes 2 Heading 2103 Heading 0702 ORIGIN BECAUSE SUFFICIENTLY PROCESSED (CHANGE OF HEADING)
  31. 32. <ul><ul><li>Example for restriction of used materials: </li></ul></ul><ul><ul><li>Heading 3822: &quot;Diagnostics…..“ </li></ul></ul><ul><li>Foreign materials are allowed up to: </li></ul><ul><li>50 %, related to the ex works-price of the finished goods . </li></ul>
  32. 33. The percentage relates to the &quot; Ex-works Price &quot; of the finished goods.
  33. 34. <ul><li>The value of the used materials is their customs value. </li></ul><ul><li>So: Check the Customs value carefully! </li></ul><ul><li>Be aware of the exchange rate! </li></ul>
  34. 35. Example for change of heading and restriction for the used materials: Chapter 18 Cocoa and cocoa preparations Semi colon reads = and !
  35. 36. Combined criteria - Medicine <ul><li>HS headings 3003, 3004: </li></ul><ul><li>1. Tariff change of all used materials </li></ul><ul><li>But: materials of headings 3003 and </li></ul><ul><li>3004 only up to 20% ex-works </li></ul><ul><li>and </li></ul><ul><li>2. Used materials must not exceed 50% of the ex works-price. </li></ul>
  36. 37. <ul><li>40 % rule for imported parts </li></ul><ul><li>Restriction of the value for special parts to the value of the originating materials </li></ul><ul><li>Obligatory origin for special parts </li></ul><ul><li>- extremely restrictive - </li></ul>Example for technical criteria: Sewing Machines of HS- heading 8452
  37. 38. Example for <ul><li>Exclusion of a heading, </li></ul><ul><li>exclusion specific imported materials </li></ul><ul><li>and </li></ul><ul><li>restriction of imported materials: </li></ul><ul><li>Heading 1904, I.E. Corn Flakes Question: Is it allowed to use imported mineral salts? </li></ul>
  38. 39. Example for minimum- input criteria: <ul><li>Heading ex 2008 ..Nuts.. </li></ul><ul><li>“ Manufacture, in which the value of originating nuts and oil seeds …used exceeds 60% of the ex-works price of the product” </li></ul>
  39. 40. Other example for minimum- input of Serbian originating materials: <ul><li>HS-heading 2402, </li></ul><ul><li>… Cigarettes…: </li></ul><ul><li>At least 70% by weight of the used tobacco must be originating in the country </li></ul>
  40. 41. Heading 2309, preparations for animal feeding <ul><li>All cereals, sugar, meat, milk must be originating products of </li></ul><ul><li>Chapter 3, </li></ul><ul><li>fish must be wholly obtained in Serbia </li></ul>
  41. 42. Example for necessary processing procedures: <ul><li>Headings: </li></ul><ul><li>ex 4415 </li></ul><ul><li>4816 </li></ul><ul><li>7601 </li></ul>
  42. 43. Example for Necessary Production Range: 1. Glass Mirrors of Heading 7009 : &quot;Manufacture from materials of heading 7001” 7001 = waste and scrap of glass, glass in the mass
  43. 44. <ul><ul><li>2. Clothes and garments of chapter 61 and 62: </li></ul></ul><ul><ul><li>&quot;Manufacture from yarn &quot; </li></ul></ul>
  44. 45. <ul><ul><ul><li>&quot; Manufacture from animals of chapter 1” </li></ul></ul></ul><ul><ul><li>3. Preparations of meat </li></ul></ul><ul><ul><li>ex Chapter 16: </li></ul></ul><ul><ul><ul><li>Notice: Chapter 1 = Live animals! </li></ul></ul></ul>
  45. 46. Rules for cotton products: <ul><li>1.Natural cotton fibers, not prepared for spinning HS 5201 </li></ul>
  46. 47. <ul><li>2. Cotton yarn, HS 5203 </li></ul>Manufacture from natural fibers, not prepared for spinning
  47. 48. 3. Cotton Fabric HS 5208 Manufactured from natural fibers, can be prepared for spinning
  48. 49. Jeans HS 6203 Manufactured from YARN
  49. 50. Alternative 1/fabrics: <ul><li>Printing of the raw fabric in Serbia </li></ul><ul><li>(Plus at least two finishing steps) </li></ul><ul><li>But: Value of the unprinted fabric only up to 47,5 % of the ex-works price of the goods </li></ul>
  50. 51. Alternative 2/clothing: <ul><li>Embroidered clothing: </li></ul><ul><li>Manufacture from un embroidered fabric with a value of not more than 40 % of the ex-works price of the finished good </li></ul>
  51. 52. Sufficient working without a change of heading <ul><li>Example: </li></ul><ul><li>Export of worked precious stones, heading ex 7103 </li></ul><ul><li>Criterion : manufacture from unworked precious stones heading ex 7103 </li></ul>
  52. 53. Reason for the Rule: <ul><li>The working of a raw precious stones needs a high complex of processing input, esp. labor input, which is “sufficient” without a change of heading </li></ul>
  53. 54. Why is a minor processing not accepted as origin???
  54. 55. Is &quot;Mixing” always a simple operation ?? <ul><ul><li>When will the &quot;Mixing”be sufficient ?? </li></ul></ul>
  55. 56. Origin Rules for Sets : <ul><li>All components must be originating, but </li></ul><ul><li>up to 15% </li></ul><ul><li>there may be non-originating material in the set </li></ul>
  56. 57. Example for Sets <ul><li>Set of foodstuff for the preparation of spaghetti, containing: </li></ul><ul><li>Spaghetti </li></ul><ul><li>Cheese </li></ul><ul><li>Tomato paste </li></ul>
  57. 58. All this put up in a carton goes to HS Heading 1902 as Spaghetti because this is the material which gives the essential character (HS-rule 3b) - see also HS 9605 (traveller sets) -
  58. 59. When should you use the alternative criterion??
  59. 60. Fertilizers Ex - 3105 <ul><ul><li>Standard rule col. 3: </li></ul></ul><ul><ul><li>Manufacture, in which all materials used are classified within a Heading other than that of the product. </li></ul></ul><ul><ul><li>However, materials classified within the same heading may be used, provided their value does not exceed 20% of the ex-works price of the product </li></ul></ul>
  60. 61. <ul><ul><li>And the value of all materials used does not exceed 50% of the ex-works price of the product </li></ul></ul><ul><ul><li>- COMPLICATE - </li></ul></ul>
  61. 62. Alternative Rule Col.4: <ul><li>Manufacture, in which the value of all the materials used does not exceed 40% of the ex-works price of the product </li></ul><ul><li>- Simple but restrictive - </li></ul>
  62. 63. Example Color Lakes <ul><ul><li>HS - heading 3205 Standard rules col.3 </li></ul></ul><ul><ul><li>Manufacture from materials of any Heading, except </li></ul></ul><ul><ul><li>Headings Nos. 3203, 3204 and 3205. </li></ul></ul><ul><li>However, materials from heading No. 3205 may be used, provided their value does not exceed 20% of the ex-Works Price of the product </li></ul><ul><li>- Very complicate, large classification works - </li></ul>
  63. 64. Alternative Rule Col. 4: <ul><li>Manufacture in which the value of all the materials used does not exceed 40% of the ex-works price of the product </li></ul><ul><li>Simple and allows products of heading 3205 up to 40% </li></ul>
  64. 65. Loudspeakers <ul><li>HS heading ex 8518 </li></ul><ul><li>Standard rule col. 3: </li></ul><ul><li>Manufacture: </li></ul><ul><li>In which the value of all materials used does not exceed 40% of the ex-works price of the product; </li></ul><ul><li>Where the value of all the non - originating materials used does not exceed the value of the originating materials used </li></ul><ul><li>Complicate and restrictive </li></ul>
  65. 66. Alternative Rule Col. 4: <ul><li>Manufacture in which value of all the materials used does not exceed 25% of the ex-works price of the product </li></ul><ul><li>Simple but restrictive - </li></ul>
  66. 67. Classification of Parts <ul><ul><li>1. The heading of the principle good contains parts (94.01) </li></ul></ul><ul><ul><li>2. There are own headings for groups of goods (8708 for 8803, 8701 – 8705) 9305……. </li></ul></ul>
  67. 68. <ul><ul><li>3. The notes rule the classification of parts (note 3 chapter 95 / note 2 chapter 90) </li></ul></ul><ul><ul><li>4. If there is no solution by rule 1 – 3, then parts have to be classified after their own composition / nature (mast of a sailing boat / aluminum goes out of 89 Chapter 76) </li></ul></ul>
  68. 69. The Use of Part s <ul><ul><li>If parts have the same HS-heading as the finished product, then there is no change of heading! </li></ul></ul>
  69. 70. Example: <ul><li>Dolls ex chapter 9502 </li></ul><ul><li>Origin criteria : change of heading of the used materials. </li></ul><ul><li>But parts have the same heading 9502! </li></ul><ul><li>Result: </li></ul><ul><li>The assembling of only the parts is not sufficient , the production line must start on a lower base which means production of the parts here </li></ul>
  70. 71. Levels of co-production <ul><li>1. Bilateral accumulation </li></ul><ul><li>- needs originating products </li></ul><ul><li>2. Diagonal accumulation </li></ul><ul><li>- needs originating products </li></ul><ul><li>3. Pan-European accumulation </li></ul><ul><li>- needs originating products but with chances for </li></ul><ul><li>minor treatment </li></ul><ul><li>4. Pan-Euromed accumulation </li></ul><ul><li>- needs originating products of the partner states </li></ul><ul><li>5. Full accumulation </li></ul><ul><li>(so far only with the Maghreb states, the ACP –states and within EEA (EU + EFTA without CH ) </li></ul><ul><li>- includes all accumulations and minor treatment </li></ul>
  71. 72. Bilcum Bilateral Accumulation PREFERENCE AREA A CONTRACTING PARTY B
  72. 73. Conditions for bilateral accumulation <ul><li>1. Origin of the materials to be documented </li></ul><ul><li>2. Treatment more than minor processing </li></ul><ul><li>- but may be less than sufficient processing </li></ul><ul><li>3. If only minor processing: </li></ul><ul><li>Origin will be retained </li></ul><ul><li>4. Non-originating materials have to be processed sufficiently </li></ul><ul><li>---actually: against EU only “donor content”, </li></ul><ul><li>within CEFTA 2006 possible--- </li></ul>
  73. 74. MULTI - LATERAL ACCUMULATION MULTILATACCUM PREFERENCE A AREA CONTRACTING B PARTY C CONTRACTING PARTY
  74. 75. Conditions for diagonal accumulation with EU <ul><li>1. Agreement with the EU for diagonal accumulation </li></ul><ul><li>2. Agreements with the partner states with identic rules of origin </li></ul><ul><li>3. Origin of the materials </li></ul><ul><li>4. More than minor processing </li></ul><ul><li>- but less than sufficient processing will be allowed </li></ul><ul><li>5. Non-originating materials have to be processed sufficiently </li></ul><ul><li>---CEFTA 2006: Fully applicable--- </li></ul>
  75. 76. Example for Diagonal Accumulation (Theoretically!) <ul><li>Export product: woven fabric of wool, HS 5112, woven in Serbia for export to the EU </li></ul><ul><li>Input: yarn of wool of HS 5107, originating in Croatia and BiH </li></ul><ul><li>The weaving in Serbia is more than minor processing </li></ul>
  76. 77. Result: The fabric Is originating in Serbia <ul><li>Condition: Croatia and BiH are contracting parties to the EU and to Serbia with the same rules of origin. </li></ul><ul><li>In case of minor processing in Serbia, the origin falls back to the country with the highest input. </li></ul><ul><li>--- Example applicable after SAP-Agreements </li></ul><ul><li>of Serbia and BiH </li></ul><ul><li>--- Example already applies within the </li></ul><ul><li>CEFTA-2006 - zone --- </li></ul>
  77. 78. Pan- European accumulation <ul><li>Origin in the EU Origin in partner state </li></ul><ul><li>1. Processing of originating products: </li></ul><ul><li>(from the accumulation zone) </li></ul><ul><li>- Processing more than minor treatment: </li></ul><ul><li>= Origin in this country </li></ul><ul><li>(Compliance to list-criteria is not </li></ul><ul><li>necessary!) </li></ul><ul><li>- Processing only as minor treatment </li></ul><ul><li>= Origin in the country with the highest </li></ul><ul><li>value share </li></ul><ul><li>2. Processing of non-originating materials: </li></ul><ul><li>= Origin only by sufficient working or </li></ul><ul><li>processing ( according to “list criteria”) </li></ul><ul><li>3. Unchanged sale of the materials: </li></ul><ul><li>Goods retain their origin </li></ul>
  78. 79. Pan-European accumulation <ul><li>- Agreements between all partner states providing the Pan-european accumulation / does not exist with the West Balkan states (but between CEFTA members) </li></ul><ul><li>- Originating materials </li></ul><ul><li>- No more separated bilateral or diagonal accumulation </li></ul><ul><li>- Minor treatment with originating materials possible </li></ul><ul><li>- - Origin according to the highest input </li></ul><ul><li>- Non-originating materials need sufficient processing </li></ul>
  79. 80. Pan-European accumulation Case 1- Use of originating materials - more than minor processing- <ul><li>Yarn ( HS 5204) origin: EU </li></ul><ul><li>Serbia for weaving into </li></ul><ul><li>raw fabric ( HS 5208) </li></ul><ul><li>origin: Serbia </li></ul><ul><li>EU for dyeing </li></ul><ul><li>origin: EU </li></ul><ul><li>Sold from the EU to Switzerland </li></ul><ul><li>Weaving and dyeing not sufficient ( see list criteria for HS 5208!), </li></ul><ul><li>but: </li></ul><ul><li>Both processings are more than minor treatments within the pan-european accumulation </li></ul><ul><li>Applied for: </li></ul><ul><li>Bilateral trade with the EU and </li></ul><ul><li>diagonal export of the raw fabric to Switzerland </li></ul><ul><li>- - example is actually theoretically- - </li></ul>
  80. 81. Pan- European Accumulation Case 2 – Minor processing <ul><li>Jeans / Origin Serbia ( HS 6203) </li></ul><ul><li>with EUR.1 to Bosnia for packing and export to the EU: </li></ul><ul><li>Values : Jeans 20.- Euro </li></ul><ul><li> Packing costs 2.- Euro </li></ul><ul><li> Plastic bag (Croatia) 0.5 Euro </li></ul><ul><li> Other costs 2.5 Euro </li></ul><ul><li> Prices ex works 25.- Euro </li></ul><ul><li>Added value in Bosnia: 5.-- Euro </li></ul><ul><li>Highest value input = Serbia </li></ul><ul><li> Origin = Serbia </li></ul><ul><li>Preference in the EU for Serbia export to CEFTA?? </li></ul><ul><li>- the example export to the EU is actually theoretically - - </li></ul>
  81. 82. Pan-european accumulation Case 3 – actually not applied against EU <ul><li>Assembling of a ball point pen of HS 9608 </li></ul><ul><li>- All used parts are of HS 9608: </li></ul><ul><li>- Cartridge, origin EU, value 2.— € </li></ul><ul><li>- Plastic parts, origin Macedonia, value 1,-- € </li></ul><ul><li>- Clip, origin Bosnia value 1.-- € </li></ul><ul><li>Ex-works price in Serbia value 5.-- € </li></ul><ul><li>Export -> Croatia, Origin is EU ( highest share) </li></ul><ul><li>The “ List” does not apply! </li></ul><ul><li>If: Cartridge is of origin Serbia: Origin of the pen will be Serbia </li></ul><ul><li>If: Cartridge is of origin Bosnia: Origin of the pen will be Bosnia </li></ul><ul><li>If: Clip is of origin China: No preferential origin for the pen </li></ul><ul><li> No Certificate EUR.1 </li></ul><ul><li>- 10%-tolerance rule does not apply: </li></ul><ul><li> - - Minor treatment is given and </li></ul><ul><li> - - 10%-tolerance is exceeded </li></ul>
  82. 83. <ul><li>Actually: „Donor content“ of the EU: </li></ul><ul><li>- Materials originating in the EU </li></ul><ul><ul><li>count as originating in Serbia </li></ul></ul><ul><ul><li>- But : Materials originating in </li></ul></ul><ul><ul><li>Serbia do not count as originating in the EU </li></ul></ul><ul><ul><li>= „ unilateral concession“ </li></ul></ul>
  83. 84. No Draw Back rule <ul><li>General background </li></ul><ul><li>Which goods are concerned? </li></ul><ul><li>Example: TV tube </li></ul><ul><li>Origin : South Korea </li></ul><ul><li>Value not exceeding 25% of the ex - works price of the TV (HS 8528) </li></ul>
  84. 85. Clearing of the tube as <ul><li>1. Inward processing without levying of duties or </li></ul><ul><li>2. Levy of duties for free circulation </li></ul>
  85. 86. Export of the finished TV to EU with EUR.1 Consequences: <ul><li>1. Duty free access of the Korean TV tube to the EU - market, </li></ul><ul><li>2. Disadvantage for European producers against Serbian producers because of customs duties to be paid by the European producer to the EU market. </li></ul>
  86. 87. Result : <ul><li>No draw back for the paid duties or levy of duties for the tube in case of inward processing in the moment of exportation of the finished TV </li></ul><ul><li>- - - The no-draw back rule is not </li></ul><ul><ul><ul><li>applied actually! </li></ul></ul></ul><ul><ul><ul><li>But standard in all new Agreements </li></ul></ul></ul><ul><ul><ul><li>of the EU ( and in CEFTA 2006 !) </li></ul></ul></ul>
  87. 88. Example The Bagatelle Rule <ul><li>Principle: Up to 10% of prohibited materials are allowed. </li></ul><ul><li>Product: Zippers of heading 9607, ex-works price 60 CSD. </li></ul><ul><li>Used materials: </li></ul><ul><li>Cotton ribbon of heading 5806 </li></ul><ul><li>Artificial yarn of heading 5404 </li></ul><ul><li>Mechanical parts of heading 9607 from Taiwan, value </li></ul><ul><li>5 CSD </li></ul>
  88. 89. List condition: <ul><li>Change of heading for all used materials </li></ul><ul><li>But mechanical parts have the same heading! </li></ul><ul><li>Solution: </li></ul><ul><li>5 CSD do not exceed 10% of the ex-works price. The Zipper is originating. </li></ul><ul><li>---This 10%-tolerance does not apply for goods of Chapters 50 - 63 and for “minor treatments” </li></ul>
  89. 90. Impact of the rules of origin on the internal structure of your company :
  90. 91. C A L C U L A T I O N Calculation 1 Purchase Supplier Preference Section Planning Developing Production Storage of Materials and Finished Products Export /Dispatch Shipment
  91. 92. Calculation 2 Purchase Production Calculation Case Worker Preferences Sales Marketing
  92. 93. <ul><li>Formal simplification: </li></ul><ul><li>- Invoice declaration for </li></ul><ul><ul><ul><li>all shipments up to 6.000.- € or </li></ul></ul></ul><ul><ul><ul><li>as „Approved Exporter“ </li></ul></ul></ul><ul><ul><ul><li>--- in future: „Approved Economic Operator“--- </li></ul></ul></ul>
  93. 94. Details for the approved exporter: <ul><li>- Legal base in the Agreement </li></ul><ul><li>- Irrespective of the value </li></ul><ul><li>- Origin declaration by typing, stamping or printing on the invoice or any commercial doc. </li></ul><ul><li>- Wording must be according to the legal text </li></ul><ul><li>The declaration must be signed ( principle) </li></ul><ul><li>- Non-originating goods indicated only on the invoice </li></ul><ul><li>- Written application and basic audit </li></ul><ul><li>- Frequent shipments, knowledge of rules of origin </li></ul><ul><li>- Proper records and stock accounts </li></ul><ul><li>- Full responsibility by the exporter </li></ul><ul><li>- Regular audits by the Customs </li></ul><ul><li>- Withdrawal of the authorization in case of non-compliance </li></ul>
  94. 95. <ul><li>Supplier‘s declaration: </li></ul><ul><li>- Simplification for the </li></ul><ul><li>- - proof of origin of goods </li></ul><ul><li>- - status of non-originating goods </li></ul><ul><li>- For single shipments and </li></ul><ul><ul><li>as long term declaration </li></ul></ul><ul><ul><li>- Responsibility and auditing - </li></ul></ul><ul><ul><li>---Actually applied within the EEA and between EU, Turkey and the Maghreb states--- </li></ul></ul>
  95. 96. Selected Customs duties for textile products in the EU (as per 2007/8) : <ul><li>Silk yarn 2,9 – 5% </li></ul><ul><li>Wool yarn 3,2 – 4% </li></ul><ul><li>Cotton yarn 4% </li></ul><ul><li>Silk fabric 5,3 – 6,9% </li></ul><ul><li>Wool fabric 7,2 – 8% </li></ul><ul><li>Cotton fabric 8% </li></ul><ul><li>Apparel and Clothing: </li></ul><ul><li>Knitted and crocheted: 12% </li></ul><ul><li>Not knitted or crocheted: 12% </li></ul>
  96. 97. <ul><li>Thank you for the attention! </li></ul><ul><li>Helmuth Berndt </li></ul><ul><li>Senior Customs Advisor </li></ul><ul><li>Tel: + 49 30 8240 7657 </li></ul><ul><li>Mobile: + 49 177 203 7508 </li></ul><ul><li>E-mail: berndt_consult @gmx.de </li></ul><ul><li>LV-roo-serbia-2008 </li></ul>
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