1.

RULES OF ORIGIN (ROO) What are the Rules of Origin?

Rules of Origin (ROO) are those laws, regulations and administrative determinations of general application to ascertain a products country of origin. They are a set of principles to determine the economic content and nationality of a product. 2. What is the country of origin? Country of origin refers to the country where a product is o!tained, produced or manufactured. 3. What are the uses of Rules of Origin?

i. To implement measures and instruments of commercial policy, such as anti"dumping duties, #uotas, etc.$ ii. To determine whether imported products shall !e su!%ected to a most"favored"nation (&'() treatment or preferential treatment$ iii. iv. v. vi. 'or purposes of trade statistics and issuance of certificate of origin$ 'or the application of la!eling and mar)ing re#uirements$ 'or pu!lic procurement$ and 'or process patent.

4.

What are the types of Rules of Origin?

The types of ROO are the (on"preferential and the *referential ROO. (on"preferential ROO implements measures and instruments of commercial policy which include antidumping, safeguards, su!sidy, trade statistics, la!eling and mar)ing. *referential ROO determines whether a product is #ualified to preferential tariff or the &ost 'avored (ation (&'() tariff. 5. What are the criteria in determining the rules of origin?

The origin of a good can !e determined !y using the criteria on whether it is wholly o!tained or has undergone su!stantial transformation. +u!stantial transformation criterion could !e !ased on value added, change in tariff classification or process rule.

What are considered !holly o"tained goods?

,n general, the following categories of products are considered wholly o!tained in the e-porting country. (a) (!) (c) (d) /gricultural products harvested there. /nimals !orn and raised there. *roducts o!tained from animals referred to (!) a!ove. *roducts o!tained from hunting or fishing.

(e) *roducts o!tained of sea fishing and other products ta)en from the sea !y its vessel. (f) *roducts made on !oard its factory ships e-clusively from the products referred to in (e). (g) &ineral products e-tracted from its soil or its sea!ed.

(h) 0sed articles collected there fit only for the recovery of raw materials. (i) 1aste and scrap resulting from manufacturing operations conducted there. (%) *roducts o!tained there e-clusively from the products specified in (a) to (i) a!ove. #. What is the $alue added rule? The value added rule for the ROO can !e e-pressed as follows. 2 2 / minimum value added content e-pressed percentage of the total product cost$ or in

/ ma-imum allowa!le cost percentage assigned to the value of imported material including those of undetermined origin.

%. &o! does the $alue added rule operate? 3alue added can !e determined either !y. 4irect method &ethod used !y dividing the sum of the value of originating materials, overhead cost and profit, !y the 'O5 value of the finished product, e-pressed in percentage$ or

,ndirect method &ethod used to determine percentage !y adding the values of imported materials, parts and components including those of un)nown origin, divided !y the 'O5 of the finished good. '. What are the terminologies used for change in tariff classification criterion in determining the origin of the goods? ,. Change of Chapters (CC) This implies that for origin to !e conferred, the material used for a good should !e classified outside the chapter where the good which origin !eing determined is classified. ,,. Change of Tariff 6eading (CT6) Connotes that to o!tain origin, the material used to produce a good should have !een classified in a heading, su!heading, split heading or split su!heading outside the heading where the good under consideration is classified. &oreover, changes !etween the su!headings of the heading where the good is located will not confer origin under this rule. ,,,. Change of Tariff +u!heading (CT+6) +uggests that to o!tain origin, the material used for the good under consideration must come from a different su!heading including the su!heading within the same heading where the good in #uestion is located. ,3. Change of Tariff 6eading +plit (CT6+) +ame implication as CT6 e-cept that an e-isting 6+ heading is su!divided into two or more su!headings. 3. Change of Tariff +u!heading +plit (CT+6+) +ame effect as CT+6 e-cept that an e-isting su!heading is su!divided into two or more tariff lines. 1(. What are the other rules that are also applied? ,. 7-ception *rohi!its a tariff shift from a particular classification , e.g., CC e-cept from Chapter 89 (*aper). ,,. /lternative Rules

1ould confer origin under two different circumstances, e.g., 1O or Change from youth to maturity (:ive horses). ,,,. +upplementary Rule There are re#uirements which could !e in terms of production process or characteristics of the final product which are imposed in addition to another rule in order to complete the conferment of origin for a particular good. ,3. Residual Rule This is to cover those goods to which the specific rules will not apply. 11. What is the accumulation rule?

*roducts, which comply with origin re#uirements and are su!se#uently used in a &em!er +tate as inputs for a finished product eligi!le for preferential treatment in another &em!er +tate, shall !e considered as products originating in the &em!er +tate where wor)ing or processing of the finished product has ta)en place. 12. What are the types of accumulation? ; 'ull /ccumulation < /ccumulation of the full value of the product from a party in an 'T/ territory.

*artial /ccumulation < *arties are allowed to accumulate inputs with other mem!er countries to hurdle the ROO criterion. Tariff preference is given to the final e-porting country.

13.

What is de minimis in ROO? ; The 'T/ may incorporate a de minimis provision that allows a good to #ualify as an originating good provided that the total value of all non"originating materials which do not satisfy the CTC re#uirement does not e-ceed a set percentage of the 'O5 value of the final good. ; 14. The percentage set is usually within the range of 9"=>?. What are the processes that do not confer origin?

Regardless of criterion used to confer origin, the following are e-amples of operation@s considered to !e insufficient wor)ing or processing that does not confer originating status to a product.

a. Operations to ensure the preservation of products in good condition during transport and storage (drying, chilling, adding salt, etc.); b. Simple operations consisting of sifting, sorting, classifying or matching, washing, painting or cutting up; c. Changes of packing and breaking up and assembling of consignment. d. simple slicing, cutting, and repacking or placing in bottle, flasks, bags, bo es and all other simple packing operations; e. !he affi ing of marks, labels or other like distinguishing signs on products or their packaging; f. Simple mi ing of products;

g. Simple assembly of parts of products to constitute a complete product; h. combination of two or more operations specified in (a) to (f), and; i. Slaughter of animals. 15. What are considered indirect materials?

,ndirect materials are materials used in the production !ut do not form part of the good. They are themselves considered originating, regardless of origin such as. ; ; fuel; tools, dies and moulds;

; lubricants, greases, compounding materials and other similar goods; ; gloves, glasses, footwear, clothing, safety e"uipment and supplies for any of these things; and ; catalysts and solvents. &o! a"out accessories and spare parts? /ccessories, spare parts and tools imported with originating goods will !e treated as originating regardless of their actual origin if.

1 .

; !he accessories, spare parts and tools are not invoiced separately from the originating good that they are imported with; and ; !he "uantities and value of the accessories, spare parts and tools is customary for the imported good 1#. &o! are pac)aging materials and containers treated in ROO?

,f goods are pac)aged for retail sale, and the pac)ing material or container in which the goods are pac)ed for retail sale is classified with the goods in accordance with 6+ Aeneral ,nterpretative Rule >, then the pac)aging material or containers are not re#uired to meet the CTC re#uirement of the product specific rule that the originating good has to meet. 6owever, the costs of these materials and containers would !e added in case the 3alue /dded Rule is applied. 1%. What are the implications of origin conferment to industry?

a. cheaper input cost b. price advantage on e port c. wider market access 1'. Concluded =. The AeneraliBed +ystem of *references (A+*) C. /'T/ Common 7ffective *referential Tariff (C7*T) D. /+7/("China 'ree Trade /greement (/C'T/) 8. /+7/("Eorea 'ree Trade /greement (/E'T/) >. Fapan"*hilippines 7conomic *artnership /greement (F*7*/) 0nder (egotiation =. /+7/("/ustralia"(ew Gealand 'ree Trade /greement (//(G'T/) C. /+7/("Fapan Comprehensive 7conomic *artnership /greement (/FC7*) D. /+7/(",ndia 'ree Trade /greement (/,'T/) What is the status of ROO in $arious *+,s?

2(.

What is a certificate of origin?

Certificate of Origin (CO) is a declaration of the e-porter as certified !y the issuing authority, (5ureau of Customs), that the e-port product complies with the origin re#uirement as specified under !ilateral, regional, or multilateral trading arrangement to which the *hilippines is a party. Einds of Certificate of Origin #. $ith %referential !reatment& =. AeneraliBed +ystem of *references A+* ('orm(#) C. /+7/("Common 7ffective *referential Tariff ('orm()) D. /+7/("C6,(/ 'ree Trade /greement ('orm(*) 8. /+7/("EOR7/ 'ree Trade /greement ('orm(#) +. $ithout preferential !reatment& =. CO for Aeneral &erchandise (1hite C.O.) 21. What is the W+O ,greement on Rules of Origin? The /greement on Rules of Origin is one of the agreements concluded under the 0ruguay Round of the &ultilateral Trade (egotiations of the 1TO. The /greement aims to harmoniBe non"preferential rules of origin that are clear and predicta!le and are administered in a transparent, consistent, uniform, impartial and reasona!le manner. 22. Why is there a need to harmoni-e Rules of Origin? origin

Rules of Origin are necessary in order to have a uniform determining criteria and interpretation.

/t present, countries apply different rules of origin which vary depending on !asic considerations such as su!stantial transformation, value"added and@or manufacturing and processing systems. The harmoniBation of these divergent rules would !e in conformity with the 1TO advocacy of free trade. 23. Why !as the W.O chosen to do the harmoni-ation?

The 1CO is the author and drafter of the 6armoniBed Commodity 4escription and Coding +ystem (6+) which is used !y most countries worldwide in the classification of goods. 6ence, familiarity on the features of 6+ are the !ases of CTC criterion. 24. Why use the &/ as the "asic !or)ing document?

The 6+ is a systematic grouping into sections, chapters, headings and su!headings of products arranged in a progressive manner according to the degree of processing.

+ince the primary origin rule is su!stantial transformation , the change in classification in the 6+ nomenclature, also )nown as tariff shift (e.g., change in chapter or heading level) determines the origin of the product. 25. What is the present status of the &armoni-ed Rules of Origin?

The overall architecture of the (on"*referential Rules of Origin was completed and su!mitted !y the 1orld Customs OrganiBation (1CO) Technical Committee on Rules of Origin to the 1TO Committee on Rules of Origin in (ovem!er =HHH. To date there are still a num!er of product specific rules pending with the 1TO"CRO for resolution. IIII THE WTO TECHNICAL COMMITTEE ON RULES OF ORIGIN 1. What is the +echnical .ommittee on Rules of Origin 0+.RO1? The TCRO is the Committee esta!lished pursuant to the 1TO /greement on Rules of Origin to carry out the technical wor) re#uired under the said /greement. 2. What are the main functions of the +.RO? 0pon the entry into force of the 1TO /greement, the TCRO initiated the harmoniBation wor) program (,$%) for the rules of origin in con%unction with the 1TO Committee on Rules of Origin (CRO) specifically dealing with. i. *rovision of interpretations, opinions and definitions of what constitutes wholly o!tained goods and minimal operations or processes in the manufacture of goods, and su!stantial transformation resulting in a change in tariff classification$ 7la!oration on the use of supplementary criteria to determine whether su!stantial transformation of a product has indeed ta)en place in the country of origin$ and 4iscussion and development of the overall architecture, general rules and residual rules to govern the harmoniBed rules of origin including the categoriBation and arrangement of chapter notes in accordance with the 6armoniBed +ystem and the section and chapter rules that will apply.

ii.

iii.

The TCRO, in cooperation with the CRO, shall set up a mechanism to consider and propose amendments to the results of the 61*. This includes the revision of rules to ma)e them more operational or updated ta)ing into account new production processes.

0pon re#uest of the CRO, the TCRO shall refine or ela!orate its wor) and@or develop new approaches to ma)e the rules of origin more responsive to current re#uirements. 3. What !ill "e the role of the +.RO !hen the &W2 has "een completed and anne3ed to the W+O ,greement? i. /t the re#uest of any mem!er of the Technical Committee, to e-amine specific technical pro!lems that may arise during the day"to"day administration of the rules of origin of &em!ers and to give advisory opinions on appropriate solutions !ased upon the facts presented$ ii. To furnish information@origin and advice on any matters concerning the determination of origin of goods as may !e re#uested !y any &em!er of the Committee$ iii. To prepare and su!mit periodic reports on the technical aspects of the operation and status of the /greement$ and iv. To review annually the technical aspects of the implementation and operation of the various disciplines governing the application of rules of origin and the procedural arrangements on notification, review, consultation and dispute settlement. 4. What is the representation of W+O mem"ers in the +.RO?

a) 7ach &em!er has the right to !e represented in the Technical Committee. 7ach &em!er may nominate one delegate and one or more alternates to !e its representatives. Representatives of mem!ers of the Technical Committee may !e assisted !y advisers at the Committee meetings of the Technical Committee. The 1TO +ecretariat may also attend such meetings in an o!server status. !) &em!ers of the CCC (1CO) which are not &em!ers of the 1TO may !e represented at meetings of the Technical Committee !y one delegate and one or more alternates. +uch representatives attend Committee meetings as o!servers.

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* from the World Customs Organization Website, (15 September 1999)*

Harmonized Rules of Origin *

What are the Harmonized Rules of Origin ? Concept of the ules of Origin According to the WTO Agreement on Rules of Origin effective from 1995, Rules of Origin are defined as those laws, regulations and administrative determinations of general application applied ! WTO "em er countries to determine the countr! of origin of goods provided such rules are not related to contractual or autonomous trade regimes leading to the granting of tariff preferences going e!ond the application of the relevant Articles of #ATT 199$%

 !he "armonized ules of Origin and !rade #acilitation &'armoni(ed Rules of Origin& mean the coherent rules concerning origin determination which are e)pected to e set out ! co*operative efforts etween WTO "em er countries and applied to non*preferential commercial polic! instruments% When the! are completed, the Rules will e appended to the Agreement with the o +ective of contri uting to the facilitation of international trade% Scope and $uiding %rinciples of the "armonized ules of Origin The 'armoni(ed Rules of Origin shall cover all rules of origin used in non*preferential commercial polic! instruments relating inter alia, to "ost ,avoured -ation &",-& treatment, anti*dumping dut!, safeguard measures, origin mar.ing, tariff /uotas% The! shall also cover government procurement and trade statistics% The! should 0 e applied e/uall! for all the a ove*mentioned non*preferential purposes1 e o +ective, understanda le and predicta le1 not e used as instruments to pursue trade o +ectives directl! or indirectl!1 e administra le in a consistent, uniform, impartial and reasona le manner1 e coherent and ased on a positive standard%

The international institutions carr!ing out the 2rogramme have een the WTO 3ommittee on Rules of Origin 43RO5 which reports to the WTO 3ouncil for Trade in #oods, and the W3O Technical 3ommittee on Rules of Origin which was esta lished under the auspices of the W3O to underta.e the technical wor.% "em ership of oth 3ommittees is limited to "em ers of the WTO1 however, the T3RO admits as o servers those W3O "em ers that are not WTO "em ers, as well as some international organi(ations including WTO, O637, 8-3TA7 the 8- 9tatistical 7ivision, the 8- :aw of the 9ea 3onvention 9ecretariat and the ;nternational 3ham er of 3ommerce% What will be the main contents of the Harmonized Rules of Origin ? #eneral ules 4&rchitecture) The 'armoni(ed Rules of Origin will consist of 7efinitions, the #eneral Rules, Appendices 1 and <% ;n Appendi) <, Rules for the application of Appendi) < are followed ! the matri) rules covering goods classified in 3hapters 1 to 9= of the 'armoni(ed 9!stem% At the eginning of each 3hapter, the negative standard, the primar! rules, the residual rules and definitions ma! e set out% The architecture will set out the principles under which the various rules are applied and will result in the final results for appl!ing those rules to specific cases% &ppendi' 1 ((efinitions of Wholl) Obtained $oods5 This Appendi) sets forth the definitions of the goods that are to e considered as eing wholl! o tained in one countr!% ;t provides for the origin determination of live animals orn and raised in that countr!, and plants and minerals harvested or ta.en in that countr!% Appendi) * (%roduct Specific ules of Origin) This Appendi) sets forth rules for determining the countr! of origin of a good when the origin of the good is not determined under Appendi) 1% ;t will provide for the rules necessar! for origin determination, including the primar! rule and residual rule and their application%

There are still differing opinions concerning the concept of de minimis, intermediate materials, fungi le goods and putting up in sets% What benefits can be expected from the successful completion of the Harmonization Work Programme ? Contribution to !rade #acilitation 'armoni(ation means that a single origin can e determined for all non*preferential commercial polic! purposes% >oth private and pu lic sectors can anticipate eing a le to .now a clear and predicta le origin outcome ! application of a single set of Rules of Origin% 3ustoms officers and traders ma! face a significant tas. in implementing the 'armoni(ed Rules of Origin once the! are operational% 'owever, in the long run, the enefits of harmoni(ation will e widel! appreciated in the same wa! as the 'armoni(ed 9!stem -omenclature% %ro+iding o+erall consistence in origin determination The 'armoni(ed Rules of Origin are e)pected to prevent discrepancies in origin determination etween WTO "em er countries ecause the! do not allow an! loopholes in origin determination and the! should confer one origin to one good%