Examination of Different Texts of Rules of Origin
Question 1: Is the rule of origin below technically sound? Is it easy to understand and administer? Is it restrictive or lenient? Does it require special knowledge?
A change to subheadings 6202.91 through 6202.93 from any other Chapter, except from headings 5106 through 51.13, 52.04 through 52.12, 53.07 through 53.08, or 53.10 through 53.11, Chapter 54, or headings 55.08 through 55.16, 58.01 through 58.02, or 60.01 through 60.02, provided that:
a) The good is both cut and sewn or otherwise assembled in the territory of one or more of the NAFTA parties, and
b) The visible lining fabric listed in Chapter Rule 1(see below) for Chapter 62 satisfies the tariff change requirements provided therein.
Chapter Rule 1
A change to any of the following headings or subheadings for visible lining fabrics:
• 51.11 through 51.12, • 5208.31 through 5208.59, • 5209.31 through 5209.59, • 5210.31 through 5210.59, • 5211.31 through 5211.59, • 5212.13 through 5212.15, • 5212.23 through 5212.25, • 5407.42 through 5407.44, • 5407.52 through 5407.54, • 5407.61, • 5407.72 through 5407.74, • 5407.82 through 5407.84, • 5407.92 through 5407.94,
• 5408.22 through 5408.24 (excluding tariff items 5408.22.10, 5408.23.11, 5408.23.21 and 5408.24.10),
• 5408.32 through 5408.34, • 5512.19, 5512.29, 5512.99, • 5513.21 through 5513.49, • 5514.21 through 5515.99, • 5516.12 through 5516.14, • 5516.22 through 5516.24, • 5516.32 through 5516.34, • 5516.42 through 5516.44, • 5516.92 through 5516.94, • 6001.10, 6001.92,
Question 2: Can you compare the rules below with those above? What does it change in terms of requirements?
A change to subheadings 6202.91 through 6202.93 from any other chapter.
Question 3: Is the following rules of origin text clear and predictable? Are the rules of origin contained therein easy to administer? What are the possible implications?
a) For the purposes of Rule 2(b), a product shall be deemed to be originating if: i. Not less than 40% of its content originates from any Party; or
ii. If the total value of the materials, part or produce originating from outside of the territory of a Party (i.e. non-ASEAN–China Free Trade Area (ACFTA)), does not exceed 60% of the FOB value of the product so produced or obtained, provided that the final manufacturing process is performed within the territory of the Party.
b) For the purposes of this Annex, the originating criteria set out in Rule 4(a)(ii) shall be referred to as the ‘ACFTA content’. The formula for the 40% ACFTA content is calculated as follows:
Value of + Value of materials of undetermined materials, non-ACFTA origin ____________________________________ x 100 % <60%
FOB price
Therefore, the ACFTA content: 100% – non-ACFTA material = at least 40%
c) The value of the non-originating materials shall be:
i. The CIF value at the time of importation of the materials; or
ii. The earliest ascertained price paid for the materials of undetermined origin in the territory of the Party where the working or processing takes place.
d) For the purpose of this Rule, ‘originating material’ shall be deemed to be a material whose country of origin, as determined under these rules, is the same country as the country in which the material is used in production.
Question 4: Suppose you have to determine origin with a product cost sheet for a chair of heading 9401, and the applicable rules of origin are as detailed below with cumulation applicable. The country of last manufacturing is in a TFTA Member State. Deductions or addition of cost of transport are allowed. Which of the following would be your calculations?
i. The CIF value of those materials does not exceed 60% of the total cost of the materials used in the production of the goods.
ii. The value added resulting from the process of production accounts for at least 35% of the ex factory cost of the goods.
iii. The goods are classified or become classifiable under a tariff heading other than the tariff heading under which they were imported.
iv. Method based on value of non-originating materials with deduction of transports costs. VNM = VNM x 100 => 70%
v. Method based on value of originating materials with deduction of transports costs. VOM = VOM
EWP
Where EWP is the ex works price as below. VNM is the value of non-originating materials and VOM is the value of originating materials. The finished product in the TFTA Member State is a chair under HS heading 94.01.
Manufacturing cost sheet:
• Local timber 150
• From other TFTA Member State Z 80 (110 after addition of intraregional transport)
• Malaysian origin 900 (after deduction of CIF) = 750
Other costs:
• Glue (imported from Brazil): 5, after deduction of CIF: 4
• Varnish (imported from Germany): 8, after deduction of CIF: 6
Factory overheads:
• Rent and rates: 50
• Depreciation of machinery: 30
• Direct labour: 170
• Ex factory cost: 1,380 + 14 of profit =1,394 EW price
Calculations:
• Value added (35%)?
• Import material content (60%)?
• CTH?
• VNM (70 %)?
lisT of aBBreviaTions
ACP African, Caribbean and Pacific ACFTA ASEAN–China Free Trade Area ARO Agreement on Rules of Origin
ASEAN Association of South East Asian Nations ATPA Andean Trade Preference Act
BTN Brussels Tariff Nomenclature CACM Central American Common Market CAFTA Central American Free Trade Agreement CARIBCAN Caribbean–Canada Trade Agreement CBI Caribbean Basin Initiative
CC Change of Chapter
CEFTA Central European Free Trade Agreement CIF Cost, insurance and freight
COMESA Common Market for Eastern and Southern Africa CRO Committee on Rules of Origin
CTH Change in Tariff Heading CTSH Change in Tariff Subheading
DC Developed Countries
EAC Eastern African Community
EC European Communities
EEA European Economic Area EEC European Economic Community EFTA European Free Trade Association EPA Economic Partnership Agreement
EU European Union
EWP Ex works price
FOB Free on Board
FTA Free Trade Area
GATT General Agreement on Tariffs and Trade GSP Generalised System of Preferences
HS Harmonised System
HWP Harmonisation Work Programme IC Intergovernmental Committee
IEPA Interim Economic Partnership Agreement LDC Least Developed Countries
MFN Most Favoured Nation
MMTZ Malawi, Mozambique, Tanzania and Zambia NAFTA North American Free Trade Area
REC Regional Economic Community RTA Regional Trade Arrangements
SADC Southern African Development Community TCRO Technical Committee on Rules of Origin TFTA Tripartite Free Trade Area
TRIPS Trade Related Aspects of Intellectual Property Rights UNCTAD United Nations Conference on Trade and Development
US United States
VNM Value of non-originating materials VOM Value of originating materials WCO World Customs Organization WTO World Trade Organization
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