Supplementary rules 66

There are many instances in which two different types of rules are laid down together for the same product. Virtually in every case, the choices are a CTC or percentage rule, although other combinations are also possible. They are usually referred to as alternative rules.

Example 10: Trans-Pacific Economic Partnership Agreement (SEP-4)

HS heading

No. Description of product

Working or processing carried out on non-originating materials that

confers originating status

2009.90 Mixtures of juices

A change to subheading 2009.90 from any other

subheading; or

A change of subheading is not required provided there is a

regional value content of not less than 45 percent.

Example 11: Supplementary TT and RVC rules, EU-CARIFORUM EPA

HS heading No.

Description of product

Working or processing carried out on non-originating materials that confers non-originating status

or 2711 Petroleum

gases and other gaseous

hydrocarbons

Operations of refining and/or one or more specific process(es)1

Other operations than those referred to in column (3) in which all the materials used are classified within a heading other than that of the product. However, materials classified within the same heading may be used provided their value does not exceed 50% of the ex-works price of the product

In the examples above, the producers can choose between two options in each case. Whether a CTC and an RVC in Example 1 or a between a TT and an MC in Example 2. Because this situation increases the options of the producer, it represents an additional flexibility of the origin criteria. The more instances these alternatives exist, the more liberal the rules become.

3.3.3.2. Complementary Rules

The opposite situation comes when two different criteria are specified together in the same rule to confer origin, which is only given if both criteria are fulfilled. Meeting two criteria instead of one, adds complexity to the rule.

3.3.3.3. Combinations of supplementary and complementary rules

The complexity of the RoO is enhanced by the fact that it is possible to combine both supplementary and complementary rules (which can, each of them, be a combination of CTC, percentage, TT or WO rules)

Example 12: Combination of supplementary and complementary rules, ASEAN-Korea FTA

HS heading

No. Description of product

Working or processing carried out on non-originating materials that confers originating status

1103.20 Pellets

Change to Subheading 1103.20 from any other Chapter, provided that the

materials of Headings 10.03 and 10.06 are Wholly-Obtained or Produced in the territory of any Party; or A regional value content of not less than 40 percent of the FOB value of the good, provided that the materials of Headings 10.03 and 10.06 are Wholly-Obtained or Produced in the territory of any Party

In the example above, the producer can choose between a CC or an RVC (supplementary rules) with the condition that in both cases, all the materials from headings HS 1003 and 1006 are wholly produced (complementary rule)

3.3.3.4. CTC exceptions

A very frequent case is to introduce exceptions to CTC rules (CTCex), which prohibits the utilization of a certain material from a certain digit level that is otherwise permitted by the main rule. This exception can be added at any digit level; the higher the level of exception, the more restrictive the rule becomes.

Example 13: CTCex, North American Free Trade Area (NAFTA)

HS heading

No. Description of product

Working or processing carried out on non-originating materials that confers originating status

4016.93 Gaskets, washers and other seals

A change to subheading 4016.93 from any other heading, except from headings 40.09 through 40.17

2825.70 Molybdenum oxides and hydroxides

A change to subheading 2825.70 from any other subheading, except from subheading 2613.10.

The CTH rule for subheading HS 4016.93 is further restricted by not allowing materials from headings HS 4009 through HS 4017, which reduces the number of materials from which the

producer can source. Again, the higher the level of classification of the exception (chapter, heading and subheading level), the more number of materials that are prohibited, increasing the restrictiveness of the rule.

3.3.3.5. Positive exception

There is another case in which the main CTC rule can have an exception, although in this case used to relax the application of the rule (CTC+). These rules are drafted so as to allow materials of the same family as the ones prohibited by the main rule.

Example 14: CTC+, EU-Egypt FTA

HS heading No.

Description of product

Working or processing carried out on non-originating materials that

confers originating status

Ex Chapter 29

Organic chemicals; except for:

Manufacture from materials of any heading, except that of the product.

However, materials of the same heading as the product may be used, provided that their total value does not exceed 20 % of the ex-works price of the product

ex 8211

Knives with cutting blades, serrated or not (including pruning knives), other than knives of heading 8208

Manufacture from materials of any heading, except that of the product.

However, knife blades and handles of base metal may be used

In the examples above, although the requirement is a CTH, a change from that particular heading would also confer origin under certain circumstances, even if it belongs to the same heading as the product in question. In the first case, the condition to use materials from the same heading is to comply with an MC requirement. In the second example there is no limitation, but only certain products are allowed freely.

The types of rules described above are the most common in origin protocols. However, rules may be drafted so as to combine in at least 70 different ways.⁵⁰

50 See Chapter 4 for an illustrative list of different types of rules.

3.4. Regime-wide RoO

The rules described so far affect only the good concerned. Each good has to meet them to become originating. RoO specific rules are always complemented by a series of provisions that apply to the entire universe of products (or to most of them, depending on eventual exceptions). These all-product provisions are known as regime-wide RoO. Any aspect contained in the FTA agreements or origin protocols that affect the determination of origin of the ensemble of products is a regime-wide RoO. They deal with a whole range of issues, from the treatment received by parts or accessories to the penalty received by an exporter submitting a fraudulent proof of origin.

There are a number of regime-wide provisions that have attracted most of the literature on RoO, namely cumulation, de minimis, and to a lesser extent certification procedures, the absorption principle and prohibition of duty drawback.⁵¹ Here, I concentrate on the first four, as the prohibition of duty drawback is an aspect that goes beyond the determination of origin.