Share Yeenl Document Research Material Matrade Rules Of Origin Of Fta

RULES OF ORIGINFOR FTA

MALAYSIA – PAKISTANMALAYSIA – JAPAN

ASEAN – CHINAASEAN – KOREA

MATRADE MATRADE12 OCTOBER 200612 OCTOBER 2006

Content

Background:- Definition of ROO- Origin criteria- Important concepts

Malaysia - Pakistan FTA (MPFTA) Malaysia - Japan FTA (MAJEPA) ASEAN - China FTA (ACFTA) ASEAN - Korea FTA (AKFTA) Operational Certification

Procedures (OCP)

ROO DefinitionROO Definition

The The criteriacriteria used to determine used to determine the the countrycountry in which the in which the goodgood has has been been producedproduced or or manufacturedmanufactured..

The The basisbasis used for used for internationalinternational trade purposestrade purposes..

Becoming Becoming more complexmore complex since since more more goods are produced from goods are produced from inputsinputs/ / materialsmaterials coming from coming from multiplemultiple originsorigins..

Determine whether a good qualifies for preferential treatment under a trading arrangement (FTA).

Ensure benefits are limited to products originated from the contracting parties.

Preserve (increase) existing external protection of countries within the

FTA.

Why We Need ROO?Why We Need ROO?

Goods that meet the conditions for preferential market access.

All other goods are called the non-originating goods.

Originating GoodsOriginating Goods

Wholly obtained or produced

Substantial Transformation (ST):

- Value added (VA) method

- Change in Tariff Classification (CTC)

- Specified Process of Manufacture

Origin CriteriaOrigin Criteria

Wholly Obtained Goods

Originate entirely within the exporting country. Includes:

- live animals born and raised in that country;- animals obtained by hunting, trapping, fishing, gathering or capturing in that country;

- products obtained from live animals;- plants and plant products harvested, picked or gathered in that country;- products of sea-fishing and other products taken from the sea outside a country;- goods obtained or produced on board factory ships;

…..wholly Obtained Goods

Products taken from the sea-bed or subsoil beneath the sea-bed outside a country;

Minerals and other naturally occurring substances;

Scrap and waste derived from manufacturing or processing operations or from consumption in that country and fit only for disposal or for the recovery of raw materials; and

Goods obtained or produced in that country solely from products referred to above

A product has undergone sufficient working or processing in the exporting country and has been transformed into a new and different article.

ST can be measured through:- Value added (VA)/test of origin

method;

- Change in Tariff Classification (CTC);

- Specified Process of Manufacture;

- Combinations of the above;

Substantial TransformationSubstantial Transformation

Value-added Method

Defines the degree of transformation required in terms of:

- minimum percentage of value that must come from the originating country; or

- maximum amount of value that come from the use of imported parts and materials.

Methods for calculating VA:- net-cost method- ex-factory method- FOB-based (transaction value)

…… Value-added Method

The results of the calculation is called:- Local/Regional Value Content (RVC) or- Qualifying Value Content (QVC)

Examples:

- CEPT/AFTA: 40%; - ASEAN-China FTA: 40%- NAFTA: 50-60%- Singapore-Japan FTA: 60%

Net-cost methodNet-cost method

RVC = RVC = x 100x 100

– RVC is the regional value content of a good (%);RVC is the regional value content of a good (%);

– VNM is the value of non-originating materials used VNM is the value of non-originating materials used by the producer in the production of the goods; by the producer in the production of the goods; andand

– NC is the total cost occurred in respect of all goods NC is the total cost occurred in respect of all goods produced by a producer, minus any costs related produced by a producer, minus any costs related to sales promotion, marketing, after-sales service, to sales promotion, marketing, after-sales service, packaging shipping, etc.packaging shipping, etc.

NC – VNM

NC

where

CEPT Local CEPT Local ContentContent

Calculation of 40% local contentCalculation of 40% local content

Value of importedValue of imported Value of undeterminedValue of undeterminednon-ASEAN materials, +non-ASEAN materials, + origin materials, partsorigin materials, parts

parts or produce parts or produce or produce or produce

________________________________________ x 100% ________________________________________ x 100% << 60 60

FOB PriceFOB Price

Change in Tariff ClassificationChange in Tariff Classification(Tariff shift rule)(Tariff shift rule)

Determine the origin of good by specifying the CTC of the Harmonised System of Tariff Nomenclature (HS)

ST occurred if a good obtained is classified in a different tariff classification than that of its non-originating inputs used in the process

CTC can occur at:- Chapter level (CC): 2 digit HS- Heading level (CTH): 4 digit HS- Sub-heading level (CTSH): 6 digit HS- Split heading/sub-heading

Specified Process of Manufacture Defines certain manufacturing or

processing operations that a product must undergo in the exporting country to confer origin (positive test).

Or, specifying manufacturing/processing procedures that do not confer origin (negative test).

Often used in conjunction with CTC and/or VA methods.

Widely applied for textiles & clothing and chemical products.

Products Specific Rules

Product Specific Rule or PSR is applicable to certain goods due to:

- inability of the product to meet the general rule;

- requirement for flexible rule; or

- sensitivity of the products that requires stringent rule.

Cumulation Tolerance or De Minimis Absorption principle Neutral elements Packing and packaging Accessories, parts and tools Interchangeable goods/materials Minimal operations and processes

Important ConceptsImportant Concepts

CumulationCumulation

InputsInputs originating in originating in other countriesother countries which which are are membersmembers of the of the regional associationregional association

are are regardedregarded as as domestic inputdomestic input..

Types: Types: -- bilateralbilateral-- diagonaldiagonal

-- full cumulationfull cumulation

ROO: 50% local contentROO: 50% local content

Country ACountry A Country BCountry B Country CCountry C Country DCountry DMaterials 20 % LC 30% LC Donor country

Tolerance or De MinimisTolerance or De Minimis

Rules that Rules that allowallow certain percentagecertain percentage of of non-non-originating materialsoriginating materials to be used to be used without without affectingaffecting the the originorigin of the of the final productfinal product..

The rule applies to The rule applies to CTCCTC and and specific specific manufacturing processmanufacturing process but but not affectnot affect the the value added rulevalue added rule..

Absorption PrincipleAbsorption Principle

PartsParts and and materialsmaterials which have which have acquired acquired originating statusoriginating status by satisfying the by satisfying the relevant ROO for that product relevant ROO for that product can be can be treatedtreated as being of as being of domestic origindomestic origin in any in any further processingfurther processing and and transformationtransformation..

Neutral elementsNeutral elements

The The originorigin of the of the powerpower and and fuelfuel, , plantplant and and equipmentequipment, including , including safety equipmentsafety equipment, or , or machinesmachines and and toolstools used to obtain a goodused to obtain a good or the or the materialsmaterials used in its manufacture used in its manufacture which which do not remaindo not remain in the goodin the good or or form form partpart of the good of the good shall not be taken into shall not be taken into accountaccount..

Packing and Packaging MaterialsPacking and Packaging Materialsand Containersand Containers

The origin of The origin of packingpacking and and packaging packaging materialsmaterials and and containerscontainers presentedpresented and and classifiedclassified with the goodswith the goods shall be shall be disregardeddisregarded..

Accessories, Spare Parts and Accessories, Spare Parts and ToolsTools

To be To be disregardeddisregarded when when sold therewithsold therewith and and correspondcorrespond, in , in kind and numberkind and number, to , to the the normal equipmentnormal equipment thereof. thereof.

Minimal Operations and Processes

Operations or processes undertaken, by themselves or in combination with each other for the purposes listed below, are considered to be minimal and shall not be taken into account in determining whether a good has been wholly obtained in one country:

ensuring preservation of goods in good condition for the purposes of transport or storage;

facilitating shipment or transportation; packaging or presenting goods for sale;

MALAYSIA-PAKISTAN FTAMALAYSIA-PAKISTAN FTA(MPFTA)(MPFTA)

Malaysia - PakistanMalaysia - Pakistan

Interim ROO for the Early Harvest Programme (EHP)

Origin criteria:- Wholly obtained or produced- 40% value content (single/cumulative)

Cumulation: Aggregate Malaysia-Pakistan FTA content on final product must not be less than 40%.

Specific rules for selected products:

- textiles and textile products- jewellery

FormulaFormula for calculating the Regional Value for calculating the Regional Value Content (Content (RVC)RVC)

Value of Non Value of Non Value of materialsValue of materials

Malaysia-PakistanMalaysia-Pakistan ++ of undetermined of undetermined FTA materialsFTA materials origin origin x 100% x 100%

< 60% < 60%

FOBFOB

Malaysia-PakistanMalaysia-Pakistan


PODUCT SPECIFIC RULESPODUCT SPECIFIC RULES

Textiles and textile productsTextiles and textile products

One processOne process rule: rule:- spinningspinning- weavingweaving- bleachingbleaching- dyeingdyeing- printingprinting- finishingfinishing

Jewellery Jewellery

Change in tariff heading (Change in tariff heading (CTHCTH))

Minimal operationsMinimal operations and processes and processes Ensuring preservation of goods in good Ensuring preservation of goods in good

condition for the purposes of transport condition for the purposes of transport or or storage.storage.

Facilitating shipment or transportation.Facilitating shipment or transportation.

Packaging or presenting goods for sale Packaging or presenting goods for sale (This (This excludes encapsulation which is excludes encapsulation which is termed termed packaging by the electronics packaging by the electronics industry).industry).



Example of PSR

5208.11.000 - Unbleached: Plain weave, weighing not more than 100 g/m2:

“A change to heading 52.08 through 52.12 from any heading outside that group, provided that the fabric is undergone one or more of the preparatory or finishing operations.”


Example of PSR

5509.11.000 - Containing 85% or more by weight of polyester staple fibres: Single

yarn:

“A change to heading 55.09 from any heading outside that group, except from heading 50.04 through 50.06, 51.06 through 51.10, 52.03 through 52.07, 54.01 through 54.06 or 55.06 through 55.11.”

Malaysia - PakistanMalaysia - Pakistan 5516.12.000 - Woven fabrics of artificial

staple fibres: Dyed

“A change to heading 55.16 from any heading outside that group” or,

“A change to heading 55.16 from heading 50.04 through 50.06, 51.06 through 51.10, 52.04 through 52.07, 53.06 through 53.08, 54.01 through 54.06 or 55.08 through 55.11, provided that the fabric is dyed or printed, undergone one or more of the preparatory or finishing operations”; or

“A change to heading 55.16 from heading 50.04 through 50.06, 51.06 through 51.10, 52.04 through 52.07, 53.06 through 53.08, 54.01 through 54.06 or 55.08 through 55.11, provided that the yarn is dyed prior to weaving the fabric, undergone one or more of the preparatory or finishing operations.”

Malaysia - PakistanMalaysia - Pakistan

Example of PSR

7113.11.000 - Of precious metal whether or not plated or clad with precious metal: Of silver, whether

or not plated or clad with other precious metal:

“A change to heading 7113 from any other headings.”

MALAYSIA-JAPAN FTAMALAYSIA-JAPAN FTA(MAJEPA)(MAJEPA)

Malaysia - JapanMalaysia - Japan

Origin criteriaOrigin criteria:: Wholly obtainedWholly obtained or produced or produced 40% Value Content40% Value Content oror CTSHCTSH

Cumulation: Cumulation: for for certain productscertain products allows allows for for cumulationcumulation from from ASEAN ASEAN countriescountries..

Specific rulesSpecific rules for for selected productsselected products:: textiles and clothingtextiles and clothing agriculture and processed agricultural agriculture and processed agricultural productsproducts

leather and footwear productsleather and footwear products cementcement

FormulaFormula for calculating the for calculating the RVCRVC

FOB - Value of Non-originating MaterialFOB - Value of Non-originating Material x x 100%100%

FOBFOB


Malaysia-JapanMalaysia-Japan Refrigerator:Refrigerator:

Part A (Japan)Part A (Japan) -- US$ 200US$ 200

Part B (Japan)Part B (Japan) -- US$ 100US$ 100

Part C (China)Part C (China) -- US$ 200*US$ 200*

Part D (India)Part D (India) -- US$ 200*US$ 200*

Other Costs (N/A) Other Costs (N/A) -- US$ 300US$ 300

FOB PriceFOB Price -- US$1,000US$1,000

US$1,000- US$400*US$1,000- US$400* x 100 = 60% x 100 = 60%

US$1,000US$1,000

The product (refrigerator) qualifies as an The product (refrigerator) qualifies as an originating good.originating good.


PRODUCT SPECIFIC RULESPRODUCT SPECIFIC RULES

Textiles and clothing

Two process rule:- spinning- weaving- bleaching- dyeing- printing- finishing

Flexibility – one of the processes could be done within the ASEAN countries.


Agriculture and processed agricultural products (Chapter 1 -21)

Exclusive wholly obtained or

Chapter Change (CC) with allowable

cumulation from ASEAN countries. Leather and footwear products

(Chapters 41, 43 and 64)

Exclusive wholly obtained.


Cement (Chapter 25)

Cement clinkers and portland

cement – change in tariff

heading (CTH)

Other white cement – change in

tariff subheading (CTSH)

De Minimis : A good that does not undergo a change in tariff classification (CTC) shall be considered as originating if:

if the value of non-originating materials (NOM) does not exceed 10% of the FOB value of the good; or

for textiles and apparel, if the weight of NOM does not exceed 7% of the

total weight of the product.



Example of PSR

Chapter 52 - Cotton

“A change to heading 52.04 through 52.07 from any heading outside that group, provided that, where non-originating materials of heading 52.03 are used, each of the non-originating materials is carded or combed in the territory of either Country or a third state which is a member country of the ASEAN.”


Chapter 61 - Articles of Apparel and Clothing Accessories, Knitted or Crocheted

“A change to heading 61.01 through 61.17 from any other chapter, provided that, where non- originating materials of heading 50.07, 51.11 through 51.13, 52.08 through 52.12, 53.09 through 53.11, 54.07 through 54.08, 55.12 through 55.16 or chapter 60 are used, each

of the non-originating materials is knitted or crocheted in the territory of either Country or a third State which is a member country of the ASEAN.”


1604.13 - Sardines, sardinella and brisling or sprats

“A change to subheading 1604.13 from any other chapter, provided that, where non- originating materials of chapter 3 are used, each of the non-originating materials is obtained by fishing in the territory of a third State which is a member country of the ASEAN or taken by vessels, which are registered in and sail under the flag of a third State which is a member country of the ASEAN, from the sea outside the territorial sea of that third State. ”


Chapter 41 - Raw Hides and Skins (Other than Furskins) and Leather:

“A change to heading 41.01 through 41.03 from any other chapter.”

ASEAN-CHINA FTAASEAN-CHINA FTA(ACFTA)(ACFTA)

ASEAN-ChinaASEAN-China

Based on CEPT ROO and OCP Origin criteria:

Wholly obtained or produced 40% Value Content

Cumulative incl. all ASEAN countries and China (excl. Hong Kong, Taiwan, Macau)

Specific rules for selected products: textiles productstextiles products preserved fish foodpreserved fish food leather goods and furskin productsleather goods and furskin products

footwearfootwear

Formula for calculating the RVC

Value of Non Value of Non Value of materialsValue of materials

ACFTA materialsACFTA materials ++ of undetermined of undetermined originorigin x x

100% < 60%100% < 60%

FOB PriceFOB Price



PSR – as the Only Rule Applicable to 6 wool and woven

products.

PSR for other products is being negotiated

Products (input) must be wholly obtained from within ACFTA.

40% Value Added or other rules cannot be applied for these

products


PSR – as the Alternative Rule

Applicable to 466 products covering:

- textiles and textiles products;- preserved fish food;

- leather goods, furskin products;

- footwear.

Exporters can choose whether to use 40% VA rule or alternative PSR.


The Alternative Rule is based on:

- specific process of manufacture for textiles and textiles products (adopted from CEPT ROO).

- Change of Tariff Classification (CTC) for other products, mostly Change of Tariff Heading (CTH).

Minimal operations and processes

Ensuring preservation of goods in good condition for the purposes of transport or storage.

Facilitating shipment or transportation.

Packaging or presenting goods for sale (This excludes encapsulation which is termed packaging by the electronics industry).


ASEAN-KOREA FTAASEAN-KOREA FTA(AKFTA)(AKFTA)

ASEAN-KoreaASEAN-Korea

Origin criteria: Wholly obtained or produced 40% RVC or CTH

Cumulative includes all ASEAN countries and Korea

Specific rules for selected products:

agriculture products textiles products process agricultural products Iron and steel automotive

Formula for calculating RVC

Built-up Method

RVC = Value of Originating Material x 100%

FOB Build-down Method

RVC = FOB - Value of Non-originating Material x 100%

FOB


ASEAN-KoreaASEAN-Korea PSR – as the Only rule

General rule of 40% RVC or CTH cannot be applied for these products

The rules are based on:- wholly obtained in a territory of

the exporting country- wholly obtained within AKFTA - process rule- Change in Tariff Classification at

various level: CC, CTH or CTSH- combination of RVC and/or CTC


Agriculture (Chapter 1 – 14) wholly obtained in the territory of the

exporting country except:

- 25 tariff lines - wholly obtained in the territory of any party

- 27 tariff lines – RVC at various % or CTC at various level.

Processed agricultural products (Ch 15 - 24)

RVC or CTC or combination of RVC and/or CTC


Textiles and clothing

Chapters 50 - 59: generally CTC or RVC 40%. Certain tariff lines require CTC accompanied by at least two preparatory or finishing operations.

Chapters 61 - 63 : CC provided that the good is both cut and sewn in the territory of any party.


Other industrial products(124 tariff lines)

RVC

CTC Combination of RVC and/or CTC

De Minimis : A good that does not undergo a change in tariff classification shall be considered as originating if:

if the value of NOM does not exceed 10% of the FOB value; or

for textiles and apparel, if the weight of NOM does not exceed 10% of the total weight of the product.



Example of PSR

0305.20 - Livers and roes of fish, dried, smoked, salted or in brine

“Wholly-Obtained or Produced in the territory of any Party.”


1604.16 - Anchovies

“Change to Subheading 1604.16 from any other Chapter, provided that the materials from Chapter 3 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 from Chapter 3 are Wholly-Obtained or Produced in the territory of any Party.”


51.05 - Wool and fine or coarse animal hair, carded or combed (including combed wool in fragments).

“Change to Heading 51.05 from any other Chapter; or A regional value content of not less than 40 percent of the FOB value of the good.”


61.04 - Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear) knitted or crocheted.

“Change to Heading 61.04 from any other Chapter, provided that the good is both cut and sewn in the territory of any Party; or A regional value content of not less than 40 percent of the FOB value of the good.”

OPERATIONAL OPERATIONAL CERTIFICATION CERTIFICATION PROCEDURESPROCEDURES

Certificate of Origin (CO) Form MPFTA for Malaysia-Pakistan

Form XX for Malaysia-Japan

Form E for ASEAN-China

Form AK for ASEAN-Korea

For export to ASEAN countries, exporters can choose to use either CEPT Form D or FTA’s Forms.

Advisable to use Form D, unless using other FTA Forms could render more benefits

Certificate of OriginCertificate of Origin

Application for the CO: MITI is the sole issuance authority Forms are available from FMM and its branches.

Pre-exportation verification to determine the origin of a product is

required prior to CO approval.

Result of the verification is valid for two years.


Claim for preferential tariff treatment Present the CO to Customs Authority

of the importing party. if there is reasonable doubt, Customs Authority of the importing party may request issuing authority of the exporting party to conduct retroactive check.

if not satisfied, the Customs Authority may conduct verification visit to the manufacturer’s premise in exporting country.



Time limit for presentation of CO

Normal Extension

Force Majeure

MPFTA 4 months

6 months Discretion

JMEPA 12 months

- -

ACFTA 4 months

6 months Discretion

AKFTA 6 months

- Discretion

Fraudulent ActFraudulent Act

Government Authorities concerned shall cooperate in the action to be taken in the territory of the respective Party against the persons involved.

Each Party is responsible to provide legal sanction for fraudulent acts related to a Certificate of Origin.

Share Yeenl Document Research Material Matrade Rules Of Origin Of Fta

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