RULES OF ORIGIN: I. Rules of Origin Flashcards
Are sets of principles to determine the economic content and nationality of a product.
Rules of Origin (ROO)
Used to ascertain the origin of a good.
Rules of Origin (ROO)
Other uses of ROO
- to implement the measure and instruments of commercial policy, such as anti-dumping duties and quotas
- to determine whether imported products shall be subjected to MFN or preferential treatment
- for purposes of trade statistics and issuance of certificate of origin
- for the application of labelling and marking requirements
- for public procurement
- for process patent
types of ROO
Non-preferential ROO
Preferential ROO
used to implement measures and instruments of commercial policy, such as quotas, anti-dumping, safeguards, subsidy, anti-circumvention, trade statistics, origin labelling and marking.
Non-preferential ROO
used to establish whether a product is qualified for preferential tariff treatment; they are an integral component of international trading arrangements, whether regional or bilateral, to ensure that only qualified goods are accorded preferential duties
Preferential Duties
refers to the country where a product is obtained, produced or manufactured.
Rules of Origin
T/F
Some products clearly originated in a given country. But in today’s world characterized by global production chain, other manufactured goods not only used materials originating from other countries but also undergo processing or assembly in multiple countries.
True
refers to a product occurring naturally within a country and to a good made entirely from said product. For this typed of good, origin is obviously derived from the country from which the good is obtained.
Wholly Obtained
this requires that a good be transformed into a new and different article having a distinctive name, character or use. Under the rule, a good is a product of the country where it last underwent substantial transformation.
substantial transformation
Under the ATIGA, what categories of products are considered wholly obtained in the exporting country?
i. agricultural products harvested there;
ii. animals born and raised there;
iii. products obtained from animals referred to (ii) above;
iv. products obtained from hunting or fishing;
v. products obtained of sea fishing and other products taken from the sea by its vessel;
vi. products made on board its factory ships exclusively from the products referred to in (v);
vii. mineral products extracted from its soil or its seabed;
viii. used articles collected there fit only for the recovery of raw materials
ix. waste and scrap resulting form manufacturing operations conducted there;
x. products obtained there exclusively from the products specified in (i) to (ix) above.
what are the 3 major rules applied in substantial transformation?
a. Regional Value Content (RVC) Requirement
b. Change in Tariff Classification Criteria
c. Specific Process Rule
T/F
In Regional Value Content (RVC) Requirement. Value added can be expressed either as a minimum value-added content expressed as a percentage of total product cost, or a maximum allowable cost percentage assigned to the value of imported material including those of undermined origin.
True
Change in Tariff Classification Criteria includes?
- change in chapter (CC)
- change in tariff heading (CTH)
- change in tariff subheading (CTSH)
- change in tariff subheading split (CTSHS)
implies that for origin to be conferred, the non-originating material used to produce a good should be classified outside the HS Chapter (2-digit level) where the final good whose origin is being determined is classified.
Change in Chapter (CC)
connotes that to obtain origin, the non-originating material used to produce a good should have been classified in a tariff heading (4-digit level) outside the heading where the good under consideration is classified.
Change in Tariff Heading (CTH)
suggests that to obtain origin, the non-originating material used for the good under consideration must come from a subheading (6-digit level) other than the subheading where the good in question is classified.
Change in Tariff Subheading (CTSH)
same effect as change in tariff subheading except that an existing HS subheading is split into two or more tariff lines.
Change in Tariff Subheading Split (CTSHS)
T/F
In Specific Process Rule, Some goods are required to meet special product specific rules in the exporting FTA party. In many cases, these rules specify a process that must be undergone in order for a good to be considered originating.
True
2 methods used in determination of RVC
a. Direct/Build-up Method
b. Indirect/Build-down Method
The sum of the value of originating materials, overhead cost and profit is divided by the free-on-board value of the finished product; for a good to be considered originating, a value equal to or higher than the RVC requirement must be obtained.
Direct/Build-up Method
The sum of the value of non-originating imported materials, parts and components including those of unknown origin is divided by the free-on-board value of the finished good; for a product to be considered as originating, the resulting value should be less than the value of “1 minus the RVC requirement”
Indirect/Build-down Method
T/F
In ASEAN FTAs, goods produced in an FTA Party which comply with origin requirements and are subsequently used in another FTA Party as input or material to produce a finished good shall be considered as originating in the FTA Party where working or processing of the finished product has taken place. As a result, the use of originating goods as inputs or materials in the production of another good can be counted towards satisfying the finished product’s origin requirements.
True
inputs used in production, but do not form part of a good. These materials are considered originating regardless of origin.
Indirect Materials
fuel; tools, dies and moulds; lubricants, greases, compounding materials and other similar goods; gloves, glasses, footwear, clothing, safety equipment and supplies for any of these things; and catalyst and solvents are examples of __________________________
Indirect Materials
Accessories, spare parts and tools imported with originating goods are treated as originating regardless of their actual origin if?
i. the accessories, spare parts and tools are not invoiced separately from the originating good that they are imported with
ii. the quantities and value of the accessories, spare parts and tools is customary for the imported good.
T/F
If goods are packaged for retail sale, and the packaging material or container in which the goods are packed for retail sale is classified with the goods in accordance with HS General Interpretative Rule 5, then the packaging material or containers are not required to meet the change in tariff classification requirement of the product specific rule that the originating good has to meet. However, the costs of these materials and containers would be added in case the RVC is applied.
True
what are the other rules that may be applied in determining the country of origin of a product?
a. Exception Rule
b. Alternative Rule
c. Supplementary Rule
d. Residual Rule
This rules provides exceptions to the change in tariff classification criteria (e.g., CC, CTH, or CTSH).
Exception Rule
conferment of origin under the two different circumstances, eg., wholly obtained or change from youth to maturity (live horses)
Alternative Rule
These are requirements, which could be 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.
Supplementary Rule
This is to cover those goods to which the specific rules will not apply
Residual Rule
“de minimis” in ROO
when total value of all non-originating materials which do not satisfy the change in tariff classification requirement does not exceed a set percentage (usually ranging from 7% to 15%) of the Free-on Board value of the final good.
what are the process that do not confer origin?
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 packaging, breaking up, and assembling of consignment;
d. simple, slicing, cutting, re-packing or placing in bottles, flasks, bags, boxes, and all other simple packing operations;
e. affixing of marks, labels or other like distinguishing signs on products or their packaging;
f. simple mixing 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
T/F
Certificate of Origin is a declaration of the exporter, certified by the issuing authority (BOC in the case of a Philippine exporter), that the exported product complies with the origin requirement as specified under a bilateral, regional, or multilateral trading arrangement.
True
T/F
In the same way that the passport is an evidence of the nationality of a person, the CO is an evidence of the economic nationality of a product that must be presented by Philippine importers to BOC for them to avail of preferential tariff rates
True
2 kinds of CO
non-preferential treatment
preferential treatment
Implications of origin conferment to industry
- cheaper imported input costs
- greater price advantage on exports
- wider access to foreign markets
