The Pan-Euro-Mediterranean Cumulation of Origin Achim Seiler, Trade Consultant and Capacity Building Specialist EU-Project: Trade and Private Sector Development (TPSD) TPSD is implemented by in cooperation with and

Table of Contents Key aspects What is origin ? What is cumulation ? Bilateral Diagonal Regional Full Structure of the origin protocols Examples of cumulation

Key aspects Originating status Cumulation Minimal operations General tolerance rule No-drawback rule Principle of territoriality Direct transport rule Proof of origin Approved exporter

What is Origin? Origin is the economic nationality of goods traded in commerce a) Non-preferential origin b) Preferential origin

What is Origin ? (2) Non-preferential Origin Non-preferential origin merely confers an „economic“ nationality on goods and does not confer any benefit on them. Country where goods have been wholly obtained Country of last, substantial, economically justified working or processing

What is Origin ? (3) Preferential Origin Preferential origin confers certain benefits on goods traded betweeen countries that have agreed such an arrangement, usually entry at a reduced rate or free of duty. a) Country where goods have been wholly obtained Country of sufficient working or processing according to the list rules of the protocols Country where originating materials have been (ac)cumulated

Cotton Cotton Cotton Fibre Fibre Fibre Yarn Yarn Yarn Fabric Fabric Garment Garment Garment Wholly obtained List rules fulfilled Non originating

Cotton Cotton Cotton Fibre Fibre Fibre Yarn Yarn Yarn Fabric Fabric Garment Garment Garment Non originating Cumulation Cumulation

Originating since wholly obtained. No cumulation needed Non-originating originating Non-originating originating Originating originating Originating Originating since wholly obtained. No cumulation needed Originating since list rules fulfilled. No cumulation needed

List rule not fulfilled, but cumulation Non-originating Non-originating Non-originating Non-originating Originating A Non-originating A Originating B Non-originating B List rule not fulfilled, but cumulation Non-originating. List rules not fulfilled. No cumulation possible

List requirements Value percentage: the value of non-originating materials must not exceed a certain percentage of the ex-works price of the finished product Change of tariff heading: non-originating raw materials or components used must have a different HS heading from the HS heading of the finished product Specific rules: very specific criteria laid down

Processing Status Cumulation Country of Origin Wholly obtained No A B Sufficient working No A B C Last working Yes A B C Minimum or less Yes (A) (B) C No processing Yes A B C No Pan-Euro-Med No A B C

What is cumulation? Cumulation is a system that allows contracting parties to use originating products from each other Cumulation allows for originating materials and components to be further processed into a final product abroad without them loosing their initial originating status after exportation (absorption of originating status) Cumulation means that products that have obtained originating status in one partner country my be used with products originating in another partner country without prejudice to the preferential status of the finished product

Types of cumulation (1) Bilateral Cumulation Diagonal Cumulation Full Cumulation Regional Cumulation

Types of cumulation (2) a) Bilateral cumulation Bilateral cumulation operates between two countries where a free trade agreement contains provisions allowing them to cumulate origin. Only originating products or materials can benefit from it.

Bilateral Cumulation (3) EEC CH EEC-Origin (Minimal) Treatment EEC CH CH-Origin EEC CH

Bilateral Cumulation (4) EEC-Origin CH CH-Processing TREATMENT CH CH-Origin EEC CH

Types of cumulation (5) b) Diagonal cumulation Diagonal cumulation operates between more than two countries provided they have Free Trade Agreements containing identical origin rules and provision for cumulation between. As with bilateral cumulation, only originating products or materials can benefit from diagonal cumulation.

Diagonal Cumulation (6) China EEC 40% CH Non-Originating EEC CH

Diagonal Cumulation (7) Morocco Morocco 40% CH Originating MC CH

Diagonal Cumulation (8) EEC EEC 40% CH Originating EEC CH

Diagonal Cumulation (9) Morocco EEC 40% CH Originating EEC CH MC EEC MC CH

Diagonal Cumulation (10) Cumulation can only be applied if the countries of final manufacture and of final destination have concluded free trade agreements, containing identical rules of origin, with all the countries participating in the acquisition of originating status, i.e. with all the countries from which all the materials used originate. Materials originating in the country which has not concluded an agreement with the countries of final manufacture and of final destination shall be treated as non-originating

Diagonal Cumulation (11) EEC CH 01.01.2006 01.12.2005 MA EEC 01.03.2005 MA CH

Diagonal Cumulation (12) Diagonal Cumulation after 01.01.2006 Morocco EEC 40% CH Originating EEC CH MC EEC MC CH

Diagonal Cumulation (13) NO Diagonal Cumulation Before 01.01.2006 Morocco EEC 40% CH Non-Originating EEC CH MC EEC MC CH

Regional Cumulation Regional cumulation is a form of diagonal cumulation, which only exists under the Gneralised System of Preferences (GSP) and operates between members of a regional group of beneficiary countries (e.g. ASEAN)

Full Cumulation Full cumulation means that all operations carried out in the respective cumulation zone are taken into account when assessing the final origin. It does not require that the goods in one of the partner countries be originating before being exported for further working or processing in other partner countries but it does require that all the working or processing necessary to confer origin is carried out on the product

List rule not fulfilled, but cumulation with originating materials Non-originating Non-originating Non-originating Non-originating Originating A Non-originating A Originating B Non-originating B List rule not fulfilled, but cumulation with originating materials Processing of non-originating materials cumulated. List rule fulfilled.

Structure of the Origin Protocols Title I General provisions Title II Definition of „originating products“ Title III Territorial requirements Title IV Drawback or exemption Title V Proof of origin Title VI Administrative cooperation Title VII Ceuta and Melilla Title VIII Final provisions

Examples (A) France Morocco EEC Wood felled in France is imported into Germany (EC), where it is manufactured into chemical pulp, using only chemical products originating in the Community. The product is wholly obtained in the EC

Examples (B) Mali Morocco EEC Cotton yarn from Mali is imported into Portugal (EC), where it is woven and used for the production of shirts. List rules are fulfilled. The product is originating in the EC

Examples (C) Mali Morocco EEC Cotton fabric from Mali is imported into Portugal (EC), where it is used for the production of shirts which are then exported to Morocco. List rules are not fulfilled. The product has no EC origin

Examples (D) Egypt Morocco EEC Cotton yarn from Egypt is imported into Portugal (EC), where it is used for the production of fabric which is then exported to Morocco. List rules are fulfilled. The product is originating in the EEC

Examples (E) Egypt Morocco EEC Cotton fabric from Egypt is imported into Portugal (EC), where it is used for the production of shirts which are then exported to Morocco. List rules are not fulfilled. Cumulation necessary and possible. The product has EC origin

Examples (F) Morocco Algeria EEC Cotton fabric from Morocco is imported into Portugal (EC), where it is used for the production of shirts which are then exported to Algeria. List rules are not fulfilled. Cumulation necessary, but not possible. The product has no EC origin