RESTRICTED
WORLD TRADE G/RO/5
26April 1996
ORGANIZATION(96-1573)
Committee onRules ofOrigin
THIRD REPORT TOTHE COMMITTEE ONRULES OFORIGIN
Note bytheSecretariat
1. Inconformity withparagraph 2(c)(ii) ofArticle 9oftheAgreement onRules ofOrigin, the
Technical Committee onRules ofOrigin hassubmitted totheCommittee onRules ofOrigin itsThird
Report. TheReport pertains to:
(a) theexamination oftherequests raised bytheCommittee onRules ofOrigin atits
meetings on16November 1995 (G/RO/W/9) and1February 1996 (G/RO/W/11);
and
(b) thecommencement ofPhase IIoftheWork Programme fortheElaboration of
Harmonized Rules ofOrigin onthebasisofchange oftariffclassification, asacriterion
ofsubstantial transformation.
2. Theattached Report (WCO document 40.198) isherewith circulated toMembers.1
1TheviewsexpressedanddecisionsreachedconcerningPhaseIIoftheWorkProgramme (containedinAnnexes
totheReport oftheThird Session oftheTechnical Committee onRules ofOrigin) areavailable forconsultation
intheSecretariat (Market Access Division).G/RO/5
Page2
Brussels, 16April 1996
Dear Mr.Osakwe,
THIRD REPORT TOTHE COMMITTEE ONRULES OFORIGIN
Ihave thehonour toinform youthat, atitsThird Session heldinBrussels from 11to
22March 1996, theTechnical Committee onRules ofOrigin:
1. Examined therequests raised inyourletters of2January 1996 and1February 1996; and
2. Commenced Phase IIoftheWork Programme fortheelaboration ofHarmonized Rules of
Origin onthebasisofchange oftariffclassification, asacriterion ofsubstantial transformation.
With regard tothefirstpoint, examination ofyourrequests ledtothefollowing decisions:
(a) Re-examination ofthedefinitions 1(c),1(d)andformer 1(g)ofwholly obtained goods;
TheTechnical Committee concluded that,inorder toavoid theriskofmisinterpretation of
thesedefinitions, theNotes should beamended. Noamendments weremade tothedefinitions.
(b) Problem ofparts recovered from articles collected which cannolonger perform the
function forwhich theywere produced:
TheTechnical Committee didnotreach aconsensus onthismatter. Twoalternative textsfor
anewdefinition were placed insquare brackets foradecision bytheCommittee onwhich
alternative istobeadopted.
(c)(i) Legal status oftheExplanatory Notes relating tothedefinitions ofwholly obtained
goods:
TheTechnical Committee reviewed andamended thewording oftheNotes toreflect theirlegal
status.
(ii) Legal nature oftheExplanatory Notes relating tominimal operations orprocesses:
Thedefinitions ofminimal operations orprocesses willonlybefinally adopted attheendof
theWork Programme. TheTechnical Committee willre-examine theNotes tomake them
legally binding, astheharmonization work develops.
Theviews expressed andthedecisions reached onthese points (a),(b)and(c)above are
reproduced inAnnexes 1and2tothisReport.
(d) General format establishing theoverall architectural design oftheAnnex provided for
inArticle 9.4oftheAgreement onRules ofOrigin:
TheTechnical Committee approved theattached framework forinformation oftheCommittee
onthestatus ofwork inprogress onthisissue.
Forthetimebeing, thisframework comprises:G/RO/5
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- Eight Articles provisionally titled:
Scope ofApplication; TheHarmonized System; Definitions; Determination ofOrigin;
Residual Rules ofOrigin; Minimal Operations orProcesses; Special Provisions; DeMinimis .
- Three Appendices:
-Appendix 1:wholly obtained goods;
-Appendix 2:product rules -substantial transformation;
-Appendix 3:minimal operations orprocesses.
Itshould alsobenoted thatthesequential presentation oftheHarmonized Rules ofOrigin was
agreed bytheTechnical Committee onRules ofOrigin asaworking model. Theviews expressed
andthedecisions reached onthearchitectural framework arereproduced inAnnexes 3,4and5to
thisReport.
With regard toharmonization oftheRules ofOrigin onthebasis ofthesubstantial
transformation-changeintariffclassificationcriterion,theTechnicalCommitteeexaminedChapters25,
26,27,41,42,43,72and73oftheHarmonized System Nomenclature.
Forsome products theTechnical Committee decided thatimportant issues hadbeenraised that
should bestudied further. TheTechnical Committee agreed thatrulesforthese products andproduct
sectors would beexamined laterinPhase II.
OriginRuleselaboratedonthebasisofchangeintariffclassificationwereagreedfortheproducts
ofheadings 27.04, 27.05, 27.06, 41.08, 41.11, 42.06, 4302.11-4302.19, 4302.20, 72.01, 72.02, 72.03,
72.06, 72.18, 72.24, 73.02, ex73.03, ex7305.11-ex 7305.19, 7305.20-7305.90, ex7306.10,
7306.20-7306.90, 73.07, 73.09, 73.10, 73.11, 73.13, 7314.12-7314.41, 73.19 and73.20.
Theviews expressed anddecisions reached concerning Phase IIoftheWork Programme are
reported atAnnexes C1andC2,D1andD2andE1andE2totheReport oftheThird Session ofthe
Technical Committee onRules ofOrigin, acopyofwhich isenclosed foryourinformation.2
Thefinalresults oftheharmonization ofRules ofOrigin onthebasis ofthesubstantial
transformation -change intariff classification criterion willbenotified totheCommittee attheend
ofPhase IIoftheWork Programme.
Yours sincerely,
R.Janeczko
Chairman
Mr.Chiedu Osakwe
Chairman
Committee onRules ofOrigin
World Trade Organization
2Available forconsultation intheSecretariat (Market Access Division).G/RO/5
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ANNEX 1
AGENDA ITEM IV(b) Requests from theCommittee onRules of
Origin concerning theharmonized definitions
ofgoods thataretobeconsidered asbeing
wholly obtained inonecountry
Reference document 39.844
Texts adopted reproduced in Annex 2
VIEWS AND DECISIONS OFTHE TECHNICAL COMMITTEE ONRULES OFORIGIN
1. TheCommittee onRules ofOrigin hadsentsome requests concerning theresults ofPhase
IoftheHarmonization Work Programme which hadbeenincluded intheFirstReport oftheTechnical
Committee toGeneva.
2. Theviews oftheCommittee werereported inAnnexes CandDtodocument 39.844, prepared
forItemII(c)oftheAgenda forthissession. TheReport ondiscussion ofAgenda ItemII(c)canbe
found atparagraphs 16-18 inthemain body ofthisReport.
Secretariat note:
Thetextsapproved bytheTechnical Committee following examination oftherequests from
theCommittee arereproduced inAnnex 2.Itistobenoted thatasaresult ofdecisions by
theCommittee andofthefurther work during thissession oftheTechnical Committee certain
definitions havebeenrenumbered. Forexample, former definition 1(g) ("Goods obtained
orproduced inthatcountry solely from products referred toin(a)-(f)above") hasbeen
renumbered as1(i)inAnnex 2.
3. Therequests concerned:
I. Definitions 1(c),1(d)and1(i)(formerly 1(g));
II. theorigin ofrecovered parts;
III. legally binding notes tothedefinitions.
I. Definitions 1(c),1(d)and1(i)(formerly 1(g)*
4. TheCommittee hadexamined thedefinitions forwholly obtained goods andinformed the
Technical Committee thatithadreached thefollowing conclusions:
"Asconcerns theterm"plant products" indefinition 1(d), itwasobserved thatthis
could bemisinterpreted as"products made from aplant" asopposed to"products obtained
*Theformer definition 1(g)isreferred tohereafter inAnnex 1andAnnex 2asdefinition 1(i)asaresult
ofdecisions bytheCommittee andofthefurther work during thissession oftheTechnical Committee.G/RO/5
Page5
fromaplant", andtherefore, anyproducts manufactured fromplants could beregarded asbeing
wholly obtained, regardless ofwhere theplanthascome from. According tothisobservation,
theword "obtained" indefinition 1(g)* might make thedefinition 1(c)andtheterm"plant
products" indefinition 1(d)redundant, andapossible solution tothismisinterpretation might
betodelete definition 1(c)andtheterm"plant products" indefinition 1(d). However, another
observation wasthatdifferent products were covered bythedefinitions 1(c)and1(g).* As
anexample itwasmentioned thatoneoftheproducts covered bydefinition 1(c)was"wool"
asillustrated intheExplanatory Note, while definition 1(g)*might include products made from
"wool".
"Another observation concerning definition 1(g)* wasthatiftheterm"solely" was
interpreted literally, thismight beinconsistent withdefinition 2inAnnex BtotheReport."
5. TheTechnical Committee examined thepossibility ofmisinterpretation ofdefinitions 1(c),1(d)
and1(i)astheyapply togoods wholly obtained from liveanimals andtoplant products.
6. Accordingtodefinition1(c),"Productsobtainedfromliveanimalsinthatcountry",theTechnical
Committee understood that,forexample, milkwould beconsidered aswholly obtained inthecountry
inwhich thecowwasmilked. Theproposed deletion ofdefinition 1(c)would produce theresult that
theorigin ofthemilkasawholly obtained good would bedetermined under definition 1(i): "Goods
obtained orproduced inthatcountry solely from products referred to(a)-(h)above". Thiswould
introduce anadditional requirement thattheorigin ofthemilkasawholly obtained good would be
dependant onwhether thecowwasalsowholly obtained inthesamecountry under definition 1(a)"Live
animals bornandraised inthatcountry". TheTechnical Committee understood thatitwasnotthe
intention oftherequest from theCommittee tochange thescope ofthedefinitions inthisway. The
Technical Committee concluded thatdefinition 1(c)should beretained.
7. Toavoid anypossible misinterpretation ofthedifference between thecoverage ofdefinition
1(c)anddefinition 1(i)itwasagreed thatanamendment would bemade tothelegally binding note
todefinition 1(c)toinsert thewords "without further processing". Itwasalsoagreed toextend the
listofproducts forclarity. Thenoteasamended andapproved would readasfollows, thenewtext
isunderlined:
"Definition1(c)coversproductsobtainedfromliveanimalswithoutfurtherprocessing,including
milk, eggs, natural honey, hair,wool, semen anddung."
8. TheTechnical Committee confirmed thatitunderstood thatwholly obtained wool would be
covered under definition 1(c)andthatproducts made inthesame country from thewholly obtained
wool would becovered under definition 1(i).
9. TheTechnical Committee examined definition 1(d)"Plants andplantproducts harvested, picked
orgathered inthatcountry" andagreed thattheterm"plant products" described, forexample, fruit
thatwere notinthemselves thewhole plant andhadnotbeenobtained byprocessing theplant, but
which were obtained from theplant, inasimilar sense tomilkobtained from acoworwool from a
sheep under definition 1(c). There wasunderstood tobeacleardistinction therefore between goods
covered bydefinition 1(d)andgoods covered bydefinition 1(i)which wereobtained orproduced in
thesamecountryfromthewhollyobtainedgoodsofdefinition1(d).TheTechnicalCommitteeconcluded
thattheterm"plant products" should beretained indefinition 1(d).
*Theformer definition 1(g)isreferred tohereafter inAnnex 1andAnnex 2asdefinition 1(i)asaresult
ofdecisions bytheCommittee andofthefurther work during thissession oftheTechnical Committee.G/RO/5
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10. Toavoid anypossible misinterpretation ofthedifference between thecoverage ofdefinition
1(d)anddefinition 1(i)itwasagreed thatanamendment would bemade tothelegally binding note
todefinition 1(d)toclarify thecaseofplants grown andexported inpotsaswholly obtained liveplants
thatwould continue togrow intheimporting country. TheTechnical Committee agreed thatthe
following amendment would bemade tothelegally binding notetothisdefinition, thenewtextis
underlined:
"Definition 1(d)covers allplantlife,including fruit,flowers, vegetables, trees, seaweed, fungi,
andliveplants grown inthatcountry."
11. TheTechnicalCommitteeunderstoodthattheCommittee'squestionconcerningtheinterpretation
oftheterm"solely" indefinition 1(i),andtherelationship ofthisdefinition todefinition 2ofminimal
operations orprocesses, wasrelated toitswork ontheoverall architecture oftheHarmonized Rules
ofOrigin.
12. Tohelpclarify theinterpretation oftheterm"solely" adraftlegally binding notewasproposed:
"Foragood tobeconsidered wholly obtained inonecountry under definition 1(i):
(i) Thegood must havebeenobtained orproduced from theproducts ofthatcountry
mentioned indefinitions 1(a)to(h);
(ii) theproducts ofdefinitions 1(a)to(h)mustnothaveundergone processing inanother
country; and
(iii) thegood must notcontain materials notconsidered tobewholly obtained inthat
country."
13. Itwasagreed thattheTechnical Committee would deferadecision onthisdraftnote. Inaddition
itwaspointed outthatafinaldecision onalegalnotefordefinition 1(i)should await adecision on
thedefinitions 1(g)and1(h).
II. Theorigin ofrecovered parts
14. TheTechnical Committee wasinformed thattheCommittee hadexamined thedraft
definition 1(g): "Articles collected inthatcountry which cannolonger perform theiroriginal purpose
norarecapable ofbeing restored orrepaired andwhich arefitonlyfordisposal orfortherecovery
ofparts orrawmaterials" andhadreached thefollowing conclusions:
"Many delegations supported draft definition 1(g); some stated theneedformore timeto
consider thefullscope ofthecontent oftheparagraph. They needed toreferbacktotheir
capitals. Furthermore, theproblem ofpartsrecovered wasrecognized asbeing different from
theproblem ofarticles. Consequently, itwasagreed thattheproblem ofpartsshould beurgently
firstaddressed atatechnical levelinBrussels. Itwasdecided thattheCommittee should revisit
draftdefinition 1(g)atthenextmeeting."
15. TheTechnical Committee examined thequestion oftheorigin aswholly obtained goods of
parts recovered from articles defined indefinition 1(g). Itwasnoted thatpending theresults ofthe
Technical Committee 'swork onthisquestion theCommittee hadplaced thedefinition 1(g)insquare
brackets.G/RO/5
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16. TheTechnical Committee agreed thatpartsrecovered inthesamecountry fromarticles collected
inthatcountry were tobeconsidered aswholly obtained inthatcountry.
17. TheTechnical Committee didnotreach aconsensus concerning theorigin ofpartsrecovered
inacountry fromarticles collected inanother country. Thefivefollowing possibilities forconferring
origin were analyzed:
(1) Country oforigin oftheparts;
(2) country oforigin ofthearticles collected;
(3) country ofconsumption ofthearticles collected;
(4) country where thearticles were collected;
(5) country where theparts were recovered.
18. Duetotheadministrative burden andothertechnical problems (including lackofadequate proof
oforigin) inconnection withthefirstthree possibilities, thetechnical Committee focused itswork on
thelasttwo,namely:
(4) Country where thearticles were collected;
(5) country where theparts were recovered.
19. Onedelegation made anearlyreservation based onthepolicy issueofthere-export ofrecovered
parts tocountries applying special import regimes forsuchproducts originating inthird countries.
Thereservation waslaterlifted without prejudice tothatdelegation 'sfinalposition concerning articles
andparts.
20. Anumber ofdelegations wereoftheopinion thatthewholly obtained status should beconferred
onthebasisofwhere thepartswererecovered andproposed thefollowing textforanewdefinition 1(h):
"Parts ofrawmaterial recovered inthatcountry from articles which cannolonger perform
theiroriginal purpose norarecapable ofbeing restored orrepaired."
21. Onedelegationexpressedadifferenttechnicalopinionthatarticlescollectedinacountrydeserved
theorigin ofthatcountry under theassumption thatthese articles were consumed inthecountry of
collection. Consequently, theoriginal origin waslost.Forthesame reason, thepartsrecovered from
those articles deserved theorigin ofthearticles collected, reflecting thereby thecountry where the
parts hadbeenconsumed.
22. Thedelegation made thefollowing alternative proposal which reflected thatonlyparts and
rawmaterials recovered inthesame country where thearticles werecollected, weretobeconsidered
wholly obtained. Theproposal didnotconsider as"wholly obtained" inonecountry partsrecovered
from imported articles; inthiscasetheparts recovered maintained theorigin ofthecountry where
thearticle wascollected:
"Parts orrawmaterials obtained inthatcountry fromarticles collected inthatcountry which
arenotfitfortheiroriginal purpose norarecapable ofbeing restored orrepaired andarefit
onlyfordisposal orfortherecovery ofrawmaterial."G/RO/5
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23. Several delegations could notagree withthisalternative position forthefollowing technical
reasons: first,ifcollecting articles could confer "wholly obtained" status, thenrecovery ofpartsshould
alsoconfer "wholly obtained" status because recovery wasnolessdemanding thancollecting.
24. Secondly, itwasexplained thatitwould generally notbepossible todetermine the"true" origin
oftherecovered parts; duetothefactthattheorigin ofthearticles collected might beindicative of
neither theorigin ofthearticles collected, notoftheirparts, itwaswarranted toconsider these parts
"wholly obtained" inthecountry ofrecovery andre-export.
25. Thirdly,onedelegationmentionedthatpartsmightberecoveredfromarticlescollectedinseveral
countries; during therecovery process, itmight prove veryburdensome toseparate physically the
articles according totheirorigin, anditmight leadtoconfusion tore-export aconsignment ofexactly
thesame parts withdifferent origins depending onthecountry ofcollecting.
26. Fourth, thepoint wasmade thatduetothefactthatthe"wholly obtained" concept applied
onlytogoods obtained inonecountry, partsrecovered inanother country could notbewholly obtained
goods ofthecountry where thearticles hadbeencollected. Thisimplied thatarulefortherecovery
ofpartsshould beinserted intheGeneral Rules. Itwasrecognized thatthiswould haveconsequences
interms ofconsistency regarding therelationship between thatruleanddefinitions 1(f)and1(g).
27. Another delegation stated thatitwasnotconvinced bythearguments presented forthesecond
alternative textwhich assumed thatconsumption andcollection tookplace inthesame country; in
reality these twoprocesses could takeplace indifferent countries.
28. Inconclusion, additional timewasrequested forconsideration ofaquestion ofprinciple
concerning theappropriateness ofincluding recovery ofpartswithin thewholly obtained provisions.
29. Itwasobserved thatifdefinitions 1(g),andoneofthealternative textsfor1(h),wereadopted
itwould benecessary thatconsideration begiveintheappropriate forum totheclassification ofthose
products. Itwasnoted thattheHarmonized System didnotdistinguish between, i.e.,anewcomputer
andacomputer nolonger suited foritsoriginal purpose, orbetween anewpartandapartrecovered
from ausedcomputer.
30. Itwasagreed thattheTechnical Committee would inform theCommittee ofthetwoalternative
proposals andforward bothproposed textsfordefinition 1(h)insquare brackets toGeneva foradecision
onwhich alternative istobeadopted.
III. Legally binding notes tothedefinitions
31. TheCommittee hadexamined theissueofthebinding ornon-binding nature oftheexplanatory
notes forthedefinitions ofwholly obtained goods andminimal operations orprocesses andreached
thefollowing conclusions:
"Itwasagreed thattheExplanatory Notes should belegally binding. Itwasalsoagreed that
theCommittee shallrequest theTechnical Committee inBrussels torevisit theExplanatory
Notes onthebasis thattheyaretobelegally binding."
32. TheTechnical Committee reviewed thetextoftheNotes established forthedefinitions ofwholly
obtained goods. Thisexamination included theresults ofthework described above inrelation tothe
interpretation ofdefinitions 1(c),1(d)and1(i).G/RO/5
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33. Arevised textwasproposed fortheNotetodefinition 1(f)toremove anyambiguity fromthe
term"disposal "asfollows, thenewtextisunderlined:
"Definition 1(f)covers allscrap andwaste, including waste resulting frommanufacturing or
processingoperationsorconsumptioninthesamecountry,scrapmachinery,discardedpackaging
andhousehold rubbish andallproducts thatcannolonger perform thepurpose forwhich they
were produced, andarefitonlyfordiscarding orfortherecovery ofrawmaterials. Such
manufacturing orprocessing operations include alltypes ofprocessing, notonlyindustrial or
chemical butalsomining, agricultural, construction, refining, incineration andsewage treatment
operations."
34. TheTechnical Committee agreed tothisrevised textfortheNote to1(f).
35. Minor drafting amendments weremade totheother Notes toadapt theminviewoftheirstatus
aslegally binding Notes. Theresults ofthisdiscussion areincorporated inAnnex 2withtheresults
oftheother work carried outinresponse totherequests from theCommittee.
36. TheTechnical Committee concluded thatareview oftheNotes forthedefinitions ofminimal
operations orprocesses would beundertaken inthecontext ofitsearlier decision tokeepthem open
andunder examination throughout thework programme.
37. TheTechnical Committee agreed toforward theattached Annex 2toGeneva, together with
thereport ofitsdiscussion andthereasons forsquare brackets, aspartofitsThird Report tothe
Committee onRules ofOrigin.G/RO/5
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ANNEX 2
Harmonized definitions ofthegoods thataretobeconsidered asbeing
wholly obtained inonecountry
Definition Notes
1. Thefollowing goods aretobeconsidered asbeing wholly
obtained inonecountry:
(a) Liveanimals bornandraised inthatcountry; Indefinitions 1(a), (b),and(c)theterm"animals"
covers allanimal life,including mammals, birds, fish,
crustaceans, molluscs, reptiles, bacteria andviruses.
(b) Animals obtained byhunting, trapping, fishing, gathering or
capturing inthatcountry;Definition 1(b)covers animals obtained inthewild,
whether liveordead, whether ornotbornandraised in
thatcountry.
(c) Products obtained from liveanimals inthatcountry; Definition 1(c)covers products obtained from live
animals without further processing, including milk,
eggs, natural honey, hair,wool, semen anddung.
(d) Plants andplant products harvested, picked orgathered in
thatcountry;Definition 1(d)covers allplant life,including fruit,
flowers, vegetables, trees, seaweed, fungi andlive
plants grown inthatcountry.
(e) Minerals andother naturally occurring substances, not
included indefinitions (a)-(d), extracted ortaken inthat
country;Definition 1(c)covers crude minerals andother
naturally occurring substances, including rockorsolar
salt,crude mineral sulphur occurring infreestate,
natural sands, clays, stones, metallic ores, crude oil,
natural gas,bituminous minerals, natural earths,
ordinary natural waters, natural mineral waters, natural
snow andice.
(f) Scrap andwaste derived from manufacturing orprocessing
operation orfrom consumption inthatcountry andfitonly
fordisposal orfortherecovery ofrawmaterials;Definition 1(f)covers allscrap andwaste, including
waste resulting from manufacturing orprocessing
operations orconsumption inthesame country, scrap
machinery, discarded packaging andhousehold rubbish
andallproducts thatcannolonger perform thepurpose
forwhich theywere produced, andarefitonlyfor
discarding orfortherecovery ofrawmaterials. Such
manufacturing orprocessing operations include alltypes
ofprocessing, notonlyindustrial orchemical butalso
mining, agricultural, construction, refining, incineration
andsewage treatment operations.
(g) [Articles collected inthatcountry which cannolonger
perform theiroriginal purpose norarecapable ofbeing
restored orrepaired andwhich arefitonlyfordisposal orfor
therecovery ofparts orrawmaterials;]
(h) Alternative 1:
[Parts orrawmaterials recovered inthatcountry from
articles which cannolonger perform theiroriginal purpose
norarecapable ofbeing restored orrepaired;]
Alternative 2:
[Parts orrawmaterials obtained inthatcountry from articles
collected inthatcountry which arenotfitfortheiroriginal
purpose norarecapable ofbeing restored orrepaired andare
fitonlyfordisposal orfortherecovery ofparts orraw
materials;]
(i) Goods obtained orproduced inthatcountry solely from
products referred toin(a)-(f) [and(g)and(h)]above;[*]
*For information: adraftnotehasbeenproposed for1(i). Itwasagreed thattheTechnical Committee would defer adecision
onthisdraftnote. Inaddition, itwaspointed outthatafinaldecision onalegalnotefordefinition 1(i)should await adecision onthedefinitions
1(g)and1(h).G/RO/5
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ANNEX 3
Agenda itemV(a)
Agenda itemV(b)Overall Architectural Design oftheHarmonized
Rules ofOrigin
General Rules
Working andreference documents 39.863
39.864
39.865
39.865/Add
Texts adopted reproduced in Annex 4
Annex 5
VIEWS AND DECISION OFTHE TECHNICAL COMMITTEE ONRULES OFORIGIN
1. TheChairman recalled thattheTechnical Committee hadreceived arequest fromtheCommittee
onRules ofOrigin "toforward aspartofitsnextreport ageneral format establishing theoverall
architectural design ofanAnnex withwhich theresults ofthedifferent phases ofHarmonization Work
Programme would befinalized asprovided forinArticle 9.4oftheAgreement onRules ofOrigin".
2. TheChairman, noting thatasthecontent ofthegeneral ruleswould beclosely related tomatters
ofarchitecture andpresentation, proposed thatAgenda Items V(a)andV(b)betaken uptogether.
3. TheTechnical Committee conducted apreliminary discussion onthebasis ofdoc.39.864,
theSecretariat'sworkingpaperongeneralrules,whichelicitedanumberofobservations.TheChairman
thenappointed Vice-Chairman, Mr.Harmon (United States) toleadthedrafting process. Theterms
ofreference weretheinitial observations oftheTechnical Committee andtheproposals andcommentary
contained intheworking andreference documents.
4. Later, Vice-Chairman, Mr.Harmon reported totheTechnical Committee ontheprogress of
thedrafting. Adocument compiled onthebasisofproposals forgeneral rulesandarchitecture offered
previously byCanada, theEuropean Communities, Japan andtheUnited States hadbeenusedforthis
work. TheTechnical Committee tooknoteofthereport.
5. Mr.Harmon reported thattheSecretariat hadbeenrequested toprepare arevised document
onGeneral Rules forconsideration bytheTechnical Committee. Heexpressed thehope thatthis
document would beseenasfulfilling, toaconsiderable extent, therequest from theCommittee for
ageneral format fortheAnnex containing theHarmonized Rules ofOrigin. Inconcluding, Mr.Harmon
stated thatconsiderable progress inthedevelopment ofthearchitecture andgeneral ruleshasbeenmade.
6. TheChairman theninvited theTechnical Committee toexamine thedocument, "Harmonized
Rules ofOrigin -Revision 2".Heobserved thattheTechnical Committee hadpreviously concluded
thatthedevelopment ofgeneral rulesfortheHarmonized Rules ofOrigin waslikely tobeanincremental
process. Consequently, anyconclusions reached concerning thisdocument were toberegarded as
provisional. Several delegates endorsed thisunderstanding, adding thatalthough many delegates were
notready toagree onspecific texts, thepaper under consideration provided abasis forprogress.G/RO/5
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7. Itwasnoted thatifapreamble istobeincluded intheAnnex containing theHarmonized Rules
ofOrigin, itwillbenecessary toensure itsconsistency withthepreamble totheAgreement.
8. Itwasagreed thatanappropriate reference totheprovisions oftheHarmonized System was
anessential partofthegeneral rules andarchitecture. Thetextsadopted inthisregard consist ofa
definition referencing theHarmonized System asinforce on1January 1996 andageneral provision
onapplication.
9. Several delegates noted thataswork ontheAnnex proceeds andsubdivisions arecreated to
identify particular goods, itwillbeadvisable toreview therelationship between these subdivisions
andheadings andsubheadings oftheHarmonized System.
10. Itwasagreed thatforpurposes ofthedocument under consideration thedefinitions would be
moved toappear afterthescope provision.
11. There wasagreement thatgeneral rules include allorigin-related provisions which apply to
theentire Harmonized Rules ofOrigin. Provisions relating exclusively tothedefinitions ofwholly
obtained goods orthedefinitions ofminimal operations orprocesses, ortotheproduct-specific rules
forsubstantial transformation aretobesetoutinseparate annexes orappendices. Thisapproach was
described inparagraph 8ofdoc.39.864.
12. TheTechnical Committee conducted alengthy anddetailed discussion ofresidual rules for
conferring origin. Widely varying views wereexpressed. Anumber ofdelegations accepted residual
rulesasaprinciple. Itwasobserved thatbecause oftherequirement under theAgreement thatorigin
beconferred upon agood inallcases, theHarmonized Rules ofOrigin should contain, ifnecessary,
residual ruleswhich would operate toconfer origin when origin isnotconferred under anyoftheother
provisions oftherules. Certain delegations, however, questioned thenecessity oftherulesandreserved
theirpositions onresidual rules.
13. Aconcern wasraised astowhether there wasauthority under Article 9oftheAgreement to
adopt orapply residual rules which werenotbased upon either thewholly obtained definition orthe
substantial transformation principle. Itwassuggested thattheTechnical Committee didnothave
competence todecide thisquestion. TheTechnical Committee agreed thatresidual rules should be
subject tofurther consideration.
14. Inthisregard theTechnical Committee alsodiscussed theappropriate placement ofanyresidual
rules within thegeneral rules andarchitecture. Onthebasis ofthisdiscussion itwasagreed, again
without prejudice toanylaterdecision, torelocate references toresidual rulesfromtheGeneral Rule
fordetermination oforigin toaseparate position inbrackets.
15. During thediscussion ofthegeneral rulesprovision onminimal operations orprocesses itwas
recognized thatthescope ofminimal operations orprocesses, forexample, inrelation togoods wholly
obtained, hasnotyetbeenestablished. Inthisregard, itwasnoted thatthere maynotbeaneedfor
aprovision inthegeneral rulesconcerning minimal operations orprocesses. Atthesame time, there
wasaview expressed thatageneral rules provision concerning theapplicability ofthedefinition in
relation todeterminations ororigin should appear before theprovision specifying howorigin istobe
conferred (Article 4).Following these observations theTechnical Committee decided toleave this
provision initspresent position, ontheunderstanding thatconclusions reached latermight require
adifferent approach, andthattherehadbeennoconclusions reached concerning thesubstance ofsuch
aprovision.G/RO/5
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16. Aprovision onneutral elements wasconsidered desirable bysome asitwould answer questions
frequentlyraisedbytradersconcerningtheelementswhichenterordonotenterintoorigindetermination.
Aviewwasexpressed, however, thatatleastfororigin determinations based upontariffclassification
suchaprovision wasnotnecessary. Itwasunderstood thattheprovision could beretained subject
tofurther consideration.
17. During thediscussion oftheprovision onpacking andpackaging materials andcontainers it
wasnoted thattheprovision wasdrafted toaddress onlythesituation where thematerials orcontainers
areclassified withthegood. Remaining tobeconsidered isthetreatment ofcontainers forrepetitive
use.Itwasobserved thattodraftarulebased uponGeneral Interpretative Rule5(b)oftheHSwould
present difficulties because ofitsnon-binding character. TheTechnical Committee would needata
latertimetodecide whether theorigin ofacontainer forrepetitive usewastobetaken intoaccount
indetermining theorigin ofagood, andifitsodecided, todraftarulewhich goesnotrefertoGIR5(b).
18. During thediscussion oftheprovision onaccessories, spare parts andtoolsitwasobserved
thatoften theyareinvoiced together withthegood, butarenotimported atthesame time. Several
delegates reported that,asapolicy matter, theircustoms administrations treatsparepartsandaccessories
delivered separately andinvoiced separately ashaving thesame origin asthegoods withwhich they
areassociated. They advised theTechnical Committee thatthispractice hadbeenwidely accepted
andsatisfactorily administered. Other delegates reported thattheircustoms administrations make a
separate origin determination, andthattheywould notfavour automatically giving thesame origin
status tospare partsastothemachines forwhich theyaredelivered. TheTechnical Committee took
noteofthese policy differences. Thepresent draftArticle treats spares ashaving theorigin ofthe
goods onlyiftheyarepresented forimportation atthesame timeasthegoods.
19. Anumberofclarificationsandexplanationswererequestedconcerningtheprovisionforfungible
goods andfungible materials. Itwasagreed toconduct further discussions withaviewtoward increasing
understanding ofthepossible benefits ofsuchaprovision andtoclarify thescope ofthegoods towhich
suchaprovision would apply.
20. NexttheTechnical Committee discussed thepossibility ofademinimis rule. Awidevariety
ofviews wereexpressed. Itwasagreed thatfurther work onthisissuewould beneeded, perhaps during
laterstages ofthework programme. Some delegations preferred tohavethese discussions inPhase
IIIofthework programme. Delegations wereinvited topresent forconsideration concrete examples
ofhowademinimis rulewould assist inresolving origin difficulties intheHarmonized Rules ofOrigin,
especially inthecontext ofrules based onchange oftariff classification.
21. Thedelegate oftheECreported thathewould present aproposal onresidual ruleswhich would
alsoaddress theissue ofsets. Itwasdecided todefer consideration ofsetsuntilthisproposal was
received.
22. Thedelegate ofthePhilippines expressed theview thatthere isaneedforageneral rule
concerning theuseofdifferent manufacturing processes. Thisgeneral rulecould bethatrulesoforigin
should remain neutral withrespect toalternative manufacturing processes ortypes ofmachinery used
inanorigin-conferring situation. Aproposal would besubmitted fortheTechnical Committee 's
consideration.
23. Onthebasisofthepreceding observations andeditorial comments made during thediscussion
theTechnical Committee adopted thedocument, "Harmonized Rules ofOrigin", asrevised. Therevised
document isreproduced asAnnex 4tothisreport.G/RO/5
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24. Following thisexamination theChairman invited theTechnical Committee toexamine a
discussion document prepared bytheSecretariat onthesequential presentation ofHarmonized Rules
ofOrigin. TheChairman explained thatthedocument wasasample, based upon Chapter 78ofthe
Harmonized System, showing howrulesoforigin ofallthetypesunder consideration might bepresented
intheAnnex containing theharmonized rulesoforigin. Hepointed outthatunder thesequential method
ofpresentation therewould beno"chapter rule"forconferring origin followed byexceptions. Instead,
theruleforeachgood would appear nexttotheHScoding anddescription forthegood.
25. TheTechnicalCommitteewelcomedthisdocumentasabasisforfurtherworkonthearchitecture
andform ofpresentation.
26. Several delegates observed thatitwould bepreferable toinclude inthesample document the
HSdescription forallgoods down tothesubheading level, asthiswould improve theclarity of
presentation andeaseofuse.
27. Itwasobserved thatininstances where alegal noteorchapter notemade reference tothe
descriptions oftheHarmonized System, anappropriate reference totheHarmonized System should
appear.
28. TheHead oftheOrigin Project, Mr.Zielnski, requested instruction from theTechnical
Committeeonthepreferredpresentationofgoodsdescribedby"ex"headingor"ex"subheading,wishing
toknow iftheTechnical Committee intended thatanew"ex"provision wastobecreated forevery
good forwhich aseparate rulewasprescribed. TheTechnical Committee tooknoteofthisrequest
forinstruction.
29. After these discussions theTechnical Committee endorsed theapproach forthepresentation
ofproduct-specific rules setoutinthedocument.
30. Thedocument asamended inaccordance withthese observations isreproduced asAnnex 5
tothisReport.
31. TheTechnical Committee decided thatthedocuments reproduced asAnnexes 4and5would
betransmitted totheCommittee onRules ofOrigin inresponse totheCommittee 'srequest forageneral
format establishing theoverall architectural design oftheAnnex containing theHarmonized Rules of
Origin.G/RO/5
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ANNEX 4
Provisional textoftheTechnical Committee onRules ofOrigin atitsThird Session
HARMONIZED RULES OFORIGIN
Preamble
..........
..........
General Rules
Article 1:Scope ofapplication
Rules ofOrigin provided inthisAnnex shallbeasdefined inArticle 1,paragraph 1ofthe
Agreement, andshall beapplied forthepurposes setoutinArticle 1,paragraph 2ofthe
Agreement.
Article 2:Harmonized System
References toheadings andsubheadings arereferences tothemastheyappear intheHarmonized
System. References toclassification inthisAnnex arereferences toclassification under the
Harmonized System.
Article 3:Definitions
Forthepurposes ofthisAnnex:
1. "Harmonized System" means theHarmonized Commodity Description andCoding
System defined inArticle 1oftheInternational Convention ontheHarmonized
Commodity Description andCoding System (done atBrussels on14June1983) as
amended andbeing inforce on1January 1996.
2. ["Neutral Elements" means:
Goods usedintheproduction, testing orinspection ofanother goodbutnotphysically
incorporated intothegood, orgoods usedinthemaintenance ofbuildings orthe
operation ofequipment associated withtheproduction ofagood, andincludes:
(a) Fuelandenergy;
(b) tools, diesandmoulds;
(c) spare partsandmaterials usedinthemaintenance ofequipment andbuildings;
(d) lubricants, greases, compounding materials andother material used in
production orusedtooperate equipment andbuildings;
(e) gloves, glasses, footwear, clothing, safety equipment andsupplies;G/RO/5
Page16
(f) equipment, devices andsupplies usedfortesting orinspecting theother goods;
(g) catalysts andsolvents; and
(h) anyother goods thatarenotincorporated intothegood buttheuseofwhich
intheproduction ofthegood canreasonably bedemonstrated tobepartof
thatproduction.]
3. [Other definitions, asnecessary]
Article 4:Determination oforigin
1. Thecountry oforigin ofagoodshallbedetermined inaccordance withtheprovisions
ofsubparagraph 2,applied insequence.
2. Subject totheprovisions ofArticle 5,thecountry oforigin ofagood isthecountry
inwhich:
(a) Thegood iswholly obtained asdefined inAppendix 1;
[(b) [Each material inthegood which does notoriginate inthatcountry has
undergone achange inclassification assetforth inAppendix 2orotherwise
satisfies therules setforth inthatAppendix;]
[Each material inthegood which does notoriginate inthatcountry has
undergone asubstantial transformation which satisfies therules setforth in
Appendix 2];]
[Article 5:Residual rules oforigin
Where theorigin ofagoodcannot bedetermined onthebasisoftherulessetforthinAppendix 1
orAppendix 2,thecountry oforigin ofthegood shallbe....]
Article 6:Minimal operations orprocesses
Notwithstanding compliance withtherulessetforthinAppendix 1orAppendix 2,origin shall
notbeconferred onagoodmerely asaresult oftheoperations ofthetypelisted inAppendix 3.
Article 7:Special provisions
1. [Neutral elements]
[Inorder todetermine whether aproduct originates inacountry, itshall notbe
necessary toestablish whether ornotthepower andfuel,plant andequipment, and
machines andtoolsusedtoobtain suchproduct orthematerials usedinitsmanufacture
which donotandarenotintended toremain intheproduct asfinally constituted
originate inthirdcountries.]
[Neutral elements usedintheproduction ofagoodshallbedisregarded indetermining
whether materials notoriginating inthatcountry andusedintheproduction ofagood
undergo achange intariff classification orsatisfy anyother requirements assetout
forthatgood inAppendix 2.]G/RO/5
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2. Packing andpackaging materials andcontainers
Theorigin ofpacking andpackaging materials andcontainers presented withthegoods
therein shallbedisregarded indetermining theorigin ofthegoods under anychange
oftariffclassification rulesetoutinAppendix 2,provided suchpacking andpackaging
materials andcontainers areclassified withthegoods under theHarmonized System.
3. Accessories andspare parts andtools
Theorigin ofaccessories, spare parts andtools presented withagood shall be
disregardedindeterminingtheoriginofthegoodunderanychangeintariffclassification
rulesetoutinAppendix 2,provided that:
- They arestandard accessories, spare parts andtoolsandtheirquantities and
value arecustomary forthegood; and
- theyareincluded inthepriceofthegoodandarenotseparately invoiced from
thegood.
[4. Mixtures]*
*Placement andcontent tobedetermined.
[5. Fungible goods andmaterials
Forthepurpose ofdetermining thecountry oforigin ofagood:
(a) Where domestic materials andforeign materials thatarefungible materials are
usedintheproduction ofthegood, thedetermination ofwhether thematerials
aredomestic materials may, atthechoice oftheproducer ofthegood orthe
person fromwhom theproducer acquired thematerials, bemade onthebasis
ofanyapplicable inventory management methods; and
(b) where domestic goods andforeign goods thatarefungible goods arephysically
combined ormixed inaninventory and,prior toacquisition bythebuyer, do
notundergo production oranyotheroperation, otherthanunloading, reloading
oranyother operation necessary topreserve thegoods ingood condition or
totransport thegoods tothebuyer ofthegood, thedetermination ofthecountry
oforigin ofthatgood may, atthechoice oftheseller ofthegood, bemade
onthebasis ofanyoftheapplicable inventory management methods.]
[Article 8:Deminimis *]
*Placement andcontent tobedetermined.
....
....
---------------------------------------------
Appendix 1-Wholly Obtained GoodsG/RO/5
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---------------------------------------------
Appendix 2-Product Rules -Substantial Transformation
---------------------------------------------
Appendix 3-Minimal Operations orProcesses
---------------------------------------------G/RO/5
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ANNEX 5
SAMPLE FOR ILLUSTRATIVE PURPOSES ONLY
SEQUENTIAL PRESENTATION OF
HARMONIZED RULES OFORIGIN
INTRODUCTORY NOTES FOR THE APPLICATION OFAPPENDIX 2*
1. Inapplying thisAppendix, thetitlesofsections andchapters areprovided foreaseofreference
only; forlegalpurposes, origin shallbedetermined according totheterms oftherules themselves,
anyrelative legalnotes, andthefollowing provisions.
2. Indetermining theorigin ofagood, thecountry oforigin ofagood shallbethecountry of
origin conferred onthegood byapplication oftheruleforthegood setforth inthethirdcolumn.
3. Where anentry inthefirstcolumn ispreceded by"ex", thissignifies thattheruleinthethird
column applies onlytothepartofthatheading orsubheading described inthesecond column
___________________________
*Tobeapplied forallchapters including thissample.G/RO/5
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APPENDIX 2
Chapter 78
Lead andArticles Thereof
ChapterNotes:Inthischaptertheexpression"wire"means............./expression"foil"means............
HSCode Description ofgoods Substantial transformation criteria
78.01 Unwrought lead
7801.10 -Refined lead Change tothissubheading from anyother
subheading provided thevalue ofnon-
originating materials does notexceed
75percentoftheex-factory price ofthegood
-Other
7801.91 --Containing byweight antimony
astheprincipal elementChange tothissubheading from anyother
heading
7801.99 --Other Change tothissubheading from anyother
subheading
78.02 Lead waste andscrap [(a)Where thematerial thatdetermines the
classification ofthegood waswholly
obtained; or
(b)where each material inthegood, which
does notoriginate inthatcountry, has
undergone achange inclassification to
thisheading from another heading]
78.03 Lead bars, rods, profiles andwire
ex78.03 -Wire Change towireofthisheading from rodofthe
same heading, provided thecross-sectional
areaoftherodisreduced atleast 50percent
ex78.03 -Other Change tothissplitheading from anyother
heading
78.04 Lead plates, sheets, stripandfoil;
leadpowders andflakes
-Plates, sheets, strip andfoil
ex7804.11 --Lead foil Change tothissplitsubheading from anyother
subheading, provided there hasbeen a
reduction inthethickness ofthesource
product byatleast 50percent
ex7804.11 --Other Change tothissplitsubheading from anyother
heading
7804.19 --Other Change tothissubheading from anyother
subheading, except subheading 7804.11
7804.20 -Powders andflakes Change tothissubheading from anyother
subheading, except subheading 7804.11G/RO/5
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HSCode Description ofgoods Substantial transformation criteria
78.05 Lead tubes, pipes andtubeorpipe
fittings (forexample, couplings,
elbows, sleeves)Change tothisheading from anyother heading
78.06 Other articles oflead Change tothisheading from anyother heading