5. Rules of Origin under the Revised Kyoto Convention

5.1. Revised Kyoto Convention - Specific Annex K

There has been considerable activity within the WTO and the WCO to develop standard origin rules. Although this work has proved harder than anticipated and is still incomplete, substantial agreement on the basic rules of origin now exists. These understandings find their latest expression in Annex K to the Revised Kyoto Convention.

The Annex contains three chapters.

Chapter

1

Rules of origin, as they have emerged from the WTO/WCO development work.

Chapter

2

Certificates of origin — proof that goods were manufactured or substantially transformed in a particular country.

Chapter

3

Further provisions on Certificates of origin.

Most of the provisions in Annex K are Recommended Practices rather than Standards, which suggests that they do not yet enjoy universal support, and which allows states to enter reservations against them should they wish.

Chapter 1 provisions are worth a closer look. The table below sets out those goods which can be regarded as wholly obtained from a particular country.

Wholly obtained

Goods produced wholly in a given country shall be taken as originating in that country. The following only shall be taken to be produced wholly in a given country:

(a) mineral products extracted from its soil, from its territorial waters or from its seabed

(b) vegetable products harvested or gathered in that country

(c) live animals born and raised in that country

(d) products obtained from live animals in that country

(e) products obtained from hunting or fishing conducted in that country

(f) products obtained by maritime fishing and other products taken from the sea by a vessel of that country

(g) products obtained aboard a factory ship of that country solely from products of the kind covered by the paragraph (f) above

(h) products extracted from marine soil or subsoil outside that country's territorial waters, provided that the country has sole rights to work that soil or subsoil

(i) scrap and waste from manufacturing and processing operations, and used articles, collected in that country and fit only for the recovery of raw materials

(j) goods produced in that country solely from the products referred to in paragraphs (a) to (i) above.

Source: WCO, 1999. Standard 2, Specific Annex K

In addition, Recommended Practice (RP) 3 says that the substantial transformation criterion should apply to any good that is manufactured in more than one country. RP 4 recommends that the Harmonized System is be used to assist in determining substantial transformation.

RP 5 recommends that where the substantial transformation criterion is expressed in terms of the ad valorem percentage rule, the values to be taken into consideration should be:

Materials imported

Goods produced

•  The dutiable value at importation. For materials of undetermined origin, the first ascertainable price paid for them in the territory of the country in which manufacture took place.

•  Either the ex-works price or the price at exportation, according to the provisions of national legislation.

RP 6 recommends that operations which do not contribute, or which contribute only to a small extent to the essential characteristics or properties of the goods, and in particular operations confined to one or more of those listed below, should not be regarded as constituting substantial manufacturing or processing:

01  Preservation operations

Operations necessary for the preservation of goods during transportation or storage.

02  Packaging operations

Operations to improve the packaging or the marketable quality of the goods or to prepare them for shipment, such as breaking bulk, grouping of packages, sorting and grading, repacking.

03  Simple assembly

Simple assembly operations.

04  Mixing goods of different origin

Mixing of goods of different origin, provided that the characteristics of the resulting product are not essentially different from the characteristics of the goods which have been mixed.

The table below sets out some special WCO rules to assist with determining origin:

Special Cases of Qualification for Origin

1. Recommended Practice

Accessories, spare parts and tools for use with a machine, appliance, apparatus or vehicle should be deemed to have the same origin as the machine, appliance, apparatus or vehicle, provided that they are imported and normally sold therewith and correspond, in kind and number, to the normal equipment thereof.

2. Recommended Practice

An unassembled or disassembled article which is imported in more than one consignment because it is not feasible, for transport or production reasons, to import it in a single consignment should, if the importer so requests, be treated as one article for the purpose of determining origin.

3. Recommended Practice

For the purpose of determining origin, packings should be deemed to have the same origin as the goods they contain unless the national legislation of the country of importation requires them to be declared separately for tariff purposes, in which case their origin should be determined separately from that of the goods.

4. Recommended Practice

For the purpose of determining the origin of goods, where packings are deemed to have the same origin as the goods, account should be taken, in particular where a percentage method is applied, only of packings in which the goods are ordinarily sold by retail.

5. Standard

For the purpose of determining the origin of goods, no account shall be taken of the origin of the energy, plant, machinery and tools used in the manufacturing or processing of the goods.

Source: WCO, 1999. Standard 2, Specific Annex K

Despite the activities of the WTO and the WCO, there is still considerable scope for States to determine within their own legislation what criteria they will use to determine origin. There are also some creative bilateral arrangements in place. Where bilateral or other agreements stipulate a particular methodology, that methodology must be incorporated into domestic law.

 

Further reading 3: World Customs Organization (WCO) 1999, Revised Kyoto Convention, Special Annex K, Origin, Brussels.