Sufficiently worked or processed products
If a product includes materials from a third country, it may still qualify for preferential treatment if those materials have been sufficiently worked or processed in the EU or the partner country. The working or processing required for the final product to acquire preferential origin is determined by the applicable product-specific rules of origin set out in each preferential trade arrangement.
In preferential trade arrangements, list rules contain introductory notes which explain how to read them and cover requirements to be fulfilled for allocating preferential origin to the final product.
The product-specific rules are usually presented using a table structured as follows:
Example from the EU-Colombia-Peru-Ecuador Trade Agreement:
| HS heading | Description of the product | Working or processing, carried out on non-originating materials, that confers originating status(3) or (4) | |
|---|---|---|---|
| (1) | (2) | (3) | (4) |
| 8417 | Industrial or laboratory furnaces and ovens, including incinerators, nonelectric | Manufacture from materials of any heading, except that of the product | Manufacture in which the value of all the materials used does not exceed 40% of the ex-works price of the product |
The presentation of the list rules may however differ from the above presented model in particular preferential trade arrangements. For instance, rules and even the alternative rules, may be gathered together in one column and the products may be indicated by the HS chapters, headings or sub-headings only.
| HS classification | Products specific rule for sufficient production pursuant to Article 5 |
|---|---|
| 84.01 – 84.12 |
A change from any other heading; or A change from within any one of these headings, whether or not there is also a change from any other heading, provided that the value of non-originating materials classified in the same heading as the final product does not exceed 50 per cent of the transaction value or ex-works price of the product |
Meaning of the prefix “ex”
In some arrangements, a chapter, a heading or a sub-heading entry is preceded by "ex". This means that the specified origin rule applies only to that part of the chapter, heading or sub-heading for which the description of the product is provided.
Types of rules for sufficient working or processing
There are multiple types of rules used in the product-specific list rules to determine whether a product has been sufficiently transformed in the EU or in a trading partner country. For the full list of applicable rules, consult the product-specific rules of origin in the relevant preferential trade arrangement. Be aware that in some cases the rule may be a combination of multiple types of rules.
- The 'value added' rule
For many products one of the rules provides that the value of all non-originating materials used by the manufacturer or exporter in the EU or a partner country may not exceed a specified percentage of the ex-works price of the product.
It is stated as manufacture in which the value of all the materials used does not exceed [X]% of the ex-work price of the product or MaxNOM [X]% (EXW).
In this case, you must determine the customs value of all the non-originating materials used and compare it with the ex-works price of the product, i.e. the price when leaving the facility where it was produced.
The rule is met if the value of the non-originating materials does not exceed the percentage specified in the rule. - Change of tariff classification
Another rule that is provided for many products is a change in tariff classification rule, which stipulates that the non-originating materials used in the manufacture of the final product may not have the same tariff classification as the final product itself.
The change in tariff classification requirement may apply on two-digit level (chapter), four-digit level (heading) or six-digit level (subheading). It is usually stated as:
manufacture from materials of any chapter/heading/subheading except that of the product;
or
CC (change in chapter), CTH (change in tariff heading), TSH (change in tariff subheading).
In this case, you must determine the tariff classification of the non-originating materials used (on two-, four- or six-digit level) and compare it with the tariff classification of the product you want to export or import.
The rule is met when none of the non-originating materials used have the same tariff classification as the final product at the designated level. - Production from non-originating materials of any heading
For certain products, the “production from non-originating materials of any heading” rule provides that a product is sufficiently worked or processed if the operations performed exceed those defined as insufficient, even if the non-originating materials used in the manufacture are classified under the same tariff classification. - Specific working or processing
For specific products, the rules define the operations that must be carried out to produce the final product, in order for the final product to acquire preferential origin. Specific processing rules generally apply to textile products, chemical products, and certain agricultural products. - Production from certain products or specific processing rules
For some products, a rule applies that allows the use of specific non-originating materials from a third country (other than the EU or the partner country) in the manufacture of the product and still qualify it as originating in the EU or a partner country.
It is usually stated as: Manufacture from [type of product], e.g. [yarn] [meat], etc.
The manufacturer/exporter may import the material in a previous state of production (e.g. for yarn, you may import fibres). However, the manufacturer/exporter may not import a material in a later stage of production (e.g. for yarn, you may not import fabric).