Free Trade Agreements Rules Of Origin

Rules of origin are particularly important in free trade agreements established to grant preferences exclusively to products of preferential origin. In this context, rules of origin are essential to distinguish between products originating in the Contracting Parties and those originating in third countries. Such differentiation has two objectives: 1. It allows the importing Party to determine whether a product is eligible for preferential treatment under this Free Trade Agreement; (2) It avoids the scenario in which exports from third countries enter the free trade agreement through the member with the lowest external tariffs (i.e. relocation). [14] This explains why, in a customs union, it is not necessary to lay down rules of origin between their contracting parties – members of a customs union must maintain a common external customs duty for imports from third countries. [15] Since rules of origin are applied at national level, it is the national institutions that deal directly with the certification and verification procedures. The competent authorities differ from country to country and also differ between trade agreements. (i) minimum percentage of value added of finished products (structure or direct test): manufacturing or processing operations carried out in the country of origin must reach a certain degree, i.e. the percentage of value added to finished products must correspond to or exceed a specific threshold in order for it to obtain its origin there. This test requires a balance between the value of content created at regional or local level and that of finished products. As a result, the stringency of the rules of origin would increase with the threshold applicable to regional or national content. For example, a rule that requires 40% regional content is stricter than a rule that requires 35%.

It should be noted that international organizations are not the institutions directly related to traders. However, they play a very important role in the education, management and facilitation of the application of rules of origin. Although the lists of fully obtained products are more or less identical beyond the agreements, there are nevertheless some subtle differences. For example, some agreements consider animals raised in a country to be fully earned in that country, while most agreements require that they be born and raised there. In addition, most of the agreements in this list contain only products manufactured in a single country, while some agreements consider an article to be entirely obtained if it is produced entirely from intermediate consumption originating in one or more partner countries. 1. For the purposes of Parts I to IV of this Agreement, rules of origin shall mean laws, regulations and administrative provisions of general application applied by each Member to determine the country of origin of goods, unless such rules of origin are linked to contractual or autonomous trade arrangements which give rise to the granting of tariff preferences going beyond the application of Article I, paragraph 1 of GATT 1994. Accessories, spare parts and tools: a provision that clarifies the process of determining the origin of accessories, spare parts or tools delivered with the goods. Exemption from certification: a provision that lists exceptions to the obligation to prove origin.

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