What are the types of rules of origin?

What are the types of rules of origin?

Rules of origin pdf

These are those defined within each preferential trade agreement that enable the qualification of a product as originating in order to access the tariff advantages of the same. Therefore, a product that does not have originating status according to these rules will not be able to benefit from the preferences provided for in the trade agreement. It should be noted that these rules vary from one agreement to another.

Products must be considered originating in order to qualify for preferential treatment. To qualify, they must be considered either “wholly obtained” or “sufficiently worked or processed”.

This is a closed list of operations of minor importance in the processing of the final product, which, whether carried out individually or jointly, are considered insufficient to confer origin. Even if the transformation carried out on a product complies with the provisions of the list rule, if it is one of the transformations in the list of minimum operations, it will not result in obtaining the status of originating product. These operations are also imposed as the minimum level of processing that has to be carried out to allow cumulation.

Importance of rules of origin

Rules of origin are the rules for attributing a country of origin to a product in order to determine its “economic nationality”. [1] The need to establish rules of origin stems from the fact that the implementation of trade policy measures, such as tariffs, quotas, trade remedies, in several cases, depends on the country of origin of the product in question.

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The most comprehensive definition of rules of origin is found in the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention), which entered into force in 1974 and was revised in 1999. According to Specific Annex K of this Convention:[3].

“Rules of origin means the specific provisions, developed from principles established by national legislation or international agreements (“origin criteria”), applied by a country to determine the origin of goods;”

Rules of origin can be classified into non-preferential rules of origin and preferential rules of origin. Non-preferential rules of origin are those that are designated primarily to maintain most-favored-nation treatment (MFN) within the World Trade Organization (WTO). Preferential rules of origin are those associated with “contractual or autonomous trade regimes leading to the granting of tariff preferences that go beyond” the MFN application. This separation is stipulated in Article 1 of the WTO’s Agreement on Rules of Origin.[5] This separation is stipulated in Article 1 of the WTO’s Agreement on Rules of Origin.

Examples of rules of origin

The Rules of Origin Agreement, negotiated by the members of the General Agreement on Tariffs and Trade (GATT), established during the Uruguay Round, defines rules of origin as “laws, regulations and administrative rulings of general application applied by a Member to determine the country of origin of products provided that such rules of origin are not related to contractual or autonomous trade regimes leading to the granting of tariff preferences beyond the application of paragraph 1 of Article I of GATT 1994”.

The assignment of origin in this case is not simple, especially if we consider that currently there are goods with an intensive integration of materials, which come from an endless number of origins. In this case, Article 10 of the Foreign Trade Law states that there are three criteria that serve to confirm whether the substantial transformation has been complied with:

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Tariff classification consists of coding the merchandise subject to trade, in accordance with the classification rules of the World Customs Organization (WCO), so that in all member countries they apply the same 6-digit coding that refers to a particular merchandise. For HS the first two digits of the coding correspond to the chapter, the next four are called the heading, the integration of six will be the subheading and in Mexico the set of eight is called the tariff fraction. In other countries the tariff coding can be up to 12 digits, if the customs authorities require a more precise statistical control over the commercial exchange.

Preferential and non-preferential rules of origin

Foreign Trade Operators have the possibility of accessing the tariff preferences established by the trade agreements signed so far by Chile. To do so, they must prove that the goods to be imported actually come from the country with which a preferential treatment has been agreed, as well as that they comply with other rules or provisions.

The tariff preferences established by the trade agreements signed so far by Chile, normally allow Foreign Trade Operators not to have to pay the customs duties associated with the importation of certain goods, collecting only the VAT (or other additional or specific taxes depending on the merchandise).

[Proof of Origin] Proves the originating nature of the goods. That is to say, that they effectively come from the country with which a preferential treatment has been agreed. The proof of origin must be presented and be valid at the time of importation, according to the term established in each agreement. In general there are two formats:

What are the types of rules of origin?
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