Rules of origin

Non-Preferential Rules on Origin of Goods

 

Non-preferential rules on origin of goods are a set of criteria for determination of the country of origin of a product. At a global level, those rules apply to a wide range of commercial policy measures, such as anti-dumping and compensatory measures, trade embargo against certain countries, safeguard measures and quantitative restrictions. In addition, these rules are also applied for the purposes of public procurement procedures and to customs declaration of goods.

 

The legal basis for the implementation of non-preferential rules on origin in the Republic of Serbia is laid down in Articles 32 to 36 of the Customs Law (“Official Gazette of the RS” No. 18/10 and 111/12) and Articles 41 to 65 and Annexes 7, 8, 9 and 10 of the Regulation on Customs Approved Treatment of Goods (“Official Gazette of the RS”, No. 93/10, 63/13 and 145/14). These rules are completely harmonized with non-preferential rules of origin of goods that are in force in the EU.

 

Basic criteria for acquiring the non-preferential origin are the following: entirely obtained/manufactured or sufficiently processed products and processed products. In compliance with Article 34 of the Customs Law, goods whose production involved two or more countries shall be deemed to originate in the country where they underwent their last substantial, economically justified processing or working, in a company equipped for that purpose, and resulting in the manufacture of a new product or representing an important stage of manufacture.

 

The authority issuing certificates on non-preferential domestic origin is the Chamber of Commerce of Serbia. Certificates are issued at a written request of the party concerned. The forms of the certificate on domestic origin of goods and of the application for certification of domestic origin are provided for in Annex 10 to the Regulation on Customs Approved Treatment of Goods.

 

Preferential Rules of Origin

 

Preferential rules of origin of goods are laid down in free trade agreements signed by the Republic of Serbia with other countries or territories, i.e. in protocols defining the “concept of originating products and methods of administrative of cooperation,” which make an integrated part of these agreements.

 

At the national level, preferential rules of origin are laid down in Article 37 of the Customs Law and Articles 65 to 97 of the Regulation on Customs Approved Treatment of Goods. In this Regulation, the area covering the rules of origin are to greatest extent harmonized with the European Commission Regulation no. 2454/93. When it comes to the matter of preferential rules of origin of goods, the starting point is that international free trade agreements fully regulate the rules of origin of goods and administrative cooperation between customs authorities of contractual parties, so it is not necessary to elaborate them particularly in the Regulation.

 

However, Article 30, paragraph 3, item 5 of the Customs Law stipulates cases in which the Republic of Serbia can appear as provider of preferential based on autonomous measures it had adopted unilaterally with respect to other countries, group of countries or territory. To this end, preferential rules of origin of goods are adjusted to situations in which Serbia appears as autonomous provider of preferentials.

 

Preferential Rules of Origin of Goods Applied in Trade between Serbia, European Union, SAP Countries/Territories (CEFTA-2006), Republic of Turkey and EFTA Countries

                                    

 

In preferential trade between Serbia and the European Union, the SAP countries/territories in the framework of CEFTA 2006, Turkey and the EFTA countries, pan-European preferential rules of origin are applied defining the uniform principles for the acquisition of preferential origin.

 

The goods acquire preferential status in import into a member party of the above-mentioned agreements under the following general conditions:

1. goods are included in  a specific Agreement,
2. goods fulfil conditions of origin defined in the Protocol of origin,
3. goods are directly transported between the contractual parties,
4. exports of goods are not  subject of  duty return or exemption of any kind in any of the contracting parties,
5. fulfilment of the above-mentioned is documented by proof of the origin of goods.

Basic rules for acquiring the origin of goods are the following:

• entirely obtained products,
• sufficiently processed or worked products,
• diagonal cumulation of origin.

Diagonal Cumulation of Origin

 

All above mentioned agreements or protocols on the origin of goods, which are integrated parts of every agreement, include provisions on diagonal cumulation of origin. According to that rule, the cumulation of the origin of goods is possible only between countries that mutually apply free trade agreements (provided that the cumulation is stipulated in the specific agreement). This means that products which have acquired the status of products with origin in any of the contracting parties can be used as inputs in the manufacture of export products in another contracting party, are considered to be of the domestic origin. In the case of cumulating of origin, working or processing of “originating product” does not have to represent “sufficient working or processing” defined in the List of working and processing (which is an integrated part of every protocol), to confer to the final product the origin of the country where working or processing is carried out. However, the work or processing must represent more than a “minimum treatment” (“minimal procedures”). If this is not the case, the obtained product shall be considered as originating in the contracting party in which originate the inputs participating with the highest value in the value of the  obtained final product. In addition, products originating from one contracting party, which have not undergone any work or processing in the importing contracting party, shall retain their origin when exported to any of the contracting parties. Diagonal cumulation of origin of goods applies between three or more countries signatories to a free trade agreement, providing that they apply identical rules on origin.

 

Other conditions for acquiring the origin of goods are:

 

·         principle of territoriality,

·         direct transport,

·         exhibits and no draw-back rules.

 

Documents on Origin

 

Products originating from a contracting party when imported in any other contracting party shall have the preferential treatment if one of the following documents is submitted:

• movement certificate, EUR.1, or
• invoice declaration (in the case of an authorised exporter or any exporter of goods value of which does not exceed 6,000 Euros).

The certificate of origin EUR.1 is issued by the Customs Administration of the Republic of Serbia at request of the party concerned. Validity period of the mentioned certificate is 4 months upon the issuance.

 

Subsequent control of proofs of origin shall be carried out by random check or based on reasonable doubt in real origin of goods or in plausibility of the proof of origin.

 

Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin – PEM Convention (Official Gazette of the Republic of Serbia – International Agreements, no. 7/013)

 

The Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin (PEM Convention) is an international agreement prescribing a unified set of rules on origin of goods. This convention is aimed at repealing the existing protocols on origin in all free trade agreements between the signatories of the PEM Convention – by applying a unique legal instrument which defines rules of origin. The final goal is to create a vast zone of diagonal cumulating (merging of PEM cumulative zone and SAP cumulative zone).

 

Contractual parties to this Convention are the following countries and territories:

1. European Union,
2. ЕFТА countries (Island, Norway, Switzerland, Lichtenstein),
3. Faroe Islands,
4. Participants in Barcelona Process (Mediterranean countries – Algeria, Egypt, Israel, Lebanon, Morocco, Syria, Tunisia, Gaza Strip and West Coast under Palestinian authority, and Turkey),
5. Participants in stabilisation and association process (Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia, as well as Kosovo under Resolution 1244/99 UN SC).

The text of the Convention has 10 articles and two annexes, as follows: 

 

• Annex 1 – Definition of the notion of originating products and methods for administrative cooperation, rules on originating goods which are obligatory for contractual parties in their mutual preferential trade, and  
• Annex 2 – Special provisions, pertaining to specificities in mutual trade between certain countries and territories of contractual parties to the Convention (relevant annexes for Serbia are Annex I and Annex VIII). 

The importance of the convention for Serbia

 

Although the Convention entered into force in 18 contractual parties which have ratified this Convention, it still does not have any great influence, and is not applied between all contractual parties because the process of the PEM Convention application starts with amendments of all free trade agreements. This means that bilateral and multilateral free trade agreements valid for contractual parties to the PEM Convention must be amended to make a reference to the PEM Convention in order to apply rules on origin of goods.

 

Transitional period stipulated as the beginning of the Convention application between the ЕU, SАP and EFTA countries (SАP + cumulation) is the first quarter of 2015. Until then, the existing diagonal cumulation of goods origin shall apply based on bilateral or multilateral free trade agreements in place, since priority interest is that cumulation is not disturbed until the beginning of application.

Once the full application of PEM Convention starts, the Republic of Serbia will have the opportunity to get involved together with other SAP countries into SAP + cumulation of origin.

 

SАP cumulation – enables diagonal cumulation between the EU, SAP partners and Turkey (except for products such as coal and steel and certain agricultural products in accordance with agreements signed between the EU and Turkey). 

 

SАP + cumulation – PEM cumulations will enable diagonal cumulation between the EU, SAP partners, Turkey and EFTA.

 

PЕМ cumulation – opens further options for extension of the zone of diagonal cumulation of goods origin to the “participants to the Barcelona process”, if we enter into free trade agreements with some of them in the future. 

 

Application of the PEM Convention within the CEFTA

 

B virtue of Decision 3/13 CEFTA of the Joint Committee dated on 20 November 2013 (Official Gazette of RS, no. 28/14 dated 12 March 2014), the Protocol on origin of CEFTA shall be repealed by new Protocol on definition of “originating products” and methods for administrative cooperation provided for in Annex of the Decision, thus relating the Agreement to the PEM Convention. Article 1 of this Annex prescribed that Appendix I as well as relevant provisions of Appendix II of the PEM Convention shall apply to the rules on origin.

 

The PEM Convention is currently being applied as a part of this Agreement between Serbia, Albania, Macedonia, Montenegro and Bosnia and Herzegovina. 

 

The rules on origin are identical to those in CEFTA, except for the provisions on cumulation of origin and proofs of origin. For the sake of application of the PEM Convention, the Movement Certificate EUR.1, series A (Annex IIIa to the Convention) shall apply, i.e. the statement of origin (Annex Iva to the Convention). The difference between these proofs of origin and proofs of origin used in compliance with CEFTA is that these proofs do not contain the note “cumulation applied with”, i.e. “no cumulation applied”.

 

Application of PEM Convention within SAP

 

The Stabilisation and Association Council adopted on 17 December 2014 the Decision no. 1/14 which entered into force on 1 February 2015.

 

By virtue of this Decision, the Protocol on origin in the SAA was repealed with new Protocol on definition of “originating products” and methods for administrative cooperation provided for in Annex of the Decision, thus relating the SAA to the Convention.

 

The PEM Convention has been in application between the EU, Serbia and Montenegro since 1 February 2015.

 

Further steps related to amendments of the Protocol on origin in other agreements signed between Serbia and contractual parties of the PEM Convention are amendments to protocols in free trade agreements with Turkey and EFTA countries. The expected deadline is first half of 2015.

  

Preferential Rules on Origin in Trade between the Republic of Serbia and Russian Federation, Republic of Belarus and Republic of Kazakhstan (Member Countries of the Customs Union)

 

In order to  achieve the unification of trade regimes between the Republic of Serbia and the Russian Federation, Republic of Belarus and Republic of Kazakhstan ( hereinafter referred to as: member countries of the customs union), it was agreed to apply uniform rules on origin of goods in mutual preferential trade. To this end, the process of harmonization of rules on origin was initiated in 2010, and it ended with the signing and entry into force of the following documents:

1. Free Trade Agreement between the Republic of Serbia and the Republic of Kazakhstan, which entered into force on 1 January 2011. The rules on origin of goods are laid down in the Annex 3 to the Agreement; 
2. Protocol between the Republic of Serbia and the Russian Federation on exemptions from the free trade regime and on rules for determining the country of origin of goods accompanying the Agreement between the Federal Government of the Federal Republic of Yugoslavia and the Government of the Russian Federation on free trade between the Federal Republic of Yugoslavia and the Russian Federation, which has been applied provisionally (pending the ratification) since 22 July 2011. The rules on origin of goods are set down in the Annex 3 accompanying the Protocol;
3. Protocol on amendments to the Agreement between the Government of the Republic of Serbia and the Government of the Republic of Belarus on Free Trade between the Republic of Serbia and the Republic of Belarus, which entered into force on 15 August 2011. The rules on origin of goods are set down in the Annex B accompanying the Protocol.  

In that way, the conditions were met to apply identical rules of origin in preferential trade agreements between Serbia and the members of the Customs Union, which facilitates the application of the criteria for acquiring the origin of goods.

 

In accordance with those uniform rules, the basic criteria determining the country of origin of goods are:

• fully obtained goods,
• sufficiently worked or processed goods (it is considered that goods were sufficiently worked or processed if the value of inputs used in the process of production originating in other countries or inputs of the unknown origin, do not exceed 50% of the value of exported product, and
• diagonal cumulation of origin (agreed between the Serbia and the members of the Customs Union, if the prescribed conditions are met).

Other criteria representing the conditions for the application of free trade regime are:

• principle of direct purchasing (no intermediary in trade is permitted);
• principle of direct delivery. 

In order to prove preferential origin of export or import goods, proof of origin must be submitted, as follows:

1. certificate on origin CT-2 (Article 9),
2. declaration on origin of goods, for consignments of the value up to 5,000 dollars (Article 10).

The template of certificate CT-2 is contained in Annex 1.  Validity of certificates is 12 months from the issuance date.  In the Republic of Serbia, that certificate issues the Customs Administration. In the contracting parties to the Customs Union, the certificate is issued by authorised chambers of commerce. 

 

Declaration on goods origin is a statement about the country of goods origin issued by the producer, seller or transporter of goods, on a commercial invoice or other document pertaining to goods. This declaration can be submitted for consignments of low value – up to 5,000 dollars. The text of the declaration in Russian and English language is contained in Annex 3.

 

Subsequent review of certificates on origin takes place on a random sample, or where there is a reasonable doubt in the true origin of goods, or in the credibility of a certificate on origin of goods. 

 

Preferential Rules on Origin Based on the Generalized System of Preferences (GSP)

 

In addition to the preferential trade based on free trade agreements providing for mutual benefits for parties to those agreements, there are also the so-called autonomous measures in international trade. Certain countries, mainly developed ones, unilaterally accord those measures to their trading partners, mostly developing countries.  One of the oldest and most famous autonomous preferential arrangements is the Generalized System of Preferences (GSP).

 

At the moment, eleven GSP issuing countries reported their GSP schemes to the UNCTAD Secretariat: Australia, Belarus, Canada, European Union, Japan, New Zeeland, Norway, Russian Federation, Switzerland, Turkey and the United States. The so-called “GSP schemes” of the preference issuing countries containing conditions for imports, as well as the list of preference giving countries and the list of countries beneficiaries of the GSP, are accessible at the website of the UNCTAD >>> 

 

The Republic of Serbia is included in that system as the beneficiary country, i.e. goods originating from Serbia benefit from preferential treatment when imported into the USA, Japan and Russian Federation. When issuing certificates of origin (Template A) the rules of origin apply in accordance with the regulations of preference giving countries. Certificate on origin Template A is issued by the Chamber of Commerce of Serbia, pursuant to Article 69 of the Customs Law (Official Gazette of RS, no. 18/10).

 

Rules on Origin for the Application of Autonomous Measures (ATM) Approved by the EU

 

Regulation of the European Parliament and of the Council No. 1336/2011 of 13 December 2011 contains the amendments to the Regulation No. 1215/2009, introducing exceptional trade measures for countries and territories participating in or linked to the European Union’s stabilization and association process.

 

This act extends the autonomous trade measure (ATM) intended for the Western Balkans countries and territories for the period from the 1 January 2011 until the 31 December 2015. All amendments are codified in Regulation No. 1215/2009.

 

The Regulation specifies that ATM regime is still in force for the Western Balkans countries having valid bilateral free trade agreements with the EU, in cases where it is more favourable than under the bilateral agreements.

 

 

In the case of goods originating from Serbia, ATM provide for more favourable treatment than the Interim Trade Agreement  for products  from Chapters 7  (vegetables) and 8 (fruit) of the Combined Nomenclature. For those goods, the EU Common Customs Tariff, in addition to ad valorem duties, provides also for specific duties. ATM regime provides for relief of both kinds of duties. Consequently, it is more favourable for Serbia than the Interim Trade Agreement, providing only for elimination of ad valorem duties. At the same time, the ATM provides for concessions for wine imports from all Western Balkans countries within the global quota of 50,000 hl. This means that Serbian exporters of wine from fresh grapes, after the exhaustion of individual EU import quota set down in the Interim Trade Agreement, may still benefit from the global quota for wine in accordance with the ATM.

 

In order to be eligible for preferential import in the EU based on ATM, goods must have the preferential origin of the exporting country. Rules on origin of goods are contained in the Commission Regulation (No. 2454/93 implementing the Community Customs Code (Part I, Title IV, Chapter 2, Section 2). Certificates on origin (EUR.1), issued by customs authorities of the exporting country, prove the preferential origin of imports into the EU.