Policy ( Exim Policy )

Counter trade Policy in Thailand

1. The principle policy of counter trade

The Cabinet’s resolution on 6 June 1995 stipulated that all procurement of foreign goods and services by government agencies and state enterprises over Baht 500* million must have a related counter trade transaction. The current value for Counterpurchase is set at between 20% to 50%* of the imported price.

2. The policy objectives

2.1 To enhance Thai overseas trade

2.2 To alleviate the problem of imbalance of trade

2.3 To help in case when there is a fall in prices of products

2.4 To increase the bargaining/negotiation power

2.5 To diversify types of exports and create new export markets

3. Types of countertrade

Counter-purchase (the value of counterpurchase is set at between 20%-50% of the total value of the major contract)

4. Procedure of counterpurchase execution

4.1 Towards the new fiscal year, government and state agencies forward notification of their intended projects (a value in excess of Baht 500 million) to the Department of Foreign Trade, Ministry of Commerce. The Department of Foreign Trade is acting in the capacity of the Secretary to the Sub-Committee on Counter trade.

4.2 The Department of Foreign Trade submits a list of intended projects to the Sub-Committee on Counter trade. The Sub-Committee will decide whether particular exceptions or changes be made in the implementation of Counter trade measures as well as deciding the proportion of Counter purchase to be required.

4.3 The Department informs the relevant government or state agency of the Sub-Committee’s decision. Letter of Undertaking for Counter trade (LOU), as required in the tender documents is also forwarded to relevant government authority for future bidding process.

4.4 The concerned government agency announces to companies for tender bid. The counter purchase requirement, including the proportion of counter-purchase to be required form part of the tender documents.

4.5 The concerned government agency informs the Department of Foreign Trade of the bidding outcome. Upon the receipt of a Letter of Award for the main contract and the LOU, the successful bidder must contact the Department to finalize the Counter purchase Agreement.

4.6 The Department negotiates with the successful bidder before the Counter purchase Agreement is signed. In case where they lack of their own in-house facility, trading firm will normally take up this Counter purchase obligations.

4.7 After the signing of Counter purchase Agreeement, the Department gives notification to the concerned government or state agency, so the main contract can be subsequently signed.

4.8 The successful supplier or the designated trading firm must fulfill its counter purchase commitments by exporting Thai products to foreign destinations (in line with the conditions set forth in the Counter purchase Agreement). In order to show evidence of fulfillment of the counterpurchase, it is required to submit Commercial Invoice, Bill of Lading, and Credit Advice to the Department.

4.9 The Department examines all these submitted documents. If the documents meet the counterpurchase conditions, then the counterpurchase amount will be deducted to the value where goods are exported. In return, the Department notifies both the supplier and the trading firm of the outstanding balance.

4.10 The Department reports progress on each Counter purchase Agreement to the Sub-Committee on Counter trade.

5. Entering of Counterpurchase Agreement

5.1 The Department of Foreign Trade will proceed the Counterpurchase Agreement negotiations with the company selected and the assigned company in case where there is the assignment for execution of the Agreement.

5.2 The detailed information of the Counterpurchase Agreement shall consist of:

• Value of products for counterpurchase in which the evaluation will be based on the CIF value of imported products and service as a proportion stated by the Sub-Committee.

• A List of products for counterpurchase approximately 14 categories, selected from the DFT's list of covered products for counterpurchase by the Contractor or the Assignee; as well as the Negative Country List of each product.

• A Bank Guarantee issued by a commercial bank operating in Thailand to the value of 5% of the counterpurchase value, in which the Contractor or the Assignee shall furnish to the DFT the mentioned Bank Guarantee at the time of signing of the Agreement to insure its implementation.

• A Penalty. In case where the Contractor or the Assignee fails to complete an execution of the Agreement, according to the Bank Guarantee; there will be a fine of 5% of the value of counter purchase obligation that are unfulfilled.

• Validity of the Counterpurchase Agreement. The Agreement will be terminated 2 months prior to the expiration of the Underlying Agreement.

5.3 Signing of the Counterpurchase Agreement

• Time and date to sign the Counterpurchase Agreement will be determined by the DFT.

• The signer of the Agreement shall be authorized for signing. In case where the signer does not have an authority for signing, submission of a Power of Attorney is required.

• In case where the Contractor assigns rights of the Agreement execution to the Assignee, the Assignee needs to sign an acceptation of the assignment at the same date which the Contractor signs the Agreement.

• The Contractor and the Assignee in case of the assignment shall each side provide a witness at time of signing of the Agreement.

• Mandatory documents required at the date of signing are:

1. Guarantee of signing authority, or Power of Attorney

2. Bank Guarantee issued by a commercial bank operating in Thailand

6. Export of products under the Counterpurchase Agreement

6.1 Following the signing of the Counterpurchase Agreement, the Contractor or the Assignee shall carry on the export of Thai products within the conditions and timeframe stated in the Agreement.

6.2 Subsequent to the export of products of each consignment, certain export documents to show evidence of fulfillment of the counterpurchase are submitted to the DFT, which are Commercial Invoice, Bill of Lading, and Credit note or Credit Advice by an issuing bank confirming payment of such counterpurchase.

6.3 The DFT will then examine such documents. If the conditions setforth in the Agreement are fulfilled, the DFT will debit the account at the value of the date of export, and inform the deduction as well as the remaining amount to the Contractor or the Assignee.

6.4 As soon as the Contractor or the Assignee has completed the obligation under the Agreement, the DFT shall inform the bank issuing the Bank Guarantee and release the Bank Guarantee to the bank.

Introduction

The decisions taken by the Technical Committee on Rules of Origin since the inception of the Harmonization Work Programme were scattered in working matrices, referral documents and reports. The Technical Committee decided to reproduce in a single publication all origin rules that have so far been developed or evolved as well as the proposals that are still under discussion in the Technical Committee or have been submitted to the Committee for consideration. This is to provide Members with a complete and ever-updating compendium - the “Consolidated Text”, for ease of reference, comparison and the grasping of a comprehensive picture of all decisions on rules of origin so as to further enhance the efficiency of the work of the Harmonization Programme.  This Consolidated Text puts together the following : 

Agreement on Rules of Origin*

The legal basis for the Harmonization Work Programme. This part is included to facilitate Members to make reference to the Agreement whenever necessary. 

General Rules

This covers the general principles on how the harmonized rules of origin should be structured and interpreted. There are a total of 6 General Rules under development. 

Appendix 1 - Definitions of Wholly Obtained Goods

This Appendix is made up of two parts, in which both the definitions elaborated by the Technical Committee and the decisions taken by Committee are recorded. 

Appendix 2 - Product Specific Rules

In this Appendix, the origin rules are presented chapter by chapter. Against each rules, the decisions taken by both Committees as well as the relevant referral documents are indicated.

* The Agreement contains 2 annexes and the agreed origin rules will constitute the third one, Annex 3. Consequently, upon completion of the Harmonization Work Programme, the above-mentioned General Rules and Appendices 1 to 3 may be wrapped up to form Annex 3, which as prescribed in Article 9. 4 of the Agreement on Rules of Origin, is an integral part of the Agreement.

Appendix 3 - Definitions of Minimal Operations or Processes

Like Appendix 2, this Appendix is also made up of two parts, each records the decisions of the Technical Committee as well as the Committee. However, during its 14th Session, the Technical Committee decided to incorporate the definitions of minimal operations or processes as set out in this Appendix into paragraph 3 of General Rule 4. The Technical Committee also decided to examine the need for explanatory notes and indicative examples in subsequent sessions.

Information of interest

This part serves to give additional information to Members and interested parties about the Harmonization Work Programme. Included in this part is three lists of information concerning respectively the plenary sessions and intersectional discussion groups, the issues referred to the Committee for decision, and a compilation of referral documents.

AGREEMENT ON RULES OF ORIGIN

Noting that Ministers on 20 September 1986 agreed that the Uruguay Round of Multilateral Trade Negotiations shall aim to "bring about further liberalization and expansion of world trade", "strengthen the role of GATT" and "increase the responsiveness of the GATT system to the evolving international economic environment"; 

Desiring to further the objectives of GATT 1994; 

Recognizing that clear and predictable rules of origin and their application facilitate the flow of international trade; 

Desiring to ensure that rules of origin themselves do not create unnecessary obstacles to trade; 

Desiring to ensure that rules of origin do not nullify or impair the rights of Members under GATT 1994;

Recognizing that it is desirable to provide transparency of laws, regulations, and practices regarding rules of origin;

Desiring to ensure that rules of origin are prepared and applied in an impartial, transparent, predictable, consistent and neutral manner;

Recognizing the availability of a consultation mechanism and procedures for the speedy, effective and equitable resolution of disputes arising under this Agreement;

Desiring to harmonize and clarify rules of origin;

Hereby agree as follows:

PART I

DEFINITIONS AND COVERAGE

Article 1  Rules of Origin

1.       For the purposes of Parts I to IV of this Agreement, rules of origin shall be defined as those laws, regulations and administrative determinations of general application applied by any Member to determine the country of origin of goods provided such rules of origin are not related to contractual or autonomous trade regimes leading to the granting of tariff preferences going beyond the application of paragraph 1 of Article I of GATT 1994. 

2. Rules of origin referred to in paragraph 1 shall include all rules of origin used in non-preferential commercial policy instruments, such as in the application of: most-favoured-nation treatment under Articles I, II, III, XI and XIII of GATT 1994; anti-dumping and countervailing duties under Article VI of GATT 1994; safeguard measures under Article XIX of GATT 1994; origin marking requirements under Article IX of GATT 1994; and any discriminatory quantitative restrictions or tariff quotas. They shall also include rules of origin used for government procurement and trade statistics.[1]  

[1] It is understood that this provision is without prejudice to those determinations made for purposes of defining "domestic industry" or "like products of domestic industry" or similar terms wherever they apply.

PART II

DISCIPLINES TO GOVERN THE APPLICATION OF RULES OF ORIGIN

Article 2 Disciplines During the Transition Period

Until the work programme for the harmonization of rules of origin set out in Part IV is completed, Members shall ensure that:

(a) when they issue administrative determinations of general application, the requirements to be fulfilled are clearly defined. In particular:

(i) in cases where the criterion of change of tariff classification is applied, such a rule of origin, and any exceptions to the rule, must clearly specify the subheadings or headings within the tariff nomenclature that are addressed by the rule;  

(ii) in cases where the ad valorem percentage criterion is applied, the method for calculating this percentage shall also be indicated in the rules of origin; 

(iii) in cases where the criterion of manufacturing or processing operation is prescribed, the operation that confers origin on the good concerned shall be precisely specified; 

(b)        notwithstanding the measure or instrument of commercial policy to which they are linked, their rules of origin are not used as instruments to pursue trade objectives directly or indirectly;

(c) rules of origin shall not themselves create restrictive, distorting, or disruptive effects on international trade. They shall not pose unduly strict requirements or require the fulfilment of a certain condition not related to manufacturing or processing, as a prerequisite for the determination of the country of origin. However, costs not directly related to manufacturing or processing may be included for the purposes of the application of an ad valorem percentage criterion consistent with subparagraph (a);  

(d) the rules of origin that they apply to imports and exports are not more stringent than the rules of origin they apply to determine whether or not a good is domestic and shall not discriminate between other Members, irrespective of the affiliation of the manufacturers of the good concerned[1];  

(e) their rules of origin are administered in a consistent, uniform, impartial and reasonable manner;  

(f) their rules of origin are based on a positive standard. Rules of origin that state what does not confer origin (negative standard) are permissible as part of a clarification of a positive standard or in individual cases where a positive determination of origin is not necessary; 

(g) their laws, regulations, judicial decisions and administrative rulings of general application relating to rules of origin are published as if they were subject to, and in accordance with, the provisions of paragraph 1 of Article X of GATT 1994; 

(h) upon the request of an exporter, importer or any person with a justifiable cause, assessments of the origin they would accord to a good are issued as soon as possible but no later than 150 days[2] after a request for such an assessment provided that all necessary elements have been submitted. Requests for such assessments shall be accepted before trade in the good concerned begins and may be accepted at any later point in time. Such assessments shall remain valid for three years provided that the facts and conditions, including the rules of origin, under which they have been made remain comparable. Provided that the parties concerned are informed in advance, such assessments will no longer be valid when a decision contrary to the assessment is made in a review as referred to in subparagraph (j). Such assessments shall be made publicly available subject to the provisions of subparagraph (k);  

(i) when introducing changes to their rules of origin or new rules of origin, they shall not apply such changes retroactively as defined in, and without prejudice to, their laws or regulations; 

(j) any administrative action which they take in relation to the determination of origin is reviewable promptly by judicial, arbitral or administrative tribunals or procedures, independent of the authority issuing the determination, which can effect the modification or reversal of the determination; 

(k) all information that is by nature confidential or that is provided on a confidential basis for the purpose of the application of rules of origin is treated as strictly confidential by the authorities concerned, which shall not disclose it without the specific permission of the person or government providing such information, except to the extent that it may be required to be disclosed in the context of judicial proceedings.  

[1] With respect to rules of origin applied for the purposes of government procurement, this provision shall not create obligations additional to those already assumed by Members under GATT 1994.  

[2] In respect of requests made during the first year from the date of entry into force of the WTO Agreement, Members shall only be required to issue these assessments as soon as possible.

Article 3 Disciplines after the Transition Period

Taking into account the aim of all Members to achieve, as a result of the harmonization work programme set out in Part IV, the establishment of harmonized rules of origin, Members shall ensure, upon the implementation of the results of the harmonization work programme, that: 

(a) they apply rules of origin equally for all purposes as set out in Article 1;  

(b) under their rules of origin, the country to be determined as the origin of a particular good is either the country where the good has been wholly obtained or, when more than one country is concerned in the production of the good, the country where the last substantial transformation has been carried out; 

(c) the rules of origin that they apply to imports and exports are not more stringent than the rules of origin they apply to determine whether or not a good is domestic and shall not discriminate between other Members, irrespective of the affiliation of the manufacturers of the good concerned; 

(d) the rules of origin are administered in a consistent, uniform, impartial and reasonable manner;  

(e) their laws, regulations, judicial decisions and administrative rulings of general application relating to rules of origin are published as if they were subject to, and in accordance with, the provisions of paragraph 1 of Article X of GATT 1994;  

(f) upon the request of an exporter, importer or any person with a justifiable cause, assessments of the origin they would accord to a good are issued as soon as possible but no later than 150 days after a request for such an assessment provided that all necessary elements have been submitted. Requests for such assessments shall be accepted before trade in the good concerned begins and may be accepted at any later point in time. Such assessments shall remain valid for three years provided that the facts and conditions, including the rules of origin, under which they have been made remain comparable. Provided that the parties concerned are informed in advance, such assessments will no longer be valid when a decision contrary to the assessment is made in a review as referred to in subparagraph (h). Such assessments shall be made publicly available subject to the provisions of subparagraph (i);  

(g) when introducing changes to their rules of origin or new rules of origin, they shall not apply such changes retroactively as defined in, and without prejudice to, their laws or regulations;  

(h) any administrative action which they take in relation to the determination of origin is reviewable promptly by judicial, arbitral or administrative tribunals or procedures, independent of the authority issuing the determination, which can effect the modification or reversal of the determination; 

(i) all information which is by nature confidential or which is provided on a confidential basis for the purpose of the application of rules of origin is treated as strictly confidential by the authorities concerned, which shall not disclose it without the specific permission of the person or government providing such information, except to the extent that it may be required to be disclosed in the context of judicial proceedings.

PART III 

PROCEDURAL ARRANGEMENTS ON NOTIFICATION, REVIEW,

CONSULTATION AND DISPUTE SETTLEMENT

Article 4 Institutions

1. There is hereby established a Committee on Rules of Origin (referred to in this Agreement as "the Committee") composed of the representatives from each of the Members. The Committee shall elect its own Chairman and shall meet as necessary, but not less than once a year, for the purpose of affording Members the opportunity to consult on matters relating to the operation of Parts I, II, III and IV or the furtherance of the objectives set out in these Parts and to carry out such other responsibilities assigned to it under this Agreement or by the Council for Trade in Goods. Where appropriate, the Committee shall request information and advice from the Technical Committee referred to in paragraph 2 on matters related to this Agreement. The Committee may also request such other work from the Technical Committee as it considers appropriate for the furtherance of the above-mentioned objectives of this Agreement. The WTO Secretariat shall act as the secretariat to the Committee.

2.  There shall be established a Technical Committee on Rules of Origin (referred to in this Agreement as "the Technical Committee") under the auspices of the Customs Co-operation Council (CCC) as set out in Annex I. The Technical Committee shall carry out the technical work called for in Part IV and prescribed in Annex I. Where appropriate, the Technical Committee shall request information and advice from the Committee on matters related to this Agreement. The Technical Committee may also request such other work from the Committee as it considers appropriate for the furtherance of the above-mentioned objectives of the Agreement. The CCC Secretariat shall act as the secretariat to the Technical Committee.

Article 5 Information and Procedures for Modification and Introduction of New Rules of Origin  

1. Each Member shall provide to the Secretariat, within 90 days after the date of entry into force of the WTO Agreement for it, its rules of origin, judicial decisions, and administrative rulings of general application relating to rules of origin in effect on that date. If by inadvertence a rule of origin has not been provided, the Member concerned shall provide it immediately after this fact becomes known. Lists of information received and available with the Secretariat shall be circulated to the Members by the Secretariat. 

2. During the period referred to in Article 2, Members introducing modifications, other than de minimis modifications, to their rules of origin or introducing new rules of origin, which, for the purpose of this Article, shall include any rule of origin referred to in paragraph 1 and not provided to the Secretariat, shall publish a notice to that effect at least 60 days before the entry into force of the modified or new rule in such a manner as to enable interested parties to become acquainted with the intention to modify a rule of origin or to introduce a new rule of origin, unless exceptional circumstances arise or threaten to arise for a Member. In these exceptional cases, the Member shall publish the modified or new rule as soon as possible.

Article 6 Review  

1. The Committee shall review annually the implementation and operation of Parts II and III of this Agreement having regard to its objectives. The Committee shall annually inform the Council for Trade in Goods of developments during the period covered by such reviews. 

2. The Committee shall review the provisions of Parts I, II and III and propose amendments as necessary to reflect the results of the harmonization work programme. 

3. The Committee, in cooperation with the Technical Committee, shall set up a mechanism to consider and propose amendments to the results of the harmonization work programme, taking into account the objectives and principles set out in Article 9. This may include instances where the rules need to be made more operational or need to be updated to take into account new production processes as affected by any technological change.

Article 7 Consultation  

  The provisions of Article XXII of GATT 1994, as elaborated and applied by the Dispute Settlement Understanding, are applicable to this Agreement.

Article 8 Dispute Settlement  

The provisions of Article XXIII of GATT 1994, as elaborated and applied by the Dispute Settlement Understanding, are applicable to this Agreement.

PART IV

HARMONIZATION OF RULES OF ORIGIN

Article 9 Objective and Principles

1. With the objectives of harmonizing rules of origin and, inter alia, providing more certainty in the conduct of world trade, the Ministerial Conference shall undertake the work programme set out below in conjunction with the CCC, on the basis of the following principles:  

(a) rules of origin should be applied equally for all purposes as set out in Article 1;  

(b) rules of origin should provide for the country to be determined as the origin of a particular good to be either the country where the good has been wholly obtained or, when more than one country is concerned in the production of the good, the country where the last substantial transformation has been carried out;  

(c) rules of origin should be objective, understandable and predictable;  

(d)  notwithstanding the measure or instrument to which they may be linked, rules of origin should not be used as instruments to pursue trade objectives directly or indirectly. They should not themselves create restrictive, distorting or disruptive effects on international trade. They should not pose unduly strict requirements or require the fulfilment of a certain condition not relating to manufacturing or processing as a prerequisite for the determination of the country of origin. However, costs not directly related to manufacturing or processing may be included for purposes of the application of an ad valorem percentage criterion;  

(e) rules of origin should be administrable in a consistent, uniform, impartial and reasonable manner;

(f) rules of origin should be coherent;  

(g) rules of origin should be based on a positive standard. Negative standards may be used to clarify a positive standard.

Work Programme  

2. (a)       The work programme shall be initiated as soon after the entry into force of the WTO Agreement as possible and will be completed within three years of initiation.  

(b)       The Committee and the Technical Committee provided for in Article 4 shall be the appropriate bodies to conduct this work. 

(c) To provide for detailed input by the CCC, the Committee shall request the Technical Committee to provide its interpretations and opinions resulting from the work described below on the basis of the principles listed in paragraph 1. To ensure timely completion of the work programme for harmonization, such work shall be conducted on a product sector basis, as represented by various chapters or sections of the Harmonized System (HS) nomenclature. 

(i) Wholly Obtained and Minimal Operations or Processes  

The Technical Committee shall develop harmonized definitions of:  

- the goods that are to be considered as being wholly obtained in one country. This work shall be as detailed as possible; 

- minimal operations or processes that do not by themselves confer origin to a good.  

The results of this work shall be submitted to the Committee within three months of receipt of the request from the Committee.  

(ii) Substantial Transformation - Change in Tariff Classification  

- The Technical Committee shall consider and elaborate upon, on the basis of the criterion of substantial transformation, the use of change in tariff subheading or heading when developing rules of origin for particular products or a product sector and, if appropriate, the minimum change within the nomenclature that meets this criterion.

- The Technical Committee shall divide the above work on a product basis taking into account the chapters or sections of the HS nomenclature, so as to submit results of its work to the Committee at least on a quarterly basis. The Technical Committee shall complete the above work within one year and three months from receipt of the request of the Committee. 

(iii)  Substantial Transformation - Supplementary Criteria  

Upon completion of the work under subparagraph (ii) for each product sector or individual product category where the exclusive use of the HS nomenclature does not allow for the expression of substantial transformation, the Technical Committee: 

- shall consider and elaborate upon, on the basis of the criterion of substantial transformation, the use, in a supplementary or exclusive manner, of other requirements, including ad valorem percentages[1] and/or manufacturing or processing operations[2], when developing rules of origin for particular products or a product sector;  

- may provide explanations for its proposals;  

- shall divide the above work on a product basis taking into account the chapters or sections of the HS nomenclature, so as to submit results of its work to the Committee at least on a quarterly basis. The Technical Committee shall complete the above work within two years and three months of receipt of the request from the Committee.

Role of the Committee

3. On the basis of the principles listed in paragraph 1:  

(a) the Committee shall consider the interpretations and opinions of the Technical Committee periodically in accordance with the time-frames provided in subparagraphs (i), (ii) and (iii) of paragraph 2(c) with a view to endorsing such interpretations and opinions. The Committee may request the Technical Committee to refine or elaborate its work and/or to develop new approaches. To assist the Technical Committee, the Committee should provide its reasons for requests for additional work and, as appropriate, suggest alternative approaches;  

(b) upon completion of all the work identified in subparagraphs (i), (ii) and (iii) of paragraph 2(c), the Committee shall consider the results in terms of their overall coherence.  

Results of the Harmonization Work Programme and Subsequent Work

4. The Ministerial Conference shall establish the results of the harmonization work programme in an annex as an integral part of this Agreement.[3] The Ministerial Conference shall establish a time-frame for the entry into force of this annex.  

[1]       If the ad valorem criterion is prescribed, the method for calculating this percentage shall also be indicated in the rules of origin.

[2] If the criterion of manufacturing or processing operation is prescribed, the operation that confers origin on the product concerned shall be precisely specified.

[3] At the same time, consideration shall be given to arrangements concerning the settlement of disputes relating to customs classification.

ANNEX I TECHNICAL COMMITTEE ON RULES OF ORIGIN

Responsibilities 

1. The ongoing responsibilities of the Technical Committee shall include the following: 

(a) at the request of any member of the Technical Committee, to examine specific technical problems arising in the day-to-day administration of the rules of origin of Members and to give advisory opinions on appropriate solutions based upon the facts presented; 

(b) to furnish information and advice on any matters concerning the origin determination of goods as may be requested by any Member or the Committee; 

(c) to prepare and circulate periodic reports on the technical aspects of the operation and status of this Agreement; and 

(d) to review annually the technical aspects of the implementation and operation of Parts II and III. 

2. The Technical Committee shall exercise such other responsibilities as the Committee may request of it. 

3. The Technical Committee shall attempt to conclude its work on specific matters, especially those referred to it by Members or the Committee, in a reasonably short period of time.

Representation

4. Each Member shall have the right to be represented on the Technical Committee. Each Member may nominate one delegate and one or more alternates to be its representatives on the Technical Committee. Such a Member so represented on the Technical Committee is hereinafter referred to as a "member" of the Technical Committee. Representatives of members of the Technical Committee may be assisted by advisers at meetings of the Technical Committee. The WTO Secretariat may also attend such meetings with observer status. 

5. Members of the CCC which are not Members of the WTO may be represented at meetings of the Technical Committee by one delegate and one or more alternates. Such representatives shall attend meetings of the Technical Committee as observers.

6. Subject to the approval of the Chairman of the Technical Committee, the Secretary-General of the CCC (referred to in this Annex as "the Secretary-General") may invite representatives of governments which are neither Members of the WTO nor members of the CCC and representatives of international governmental and trade organizations to attend meetings of the Technical Committee as observers. 

7. Nominations of delegates, alternates and advisers to meetings of the Technical Committee shall be made to the Secretary-General. 

Meetings

8. The Technical Committee shall meet as necessary, but not less than once a year. 

Procedures 

9. The Technical Committee shall elect its own Chairman and shall establish its own procedures.

ANNEX II COMMON DECLARATION WITH REGARD TO PREFERENTIAL RULES OF ORIGIN 

1. Recognizing that some Members apply preferential rules of origin, distinct from non-preferential rules of origin, the Members hereby agree as follows. 

2. For the purposes of this Common Declaration, preferential rules of origin shall be defined as those laws, regulations and administrative determinations of general application applied by any Member to determine whether goods qualify for preferential treatment under contractual or autonomous trade regimes leading to the granting of tariff preferences going beyond the application of paragraph 1 of Article I of GATT 1994. 

3. The Members agree to ensure that: 

(a) when they issue administrative determinations of general application, the requirements to be fulfilled are clearly defined. In particular: 

(i) in cases where the criterion of change of tariff classification is applied, such a preferential rule of origin, and any exceptions to the rule, must clearly specify the subheadings or headings within the tariff nomenclature that are addressed by the rule; 

(ii) in cases where the ad valorem percentage criterion is applied, the method for calculating this percentage shall also be indicated in the preferential rules of origin; 

(iii) in cases where the criterion of manufacturing or processing operation is prescribed, the operation that confers preferential origin shall be precisely specified; 

(b) their preferential rules of origin are based on a positive standard. Preferential rules of origin that state what does not confer preferential origin (negative standard) are permissible as part of a clarification of a positive standard or in individual cases where a positive determination of preferential origin is not necessary; 

(c) their laws, regulations, judicial decisions and administrative rulings of general application relating to preferential rules of origin are published as if they were subject to, and in accordance with, the provisions of paragraph 1 of Article X of GATT 1994; 

(d) upon request of an exporter, importer or any person with a justifiable cause, assessments of the preferential origin they would accord to a good are issued as soon as possible but no later than 150 days after a request for such an assessment provided that all necessary elements have been submitted. Requests for such assessments shall be accepted before trade in the good concerned begins and may be accepted at any later point in time. Such assessments shall remain valid for three years provided that the facts and conditions, including the preferential rules of origin, under which they have been made remain comparable. Provided that the parties concerned are informed in advance, such assessments will no longer be valid when a decision contrary to the assessment is made in a review as referred to in subparagraph (f). Such assessments shall be made publicly available subject to the provisions of subparagraph (g); 

(e) when introducing changes to their preferential rules of origin or new preferential rules of origin, they shall not apply such changes retroactively as defined in, and without prejudice to, their laws or regulations; 

(f) any administrative action which they take in relation to the determination of preferential origin is reviewable promptly by judicial, arbitral or administrative tribunals or procedures, independent of the authority issuing the determination, which can effect the modification or reversal of the determination; 

(g) all information that is by nature confidential or that is provided on a confidential basis for the purpose of the application of preferential rules of origin is treated as strictly confidential by the authorities concerned, which shall not disclose it without the specific permission of the person or government providing such information, except to the extent that it may be required to be disclosed in the context of judicial proceedings. 

4. Members agree to provide to the Secretariat promptly their preferential rules of origin, including a listing of the preferential arrangements to which they apply, judicial decisions, and administrative rulings of general application relating to their preferential rules of origin in effect on the date of entry into force of the WTO Agreement for the Member concerned. Furthermore, Members agree to provide any modifications to their preferential rules of origin or new preferential rules of origin as soon as possible to the Secretariat. Lists of information received and available with the Secretariat shall be circulated to the Members by the Secretariat.

HARMONIZED RULES OF ORIGIN

GENERAL RULES

General Rule 1: SCOPE OF APPLICATION 

[Rules of Origin provided in this Annex shall be as defined in Article 1, paragraph 1 of the Agreement on Rules of Origin, and shall be applied for the purposes set out in Article 1, paragraph 2 of the Agreement on Rules of Origin.]  

General Rule 2: HARMONIZED SYSTEM 

[References to headings and subheadings are references as they appear in the Harmonized Commodity Description and Coding System as amended and in force. Classification of goods within any additional provisions created for purposes of these rules shall be subject to the General Interpretative Rules and any relative Section, Chapter and subheading notes to the Harmonized System, unless the rules of this Annex otherwise require.]

General Rule 3:  DEFINITIONS 

For the purposes of this Annex:

[“Produced" means having undergone a production process, whether or not country of origin status was conferred as a result thereof.] (US)  ["Production" means growing, mining, harvesting, fishing, trapping, hunting, capturing, manufacturing, processing, or assembling.] (US) 

[“Good” refers to any article of commerce, as classified within the Harmonized System for the purposes of these rules of origin, whose origin is to be determined as provided in this Annex.] [“Material” or “materials” refer to any good used in the production of another good.] 

General Rule 4: DETERMINATION OF ORIGIN

1.    The country of origin of a good shall be determined in accordance with the provisions of paragraph 2 of this General Rule, applied in sequence.

2.    The country of origin of a good is the country in which: 

(a) The good is wholly obtained as defined in Appendix 1; 

(b) The good satisfies the applicable rule set forth in Appendix 2;  

3.     Minimal operations or processes* 

(a) The following operations or processes, taken by themselves or in combination with each other and undertaken for the purposes prescribed herein, are considered to be minimal and thus shall not confer origin on a good:  

(I)  operations or processes to ensure the preservation of goods in good condition for the purposes of transport or storage;

(II)  operations or processes to facilitate shipment or transportation;

(III)  operations or processes that concern the packaging or presentation of goods for sale.

(b) A minimal operation or process or a combination of them shall not preclude conferring origin on a good if a substantial transformation occurred as a result of other operations or processes. 

* CH reserved its position.  

The TCRO will examine the need for explanatory notes to this paragraph, including indicative examples, in its final preparation of the work results.  

4. Neutral elements 

[Unless the context otherwise requires in the present Annex (MOR) (TUN)], in order to determine whether a product originates in a country, [it shall not be necessary to take into account (NOR)] [the origin of (TUN) (NOR)] the power and fuel, plant and equipment, and machines and tools used to obtain such product or the materials used in its manufacture which do not remain in the product or form part of the product [shall not be taken into account.]]

  ISSUES AND OBSERVATIONS :

1.  Do we need a special provision for neutral elements ?  

2.  Is it a rule of origin or a similar issue as fungible goods ?  

3.  Should this provision be applied to both Appendices 1 and 2 ?  

4.  Do we need to set limits to its application ? Bearing in mind that the Harmonized Rules of Origin shall be used in the application of such commercial policy instruments as anti-dumping and countervailing duties and origin marking requirements under GATT 1994. 

5.  Should it also be applicable to added value rules or only to change of tariff classification rules and product specific rules ? 

6.  Do we need to define the “products” to which this rule applies ?

General Rule 5:  Special Provisions 

PACKING AND PACKAGING MATERIALS AND CONTAINERS 

The origin of packing and packaging materials and containers presented with the goods therein shall be disregarded in determining the origin of the goods under any change of tariff classification rule set out in Appendix 2, provided such packing and packaging materials and containers are classified with the goods under the Harmonized System. (Before M.L.) 

Proposed Text 

[Unless the provisions of Appendix 1 or Appendix 2 otherwise require, the origin of packing and packaging materials and containers presented with the goods therein shall be disregarded in determining the origin of the goods under General Rule 4, provided such packing and packaging materials and containers are classified with the goods under the Harmonized System.] (US)

Placement and need for this General Rule will be examined later.  

[General Rule 6: DE MINIMIS]  

Proposed Text  

1. [Foreign materials that do not undergo an applicable change in tariff classification or satisfy ant other applicable requirements of these Regulations shall be disregarded in determining the country of origin of the goods if: 

(a) In the case of goods classified under Harmonized System, the value of the foreign materials is not more than 7% of the transactional value of the good, or 10% of the volume of the total alcoholic strength of the goods classified and 

(b) [in the case of goods classified, the combined weight of the foreign materials does not exceed 7% of the total weight of the goods;] 

2. For the purpose of paragraph 1, the value of the good or the material shall be: 

(a) the transaction value of the good or material, determined in accordance with Article 1 of the Customs Valuation Agreement; or 

(b) in the event that there is no transaction value or the transaction value of the good or material is unacceptable under Article 1 of the Customs Valuation Agreement, determined in accordance with Article 2 through 7 of the Customs Valuation Agreement. 

3. For purposes of paragraph 1:

(a) the value of the good shall be adjusted to an f.o.b. basis, and 

(b) the value of the material shall be adjusted to a c.i.f. basis. 

4. For purposes of applying the Customs Valuation Agreement under this General Rule, the principles of the Customs Valuation Agreement shall apply to domestic transactions, with such modifications as may be required by the circumstances, as would apply to international transactions.] (CAN)  

Proposed as part of General Rule 4 (determination of origin): 

[Notwithstanding the provisions in General Rule 4, Paragraphs 2 b) and 3 (residual rules proposed by EC) above, non-originating materials that do not meet the primary rules set forth in Appendix 2 shall be disregarded in determining the country of origin provided that these materials do not exceed the threshold laid down in Appendix 2. This provision is hereinafter referred to as the de minimis rule.] (EC) 

Six questions raised for Members consideration: 

1. Is the de minimis rule necessary under any circumstances?

If the answer is positive: 

2. Should the application of this rule be optional or mandatory?

3. Should this rule apply to both Appendices 1 and 2?

4. Should this rule apply to the residual rules?

5. What would be the basis of setting thresholds for this rule?

6. Should there be an order of application, or any restriction or limitation for the application of this rule?