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Study on Preferential

Rules of Origin

EUR-MED ORIGIN MODELS:

PRINCIPLE OF TERRITORIALITY
The principle of territoriality requires that the manufacturing process to be considered for origin determination
must not be interrupted by working outside the territories of the EU or the free trade partner country.
Article 3 of the Community Customs Code lists the different territories of the Member States and
defines the customs territories of the Community.
Paragraph 2 of Article 3 of the Community Customs Code includes also the territorial waters, the inland
maritime waters and the airspace of the Member States.
It has to be stressed that for origin determination, the EU is considered as one single territory. The origin
relevant information will be transmitted between manufacturers in the EU through a supplier declaration.
Title III of the European Origin Protocols is dealing with the territorial requirements encompassing one
article concerning the Principle of Territoriality (Article 12), one article concerning Direct Transport (Article
13) and one article concerning Exhibitions (Article 14).
Article 12, para. 1 stipulates that the conditions in Title II for acquiring originating status must be fulfilled
without interruption in a Contracting Party of the free trade zone, i.e. the manufacturing operations must not
be interrupted by working or processing operations carried out outside the territories of the free trade partner
countries (including all partner countries with which cumulation is possible).
When originating goods which had been exported from the Community or a partner country to another
country outside the free trade zone return, they must be considered as non-originating unless it can be
proven to the Customs Authorities that the returning goods are the same goods which left the zone and that
the goods did not undergo any manufacturing operation outside the zone (Article 12, para. 2 (a) and (b)).
Moreover, manufacturing operations carried out prior to the export on intermediate products which can be
taken for origin determination are lost when the good is leaving the free trade zone. The entire final product
has to be considered as non-originating when such goods are re-imported into the free trade zone.

+
Respective Partner Country and
countries listed under
Cumulation Provisions

DEROGATION TO THE PRINCIPLE OF


TERRITORIALITY
However, there is an exception in Article 12, para. 3 allowing to keep the originating status or the originating conferring part initially carried out when
products are exported under outward processing arrangements (Article 12, para. 8) and a limited degree of outward processing was carried out
in the outside the territories of the free trade zone. The precondition for such an exception is that:

Article 12, para. 3 (a)


a certain degree of a origin conferring process had already been carried out on the product to be exported (the product is either wholly obtained
in the free trade zone or has undergone working or processing going beyond minimal operations listed in Article 7);

Article 12, para. 3 (b)


the working or processing done on the exported products does not exceed 10 % of the ex-works price of the final product for which origin status
is claimed.

The provisions of the derogation from the Principle of Territoriality under Article 12 apply only in situations where exported products are sent back to the
same exporting country. The derogation will not apply when the exporting country in the free trade zone is different from the importing country.
Restrictions for the application of the derogation rule are made under Article 12 para. 4 to 7 stipulating that:

Article 12, para. 4


the 10 % working or processing part done outside the zone cannot be added to a maximum value of non-originating materials required under the
list rules in Annex II (the value of the non-originating materials incorporated in the zone and the value-added part acquired outside the free trade
zone shall not exceed the maximum value of non-originating materials).

Article 12, para. 6


The 10 % tolerance under the Derogation of the Principle of Territoriality under Article 12, para. 3 and the General Tolerance under Article 6,
para. 2 cannot be aggregated (The tolerance under the Derogation of the Principle of Territoriality cannot be used when the origin determination
of the good was made by applying the General tolerance rule under Article 6).
Article 12, para. 7
The Derogation of the Principle of Territoriality does not apply to textile products of Chapters 50 to 63 of the Harmonized System.

The derogation of the principle of territoriality through limited working or processing operations to be carried out outside the territories of the free trade
zone under outward processing arrangements is found in the European origin legislation of the pan-European / EUR-MED cumulation system with a
10 % threshold.
More liberal approaches with regard to a derogation of the principle of territoriality are found in certain free trade agreements concluded by EFTA with
Asian partner countries (e.g. EFTA-South Korea, EFTA-Singapore).

Legal Text outlining the


Principle of Territoriality in
the European Origin
Models

Principle of
Territoriality