RESTRICTEDWORLD TRADE
ORGANIZATIONG/RO/W/43
27 July 1999
(99-3145)
Committee on Rules of Origin
OVERALL ARCHITECTURE OF THE HARMONIZED
NON-PREFERENTIAL RULES OF ORIGIN
Note by the Secretariat
As agreed in the meeting of the Committee on Rules of Origin on 23 July 1999, the latest
update of the text of the overall architecture is herewith circulated to Members.G/RO/W/43
Page 2
WORKING DOCUMENT
HARMONIZED NON-PREFERENTIAL RULES OF ORIGIN*
1. Where no square bracket is placed in the text, it is understood that a general consensus has been
reached on the text, subject to the overall coherence examination.
2. *Order of rules and the placement of rules are to be finalised.
DEFINITIONS
[References to manufacturing, producing or processing goods include any kind of working, assembly
or processing operation.
Methods of obtaining goods include manufacturing, raising, growing, breeding, mining, extracting,
harvesting, fishing trapping, gathering, hunting and capturing.
Material includes ingredients, parts, components, subassemblies and goods that were physically
incorporated into another good or were subject to a process in the production of another good.
Originating material means a material whose country of origin, as determined under these rules, is the
same country as the country in which the material is used in production.
Non-originating material means a material whose c ountry of origin, as determined under these rules,
is not the same country as the country in which that material is used in production.
Customs Valuation Agreement means the Agreement on Implementation of Article VII of the General
Agreement on Tariffs and Trade 1994.
["Essential character" means the predominant physical nature, principal function, or other attribute of
a good, that establishes the identity of the good. (CAN)]]
Observations :
(a) The definitions should include a definition of “change in tariff classification” instead of
indicating such a definition in Appendix 2, Rule 3 (Rules of Application) (IND)
(b) The inclusion of the term  “essential character” in the definitions is not necessary since this term
is not used in the harmonized rules of origin.  Moreover, no satisfactory definition of this term
has been established so far.  (EC)
(c) The scope of application should be the first provision of the Annex followed by Definitions.
Thereafter the General Rules should be gin in numbered sequence.  (CAN)(IND)G/RO/W/43
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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 annexed to the Agreement Establishing the World Trade Organization
(WTO), 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
1. References to headings and subheadings are references as they appear in the Harmonized
Commodity Description and Coding System (herei nafter referred to as “Harmonized System”
or “HS”) as amended and in force.  Classification of goods within headings and subheadings
of the Harmonized System is governed by  the General Interpretative Rules and any relative
Section, Chapter and Subheading Notes to that System.  Classification of goods within anyadditional subdivisions created for purposes of the rules of origin  shall also be governed by
the General Interpretative Rules and any relative Section, Chapter and Subheading Notes to
the Harmonized System, unless the rules of this Annex otherwise require.
2. [The outcome of an origin determination under the Harmonized Non-Preferential Rules of
Origin shall not be affected by the amendments to the Harmonized System. (CAN)(IND)]
When amendments to the Harmonized System are recommended by the CCC [WCO Council]
, a technical review shall be undertaken with respect to their possible effect upon the results of
origin determinations under the Harmonized Non- Preferential Rules of Origin.   Necessary
technical rectifications approved by the WTO shall take effect on the date when theamendments to the Harmonized System enter into force. [Such approval shall be made at least
one year before the entry into force of the amendments to the Harmonized System.  Otherwise
the technical rectifications shall take effect on the date specified by the Committee on Rules
of Origin. (JPN)]
The Technical Committee intends to consult with the Committee on Rules of Origin concerning
possible institutional arrangements for technical review and rectification.  As provided in Art. 6 of the
Agreement, such technical review should encompass not only alignment with the HS, but also
technical review of the origin rules to k eep them updated and assure administrability.
General Rule 3 :  DEFINITIONS
[moved to the beginning of this Annex]
General Rule 4:  DETERMINATION OF ORIGIN
The country of origin of a good shall be determined in accordance with these General Rules
and in accordance with the provisions of Appendix 1 and Appendix 2, applied in sequence.
[General Rule 5 (Proposed) : DE MINIMIS
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 exceedG/RO/W/43
Page 4
the threshold laid down in Appendix 2.  This pr ovision is hereinafter referred to as the “de
minimis rule”. (EC)]
(to be considered with other de minimis proposals in General Rule 8 and Appendix 2, Rule 6)
General Rule 5 : Minimal operations or processes
[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 be treated
as provided in Paragraph 2 to Appendix 1 [or Rule 3 to Appendix 2, as appropriate (Deletion
proposed by PHI, CH, IND )]]:
(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.]
[Operations or processes undertaken for the following purposes, by themselves or in
combination with each other, are considered to  be minimal in the context of paragraph 2
to Appendix 1 [and Rule 3 to Appendix 2, as appropriate (deletion proposed by PHI,CH, IND)]:
(i) to ensure presentation of goods and good condition for the purposes of transport
or storage;
(ii) to facilitate shipment or transportation;
(iii) packaging or presentation of goods for sale (IND)]
Observations:
Minimal operations and processes have already been taken into account in the preparation of the
product-specific rules.  Appendix-level exclusions would override rules at the chapter and matrix
level which have been agreed to confer origin. (CH)(PHI)
[Examples of minimal operations or processes include, among others :
- ventilation
- spreading out
[- drying (Relevance of this process has been questioned by the US)]
[- chilling ( """"""" ) ]
[- removal of damaged parts ( " """"" ) ]
[- application of grease, anti-rust paint or protective coating  (" " ) ]
- removal of dust- cleaning
- washing
- sifting or screeningG/RO/W/43
Page 5
- sorting
- classifying or grading
- testing or calibration
- breaking bulk
- packing, unpacking or repacking- grouping of packages
- affixing of marks, labels or distinguishing signs on goods or their packages
- dilution with water or any other aqueous solution
[- ionizing (Relevance of this process has been questioned by the US)]
[- salting ( """"""" ) ]
- husking
[- shelling (unshelling) ( """""" ) ]
[- stoning ( """"""" ) ]
- crushing  ( MOR )]
This list should be deleted. (CAN)(US)(HK)(PHI)
With a view to an uniform application of this pr ovision, an indicative list of processes regarded as
minimal operations according to this definition would be appropriate.  A list will be provided later
on.  (EC)  (CHI) supports this approach.  This list could be in the form of a legally non-binding
explanatory note or user's guidelines (EC) (JPN)
See Referral Issues Nos. 1 & 2
General Rule 6. NEUTRAL ELEMENTS
[[Unless otherwise provid ed in this Annex, (MOR) (TUN )] in order to determine whether a
good originates in a country, the origin of th e power and fuel, plant and equipment, including
safety equipment, or machines and tools used to obtain a good or the materials used in its
manufacture which do not remain in the good or form part of the good shall not be taken into
account.]
See Referral Issue No. 3
General Rule 7 : PACKING AND PACKAGING MATERIALS AND CONTAINERS
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.  The packing and packaging materials and containers which are not classified withtheir contents are separate goods, thus their or igin shall be determined in accordance with the
appropriate rules set forth in Appendices 1 and 2.
[General Rule 8:  DE MINIMIS]G/RO/W/43
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[In application of rules in Appendices 1 and 2, non-originating materials that do not meet the
primary rule set forth for the obtained good shall be disregarded in determining the country of
origin provided these materials do not exceed the threshold of 20% of the ex-works price of
such a good.  ( (MAU) MOR)]
3. 
4. (To be considered with proposed De Minimis rules at proposed General Rule 5 and
in Appendix 2, Rule 6.)
5. 
6. This Rule is not necessary.  (PHI) (SEN)(IND)(MAL)(NZ)
7. 
See Referral Issue No. 4G/RO/W/43
Page 7
APPENDIX 1 - Wholly Obtained Goods
1. Scope of Application
This Appendix sets forth the definitions of the goods that are to be considered as being wholly
obtained in one country.
2. Minimal Operations and Processes
For purposes of this Appendix, minimal operations or processes referred to in General Rule 5
shall not be taken into account in determining whether a good has been wholly obtained in
one country.
3. Accessories and spare parts and tools
Accessories, spare parts, tools and instructional or other informational material classified
and presented with a good shall be disregar ded in determining the origin of that good
under General Rule 4, provided they are imported and normally sold therewith and
correspond, in kind and number, to the normal equipment thereof.
Definitions Notes
1. The following goods are to be considered as
being wholly obtained in one country :
(a) Live animals born and raised in that country; In definitions 1 (a), (b), and (c) the term "animals"
covers all animal life, including mammals, birds,
fish, crustaceans, molluscs, reptiles, bacteria andviruses.
(b) Animals obtained by hunting, trapping, fishing,
gathering or capturing in that country;Definition 1 (b) covers animals obtained in the
wild, whether live or dead, whether or not born
and raised in that country.
(c) Products obtained from live animals in that
country;Definition 1 (c) covers products obtained from
live animals without further processing, includingmilk, eggs, natural honey, hair, wool, semen anddung.
(d) Plants and plant products harvested, picked or
gathered in that country;Definition 1 (d) covers all plant life, including
fruit, flowers, vegetables, trees, seaweed, fungi
and live plants grown in that country.
(e) Minerals and other naturally occurring
substances, not included in definitions (a)-(d),extracted or taken in that country;Definition 1 (e) covers crude minerals and other
naturally occurring substances, including rock or
solar salt, crude mineral sulphur occurring in free
state, natural sands, clays, stones, metallic ores,crude oil, natural gas, bituminous minerals, natural
earths, ordinary natural waters, natural mineral
waters, natural snow and ice.G/RO/W/43
Page 8
Definitions Notes
(f) Scrap and waste derived from manufacturing or
processing operations or from consumption inthat country and fit only for disposal or for therecovery of raw materials;Definition 1 (f) covers all scrap and waste,
including scrap and waste resulting frommanufacturing or processing operations or
consumption in the same country, scrap
machinery, discarded packaging and household
rubbish and all products that can no longer
perform the purpose for which they wereproduced, and are fit only for discarding or for the
recovery of raw materials.  Such manufacturing or
processing operations include all types of
processing, not only industrial or chemical but
also mining, agricultural, construction, refining,incineration and sewage treatment operations.
(g) [Articles collected in that country which can no
longer perform their original purpose nor are
capable of being restored or repaired and whichare fit only for disposal or for the recovery ofparts or raw materials;]
(h) Alternative 1 :
[Parts or raw materials recovered in that country
from articles which can no longer perform their
original purpose nor are capable of being
restored or repaired;] [1]
Alternative 2 :
[Parts or raw materials obtained in that country
from articles collected in that country which are
not fit for their original purpose nor are capable
of being restored or repaired and are fit only for
disposal or for the recovery of parts or rawmaterials;]
                                                     
1   [In the recovery of parts or raw materials, envi ronmental considerations may arise, particularly for
radioactive, hazardous and toxic waste that may result from  the recovery of parts or raw materials from Articles.
In this connection, this rule is without prejudice to Me mbers’ rights to take WTO-consistent measures to protect
the environment.]G/RO/W/43
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Definitions Notes
(i) Goods obtained or produced in that country
solely from products referred to in (a) - (f) [and(g) and (h)] above;[For a good to be considered wholly obtained in
one country under definition 1(i):
(i)      The good must have been obtained or
produced from the products of that country
mentioned in definitions 1(a) to (h);
(ii)      the products of definitions 1(a) to (h) must
not have undergone processing in anothercountry; and
(iii)     the good must not contain
materials not considered to be wholly obtained inthat country.]
[2 (i)  Products of sea-fishing and other products
taken from the sea outside a country are
considered to be wholly obtained in the country
of registration of the vessel that carries out those
operations.
(ii)  Goods obtained or produced on board
factory ships are considered to be wholly
obtained in the country of registration of the
factory ship, provided that those goods are
manufactured from the products referred to insubparagraph (i) originating in the samecountry.
(iii)  Products taken from the sea-bed or subsoil
beneath the sea-bed outside a country are
considered to be wholly obtained in the countrythat has the rights to exploit that sea-bed orsubsoil.][The term “registration” in Definition 2(i) and (ii)
includes registration that a country grants to
chartered vessels or factory ships, provided this
registration is in accordance with the requirements
of that country.]
[2Alternative Text
(i)  Products of sea-fishing and other products
taken from the sea outside the territorial sea and
maritime zones over which the coastal state has
jurisdiction are considered to be wholly
obtained in the state of registration of the vessel
that carries out those operations.
(iii)  products taken from the area of the seabed
and ocean floor and subsoil thereof outside
national jurisdiction, as defined in accordance
with the provisions of the United Nations
Convention on the Law of the Sea, areconsidered to be wholly obtained in the state
that has the exploitation rights, in conformity
with the provisions of that Convention and the
Agreement relating to the Implementation of
Part XI of that Convention of 28 July 1994.][The term “registration” in Definition 2(i) and (ii)
includes registration that a country grants tochartered vessels or factory ships, provided this
registration is in accordance with the requirements
of that country.]G/RO/W/43
Page 10
APPENDIX 2 - Product Specific Rules of Origin
Rule 1 Scope of Application
This Appendix sets forth rules for determining the country of origin of a good when the origin
of the good is not determined under Appendix 1.
Rule 2 Determination of origin
[Principles of Approach]
Observation  : See Attachments I, II, III, IV, and V
[Origin Determination under Primary Rules insertion of this header proposed by (HK)(PHI);
deletion proposed by (US)(CAN) ]
The country of origin shall be determined in accordance with the following provisions,
applied in sequence;
(a)  when a primary rule specifies that the origin of a good is the country in which the good
was obtained in its natural or unprocessed state,  the country of origin of the good shall
be the country in which that good was obtained in that condition;
N.B.  reference to other Ottawa-type rules (where born, where raised, where grew) to be
added when final decisions are made on product-specific rules.]
(b)  the country of origin of a good is the last country of production [provided] [where
(IND)(PHI)(HK)(MAL)(BRA)] a primary rule applicable to the good was satisfied  [in
that country (deletion suggested by India )];
[(c)(i) [when a good undergoes a non-origin conferring operation, the origin of the good is the
country from which the good originated immediately prior to such an operation.]
Observation  :  The scope of this provision (c)(i)as drafted is overly broad; there should be
reference  to operations identified in the Annex, such as minimal operations or processes or
other non-origin conferring operations as specified at a Chapter level.  (EC)
[(c)(ii)
Alternative 1
[when no applicable primary rule was satisfied [in the last country of manufacture or
processing deletion proposed by (PHI) ][and no applicable chapter residual rule was satisfied]
but the good has been produced in that country by further processing of [a material or article][an article] classified in the same provision as that of the good, the country of origin of the
good is the country in which that [material or article] [article] originated, provided that any
materials subsequently added to the [material or article][article] have undergone the change ofG/RO/W/43
Page 11
classification or have otherwise satisfied any other requirement specified in the primary rule
applicable to the good;]
Alternative 2
[when the further processing of a good does not change the classification of the good, and any
materials used in the further processing satisfy the primary rule for the good, the country of
origin of the good is the country of origin prior to the further processing;]
Alternative 3
[when no applicable primary rule was satisfied in the last country of manufacture or
production [and no applicable chapter residual rule was satisfied] and the good was produced
as a result of further processing which did not change its classification, the country of origin
of the good is the country of origin prior to such further processing;]
Observation: This provision (c)(ii) is unnecessary as the idea and consequences of its
application are taken up in subparas. (b) and (c)(i).  Moreover, the provision is not properly
a rule but a principle; as such, it needs to be reformulated and probably presented elsewhere.
(IND)(SEN)
[Origin Determination under Residual Rules insertion of this header proposed by (HK)(PHI);
deletion proposed by (US)(CAN) ]
[(d) when no applicable primary rule has been satisfied [in the last country of production -
deletion proposed by (IND) ],  the country of origin shall be determined as indicated in
the applicable residual rule specified at the chapter level;]
Observations:
It may be appropriate to apply (d) before (c)(i)and (c)(ii). (US) (CH) (EC) (EGY) (CAN (JPN)
(MOR)
The placement here is ap propriate.  (HK)(IND)(MAL)
(e) when no applicable primary rule was satisfied [in the last country of manufacture or
processing of the good deletion proposed by PHI] ] [and no applicable chapter residual
rule was], and the good is produced from materials originating in a single country, the
country of origin of the good is the country in which those materials originated;
[(f)  when no applicable primary rule was satisfied [in the last country of manufacture or
processing of the good deletion proposed by (PHI  ][and no applicable chapter residual
rule was satisfied], and the good is produced from materials originating in a single
country that did not undergo the change of classification or otherwise satisfy the primary
rule applicable to the good, the country of origin of the good is the country in which that
material originated;]G/RO/W/43
Page 12
Observations:
This provision (f) is highly important because of its relation to the primary rules.  When a
primary rule is not met, account should be taken in the residual rules of the design of the
primary rules, giving due weight to the intended results of the primary rules and seeking not
to give originating status to an operation or material by application of a residual rule when
the applicable primary rule was intended to prevent that same result.  That is why this rule
bases origin on the country of origin of the material(s) originating in a single country which
did not satisfy a primary rule, and thus complements the outcome of the primary rule.  If the
applicable primary rule is change of heading “except from a specified heading”, then
obviously the intent of the primary rule was that the specified change did not result in
substantial transformation.  It is thus logical and appropriate to focus on the origin of the
materials which did not undergo the required change. (US)
This provision (f) should be deleted.  In the residual rules origin should be based upon the
origin of all the materials used, without distinction.  (IND)
The provision (f) introduces an extra step in determination of origin and is overly complex to
apply.  In many cases the materials used will originate in several countries, and thus origin
would be found by application of subparagraph (g). (EC)(EGY)
This provision (f) has to be considered in relation  to primary rules submitted to the CRO
which are based on the exclusion of specified materials.  (CH)
Additional provision proposed for application before provision (g):  [when the good is
produced from originating or non-originating materials of more than one country and aprimary rule has not been satisfied for the good, the country of origin of the good shall be the
country of origin of the material that fulfills the major role with regard to the use of the good;
(CAN)]
Observation : This is a very practical and transparent method of determining origin in a
residual environment by first focussing on the use of the good and associating based on that
material which fulfils the major role in this regard. (CAN)
(g) when no applicable primary rule was satisfied [in the last country of manufacture or
processing of the good deletion proposed by (PHI) ][and no applicable chapter residual
rule was satisfied], and the good is produced from materials [(whether or not originating)
(CH) (IND) (US) deletion proposed by (EC) ] of more than one country [that did not
undergo the change of classification or otherwise satisfy the primary rule applicable to
the good deletion proposed by (IND )(CAN)  ], the country of origin of the good shall be
the country in which the major portion of those materials originated, as determined on the
basis specified in each chapter.
Observations:
The bracketed text referring to materials which did not undergo change of classification or otherwise
satisfy the primary rule should be deleted.  In the residual rules origin should be based upon the
origin of all the materials used, without distinction.  (IND)(CAN)G/RO/W/43
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The bracketed text in (g) referring to materials which did not undergo change of classification or
otherwise satisfy the primary rule should be retained for the reasons expressed in the observation
regarding subparagraph (f). (US)
General Observation:
All three provisions, subparagraphs (e), (f), and (g), will be necessary to determine origin in certain
cases and should be retained.    (COL)
[(h) the country of origin of the good shall be the last country of production. (CAN) ]
Observation :  Subparagraph (h) to be used in only the few cases where subparagraph (g) cannot
provide a single country of origin.  Normally, this wo uld only occur in the case of a tie, at which point
a rule providing origin to the last country of production is the most predictable, clear and simplest
solution. (CAN)
Rule 3 Rules of Application
(a) [[Subject to the minimal operations or processes referred to in General Rule 5 or any
other applicable provisions – deletion proposed by (PHI)],  rules of origin that refer to
change in classification require that each non-originating material in the good has
undergone a change in classification at the level of the Harmonized System (Section,Chapter, heading, or subheading), or of any additional subdivision thereof, specified in
the rule.]
(b) [Unless the rules of this Appendix require comparison of originating and non-originating
materials, the origin criteria set forth in th e rules apply only to non-originating materials.
(EC)]
(c) [The term “change in tariff classification” is understood to mean that non-originating
materials used in the production of a good are not classified in the same split
subheading, subheading, split heading, heading, respectively, as the good that is under
examination. (TUN)]
[Rules of origin that refer to change in classification require that each foreign material
in the good undergo a change in classification at the level of the Harmonized System
(section, chapter, heading, subheading), or of any additional subdivision thereof,
specified in the rule, by reason of production, other than by the minimal operations or
processes defined in General Rule 5 or in applicable legal notes.  (US)]
_______________
A suggestion was made to consolidate the above provisions within the following text:
In applying this Appendix :
[(a) Origin shall be determined according to the rules provided for goods based upon
their classification in the Harmonized System and any additional subdivisions created
thereunder, and subject to other rules [or chapter notes (CAN) ] provided in this Annex.
(b) Rules of origin that refer to change in classification require that each non-originating
material in the good undergo the change of classification specified in the rule, other thanG/RO/W/43
Page 14
by the minimal operations or processes defined in General Rule 5 or any other applicable
non-origin conferring process.  (US) (IND, see Rule 3 in Attachment 1)(PHI)]
_______________
 (d) Minimal operations or processes
[For the purposes of this Appendix:
(i) [minimal operations or processes referred to in General Rule 5 shall not confer origin
on a good; and deletion proposed by (CH)(PHI) ]
(ii) a minimal operation or process referred to in General Rule 5 or a combination of
them shall not preclude conferring origin on a good if origin is conferred as a result of
other operations or processes.]
_______________
Observations and Drafting Guidelines for Rule 3, Rules of Application
The Technical Committee took note that for completeness, a rule concerning the application of origin
criteria might require more elements than those embodied in the texts above.  The Technical
Committee was of the view that consideratio n should be given to inclusion and appropriate
arrangement of the following elements:
• Application of rules of origin begins with classification of the good in the HS and the
identification of the corresponding product descript ion in the Harmonized Non-Preferential Rules
of Origin;
• An indication of where the rules of origin are to be found (matrix, chapter, Appendices, General
rules), and that rules of origin are to be applied together with any applicable legal notes, chapter
notes or rules of interpretation;
• An indication that primary rules are those rules found at a matrix or chapter level which confer
origin and are to be applied first.  All rules of origin are primary rules unless otherwise
indicated;
• Residual rules are found at chapter [section] or appendix level, are specifically designated as
such, and are applied only if primary rules give no result;
• For primary rules, both change of classification or other, a rule applicable to a good is met when
non-originating materials undergo the required change in the last country of production; [For
residual rules this is not decided, and normally residual rules will be applied according to their
terms]
• It is also to be considered whether the present Rule 4 on intermediate materials could be included
under Rule 3 as a Rule of Application.G/RO/W/43
Page 15
• Separate specific application instructions are needed for change of classification rules as follows:
-  to indicate that all non-originating materials must undergo the required change of
classification  (subject to any limitations under a de minimis rule if agreed). ( Under other kinds
of rules it is not necessarily the case that all materials undergo the required change);
-  to indicate the changes in classification which do not confer origin, such as disassembly,
change of use, or change of classificat ion by reason of GIR 2(a) of the HS.
There are three provisions that might be placed here as relating to the application of change of
classification criteria :  treatment of GIR 2(a); di sassembly and the origin of disassembled parts; and
change of use.  Presentation of rules on these items as Appendix 2 Rules of Application would permit
the deletion of these provisions from the Chapters in which they appear, and the Technical Committee
decided to pursue this approach.
The Technical Committee’s previous discussions on these issues took place largely in the context of
rules for Chapters 84-90.  The unresolved issues  which emerged from these discussions are now
considered by the Technical Committee to be horizontal issues relating  to the application of origin
criteria based on change in tariff classification which should be resolved in the context of rules of
application in the overall architecture.  These issues, originally formulated as Unresolved Issues in
Referral Doc. 0015 covering Chapters 84-90,  are reproduced at the end of this document following
the presentation of the other Unresolved Issues arising in the overall architecture.
Rule 4 Intermediate materials
[[Except as otherwise provided in this A ppendix, (US)] materials which have acquired
originating status in a country by virtue of fulfilling the rules set forth in this Appendix [Annex
(CAN)(US)] are considered to be originating materials of that country for the purpose ofdetermining the origin of a good incorporat ing such materials or a good made from such
materials by further working or processing in that country.]
Rule 5 Special provisions
(a) Accessories and spare parts and tools
Accessories, spare parts, tools and instructional or other informational material, [instructional
and other informational material (MAL) ] classified and presented with a good shall be
disregarded in determining the origin of that good under General Rule 4, provided they are
imported and normally sold therewith and correspond, in kind and number, to the normal
equipment thereof.
Observations:
Consideration could be given to moving this provision to the Annex, as it applies to the entire
Annex. (HK)
The provision is potentially troublesome as drafted because the terms “accessories” and
“spare parts” are not sufficiently precise.  The provision needs to avoid leaving  wide scope for
differing interpretations.  (NIGG/RO/W/43
Page 16
[(b) [Fungible goods and materials]
[When it is necessary to determine the origin of interchangeable goods or materials which are
combined [commingled (US)] in inventory so that  it is not practical to segregate the goods or
materials by their country of origin, for purposes of the application of the origin rules, an
allocation by country of origin can be made [for the relevant production period (US)] in
accordance with an applicable recognised inventory management method.]
Observations :
The Technical Committee has not reached a resolution on this issue.  Some Members favour it,
some oppose it, and others continue to study its utility.  During the 15th Session Members noted
that answers to the following questions would help the consideration:
To what products does this provision apply?
What is the inventory management method to be adopted?
Clarification on “applicable recognized inventory management method”.
Clarification on “for the purposes of the application of the origin rules”.
Is the provision also used for the purposes of clarifying the residual rule ?
The following Members indicated at the 17th Session that for them the text left uncertain what
goods were considered fungible; what was an inventory management method.  (HK, EGY, PHI)
The proposed method is considered to result in the arbitrary assignment of origin. (MAL)
The provision is beneficial when considering the commercial reality of trade.  As well, it is not
a rule of origin. (CAN)
(c) Putting up in sets [or kits (CAN )(NZ)(CH) ]
[For purposes of these rules and except as otherwise provided in this Appendix:
Goods put up in sets shall retain the origin of the individual articles in the set. (US)]
[For purposes of determining the origin of sets  [kits] and except as otherwise provided in this
Appendix:
(1) [Merely putting articles into sets is not origin conferring.](2) for [goods explicitly mentioned as sets in a heading of the HS deletion proposed by PHI ] and
for goods classified as sets by GIR 3(b) of the HS, the following rules shall apply:
(i) The country of origin of a set [or kit] put up from articles that originate in one
country shall be that country;
(ii) [The country of origin of a set [or kit] put up from articles that originate in more
than one country shall be that country of origin of the article or articles that confer
the essential character of the set or kit as a whole. (CAN)(MAL) (JPN) ]G/RO/W/43
Page 17
[The country of origin of a set put up from articles that originate in more than one
country shall be the country of the article(s) representing the highest value, the
value of the articles having the same origin being taken together. (EC)]
[The country of origin of a set put up from different articles shall be the country
which contributes with the highest value to the set, taking into account the value of
the articles and the work carried out, the value of the articles (including work)
having the same origin being taken together; and
For the purposes of this paragraph,  the term “work” means that the country which
put up articles into sets can consider its work (value) carried out as an equivalent
part of the calculation. (CH)]
(3) for goods merely put together that are not classified together by GIR 3(b) and do not satisfy
the requirements of GIR 3(b) of the Harmonized System, the following rule shall apply:
The origin of the goods shall be the origin of individual articles.]
Observations  :
The proposed rule should cover only sets defined under GIR 3(b) and 3(c) ; for sets explicitly
mentioned in headings of the HS primary rules have been devised to address each case and should be
retained.  (PHI)
The proposed rule should cover all sets and provide the same rule for them. (CAN)
The term “essential character” is not appropriate as a criterion to determine the origin of sets
because it might be subject to different interpretations.  No satisfactory definition of this term has
been established so far.  (EC)
See Referral Issue No. 5
[Rule 6  DE MINIMIS]   See also General Rule 8
[In application of the primary rules in Appendix 2, non-originating materials that do not meet
the primary rule set forth for the obtained good shall be disregarded in determining the country
of origin provided these materials do not exceed the threshold of 20% of the ex-works price of
such a good.  (CH) (MAU) ]
[1. Non-originating materials that do not undergo an applicable change in tariff classification or
satisfy any 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 any other chapter of the Harmonized System other
than under any of Chapters 1 to 4, 6 to 8, 11, 12, 15, 17 and 20 the value of the non-originating
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 under Chapter 22; and
(b)   [in the case of goods classified under Chapters 50 to 63, the combined weight of the non-
originating 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:G/RO/W/43
Page 18
(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 suchmodifications as may be required by the circumstances, as would apply to international transactions.
(CAN)]
Observations  :  A de minimis rule, if adopted, should not be applicable to origin determination
for goods of Chapters 9 or 21.  (COL)
Subparagraph 3 of the Canadian proposal is no t consistent with the WTO Valuation
Agreement.  (JPN)
De minimis rules should be articulated on a Chapter or product sector basis.  (JPN)
(KOR)(EGY)(COL)
A de Minimis rule is not necessary. (PHI) (SEN)(IND)(MAL)(NZ)
See Referral Issue No. 4
Observations (PHI):
1. Some delegations have proposed a de minimis provision in the architecture of the rules of
origin because such a provision could in some way facilitate the determination of the origin
of good.  It is the view of the Philippines th at such a provision could on the other hand,
pose more problems than facilitate the determination of origin of a good.
2. There are "minor" components in the produ ction of a good which could easily fall within
the threshold or tolerance of value of de minimis.  Such "minor" components, however, are
very important  if not crucial in the productio n of the good as the following examples show:
(a) The use of FLUX in the production of iron ore agglomerates.  The flux (either
limestone or dolomite) is a minor component, but without the flux which serves as
the binder, one can not have the agglomerate.
(b) The use of CATALYST is in many industrial processes, as in petrochemical
production.  The catalyst is the most important component of production in the
conversion of olefin to polymer.  But, the catalyst is only a "minor" component in
the production and can easily fall within the threshold value established by the de
minimis rule.G/RO/W/43
Page 19
(c) The use of ENZYMES in biotechnology  or in food production.  The enzymes
normally operate similarly as the catalyst s but they are "minor" components.  And
yet without these elements, one cannot produce the good.
(d) The use of gypsum in cement production.   Without the gypsum added to the clinker,
one cannot have cement.  At the same time, the value of gypsum may fall within the
threshold level of de minimis.
3. It may be argued that de minimis provision will apply only to non-originating materials that
do not meet the primary rules or that did not undergo an applicable change in tariff
classification or satisfy any other applicable requirements of the rules of origin.  Hence, the
so-called non-originating "minor" componen ts in the examples given above would have
satisfied the primary rules.  Take the case of  gypsum (HS 25.20).  Assume that the rule for
cement is CTH.  Gypsum, although a "minor" component in cement (HS 25.23) as a good,
would meet the primary rule and will not be subject to the de minimis rule.
4. At face value, the foregoing conclusion ma y be correct.  On the other hand, did "gypsum"
per se, become "cement"?  The simplified process in cement manufacturing as shown
below will illustrate the preceding concern:
Limestone + Clay                       Clinker + Gypsum                         Cement
       (firing)    (homogenization)
Gypsum in the finishing process is homogenized with clinker to produce cement.  But the
gypsum in cement remains gypsum, i.e. no chemical reaction.  Therefore, gypsum in this
particular case did not change classification if one were to look at the individual
component of cement, i.e., clinker and gypsum.  Gypsum remains as gypsum!
With a de minimis rule, the gypsum (in value, in volume or in weight) per se may easily fall
within the threshold value of de minimis.  Is the value of gypsum then disregarded in the
determination of the origin of cement? Certainly, it may be argued that this is not the case.
5. In the case of catalysts and enzymes, in many instances, they do not become part of the
finished good.  They serve mainly as triggering elements to start or hasten a reaction, say
from olefins to polymers.  The catalysts in most instances undergo no chemical range.
Thus, they do not undergo change in classifica tion, nor do they satisfy the primary rule in
the production of a good.  Are they then disregar ded in the determination of the origin of
the good simply because they are within the de minimis value?  Again, it may be argued
that this is not the case.
6. Notwithstanding the examples given above, a de minimis rule may not have much value in
the primary rule environment.  This is the scenario on the assumption that in many
instances, the non-originatin g materials (minor or major components) to produce the good
would satisfy the primary rule.
7. On the other hand, the de minimis value would play a very important role in the residual
rule environment because the criteria to be used in most instances, at the chapter level,
would either be weight, volume or value.  The de minimis provision will also impact on the
general residual rule, depending on how it will  be worded, i.e., non-originating materials
only (by EC), only materials that did not satisfy the primary rule, whether or not
originating (by U.S.), or all materials (by India).G/RO/W/43
Page 20
8. Even in the proposals for de minimis rule, these appears to be no agreement as to what
value to use and to which products it will apply.
Canada, for example, uses 7% for Chapters 1-4, 6-8, 1-12, 15, 17, 20 and 50-63, and 10%
for Chapter 22.  What about the other Chapters?
Morocco and Switzerland recommend 20% for all goods.
Colombia proposes exception for Chapters 9 and 21.
Japan, Korea and Egypt would want it on a chapter by chapter basis, with Japan further
stating that it could go on a product by product basis.
9. A provision for de minimis is therefore not necessary and not advisable as negotiating such
provision will be counterproductive to the difficult progress achieved so far.G/RO/W/43
Page 21
Unresolved issues submitted for decision by the CRO
ISSUE No. 1:   Content of the General Ru le on Minimal Operations and Processes
A. Definitions only; No list . (CAN)(US)(PHI)(NOR)(SEN)(CH)(HK)
The list of examples is not appropriate because the listed processes are not all related to any
common definition, and in a number of cases are at odds with product-specific rules.  As a
general matter, a list of examples should not appear in a legal text, and it would not be
possible to arrive at a permanent list; adjustment to the list would always be needed.  The list
might mislead the user to think that the listed operations never confer origin, when in fact theyare not taken into account for origin determina tion when done for the purposes set out in the
definition.
B.  List only, no definitions  (IND)
Minimal operations and processes have already been taken into account in the preparation of
the product-specific rules.  Appendix-level exclusions would override rules at the chapter and
matrix level which have been agreed to confer origin.  The list is a practical way to indicate
with specificity what does not confer origin.
C.  Both the definitions and list should be retained  (EGY)(CHI) (MOR)
The debate on minimal operations or processes has demonstrated that there can be great
uncertainty as to the actual operations within the scope of the definitions.  Because it is not yet
known whether the harmonized rules of origin might include explanatory notes or other
guidance, it is useful for the understanding to include an indicative list of operations orprocesses.  The preparation of an appropriate list requires the selection of examples which are
not open to doubt.
D. Both the definitions and list, but the list could be in for form of legally non-binding
explanatory notes or user's guidelines (EC)(JPN)
ISSUE No. 2:   Scope of application of the Ge neral Rule on Minimal Operations or Processes
A. Applicable to Appendix 1 only  (PHI) (IND) (CH)
In Appendix 2 the issue of minimal operations or processes is addressed by a Chapter Note
(negative standards) or an individual primary ru le, where appropriate.  Therefore, there is no
need to set forth a general provision in General Rules.  Otherwise, origin conferred by such a
primary rule, which has already taken into account whether that rule may confer origin on agood by a minimal operation or process, will be overruled by the general provision.  This will
jeopardise the intent of the rules concerned and make the determination of origin
unpredictable.
The reference to Appendix 2, Rule 3(d) should be deleted.
B: Applicable to both Appendices 1 and 2
Article 9.2(c)(i) of the Agreement provides that the Technical Committee shall develop
harmonized definitions of minimal operations or processes that do not by themselves confer
origin to a good.  This is understood to mean  that these definitions must apply to the wholenon-preferential rules of origin.  Negative standards elaborated at the Chapter level do notG/RO/W/43
Page 22
have the same characteristics as the definitions of minimal operations or processes, i.e., not
necessarily the cases of facilitating transportation or packaging for retail sale only.  Thus the
General Rules must have a safety valve to prevent minimal operations or processes from
conferring origin on a good.
B/1: In Appendix 2, should be applicable to the change of classification rules only  (EC)
General Rule 5 is applicable to Appendix 2.  However, this General Rule should not overrule
the origin determination made by a specific process rule provided in Appendix 2.  The process
rules are articulated to confer origin on the particular good in any condition, if the specified
process requirements are satisfied.
B/2: Applicable to all the rules  (US) (CAN)(MOR)
General Rule 5 is applicable to any single rule set forth in Appendix 2 or in the Annex as a
whole.  There is no reason to distinguish between Appendix 1 or Appendix 2 or between kinds
of origin rules.
ISSUE No. 3:  Inclusion of a Provision on Neutral Elements
A  : This provision is necessary . ( MEX)(MOR)
By indicating elements which are never to be taken into account in the determination of origin
this text adds certainty and clarity.
B  :  This provision is not necessary.  (PHI) (HK) (SEN) (IND) (NZ)(MAL)
It is understood and agreed that the elements de scribed are not a part of origin determination;
the Agreement and the entire structure of the origin Annex are formulated on thisunderstanding.  To include such a reference is superfluous and potentially raises uncertainty.
ISSUE No. 4:    Should a de Minimis Rule be included in the Harmonized Rules of  Origin?
(a) A de minimis approach is familiar to a num ber of Customs Administrations as a way to
disregard materials which otherwise would prevent an origin rule from being met.  In thisrespect de minimis rules, or tolerances, give greater possibilities for primary rules to be
satisfied.  They should be a part of the harmonized rules of origin.(EC, CH, MOR, CAN)
(b) The de minimis approach is a feature of prefer ential rules of origin and has no place in these
MFN non-preferential rules.  The administrative apparatus and recordkeeping needed toadminister de minimis rules are prohibitively cost ly, and certainly too costly in relation to the
supposed benefits of such an approach.  It would be extremely difficult to set a universal
threshold, or product-specific thresholds, which reasonably identify the amount of materials
considered sufficiently unimportant to be disregarded.  (PHI, SEN, IND MAL)
(c) The de minimis approach, with its requirements to calculate the value of materials of every
good, might not facilitate origin determination.  If Rule 2 is well formulated, the need for a
de minimis rule could be minimalized.  A de minimus rule could be successfully discussed
after the completion of Rule 2 (US)
Issue No. 5:  Single or Multiple Countries of Origin for Sets
There are two principal differing views in the Technical Committee concerning the origin of sets.G/RO/W/43
Page 23
A. Sets, being made up of multiple goods, are treated for origin purposes as separate goods and
the origin of each constituent good is retained,  as agreed by all Members that packaging is
not origin-conferring. (US)
B. A set has the origin of a single country.  Proposed criteria by which this single country is
determined are as set out in the text above: coun try of origin of the article that confers the
essential character to the set (CAN) (JPN)(MOR) ; country of origin of the article in the set
which represents the highest value (EC); country which contributes the country which
contributes the most to the total value in term s of total value of parts and related processing
activities.(CH).  There is also a view in the TCRO that the making up alone of a set, without
any production of constituent articles, can mean that the origin of a set is the country in
which the set was put up.(IND, CH).
C. There are three possible kinds of sets, as follows:  (i) sets explicitly mentioned as such in a
heading or subheading of the HS;  (ii) sets cl assified in a heading or subheading of the HS
by application of GIR 3(b) of the HS;  and (iii) what could be called sets but classified in
various headings or subheadings of the HS.  Th ere is agreement that the issue of sets under
consideration does not cover the case (iii).
D. For sets explicitly mentioned in headings of the HS primary rules have been devised to
address each case and should be retained (PHI)
_______________
Horizontal issues contained in Doc. OC0031 to be  considered as relevant to Appendix 2 rules:
 ISSUE No.4 in doc. OC0031:
 
 CHANGE OF CLASSIFICATION BY VIRTUE OF THE APPLICATION OF THE SECOND
PART OF GIR 2(A) - COLLECTION OF PARTS
 
 NOTE :
 
4. The General Rule for the Interpretation of the Harmonized System (GIR) 2(a) provides as
follows:
 “2.(a) Any reference in a heading to an article shal l be taken to include a reference to that article
incomplete or unfinished, provided that, as presented, the incomplete or unfinished article hasthe essential character of the complete or finished  article.  It shall also be taken to include a
reference to that article complete or finished (or falling to be classified as complete or finished
by virtue of this Rule), presented unassembled or disassembled.”
 
5. This issue arises by virtue of the second part of GIR 2(a) when non-originating articles arepresented unassembled or disassembled (a set of parts classified as articles).  This issue is still valid
even if some parts are missing from the set of parts when presented, as long as those presented parts
as a whole have the essential character of the complete or finished article concerned (First part of GIR
2(a)).  However, this issue is not valid when parts are separately presented to Customs, i.e., parts are
classified as parts.
OPTION A :  Yes, collecting parts is an origin conferring event under the specified conditions
(IND) (SEN)G/RO/W/43
Page 24
6. The legal requirements of the Harmonized System should be strictly observed in order to
apply the Harmonized Rules of Origin.  The Agreement provides that the change of tariff
classification criterion should be based on the Harmoni zed System.  This means that the HS is being
used not only to identify a good by classification but also to judge whether or not a good undergoes a
substantial transformation by a change of classification.  Therefore if the HS is not sufficient for theorigin determination purposes, supplementary criteria should be elaborated instead of modifying the
HS.  The Customs officials and traders are familiar with the current HS in force, thus if the HS is
applied for the origin determination purposes different from the way which is applicable to the
classification purposes, the Customs officials and traders would be confused.
7. A set of parts, which has the essential character of the complete or finished article, is
considered to have substantially transformed from individual parts, when these parts collected take aform of a set with a manual or an instructional document for assembly and a guarantee by the
supplier.
8. Similar to a do-it-yourself kit or unassembled furniture, handy electronics equipment is
commonly found in this form in a market.  Origin of these sets must be the country where they arecollected and arranged as sets with a guarantee by the supplier; otherwise the same set would have
different origin depending on the place where it is finally assembled.
OPTION B : No, collecting parts is not an origin conf erring event  (US) (AUS) (JPN) (EC) (BRA)
(CAN) (MOR)
9. Collection of parts should not be considered as substantial transformation.  Collection of parts
requires storing and regrouping of goods only; thus  assembly or working or processing on the parts
are not necessary.  Parts may be grouped together, but an individual part is still the same part.
10. The Chapter Note/Chapter Rule/Legal Note should be:
“[Where a change in classification results from the application of HS General Interpretative
Rule 2(a) with respect to collections of parts that are presented as unassembled articles of
another heading or subheading the individual pa rts shall retain their origin prior to such
collection.  (For goods assembled from collecti ons of parts, Note 2.C shall apply.)  (US)
(AUS)]”
or
“[A change of classification which results from the application of Rule 2(a) of the General
Rules for the Interpretation of the HS (GIR 2(a)),  with respect to a collection of parts, shall
not be considered as the change required by the rule set forth in the matrix.  (Sec)]”  Origin of
the collected parts should be determined as a good by a [general] [final]
 residual rule (EC) .
ISSUE No.5 in doc. OC0031:
CHANGE OF CLASSIFICATION BY VIRTUE OF THE APPLICATION OF THE SECOND
PART OF GIR 2(A) - ASSEMBLY OF THE COLLECTED PARTS
OPTION A : Yes.   (by an assembly definition)
Option A/1:  (SG)
159. Any assembly from parts confers origin on the assembled goods.G/RO/W/43
Page 25
160. The Chapter rule should be:
“Obtaining goods from parts by assembly, incl uding sub-assembly, shall be considered as
reflecting last substantial transformation.”
Option A/2:  (MOR)
161. Any assembly resulting in a new good having new characteristics is considered to be
substantial transformation.
162. The Chapter rule should be:
“An assembly operation resulting in a new good having new characteristics is considered to
be substantial transformation.”
OPTION B :     Yes, provided
Option B/1: (by a value added rule)   (EC) (BRA – all goods of Chapters 84 and 86; Some goods of
Chapters 85, 87 and 90) (TUR – some goods of Chapter 85) (AUS – goods of Chapter
87) (EGY – 85.28)
163. When the collected parts are assembled, provided that the required value added (40% (EGY),
45% (EC, BRA, TUR, AUS), 51% (BRA) or 60% (EC,  BRA, AUS)) is achieved in that country as a
result of working and processing and, if applicable, the incorporation of parts originating in that
country, origin should be conferred on that article.
164. The proposed value added rules are as follows:
“the increase in value acquired as a result of working and processing and, if applicable, the
incorporation of parts originating in the country of manufacture represents at least 60 (for
some complete vehicles) or 45 (for others) percent of the ex-works price of the good is carried
out”  (EC) (TUR) (AUS)
“the increase in value acquired as a result of working and processing and, if applicable, the
incorporation of parts originating in the country of manufacture represents at least 60% for all
goods of Chapters 84 and 86; 60% for some goods of Chapter 85; 60% of some goods of
Chapter 87; 45%, 51% or 60% for some goods of Chapter 90”  (BRA)
“40% value added”  (EGY) (SEN)
165. If neither the required value added nor the change of tariff classification rule is satisfied a
[general] [final] residual rule is applied.  (EC) (TUR) (BRA) (EGY)
166. Origin conferred by application of the value added rule should not be nullified by the negative
standards for a non-origin-conferring assembly.  When the required value added rule is not met or the
value added rule is not set out, the “5 parts” rule, the specified process rule, the use of one originating
part rule and a [general] [final] resi dual rule apply in sequence. (AUS)
Option B/2:  (by a cascading approach)  (US)
167. When a collection of parts occurred in one country, the individual parts shall retain their
origin prior to such collection by application of a Chapter [Legal] Note.  If the collected parts are
assembled there is no change in classification after the assembly.  Thus a change of classification ruleG/RO/W/43
Page 26
is not applicable.  Origin of the assembled good from the collected parts is determined by application
of the “5 parts” rule with negative standards for a non-origin-conferring assembly, the specified
processes with negative standards for a non-origin-conferring assembly, or the use of at least one
originating part with negative standards for a non-origin-conferring assembly.
168. The Chapter [Legal] Note should be:
“[Where a change in classification results from the application of HS General Interpretative
Rule 2(a) with respect to collections of parts that are presented as unassembled articles of
another heading or subheading the individual pa rts shall retain their origin prior to such
collection.  (For goods assembled from collections of parts, Note 2.C shall apply.)]”
Option B/3:  (by a Chapter Note and a change of tariff classification rule) (JPN) (CAN) (HK) (CH)
169. Assembly of the collected parts should be treated the same as assembly of separately
imported parts.  Application of a change of tariff classification rule should not be foregone depending
on whether or not parts are presented together and satisfy the requirements of GIR 2(a).  Therefore, aChapter Note should be set out to deal with this qu estion first, and a change of tariff classification rule
determines origin of the collected parts.
170. The Chapter Note should be:
“A good assembled from a collection of parts that are classified by virtue of the application of
GIR 2(a) in the same heading or subheading as the good shall have origin in the country
where, subject to paragraph [next], the relevant rule or note set out in the Appendix is
satisfied.
The change of classification that may be required by the relevant rule in the matrices is
considered to have taken place in the country in which the good is assembled from the
collection of parts.”
OPTION C : No  (IND)
171. The legal requirements of the Harmonized System should be strictly observed in order to
apply the Harmonized Rules of Origin.  The Agreement provides that the change of tariff
classification criterion should be based on the Harmoni zed System.  This means that the HS is being
used not only to identify a good by classification but also to judge whether or not a good undergoes a
substantial transformation by a change of classification.  Therefore if the HS is not sufficient for the
origin determination purposes, supplementary criteria should be elaborated instead of modifying theHS.  The Customs officials and traders are familiar with the current HS in force, thus if the HS is
applied for the origin determination purposes different from the way which is applicable to the
classification purposes, the Customs officials and traders would be confused.
172. A collection of parts, which has the essential character of the complete or finished article, is
considered to have substantially transformed from individual parts, when these parts collected take a
form of a set with a manual or an instructional document for assembly and a guarantee by the
supplier.
173. Origin of these collections, even though finally assembled elsewhere, must be the country
where they are collected and arranged as sets with a guarantee by the supplier; otherwise the same set
would have different origin depending on the place where it is finally assembled.
ISSUE No.6 in doc. OC0031:G/RO/W/43
Page 27
CHANGE OF CLASSIFICATION BY VIRTUE OF PACKAGING OR REPACKAGING OF
GOODS
NOTE:
11. It should be noted that the proposed General Rule 5 (minimal operations or processes)
provides one of the minimal operations or processes as follows:
“[(iii) operations or processes that concern the packaging or presentation of goods for
sale.]”
12. This issue refers to a change of classification by virtue of packaging or repackaging.
Therefore, this issue does not cover whether or not the “value acquired as a result of working or
processing” includes the cost of packaging or repackaging.  It should also be noted that the Secretariat
(Tariff and Trade Affairs Directorate) is of the vi ew (NC0008E1) that a rep ackaging would not lead to
a change of classification.  At its 23rd Session the HS Committee took note of this.  However, to
ensure that in all cases a packaging or repackaging cannot be considered as an origin conferring event
a Chapter Note is proposed.
OPTION A : Yes.
13. If a change of classification by virtue of packaging and repackaging  is not an origin
conferring event, such a change should be explicitly excluded from a change of classification rule.
Otherwise, once a change of tariff classification rule is set forth in the matrix and the rule is satisfied
by any cause, origin should be conferred.  (PHI reserved its position on this general observation on
packaging)
OPTION B : No.  (US) (AUS) (SEN) (EC)(MOR)
14. A change of classification by virtue of packaging and repackaging should not be considered
as substantial transformation. Packaging and repackaging does not require any assembly or working
or processing on the good itself.  A good may be packed or repacked, but the good is still the same
good.
15. The Chapter Note/Chapter Rule/Legal Note should be:
[Where a change in classification results from packaging or repackaging the origin of the
good shall be the origin prior to such packaging or repackaging. (US) (AUS)] (EC stated that
discussion on this issue unnecessary)
ISSUE No.9 in doc. OC0031:
CHANGE OF CLASSIFICATION BY VIRTUE OF:  CHANGE OF USE
NOTE
16. It is understood that application of the HS GIR and other legal notes provides that the actual
use of a good would not result in a re-classification.  It should also be noted that the Secretariat (Tariffand Trade Affairs Directorate) is of the view (N C0008E1) that a change of use of a good would not
lead to a change of classification.  At its 23
rd Session the HS Committee took note of this.  However,
to ensure that in all cases a change of use cannot be considered as an origin conferring event a Chapter
Note is proposed.G/RO/W/43
Page 28
17. This issue is different from the issue of modification of goods.  Modification is considered as
part of assembly processes; a change of use is considered to be a case caused by a cross-boarder
transfer of goods which might be classified in a different heading or subheading depending on the
intended use in the importing country.
OPTION A : Yes.
18.         So far there is no Member who supports this option.  However, the TCRO has not decided yet
that a change of classification by a change of use is not an origin conferring event.
OPTION B : No.
19. A change of classification by virtue of a change of use is not considered as substantial
transformation.
20. The Chapter Note/Chapter Rule/Legal Note should be :
[a change of classification which results from the change of use of the good shall not be
considered as the change required by the rule set forth in the matrix.  (SEN)]
* It has been suggested that general discussion of  this matter should be postponed until
completion of discussion on Rule 2.
ISSUE No.11 in doc. OC0031:
ORIGIN OF A DISASSEMBLED OR RECOVERED PART OR A REMOVED ARTICLE
FROM THE GOOD THAT WOULD HAVE PERFORMED ITS ORIGINAL PURPOSE OR
WOULD HAVE BEEN RESTORED OR REPAIRED
NOTE
21. It has been agreed that disassembly is not an origin conferring event.  This issue deals with
origin of a disassembled (recovered) part or a removed article from the good that would haveperformed its original purpose or would have been restored or repaired.  Thus this issue covers parts
or articles which are not subject to Definitions f), g) and h) of the wholly obtained goods.
22. Chapter Note/Rule was proposed to cover this issue as follows:
“Disassembly    ( not origin conferring )
A change of classification which results from the disassembly of the good shall not be
considered as the change required by the rule set forth in the matrix.   (Basket 1)
[(1) A change of classification which results from the disassembly of the good that can
perform its original purpose shall not be considered as the change required by the rule set
forth in the matrix.  The parts recovered from the good shall retain the country of origin of the
good prior to disassembly.
(2) A change of classification which results from the disassembly of the good that cannot
perform its original purpose without being restored or repaired shall not be considered as the
change required by the rule set forth in the ma trix.  The country of origin of the recovered
parts shall be (one among the following options (US):G/RO/W/43
Page 29
[(a) the country where the parts are recovered]  (SEN)
[(b) the country of origin of the good from which the parts are recovered]  (CAN)
[(c) the initial country of origin of the parts].  (IND)]”
OPTION A : (by Chapter Note/Rule (a))  (SEN)
23. A change of classification which results from the disassembly of the good that would have
performed its original purpose or would have been restored or repaired shall not be considered as the
change required by the rule set forth in the matrix.  However, the parts recovered from the good or thearticles removed from the good should have origin in the country where the parts or the articles are
recovered.  This approach is the most practical and administratively less burdensome.  This approach
is the same as Definition (h), Alternative 1 of the wholly obtained goods.  (Disassembly confers origin
on the disassembled goods.)
OPTION B : (by Chapter Note/Rule (b))  (CAN)
24. A change of classification which results from the disassembly of the good that would have
performed its original purpose or would have been restored or repaired shall not be considered as the
change required by the rule set forth in the matrix.  The parts recovered from the good or the articlesremoved from the good shall retain the country of origin of the good prior to disassembly.  If
disassembly does not confer origin on a disassembled good this approach should be taken.  The
proposed rule (c) is difficult to implement, due to the fact that not all parts or articles have the
marking of the country of origin.
OPTION C : (by Chapter Note/Rule (c))  (IND)
25. A change of classification which results from the disassembly of the good that would have
performed its original purpose or would have been restored or repaired shall not be considered as the
change required by the rule set forth in the matrix.  The parts recovered from the good or the articles
removed from the good shall retain the initial country of origin of the parts or the articles.  If
disassembly does not confer origin on a good this approach is theoretically correct.  When the countryof origin of the part or article is marked on its surface, this approach does not confuse the
manufacturers or traders.
OPTION D :  (by application of Appendix 2, Rule 2)  (EC)
26. A change of classification which results from the disassembly of the good that would have
performed its original purpose or would have been restored or repaired shall not be considered as the
change required by the rule set forth in the matrix.  It is not necessary to have a provision in the
Chapter Notes/Rules to deal with this issue.  The origin of the parts recovered from the good or of the
articles removed from the good is determined by a [g eneral] [final] residual rule set forth in Appendix
2, Rule 2.  [A rule to be finalised]G/RO/W/43
Page 30
Attachment I
APPENDIX 2 – Product-specific rules of origin
Draft by India
Rule 1 Scope of application
This Appendix sets forth rules for determining the country of origin of a good when the origin
of the good is not determined under Appendix 1.
Rule 2 Determination of origin
The country of origin shall be determined in accordance with the following provisions,
applied in sequence:
(a) When a primary rule specifies that the origin of a good is the country in which the good was
obtained in its natural or unprocessed state, the country of origin of the good shall be the
country in which that good was obtained in that condition;
(b) The country of origin of a good is the last country of production where a primary rule
applicable to the good was satisfied;
(c) When a good undergoes a non-origin-conferring operation, the origin of the good is the
country from which the good originated immediately prior to such an operation;
(d) The country of origin shall be determined as indicated in the applicable residual rule specified
at the chapter level;
(e) When the good is produced from materials originating in a single country, the country of
origin of the good is the country in which those materials originated;
(f) When the good is produced from materials (whe ther or not originating) of more than one
country, the country of origin of the good shall be the country in which the major portion of
those materials originated, as determined on the basis specified in each chapter, [and in the
event of two or more countries equally contributing major portions of those materials, the
good shall be assigned a multi-country origin].
Rule 3 Rules of application
(a) Origin shall be determined according to the rules provided for goods based upon their
classification in the Harmonized System and any additional subdivisions created thereunder,
and subject to other rules or chapter notes provided in this Annex.
(b) Rules of origin that refer to change in classification require that each non-originating material
in the good undergoes the change of classification specified in the rule, other than by any
minimal operations or processes defined in the Chapter Rules or by any other applicable
non-origin conferring process.
(c) For the purposes of this Appendix, a minimal operation or process referred to in the Chapter
Rules or a combination of them shall not preclude conferring origin on a good, if origin is
conferred as a result of other operations or processes.G/RO/W/43
Page 31
Rule 4 Special provisions
(a) Accessories and spare parts and tools
Accessories, spare parts, tools and instructional or other information material classified and
presented with a good shall be disregarded in determining the origin of that good under
General Rule 4, provided they are imported and normally sold therewith and correspond, in
kind and number, to the normal equipment thereof.
(b) Fungible goods and materials
When it is necessary to determine the origin of interchangeable goods or materials which are
commingled in inventory so that it is not practical to segregate the goods or materials by the
country of origin, for purposes of the application of the origin rules, an allocation by country
of origin can be made in accordance with an applicable recognized inventory management
method.
(c) Putting up in sets or kits
Goods put up in sets or kits shall retain the or igin of the individual articles except when such
goods are explicitly mentioned as sets or kits in a heading or sub-heading of the HS or areclassified as sets or kits by application of GIR 3(b) of the HS, in which case the origin of the
set or kit shall be the country where it is put up.
(d) Collection of parts
Collection of parts shall retain the origin of the individual parts except when such collection
satisfies GIR 2(a) of the HS by acquiring the essential characteristics of a complete or finished
article, in which case the origin of such a collection shall be the country where it satisfies
GIR 2(a) of the HS.G/RO/W/43
Page 32
Attachment II
APPENDIX 2 – Product-specific rules of origin
Draft by the United States
Rule 2 Determination of origin
The country of origin shall be determined in accordance with the following provisions,
applied in sequence:
(a) when a primary rule specifies that the origin of a good is the country in which the good was
obtained in its natural or unprocessed state, the country of origin of the good shall be the
country in which the good was obtained in that condition;
(b) the country of origin of a good is the last country of production, provided a primary rule
applicable to the good was satisfied in that country;
(c) when no applicable primary rule was satisfied in the last country of production, the country of
origin shall be determined as indicated in the applicable residual rule as specified at the
chapter level;
(d) when no applicable primary rule was satisfied in the last country of production and no
applicable chapter residual rule was satisfied, but the good has been produced in that country
by further processing of a material classified in the same provision as that of the good, the
country of origin of the good is the country in which that material originated, provided thatany material subsequently added to the good has undergone the change of classification or has
otherwise satisfied any other requirement specified in the primary rule applicable to the good;
(e) when no applicable primary rule was satisfied in the last country of production and no
applicable chapter residual rule was satisfied, and the good is produced from material
originating in a single country that did not undergo the change of classification or did not
otherwise satisfy the primary rule applicable to  the good, the country of origin of the good is
the country in which that material originated;
(f) when no applicable primary rule was satisfied in the last country of production and no
applicable chapter residual rule was satisfied, and the good is produced from materials
(whether or not originating) of more than one country that did not undergo the change ofclassification or did not otherwise satisfy the primary rule applicable to the good, the country
of origin of the good shall be the country in which the major portion of those materials
originated, as determined on the basis specified in each chapter.G/RO/W/43
Page 33
Attachment III
APPENDIX 2 – Product-specific rules of origin
Draft by the European Communities
Rule 1 Scope of application
This Appendix sets forth rules for determining the country of origin of a good when the origin
of the good is not determined under Appendix 1.
Rule 2 Determination of origin
The country of origin shall be determined in accordance with the following provisions,
applied in sequence:
(a) when a primary rule specifies that the origin of a good is the country in which the good was
obtained in its natural or unprocessed state, the country of origin of the good shall be the
country in which that good was obtained in that condition;
(b) the country of origin of a good is the last country of manufacture or processing, provided a
primary rule applicable to the good was satisfied in that country;
(c) when no applicable primary rule was satisfied in the last country of manufacture or
processing, the country of origin shall be determined as indicated in the applicable residual
rule specified at the chapter level;
(d) when in the last country of manufacture or processing the good is produced by further
processing of an article that is already classified in the same (sub)heading as that of the good,
the country of origin of that good is the country in which that article originated [, provided
that any materials subsequently added to the article have undergone the change of
classification or have otherwise satisfied any other requirement specified in the primary rule
applicable to the good];
(e) when in the last country of manufacture or processing the good is produced from materials
originating in a single country, the country of origin of the good is the country in which those
materials originated;
(f) when in the last country of manufacture or processing the good is produced from
{non-originating}* materials of more than one country, the country of origin of the good shall
be the country in which the major portion of those materials originated, as determined on the
basis specified in each chapter.
[(g) when no manufacture or processing takes place, the good retains its origin.]
                                                     
* Still under consideration.G/RO/W/43
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Attachment IV
APPENDIX 2 – Product-specific rules of origin
Draft by India and Hong Kong, China
Rule 2: Determination of origin
The country of origin of a good is the last country of production provided that a
primary rule applicable to the good was satisfied in that country;  otherwise the goodshall retain the origin it possesses before proc essing in the last country of production.
Rule 2(c):
Observation:
Discussions in the past two weeks (12-22 July 19 99) relating to Rule 2(b) and Rule 2(c) of
Appendix 2 have recognized that both "provided"  and "where" will achieve the similar, if not
same, result.  There is also a common understanding among Members that:
(a) primary rules should reflect the production processes required to effect substantial
transformation (Article 9(b));
(b) if so, residual rules reflect less than substant ial transformation and sh ould be intended for
use as a last resort only when origin cannot be determined by primary rules;
(c) in which case, origin should always be determined by primary rules, whether or not
satisfied in the last country of production, whenever possible, either to reflect wholly
obtained or last substantial tran sformation (Article 3(b)); and
(d) in light of the foregoing, we seek to contribute to the Committee's discussion of these issues
by offering a new draft text for replacing Ru le 2(b) and Rule 2(c) of Appendix 2 (HK).G/RO/W/43
Page 35
Attachment V
APPENDIX 2 – Product-specific rules of origin
Draft by the Philippines
Rule 2: Determination of Origin
The country of origin shall be determined in accordance with the following provisions,
applied in sequence;
(a) When a primary rule specifies that the or igin of a good in which the good was obtained
in its natural or unprocessed state, the count ry of origin of the good shall be in the
country in which that good was obtained in that condition;
(b) The country of origin of a good is the last country of production provided that a
primary rule applicable to the good was satisf ied in that country; provided further that
when a good undergoes a non-origin conferring operation in that country, the origin of
the good is the country where the last substa ntial transformation of the good has taken
place prior to such an operation;
(c) When no applicable primary rule has been satisfied, the country of origin shall be
determined as indicated in the applicable residual rule specified at the chapter level;
(d) When no applicable primary rule was satisfied and no applicable chapter residual rule
was satisfied, and the good is produced from materials originating in a single country,
the origin of the good is the countr y in which those materials originated;
(e) When no applicable primary rule was satisfied and no applicable chapter residual rule
was satisfied, and the good is produced from materials of more than one country, the
country of origin of the good shall be the co untry in which the major portion, by weight
or volume as applicable, of those materials originated.
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