05-1343  
JOB(03)/132/Rev.7         4  A p r i l  2 0 0 5  
 
 
  
RULES OF ORIGIN 
HARMONIZATION WORK PROGRAMME 
PROPOSALS BY THE CHAIRMAN OF TH E COMMITTEE ON RULES OF ORIGIN 
 
Revision
 
 
 1. At the request of the Chairman of the General Council (see WT/GC/M/77, paragraph 158), 
the Chairman and Vice-Chairman of the Commit tee on Rules of Origin (CRO) have conducted 
intensive consultations on the core policy issues identified in paragraphs  3 and 4 of document 
G/RO/52.  Following consultations with Members co ncerned, the Chairman has circulated a package 
proposal for the 94 core policy issues.  
2. The attached document is the latest update , reflecting the work done during the informal 
consultations from 10-14 January 2005. JOB(03)/132/Rev.7 
Page 2  
TERMINOLOGY  GUIDE 
 
 
I. Rules presented at heading level : 
 (a) If the rule is for the whole heading
: 
 
CTH  - change to this heading from any other heading 
 (b) If the rule is for a split heading
: 
 
CTHS  - change to this split heading from any ot her split of this heading or from any other 
heading  CTH  - change to this split head ing from any other heading   
(N.B.  change from any other split of this heading is excluded.) 
 
II. Rules presented at subheading level:  
 
(a) If the rule is for the whole subheading
: 
 CTSH  - change to this subheading from any other subheading or from any other heading 
 
CTH  - change to this subheading from any other heading   
(N.B.  change from any other subheading of this heading is excluded.)  (b) If the rule is for a split subheading
: 
 
CTSHS - change to this split subheading from any other split of this subheading or from any 
other subheading or heading  CTSH  - change to this split subheading from any ot her subheading or heading  (N.B.  change 
from any other split of this subheading is excluded) 
 
CTH  - change to this split subheading from any other heading   
(N.B.  change from any other split of this subheadin g or from any other subheading of this heading is 
excluded.)  III. Rules presented at heading or subheading level  
CC - change to this chapter from any other chapter 
 
 JOB(03)/132/Rev.7 
Page 3 
 
IMPLICATION ISSUES  
 
CRO Chairman's proposal  
 
  
HARMONIZED RULES OF ORIGIN 
 
Results of the Work Programme
 
 
Decision of [date of decision]  
 
  The Ministerial Conference/General Council,   Having regard to  paragraph 1 of Article IX of the Marrakesh Agreement Establishing the 
World Trade Organization (the "WTO Agreement"), and paragraph 4 of Article 9 of the Agreement 
on Rules of Origin;   Desiring  to harmonize rules of origin used in non-preferential commercial policy instruments 
and to provide more certainty in the conduct of world trade; 
 
 Desiring  to clarify how harmonized rules of origin apply to certain non-preferential 
commercial policy instruments;   Recognizing  that the Agreement on Rules of Origin  does not prejudice Members' rights and 
obligations under the provisions of Annex es 1B and 1C of the WTO Agreement;  
 
 [Recognizing  that rules of origin do not prejudice Members' rights and obligations in respect 
of the application of domestic requirements for food labelling or for sanitary and phytosanitary 
measures.]   Noting with satisfaction the results of the harmonization work programme undertaken 
pursuant to Part IV of the Agreement on Rules of Origin as set out in the annex to this Decision; 
  Recognizing the special needs of developing country Me mbers in respect of flexibility in the 
domestic implementation of  laws and regulations; 
 
 Considering  that arrangements concerning the settlement of disputes relating to customs 
classification […];   Decides  as follows: 
 1. The results of the harmonization work programme, as set out in the annex to this decision, are 
established in an annex entitled "Annex III" as an integral part of the Agreement on Rules of 
Origin. 
 2. Annex III will enter into force on [1 January 2007].
1 
 
3. The Committee on Rules of Origin may, on request, delay the application of Annex III in a 
developing country Member or a least-developed country Member for a period not exceeding 
three years from the date of its entry into force specified in paragraph 2. 
                                                      
1 The idea is to coordinate the entry into force with the next revision of the Harmonized System for 
practical implementation reasons. JOB(03)/132/Rev.7 
Page 4  
 
ANNEX 
  
GENERAL RULES  
General Rule 1:  SCOPE OF APPLICATION
 
 
1. 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 Ag reement Establishing the World Trade Organization 
(WTO Agreement). 
 
2. Rules of Origin provided in this Annex sh all be applied equally for the purposes set out in 
Article 1, paragraph 2 of the Agreement on Rules of Origin, whenever a Member is required, or in the 
absence of such a requirement voluntarily decides, to determine the country of origin of a good in the 
application of an agreement set out in Annex 1A of the WTO Agreement.  However, the Rules of 
Origin in this Annex shall be without prejudice to Members' rights and obligations in respect of the 
application of non-preferential commercial policy instruments. JOB(03)/132/Rev.7 
Page 5 
 
Comments on the Chair's proposal by Australia and New Zealand  
  
1. The following expresses our concerns with the CRO  Chair’s implications proposal, found in 
page 4-5 of JOB(03)/132.  
2. Para. 2, General Rule 1 of the implications proposal provides: 
 
"2. Rules of Origin provided in this Annex shall be applied equally for the purposes set 
out in Article 1, paragraph 2 of the Agreemen t on Rules of Origin, whenever a Member is 
required, or in the absence of such a requiremen t voluntarily decides, to determine the country 
of origin of a good in the application of an  agreement set out in Annex 1A of the WTO 
Agreement.  However, the Rules of Origin in this Annex shall be without prejudice to 
Members’ rights and obligations in respect of the application of non-preferential commercial policy instruments." 
 3. The first sentence can be better explained by  way of an example, such as the Anti-dumping 
Agreement.  The ADA provides that a Member can either use "Country of Origin" or "Country of 
Export" to determine origin.  In this case, a Me mber could choose to use the "Country of Export" 
criteria, avoiding the need to use harmonised rul es.  However, there may be cases (possibly where a 
good is transshipped through a third country or not produced in the country of export) that the Member would have to use the "country of origin" crite ria.  In that case, they would have to use the 
harmonised rules. 
 
4. It is unclear what the second sentence means.   "Rules of Origin used in non-preferential 
commercial policy instruments" are defined in Article 1 (para. 2) of the Agreement on Rules of Origin 
(ARO) to include the application of MFN, Nati onal Treatment, Schedules of Concession, Marks of 
Origin, Quotas, Anti-dumping and Countervailing duties and Safeguards Measures.  The second 
sentence could be read to exclude certain measures from the scope of the ARO.  We question whether 
it would mean that even where a Member chooses, or is required to determine origin, e.g. to use the 
"Country of Origin" criteria in the ADA, the harmonised rules of origin do not have to be used. 
5. We consider that the second sentence could gi ve Members a free rein to pick and choose how 
they apply the harmonised rules.  In our view it al so conflicts with the first sentence in the proposed 
text and with Article 1, paragraph 2, of the ARO. 
 
6. We have major concerns over this wording.  We  suggest either deleting the second sentence, 
or amending it to reflect the original wording of  Brazil’s proposal, including Australia’s suggested 
amendment, that is, "in a manner consistent with  the rights and obligations derived from the WTO 
Agreements."  The second sentence of para 2 would therefore provide,  
 "The Rules of Origin in this Annex shall be applied in a manner consistent with the rights and 
obligations derived from the WTO Agreements." JOB(03)/132/Rev.7 
Page 6  
 
Brazil's proposal
 
   What also seems clear from the debate in the CRO , however, is that there seems to be a broad 
understanding on the intention of the negotiators of  the ARO.  This general understanding could be 
summed up in the following manner: 
 
i) Members have undertaken to apply rule s of origin equally for all purposes (Article 9(a) of the 
ARO) ; 
ii) Article 1.2 of the ARO limits itself to providing  an illustrative list of situations in which, 
whenever rules of origin are used, the harmonized rules of origin shall be applicable; 
iii) It is up to Members to decide, in light of their commitments deriving from other WTO 
Agreements, whether a determination of origin is a mandatory requirement in a particular 
instance; 
iv) In all such instances where a determination of origin is a mandatory requirement, as well as in 
those instances in which a Member autonomously  decides to undertake a determination of 
origin, the harmonized rules of origin annexed to  the ARO (once concluded) shall be applied; 
v) It is the responsibility of relevant bodies of th e WTO to decide if an interpretation of the 
respective Agreement is required regarding the instances where a determination of origin is 
mandatory; 
vi) Such an understanding in no way precludes the ri ghts of Members to adopt laws, regulations 
or administrative determinations that go beyond the specific determination of origin according 
to the harmonized rules of origin, so long as such  actions are consistent with their rights and 
obligations deriving from other WTO Agreements; 
vii) Members will always retain the right to exercise their rights regarding the manner in which 
another Member has implemented its commitments. 
 
 In the event that this broad understanding can form the basis for a constructive approach to 
the issue of implications of harmonized rules of  origin on other WTO Agreements, Brazil would 
propose that the following text replace current Ge neral Rule 1 of the Overall Architecture of the 
Harmonized Rules of Origin:
1  
 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 Ag reement Establishing the World Trade Organization 
(WTO).  Such Rules of Origin shall be applie d equally for all purposes as set out in Article 1, 
paragraph 2 of the Agreement on Rules of Origin and in a manner consistent with the rights and 
obligations derived from the relevant Agreements of the WTO. 
                                                     
 
1 G/RO/45/Rev.1. JOB(03)/132/Rev.7 
Page 7 
 
Australia's comments on Brazil's proposal  
 
General Understanding  
 
i Members have undertaken to apply rules of origin equally for all purposes (Article 9(a) of the 
ARO) ; 
 
 Comment:  the reference should be to Article 9. 1(a) of the ARO not Article 9(a).  
 
vi Such an understanding in no way precludes the rights of Members to adopt laws, regulations 
or administrative determinations that go beyond the specific determination of origin according 
to the harmonized rules of origin, so long as such  actions are consistent with their rights and 
obligations deriving from other WTO Agreements; 
  Comments:   It is not clear what understanding the phrase "Such an understanding" is 
referring to.  Suggest replace this phrase with "The understanding articulated in provisions i-v 
above …"  
 
 :  The phrase "so long as such actions are consiste nt with their rights and obligations deriving 
from other WTO Agreements" excludes the ARO from the scope of this provision.  Suggest replace the word "other" with "the" so the phrase reads "so long as such actions are consistent 
with their rights and obligations d eriving from the WTO Agreements".  
 vii Members will always retain the right to exer cise their rights regarding the manner in which 
another Member has implemented its commitments. 
  Comment:   Replace "commitments"  with "obligations" . 
 General Rule 1:  Scope of Application  
 
Rules of origin provided in this Annex shall be as defined in Article 1, para graph 1 of the Agreement 
on Rules of Origin annexed to the Agreement Es tablishing the World Trade Organization (WTO).  
Such rules of origin shall be applied equally for a ll purposes as set out in Article 1, paragraph 2 of the 
Agreement on Rules of Origin and in a manner cons istent with the rights and obligations derived from 
the WTO Agreement.  
 JOB(03)/132/Rev.7 
Page 8  
 
FISH: FISH TAKEN FROM THE EXCLUSIVE ECONOMIC ZONE  
 
APPENDIX 1, DEFINITION 2(i) Related issues:  
definition 2(ii) and (iii) 
There was an agreement among all Members that the origin of fish and other 
products taken from the territorial sea (not exceeding 12 nautical miles) of a 
country should be the coastal state.  The outstanding question concerns the origin of fish and other products taken from the exclusive economic zone 
(EEZ) (not exceeding 200 nautical miles).  
Considerations:  
Alternative text 1 suggests the origin of fish and other products taken 
from the EEZ should be the country of the flag of the vessel. 
 
Alternative Text 1   
[(i)  Products of sea-fishing and other pr oducts taken from the sea, outside the 
territorial sea of a country, are considered to be wholly obtained in the country whose flag the vessel that carries out those operations is entitled to fly.]  CAN, CHN, EEC, 
EGY, HKC, JPN, KOR, MAR, MEX, NOR, THA, TPKM, 
USA JOB(03)/132/Rev.7 
Page 9 
 
APPENDIX 1, DEFINITION 2(i) Related issues:  
definition 2(ii) and (iii) 
Alternative text 2 suggests that the origin of fish and other products taken 
from the EEZ should be the coastal state.  
(i)  Products of sea-fishing and other pr oducts taken within the territorial sea 
and/or exclusive economic zone of a coastal state, are considered to be wholly 
obtained in that coastal state.   (ii)  Goods obtained or produced on board a factory ship, within the territorial sea and/or exclusive economic zone of a coastal state, are considered to be wholly obtained in that coastal state provided that these goods are 
manufactured from products referred to in  subparagraph (i) originating in the 
same coastal state.  Alternative Text 2-1
  
[(i)  Products of sea fishing and other products taken from waters beyond the 
sovereignty and jurisdiction of a State are considered to be wholly obtained in 
the country whose flag the vessel that carries out those operations is entitled to fly.]  
Alternative Text 2-2
 
[(i)  Products of sea-fishing and other products taken from the sea outside the 
exclusive economic zones, over which th e coastal State has jurisdiction, are 
considered to be wholly obtained in the country whose flag  the vessel that 
carries out those operations is entitled to fly.]  Alternative Text 2-3
 
[(i)  Products of sea-fishing and other products taken from waters beyond the 
sovereignty and jurisdiction of a State are considered to be wholly obtained in 
the country of registration of the vessel that carries out those operations.]  Alternative Text 2-4
 
[(i)  Products of sea-fishing and other pr oducts   taken from the sea outside the 
territorial sea of a country but with in its exclusive economic zone, are 
considered to be wholly obtained in that country.  (iii)  Products of sea-fishing and other products taken from waters in the high 
seas are considered to be wholly obtaine d in the country whose flag the vessel 
that obtains such products is entitled to fly.]  
  ARG, AUS, BRA, 
COL, CHL, CUB, 
DOM, ECU, HND, IND, MYS, NZL, PAK, PHL, URY   
 
  ARG  
 
    
BRA 
     
PHL 
    
ECU, CUB, GTM, 
IND JOB(03)/132/Rev.7 
Page 10  
APPENDIX 1, DEFINITION 2(i) Related issues:  
definition 2(ii) and (iii) 
Alternative text 3 suggests that the best way to address this issue should 
be to leave the importing country to determine the origin of the good in accordance with its legal standpoint of the Law of the Sea. 
 Alternative Text 3
  
[(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.] Note by the 
Secretariat  
  
Alternative Text 3
 is 
a consensus text recommended by the informal Working Group to the CRO on 6 
February 1997 
(document G/RO/M/9, paragraph 3)  
CRO Chairman's proposal:  Alternative Text 1  
Reasoning:  
The rule to decide does only determine the origin of the fish. Following the 
informal discussion it aroused that if fishing rights are accorded by country A 
to country B to fish inside the EEZ of country A, eventual catching quotas are 
attributed to the flag of the vessel th at obtained the fishing rights, meaning 
country B. In this instance the origin rule would follow international practice. The rule of origin does not prejudice in any way the definition of a country or diminish its rights and obligations under the UNCLOS. In this respect the rule 
of origin does not define the country. 
Similarly to this the country of origin of minerals extracted from the subsoil should be the country that received the right to exploit.  
 JOB(03)/132/Rev.7 
Page 11 
 
Note by the Secretariat  
 At the informal consultations in April 2004, so me Members discussed a possible solution whereby 
each Member would be permitted to choose either A lternative Tex 1 or Alternative Text 2 for this 
issue.  In the light of this, the Secr etariat has prepared the following text: 
 
 
Definitions
 Notes  
1.  The following goods are to be considered as being wholly 
obtained in one country:  (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. 
 [2(a)(i)  Products of sea-fishi ng and other products taken from 
the EEZ of a coastal state are to be considered as wholly 
obtained in that coastal state.] 
 [2(a)(ii)  Products of sea-fishi ng and other products taken from 
the EEZ of a coastal state are to be considered as wholly obtained in the country whose flag the vessel that carries out those operations is entitled to fly.] 
 
[2(b)  Products of sea-fishing and other products taken from 
waters in the high seas are to be considered as wholly obtained in the country whose flag the vessel that carries out those operations is entitled to fly.]  
[1.  For the purposes of this 
definition, the terms "exclusive 
economic zone" and "high seas" are those referred to in the United Nations Convention of the Law of the Sea.
1] 
 
[2.  In framing its legislation each Member shall provide for the application of either one of Definitions (2)(a)(i) or (2)(a)(ii) 
for it;  each Member thereby shall 
notify the Committee on Rules of Origin of its application.] 
 
 
 
                                                      
1 It is understood that this Note is without prej udice to Members' rights and obligations who are not 
States Parties to the United Nations Convention on the Law of the Sea. JOB(03)/132/Rev.7 
Page 12  FISH:  DRYING OF FISH  
 
ISSUE NO. 4(II) (Ch. 1-24) HS ex0305(b), 
ex0306(b)  
  
Description of production process: 
Input:  Fish 
Output:  Dried fish  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTH 
 
The drying of fish, fish livers, roes and fish fillets is a complex process which 
completely transforms the initial products  used.  That process fully reflects last 
substantial transformation.  The proces s of drying fish takes approximately 
three months.  After the fish have b een gutted, they are hung on stocks, hence 
the term “stockfish”.  During the drying process, the proteins in the flesh undergo a complete change in character.  During that process, approximately 70 % of the water is removed.  To pr oduce 1 kg of dried fish, approximately 
4.3 kg of gutted and de-headed fish is re quired.  The value of dried fish is 
approximately eight times that of the raw material.  The drying process results 
in a new finished product which is sought  after by consumers.  Consequently, 
it cannot be regarded as a process for the preservation of goods during transportation and/or storage.  AUS, ARG, BRA, 
CAN, CHE, COL, 
DOM, EEC, EGY, 
GTM, HND, IND, ISL, MAR, MEX, MYS, NZL, NOR, PER, SGP, THA, 
TPKM, USA, VEN  
Members not considering it a substantial transformation : 
 
Option C:  The country of origin of the goods of this heading shall be the 
country in which they have been capt ured;  or if farmed, the country in 
which the fish has been raised from egg or fry (including fingerling) 
 
Drying is based on controlling or redu cing the quantity of water naturally 
occurring in a product, with a view to delaying the activity of 
micro-organisms. It is intended to pr eserve goods during transportation and/or 
storage and accordingly is a minimal operation.  [CHL], [JPN
*], 
[KOR*], PHL 
CRO Chairman's proposal :  Option A.  
  
 
                                                      
* Japan and Korea are able to join  the consensus if full consensus is  reached on this issue, on the 
condition that its concerns set out in document G/RO/W/74 are duly accommodated within the context of the 
discussions on the implications of the HRO on othe r WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 13 
 
FISH:  SMOKING OF FISH 
 
ISSUE NO. 6(II) (Ch. 1-24) HS ex0305(c)  
Description of production process: 
Input:  Fish Output:  Smoked fish  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTHS 
 The smoking of fish, or fish livers and roes or of fish fillets substantially alters 
the characteristics of those products, making it possible to obtain new products that are completely different from the initial materials used.  Prior to smoking, these products are sometimes salted.  The taste and the flavor of smoked products meets an ever increasing demand.  The smoking process, which lasts 
between six and twelve hours, results in a new finished product.  The use of 
smoked products differs completely from that of unsmoked products.  
Smoking, which is a complete pro cess requiring skills, know-how and 
technology, is therefore regarded as refl ecting last substantial transformation. 
 AUS, ARG, BRA, 
CAN, CHE, COL, DOM, EEC, EGY, GTM, ISL, MAR, 
MYS, NZL, NOR, 
PER, SGP, THA, TPKM 
Members not considering it a substantial transformation : 
 
Option C:  The country of origin of the goods of this heading shall be the 
country in which they have been capt ured;  or if farmed, the country in 
which the fish has been raised from egg or fry (including fingerling) 
 
Smoking is a simple process which does not substantially alter the characteristics of fish, fish livers and roes or fish fillets.  Consequently, 
smoking of those products cannot reflect  last substantial transformation. 
 [CHL], HND, IND, 
[JPN
*], [KOR*], 
MEX, [PHL], USA, 
VEN 
CRO Chairman's proposal :  Option A.  
  
 
                                                      
* Japan and Korea are able to join  the consensus if full consensus is  reached on this issue, on the 
condition that its concerns set out in document G/RO/W/74 are duly accommodated within the context of the 
discussions on the implications of the HRO on othe r WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 14  FISH:  FILLETING OF FISH  
 
ISSUE NO. 12 (Ch. 1-24) HS ex0304(b) 
Description of production process: 
Input:  Fish Output:  Fish fillets Process:  Fish is processed through grading, cutting, skinning, boning, 
cleaning, chilling or freezing and packing  
Considerations:  
Members considering it a substantial transformation : 
 Option A: CTH 
 
Filleting of fish involves complex processes and more than doubles the value of fish  CAN, COL, DOM, 
GTM, ISL, MYS, 
MAR, NOR, NZL, 
SGP, THA   
Members not considering it a substantial transformation : 
 Option B: The country of origin of the goods of this heading shall be the country in which they have been capt ured;  or if farmed, the country in 
which the fish has been raised from egg or fry (including fingerling) 
 
The process for obtaining fish fillets is a simple one.  It is purely and simply a matter of cutting the fish lengthwise into two symmetric parts and removing 
the bones, without the slightest transformation of the fish. 
 ARG, AUS, BRA, 
CHE, CHL, EEC, 
EGY, HND, IND, 
JPN, KEN, KOR, MEX, PHL, TPKM, USA, VEN, 
Compromise proposal : 
 
CTH, except for species subject to conservation measures applied by 
regional fisheries management organizations  
Regarding tuna and tuna-like species of fish, joint measures, including import bans on these species of fish and their products from certain countries, are now taken to prevent over fishing under the existing regional frameworks for 
conservation and management of these res ources.  If it is decided that filleting 
of tuna and tuna-like species can confer  their origin, then circumvention on 
import bans ("tuna-laundering") could easily  take place, since it would become 
extremely difficult for the customs authorities to carry out necessary import 
controls, so as to fulfill the obligat ions under the resource conservation 
organizations.  On such a basis, it is not appropriate to authorize an origin rule 
which can hamper the effective impl ementation of joint measures for the 
conservation of these species. [JPN,]  
CRO Chairman's proposal:  Option A  
 JOB(03)/132/Rev.7 
Page 15 
 
FISH:  HEAVY SALTING OF FISH  
 
ISSUE NO. 15 (Ch. 1-24) HS ex0305(b) 
Description of production process: 
Input:  Fish Output:  Heavy salted fish Process:  In order to produce the heav y salted product wet salted split fish, for 
instance, the raw material is going th rough the following processing stages: 
 
• de-icing or thawing and washing  
• size- and quality grading  
• splitting, 2/3 of the back bone is removed 
• brushing machine to remove blood from the neck part 
• trimming and washing  to rem ove all bloodspots and nematodes 
• first stage of the salt ripening process: pickle salted in tubes 
• ripening in tubes for approximately one week 
• stacked on pallets, new salt added 
• continued ripening dry salted on pallets 
• grading and quality inspection 
• packing 
• chilled storage  0 °C to +4 °C 
 
 A standard processing line for frozen fillets consists of  about 10 steps from raw material to shipment. In comp arison, split heavy salted fish usually 
consists of about 11 steps including at least two steps of ripening.  
Considerations:  
 
Members considering it a substantial transformation : 
 
Option A:  CTHS 
 
Definition proposed by Norway  
A "heavy salted fish" under HS heading 03.05 is a fishery product where the fish meat is fully saturated with salt, such that the amount of salt is at least 
26.4 grammes per 100 grammes of water  
Definition by the FAO/WHO
 
Heavy salted fish:  salted fish and dr ied salted fish which has been fully 
saturated with salt which may be offe red for consumption without further 
industrial processing.  
Members not considering it a substantial transformation
: 
 
Option B: The country of origin of the goods of this heading shall be the 
country in which they have been capt ured;  or if farmed, the country in 
which the fish has been raised from egg or fry (including fingerling)   
  ARG, AUS, BRA, 
CAN, CHE , CHL, 
COL, DOM, EEC, GTM, IND, ISL, KOR, MAR, MEX, MYS, NOR, NZL, SGP, THA, USA,  
 
    
 
 EGY, HND, VEN   
CRO Chairman's proposal: Option B for salted fish and Option A for heavy salted fish  JOB(03)/132/Rev.7 
Page 16  SLAUGHTERING OF LIVE ANIMALS  
ISSUE NO. 2 (Ch. 1-24) HS 0201-0207, 
0209, 0210  
Description of production process: 
Input:  Live animals Output:  Meat 
Process:  Slaughtering of live animals by  bleeding, eviscerating, removal of 
hair, hide or feathers, removal of extremities, splitting carcasses, chilling, deboning and grading  
Considerations:  
Option A:  CC 
 
The meat, meat products, hair bristles, hides, blood and other such animal 
products which come out of a slaughter plant bear no resemblance to the live 
animals which enter the plant.  There is no way that the sum of the parts will 
ever be able to reconstitute the live an imal.  Holding animals for a time before 
slaughter because of sanitary and phytosan itary concerns is not only a misuse 
of the rules of origin, but a serious dang er to animal health.  If the concern is 
the presence of foot and mouth disease (FMD), holding infected animals will result in the contamination of the surroundi ngs and spread to healthy animals.  
If the concern is bovine spongiform encephalopathy (BSE), holding an animal 
for a few months will prove nothing as the disease takes several years to 
manifest itself and even then, only an autopsy provides definitive proof of its presence.  The proper method for handling suspected disease-harboring animals is through quarantine and that is not within the scope of the rules of origin. 
 ARG, AUS, BRA, 
CAN, CHE, HND, IND, MEX, MYS, NOR*, NZL, [PHL]*, USA 
 
     
 
    
 
 * Flexible 
Option B:  Slaughtering confers origin in combination with a certain period of fattening (e.g. 4 months) 
 
Meat quality depends on the conditions in which the animals ar e raised, as well 
as on the period of time under such conditions.  In some countries, in order to 
obtain the preferred meat taste, bovine animals are fed with concentrates and systematically nurtured for more than 4 months prior to slaughtering.  If the 
country of origin for meat is determined by the criterion of where mere 
slaughtering takes place, it will cause  obvious problems of misleading the 
public with conflicting information. DOM, EEC, EGY, 
GTM, JPN, KOR, MAR, PER, THA, TPKM, VEN 
CRO Chairman's proposal: Option A  
 JOB(03)/132/Rev.7 
Page 17 
 
DAIRY PRODUCTS:  OBTAINING COFFEE CREAMER  
 
ISSUE NO. 16 (Ch. 1-24) HS ex0402(a) 
Description of production process: 
Input:  Skimmed milk powder Output:  Coffee creamer Process:  Skimmed milk powder is processed through the addition of milk fat, 
water, emulsifiers and stabilizer into coffee creamer  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTHS 
 
In the manufacture of coffee creamer, the starting material is skimmed milk powder (possibly also from other dairy ingredients).  Milk fat, water, 
emulsifiers and stabilizers are added in  accordance with specifications. The 
product is sterilized at a specific temperature, then cooled before putting into 
packages.  The final product has a specifi c use and is intended to be consumed 
by putting into coffee.   AUS, CHE, CHL, 
COL, HKC, MYS, 
NZL, PHL, SGP, 
THA    
 
     
Members not considering it a substantial transformation : 
 Option C: The country of origin of the goods of this split heading shall be the country in which the milk is ob tained in its natural or unprocessed 
state. 
 
The process required is not a particular ly complex one and, above all, the 
product obtained has no specially differe nt characteristics compared with the 
products used, since it is also milk. 
 
 ARG, BRA, CAN, 
EEC, EGY, GTM, 
HND, IND, JPN, 
KOR, MEX, SLV, USA, VEN,  
CRO Chairman's proposal: Option C  
 JOB(03)/132/Rev.7 
Page 18  DAIRY PRODUCTS:  OBTAINING RECOMBINED OR RECONSTITUTED MILK  
 
ISSUE NO. 17 (Ch. 1-24) HS 0402(b)  
Description of production process: 
Input:  Skimmed milk powder and AMF (butter oil) or WMP Output:  Recombined or reconstituted milk Process:  Milk powder is processed through  addition of milk fat, stirring of 
mixture, homogenization, pasteurization and boiling into recombined or 
reconstituted milk  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTHS 
 
Milk is reconstituted from two main ingredients which are anhydrous (no moisture), whereas the end product is hydrous (rich in moisture), i.e. the 
essential nature of the product is changed considerably.  Its physical 
composition and functional properties are diametrically opposed to those of its components.   The production process is relatively complex and has to be carried out in a specially equipped f acility.  The processes are as follows : 
 - Reconstitution of the milk powder;  -  Addition of milk fat; 
 - Stirring of the mixture; 
 -  Homogenization, pasteurization, boiling.  
Australia/New Zealand's proposal
 (Note for Chapter 4) 
To confer originating status on "dairy products" obtained as a result of 
recombination or reconstitution and dairy products obtained from 
recombined or reconstituted materials".  
 ARG, AUS, CHE, 
COL, DOM, KOR, 
MYS, NZL, PHL, THA  
Members not considering it a substantial transformation : 
 
Option B: The country of origin of the goods of this split heading shall be 
the country in which the milk is ob tained in its natural or unprocessed 
state.  
The process required is not a particular ly complex one and, above all, the 
product obtained has no specially differe nt characteristics compared with the 
products used, since it is also milk. 
 BRA, CAN, EEC, 
EGY, GTM, HND, IND, JPN, MEX, SLV, TPKM, USA, VEN  
CRO Chairman's proposal:  Option A   
 JOB(03)/132/Rev.7 
Page 19 
 
DAIRY PRODUCTS:  OBTAINING CONDENSED MILK  
 
ISSUE NO. 18 (Ch. 1-24) HS 0402(c)  
Description of production process: 
Input:  Milk powder or liquid milk Output:  Condensed milk  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTHS 
 
The process (or processes) for obtaining condensed milk from liquid milk or, by reversibility, from skimmed milk pow der or from anhydrous milk fats to 
which sugar or sweetening matter may or may not have been added, is a 
complex one which results in a product that is completely different from the products used.  AUS, CHE, CHL, 
DOM, MYS, NZL, 
PHL, SGP, THA   
Members not considering it a substantial transformation : 
 
Option C: The country of origin of the goods of this split heading shall be 
the country in which the milk is ob tained in its natural or unprocessed 
state. 
 
Neither removal of the water contained in milk nor the addition of sugar or 
other sweetening matter in any way alters the milk molecule. 
 ARG, BRA, CAN, 
COL, EEC, EGY, GTM, HND, IND, 
JPN, KOR, MEX, 
SLV, TPKM, USA, VEN 
CRO Chairman's proposal: Option C  
 JOB(03)/132/Rev.7 
Page 20  DAIRY PRODUCTS:  OBTAINING MILK POWDER  
 
 
ISSUE NO. 19 (Ch. 1-24) HS ex0402(d) 
Description of production processes: 
Input:  Liquid milk Output:  Milk powder 
Process:  Liquid milk is processed through removing the water contained in 
liquid milk into milk powder  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH/CTHS/CTSH 
 
A solid product is obtained by removing the water contained in liquid milk.  
The method of removal is drying of the liquid milk.  The functional properties 
of the end-product (skimmed milk powde r or whole milk powder) are a key 
element to be taken into account when de termining substantial transformation.  
Milk powder is solid and usually anhydrous ;  it is richer in proteins (skimmed 
milk powder) and in fats (whole milk powder) than ordinary fresh milk.  In 
addition, it can be kept for far longer than fresh milk – particularly skimmed milk powder which will keep for three years if conserved under the correct 
conditions. 
 . AUS, CHE, MAR, 
MYS, NZL, PHL 
(CTHS), SGP, THA, VEN   
 
Members not considering it a substantial transformation : 
 
Option B:  The country of origin of the goods of this split heading shall be 
the country in which the milk is ob tained in its natural or unprocessed 
state.  
 
Partial or total removal of the water in milk in no way alters the milk molecule  
 ARG, BRA, CAN, 
COL, EEC, EGY, GTM, HND, IND, JPN, KOR, MEX, 
SLV, TPKM, USA  
CRO Chairman's proposal: Option B  
 
 JOB(03)/132/Rev.7 
Page 21 
 
DAIRY PRODUCTS:  OBTAINING MILK PRODUCTS  
 
ISSUE NO. 20 (Ch. 1-24) HS ex0403(a) and 
(c), 0404.90 
Description of production processes: Input:  Liquid, concentrated or rec onstituted milk or starter cultures 
Output:  Yogurt, kephir or fermented or acidified milk  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH 
 
Obtaining milk products such as yogurt, kephir, fermented or acidified milk and the like from liquid milk, from concentrated milk (whether or not in powder form) or from reconstituted milk fully reflects last substantial transformation.  Such milk products have a totally different composition from 
milk.  They also have characteristics and uses that differ from those of milk. 
  ARG, AUS, BRA, 
CAN, CHE, CHL, COL, DOM, EGY, 
GTM, IND, JPN, 
KOR , MEX, MYS, NZL, PHL, THA, USA, VEN  
Members not considering it a substantial transformation : 
 
Option B:  The country of origin of the goods of this split heading shall be 
the country in which the milk is ob tained in its natural or unprocessed 
state. 
 
Obtaining milk products such as yogurt, kephir, fermented or acidified milk and the like from liquid milk, from concentrated milk (whether or not in powder form) or from reconstituted milk  does not reflect last substantial 
transformation, since the process is a simple one which consists, purely and 
simply, of adding cultures to the base input products eventually supplemented 
by small quantities of milk powder in or der to slightly increase the dry matter 
content.   It is not true that those products have  a totally different composition from milk. 
Such milk products have a similar composition as milk except that part of the 
lactose content, approximately 1%
, is converted by the cultures into lactic acid. 
The fat, protein, mineral and vitamin components are the same as in natural milk.  
 EEC 
CRO Chairman's proposal: Option A  
 JOB(03)/132/Rev.7 
Page 22  DAIRY PRODUCTS:  OBTAINING PROCESSED CHEESE  
 
ISSUE NO. 22(Ch. 1-24) HS 0406.30  
Description of production process: 
Input:  Natural cheese, emulsifying an d acidifying agents;  salt and spices 
Output:  Processed cheese Process:  Natural cheese is processed through addition of other ingredients, 
melting and emulsifying into processed cheese  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTSH 
 
Natural cheese is comminuted and then mixed with the emulsifying salts and 
other ingredients such as milk solid s, milk powder, whey powder, co 
precipitates, cream, butter or butter o il, and in some instances previously 
processed cheese.  Processed  cheeses can  also contain ingredients such as 
meat, fish, crustaceans, herbs, spices vegetables, fruits, nuts and vitamins.  
Other additives such as preservatives, co loring and flavoring agents, binders, 
and salt and water complete the list of the ingredients.  This mix is then heated and melted which allows the emulsification of the raw ingredients.  The emulsifying salt plays an integral part in the melting of the cheeses.  ARG, AUS, DOM, 
GTM, HND, [JPN
*], 
MEX, MAR, MYS, 
NOR*, NZL, PHL, 
SGP, VEN   * Flexible  
 
 
Members not considering it a substantial transformation : 
 Option B:  CTH 
 
The process for obtaining processed cheese is a simple one which consists, purely and simply, of mixing various sorts of cheese and melting them by means of heat or emulsifiers.  BRA, CAN, CHE, 
EGY, EEC, IND, 
KOR, THA, USA 
CRO Chairman's proposal: Option B  
 
                                                      
* Japan is able to join the consensus on this issue, on the condition that its concerns set out in document 
G/RO/W/74 are duly accommodated within the context of the discussions on the implications of the HRO on 
other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 23 
 
DAIRY PRODUCTS:  OBTAINING PRODUCTS CONTAINING OVER 50% OF MILK SOLIDS  
 
ISSUE NO. 91 (Ch. 1-24) HS ex2106.90(b) 
Description of production processes: 
Input:  Milk (of Ch. 4) or food preparations of milk (HS 1901) or AMF (butter oil);  vegetable oils, additives and flavorings 
Output:  Food preparations containing over 50% of milk solids  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTSH/CTH 
 
 ARG, AUS, [BRA], 
CHE, COL, EEC, 
EGY, GTM, HKG, 
HND, KOR, MEX, MYS, NZL, PHL, THA, VEN  
Members not considering it a substantial transformation : 
 Option B:  CTSH, except from Ch. 4 or from 1901.90  USA's compromise proposal
 
[Primary rule :  CTSH, provided that the percentage of  milk originating 
in a single country is not more than 80% of the total milk solids. Heading residual rule
:  The country of origin of the goods of this split 
subheading shall be the single country of origin of milk that accounts for 
not less than 80% of the total milk solids]  
  
 
 
  CAN, USA 
CRO Chairman's proposal: Option A  
 JOB(03)/132/Rev.7 
Page 24  DAIRY PRODUCTS:  OBTAINING BEVERAGES CONTAINING OVER 50% OF MILK SOLIDS  
 
ISSUE NO. 95 (Ch. 1-24) HS ex2202.90(a) 
Description of production processes: 
Input:  Milk Output:  Beverages containing over 50% of milk solids  
Considerations:  
Members considering it a substantial transformation : 
 
Rule proposed:  CC/CTH/CTSHS  ARG, [AUS], 
[BRA], CHE, EGY, GTM, HND, IND, 
KOR, MEX, MYS, 
NOR*, NZL, SGP, VEN  * Flexible 
 
Members not considering it a substantial transformation : 
 
Rule proposed:  CTH, except from Ch. 4 or HS 1901/from Ch. 4  
USA's compromise proposal
 
[Primary rule :  CTSH, provided that the percentage of  milk originating 
in a single country is not more than 80% of the total milk solids. 
Heading residual rule :  The country of origin of the goods of this split 
subheading shall be the single country of origin of milk that accounts for not less than 80% of the total milk solids]  
 EEC 
 
   CAN, USA  
CRO Chairman's proposal:  CTH HKC 
 JOB(03)/132/Rev.7 
Page 25 
 
DAIRY PRODUCTS:  ADDING MILK TO OBTAIN PREPARATIONS OF A KIND USED IN ANIMAL FEEDING  
 
ISSUE NO. 110 (Ch. 1-24) HS ex2309.90(A) 
Description of production processes: 
Input:  Milk (of Ch.24) Output:  Preparations of a kind used in animal feeding  
Considerations: Preparations of a kind used in animal feeding  
Members considering it a substantial transformation : 
 
Option A: CTH  
 GTM, [HND], 
MYS, NZL 
CRO Chairman's proposal: CTH except from heading 0401-0403 ARG, BRA, CAN, 
CHE, EEC, EGY,  
HKC, IND, JPN, KOR, MEX, PHL, TPKM, USA 
 JOB(03)/132/Rev.7 
Page 26  COFFEE:  ROASTING OF COFFEE  
 
ISSUE NO. 31 (Ch. 1-24)  
HS 0901.21, 
0901.22 Description of production process: Input:  Green coffee bean Output:  Roasted coffee Process:  Green coffee bean is processed through roasting into roasted coffee  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTSH/CTSH, except from HS 0901.21 
 
Coffee is always roasted for use.  Roasting consists of dry distillation with the formation of new components that produce the flavor and aroma.  The aroma results from a combination of aldehydes, alcohols and phenols.  
 CAN, CHE, EEC, 
EGY, [JPN
*], KOR, 
NZL, SGP, THA, 
USA 
  
Members not considering it a substantial transformation : 
 
Option B: The country of origin of the goods of this subheading shall be 
the country in which the plant grew 
 
Roasting of coffee is a simple process pr acticed since 1554, whereby dry heat 
is added (between 200o and 300o C) with the purpose of eliminating water and 
facilitating the preparation of the beverage. The process is so simple it can be done at home in the stove or in the oven, because it does not require precision with regard to temperature or its duratio n.  In this process, no new substance is 
added and no new product is obtained. All the complex biochemical reactions 
that are responsible for the final flavor, aroma, bitterness and acidity, and 
which identify the beverage, have occurr ed in the geographical place where the 
coffee trees are cultivated 
 CHL, COL, CRI,  
DOM, ECU, GTM, 
HND, KEN, MEX, PER, PHL, SLV, URY, VEN,  
 Compromise proposal
: 
 
The country of origin of the goods of this subheading shall be the country 
of origin of materials of subheading 09.01 that account for more than 85[x]% by weight of all materials used.  When none of the materials used meet the percentage required, the origin of the goods shall be the country in which roasting was carried out 
  
ARG, EEC, IND 
CRO Chairman's proposal: Compromise proposal  
 
                                                      
* Japan is able to support the CRO Chairman's reco mmendation, on the condition that its concerns set 
out in document G/RO/W/74 are duly accommodated within the context of th e discussions on the implications 
of the HRO on other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 27 
 
COFFEE:  BLENDING AND ROASTING OF COFFEE 
Alternative text  (reflecting the discussions at the consultations in April 2004) 
 
ISSUE NO. 31 (Ch. 1-24)  
HS 0901.21, 
0901.22 Description of production process: Input:  Green coffee bean (HS 0901.11, 0901.12) Output:  Roasted coffee (HS 0901.21, 0901.22) 
Process:  Green coffee bean is processe d through blending and roasting into 
roasted coffee  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTSH/CTSH, except from HS 0901.21 
 
After quality coffee beans are obtained, the most important phase of the production of gourmet coffee begins, the roasting and blending. 
 
Coffees of various origins are usually blended in different proportions so as to make a cup with varying acidity and di fferent taste characteristics.  Coffee 
from 100 growing regions in the world produces beans with distinctive characteristics.  The essential aim of the blending is to balance the flavours needed to create a superior coffee.  Many blends contain about 5-7 different 
types of beans. 
 The experienced roaster, with his knowle dge of each bean, artfully combines 
them to create the desired blend of flav ours.  The roaster's blending knowledge 
is usually a closely guarded secret. 
 
A good roaster must be part artist and part scientist to maintain quality and consistency.  It is during the roasting process that the sugars and other carbohydrates within the bean become caramelized, creating a substance which 
is known as the coffee oil.  Technically, this fragile chemical is not actually an 
oil (since it is water-soluble), but it is  what gives the coffee its flavour and 
aroma.  CAN, CHE, EEC, 
EGY, [JPN
*], KOR, 
NZL, SGP, THA, USA   
Members not considering it a substantial transformation : 
 
Option B: The country of origin of the goods of this subheading shall be 
the country in which the plant grew 
 When a roaster roasted coffee beans originating from a single country, the 
origin of the roasted coffee should be the country in which the coffee beans are harvested.  When a roaster blended various coffee beans, origin should be determined by the general residual rule  (the major portion of coffee beans). CHL, COL, CRI,  
DOM, ECU, GTM, HND, KEN, MEX, PER, PHL, URY, VEN,  
                                                      
* Japan is able to support the CRO Chairman's reco mmendation, on the condition that its concerns set 
out in document G/RO/W/74 are duly accommodated within the context of th e discussions on the implications 
of the HRO on other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 28  
 
Compromise proposal
: 
 
The country of origin of the goods of th is subheading shall be the country of 
origin of materials of subheading 0901.11 or 0901.12 that account for more than 85[x]% by weight of all materials used.  When none of the materials used 
meet the percentage required, the origin  of the goods shall be the country in 
which roasting was carried out  ARG, IND 
Chairman's proposal (pending the results of the decaffeination issue, the 
same rules are to be applied mutatis mutandis  to subheading 0901.22) 
 HS 0901.21 
 
–  ex0901.21(a) (- coffee, roasted, of  coffee beans of subheading 0901.11, 
wholly obtained in a single country) Origin rule:  The country of origin of the goods of this split subheading shall be the country in which the plant grew. 
 
–  ex0901.21(b) (other) Origin rule:  CTSH  BRA, [CAN], CUB, 
[EEC], [JPN],  [THA]    
  JOB(03)/132/Rev.7 
Page 29 
 
 
COFFEE:  OBTAINING EXTRACTS, ESSENC ES AND CONCENTRATES (INCLUDING 
INSTANT COFFEE) EXCLUSIVELY OF REAL COFFEE 
 
ISSUE NO. 79 (Ch. 1-24) HS ex2101.11(a) 
Description of production process: 
Input:  Coffee 
Output:  Extracts, essences and concentrates of coffee (including instant 
coffee) Process:  Coffee is processed through roasting, extracting, concentrating, 
agglomeration into extracts, essences and concentrates of coffee  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH/CTSH 
 The processes include roasting, extracting, concentrating, agglomeration which 
result in a new product with new characteristics.  ARG, AUS, CAN, 
CHE, CHL, EEC, EGY, HKC, JPN, KOR, MAR, MYS, 
NOR, NZL, THA, 
USA   
Members not considering it a substantial transformation : 
 Obtaining coffee concentrates, extracts and essences is not a substantial transformation inasmuch as these coffee forms are obtained through addition and subsequent removal of water, to a greater or lesser extent, depending on 
the form that is desired.  The su ccess of the process lies in obtaining the 
extract, concentrate or essence without modifying the organoleptic characteristics that where already dete rmined in the green coffee bean.  
Consequently, the process is done in such a way as not to alter these organoleptic characteristics, which, in turn, are exclusively dependent on the 
variety, the place of cultivation and the methods of obtaining of the green 
bean.  
Option C: CTH, except from HS 0901 
  
Option D: The country of origin of the goods of this subheading shall be 
the country in which the plant grew    
    
 
    
 
  CRI, [GTM], HND, MEX, SLV 
 
COL, DOM, KEN, LKA, PER, PHL, VEN   
Compromise proposal : 
 
The country of origin of the goods of this split subheading shall be the 
country of origin of coffee that accoun ts for more than 85% by weight of 
all coffee used.  When none of the coffee used meet the percentage 
required, the origin of the goods shall be the country in which obtaining of 
extracts, essences or concentrates was carried out.  BRA, CAN, IND, 
SGP 
CRO Chairman's proposal: Compromise proposal  
 JOB(03)/132/Rev.7 
Page 30  COFFEE:  OBTAINING PREPARATIONS WITH  A BASIS OF EXTRACTS ETC. OF 
COFFEE  
 
ISSUE NO. 81 (Ch. 1-24) HS ex2101.12 
Description of production processes: 
Input:  Instant coffee Output:  Mixture of instant coffee, sugar and creamer  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTSH 
 
Deliberate blending of instant coffee, sugar and creamer in a specific formulation and putting the constituen ts in ready-to-serve sachets for 
immediate consumption are carried out.  A new product results with a different 
taste from the individual constituents and which is ready to be served 
immediately. 
 AUS, KOR, SGP, 
USA, CAN 
Members not considering it a substantial transformation : 
 
Option B:  CTH 
 
Obtaining the products merely from ex tracts, essences or  concentrates of 
coffee is not a substantial transformation.  
 ARG, BRA, CHE, 
CHL, COL, DOM, EEC, EGY, GTM, HND, HKC, IND, JPN, KEN, LKA, MAR, MEX (CC), 
NOR, NZL, PER, 
PHL,  VEN 
CRO Chairman's proposal: Option B  
 JOB(03)/132/Rev.7 
Page 31 
 
REFINING OF FATS AND OILS  
 
ISSUE NO. 45 (Ch. 1-24) HS 1501-1515 
Description of production process: 
Input:  Raw fats and oils Output:  Refined fats and oils Process:  Raw fats and oils are process ed through neutralization, decolorizing, 
deodorizing and stabilization into refined fats and oils  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTH;  or change by refining  (1) All three following operations are carried out in a single country  -  Neutralization with alkali or de-acidification (removal of   the free fatty acids from the oil); 
 -  Decolorizing (removal of coloring substances); and 
 -  Deodorizing (separation of the volatile odorous and    flavourous substances by distillations)  (2) Three out of the following four operations are carried out in a  single country   
 -  Neutralization with alkali or de-acidification (removal of 
  the free fatty acids from the oil);  -  Decolorizing (removal of coloring substances); and  -  Deodorizing (separation of the volatile odorous and    flavourous substances by distillations) 
 -  stabilization   
Crude fats are not suitable for direct consumption or for specific technical 
purposes because of their acidity and their organoleptic characteristics.  To make them suitable for consumption or use for specific technical purposes they 
have to be refined.  The refining process (chemical or physical) entails 
eliminating the odor, taste, color and acidity of a crude fat and oil.   
 
 
 AUS, CHE, EEC,  EGY, DOM, IND, JPN, KEN, KOR, 
[NOR], NZL, PER, 
THA, [VEN]    GTM, ISL, MEX, 
[NOR], SGP, 
[VEN]   
Members not considering it a substantial transformation : 
 
Option B:  CTH 
 
Fats and oils occur widely in nature and are formed in the cells of certain 
plants or animals from which they are extracted by various means such as 
pressure or use of solvents.  The essentia l characteristics of fats and oils and 
their essential molecular structure as a compound are formed in the source material and they are also present unaltere d in the extracted oil in crude form.  
These essential characteristics are not changed by refining.  ARG, BRA, CAN, 
COL, HND, LKA, MYS, MAR, PHL, USA  
CRO Chairman's proposal: Option A (1)  
 JOB(03)/132/Rev.7 
Page 32  SUGAR: REFINING SUGAR  
 
ISSUE NO. 53 HS 1701-1702 
Description of production process: 
Input:  Raw sugar Output:  Refined sugar Process:  Raw sugar is processed through centrifuging, dissolving, 
carbonization, concentration, crystallization into refined sugar  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTSH/CTHS/CTSH, excep t from HS 1701.99 (for HS 1701.91) 
 
Raw sugar is more than an intermedia te product used to manufacture refined 
sugar.  It is used for many other commercial purposes, including cement manufacturing, animal feed and ethano l production. Refined sugar is used 
almost exclusively as a food product. Thus, refined sugar has uses that are 
completely different from those of raw sugar.  During the refining process the crystal structures in the raw sugar are completely broken down to molecular constituents so as to completely lose their physical identity. The refined sugar that emerges is composed of new sucrose crystals that no longer contain non-sucrose materials occluded within th e crystals. In addition, non-sucrose 
materials mixed with and coating the raw sugar crystals are removed in 
refining through extensive processing opera tions involving both chemical and 
physical reactions and changes. As a result, raw and refined sugar are 
fundamentally different products with  significant differences in crystal 
structure and size, color, odor, texture, bacterial level, chemical makeup, taste 
and shelf-life. 
 The change from raw sugar to flavor ed or colored sugar of HS 1701.91, 
through both refining and the addition of flavoring or coloring, should be considered as substantial transformati on.  However, the mere addition of 
flavoring or coloring to refined suga r of HS 1701.99 is not origin-conferring. 
 AUS, CAN, CUB, 
[JPN
*], NZL  
 
Members not considering it a substantial transformation : 
 
Option B:  CC 
 
Refining raw sugar does not constitute s ubstantial transformation. Raw sugar 
already has a sucrose content of 97.5 %.  Much of the impurities in the cane 
juice would have been removed in the crystallization process at the raw sugar 
stage. The refining process, which empl oys such steps as affination, melting, 
filtration, color absorption and recrystallization, while further removing impurities raises sucrose content only marginally from 96 %- 99 % in raw sugar to 99.5 % or higher in refined s ugar.  The sugar refining process does not 
alter the original sucrose formed in  the cane plant which gives sugar its 
essential character as a sweetener. The chemical reactions which occur in 
refining affect only the non-sucrose components but preserve the original sucrose molecule.  ARG, BRA, CHE, 
CHL, COL, CRI, 
DOM, ECU, EEC, EGY, GTM, HKC, HND, IND, KOR, MEX, PER, PHL, 
SLV, SGP, THA, 
USA, VEN 
CRO Chairman's proposal: Option B  
 
                                                      
* Japan is able to join the consensus if full consensu s is reached on this issue, on the condition that its 
concerns set out in document G/RO/W/74 are duly accomm odated within the context of  the discussions on the 
implications of the HRO on other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 33 
 
SUGAR:  MANUFACTURING INVERT SUGAR  
 
ISSUE NO. 55 HS ex1702(b) and 
(c) 
Description of production processes: Input:  Sugar Output:  Invert sugar 
Process:  Sugar is processed through acidi c or enzymatic hydrolysis into invert 
sugar  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTHS, except from HS 1701.91 or 1701.99 
 
Hydrolyzing refined sugars to obtai n invert sugar is not substantial 
transformation.  It is substantial, however, if one starts from raw sugar. 
 AUS, CAN, [JPN∗], 
NZL 
Members not considering it a substantial transformation : 
 
Option B:  CC 
 ARG, BRA, CHE, 
CHL, CRI, DOM, 
ECU, EEC, EGY, GTM, HKC, IND, KOR, MEX, PER, PHL, SLV, SGP, THA, USA, VEN 
CRO Chairman's proposal:  Option B  
 
                                                      
∗ Japan is able to join the consensus if full consensu s is reached on this issue, on the condition that its 
concerns set out in document G/RO/W/74 are duly accomm odated within the context of  the discussions on the 
implications of the HRO on other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 34  SUGAR:  OBTAINING SUGAR SYRUPS, ETC.  
 
ISSUE NO. 56 HS ex1702(e) 
Description of production processes: 
Input:  Sugar Output:  Sugar syrups, sugar juices, caramelized molasses  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH, except from HS 1701.99 
 Liquefying refined sugar to obtain a syrup is not substantial transformation.  It 
is substantial, however, if one starts from the plant or from raw sugar.  AUS, CAN, [JPN
∗], 
NZL 
Members not considering it a substantial transformation : 
 
Option B:  CC 
 ARG, BRA, CHE, 
CHL, CRI, DOM, ECU, EEC, EGY, GTM, HKC, IND, 
KOR, MEX, PER, 
PHL, SLV, SGP, THA, USA, VEN 
CRO Chairman's proposal: Option B  
 
                                                      
∗ Japan is able to join the consensus if full consensu s is reached on this issue, on the condition that its 
concerns set out in document G/RO/W/74 are duly accomm odated within the context of  the discussions on the 
implications of the HRO on other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 35 
 
SUGAR:  OBTAINING MOLASSES  
 
ISSUE NO. 57 HS ex1702(e) 
Description of production processes: 
Input:  Sugar plants Output: Molasses  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH 
  AUS, CAN, [JPN
*], 
NZL 
Members not considering it a substantial transformation : 
 
Option B:  CC 
 ARG, BRA, CHE, 
CHL, CRI, DOM, 
ECU, EEC, EGY, GTM, HKC, IND, KOR, MEX, PER, PHL, SLV, SGP, 
THA, USA, VEN 
CRO Chairman's proposal: Option B  
                                                      
* Japan is able to join the consensus if full consensu s is reached on this issue, on the condition that its 
concerns set out in document G/RO/W/74 are duly accomm odated within the context of  the discussions on the 
implications of the HRO on other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 36  COCOA:  OBTAINING COCOA PASTE  
 
ISSUE NO. 58 (Ch. 1-24) HS 1803 
Description of production process: 
Input:  Cocoa beans Output:  Cocoa paste Process:  Roasting beans, winnowing (cleaning), alkalization and grinding into 
cocoa paste  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTH 
 
 AUS, CAN, CHE, 
HKC, [KOR], 
MAR, MYS, NZL,  
SGP, SLV, USA  
Members not considering it a substantial transformation : 
 
Option B:  CTH, except from HS 1801 or 1802 
 
 ARG, BRA, COL,  
DOM, ECU, EGY, EEC, GTM, HND, IND, JPN, LKA, 
MEX, PER, PHL, 
THA, VEN    
CRO Chairman's proposal: Option B  
 JOB(03)/132/Rev.7 
Page 37 
 
COCOA:  OBTAINING COCOA BUTTER, FAT AND OIL  
 
ISSUE NO. 59 (Ch. 1-24) HS 1804 
Description of production process: 
Input:  Cocoa paste Output:  Cocoa butter, fat and oil Process:  Cocoa paste is processed through pressure or by extraction into cocoa 
butter, fat and oil  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTH 
 
 ARG, AUS, [CAN], 
CHE, GTM, HKC, 
[KOR], MAR, NZL, 
SGP, SLV  
Members not considering it a substantial transformation : 
 
Option B:  CTH, except from HS 1803 BRA, COL, DOM, 
ECU, EEC, EGY, HND, JPN, LKA, MEX, PER, PHL, 
THA, USA, VEN, 
  
CRO Chairman's proposal: Option B  
 JOB(03)/132/Rev.7 
Page 38  COCOA:  OBTAINING COCOA POWDER FROM COCOA PASTE  
 
ISSUE NO. 60 (Ch. 1-24) HS 1805 
Description of production process: 
Input:  Cocoa paste Output:  Cocoa powder Process:  Cocoa powder is processed by heating and pressing to remove fat, 
tempering and pulverizing into cocoa powder  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTH 
 AUS, CAN, GTM, 
HKG, [KOR], 
MAR, NZL, SGP, 
SLV, USA,   
Members considering it a substantial transformation, except from defatted 
cocoa paste : 
 
Option B:  CTH, except from HS 1803.20 
 
Defatted cocoa paste is already in powder form or requires only minor processing to obtain cocoa powder. 
 ARG, ECU 
  
Members not considering it a substantial transformation : 
 Option C:  CTH, except from HS 1803 BRA, COL, CHE,  
DOM, EEC, EGY, 
HND, IND, JPN, 
LKA, MEX, NOR, PER, PHL, THA   
CRO Chairman's proposal:  Option C  
 JOB(03)/132/Rev.7 
Page 39 
 
COCOA:  ADDING SUGAR TO COCOA POWDER  
 
ISSUE NO. 61 (Ch. 1-24) HS 1806.10 
Description of production process: 
Input:  Cocoa powder Output:  Sweetened cocoa powder Process:  Cocoa powder is processed through the addition of sugar into 
sweetened cocoa powder  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTH 
 
 AUS
∗, KOR*, NZL* 
Members not considering it a substantial transformation : 
 
Option B:  CTH, except from Ch. 17 or HS 1805  
 
 
  Option C: CTH, except from HS 1803 or 1805   
 
 Option D: CTH, except from HS 1805    
 ARG, BRA, CAN, COL, CUB, ECU, 
EGY, HND, GTM, 
PHL, SLV, USA   
 
DOM, EEC, IND, 
[NOR], PER, VEN 
 
HKC, MEX, [NOR], SGP 
CRO Chairman's proposal: CTH, excep t from Ch.17 or HS 1803 or 1805 [CHL], [JPN], USA 
 
 
                                                      
∗ Negotiable. JOB(03)/132/Rev.7 
Page 40  CRUCIAL ISSUE:  MAKING COCOA PREPARATIONS FROM COCOA POWDER  
 
ISSUE NO. 62 (Ch. 1-24) HS ex1806.20(a) 
Description of production process: 
Input:  Cocoa powder Output:  Cocoa preparation (other th an sweetened cocoa powder) in liquid, 
paste, powder or granular form, of a content exceeding 2Kg.  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTSH 
 
 MAR, MEX, 
[KOR], NZL   
Members considering it a substantial transformation, except from a sweetened 
cocoa powder : 
 
Option B:  CTH 
  ARG, BRA, CAN 
CHE, COL, DOM, ECU, EEC, EGY, GTM, HKC, HND, IND, JPN, NOR, 
PER, PHL, USA, 
VEN  
Members not considering it a substantial transformation : 
 
Option C:  CTSH, except from Ch. 17, 1805 or 1806.10 
 
 SLV, LKA 
CRO Chairman's proposal: Option B  
 JOB(03)/132/Rev.7 
Page 41 
 
COCOA:  MAKING CHOCOLATE IN BL OCKS FROM SWEETENED COCOA POWDER  
 
ISSUE NO. 63 (Ch. 1-24) HS ex1806.20(b) 
Description of production process: 
Input:  Sweetened cocoa powder Output:  Chocolate in blocks, slabs or bars, of content exceeding 2 Kg.  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTSH 
 Chocolate is composed essentially of cocoa paste and sugar (or other 
sweetening matter) usually with the addition of flavoring and cocoa butter; in some cases, cocoa powder and vegeta ble oil may be substituted for cocoa 
paste.  Other ingredients such as milk, co ffee, nuts, raisins, etc. may sometimes 
also be added.  Processing cocoa, including cocoa powder whether or not 
sweetened, into the cocoa preparations in  blocks, slabs or bars weighing more 
than 2kg of subheading 1806.20 is a subs tantial transformation.  The product is 
a new product with different appearance , uses and characteristics to the cocoa 
powder or other ingredients.   AUS, HKC, [KOR], 
NZL, [PHL]   
Members not considering it a substantial transformation : 
 Option B:  CTH 
 
Processing cocoa, including cocoa powde r unless already sweetened, into the 
cocoa preparations in blocks, slabs or bars weighing more than 2kg of 
subheading 1806.20 is a substantial tran sformation.  The product is a new 
product with different appearance, uses and characteristics to the cocoa 
powder or other ingredients.  However, if sweetened cocoa powder is used the 
transformation is not sufficient to be considered as  a substantial 
transformation. 
 ARG, BRA, CAN, 
CHE, COL, DOM, 
ECU, EEC, EGY, 
GTM, HND, JPN, MEX, NOR, PER, USA, VEN 
CRO Chairman's proposal: Option B  
 
 JOB(03)/132/Rev.7 
Page 42  COCOA:  MAKING FINISHED RETAIL CHOCOLATE FROM CHOCOLATE CRUMB  
 
ISSUE NO. 64 (Ch. 1-24) HS 1806.31-
1806.90 
Description of production process: Input:  Chocolate crumb Output:  Finished retail chocolate 
Process:  Chocolate crumb is processed through the addition of lecithins and 
butters, refining, conching and temper ing into finished retail chocolate  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTSH 
 
From the chocolate crumb (1806.20), which is the pre-cursor to the finished retail chocolate, to the retail chocolate bar there are at minimum five processes 
including the addition of lecithins and butter, refining, conching and 
tempering.  These do not include the deposition or enrobing, molding and 
cooling of the bars.  Clearly, the transformation of the 2 kg + blocks of chocolate crumb to the final retail product entails more than breaking up and melting of a 2 kg + block into smaller pieces.  
 ARG, AUS, CAN, 
CHL, HKC, [JPN
*], 
KOR, LKA, MAR, MEX, NZL, TPKM, USA  
 
Members not considering it a substantial transformation : 
 
Option B:  CTH 
 BRA, CHE, COL, 
DOM, ECU, EEC, 
EGY, GTM, HND, KLA, PER, PHL, NOR, VEN 
CRO Chairman's proposal:   1806.31 and .90:  CTSH 
    1806.32:  CTH   
 
                                                      
* Japan is able to join the consensus on this issue, on the condition that its concerns set out in document 
G/RO/W/74 are duly accommodated within the context of the discussions on the implications of the HRO on 
other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 43 
 
PRODUCING JUICES FROM FRUITS OR VEGETABLES 
 
ISSUE NO. 77 (Ch. 1-24) HS 2009 
Description of production process: 
Input:  Fruits or vegetables Output:  Juices Process:  Fruits or vegetables are processed through extraction into juices  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH 
 
  Option B: CC  
  CAN, CHL, COL, 
CUB, DOM, EEC, EGY, GTM, HKC, 
IND, [JPN
*], NZL, 
SGP   ARG, CHE, HND, MAR, MEX, 
[THA], USA, VEN 
  
Members not considering it a substantial transformation : 
 
Option C: the country of origin of the goods of this subheading shall be 
the country in which the fruits are harvested  AUS, LKA, PHL 
CRO Chairman's proposal:  CC for orange juice;  option A for other [BRA], KOR 
 
                                                      
* Japan is able to support the CRO Chairman's reco mmendation on this issue, on the condition that its 
concerns set out in document G/RO/W/74 are duly accomm odated within the context of  the discussions on the 
implications of the HRO on other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 44   PRODUCING RECONSTITUTED JUICES FROM FRUIT OR VEGETABLE JUICE CONCENTRATES  
 
ISSUE NO. 78 HS 2009 
Description of production processes: 
Input:  Fruit or vegetable juice concentrates Output:  Reconstituted juices  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CC or change to reconstituted juices in retail packets of 
subheadings 2009.11 through 2009.80, fr om concentrates of subheadings 
2009.11 through 2009.80, provided the change involves adding oil and essence, blending and sterilizing/CTH or  change to reconstituted juices of 
these subheadings from concentrates of the same subheadings 
 CAN, CHE, CUB, 
DOM, HND, HKC, [JPN
*], NZL, SGP  
Members not considering it a substantial transformation : 
 Option B: CTH /  the country of origin of the goods of this subheading 
shall be the country in which the fruits are harvested/CC  ARG, AUS, CHL, 
COL, EEC, EGY, 
GTM, IND, LKA, 
MAR, MEX, PHL, THA, USA, VEN  
CRO Chairman's proposal:  CC for orange juice;  option A for other juices [BRA], KOR 
 
 
                                                      
* Japan is able to join the consensus on this issue, on the condition that its concerns set out in document 
G/RO/W/74 are duly accommodated within the context of the discussions on the implications of the HRO on 
other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 45 
 
WINE:  PRODUCING WINE FROM GRAPES 
 
ISSUE NO. 98 (Ch. 1-24) HS 2204 
Description of production process: 
Input:  Grapes Output:  Wine  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH/CTSH 
 
Wine is a totally different product fr om grapes or grape must.  It is 
substantially changed and given new characteristics by a fermentation process.  
Therefore, producing wine from grapes should be regarded as origin conferring  AUS, CAN, CHE, 
EGY, GTM,HKC, HND, IND, JPN, [KOR], MEX, PER, 
PHL, THA, USA  
  
Members not considering it a substantial transformation : 
 Option B:  The country of origin of the goods of this subheading shall be the country in which the grapes grew  
Wine is a special product, whereby the concept of quality is a crucial element 
in the differentiation of wines. The distinctive features of a wine are defined by the quality and thus the origin of the ra w material, the grapes, in combination 
with certain vinification techniques.  Of  these two criteria, the origin of the 
grapes is by far the most decisive factor in forming the character of a wine. The particular soil and the particular climate in a given region determines the 
quality of the grapes. When wine is prepared in a country different from the country the grapes come from, the origin is determined by the country where 
the grapes grew.  
 
 ARG, BRA, CHL,  
EEC, NZL 
CRO Chairman's proposal: CTH  JOB(03)/132/Rev.7 
Page 46  WINE:  PRODUCING WINE FROM GRAPE MUST  
 
ISSUE NO. 99 (Ch. 1-24) HS 2204 
Description of production process: 
Input:  Grape must (HS 2204.30) Output:  Wine Related issues: 
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTSH/CTSH, except from HS 2204.10, 2204.29/CTH;  or 
change from HS 2204.30/CTSHS, except from HS ex2204.29(b) for 
ex2204.29(a)/CTSH, except from HS ex2204.21(a) or ex2204.29(a)  
Wine is a totally different product fr om grapes or grape must.  It is 
substantially changed and given new characteristics by a fermentation process.  
Therefore, producing wine from grapes should be regarded as origin 
conferring 
  
 AUS, CAN, HKC, [KOR], MEX, PER, 
PHL, THA 
 
Members not considering it a substantial transformation : 
 
Option A1:  CTH 
 
Option B: The country of origin of the goods of this subheading shall be 
the country in which the grapes grew 
 Wine is a special product, whereby the concept of quality is a crucial element 
in the differentiation of wines. The distinctive features of a wine are defined by the quality and thus the origin of the ra w material, the grapes, in combination 
with certain vinification techniques.  Of  these two criteria, the origin of the 
grapes is by far the most decisive factor in forming the character of a wine. 
The particular soil and the particular climate in a given region determines the 
quality of the grapes. When wine is prepared in a country different from the country the grapes come from, the origin is determined by the country where the grapes grew.   
 CHE, IND, JPN
1, 
USA  ARG, BRA, CHL,  
EEC, EGY HND, 
NZL    
Compromise proposal : 
 "Producing wine from grape must who se alcohol content just prior to the 
production of wine is less than 1.0% is origin-conferring."   Grape must is 
imported in a concentrated condition for the convenience of transportation and 
for the purpose of preventing decaying.  Then it is reconstituted before the 
production of wine.  "Alcohol content just prior to the production of wine" means the alcohol content of grape must in a reconstituted condition. 
  
CRO Chairman's proposal: CTH  
 
                                                      
1 Japan changed its position to join the Chair's proposal on the condition that the following 
understanding is reached by all Members:  (1) grape juice (alcohol content not exceeding 0.5%) has been 
changed to grape must by the exporter (the alcohol content has been increased  to more than 0.5%, classified as 
grape must falling in HS Chapter 22);  (2) the importer has again changed the imported grape must into grape 
juices;  and (3) wine has been produced from grape juices .  It was noted that the country of origin of the wine 
should be the country producing the wine, by the applicatio n of Rule 4 (Intermediate Materials) of Appendix 2. JOB(03)/132/Rev.7 
Page 47 
 
WINE:  OBTAINING GRAPE MUST  
 
ISSUE NO. 101 (Ch. 1-24) HS 2204.30 
Description of production process: 
Input:  Grape Output:  Grape must  
Considerations:  
Members considering it a substantial transformation : 
 
Option A: CTH 
 AUS,  
 
Members not considering it a substantial transformation : 
 Option B:  The country of origin of the goods of this subheading shall be 
the country in which the grapes grew 
 ARG, BRA, CAN, 
CHE, CHL, EEC, 
EGY, JPN
∗, HKC, 
HND, IND, KOR, MEX, NZL PHL, THA, USA 
 
CRO Chairman's proposal: Option B  
 
 
                                                      
∗ Flexible, if No. 99 is resolved. JOB(03)/132/Rev.7 
Page 48  MIXTURES/BLENDS  
 
ISSUE NOS. 36, 66, 76, 100, 106, 121, 122, 123 & 124 (Ch. 1-24)  
Description of production process: 
Mixing or blending of identical or similar goods of various origins  
Considerations:  
No. 36:  Obtaining curry or other mixed spices (HS ex0910(a), ex0910(c)) 
 
Members considering it a substantial transformation : 
 
Option A:  CTHS 
  
 ARG, BRA, CAN, CHE, CHL, EEC, EGY, GTM, IND, 
JPN, KOR, MEX, 
MYS, PHL, SGP, USA, VEN  
Members not considering it a substantial transformation : 
 
Option B: The country of origin of the goods of this split heading shall be 
the country in which the plants grew  
Residual rule
: 
 
Option A (G/RO/W/64):  Origin shall be  conferred to the country of origin 
of materials that account for more th an 50% by weight of all materials 
used.  When none of the materials used meets the percentage required, the 
origin of the goods shall be the country in which mixing was carried out  Option B (general residual rule):  Orig in shall be conferred to the country 
in which the major portion of materials originated.  
 LKA 
  
 
   EEC  
 
   
CRO Chairman's proposal:  Option A  
No. 66:  Production of mixes and doug hs for preparation of bakers' wares 
using materials of 1901.90 (HS 1901.20)  
Rule endorsed:  CTSH  
No. 76:  Mixing and seasoning of nuts or seeds (HS 2008.19, 2008.92) 
 Rule endorsed:  WO for HS 2008.19 
 CC except from Ch. 8 for HS 2008.92  
No. 100:  Blending of wine (HS 2204)  
 
Members considering it a substantial transformation : 
 Option A:  Change within the subheading resulting from blending 
 
Members not considering it a substantial transformation
: 
 
Option B:  No specific proposal (general residual rule) 
 
Compromise proposal : 
 G/RO/W/64 (threshold:  85%)  
  
 AUS, CHL, JPN, MEX 
 
 HND, IND, GTM, LKA   
ARG, BRA, CHL, 
EEC, EGY, JPN, KOR, NZL,  CAN (75%), USA (75%) 
CRO Chairman's proposal:  Compromise proposal  JOB(03)/132/Rev.7 
Page 49 
 
ISSUE NOS. 36, 66, 76, 100, 106, 121, 122, 123 & 124 (Ch. 1-24)  
No. 106:  Blending whisky or other spirit drinks (HS 2208) 
 Members considering it a substantial transformation
: 
 
Option A:  Change within the subheading resulting from blending and 
putting into bottles or other containers for retail sale 
 
Members not considering it a substantial transformation : 
 
Option B:  No specific proposal (general residual rule) 
 
Compromise proposal : 
 
Option C:  G/RO/W/64 (threshold:  85%)  
 
MEX (for tequila and mezcal mixture or blending confers origin), PHL 
 
GTM, IND, HND, LKA, USA    
 
ARG, BRA, CAN, CHE, EEC, EGY, JPN, KOR, MEX  
CRO Chairman's proposal:  Option C  
No. 121:  Obtaining mixtures of vege tables or fruits (0710.90, 0711.90, 
0712.90 and 0813.50)  
 
Members considering it a substantial transformation : 
 
Option A:  Specific proposal 
 
Members not considering it a substantial transformation : 
 
Option B:  No specific proposal (general residual rule) 
 Compromise proposal
:  G/RO/W/64  
  
 
 CAN, MEX   
 
ARG, BRA, GTM, HND, IND, NZ, PHL   
EEC 
CRO Chairman's proposal:  Deletion  
No. 122:  Obtaining mixtures of coffee or tea (0901, 0902)  
 
Members considering it a substantial transformation : 
 
Option A:  No specific proposal  
 
Members not considering it a substantial transformation : 
 
Option B:  No specific proposal (general residual rule) 
 
 
Compromise proposal :  G/RO/W/64  
  
 [JPN
*] 
  
 
CAN, CHL, COL, DOM, ECU, GTM, HND, IND, LKA, MEX, PHL 
 
BRA (85%), CAN (85%), EEC 
CRO Chairman's proposal:  G/RO/W/64  
                                                      
* Japan is able to support the CRO Chairman's reco mmendation, on the condition that its concerns set 
out in document G/RO/W/74 are duly accommodated within the context of th e discussions on the implications 
of the HRO on other WTO Agreements towards the completion of the HWP. JOB(03)/132/Rev.7 
Page 50  
ISSUE NOS. 36, 66, 76, 100, 106, 121, 122, 123 & 124 (Ch. 1-24)  
No. 123:  Obtaining mixtures classified in Ch. 15 (Ch. 15)  
 
Members not considering it a substantial transformation : 
 
Option B:  No specific proposal (general residual rule) 
 
Option C:  G/RO/W/64   
 
ARG, BRA, CAN, CHE, GTM, HND, IND, PHL, SGP, USA 
 
EEC, [NOR] 
CRO Chairman's proposal:  Deletion MEX, [NOR] 
No. 124:  Obtaining mixtures classified in each of the subheadings of 
heading 1901 (of Chapter 18) from materials classified in each of those same subheadings  
 
Members considering it a substantial transformation
: 
 
Option A:  No specific proposal 
 
Members not considering it a substantial transformation : 
 Option B:  No specific proposal (general residual rule)  Compromise proposal
:  G/RO/W/64 
  
   CAN 
 
  ARG, BRA, EGY, GTM, HON, IND, 
PHL 
  EEC 
CRO Chairman's proposal:  Deletion MEX 
No. 125:  Obtaining mixtures of tobacco (2401 and 2403)  
 Members considering it a substantial transformation
: 
 
Option A:  Chapter Note 
 For the purposes of headings 24.01 and 24.03, any deliberate and proportionally controlled mixing or blending of tobacco resulting in a 
product with a determined composition confers origin  
 
Members not considering it a substantial transformation
: 
 
Option B:  No specific proposal (general residual rule) 
 
Compromise proposal :  G/RO/W/64 
  
 
ARG, EGY, JPN, 
NZL, SEN, USA     
 
 CAN, GTM, HND, IND, PHL  
 
EEC 
CRO Chairman's proposal:  Deletion MEX 
 JOB(03)/132/Rev.7 
Page 51 
 
CRUSHING/GRINDING OF SPICES  
 
ISSUE NO. 35 (Ch. 1-24) HS 0904.12, 
ex0904.20(a), ex 0905(a), ex0906.20, 
ex 0907(a), 
ex0908(a), ex 0909(a), ex0910.10(b), ex 1211(b) 
Description of production process: Input:  Spices 
Output:  Crushed or ground spices Related issues: 
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTSH/CTSHS/CTHS    
 
For spices of Chapter 9, crushing and/or grinding are considered to reflect the 
last substantial transformation. They change the character of the goods by : 
-  Increasing their surface area, thereby enhancing the transfer of 
flavoring agents to the product to be flavored; 
 -  Releasing essential oils that are inside the seed or leaf, making these 
flavoring ingredients more easily available and more intense; and 
 
-  Creating a form of the seasoning that can be precisely measured for 
dispensing during cooking. 
 The same changes are obtained when crushing and/or grinding plants or parts of plants (including seeds and fruits) of a kind used primarily in perfumery, in 
pharmacy or for insecticidal, fungicidal or similar purposes, fresh or dried, 
whether or not cut. 
The process therefore substantially chan ges those products into a new and 
different product.  Consequently, the origin of these products is the country 
where the crushing and/or grinding takes place.  ARG, CAN, SGP, 
USA 
Members not considering it a substantial transformation : 
 Option B:  The country of origin of this [split sub]heading shall be the country in which the plant grew 
 
Crushing and/or grinding are not subs tantial transformations.  All the 
characteristics of the spices of Chapter 9 or of the above-mentioned plants and 
parts of plants are determined when they are growing.  Crushing and/or 
grinding merely release properties already present in those products.  Consequently, the origin is the country where the plants grew.  BRA, CHE, CHI, 
COL, DOM, EEC, 
EGY, GTM, HND, 
IND, JPN, KOR, LKA, MEX, MOR, NOR, NZL, PHL, VEN 
CRO Chairman's proposal:  Option B  
 JOB(03)/132/Rev.7 
Page 52  PRODUCTION OF CEMENT FROM CLINKER  
 
ISSUE NO. 1 (Ch. 25-27) HS 2523.21-
2523.29 
Description of production process: Input:  Clinker Output:  Cement 
Process:  Clinker is processed through grinding into cement  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTSH 
 
Characteristics of clinkers and cement:  Cement and clinkers are two different articles of commerce with different character and properties, uses and name.  Clinkers are obtained from firing limest one containing a suitable proportion of 
clay.  Clinkers consist mainly of calcium silicates in pebble form.  The clinkers 
cannot be used as a building material unless transformed into cement.  They do not have the same bonding effect as ceme nt when mixed with fine and coarse 
aggregates to produce concrete for use in  construction.  Cement, on the other 
hand, has to meet certain specifications like minimum fineness of 225 m²/kg and minimum compressive strength in orde r to be used in concrete work.  
Various types of cement can be produ ced from the same clinkers.  To obtain 
cement from clinkers, the clinkers have  to be ground to higher fineness and 
interground ingredients and additives are introduced during the grinding process.  It is considered that it is the fact of a new product and not the process which determines that a substantial transformation has occurred. 
 [EEC], MUS, NZL, 
[PHL] 
 
Members not considering it a substantial transformation : 
 
Option B:  CTH 
 
Production of cement from clinker is a “s imple” process.  It is merely ground 
to reduce the size of clinkers to cement.  Grinding alone is not considered a 
substantial transformation.  It was not ed that the HS subheading explanatory 
note defines “Portland cement”  as “cement obtained by grinding Portland clinker with the possible addition of a small quantity of calcium sulphate” and that it might be necessary to define supple mentary criteria to qualify the rule in 
order to separate “simple” grinding.  AUS, CHL, EGY, 
[GTM], IND, [JPN], 
MEX, PER, USA 
Mixture rule proposed by Australia : 
 The origin of cement produced thro ugh the deliberate and proportionally 
controlled mixture of unmixed clinker of different origins, or of unmixed clinker of different origins with additives like gypsum and limestone and 
other additives, shall be the country of origin of the greatest proportion of 
clinker by weight of the total clinker in the cement AUS, [USA] JOB(03)/132/Rev.7 
Page 53 
 
ISSUE NO. 1 (Ch. 25-27) HS 2523.21-
2523.29 
Australia continues to support Option B  – that the country of origin of any 
types of cement  (including both OPC a nd blended cements) is the country of 
origin of the clinker.  Discussion of and reasons for this support follow:  
• In some cases, there is likely to be a mixture of clinker of different 
origins, in which case a second rule will n eed to be applied.  The Australian 
view is to apply a ‘mixtures’ rule that  determines the country of origin of the 
cement based on the country of origin of at least 50% by weight of the total clinker in the cement (as opposed to the total weight of the cement – see below for ‘value-added’ discussion). 
• In the event that this mixture criterion for clinker origin cannot be met 
(i.e., the origin of no single clinker component in the cement is greater than 
50%), then the country of origin should be assigned based on the country from 
which the greatest quantity of clinker was sourced, rather than the country of mixing.   
 
Origin based on clinker vs. all inputs to cement
 
 
• The value-added component in cement is clinker. 
• Grinding of clinker and addition of other components such as gypsum, 
mineral additions, and SCMs are not re garded as significant value-adding 
steps; nor does the transformation process of grinding and blending of clinker and the other additions change the chemistry of the clinker component. 
• On this basis Australia argues that  there is no basis for a ‘mixtures 
rule’ that takes account of these various  additions to the ground clinker. 
 
 However, there is a need for a ‘m ixtures rule’ to deal with cement 
made by combining clinker from more than one country: 
• The ‘Mixtures rule’ currently under consideration proposes a 
threshold of 75% for clinker from a singl e source, and in default, the country 
of origin is the country of mixing. 
• Australia argues for a ‘mixtures ru le’ that sets a 50% threshold for 
clinker from a single source and a default provision that determines the 
country of origin being that from where the greatest proportion of clinker (to 
the total weight of clinker) is sourced. 
• It will be important for the mixing rule to be clear that the threshold 
applies to a percentage of the total clinker component (by weight), and not of the total cement (by weight). 
  JOB(03)/132/Rev.7 
Page 54  
ISSUE NO. 1 (Ch. 25-27) HS 2523.21-
2523.29 
Reasons for Australian position  
 
At present, the non-clinker component in OPC can be as high as 15% 
by weight – and there is no guarantee that the cement standards won’t change in the future to allow for a higher fi gure for non-clinker component.  This 
means that a ‘mixtures rule’ with a 75% threshold for clinker will be relatively 
easy to circumvent through the inclusio n of clinker from a second country, and 
potentially in the future through the add ition of more non-clinker material.  In 
either situation, the mechanism in th e ‘mixtures rule’ to handle cases which do 
not reach the threshold, becomes critical. 
Australia believes a 50% threshold would be more workable, in the 
sense that it would still provide recognition for the value-adding component and that the default would not be as e asily triggered (as it would under a higher 
threshold). 
In the case of ‘Blended Cements’, inclusion of all components will lead to the same problems in relation to a very significant proportion of the blended cement market, unless the clinker threshold is reduced from 75% to 50% and the threshold applies to the clinker content only (by weight) and not the total 
cement (by weight). 
  
Former CRO Chairman's proposal:  CTH; or 
CTSH provided Chapter Note X is satisfied  Chapter Note X: 
 
The production of cement through th e  deliberate and proportionally 
controlled mixture of unmixed clinker of not more than[75%] by weight of the total weight of the finished good with additives like gypsum and limestone and other additives is origin conferring  ARG, COL 
 
New CRO Chairman's proposal:  CTH  
Residual rule: mixture rule proposed by Australia (major portion of clinker) 
 AUS, BRA, CAN, 
CHE, [IND (75% of clinker)], [JPN], 
KOR, [USA] 
 JOB(03)/132/Rev.7 
Page 55 
 
MIXING AND BLENDING OF PETROLEUM PRODUCTS  
 
ISSUE NO. 8 (Ch. 25-27) HS 2707, 2710-
2715 
Description of production process: Input:  Petroleum products Output:  Mixed or blended petroleum products  
Considerations:  
Option A:  
Chapter Note 3(a) [For the purposes of headings 2707and 2710 to 2715, the deliberate and 
proportionally controlled mixing or blending (including dispersing) of 
materials to conform to predetermined  specifications which results in the 
production of a good having physical,  chemical characteristics which are 
relevant to the purposes or uses of the good and are different from the input materials is to be considered to be origin conferring.] 
 
Option B: 
Chapter Note 3(b) 
[Goods of headings 27.07 or 27.10 [to 27.15] that have been blended to conform to specific predetermined physical specifications, which are 
different from the specifications of  the input materials, are deemed to be 
goods of the country where the blendi ng occurred, provided that not more 
than [70] per cent by volume of the product is composed of blending components originating from a single country other than the country where the blending occurred.] 
 BRA, CAN, CHE, 
CHL, COL, EEC, EGY, IND, JPN, 
KOR, MEX, PHL, 
SGP    
 
USA 
CRO Chairman's proposal:  Option A  
 JOB(03)/132/Rev.7 
Page 56  CHEMICALS:  INCREASE IN PARTICLE SIZE  
 
ISSUE NO. 4 (Ch. 28-40) Chs. 28-30, 32, 38, 
39 
Description of production process: Input:  Chemicals in dust form Output:  Chemicals with increased particle size 
Process:  Chemicals in dust form are processed through granulation, 
pelletizing, extrusion, rotoforming, prilli ng and/or flaking into chemicals with 
increased particle size  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  Chapter rule:  The deliberate and controlled [modification] in 
particle size of a good, other than by merely crushing [or pressing,] resulting in a good having a defined particle size, defined particle size 
distribution or defined surface area, which are relevant to the purposes of 
the resulting good and have different phy sical or chemical characteristics 
from the input materials is considered to be origin conferring. 
 
Crude solid chemicals from synthesis are normally in the form of powders with a very broad particle size distributio n. In this form, they generally cannot 
be used by the processing industry, as they also contain very small particles 
(below 50 microns) behaving as dust. Pr oducts with intrinsically valuable 
chemical characteristics, but being prevented from their use by detrimental (mean) particle size, particle size distribution or surface area can be physically modified into valuable products, by the controlled increase of particle size.  
Such increase of particle size represents a substantial transformation, which 
should confer origin.   AUS, SGP 
 
Members not considering it a substantial transformation : 
 
Option B:  This Chapter Note is not needed 
 
The production of chemical goods having increased particle size  is a finishing operation performed for ease of handlin g resulting in no changes in essential 
chemical characteristics. 
 CAN, EEC, EGY, 
JPN, MEX, PHL, THA, USA, IND 
CRO Chairman's proposal:   
For Chapter 30:  Option A, except fo r heading 30.04, where the rule on 
increase of particle size would not apply For Chapters 28, 29, 32, 38 and 39:  OPTION A  
 [BRA], CHE, 
[KOR], [NZL] 
 JOB(03)/132/Rev.7 
Page 57 
 
CHEMICALS:  ADDITION OF DILUENTS  
 
ISSUE NO. 5 (Ch. 28-40) Chs. 30-35, 37-40 
Description of production process: 
Input:  Chemicals Output:  Diluted chemicals Related issue:  24 
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  Exclusion of the words "[ other than the addition of diluents 
only]" from Notes of Chapters 30-35 and 37-40 
 
Note 2 of Chapter 32(a ): 
 The deliberate and proportionally controlled mixing or blending (including dispersing) of materials [other than the addition of diluents only] to conform to 
predetermined specifications which re sults in the production of a good having 
physical or chemical characteristics which are relevant to the purposes or uses of the good and are different from the input materials is to be considered to be origin conferring.  Note 1 of Chapter 33
: 
 
For the purposes of headings 33.02, 33.04, 33.05, 33.06 and 33.07, the deliberate and proportionally controlle d mixing or blending (including 
dispersing) of materials [other than the addition of diluents only] to conform to predetermined specifications which re sults in the production of a good having 
physical or chemical characteristics which are relevant to the purposes or uses 
of the good and are different from the input materials is to be considered to be origin conferring. However, the mere addition of the goods of headings 33.01 
or 33.02 to the goods of other headings of this Chapter should not be considered as producing a good having ph ysical or chemical characteristics 
which are relevant to the purposes or uses of the good under this Chapter. 
The addition of a diluent alone to a chem ical or a pre-mix, in deliberate and 
proportionally controlled conditions, ma y constitute the critical aspect of a 
mixing and blending operation and can result in physical or chemical characteristics relevant to the purposes or uses of the good which are different from those of the input materials.  In many instances, the addition of a non-
active substance to pure chemicals or pre-mixes containing active substances is 
crucial in the overall manufacturing pr ocess to achieve the required physical 
and chemical characteristics for the product. CHE, EEC 
Members not considering it a substantial transformation : 
 
Option B:  Inclusion of the words "other than the addition of diluents 
only" in Notes of Chapters 30-35 and 37-40 
 
Dilution alone, which might include the addition of liquids or solids, does nothing to change the essential character of the primary input materials, but merely serves to put them into a less concentrated state.  The performance 
characteristics of the primary materials are established before dilution, which serves the purpose merely of facilitating usage but does not create new goods.  ARG, AUS, BRA, 
CAN, EGY, IND, JPN, LKA, MEX, PHL, SGP, THA, 
USA 
CRO Chairman's proposal:  Option B (but restrictive clear definition of 
diluents excluded needed that will be added to the rule)   JOB(03)/132/Rev.7 
Page 58  
 
CHEMICALS:  PUTTING UP OF MEDICAMENTS INTO MEASURED DOSES  
 
ISSUE NO. 2 (Ch. 28-40) HS 3004 
Description of production process: 
Input:  Medicaments Output:  Medicaments in measured doses Related issues: 1 
and 3 
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH 
 
The production of tablets, capsules, granules, or other administrable forms of medicaments, such as in diffusion, disso lution, osmotic and other systems, are 
highly complex operations performed unde r controlled conditions which result 
in new products which have been substantially transformed. 
 
 AUS, CHL, EGY, 
HKC, [IND], PHL 
Members not considering it a substantial transformation : 
 
Option B:  [CTH, except from heading 30.03;  or except when this change 
results from putting up in measured doses of unmixed products of other headings;  or change from heading when this change results from a 
mixing operation] 
[CTH except when the change results from putting up in measured doses 
or for retail sale] 
 
Changes between the relevant tariff h eadings, from the mixed medicaments of 
heading 30.03 to mixed medicaments in dosage form of heading 30.04, can 
take place as a result of simple dosaging operations alone. 
 CAN, EEC, MEX 
CRO Chairman's proposal:  CTH, except by mere pressing of tablets or 
by mere encapsulation BRA, CHE, COL, 
JPN, [KOR], [MYS], [USA] 
 JOB(03)/132/Rev.7 
Page 59 
 
LEATHER:  RETANNING OF LEATHER  
 
ISSUE NO. 6 (Ch. 41-43) HS ex4104(c)-
ex4107(c) 
Description of production process: Input:  Tanned leather Output:  Retanned leather  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTHS 
 
 Option B:  Headings 4104 through 4107, based on the following example for heading 4104: 4104 – Leather of bovine or equine animals 
Provisionally prepared – CTH except from heading 4101 
Tanned, in the wet state – CTHS Other – CTHS The definition of "retanned" and "finished leather" and perhaps "tanned leather" could be dropped AUS, BRA, COL, 
EEC, EGY, GTM, KOR, NZL, THA, 
VEN 
 ARG, CAN, CHE, IND, JPN, MEX, PHL, USA 
CRO Chairman's proposal:  Compromise proposal for Issue Nos. 6 and 7, headings 4104 through 4107, based on the following example for heading 4104: 
4104 – Leather of bovine or equine animals 
Provisionally prepared – CTH except from heading 4101 Tanned, in the wet state – CTHS Other – CTHS [or change within this split heading provided the ex-works 
price of the non-originating material s used does not exceed 60% of the ex-
works price of the good]  
The definition of "retanned" and "finished leather" and perhaps "tanned leather" could be dropped CHL 
 JOB(03)/132/Rev.7 
Page 60  LEATHER:  FINISHING OF LEATHER  
 
ISSUE NO. 7 (Ch. 41-43) HS ex4104(d)-
ex4107(d) 
Description of production process: Input:  Unfinished leather Output:  Finished leather 
Process:  Unfinished leather is processed  through dyeing, graining, stamping, 
sizing, polishing, waxing, etc. into finished leather  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTHS 
 
 EEC, KOR, NZL, 
THA 
 
Members considering it a substantial transformation, except from retanned 
leather : 
 Option C:  CTHS except from ex4104(c)-ex4107(c) 
 BRA, COL, EGY, 
VEN 
Members considering it a substantial transformation, except from tanned or 
retanned leather : 
 CHL, PAK 
Option E:  Headings 4104 through 4107, based on the following example 
for heading 4104: 
4104 – Leather of bovine or equine animals Provisionally prepared – CTH except from heading 4101 Tanned, in the wet state – CTHS Other – CTHS 
The definition of "retanned" and "finished leather" and perhaps "tanned 
leather" could be dropped ARG, CAN, CHE, 
IND, JPN, MEX, 
PHL, USA AUS (CTHS, at least 3 operations must occur for 
origin to be 
conferred) 
CRO Chairman's proposal:  Compromise proposal for Issue Nos. 6 and 7, headings 4104 through 4107, based on the following example for heading 4104: 
4104 – Leather of bovine or equine animals 
Provisionally prepared – CTH except from heading 4101 Tanned, in the wet state – CTHS Other – CTHS [or change within this split heading provided the ex-works 
price of the non-originating material s used does not exceed 60% of the ex-
works price of the good]  
The definition of "retanned" and "finished leather" and perhaps "tanned 
leather" could be dropped CHE, GTM 
 JOB(03)/132/Rev.7 
Page 61 
 
TEXTILES:  DYEING OR PRINTING OF YARN  
 
ISSUE NOS. 12 & 13 (Ch. 50-63) Chs. 50-63 
Description of production process: 
Input:  Yarn Output:  Dyed or printed yarn  
Considerations:  
Members considering it a substantial transformation : 
 
Option A/3:  Permanent dyeing or printing from unbleached or 
prebleached yarn with at least two preparatory or finishing operations 
 Permanent dyeing or printing from unbleached or prebleached yarn with at 
least two preparatory or finishing operati ons is a substantial transformation.  
Permanent dyeing or printing substantia lly transforms uncolored yarn into 
colored yarn.  Dyeing not only adds grea t value to the yarn but also transforms 
the good into a distinct and different co mmercial product with different uses.  
The resulting product has new characteristics and qualities.  This process permanently change the grey yarn by imparting new characteristics and permanently giving color or pattern to the yarns, which gives them final appearance.   
 AUS, CHE, CHN, DOM, EEC, EGY, 
KEN, IND
1, KOR, 
MOR, NOR, NZL, PHL, TUR (50% value addition), VEN 
 
Members not considering it a substantial transformation : 
 Option B:  Deletion of the splits  
Neither dyeing alone nor dyeing and printing together result in a substantial 
transformation. A yarn of one country that is dyed and/or printed in another country should not be considered to originate in the latter country. ARG, BRA, CAN, 
COL, GTM, HND, 
JPN, MEX, PER, 
THA, USA  
CRO Chairman's proposal:  Option A/3  
 
                                                      
1 as part of a package JOB(03)/132/Rev.7 
Page 62  DYEING OR PRINTING OF FABRICS  
 
ISSUE NOS. 12 & 13 (Ch. 50-63) Chs. 50-63 
Description of production process: 
Input:  Fabrics Output:  Dyed or printed fabrics  
Considerations:  
Members considering it a substantial transformation : 
 
Option A/1:  Permanent dyeing or printing 
 
Permanent dyeing or printing alone can be considered as substantial 
transformation because the dyed or prin ted good is often used as a finished 
product without being subjected to any other processes. 
 
Option A/2:  Permanent dyeing or printing from unbleached or 
prebleached fabrics with at least two preparatory or finishing operations 
 
Dyeing or printing substantially transforms  an uncolored or dyed fabric (textile 
article) into an attractive beautifully designed fabric (textile article).  The 
resultant product becomes commercially di stinct and is put to different and 
specific uses.  The resulting product has new characteristics and qualities.  The 
said operations actually transform a raw ma terial, such as a raw fabric (textile 
article), unusable as it stands, into a fabric that can undergo subsequent 
transformations such as making-up.  These processes permanently change the 
grey fabric (textile article) by imparting new characteristics and permanently giving color or pattern to the fabrics (textile article), which gives them final 
appearance.  Permanent printing from unbleached or prebleached fabrics with 
at least two preparatory or finishing operations is a substantial transformation.  In the case of thermo-printing, which consists of applying motifs using thermal processes, printing should be accompanied by impregnation of the transfer paper to be considered a substantial transformation. 
 Option A/3:  Dyeing or printing plus at least one other preparatory or finishing operation  
Dyeing or printing, accompanied by at least one preparatory or finishing 
operation, is considered substantial transformation for finished fabrics.  
  
 SGP  
 
   AUS, CHE, CHN, 
EEC, EGY, IND
1, 
JPN, KEN, KOR, MOR, NOR, NZL, PAK, PHL, TUR, VEN  
 
    
 
    
 
 HKC, MYS   
 
 
Option A/6:  Dyeing and printing plus two or more of the following 
finishing operations:  bleaching, shrinking, fulling, napping, decating, 
permanent stiffening, weighting, permanent embossing or moireing  
Neither dyeing nor printing alone nor dyeing and printing together result in a 
substantial transformation.  A fabric of one country that is dyed and/or printed 
in another country should not be considered to originate in the latter country. USA 
 
Members not considering it a substantial transformation : 
 
Option B:  Deletion of the splits 
 ARG, BRA, CAN, 
COL, DOM, GTM, HND, MEX, PER, THA 
CRO Chairman's proposal:  Option A/2  
 
                                                      
1 as part pf a package JOB(03)/132/Rev.7 
Page 63 
 
TEXTILES:  COATING OF FABRICS  
 
ISSUE NO. 37 (Ch. 50-63) HS 5901, 5903, 
5906, 5907 
Description of production process: Input:  Fabrics Output:  Coated fabrics with rubber or plastics  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH 
 ARG, AUS, BRA, 
CAN (for HS 5901 and 5906), CHE, 
CHN, CHI, COL, 
DOM, EEC, EGY, HKG, HND, KOR, IND (30% value addition), JPN, 
MOR, NOR, PAK, 
PHL, SEN, SGP,  THA, TUR, VEN    
Members not considering it a substantial transformation : 
 
Option E:  CTH, except from headings of fabrics CAN (for HS 5903 
and 5907), GTM, MEX, PER, USA  
Compromise proposal :  CTH, provided the weight of rubber or plastics of 
this good is more than [50]% of the weight of the product  USA 
CRO Chairman's proposal:  Option A  
 JOB(03)/132/Rev.7 
Page 64  EMBROIDERY IN THE PIECE WITH VI SIBLE GROUND AND OTHER EMBROIDERY  
 
ISSUE NO. 35 (Ch. 50-63) HS 5810 
Description of production process: 
Input:  Fabric Output:  Embroidery in the piece with visible ground and other embroidery  
Considerations:  
Members considering it a substantial transformation : 
 
Option B:  Change to this heading if the value of non-originating 
materials does not exceed [50]% of the ex-works price of the product 
 
    
 
  
Option C/1:  Weight of embroidery
 exceeds 25% of the total weight of 
ground fabric and there is no unembroidered area greater than 7 cm. x 7 cm. 
 
Option C/3:  Distance between the edge of plain fabric and the 
embroidery pattern, or between patterns is not more than 80 cm.   
 ARG, AUS, BRA, CHE, COL, DOM, 
EEC, EGY, GTM, 
HND, IND (30% value-added), KOR, LKA, MOR, NOR, NZL, PER, PHL 
([x]%),  TUR, VEN  
  MEX   
 
CAN, JPN, PAK, THA, USA (30 cm.)  
CRO Chairman's proposal:  Option B  
 JOB(03)/132/Rev.7 
Page 65 
 
EMBROIDERY:  OF FLAT PRODUCTS  
 
ISSUE NO. 47 (Ch. 50-63) ex Chapter 61(d), 
ex Chapter 62(c) 
Description of production process: Input:  Fabric Output:  Embroidered flat products  
Considerations:  
Members considering it a substantial transformation : 
 
Option B:  Change to goods of this split chapter from unembroidered 
fabric if the value of non-originating materials used does not exceed  50% 
of the ex-work price of the product    
 
  
Members not considering it a substantial transformation
: 
 
Option D:  The country of origin of this split chapter shall be the country 
of origin of the fabric, provided that  the fabric was produced from yarn 
or fiber  
 [ARG], AUS, BRA, 
CHE, COL, DOM, 
EEC, EGY, HND, IND (30% value addition), KOR, LKA, MAR, NZL, 
PAK, PHL, TUR, 
VEN    CAN, JPN, MEX, 
PER, THA, USA 
CRO Chairman's proposal:  Option B  
 JOB(03)/132/Rev.7 
Page 66  EMBROIDERY:  OF TEXTILE ARTICLES OF CH. 63 OTHER THAN FROM FELT OR NON-WOVEN FABRIC  
 
ISSUE NO. 58 (Ch. 50-63) Chs. 6301-6307 
Description of production process: 
Input:  Fabric Output:  Embroidered textile articles of  Ch. 63 other than felt or non-woven 
fabric  
Considerations:  
Members considering it a substantial transformation : 
 Option B:  Change to this split heading from yarn of any other heading (for knitted or crocheted textile articles);  or change to this split heading from unembroidered fabrics, if the value of non-originating materials does not exceed 40 [60]% of the ex-works price of the product (for woven textile articles)  
 
Members not considering it a substantial transformation
: 
 
Option C:  Deletion of the splits 
  
 
EEC, IND (30% 
value addition), PHL ([x]%), TUR   
 
  ARG, AUS, BRA, CAN, CHE, COL, DOM, EGY, GTM, 
HND, IDN, JPN, 
MEX, MAR, MYS, NOR, PAK, PER, THA, VEN, USA 
CRO Chairman's proposal:  Option B  
 JOB(03)/132/Rev.7 
Page 67 
 
TEXTILES:  ASSEMBLY OF APPAREL FROM PARTS KNITTED TO SHAPE  
 
ISSUE NO. 45 (Ch. 50-63) ex Ch. 61(b) 
Description of production process: 
Input:  Parts knitted or crocheted to shape Output:  Apparel Process:  Parts knitted or crocheted to  shape are processed through assembling 
into apparel  
Considerations:  
Members considering it a substantial transformation : 
 Option A/1:  Change to goods of this split chapter provided that the goods are assembled in a single country in accordance with Chapter Note 
(option 1)   
Option A/2:  Change to this split chapter in accordance with Chapter Note 
(option 5) 
 
  
 
[CHE], EEC, MYS, 
NOR, PHL, TUR    
IND 
  
Members not considering it a substantial transformation : 
 
Option B/1:  The country of origin of the goods of this split chapter is the 
country in which the parts of these goods have been knitted or crocheted 
to shape 
    
 
 Option B/2:  CC provided that the parts of these goods are both knitted or crocheted to shape and sewn or otherwise assembled in the country claiming origin in accordance with Chapter Note (option 3) 
  
  ARG, AUS, BRA, 
CAN, CHN, DOM, 
EGY, GTM, HND, JPN, KOR, MEX, NZL, PER, THA,  TPKM, URY, USA, 
VEN 
 PAK 
CRO Chairman's proposal:  Option B/1  
 JOB(03)/132/Rev.7 
Page 68  TEXTILES:  ASSEMBLY OF APPAR EL FROM PARTS CUT TO SHAPE  
 
ISSUE NO. 46 (Ch. 50-63) ex Ch. 61(c), ex Ch. 
62(a) 
Description of production process: Input:  Parts cut to shape Output:  Apparel 
Process:  Parts cut to shape are pr ocessed through assembling into apparel  
Considerations:  
Members considering it a substantial transformation : 
 Option A/1:  Change to goods of this split chapter provided that the goods are assembled in a single country in accordance with Chapter Note 
(option 1) 
 
 ARG, AUS, BRA, 
CAN, CHE, CHN, 
DOM, EEC, GTM, 
HKC, HND, IND, JPN, KOR, MEX, MYS, NOR, NZL, PER, PHL, THA, 
TPKM, TUR, URY, 
USA, VEN  
Members not considering it a substantial transformation : 
 
Option B:  CC provided that the parts of these goods are both cut to shape 
and sewn or otherwise assembled in the country claiming origin in accordance with Chapter Note (option 3) 
 EGY, PAK 
CRO Chairman's proposal:  Option A/1  
 JOB(03)/132/Rev.7 
Page 69 
 
TEXTILES:  ASSEMBLY OF CLOTHING A CCESSORIES FROM PARTS KNITTED TO 
SHAPE  
 
ISSUE NO. 49 (Ch. 50-63) ex Ch. 61(f) 
Description of production process: 
Input:  Parts knitted or crocheted to shape Output:  Ties, gloves etc. 
Process:  Parts knitted or crocheted to  shape are processed through assembling 
into clothing accessories  
Considerations:  
Members considering it a substantial transformation : 
 
Option A/1:  Change to goods of this split chapter provided that the goods 
are assembled in a single country in accordance with Chapter Note 
(option 1)  
Option A/2:  Change to this split chapter in accordance with Chapter Note 
(option 5) 
  
 
EEC, MYS, NOR, NZL, TUR   
[IND] 
Members not considering it a substantial transformation : 
 
Option B1:  The country of origin of the goods of this split chapter is the 
country in which the parts of these goods have been knitted or crocheted to shape 
 
    
Option B2:  CC provided that the parts of these goods are both knitted or 
crocheted to shape and sewn or otherwise assembled in the country claiming origin in accordance with Chapter Note (option 3)   
 ARG, AUS, BRA, CAN, CHE, CHN, COL, EGY, GTM, 
HND, JPN, KOR, 
MEX, PER, PHL, THA, TPKM, URY, USA, VEN  
PAK 
CRO Chairman's proposal:  Option B/1  
 JOB(03)/132/Rev.7 
Page 70  TEXTILES:  ASSEMBLY OF CLOTHING AC CESSORIES FROM PARTS CUT TO SHAPE  
 
ISSUE NO. 50 (Ch. 50-63) ex Ch. 61(g), ex Ch. 
62(e) 
Description of production process: Input:  Parts cut to shape Output:  Ties, headbands etc. 
Process:  Parts cut to shape are pr ocessed through assembling into clothing 
accessories  
Considerations:  
Members considering it a substantial transformation : 
 
Option A/1:  Change to goods of this split chapter provided that the goods 
are assembled in a single country in accordance with Chapter Note 
(option 1) 
  ARG, AUS, BRA, 
CAN, CHE, CHN, 
COL, EEC, GTM, HKC, HND, IND, JPN, KOR, MEX, MYS, NOR, NZL, 
PER, PHL, THA, 
TPKM, TUR, URY, USA, VEN  
Members not considering it a substantial transformation : 
 
Option B:  CC provided that the parts of these goods are both cut to shape 
and sewn or otherwise assembled in the country claiming origin in 
accordance with Chapter Note (option 3) 
 EGY, PAK 
CRO Chairman's proposal:  Option A/1   
 JOB(03)/132/Rev.7 
Page 71 
 
TEXTILES:  FLAT PRODUCTS  
 
ISSUE NOS. 48, 55, 59, 61, 62 and 69 (Ch. 50-63) Ch. ex61(e), exCh. 
62(d), HS 6301-6304, 6307 
Description of production process: Input:  Fabrics 
Output:  Flat products  
Considerations:  
Members considering it a substantial transformation : 
 Option A:  CTH 
 IND, MAR, MYS, 
PHL, VEN 
Option B: - provided both cut or knitted to shape and assembled in the same country (otherwise, origin is the country of fabric)  
- for goods of knitted or crocheted  material;  CTHS, provided the 
change is attained by complete making-up  
 
Members not considering it a substantial transformation
: 
 
Option C:  - origin;  the country of fabric  
  
 
- for goods of felt or non-wovens;  CTH, except from 5602 and 5603  - for goods of woven fabric;  change to this split heading from yarn or 
fibers  of any other heading [HKC] 
  EEC, TUR  
 
ARG, CAN, COL, EGY, GTM, HND, JPN, MEX, PER, THA, USA 
 
 EEC, TUR  EEC, TUR 
CRO Chairman's proposal:  Compromise proposal :  CTH, provided the 
starting material is prebleached or unbleached fabric  The rule should not apply to non-wovens and felt AUS, BRA, CHE, 
IND, [KOR], NOR, NZL, PAK 
 JOB(03)/132/Rev.7 
Page 72  TEXTILES:  THREE-DIMENSIONAL GOODS  
 
ISSUE NOS. 63-67, 71 (Ch. 50-63) HS 6305, 6306, 
6307.90 
Description of production process: Input:  Fabrics Output:  Three-dimensional goods  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH 
 CHE, IDN, KOR, 
MAR, MYS, PAK, PHL, VEN 
Option B: - provided both cut or knitted to shape and assembled in the 
same country (otherwise, origin is the country of fabric) 
 
- for goods of knitted or crocheted  material;  CTHS, provided the 
change is attained by complete making-up  
-  CTH, except when resulting from either/both cutting to shape, 
or/and being hemmed or with rolled edges or with knotted fringes at 
any of the edges 
 
Members not considering it a substantial transformation
: 
 Option C:  - origin;  the country of fabric     
- for goods of felt or non-wovens;  CTH, except from 5602 and 5603 
 - for goods of woven fabric;  change to this split heading from yarn or 
fibers  of any other heading  [HKC] 
 
 EEC, TUR   
AUS, JPN, NZL 
    
 
ARG, [BRA], CAN, COL, EGY, GTM, HND, MEX, PER, [USA]  
EEC, TUR 
 EEC, TUR 
Compromise proposal :  CTH, provided the starting material is 
prebleached or unbleached fabric  
CRO Chairman's proposal:  Option A  
 JOB(03)/132/Rev.7 
Page 73 
 
TEXTILES RESIDUAL ASSEMBLY RULES  
 
ISSUE NOS. 75 & 77 (Ch. 50-63) Chs. 50-63 
Description of production process: 
  
Considerations:  
No. 75:  Need for chapter residual ru les for assembly of apparel from 
parts 
 
Members supporting the residual Rule for Chapters 61 and 62 (No. 75) : 
 
Option A: 
1.  Where the primary rule for a good assembled from parts requires that the 
good be wholly assembled in a single country, the country of origin of such a good that was not wholly assembled in a single country, is the country in which the most significant assembly operations were performed in the 
making-up of the good, without regard to  the addition of buttons and other 
fasteners, belt and hanger loops, belts, patch pockets, labe ls, foot straps, 
epaulettes, ornaments and other minor components.  2.  The country of origin of other goods of this Chapter shall be the country where the textile fabric or knit-to-sha pe components was formed, or in the 
case of a good containing textile fabrics or knit-to-shape component of more 
than one country, the origin of the goo d is the country in which the textile 
fabric or knit-to-shape component th at predominates by weight was formed. 
 
Alternative rule proposed: 
When application of the primary rules of Chapters 61 and 62 (including the 
product specific rules provided in the matrix) do not result in a determination of a country of origin, the country of origin shall be determined as follows :  Where the primary rule for a good assembled from parts requires that the 
good be wholly assembled in a single country, the country of origin of such a 
good that was not wholly assembled in a single country, is the country in which the most significant assembly operations were performed in the making-up of the good, without regard to: -  attaching and/or making up of the following, for example: buttons and 
other fasteners, patch pockets, foot  straps, trimmings, ornaments, cuffs, 
plackets, belt loops, epaulettes, labels , collars, lining, padding, pockets other 
than patch pockets, waistbands, garment accessories, facings, self belts, pleats; -  making button holes, hemming, pressing, stone or acid washing. 
  
    
BRA, MEX, 
[PHL
*], THA, USA 
   
 
     
 
    
 
HKC, [PHL
*], VEN 
Members not supporting the residual Chapter Rule : 
 CAN, CHE, EEC, 
EGY, HND, IND, 
JPN 
                                                      
* Reservation. JOB(03)/132/Rev.7 
Page 74  
ISSUE NOS. 75 & 77 (Ch. 50-63) Chs. 50-63 
No. 77: Need for chapter residual rules for goods of HS Section XI 
(textiles and textiles articles) and textile-related goods of other HS 
Chapters 
 
Members supporting the residual rule for Chapter 63 : 
 
Option A:   
The country of origin of goods of this Chapter shall be the country where the textile fabric was formed, or in the case of a good containing textile fabrics of more than one country,  the origin of the good is the country in which the textile fabric that pr edominates by weight was formed. 
  
 
  BRA, [PHL
*], THA, 
USA, VEN 
Members not supporting the residual Chapter Rules : 
 
Option B:  Deletion of the residual rule CAN, CHE, EGY, 
HND, IND, JPN 
CRO Chairman's proposal  
 
                                                      
* Reservation. JOB(03)/132/Rev.7 
Page 75 
 
FOOTWEAR:  PRODUCTION OF FOOTWEAR FROM FORMED UPPERS  
 
ISSUE NO. 12 (Ch. 64-67) HS 6401-6405 
Description of production process: 
Input:  Uppers Output:  Footwear Related issues:  9, 
11, 13 & 14 
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH 
 
Option C/2:  CTH, except from formed uppers of heading 6406   Option C/3:  CTH, except from any upper classified in 6406.10 (for footwear manufactured through a string lasting method);  and CTH, 
except from formed uppers classified in 6406.10 (for other footwear)   
 [IND], MAR  
DOM, EGY, GTM, 
VEN  MEX 
CRO Chairman's proposal:  CTH, except from ex6406(a) (uppers to 
which an inner sole is permanently attached which completely closes the 
bottom) ARG, AUS, BRA, 
CAN, CHE, COL, EEC, HKC, JPN, KOR, NOR, NZL, PHL, THA, USA 
 JOB(03)/132/Rev.7 
Page 76  FOOTWEAR:  PRODUCTION OF UPPERS AND PARTS THEREOF  
 
ISSUE NO. 9 (Ch. 64-67) HS 6406.10 
Description of production process:  
Considerations:  
Option A: 
-  ex 6406.10(a) – formed uppers:  CTH 
-  ex 6046.10(b) – uppers other than formed uppers:  CTH -  ex 6406.10(c) – parts of uppers:  CTH  
 DOM, EGY, GTM, 
IND, MEX, MAR, 
VEN  
CRO Chairman's proposal:  -  ex 6406(a) (uppers to which an inner sole is permanently attached which comple tely closes the bottom):  CTHS 
-  ex 6406(b) (other):  CTHS 
-  ex 6406(c) (parts of uppers):  CTH ARG, AUS, BRA, 
CAN, CHE, COL, EEC, HKC, JPN, 
KOR, NOR, NZL, 
PHL, THA, USA 
 JOB(03)/132/Rev.7 
Page 77 
 
FOOTWEAR:  DEFINITION OF FORMED UPPERS  
 
ISSUE NO. 11 (Ch. 64-67) Ch. 64 
Description of production process:  
Considerations:  
Option A: 
Uppers of heading 64.06 having closed bottoms, which have been shaped 
by lasting, molding or otherwise, but not by simple closing at the bottom  Option C:  Definition is not needed  
 
 DOM, MEX, VEN 
 
   ARG, AUS, BRA, 
CAN, CHE, COL, 
EEC, EGY, HKC, HND, IND, JPN, NOR, PHL, USA  
CRO Chairman's proposal:  Deletion  
 JOB(03)/132/Rev.7 
Page 78  FOOTWEAR:  PRODUCTION OF FOOTWEAR FROM UNFORMED UPPERS  
 
ISSUE NO. 13 (Ch. 64-67) HS 6401-6405 
Description of production process: 
Input:  Unformed uppers Output:  Footwear  
Considerations:  
Members considering it a substantial transformation : 
 
Option A: 
-  CTH 
 
 -  CTH, except from form ed uppers of heading 6406 
 -  CTH, except from formed uppers cl assified in 6406.10 (for footwear not 
manufactured through a string method) 
 Option C: -  CTH, except from any upper cl assified in subheading 6406.10   
  DOM, IND, EGY, 
MAR 
 ARG, GTM, VEN  MEX 
 
 MEX   
CRO Chairman's proposal:  -  ex 6406(a) (uppers to which an inner sole is permanently attached which comple tely closes the bottom):  CTHS 
-  ex 6406(b) (other):  CTHS 
-  ex 6406(c) (parts of uppers):  CTH AUS, BRA, CAN, 
CHE, EEC, EGY, HKC, JPN, KOR, 
NOR, NZL, PHL, 
THA, USA 
 JOB(03)/132/Rev.7 
Page 79 
 
FOOTWEAR:  PRODUCTION OF FOOTWEAR FROM OTHER THAN UPPERS OF CH. 64  
 
ISSUE NO. 14 (Ch. 64-67) HS 6401-6405 
Description of production process: 
Input:  Other than uppers Output:  Footwear  
Considerations:  
Members considering it a substantial transformation : 
 
Option A: 
 
-  CTH 
  -  CTH, except from formed uppers cl assified in 6406.10 (for footwear not 
manufactured through a string lasting method);  and CTH, except from 
formed uppers classified in 6406.10 (for other footwear)   
   
DOM, EGY, IND, 
MAR  MEX  
 
 
CRO Chairman's proposal:  -  ex 6406(a) (uppers to which an inner sole is permanently attached which comple tely closes the bottom):  CTHS 
-  ex 6406(b) (other):  CTHS -  ex 6406(c) (parts of uppers):  CTH AUS, BRA, CAN, 
CHE, EEC, JPN, KOR, NOR, NZL, PHL, THA, USA 
 JOB(03)/132/Rev.7 
Page 80  COATING OF STEEL PRODUCTS  
 
ISSUE NOS. 3(a), 3(c) and 5 (Ch. 72-73) HS ex72.10(b), 
ex72.10(d), ex72.12(b), ex72.16(d), 
ex72.17(b), 
ex72.25(d), ex72.26(d), ex72.28(e), ex72.29(b), 
ex73.03(a), 
ex73.05(a), ex73.06(a), ex73.06(b) 
Description of production process: Input:  Steel products Output:  Coated steel products with tin, zinc, etc. Related issue:  
Chapter Note 
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTHS/CTH/CTH, or if the Note of this Chapter Note is met 
 
The coating of hot-rolled products or cold rolled products  is more than a 
process involving a simple process of uncoiling the hot coil, sprinkling the spray, painting and then recoiling.  It requires a multi-stage process which 
consisted of pre-treatment, coating, ba king and post-treatment.  The surface of 
the color steel has three layers – zinc co ating, chromate coating and oil coating 
– which covered the base metal.  The colored steel is considered a new product, creating almost 100% of added value and is used for interior and 
exterior decorations of buildings due to its high corrosion resistance and weatherproof qualities, and also for electric home appliances such as refrigerators, air conditioners, etc., for its attractive appearance. AUS, BRA, CHE, 
DOM, EEC (only for flat products), 
[EGY], IND, JPN, 
KOR, NZL, PHL, SGP, VEN   
 
Members not considering it a substantial transformation  
 
Option B:  CTH, except from HS 7208, 7209/CTH (for HS ex7225(d), 
ex7226(d), 7303-7306)  
Coating or plating of steel, usually with zinc or other base metal, involves  
dipping the finished product in the molten material or processing by   
electrolytic means. The amount of materi al deposited is measured in microns.  
The purpose of the operation is to provide a measure of corrosion resistance  to the steel, although in time the coa ting may wear away. The process does  
not change the steel in any other manner. It does not meaningfully affect its  malleability, tensile strength, or other characteristics or its dimensions.  
Therefore, no substantial transformation takes place as a result of the  
process. It is noted that cladding is considered origin-conferring. It is a process  involving the integration of 2 or more meta ls that results in a product with   
significantly different strength and other metallurgical characteristics from  
the constituent input materials. It is also noted that the enameling of  
steel sinks and basins is not considered origin conferring. 
 ARG, CAN, [EGY], 
MEX, USA 
CRO Chairman's proposal:   OPTION A  JOB(03)/132/Rev.7 
Page 81 
 
 RELATED ISSUE(S):  
 
 
SWISS – KOREAN – JAPANESE, BRAZILIAN, PHILIPPINE AND SINGAPOREAN 
PROPOSAL 
 
COATING OR LAMINATION OF METALS OF CHAPTERS 72, 73 AND 76 [other chapters to be 
explored further] 
  
 Different delegations have expressed their inter est in the permanent coatings of metals. As 
usual, the problem relays in finding a rule wh ich draws a line between a substantial work and a 
minimal operation aimed only to preserve th e metal surface in good condition during the 
transshipment.  
 Recognizing the great enhancement in the pr oduct by the coating process in enhanced 
corrosion or heat resistance, protection against abrasi on, friction, erosion, longer life span, different 
appearance, quality and many other sp ecific requirements of the industry. 
  With the following rule we would like to cont ribute in a positive manner to solve different 
issues of coating of metals. 
 
 The note is intended to be an alternative pr imary rule and apply independently from the 
matrix rules (the matrix rules will therefor e disregard coating as origin conferring). 
 Note to specific headings:
 
 
The coating or lamination of goods of the headings  below with metallic or non-metallic substances is 
considered to be a substantial transformati on if the following conditions are fulfilled: 
 1) the coating, [printing/lacquering], or la mination must be of a permanent nature; 
2) the coating, [printing/lacquering,] or lamination must cover at least one full side of the good, 
except a narrow strip/margin on the borders
1; 
3) [at least two preparatory and/or finishing opera tions must be carried out as i.e., degreasing, 
washing, descaling, pickling, scraping, annea ling, hardening, tempering, case-hardening, 
nitriding, rinsing, remelting, passivation, levelli ng, oiling, chemical treatment, further chromate, 
phosphate, organic or other coating.] 
 
The following are not considered to be coating,  cladding or lamination of a permanent nature: 
 - treatment with solvents, oil, grease or transparent varnish; 
- treatments to preserve the good in good conditions during transport and storage; 
- treatments to prevent slipping during transport and to facilitate handling. 
 
The note will apply to the following headings: 
 
7210 7212 7216 7217 7225 7226 7228 7229 7303 7304 7305 7306 7606 7607 
 
[other headings in other chapters of ferrous or non-ferrous chapters – to explore further] 
 
                                                     
 
1 To move the flat product in the machines in the manufacturing process, the bo rders are sometimes left 
without treatment. These small parts are then usually cut o ff, welded or soldered in further production process. JOB(03)/132/Rev.7 
Page 82  
COMMENTS FROM THE WORKING GROUP: 
 
 
- differentiate between 1st and 2nd coatings ; 
- restrict to enhancement in the physical properties ; 
- cladding is not relevant here; 
- coating of flat products only; 
 
 JOB(03)/132/Rev.7 
Page 83 
 
ASSEMBLY IN THE MACHINERY SECTOR  
 
ISSUE NO. 1 (Ch. 84-90) Chs. 84-90 
Description of production process: 
 Input:  Materials classified outside Chs. 84-90;  and parts of Chs. 84-90 Output:  Goods of Chs. 84-90;  and parts of Chs. 84-90 Related issues: 14-
19, 21-32, 34, 35, 40-44, 46-50, 53-55, 57, 63, 64, 66, 67, 
70, 71 – 74A, 78, 
79, 80-85 
Considerations:  
Option A:  assembly approach: 
 
Proponents of  an assembly approach were of the view that the value-added approach would be complicated, non-transparent and burdensome to administer.  It would entail substantial cost of administration as well as compliance.  Fluctuation of currency values would result in different origin 
outcomes for the same good produced by  the same producer.  Differences in 
costs of production likewise would lead to inconsistent origin outcomes even applying the same rules to the same processes.  AUS, CAN, CHE, 
CHN, COL, HKC, 
IND, JPN, KOR, MEX, MAR, NZL, PHL, SGP, THA, USA 
Option B:  value-added approach: 
 
Proponents of a value-added approach were  of the view that value-added rules 
were simple and trade facilitative, and widely used in the preferential trade 
regime.  These proponents considered th at alternative "assembly approach" 
rules would be complicated and subject to technological changes.  BRA, EEC, EGY 
(for 85.28), TUR (for Ch. 85) 
Option C:  
 
–  For final products – CTH, or change within the heading or subheading provided [X]% value-added is satisfied. –  For parts – CTH or change within the heading or subheading provided the 
5-parts rule or [X]% value-added rule is satisfied TUR 
CRO Chairman's proposal: The propo sed rules are outlined as follows: 
1. For parts produced from articles of other headings – CTH 2. For parts obtained from parts of the same heading - 5 part rule or 40% value-added 3. For machines obtained from parts - CTH or CTSH, as appropriate 
4. For machines ("goods") finish ed from machines of the same 
heading/subheading - 40% value-added In addition, it was contemplated that  legal notes would be necessary in order 
to give effect to the intention of the proposal. The notes would address the following matters: 
A. Some limitations would be provided for CTH/CTSH rules where the change 
of classification occurred as a result of simple encasement, mounting to a base, 
etc. B. "Minor" parts (to be defined), e.g.  parts of general use, would not be 
counted in the 5 parts rule. 
C. The value added rule would require  manufacturing or processing to take 
place for the rule to be applied.  D. Assembly of a machine from an unassembled collection of parts of the same heading would be origin conferring. E. Exceptions to the general scheme woul d be considered when circumstances 
required. 
The following may serve as a draft guide to the rules: CHE JOB(03)/132/Rev.7 
Page 84  
ISSUE NO. 1 (Ch. 84-90) Chs. 84-90 
For machines - CTH, (or CTSH from parts), or change within the heading or 
subheading provided 40% valu e-added is satisfied.  
 For parts – CTH or change within the heading or subheading provided the 5 part rule or 40% value-added rule are satisfied. 
  
REVISED CRO CHAIR'S PROPOSAL FOR THE MACHINERY SECTOR 
 
 
 The proposed rules are outlined as follows: 
 1. For parts produced from articles of other headings – CTH  2. For parts obtained from parts of the same heading, for machines obtained from parts and for 
machines ("goods") finished from machines of the same heading/subheading: 
 CTH, CTSH, CTHS, CTSHS  or  manufacture in which the value of all non-origin ating materials used does not exceed 60% of the 
ex-works price of the product 
(See Note 8). 
   In addition, it was contemplated that  legal not es would be necessary in order to give effect to 
the intention of the proposal  
Î see Chapter Note 7. 
 
 Further considerations:  In the informal discussions at GC level, one Member’s expert raised the question about the 
appropriate percentage for a value added rule. He  submitted – on his long personal experience with 
value added rules – the following suggestion: 
 
Percentage of value added based on ex-works price of the product:  Electronics  25% Electromechanical  30% 
Mechanics  40% 
Commercial vehicles  40% Passenger cars  45-50%   
Supported by:  CHE, CHN, IND([60%]) JOB(03)/132/Rev.7 
Page 85 
 
 
OPTION A:  ASSEMBLY APPROACH 
 
Primary Chapter Rules  
 
1. Limitations on change in classification rules in the matrix .- Where satisfaction of the rules of 
this Chapter results solely fro m the following circumstances, origin shall be determined as 
indicated herein: 
  A. Goods obtained by disassembly
 
 
A change of classification which results from the disassembly of goods shall not be 
considered as the change required by the rule  set forth in the matrix.  The country of 
origin of the parts recovered from the goods  shall be the country where the parts are 
recovered, unless the importer, exporter or  any person with a justifiable cause to 
determine the origin of parts demonstrates a nother country of origin on the basis of 
verifiable evidence such as origin marks on the part itself or documents.  
 
 B. Collection of parts  
 
Where a change in classification results from the application of HS General 
Interpretative Rule 2(a) with respect to co llections of parts that are presented as 
unassembled articles of another heading or subheading the individual parts shall 
retain their origin prior to such collection.   
  C. Recertification or retesting
 
 
A change of classification which results from the recertification or retesting of the 
good shall not be considered as the change re quired by the rule set out in the matrix. 
 
 D. Assembly of the collection of parts  
 
Goods assembled from a collection of part s classified as the assembled good by 
application of General Interpretative Rule 2 shall have origin in the country of 
assembly, provided the assembly would have satisfied the primary rule for the good 
had each of the parts been presented separately and not as a collection. 
 [2. Additional Primary Chapter Rule
 – When Chapter Rule 1 does not apply and the other 
primary rules in this Chapter are not met in th e last country of production, the following shall 
be applied in sequence:] 
 
 A. Parts and accessories produced from blanks  
 
(1)  The country of origin of goods that are produced from blanks which, by 
application of the HS General Interpretativ e Rule 2(a), are classified in the same 
heading or subheading as the complete or finished goods, shall be the country in which the blank was finished provided finishing included configuring to final shape by the removal of material (other than mere ly by honing or polishing or both), or by 
forming processes such as bending, hammering, pressing or stamping. 
 
(2)  Paragraph 1 above applies to goods cla ssifiable in provisions for parts or parts 
and accessories, including goods specifically  named under such provisions, and to 
goods classifiable in h eadings 84.80 and 84.83.  
 JOB(03)/132/Rev.7 
Page 86  
 [B. When the good is produced from materials or components that changed classification 
but did not satisfy the primary rule applicable to the good, the country of origin of the good is the country that furnished all or the major portion of that material or component.] 
 
  [Explanation: Chapter rule 2(B) applies when a primary rule provides for an 
exception, i.e. “CTH except from heading 85.01.”] 
 
 C. The following rules apply only to goods classifiable under provisions for “parts” or 
“parts and accessories” and which are not described by name in the Harmonized System, applied in sequence. 
   [Explanation: Chapter rule 2(C) is to be  applied to parts and accessories which are 
not provided for by name in the Harmon ized System.  For example, it would not 
apply to subheading 8420.91 (which provid es for cylinders which are classified as 
parts of rolling machines) but it would apply to 8420.99 (which  provides for other 
non-enumerated parts of rolling machines).   The rule also applies to goods 
assembled from kits.] 
 
  (1) Goods produced by assembly of 5 or more parts(whether or not originating), 
other than parts provided for in rule 2(C)(3) shall have origin in the country of assembly. 
 
   [Explanation: Producing parts or a ccessories by assembling other parts will 
be an origin conferring event provided  that (1) the assembly involves at 
least 5 parts and (2) operations other than those enumerated in Chapter Rule 2(C)(3) below are involved.  Parts of general use and other parts 
referred to in Chapter Rule 2(C)(3)  are not  counted toward the 
requirements of this Rule.] 
 
  [ (2) Goods produced as a result of pr ocessing non-originating components other 
than parts provided for in rule 2(C)(3) into a device or apparatus capable of 
performing one or more new mechanical or electrical functions shall have 
origin in the country of such processing. 
 
   [Explanation: Producing parts which have a mechanical or electrical 
function which was not present in the materials used in their production will be an origin conferring event provid ed that operations other than those 
enumerated in Chapter Rule 2(C)(3 ) below are involved.  Examples are 
attached as an annex to this document.] 
 
  (3) The following parts shall not be c ounted for purposes of rule 2(C)(1) nor 
shall the operations described be deemed  to result in a new mechanical or 
electrical function for purposes of rule 2(C)(2):  
 
    (i) the attachment of machinery to a base;      (ii) the installation of machinery or apparatus into cabinets or 
similar encasements; 
 
    (iii) the attachment of parts of general use as defined in Note 2 to 
Section XV of the Harmonized System or similar parts of plastic (Chapter 39) ; 
 JOB(03)/132/Rev.7 
Page 87 
 
    (iv) the attachment of handles, dials, knobs, hand cranks, and 
other consumer-ope rated controls; 
     (v) the attachment of a power cord  or change of mains 
voltage/frequency by adding transformer, adapter or converter; 
 
    (vi) the installation of batteries, accumulators, sensors, 
thermostats or other articles not designed to become a permanent part of the good; 
 
    (vii) the attachment of accessories or parts (including printed 
circuits with components assembled thereon), which serve only to enhance the operation of the machine or device; 
     (viii) the addition of manua ls, warranty cards, certificates of 
conformance to standards (with or  without testing), or labels; 
   (ix) washing, cleaning; removal of dust, oxide, oil, paint or other 
coverings; 
     (x) simple painting and polishing operations; 
 
    (xi) affixing or printing marks, labels, logos and other 
distinguishing signs on products or their packaging;  or 
     (xii) the installation of software. 
 
     [Explanation: These are minimal operations which, 
whether performed individually or in any combination, are insufficient  to confer origin.  Furthermore, the parts involved in these operations are not to be counted in 
applying the 5 parts assembly rule (Chapter Rule 2(C)(1)).] 
 
Chapter Residual  Rules
 
 
 For purposes of Rule 3(d) of Appendix 2  the following residual rules shall be applied in 
sequence: 
 
1. For goods classifiable under provisions for “p arts” or “parts and accessories” and which are 
not described by name, the country of origin shall be the country of assembly provided the 
goods are produced by the assembly of two or more parts  (other than parts of general use, as 
defined in Note 2 to Section XV or similar parts of plastic (Chapter 39)), and one or more of 
the parts (other than parts of general use, as de fined in Note 2 to Section XV or similar parts 
of plastic (Chapter 39))  satisfies the requirements for origin in the country of assembly.  For 
purposes of this rule, the following parts sha ll not be counted nor shall the operations 
described be deemed to be origin conferring operations: 
 
 [Explanation: Producing parts or accessories by assembling 2 or more lesser parts will be 
an origin conferring event provided that (1) at  least one of those parts had origin in the 
country of assembly and (2) operations other th an those enumerated below are involved.  
This rule is to be applied only to parts or parts and accessories which are not provided for 
by name in the Harmonized System.  For example, it would not apply to subheading 
8420.91 (which provides for cylinders which are parts of rolling machines) but it would 
apply to 8420.99 (which  provides for other non-enumerated parts of rolling machines).] JOB(03)/132/Rev.7 
Page 88   
A. the attachment of machinery to a base; 
  B. the installation of machinery or appa ratus into cabinets or similar encasements; 
  C. the attachment of parts of general us e as defined in Note 2 to Section XV of the 
Harmonized System or similar parts of plastic (Chapter 39); 
  D. the attachment of handles, dials, knobs , hand cranks, and othe r consumer-operated 
controls; 
 
 E. the attachment of a power cord  or change of mains voltage/frequency by adding 
transformer, adapter or converter; 
  F. the installation of batteries, accumulators, sensors, thermostats or other articles not 
designed to become a permanent part of the good; 
 
 G. the attachment of accessories or parts (including printed circuits with components 
assembled thereon), which serve only to en hance the operation of the machine or 
device; 
  H. the addition of manuals, warranty cards , certificates of conformance to standards 
(with or without testing), or labels; 
  I. washing, cleaning; removal of dust,  oxide, oil, paint or other coverings; 
  J. simple painting and polishing operations; 
 
 K. affixing or printing marks, labels, logos and other distinguishing signs on products or 
their packaging;  or 
  L. the installation of software.    [Explanation: These are minimal op erations which, whether performed 
individually or in any combination, are insufficient  to confer origin. ] 
 
2. When the good is produced from materials originating in a single country that did not undergo 
the change in classification or did not otherwi se satisfy the primary rule applicable to the 
good, the country of origin is the country in which those materials originated; 
 3. The country of origin shall be the country of origin of that  [material] [functional element] that 
gives the good its essential character, to the extent to which the principle of essential 
character can be applied.  Otherwise, the country  of origin shall be the country in which the 
major portion of those materials originated , as determined on the basis of weight. ] 
          JOB(03)/132/Rev.7 
Page 89 
 
ANNEX 
 
EXAMPLES OF PROCESSING COMPONENTS INTO A DEVICE OR APPARATUS CAPABLE 
OF PERFORMING A NEW MECHANICAL OR ELECTRICAL FUNCTION 
  The first two examples are based on products included in document 41.901: 
 
(1) Assembly of a video recording head for a video tape recorder (VCR) (8522.90) from the 
following 4 components: 
    Base (8522.90) 
   Printed circuit (8534.00) 
   Head chip (8522.90)    Head wire (8544.11)  
Origin would be conferred on the country of assembly because the assembled head would 
have a new electrical function, e.g., converting va riations in electrical current flow into a 
fluctuating magnetic field for vi deo recording on magnetic tape. 
 (2) Assembly of a plasma display panel for a plas ma display unit of an automatic data processing 
machine (8473.30) from the following 3 components (Issue No. 32): 
 
   Back panel (8473.30) 
   Front panel (8473.30)    N e X e  g a s   
Origin would be conferred on the country of  assembly because the assembled panel would 
have a new electrical function, e.g., converting  an electrical current flow into electromagnetic 
energy in the visible light spectrum. 
 (3) Assembly of a blade assemb ly unit for an electrical, hand operated, hedge trimmer (8508.80) 
from the following components: 
 
   Top plate (8508.90) 
   Cutting blade (8208)    Base plate (8508.90)    Parts of general use  
Origin would be conferred on the country of assembly because the assembled unit would have 
a new mechanical function, e.g., converting horizontal motion into a shearing force. 
 
(4) Assembly of an impeller plate for a kitc hen waste disposer from the following components: 
 
Impeller plate (8509.90) 
   Impeller arm (8509.90) 
   Impeller arm cushion (8509.90)    Parts of general use  
Origin would be conferred on the country of assembly because the assembled unit would have 
a new mechanical function, e.g., using centr ifugal force to move the food waste from the 
center of the disposer chamber to the outside of the chamber where it forces the waste against 
the shredder ring.] 
 JOB(03)/132/Rev.7 
Page 90  
OPTION B:  VALUE-ADDED APPROACH  
 
 
Wording of proposed rule
: 
  "Manufacture where 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 X 
% of the ex-works price of the product".   For the purpose of calculating the percentage
: 
 
-  the term "ex-works price" shall mean the pr ice to be paid for the product obtained to the 
manufacturer in whose undertaking the last working or processing is carried out (this price shall not 
include internal taxes which are, or may be , repaid when such product is exported); 
 -  the term "value acquired as a result of wo rking and processing and in corporation of parts 
originating in the country of manufacture" sha ll mean the increase in value resulting from the 
assembly itself, together with any preparatory,  finishing and checking operations, and from the 
incorporation of any parts originating in the country  where the  operations in question were carried 
out, including profit and the general costs borne in that country as a result of the operations;  -   the term "value of non-originating materials" means the customs value at the time of importation of 
the non-originating materials used, or, if this is not known and cannot be ascertained, the first 
ascertainable price paid for the materi als in the country of importation. 
 Guidelines for calculation
: 
 
 In practice, the value added shall be calculated as follows:  
  the ex-works price of the product obtained minus  the value of all the non-originating materials 
(customs value for imported materials or ex-works price for the other materials).  JOB(03)/132/Rev.7 
Page 91 
 
OPTION C 
 
 
–  For final products – CTH, or change within the heading or subheading provided X % value-added 
is satisfied. –  For parts – CTH or change within the heading or subheading provided the 5-parts rule or X % 
value-added rule is satisfied. 
 
Suggested percentage of value added: 
 Electronics  25% 
Electromechanical  30% 
Mechanics  40% Commercial vehicles  40% Passenger cars  45-50%  
 JOB(03)/132/Rev.7 
Page 92  
CHAPTER NOTES (TO COMPLETE THE MACHINERY CHAPTER OVERVIEW)
 
 Primary rules (Notes 1 to 6 agreed):
 
 Note 1 :  Collection of parts :   
 
Where a change in classification results from the app lication of HS General Interpretative Rule 2(a) 
with respect to collections of parts that are pr esented as unassembled articles of another heading or 
subheading the individual parts shall retain  their origin prior to such collection 
 
Note 2 :   Assembly of the collection of parts :  
 
Goods assembled from a collection of parts classi fied as the assembled good by application of 
General Interpretative Rule 2 shall have origin in the country of assembly, provided the assembly 
would have satisfied the primary rule for the good ha d each of the parts been presented separately and 
not as a collection  
No
te 3:   Putting up goods for transport, storage or retail sale : (It was agreed to delete this 
issue if there is no practical example)  Where a change in classification results from putting up goods for transport, storage or retail sale, the 
origin of the g ood shall be the origin prior to putting up.  
 
Note 4 :   Recertification or retesting : (could be fitted under Note 7) 
 A change of classification which results from the re certification or retesting of the good shall not be 
considered as the change required by the rule set out in the matrix  
Note 5 :   Disassembly of goods :  
 A change of classification which results from the di sassembly of goods shall not be considered as the 
change required by the rule set forth in the matrix.  The country of origin of the parts recovered from the goods shall be the country where the parts ar e recovered, unless the importer, exporter or any 
person with a justifiable cause to determine the origin  of parts demonstrates another country of origin 
on the basis of verifiable evidence such as or igin marks on the part itself or documents. 
 
Note 6 :   Parts and accessories produced from blanks :  
 
(1)   The country of origin of goods that are pr oduced from blanks which by application of the HS 
General Interpretative Rule 2(a), are classified in the same heading or subheading as the complete or 
finished goods, shall be the country in which th e blank was finished provided finishing included 
configuring to final shape by the removal of materi al (other than merely by honing or polishing or 
both), or by forming processes such as bending, hammering, pressing or stamping.  
(2) Paragraph 1 above applies to goods classifi able in provisions for parts or parts and 
accessories, including goods specifically named under such provisions, and to goods classifiable in 
headings 84.80 and 84.83.   
[Note 7: Minimal operations:  
 
The following operations or processes, taken by them selves [or in combination with each other] and 
undertaken for the purposes prescribed herein, are consid ered to be minimal and thus shall not confer 
origin on a good:  
  (a) the attachment of parts or machinery to a base; JOB(03)/132/Rev.7 
Page 93 
 
 
  (b) the installation of parts, machiner y or apparatus into cabinets or similar 
encasements; 
   (c) the attachment of parts of general use as defined in Note 2 to Section XV of 
the Harmonized System or similar parts of plastic (Chapter 39) ; 
 
  (d) the attachment of handles, dials, knobs, hand cranks, and other 
consumer-operated controls; 
   (e) the attachment of a power cord or change of mains voltage/frequency by 
adding transformer, adapter or converter; 
   (f) the installation of batteries, accumulators, sensors, thermostats or other 
articles not designed to become a permanent part of the good; 
 
  [(g) the attachment of accessories or parts (including printed circuits with 
components assembled thereon), which serve  only to enhance the operation of the 
machine or device;] 
   (h) the addition of manuals, warranty cards, certificates of conformance to 
standards (with or without testing), or labels; or 
 
  (i) washing, cleaning; removal of dust,  oxide, oil, paint or other coverings; 
   (j) simple painting and polishing operations;  
  (k) affixing or printing marks, labels, logos and other like distinguishing signs on 
products or their packaging; 
   [(i) the installation of software]  
Chairman’s remarks
: 
the bracketed text in Rule 7 is for the purposes of recollection of former proposals under this topic, in 
the Chair’s view the bracketed texts represent substa ntial transformations. Consequently the bracketed 
notes should be deleted if the rele vant origin rules are satisfied. 
 
 
[Note 8: Ad valorem percentage criteria:  
   For the purposes of calculating the perc entage of the value added requested: 
   (a) The term “ex works price” shall mean  the price paid for the product obtained 
to the manufacturer in whose undertaking th e last working or processing is carried 
out.  The ex-works price shall include the value of all materials used in manufacture 
and all costs (material costs as well as other costs) effectively incurred by the manufacturer.  Internal taxes which are, or may be, repaid when such product is exported or commercial price reductions  shall not be taken into account. 
 
  (b) “value of non-originating material s” means the customs va lue at the time of 
importation of the non-originating materials used, or, if this is not known and cannot 
be ascertained, the first ascertainable price paid for the materials in the country of 
importation. ] 
 JOB(03)/132/Rev.7 
Page 94  ELECTRONICS:  ASSEMBLY OF MEMORY MODULES  
 
ISSUE NO. 33 (Ch. 84-90) HS 8473.30(b) 
Description of production process: 
Input:  Electronic integrated circuits or micro-assemblies Output:  Memory modules  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  CTH 
 
 
   Option C:  Value-added rule   
 AUS, CAN, CHE, COL, HKC, IND, 
JPN, KOR, MEX, 
MOR, SGP, VEN   BRA, CHN, EEC 
 
Members not considering it a substantial transformation  
 
Option D:  CTH, except from 8542  
 
USA 
CRO Chairman's proposal:  Deletion of option D, remaining issue solved 
by issue 1 and implication resolution   
 JOB(03)/132/Rev.7 
Page 95 
 
ELECTRONICS:  ASSEMBLY OF TELEVISION RECEIVERS, ETC.  
 
ISSUE NO. 56 (Ch. 84-90) HS 8528 
Description of production process: 
Input:  Cathode ray tube Output:  TV set, video monitors etc.  
Considerations:  
Members considering it a substantial transformation : 
 
Option A:  Assembly resulting in a new good having new characteristics 
 
Option B/1:  CTH    Option D:  Value-added rule 
  
 MAR  
CAN, CHE, IND, 
JPN, KOR, MEX, MYS, PHL, SGP  BRA, CHN, EEC, 
EGY (40%), TUR 
 
Members not considering it a substantial transformation  
 
Option E:  CTSH, except from 8540.11 or 8540.12 
 NZL, USA (origin:  
the country of origin of cathode-ray tube) 
CRO Chairman's proposal:  Deletion of options A and E, , remaining issue 
solved by issue 1 and implication resolution  AUS 
 JOB(03)/132/Rev.7 
Page 96  ELECTRONICS:  MOUNTING OF SEMICONDUCTORS, ETC.  
 
ISSUE NO. 59 (Ch. 84-90) HS ex85.41(b), 
ex85.42(c) 
Description of production process: Input:  Unmounted semiconductors, et c. (HS ex8541(a)/ex8542(a) and (b)) 
Output:  Mounted semiconductors, etc.  
Considerations:  
Members considering it a substantial transformation : 
 
Option B:  CTHS 
 
   Option C:  CTH;  or value-added rule  
  
 CAN, CHE, IND, 
JPN, KOR, MAL, 
MAR, MEX, MYS, PHL, SGP  BRA, CHN, EEC 
Members not considering it a substantial transformation  
 
Option D1(a): CTH, or change from ex 85.41(g)/ex 85.42(f);  (origin:  the 
country of diffusion for HS ex8541(b), 8542.13-8542.40;  the country of origin of the chips or dice therein for HS 8542.12)  Option D1(b):  CTH, or change from ex 85.41(g)/ex 85.42(f);  5 parts rule 
 
Option D1(c):  CTH, or change from ex 85.41(g)/ex 85.42(f);  general residual rule  Option D3:  For electronic integrated circuits of ex 85.42(c) only: The 
operation of diffusion (where integrated circuits are formed on a 
semi-conductor substrate by the selectiv e introduction of an appropriate 
dopant)  
 
USA    AUS 
 
HKC   CHN, EEC 
 
CRO Chairman's proposal:  Option B concerning assembly , remaining 
issue solved by issue 1   
 JOB(03)/132/Rev.7 
Page 97 
 
ELECTRONICS:  MOUNTING OF GOODS CO NSISTING OF MORE THAN TWO ITEMS 
OF DIODES AND SEMICONDUCTORS ETC.  
 
ISSUE NO. 60 (Ch. 84-90) HS ex85.41(d) 
Description of production process: 
Input:  Unmounted semiconductors, etc. Output:  Mounted goods consisting of more than two items of heading 85.41  
Considerations:  
Members considering it a substantial transformation : 
 
Option A2:  Assembly resulting in a new good having new characteristics 
 
Option B:  CTHS    
Option C:  CTH;  or value-added rule   
 MAR 
 
CAN, CHE, IND, JPN, KOR, MEX, [PHL
*], SGP, 
[VEN] 
 
BRA, CHN, EEC 
Members not considering it a substantial transformation : 
 
Option D1:  CTSH 
 Option D2: CTH;  5 parts rule  
 CHL, MYS  AUS, USA 
CRO Chairman's proposal:  Option B concerning assembly,  remaining 
issue solved by issue 1   
 
                                                      
* Flexible. JOB(03)/132/Rev.7 
Page 98  ASSEMBLY OF VEHICLES  
 
ISSUE NO. 69 (Ch. 84-90) HS 8701-8705 
Description of production process: 
Input:  Materials outside Ch. 87 or parts of Ch. 87 Output:  Vehicle Related issue: 
Considerations:  
Option B:   CTH 
 
  
 
   AUS, CAN, CHE, 
CHN, JPN, KOR, MEX, MYS (for 8701 only), PHL, 
NZL, SEN, SGP, 
THA, TPKM, USA  
Option C:  Manufacture where 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 [45-60%] of 
the ex-works price of the product 
 Option D1(a):  CTH, except from HS 8706   Option D1(b):  CTH, except from HS 8704 
  BRA, EEC, EGY, 
IND, TUR (only for 8701-8704) 
 
 MYS (for 8702 to 8704)  MYS (for 8705 
only) 
 
CRO Chairman's proposal:  Application of decision concerning Issue 1 in 
machinery Æ recognizing assembly without conditions by CTH rule and 
admit changes inside the headings by application of the value added rule.  AUS 
 JOB(03)/132/Rev.7 
Page 99 
 
PRODUCTION OF OPTICAL FIBRES, BUNDLES AND CABLES  
 
ISSUE NOS. 75-77 (Ch. 84-90)  
No. 75:  Production of optical fibers from preforms classified outside 
heading 90.01 (ex 9001.10(a))  
 
Members considering it a substantial transformation : 
 
Option A:  CTH 
    
Option B:  Value-added rule   
   
 
ARG, CAN, CHE, EGY, IND, JPN, KOR, MEX, MYS, NZL, PHL, VEN  
BRA, EEC, TUR 
 Members not considering it a substantial transformation
: 
 
Option C:  CTH except from preforms  
 
 USA 
No. 76:  Production of optical fiber bundles from optical fibers (ex 9001.10(b))  
 
Members considering it a substantial transformation
: 
 
Option A:  CTSHS  
Option B:  CTH;  or value-added rule  
 
Members not considering it a substantial transformation
: 
 
Option C:  CTH  
 
 
  MYS  
BRA, EEC, EGY, 
TUR   ARG, CAN, CHE, IND, JPN, KOR, 
MEX, USA, VEN 
No. 77:  Production of optical fiber cables other than those of 8544.70 from optical fibers and optical fiber bundles (ex 9001.10(c))  
 
Members considering it a substantial transformation
: 
 
Option A:  CTSHS 
 
  Option B:  CTH;  or value-added rule  
 Members not considering it a substantial transformation
: 
 
Option C:  CTH  
 
  CAN, CHE, EGY, IND, JPN, KOR, 
MEX, MYS, PHL, 
USA  BRA, EEC  
 
 CHL, VEN 
CRO Chairman's proposal:  Deletion of option C (for Issue Nos. 75 and 77)/option A (for Issue No. 76) and po stponing the final decision until 
Issue No. 1 (of Chs. 84-90) is resolved  JOB(03)/132/Rev.7 
Page 100  ASSEMBLY OF WATCHES FROM MOVEMENTS  
 
ISSUE NO. 1 (Ch. 91) HS 9101-9107 
Description of production process: 
Input:  Movements Output:  Watches or clocks Process:  Movements are processed thro ugh assembling into watches or clocks Related issue: 
Considerations:  
Members not considering it a substantial transformation  
 
Option A:  CTH, except HS 91.08 or 91.09 
 
The essence of a watch, or clock, is a device which indicates the time or measures the intervals of time (see explanatory notes under heading 91.02 (and 91.03)).  A movement is defined in the HS chapter notes as a device capable of determining intervals of time (see Note 3 to Chapter 91).  There is no 
difference in the essential character between a watch and a movement and it is 
the movement which imparts the essential character of a watch.  In the manufacture of a watch or clock, the ass embly of the movement is considered 
the last substantial transformation becau se at the stage of completion of the 
movement, the essential character of the watch - time-telling - is already fixed.  The final assembly from movement to wa tch does not substantially change the 
essential character of time-telling and cannot amount to substantial 
transformation.  Because the essential character and quality of a watch or a clock is determined by the movement, the origin of the movement is most important from a commercial point of view. 
  
  
 
CAN, HKC, KOR, USA, VEN 
Members considering it a substantial transformation : 
 Option B:  CTH 
 
The structure of the HS reflects that movements and watches are essentially different commercial goods.  Various finished goods can be obtained from the same movement by final assembly.  While the movement is important, 
timekeeping is a minimum characteristic.  The movement does not represent 
time and is invisible after assembly.  It is the change from components to a watch which is the last substantial tr ansformation in watch manufacture.  The 
accuracy, durability and life span of a wa tch are determined and guaranteed by 
the final assembly.  Testing and adjust ment, which constitute an essential part 
of assembly, are also of particular importance because they determine the 
above-mentioned quality of a watch.  
 
CHE, CHN, EEC, 
IND, JPN, MEX, NZL   
 
     
 
  
CRO Chairman's proposal:  Option B  
 
__________