WORLD TRADE  
ORGANIZATION  TN/CTD/W/30 
TN/MA/W/74 TN/AG/GEN/20 
12 June 2006 
 
(06-2808) 
Committee on Trade and Development  Special Session 
Negotiating Group on Market Access 
Committee on Agriculture Special Session Original:   English 
 
  
LEAST-DEVELOPED COUNTRIES' PROPOSAL ON RULES OF ORIGIN 
 
Communication from Zambia on behalf of the LDC Group
 
  
 The following communication, dated 31 May 2006 , has been received from the Delegation of 
Zambia on behalf of the LDC Group.  
_______________ 
 
 
There is no evidence that strict rules of  origin over the past 30 years have done 
anything to stimulate the development of  integrated production structures in 
developing countries. In fact such argume nts have become redundant in the light 
of technological changes and global trade liberalisation which have led to the fragmentation of production processes and th e development of global networks of 
sourcing. Globalisation and the splitting up of the production chain does not allow 
the luxury of being able to establish in tegrated production structures within 
countries. Strict rules of origin act to cons train the ability of firms  to integrate into 
these global and regional production networks and in effect act to dampen the 
location of any value-added activities. In  the modern world economy flexibility in 
the sourcing of inputs is a key element in international competitiveness. Thus, it is 
quite feasible that restrictive rules of origin rather than stimulating economic 
development will raise costs of production by constraining access to cheap inputs 
and undermine the ability of local firms  to compete in overseas markets.  
  
 From “Rules of Origin, Trade and Customs” by Brenton and Imagawa (page 36) 
 
 
INTRODUCTION 
1. Rules of Origin have been under consideration by  the WTO since almost its inception in 1995 
and consensus on Rules of Origin has yet to be arrive d at.  The main reason for this lack of consensus 
could well be that different Members of the WTO exp ect Rules of Origin to serve different functions.  
The function of Rules of Origin which refer to  the Duty-Free Quota-Free Market Access for 
Least-Developed Countries (LDCs) provisions are to reduce trade diversion and trade deflection to a 
minimum, which can be achieved by having Rules of Origin which are simple and transparent. 
2. LDCs have, for a long time, argued that, desp ite being accorded preferential market access 
through the various agreements, they have not b een able to take advantage of these opportunities TN/CTD/W/30 
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  because of the associated, often stringent, rules of or igin.  It is against this background that LDCs 
have been advancing the position that rules of origin need to be simplified. 
3. Paragraph 47 of the Hong Kong Ministerial D eclaration (WT/MIN(05)/DEC) contains the 
following: 
Building upon the commitment in the Doha Ministerial Declaration, 
developed-country Members, and devel oping-country Members declaring 
themselves in a position to do so, agree to implement duty-free and quota-free 
market access for products originating from  LDCs as provided for in Annex F to 
this document. Furthermore, in accord ance with our commitment in the Doha 
Ministerial Declaration, Members sha ll take additional measures to provide 
effective market access, both at the border and otherwise, including simplified and transparent rules of origin so as to facilitate exports from LDCs. 
 
4. The Hong Kong Ministerial Declaration, theref ore, commits developed-country Members of 
the WTO, and developing countries declaring themse lves in a position to do so to provide preferential 
market access to Least-Developed Countries. 
5. Rules of Origin are required in any preferential trading arrangement, with the minimum 
requirement being to minimise trade deflection
1 by ensuring that the product to be exported into the 
customs territory granting the pr eference is produced (however th at is defined) in the customs 
territory the preference is granted to.  Although Rules of Origin can have development objectives and 
can also be used as a means of protection, the H ong Kong Ministerial Declaration specifically states 
that the Rules of Origin, in this situation, s hould be simple and transparent and should facilitate 
exports from LDCs.  
6. Rules of Origin are important in that they can affect the sourcing and investment decisions of 
companies and can, at the same time, distort the rela tive prospects of similar firms within a country.  
The adoption of restrictive Rules of Origin are mo re likely to constrain than to stimulate regional 
economic development and can act to un dermine preferential trade agreements. 
ORIGIN-CONFERRING CATEGORIES 
7. There are two main origin-conferring categories, these being: 
(i) Wholly Produced - refers to agricultural and mining products which are collected, 
mined, grown, reared etc in the exporting country (e.g. mineral products;  vegetable 
products;  live animals;  products obtained from live animals;  etc. if these products 
originate in the Member State concerne d).  Annex D1 of the Kyoto Convention 
contains a definition of what constitutes w holly produced and most preferential Rules 
of Origin follow this definition. 
(ii) Substantive Transformation which can be achieved by one or all of the following (as 
defined in Annex D1 of the Kyoto Convention): 
                                                      
1 Trade deflection is taken to mean the export of products originating in a third country which does not 
have preferential access into  a first country being re-routed throug h a second country which does have 
preferential access.  This re-routing co uld take the form of simple transh ipment or could involve a simple 
operation, such as repackaging the goods. 
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  (a) change of tariff classification; 
(b) percentage value added (build-down method); 
(c) local content (build-up method); 
(d) specific manufacturing process. 
Change of Tariff Classification
 
8. A change of tariff classification refers to a change in the Harmonised System (HS) tariff 
classification once a good undergoes a substantial tran sformation.  Origin is granted if the exported 
product has a different tariff classification to any of th e inputs used in its production.  The benefit of 
using the change of tariff classification is that it is  unambiguous and easy to u nderstand.  In terms of 
documentary requirements, it requires that producers keep records of the tariff classifications of all 
inputs and the final product. Change of tariff classi fication is usually defined at the 6-digit level 
(change of tariff sub-head – CTSH).  
Value Addition  
9. Value-added is defined as the di fference between the cost of the finished product and the cost 
of all the materials used in the production of the fi nished product.  In calculating value addition the 
denominator is the ex-works price, which, in the ca se of the Cotonou Rules of Origin, for example, is 
the price paid for the manufactured product, ex-works , minus any internal taxes which are, or may be, 
repaid when the product is exported.  The numerator  would be the value of the materials used to 
produce the manufactured product and this could be calculated using either the free-on-board (f.o.b.) 
or cost-insurance-freight (c.i.f.) values.  Each  method of calculating value addition will give a 
different value of non-originating materials.  Pref erential Trade Agreements using the value addition 
criterion in determining source of or igin have a value-added threshold of a defined percentage that has 
to be met if origin is to be conferred. 
10. The value-added criterion has a number of limitations.  Value-addition may deter a 
manufacturer from investing in more efficient plan t and machinery as this will most probably reduce 
the cost of the manufacturing process which could result in the value added through processing to be reduced to below the value additio n threshold which confers origin. 
11. A further limitation is the fact that value-added percentages are easily affected by movements 
in exchange rates for finished products that have  imported raw materials.  When a local currency 
appreciates, the percentage value added tends to declin e, and vice versa.  The first column in the table 
below gives a example of a manufacturer importing ha lf the value of his inputs, and a value addition 
of 35 per cent, so, in this case, the manufacturer m eets the threshold for the value-addition criterion of 
the country in which his country has a preferen tial trading arrangement with.  The second column 
assumes that there has been a curre ncy devaluation of 100 per cent in the country of the exporter.  
Despite the fact that there has b een no change in technology or cha nge in volume of inputs, the value 
addition reduces to below 35 per cent so, in this case, the export would not qualify for preferential 
treatment and would be charged the full MFN duty by  the importing county, despite the fact that the 
importing country is providing preferentia l treatment to the exporting country. 
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    Local 
currency100% depreciation Local 
currency
Cost of materials 1000  1500
 Local 500 500 
 Imported 500 1000 
Direct labour 250  250
Depreciation of machinery 40  40
Factory overheads 250  250
Ex-factory cost 1540  2040
Value Added = (1540-1000)/ 1540 35.06 (2040-1500)/2040 26.47
 
12. It is often difficult to calculate the value a dded if there are a number of products produced 
from the imported material. For example, some LD Cs import crude palm oil and from this refined 
cooking oil, soap, margarine and other finish ed products are manufactured.  Under these 
circumstances there ar e various ways to calculate the input cost of the crude palm oil.  Even in 
instances where cost accounting methods are used, the calculations, which are done by the exporter, 
are open to dispute and query by the importer. 
Specific Manufacturing Process  
13. In some Rules of Origin, substantial transf ormation is defined on the basis of a list of 
processing or manufacturing operations which have to be carried out on specific non-originating 
materials in order to confer origin to the resulti ng product.  In some instances specific manufacturing 
processes are used in conjunction with other origin-c onferring criteria, such as value addition criteria. 
Specific manufacturing processing rules usually apply to  specific sectors, such as the textile industry, 
and restrict firms' choices of production methods and of product.  Requirements are usually very 
detailed and specific and are often extremely comp lex, with the end result being that it becomes 
difficult for products to qualify. 
CUMULATION 
14. Cumulation allows producers to import materials from a specific country or regional group of 
countries without undermining the origin of the product. 
DE MINIMIS  (TOLERANCE) 
15. Most Rules of Origin allow for a certain percen tage of non-originating materials to be used 
without affecting the origin of the final product.  The tolerance rule can act to make it easier for 
products with non-originating inputs to qualify for preferences. 
PROBLEMS ASSOCIATED WITH RULES OF ORIGIN 
16. There is a sizeable literature on Rules of Origin  and the uptake of preferences and, from this 
literature, the following points arise: 
- There is a direct cost associated with the completion of Rules of Origin of 
about 3 per cent to 5 per cent which reduce exports under preferential schemes; 
- Rules of Origin can make it more difficult to achieve economies of scale 
since input requirements may vary according to destination markets of the final products;  TN/CTD/W/30 
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  - Rules of Origin are an incentive to purchase intermediates in the country 
conceding the preference, and this can be a source of a trade diversion if there 
is a more efficient producer of intermediates elsewhere; 
- Rules of Origin can be used as a means of protection for the importing 
country, with some studies showing that the larger the difference in tariffs, the more restrictive the associated Rules of Origin;  and 
- Rules of Origin usually do not recognise constantly changing industrial 
configurations brought about throu gh globalisation and can retard the 
effective utilisation of trade preferences and may impede rather than facilitate 
preferential market access. 
17. However, despite these drawbacks and difficulties, it is necessary to agree on a set of Rules of 
Origin if a preferential trading arrangement such as the one agreed to by the WTO Members for LDCs 
as defined in Annex F of the Hong Kong Ministerial D eclaration is to be implemented.  The challenge 
facing WTO Members is to define a set of Rules of  Origin which will assist LDCs to take advantage 
of the improved market access conditions they have been provided with so that LDCs are able to 
translate this improved market access into impr oved living standards of their populations through 
economic growth brought about by increased trade, while minimising trade deflection. 
 
  
  TN/CTD/W/30 
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Summary of the Different Approa ches to Determining Origin 
Rule Advantages Disadvantages Key Issues 
Change of Tariff 
Classification (in the Harmonised System) ▪  Consistency with non-preferential 
rules of origin. 
▪  Once defined, the rule is clear, 
unambiguous and easy to understand 
by both operators and enforcers. 
▪  Relatively straightforward to 
implement. ▪  Harmonised System not designed for conferring 
origin, as a result th ere are often many 
individual product specific rules, which can be 
influenced by domestic industries 
▪  Documentary requirements maybe difficult to 
comply with. 
▪  Can be conflicts over the classification of goods 
which can introduce uncertainty over market 
access ▪  Level of classifica tion at which change 
required – the higher the level the more restrictive. 
▪  Can be positive (which imported inputs can be 
used) or negative (defining cases where 
change of classification will not confer 
origin) test
a – negative test more restrictive. 
Value Added ▪  Clear, simple to specify and 
unambiguous. 
▪ Allows for general rather than 
product specific rules ▪  Complex to apply – requires firms to have 
sophisticated accounting systems. 
▪  Uncertainty due to sensitivity to changes in 
exchange rates, wages, commodity prices etc. 
 ▪  The level of value added required to confer 
origin 
▪  The valuation method for imported materials – 
methods which assign a higher value (eg 
CIF) will be more restrictive on the use of imported inputs   
Specific Manufacturing Process ▪ Once defined, clear and unambiguous 
▪ Provides for certainty if rules can be 
complied with ▪  Documentary requirements can be burdensome 
and difficult to comply with. 
Leads to product specific rules. 
▪  Domestic industries can influence the 
specification of the rules. 
 ▪  The formulation of the specific processes 
required – the more procedures required the 
more restrictive. 
▪  Should test be negative (processes or inputs 
which cannot be used) or a positive test (what 
can be used) – negative test more restrictive. 
a A positive determination of origin typically takes the form of ‘change from any other heading’, as opposed to a negative determ ination of origin, such as ‘chang e from any other heading except for 
the headings of chapter XX’; It is worth noting that change of tariff classification, particularly with a negative determinatio n of origin, can be specified to have an effect identical to that of a specific 
manufacturing process. 
 
Source of Table: “Rules of Orig in, Trade and Customs” by Paul Brenton and Hiroshi Imagawa  TN/CTD/W/30 
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  Duty-Free Quota-Free Market Access Provisions 
For Least-Developed Countries 
 
Annex F of the WTO Hong Kong Ministerial Decisions 
 
Rules of Origin 
 
  
GENERAL PROVISIONS 
 
Article 1 
 For the purposes of this Agreement: 
 
(a) "LDCs" means the countries classified with in this category by the United Nations 
General Assembly. 
(b) "manufacture" means any kind of work ing or processing including assembly or 
specific operations; 
(c) "material" means any ingredient, raw materi al, component or part, etc., used in the 
manufacture of the product; 
(d) "product" means the product being manufactured , even if it is intended for later use in 
another manufacturing operation; 
(e) "goods" means both materials and products; 
(f) "customs value" means the value as determined in accordance with the 1994 
Agreement on implementation of Article V II of the General Agreement on Tariffs 
and Trade (WTO Agreement on customs valuation); 
(g) "ex-works price" means the price paid for the product ex works to the manufacturer in 
the LDC in whose undertaking the last work ing or processing is carried out, provided 
the price includes the value of all the mate rials used, minus any internal taxes which 
are, or may be, repaid when the product obtained is exported; 
(h) "value of 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 LDC except that such value may 
be adjusted to exclude any costs, charg es or expenses incurred for transportation, 
insurance and related services incident to the international shipment of the 
merchandise from the country of expor tation to the place of importation; 
(i) "value of originating materials" means th e value of such materials as defined in 
sub-paragraph (h) app lied mutatis mutandis; 
(j) "value-added" means the difference between  the ex-works cost of the finished 
product and the [f.o.b.][c.i.f.] value of the materials imported from outside the LDC 
and used in the production; TN/CTD/W/30 
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  (k) "chapters", "headings" and “sub-headings” me an the chapters, headings (four-digit 
codes) and sub-headings (six-digit codes) used in the nomenclature which makes up 
the Harmonised Commodity Description and Coding System, or HS; 
(l) "classified" refers to the classification of a product or material under a particular 
heading;  and 
(m) "consignment" means products which ar e either sent simultaneously from one 
exporter to one consignee or covered by a single transport document covering their 
shipment from the exporter to the consignee or , in the absence of such a document, by 
a single invoice. 
 
 
GENERAL REQUIREMENTS 
 
Article 2 
 
1. The following products shall be cons idered as originating in the LDCs: 
(a) products wholly obtained in the LDCs with in the meaning of Article 3 of this 
Agreement;  and 
(b) products obtained in the LDCs incorporating materials which have not been wholly 
obtained there, provided that such material s have undergone sufficient substantial 
transformation in the LDCs within the m eaning of Article 4 of this Agreement. 
2. For the purpose of implementing paragraph 1, all LDCs shall be considered as being one 
territory. 
3. Originating products made up of materials wholly obtained or sufficiently worked or 
processed in two or more LDCs shall be considered as products originating in the LDC where the last 
working or processing took place, provided the wo rking or processing carried out there goes beyond 
that referred to in Article 5 below. 
 
 
WHOLLY OBTAINED PRODUCTS 
 
Article 3 
 
1. The following shall be considered as wholly obtained in the LDCs: 
(a) mineral and other naturally occurring products extracted from their soil or from their 
seabed; 
(b) vegetable products harvested there; 
(c) live animals born and raised there; 
(d) products from live animals raised there;  TN/CTD/W/30 
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  (e) products obtained by hunting or fishing conducted there; 
(f) products of sea fishing and other products ta ken from the sea outside the territorial 
waters by their vessels; 
(g) products made aboard their factory ships exclusively from products referred to in 
sub-paragraph (f); 
(h) used articles collected there fit only for the recovery of raw materials, including used 
tyres fit only for re-treading or for use as waste; 
(i) waste and scrap resulting from manuf acturing operations conducted there; 
(j) products extracted from marine soil or subso il outside their territorial waters provided 
that they have sole rights to work that soil or subsoil; 
(k) goods produced there exclusively from the pr oducts specified in sub-paragraphs (a) 
to (j). 
2. The terms "their vessels" and "their factory ship s" in paragraph 1(f) and (g) shall apply only 
to vessels and factory ships which are registered or re corded in a LDC or in the country into which the 
exports of wholly produced products from LDCs are made. 
3. Notwithstanding the provisions of paragraph 2, the preference giving country shall recognise, 
upon request of a LDC, that vessels chartered or le ased by the LDC be treated as "their vessels" to 
undertake fisheries activities in its exclusive economic zone. 
 
 
SUBSTANTIAL TRANSFORMATION 
 
Article 4 
 1. For the purposes of these Rules of Origin, pr oducts which are not wholly obtained are 
considered to be sufficiently work ed or processed in a LDC when the LDC value content is calculated 
on the basis of the build-down method (value added criteria) or the build-up method (local content 
criteria) described below. 
(a) For the build-down (value added) method, the LDC value content of a good may be 
calculated on the basis of the formula: 
LVC =  P - VNM
 x100 
                            P 
 Where: LVC is the LDC value content of the good, expressed as a percentage. 
P is the ex-works price of the good. 
VNM is the value of non originating mate rials that are acquired and used by the 
producer in the production of the good, but does not include the value of a material that is self-produced. 
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  (b) For the build-up (local content) method, the regional value content of a good may be 
calculated on the basis of the formula: 
LVC =  VOM
  x 100 
                       P 
 
Where: LVC is the regional value content of  the good, expressed as a percentage. 
P is the ex-works price of the good. 
VOM is the value of originating material s that are acquired or self-produced, and 
used by the producer in the production of the good. 
 2. A finished good is sufficientl y worked or processed when: 
(i) In the case where the build-down method is used the LDC content expressed as a 
percentage is equal to (x) percent. 
(ii) In the case where the build-up method is used the LDC content expressed as a 
percentage is equal to (y) percent. 
(iii) In the case where adjustments are to be made to calculate the value of non-originating 
materials used in the production of a good when the built-down method is used 
paragraph 3(c) below will apply . 
3. Value of materials. 
(a) For the purpose of calculating the LDC value content of a good, the value of a 
material is: 
(i) in the case of a material that is imported by the producer of the good, the 
value of the material; 
(ii) in the case of a material acquired or self-produced as defined in paragraph 4 
in the territory in which the good is  produced, the value, determined in 
accordance with the Agreement on Impl ementation of Article VII of the 
General Agreement on Tariffs and Trade 1994. 
(b) The following expenses, if not included in  the value of an originating material 
calculated under sub-paragraph 3(a) above , may be added to the value of the 
originating material: 
(i) the costs of freight, insurance, packing and all other costs incurred in 
transporting the material within or between  the territory of one or more of the 
LDCs or neighbouring countries as define d under Article 7 to the location of 
the producer; 
(ii) duties, taxes and customs brokerage fees on the material paid in the territory 
of one or more of the LDCs or neighb ouring countries as defined in Article 7 
other than duties or taxes that are wa ived, refunded, refundable or otherwise 
recoverable, including credit against duty or tax paid or payable;  TN/CTD/W/30 
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  (iii) the cost of waste and spoilage resultin g from the use of the material in the 
production of the good, less the value of renewable scrap or by-products. 
(c) The following expenses, if included in the value of a non-originating material 
calculated under sub-division 3(a) above , are deducted from the value of the 
non-originating material: 
(i) the costs of freight, insurance, packing and all other costs incurred in 
transporting the material to the location of the producer; 
(ii) duties, taxes and customs brokerage fees on the material paid in the territory 
of one or more LDC or neighbouring countries as defined under Article 7, 
other than duties or taxes that are wa ived, refunded, refundable or otherwise 
recoverable, including credit against duty or tax paid or payable; 
(iii) the cost of waste and spoilage resultin g from the use of the material in the 
production of the good, less the value of  renewable scrap or by products; 
(iv) the cost of originating materials used in  the production of the non- originating 
material; 
(v) in the case where the deductions mentioned above under (i) to (iv) are not 
made and the value of a non-originating material is calculated on a c.i.f basis 
the required percentage under the build- down method will be increased by (z) 
percentage. 
4. If a product, which has acquired originating stat us by fulfilling the conditions set out above, is 
used in the manufacture of another product, the cond itions applicable to the product in which it is 
incorporated do not apply to it and no account sha ll be taken of the non-originating materials which 
may have been used in its manufacture.] 
 
 
INSUFFICIENT WORKING OR PROCESSING OPERATIONS 
 
Article 5 
 
1. The following operations shall be considered as insufficient working or processing to confer 
the status of originating products, whether or not the requirements of Article 4 are satisfied: 
(a) operations to ensure the preservation of products in good cond ition during transport 
and storage (ventilation, spreading out, drying, chilling, placing in salt, sulphur 
dioxide or other aqueous so lutions, removal of damaged parts, and like operations); 
(b) simple operations consisting of removal of dust, sifting or screening, sorting, 
classifying, matching (including the making-up  of sets of articles), washing, painting, 
cutting up; 
(c) changes of packaging and breaking up and assembly of packages or simple placing in 
bottles, flasks, bags, cases, boxes, fixing on cards or boards, etc., and all other simple 
packaging operations; TN/CTD/W/30 
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  (d) affixing marks, labels and other like dis tinguishing signs on products or their 
packaging; 
(e) simple mixing of products, whether or not of different kinds, where one or more 
components of the mixtures do not meet the conditions laid down in this Agreement 
to enable them to be considered as originating in a LDC; 
(f) simple assembly of parts to constitute a complete product; 
(g) a combination of two or more operations speci fied in sub-paragraphs (a) to (f);  and 
(h) slaughter of animals. 
2. All the operations carried out in the LDCs sha ll be considered together when determining 
whether the working or processing undergone by that pr oduct is to be regarded as insufficient within 
the meaning of paragraph 1. 
 
 
TERRITORIALITY 
 
Article 6 
 
1. The conditions for acquiring originating status must be fulfilled without interruption in the 
LDCs. 
2. The acquisition of originating status shall not be affected by working or processing done 
outside the LDCs on materials exported from the LDCs  and subsequently re-im ported there, provided: 
(a) the said materials are wholly obtained in the LDCs or have undergone working or 
processing beyond the operations referred to in Article 5 prior to being exported;  and 
(b) it can be demonstrated to the satisfaction of  the customs authorities  of the preference 
giving countries that: 
(i) the re-imported goods have been ob tained by working or processing the 
exported materials;  and 
(ii) the total added value acquired outside LDCs by applying the provisions of 
this Article does not exceed (a) percen t of the ex-works price of the end 
product for which originating status is claimed. 
 
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  CUMULATION 
 
Article 7 
 
Cumulation with preference giving countries
 
 1. Materials originating in the preference givi ng countries shall be considered as materials 
originating in the LDCs when incorporated into a product produced in the LDCs.  It shall not be 
necessary that such materials have undergone suffi cient working or processing, provided they have 
undergone working or processing going beyond  that referred to in Article 5. 
Diagonal regional cumulation
 
 2. Products originating in any of the countries that  are partners with a LDC of a regional group 
and used in further manufacture in a LDC shall be treat ed as if they originated in the LDC of further 
manufacture. 
3. Notwithstanding paragraph 2, products further ma nufactured in a LDC shall be considered as 
originating in a LDC only where the LDC content there is greater than the value of the materials used 
that originate in any one of the other countr ies that are members of the regional grouping. 
4. LDC content is calculated according to the me thod contained in sub-paragraph 1(a) of 
Article 4 (built down method) and the value of or iginating materials is calculated according to 
sub-paragraph 3(a) of Article 4.   
5. The cumulation provided for in this paragr aph  may be applied only provided that: 
(a) a preferential trade agreement is in place between a LDC and other members of the 
same regional trading arrangement;  
(b) originating material and products of ot her members of the regional group and 
incorporated into a product further manuf actured in a LDC have acquired originating 
status by the application of rules contained in this Agreement. 
Cumulation with neighbouring countries
 
 6. At the request of a LDC, materials origina ting in a neighbouring developing country not a 
member of a regional trade agreement which is not a LDC shall be considered as materials originating 
in the LDC when incorporated into a product obtaine d there.  It shall not be necessary that such 
materials have undergone sufficient working or processing, provided that the working or processing carried out in the LDC exceeds the operations listed in Article 5.  
 
 
UNIT OF QUALIFICATION 
 
Article 8 
 
1. The unit of qualification for the application of the provisions of this Agreement shall be the 
particular product which is considered as the b asic unit when determining classification using the 
nomenclature of the Harmonised System.  Accordingly, it follows that: TN/CTD/W/30 
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- when a product composed of a group or assembly of articles is classified 
under the terms of the Harmonised System in a single heading, the whole 
constitutes the unit of qualification;  and 
- when a consignment consists of a num ber of identical products classified 
under the same heading of the Harmonised System, each product must be taken individually when applying the provisions of this Agreement. 
2. [Where packaging is included with the produc t for classification purposes, it shall be included 
for the purposes of de termining origin.] 
3. Accessories, spare parts and tools dispatched w ith a piece of equipment, machine, apparatus 
or vehicle, which are part of the normal equipment and included in the price thereof or which are not 
separately invoiced, shall be regarded as one with the piece of equipment, machine, apparatus or 
vehicle in question. 
4. Sets, as defined in General Rule 3 of the Harm onised System, shall be regarded as originating 
when all component products are originating.  Neve rtheless, when a set is composed of originating 
and non-originating products, the set as a whole sh all be regarded as originating, provided that the 
value of the non-originating prod ucts does not exceed (b) per cent of the ex-works price of the set. 
5. In order to determine whether a product originat es, it shall not be necessary to determine the 
origin of the following which might be used in its manufacture: 
(a) energy and fuel; 
(b) plant and equipment; 
(c) machines and tools; 
(d) goods which do not enter and which are not intended to enter into the final 
composition of the product. 
 
 
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