DECISION No 1/1999 OF THE ASSOCIATION COUNCIL between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part of 28 January 1999 amending Protocol 4 to the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part (1999/149/EC)

THE ASSOCIATION COUNCIL,

Having regard to the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part (1), signed in Brussels on 16 December 1991, and in particular Article 38 of Protocol 4 (2) thereof,

Whereas the definition of the term 'originating products` in Protocol 4 needs to be amended to ensure the proper operation of the extended system of cumulation which permits the use of materials originating in the European Community, Poland, Hungary, the Czech Republic, the Slovak Republic, Bulgaria, Romania, Latvia, Lithuania, Estonia, Slovenia, the European Economic Area (hereinafter referred to as the EEA), Iceland, Norway and Switzerland;

Whereas it would seem advisable to maintain in operation until 31 December 2000 the system of flat rate charges provided for in Article 15 of Protocol 4 in connection with the prohibition of drawback and exemption from customs duty;

Whereas, in view of the particular arrangements on industrial products obtaining between the Community and Turkey, it would also be appropriate to extend the cumulation system to such products originating in Turkey;

Whereas to facilitate trade and simplify administrative tasks it is desirable to amend the wording of Articles 3, 4 and 12 of Protocol 4;

Whereas, to take account of changes in processing techniques and shortages of certain raw materials, some corrections must be made to the list of working and processing requirements which non-originating materials have to fulfil to qualify for originating status,

HAS DECIDED AS FOLLOWS:

Article 1

Protocol 4 concerning the definition of the concept of 'originating products` and methods of administrative cooperation is hereby amended as follows:

1. Article 1(i) shall be replaced by:

'(i) "added value" shall be taken to be the ex-works price minus the customs value of each of the materials incorporated which originate in the other countries referred to in Articles 3 and 4 or, where the customs value is not known or cannot be ascertained, the first price verifiably paid for the products in the Community or Hungary.`

2. Articles 3 and 4 shall be replaced by the following:

'Article 3

Cumulation in the European Community

1. Without prejudice to the provisions of Article 2(1), products shall be considered as originating in the Community if such products are obtained there, incorporating materials originating in the Community, Bulgaria, Poland, Hungary, the Czech Republic, the Slovak Republic, Romania, Lithuania, Latvia, Estonia, Slovenia, Iceland, Norway, Switzerland (including Liechtenstein (*)) or Turkey (**) in accordance with the provisions of the Protocol on rules of origin annexed to the Agreements between the Community and each of these countries, provided that the working or processing carried out in the Community goes beyond that referred to in Article 7 of this Protocol. It shall not be necessary that such materials have undergone sufficient working or processing.

2. Where the working or processing carried out in the Community does not go beyond the operations referred to in Article 7, the product obtained shall be considered as originating in the Community only where the value added there is greater than the value of the materials used originating in any one of the other countries referred to in paragraph 1. If this is not so, the product obtained shall be considered as originating in the country which accounts for the highest value of originating materials used in the manufacture in the Community.

3. Products, originating in one of the countries referred to in paragraph 1, which do not undergo any working or processing in the Community, retain their origin if exported into one of these countries.

4. The cumulation provided for in this Article may only be applied to materials and products which have acquired originating status by an application of rules of origin identical to those given in this Protocol.

The Community shall provide Hungary, through the Commission of the European Communities, with details of the Agreements and their corresponding rules of origin, which are applied with the other countries referred to in paragraph 1. The Commission of the European Communities shall publish in the Official Journal of the European Communities (C series) the date on which the cumulation, provided for in this Article may be applied by those countries listed in paragraph 1 which have fulfilled the necessary requirements.

Article 4

Cumulation in Hungary

1. Without prejudice to the provision of Article 2(2), products shall be considered as originating in Lithuania if such products are obtained there, incorporating materials originating in the Community, Bulgaria, Poland, Hungary, the Czech Republic, the Slovak Republic, Romania, Lithuania, Latvia, Estonia, Slovenia, Iceland, Norway, Switzerland (including Liechtenstein (*)) or Turkey (**) in accordance with the provisions of the Protocol on rules of origin annexed to the Agreements between Hungary and each of these countries, provided that the working or processing carried out in Hungary goes beyond that referred to in Article 7 of this Protocol. It shall not be necessary that such materials have undergone sufficient working or processing.

2. Where the working or processing carried out in Lithuania does not go beyond the operations referred to in Article 7, the product obtained shall be considered as originating in Hungary only where the value added there is greater than the value of the materials used originating in any one of the other countries referred to in paragraph 1. If this is not so, the product obtained shall be considered as originating in the country which accounts for the highest value of originating materials used in the manufacture in Hungary.

3. Products, originating in one of the countries referred to in paragraph 1, which do not undergo any working or processing in Hungary, retain their origin if exported into one of these countries.

4. The cumulation provided for in this Article may only be applied to materials and products which have acquired originating status by an application of rules of origin identical to those given in this Protocol.

Hungary shall provide the Community, through the Commission of the European Communities, with details of the Agreements and their corresponding rules of origin, which are applied with the other countries referred to in paragraph 1. The Commission of the European Communities shall publish in the Official Journal of the European Communities (C series) the date on which the cumulation, provided for in this Article, may be applied by those countries listed in paragraph 1 which have fulfilled the necessary requirements.

(*) The Principality of Liechtenstein has a customs union with Switzerland, and is a contracting party to the Agreement on the European Economic Area.

(**) Cumulation as provided for in this Article does not apply to materials originating in Turkey which are mentioned in the list at Annex V to this Protocol.`

3. Article 12 shall be replaced by the following:

'Article 12

Principle of territoriality

1. Except as provided for in Article 2(1)(c), Articles 3 and 4 and paragraph 3 of this Article, the conditions for acquiring originating status set out in Title II must continue to be fulfilled at all times in the Community or Hungary.

2. Except as provided for in Articles 3 and 4, where originating goods exported from the Community or Hungary to another country return, they must be considered as non-originating, unless it can be demonstrated to the satisfaction of the customs authorities that:

(a) the returning goods are the same as those that were exported

and

(b) they have not undergone any operation beyond that necessary to preserve them in good condition while in that country or while being exported.

3. The acquisition of originating status in accordance with the conditions set out in Title II shall not be affected by working or processing done outside the Community or Hungary on materials exported from the Community or Hungary and subsequently reimported there, provided:

(a) the said materials are wholly obtained in the Community or Hungary or have undergone working or processing beyond the insufficient operations listed in Article 7 prior to being exported

and

(b) it can be demonstrated to the satisfaction of the customs authorities that:

(i) the reimported goods have been obtained by working or processing the exported materials

and

(ii) the total added value acquired outside the Community or Hungary by applying the provisions of this Article does not exceed 10 % of the ex-works price of the end product for which originating status is claimed.

4. For the purposes of paragraph 3, the conditions for acquiring originating status set out in Title II shall not apply to working or processing done outside the Community or Hungary. But where, in the list in Annex II, a rule setting a maximum value for all the non-originating materials incorporated is applied in determining the originating status of the end product, the total value of the non-originating materials incorporated in the territory of the party concerned, taken together with the total added value acquired outside the Community or Hungary by applying the provisions of this Article, shall not exceed the stated percentage.

5. For the purposes of applying the provisions of paragraphs 3 and 4, "total added value" shall be taken to mean all costs arising outside the Community or Hungary, including the value of the materials incorporated there.

6. The provisions of paragraphs 3 and 4 shall not apply to products which do not fulfil the conditions set out in the list in Annex II or which can be considered sufficiently worked or processed only if the general values fixed in Article 6(2) are applied.

7. The provisions of paragraphs 3 and 4 shall not apply to products coming under chapters 50 to 63 of the harmonised system.

8. Any working or processing of the kind covered by the provisions of this Article and done outside the Community or Hungary shall be done under the outward processing arrangements, or similar arrangements.`

4. In Articles 13, 14, 15, 17, 21, 27, 30 and 32, the phrase 'referred to in Article 4` shall be replaced by 'referred to in Articles 3 and 4`.

5. In the last paragraph of Article 15(6), the date '31 December 1998` shall be replaced by '31 December 2000`.

6. In Article 26(1), the terms 'C2/CP3` shall be replaced by 'CN22/CN23`.

7. In Annex I, note 5.2:

(a) between the indents:

'- artificial man-made filaments`

and

'- synthetic man-made staple fibres of polypropylene`

the following shall be inserted:

'- current conducting filaments`;

(b) the fifth example ('A carpet with tufts . . . are met.`) shall be deleted.

8. Annex II shall be amended as follows:

(a) the following shall be inserted between the entries for HS heading Nos 2202 and 2208:

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(b) the entry for chapter 57 shall be replaced by:

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(c) the entry for HS heading No 7006 shall be replaced by:

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(d) the rule for HS heading No 7601 shall be replaced by:

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9. the following Annex shall be added:

'ANNEX V

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Article 2

This Decision shall apply as from 1 January 1999.

Done at Brussels, 28 January 1999.

For the Association Council

The President

J. MARTONYI

(1) OJ L 347, 31. 12. 1993, p. 2.

(2) Protocol 4 was replaced by Association Council Decision No 3/96 (OJ L 92, 7. 4. 1997, p. 1).