Proposal for a Council Decision on a Community position on an amendment to Protocol 4 on the definition of the concept of "originating products" and methods of administrative cooperation set out in the Europe Agreement between the European Communities and the Czech Republic
Date: 2000-10-24
Institutions: European Commission
Subjects: Czechia, GATT, accession to an agreement, administrative cooperation, originating product

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 24.10.2000
COM(2000) 675 final

2000/0272 (ACC)

Proposal for a

COUNCIL DECISION

on a Community position on an amendment to Protocol 4 on the definition of the
concept of 'originating products' and methods of administrative cooperation set out in
the Europe Agreement between the European Communities and the Czech Republic

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. 

GENERAL

1.1. 

1.2. 

1.3. 

1.4. 

2. 

2.1.

2.2.

Rules  of  origin  are  essential  to  the  correct  functioning  of  the  free  trade  agreements
between  the  Community  and  its  trading  partners.  Differences  in  origin  rules  in  the
various agreements signed by the Community, in fact, constitute a barrier to trade.

Following the conclusions of the European Council meeting in Essen, in December
1994,  a  programme  was  initiated  aiming  at  applying  identical  origin  rules  in  the
framework of the EEA Agreement, the agreements with the EFTA-countries and the
agreements  with  the  countries  of  Central  and  Eastern  Europe  (CEEC),  the  three
Baltic States and Slovenia (14 agreements).

A  standard  origin  protocol  was  developed  and  was  included  in  the  14  agreements
concerned and entered into force on 1st January 1997. As a result, trade between all
countries concerned was put on the same footing. The system is known as the 'Pan-
European  cumulation  system'.  On  1st  January  1999,  Turkey  was  included  in  this
system, but only insofar as industrial products are concerned.

Origin  rules  must  always  be  adaptable  to  the  technical,  political  and  economical
requirements of the free trade area in which they apply. Since 1st January 1997 some
amendments  have  been  deemed  necessary;  several  such  amendments  have  been
adopted and entered into force on 1st January 1999 and 1st January 2000 respectively.

AMENDMENTS TO THE RULES OF ORIGIN IN THE EEA AGREEMENT,
THE  EC-EFTA  AGREEMENTS  AND  THE  AGREEMENTS  WITH  THE
CEEC, THE BALTIC STATES AND SLOVENIA

Since  the  entry  into  force  of  the  standard  origin  protocol  the  interpretation  and
implementation  of  Article  7  ('insufficient  working  or  processing')  has  given  rise  to
difficulties. Therefore a new, clearer, text is proposed, based on the present wording
and taking into account the need to include some operations not covered previously
by the Article. The impact of the amendment on determining whether or not a given
product  has  originating  status  is  negligible;  it  mostly  concerns  the  allocation  of  the
originating  status  to  a  particular  country.  The  amendment  has  no  impact  on
preferential  treatment  for  most  sectors.  The  economic  consequences  for  the
Community are therefore negligible, while the proposal provides for improved clarity
for both customs authorities and economic operators.

The  origin  rules  in  the  agreements  with  the  CEEC,  the  Baltic  States  and  Slovenia,
provide that until 31 December 2000 flat rates may be used in cases where drawback
is prohibited or exemptions from customs duties are granted. Bulgaria and Hungary
have asked for this option to be extended for a further year. It is proposed to grant the
request and to apply the prolongation to all agreements. This will not give rise to any
economic difficulties for the Community and will not concern the EC-EFTA and the
EEA Agreements.

2.3.

Although  the  legal  text  does  not  clearly  say  so,  it  is  a  generally  accepted  principle
that identical originating and-non-originating materials, to be included in a product,

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2.4.

2.5.

2.6.

should be segregated physically. However, considerable cost or material difficulties
in keeping separate stocks may arise, and it is therefore proposed that under certain
conditions  customs  authorities  may  authorise  the  use  of  the  so-called  'accounting
segregation' method. This has no economic impact on the Community, but represents
a facilitation for the economic operators concerned.

The  origin  rules  include  several  amounts  expressed  in  euro.  Article  30  refers  to
equivalents  in  national  currencies  and  the  way  they  are  fixed  by  the  exporting
country and communicated to the Commission. A new wording is proposed for this
Article,  clarifying  some  questions  that  have  arisen  in  the  interpretation  and
implementation, and introducing measures to enable countries to round-off the result
of the conversion in their national currency.

The  proposal  will  also  result  in  countries  not  having  to  amend  the  equivalents  in
national currencies where changes remain within a certain range. This will reduce the
administrative  burden  on  the  national  administrations  involved  and  provide  greater
stability  for  the  level  of  the  amounts  in  national  currencies  for  the  economic
operators.

Some  technical  amendments  to  Article  1  and  Article  22  are  proposed.  These
amendments are intended to correct some anomalies between the different language
versions of the articles in question.

As an amendment to Annex II is it proposed for HS heading 5309 to 5311 that non-
originating  jute  yarn  may  be  used  in  the  manufacture  of  the  products  covered  by
those headings. As there is no production of such yarn within the Community or any
of the other countries concerned by these agreements, allowing non-originating jute
yarn to be used is beneficial to the economic operators involved in the manufacture
of the products concerned.

3. 

CONCLUSIONS

The  annexed  proposal  is  one  of  a  series  of  14  proposals  intended  to  further  improve  the
functioning of the common system of origin rules. These 14 proposals should be taken as a
single  package.  If  the  current  arrangements  allowing  Pan-European  cumulation  of  working
and processing are to remain in force, it is essential that they enter into force at the same time,
i.e. on 1 January 2001.

The  Commission  therefore  calls  on  the  Council  to  draw  up  a  common  position  for
presentation to the committees provided for in each of the relevant Agreements.

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2000/0272 (ACC)

Proposal for a

COUNCIL DECISION

on a Community position on an amendment to Protocol 4 on the definition of the
concept of 'originating products' and methods of administrative cooperation set out in
the Europe Agreement between the European Communities and the Czech Republic

(Text with EEA relevance)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article
133 in conjunction with Article 300(2), second subparagraph thereof,

Having regard to the proposal from the Commission,

Whereas Article 38 of Protocol 4 to the said Europe Agreement provides that the Association
Council may amend the provisions of the Protocol;

HAS DECIDED AS FOLLOWS:

The  position  to  be  adopted  by  the  Community  within  the  Association  council  created  by
virtue  of  Article  104  of  the  Europe  Agreement  establishing  an  association  between  the
European Communities and their Member States, of the one part, and the Czech Republic, of
the other part, on an amendment of Protocol 4 on the definition of the concept of 'originating
products' and methods of administrative cooperation set out in the Agreement shall be based
on the draft Association Council decision annexed to this Decision.

Done at Brussels,

For the Council
The President

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EUROPE AGREEMENT

Establishing an association between the European Communities and their Member States, of
the one part, and the Czech Republic, of the other part

DECISION No …./…. of the ASSOCIATION COUNCIL

amending Protocol 4 on the definition of the concept of 'originating products' and
methods of administrative cooperation

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 Czech Republic, of the other
part, signed in Brussels on 4 October 1993 and in particular Article 38 of Protocol 4 thereof;

Whereas:

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

Some  technical  amendments  are  in  order  to  correct  anomalies  between  the  different
language versions of the text.

The list of insufficient working and processing needs to be amended to ensure proper
interpretation and to take account of the need to include some operations not covered
previously by this list.

The  provisions  for  the  temporary  use  of  flat  rates  in  cases  where  drawback  is
prohibited or exemptions from customs duties are granted need to be prolonged until
31 December 2001.

The need has arisen to provide for a system of accounting segregation of originating
and non-originating materials, subject to authorisation by customs authorities.

The provisions concerning the amounts expressed in euro need to be revised in order
to clarify the procedure and to provide greater stability for the level of the amounts in
national currencies.

To  take  account  of  the  lack  of  production  of  a  certain  material  within  the  countries
concerned,  a  correction  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  on  the  definition  of  the  concept  of  'originating  products'  and  methods  of
administrative cooperation is hereby amended as follows:

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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  Article  3  and  4  or,  where  the  customs  value  is  not  known  or
cannot  be  ascertained,  the  first  verifiable  price  paid  for  the  materials  in  the
Community or the Czech Republic.

2. 

Article 7 shall be replaced by:

‘Article 7

Insufficient working or processing

1. Without prejudice to paragraph 2, 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 6 are satisfied:

(a)

preserving  operations  to  ensure  that  the  products  remain  in  good
condition during transport and storage;

(b)

breaking-up and assembly of packages;

(c) washing, cleaning; removal of dust, oxide, oil, paint or other coverings;

(d)

ironing or pressing of textiles;

(e)

simple painting and polishing operations;

(f)

husking, partial or total bleaching, polishing, and glazing of cereals and
rice;

(g)

operations to colour sugar or form sugar lumps;

(h)

peeling, stoning and shelling, of fruits, nuts and vegetables;

(i)

(j)

(k)

(l)

sharpening, simple grinding or simple cutting;

sifting, screening, sorting, classifying, grading, matching; (including the
making-up of sets of articles);

simple placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards
or boards and all other simple packaging operations;

affixing  or  printing  marks,  labels,  logos  and  other  like  distinguishing
signs on products or their packaging;

(m)

simple mixing of products, whether or not of different kinds,

(n)

(o)

simple  assembly  of  parts  of  articles  to  constitute  a  complete  article  or
disassembly of products into parts;

a combination of two or more operations specified in subparagraphs (a)
to (n);

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(p)

slaughter of animals.

2.

All operations carried out either in the Community or in the Czech Republic on
a  given  product  shall  be  considered  together  when  determining  whether  the
working  or  processing  undergone  by  that  product  is  to  be  regarded  as
insufficient within the meaning of paragraph 1.’

3. 

In Article 15, the final sentence in paragraph 6 shall be replaced by:

‘The provisions of this paragraph shall apply until 31 December 2001.’

4. 

The following article shall be inserted after Article 20:

‘Article 20a

Accounting segregation

1. Where considerable cost or material difficulties arise in keeping separate stocks
of  originating  and  non-originating  materials  which  are 
identical  and
interchangeable,  the  customs  authorities  may,  at  the  written  request  of  those
concerned, authorise the so-called "accounting segregation" method to be used
for managing such stocks.

2.

3.

4.

5.

6.

This  method  must  be  able  to  ensure  that,  for  a  specific  reference-period,  the
number of products obtained which could be considered as "originating" is the
same  as  that  which  would  have  been  obtained  if  there  had  been  physical
segregation of the stocks.

The customs authorities may grant such authorisation, subject to any conditions
deemed appropriate.

This  method  is  recorded  and  applied  on  the  basis  of  the  general  accounting
principles applicable in the country where the product was manufactured.

The beneficiary of this facilitation may issue or apply for proofs of origin, as
the  case  may  be,  for  the  quantity  of  products  which  may  be  considered  as
originating.  At  the  request  of  the  customs  authorities,  the  beneficiary  shall
provide a statement of how the quantities have been managed.

The  customs  authorities  shall  monitor  the  use  made  of  the  authorisation  and
may withdraw it at any time whenever the beneficiary makes improper use of
the  authorisation  in  any  manner  whatsoever  or  fails  to  fulfil  any  of  the  other
conditions laid down in this Protocol.

5. 

In  Article  22,  paragraph  1,  first  sentence,  the  following  shall  be  inserted  after
'exporter':
‘hereinafter referred to as “approved exporter”,’

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6. 

Article 30 shall be replaced by:

‘Article 30

Amounts expressed in euro

1.

2.

3.

4.

5.

For  the  application  of  the  provisions  of  Article  21(1)(b)  and  Article  26(3)  in
cases where products are invoiced in a currency other than euro, amounts in the
national currencies of the countries referred to in Articles 3 and 4 equivalent to
the amounts expressed in euro shall be fixed annually by each of the countries
concerned.

A consignment shall benefit from the provisions of Article 21(1)(b) or Article
26(3) by reference to the currency in which the invoice is drawn up, according
to the amount fixed by the country concerned.

The amounts to be used in any given national currency shall be the equivalent
in that currency of the amounts expressed in euro as at the first working day of
October. The amounts shall be communicated to the European Commission by
15 October and shall apply from 1 January the following year. The European
Commission shall notify all countries concerned of the relevant amounts.

A  country  may  round  up  or  down  the  amount  resulting  from  the  conversion
into  its  national  currency  of  an  amount  expressed  in  euro.  The  rounded-off
amount may not differ from the amount resulting from the conversion by more
than  5  per  cent.  A  country  may  retain  unchanged  its  national  currency
equivalent  of  an  amount  expressed  in  euro  if,  at  the  time  of  the  annual
adjustment provided for in paragraph 3, the conversion of that amount, prior to
any rounding-off, results in an increase of less that 15 per cent in the national
currency  equivalent.  The  national  currency  equivalent  may  be  retained
unchanged if the conversion would result in a decrease in that equivalent value.

The  amounts  expressed  in  euro  shall  be  reviewed  by  the  Association
Committee  at  the  request  of  the  Community  or  the  Czech  Republic.  When
carrying  out  this  review,  the  Association  Committee  shall  consider  the
desirability of preserving the effects of the limits concerned in real terms. For
this purpose, it may decide to modify the amounts expressed in euro.’

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7. 

Annex II shall be amended as follows:

the entry for HS heading 5309 to 5311 shall be replaced by:

5309 to 5311

Woven fabrics of
other vegetable
textile fibres;
woven fabrics of
paper yarn:

- Incorporating
rubber thread

Manufacture from
single yarn (1)

- Other

Manufacture from (1):

- coir yarn,
- jute yarn,
- natural fibres,
- man-made staple
 fibres not carded
 or combed or
 otherwise
 prepared for
 spinning,
- chemical
 materials or
 textile pulp, or
- paper

or

Printing accompanied
by at least two
preparatory or finishing
operations (such as
scouring, bleaching,
mercerising, heat
setting, raising,
calendering, shrink
resistance processing,
permanent finishing,
decatising,
impregnating, mending
and burling) where the
value of the unprinted
fabric does not exceed
47,5% of the ex-works
price of the product

(1)

For  special  conditions  relating  to  products  made  of  a  mixture  of  textile  materials,  see  Introductory
Note 5

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This Decision shall enter into force on the day of its adoption.

Article 2

It is applicable from 1 January 2001.

Done at Brussels,

For the Association Council
The President

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FINANCIAL STATEMENT

1.

TITLE OF OPERATION

Proposal for an amendment to the definition of the concept of 'originating products'
and the methods of administrative cooperation set out in Protocol 4 to the Agreement
on the European Economic Area and to the different Europe Agreements between the
EC and the CEEC, the Baltic States and Slovenia, and in Protocol 3 to the free trade
agreements between the EC and the EFTA-countries

2.

BUDGET HEADING(S) INVOLVED

Chapter 12, Article 120 (zero-rated duty)

3.

LEGAL BASIS

Article 133 of the Treaty

4.

OBJECTIVE

The objectives of the operation are the following:

4.1. To  ensure  proper  interpretation  of  the  list  of  insufficient  working  and

processing, and to include some operations not covered previously;

4.2. To prolong the possible use of flat rates in cases where drawback is prohibited
or exemptions from customs duties are granted; (not applicable to the EEA and
the EC-EFTA agreements)

4.3. To  introduce  a  system  of  accounting  segregation  of  originating  and  non-

originating materials, subject to authorisation by customs authorities;

4.4. To  clarify  the  provisions  concerning  the  amounts  expressed  in  euro  and  to
provide greater stability for the level of the amounts in national currencies;

4.5. To correct anomalies between the different language versions of the text;

4.6. To  revise,  in  a  single  case,  the  rule  concerning  the  working  or  processing  of

non-originating materials that confer originating status;

5.

FINANCIAL IMPACT

The proposal has no financial implications.

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