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 Republic of Hungary
Date: 2000-10-25
Institutions: European Commission
Subjects: GATT, Hungary, accession to an agreement, administrative cooperation, originating product

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 25.10.2000
COM(2000) 677 final

2000/0278 (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 Republic of
Hungary

(presented by the Commission)

1.

1.1.

1.2.

1.3.

1.4.

2.

2.1.

2.2.

EXPLANATORY MEMORANDUM

GENERAL

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
the
preferential
Community are therefore negligible, while the proposal provides for improved clarity
for both customs authorities and economic operators.

for most sectors. The economic consequences for

treatment

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
presentation to the committees provided for in each of the relevant Agreements.

to draw up a common position for

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2000/0278 (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 Republic of
Hungary

(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 Republic of
Hungary, 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

4

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

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 Republic of Hungary, of the
other part, signed in Brussels on 16 December 1991 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,

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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:

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 Hungary.

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
condition during transport and storage;

the products remain in good

(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;

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(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);

(p)

slaughter of animals.

2.

All operations carried out either in the Community or in Hungary 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.

4.

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

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

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.

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5.

6.

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

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 Hungary. When carrying out
the Association Committee shall consider the desirability of
this review,
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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