2. The Committee shall meet once a year or on the request of the other Party at a mutually agreed time, venue and means, to consider any matter arising under this Chapter. The Committee may carry out its work through whatever means that are appropriate, which may include electronic mail, videoconferencing, or other means.
3. The functions of the Committee shall include:
(a) monitoring and reviewing the implementation and administration of this Chapter, and making reports and recommendations to the Joint Committee, if appropriate;
(b) promoting trade in goods between the Parties, including through consultations on accelerating or improving the scope of preferential treatment or tariff elimination under this Agreement and other issues as appropriate;
(c) addressing barriers to trade in goods between the Parties including those related to the application of non-tariff measures which may restrict trade in goods between the Parties and, if appropriate, referring such matters to the Joint Committee for its consideration;
(d) reviewing the amendments to the HS to ensure that each Party’s obligations under this Agreement are not altered, and consulting to resolve any conflicts between such amendments to the HS and Annex 2-A, or Annex 2-A and national nomenclatures;
(e) consulting and endeavoring to resolve any difference that may arise among the Parties on matters related to the classification of goods under the HS, including adoption and review of transposition methodologies and guidelines;
(f) reviewing data on trade in goods in relation to the implementation of this Chapter; and
(g) carrying out other functions as may be assigned by the Joint Committee or agreed by the Parties.
Chapter THREE. RULES OF ORIGIN
Article Article 3.1: Definitions
For purposes of this Chapter:
aquaculture means the farming of aquatic organisms including fish, mollusks, crustaceans, other aquatic invertebrates and aquatic plants, from seedstock such as eggs, fry, fingerlings and larvae, by intervention in the rearing or growth processes to enhance production, such as, inter alia, regular stocking, feeding, protection from predators;
change in tariff classification means a change at the two-digit, four-digit, or six-digit level of the Harmonized System;
competent authority means:
for the UAE, the Ministry of Economy or any other agency notified from time to time; and
for Korea, the Ministry of Economy and Finance, or the Korea Customs Service, or their respective successors;
consignment means products which are 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;
customs value means the value as determined in accordance with the Agreement on implementation of Article VII of the Customs Valuation Agreement;
generally accepted accounting principles means the recognized consensus or substantial authoritative support in the territory of a Party, with respect to the recording of revenues, expenses, costs, assets, and liabilities, the disclosure of information and the preparation of financial statements. These standards may encompass broad guidelines of general application as well as detailed standards, practices and procedures;
good means any article of trade including materials and products;
Harmonized System (HS) means the Harmonized Commodity Description and Coding System, including its general rules and legal notes set out in the Annex to the International Convention on the Harmonized Commodity Description and Coding System;
manufacture means any kind of working or processing, including assembly or specific operations;
material means any ingredient, raw material, compound, or part used in the production of a good;
non-originating goods or non-originating materials means goods or materials that do not qualify as originating in accordance with this Chapter;
originating goods or originating material means goods or materials that qualify as originating in accordance with this Chapter;
product means that which is obtained by growing, raising, mining, harvesting, fishing, aquaculture, trapping, hunting, extracting, or manufactured, even if it is intended for later use in another manufacturing operation; and
production means methods of obtaining a good including growing, raising, mining, harvesting, fishing, aquaculture, trapping, hunting, manufacturing, processing, or assembling.
Section A: Origin Determination
Article Article 3.2: Originating Goods
For the purpose of implementing this Agreement, goods shall be deemed to be originating in territory of a Party, if:
goods are wholly obtained there in accordance with Article 3.3;
goods are not wholly obtained there, provided that the goods have undergone sufficient working or processing there in accordance with Article 3.4; or
goods are produced there exclusively from originating materials.
In each case provided in paragraph 1, the goods shall satisfy all other applicable requirements of this Chapter.
Article Article 3.3: Wholly Obtained Goods
For purposes of Article 3.2.1 (a), the following goods shall be deemed to be wholly obtained or produced in the territory of a Party:
plants and plant products grown, collected, or harvested there;
live animals born and raised there;
products obtained from live animals raised there;
mineral products or natural resources extracted or taken from that Party’s soil, subsoil, waters, seabed, or beneath the seabed;
products obtained by hunting, trapping, collecting, capturing, fishing, or aquaculture conducted there;
products of sea fishing and other marine products taken from outside the territorial waters of the Parties by a vessel registered, recorded, listed, or licensed with a Party and flying its flag;
products made on board a factory ship registered, recorded, listed, or licensed with a Party and flying its flag, exclusively from products referred to in subparagraph (f);
products, other than products of sea fishing and other marine products, taken or extracted from the seabed, ocean floor, or the subsoil of the continental shelf or the exclusive economic zone of any of the Parties, provided that the Party or a person of the Party has the right to exploit such seabed, ocean floor, or subsoil in accordance with international law;
used goods collected there, provided that such goods are fit only for disposal, for the recovery of raw materials, or for recycling purposes;
wastes or scraps resulting from utilization, consumption or manufacturing operations conducted there, provided that such wastes or scraps are fit only for disposal, for the recovery of raw materials, or for recycling purposes; and
products produced or obtained there exclusively from products referred to in subparagraphs (a) through (j), or from their derivatives, at any stage of production.
Article Article 3.4: Sufficient Working or Processing
For purposes of Article 3.2(b), a good shall be considered to have undergone sufficient working or processing and shall be deemed to be originating in a Party when the good satisfies any of the following:
a Change in Tariff Heading (CTH), which means that all non-originating materials used in the production of the good have undergone a change in HS tariff classification at the 4-digit level; or
a Qualifying Value Content (QVC) not less than 40% of the FOB Price.
Notwithstanding paragraph 1, a good that falls within the classifications included in the list of Product Specific Rules (PSR) in Annex 3-A (Product Specific Rules (PSRs)), shall satisfy the specific rule pertaining to it detailed therein.
For the purposes of paragraphs 1 and 2, the QVC shall be calculated as follows:
= ( ) − . . ∗ 100
where Ex-Works Price is used, the QVC requirement shall be five percentage points lower than the QVC requirement which is calculated on the basis of FOB Price.
where:
QVC is the qualifying value content of a good expressed as a percentage;
FOB Price is the price of the good free on board, inclusive of the cost of transportation to the port or site of final shipment abroad, regardless of the mode of transportation;
Ex-Works Price is the price paid or payable for the good ex-works to the manufacturer in the Party in whose undertaking the last working or processing is carried out, provided the price includes the value of all the
materials used, minus any internal taxes which are, or may be, repaid when the good obtained is exported;
V.N.M means:
the customs value at the time of importation of the non-originating materials used including freight and insurance costs incurred in transporting the material to the importation port in the territory of the Party where the producer of the good is located or, if this is not known and cannot be ascertained, the first ascertainable price paid for the materials in the exporting Party;
where the producer of a good acquires non-originating materials in the territory of the Party where the producer is located, the value of such materials shall not include freight, insurance, packing costs and any other costs incurred in transporting the material from the supplier’s warehouse to the producer’s location; or
in the case of a self-produced material or where the relationship between the producer of the good and the seller of the material influences the price actually paid or payable for the material, the sum of all costs incurred in the production of the material, including general expenses. Additionally, it will be possible to add an amount for profit equivalent to the profit added in the normal course of trade.
Article Article 3.5: Intermediate Goods
When an originating good is used in the subsequent production of another good, no account shall be taken of the non-originating materials contained in the originating good for purposes of determining the originating status of the subsequently produced good.
Article Article 3.6: Accumulation
An originating good of a Party which is used in the processing or production in the territory of the other Party as material for a finished good shall be deemed as a material originating in the territory of the latter Party where the working or processing of the finished good has taken place.
Notwithstanding paragraph 1, an originating good of a Party that does not undergo processing beyond the insufficient working or processing operations listed in Article 3.8 in the other Party shall retain its originating status of the former Party.
The Joint Committee may agree to review this Article with a view to providing for other forms of accumulation for the purpose of qualifying goods as originating goods under this Agreement.
Article Article 3.7: Tolerance
Notwithstanding Article 3.4, a good will be considered to have undergone a change in tariff classification if the value of all non-originating materials that are used in the production of the good and that do not undergo the applicable change in tariff classification does not exceed 15% of the Ex-Works Price of the good.
Notwithstanding paragraph 1, a good provided for in Chapters 50 through 63 of the HS will be considered to have undergone a change in tariff classification if the weight or value of all non-originating materials that are used in the production of the good and that do not undergo the applicable change in tariff classification does not exceed 10% of the weight or the Ex-Works Price of the good.
The good specified in paragraphs 1 and 2 shall meet all other applicable criteria set forth in this Chapter for qualifying as an originating good.
The value of non-originating materials referred to in paragraph 1 shall be included in the value of the non-originating materials for any applicable QVC requirement.
Article Article 3.8: Insufficient Working or Processing
Whether or not the requirements of Article 3.4 are satisfied, a good shall not be considered to be originating in the territory of a Party if the following operations are undertaken exclusively by itself or in combination in the territory of that Party:
slaughter of animals;
operations to ensure the preservation of products in good condition during transport and storage such as drying, freezing, ventilation, chilling, and like operations;
sifting, washing, cutting, slitting, bending, coiling or uncoiling, sharpening, simple grinding, slicing;
cleaning, including removal of dust, oxide, oil, paint, or other coverings;
simple painting and polishing operations;
testing or calibration;
placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards, and packaging operations;
simple mixing of goods, whether or not of different kinds;
simple assembly of parts of products to constitute a complete good or disassembly of products into parts;
simple peeling, stoning, or un-shelling;
operations to color sugar or form sugar lumps;
ironing or pressing of textiles;
changes of packing, unpacking, or repacking operations, and breaking up and assembly of consignments;
affixing or printing marks, labels, logos, and other like distinguishing signs on goods or their packaging;
husking, partial or total bleaching, polishing, and glazing of cereals and rice;
mere dilution with water or another substance that does not materially alter the characteristics of the goods; or
a combination of two or more operations specified in subparagraphs (a) through (p).
For the purposes of paragraph 1 above, the term “simple” will be defined as follows:
“Simple” generally describes an activity which does not need special skills, machines, apparatus, or equipment especially produced or installed for carrying out the activity.
“Simple mixing” generally describes an activity which does not need special skills, machine, apparatus, or equipment especially produced or installed for carrying out the activity. However, simple mixing does not include chemical reaction. Chemical reaction means a process (including a biochemical process) which results in a molecule with a new structure by breaking intramolecular bonds and by forming new intramolecular bonds, or by altering the spatial arrangement of atoms in a molecule. Nevertheless, the following are not considered to be chemical reactions for the purposes of this definition:
dissolving in water or other solvents;
the elimination of solvents, including solvent water; or
the addition or elimination of water of crystallization.
Article Article 3.9: Indirect Materials
In order to determine whether a good is an originating good, the following material used in its production shall be treated as originating material, irrespective of the origin of such material.
energy and fuel;
plant and equipment;
machines and tools; or
other materials or goods used in the production, testing, or inspection of a good and do not enter and which are not intended to enter into the final composition of the good.
Article Article 3.10: Accessories, Spare Parts, Tools
Accessories, spare parts, tools, and instructional or other information materials delivered with a good that form part of the good’s standard accessories, spare parts, tools, and instructional or other information materials shall be regarded as a part of the good, and shall be disregarded in determining whether or not all the non-originating materials used in the production of the originating goods undergo the applicable change in tariff classification provided that:
the accessories, spare parts, tools, and instructional or other information materials are classified with and not invoiced separately from the good; and
the quantities and value of the accessories, spare parts, tools, and instructional or other information materials presented with the good are customary for the good.
Notwithstanding paragraph 1, for goods that are subject to QVC requirement, the value of the accessories, spare parts, tools, and instructional or other information materials shall be taken into account as originating or non-originating materials, as the case may be, in calculating the QVC of the goods.
Article Article 3.11: Packaging Materials and Containers for Retail Sale
Each Party shall provide that packaging materials and containers in which a good is packaged for retail sale, if classified with the good, according to Rule 5 of the General Rules for the interpretation of the HS, shall be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification.
If the good is subject to QVC requirement, the value of such packaging materials and containers shall be taken into account as originating or non-originating materials, as the case may be, in calculating the QVC of the good.
Article Article 3.12: Unit of Qualification
The unit of qualification for the application of the provisions of this Chapter shall be the particular product which is considered as the basic unit when determining classification using the nomenclature of the HS. Accordingly, it follows that:
when a product composed of a group or assembly of articles is classified under a single heading, the whole constitutes the unit of qualification; and
when a consignment consists of a number of identical products classified under the same heading, each product shall be taken individually into account when in determining whether it qualifies as an originating good.
Article Article 3.13: Packaging Materials and Containers for Transportation and Shipment
Each Party shall provide that packing materials and containers for transportation and shipment are disregarded in determining whether a good is originating.
Article Article 3.14: Fungible Goods and Materials
Each Party shall provide that the determination of whether fungible goods or materials are originating shall be made through physical segregation of each good or material, or, in case of any difficulty, through the use of any inventory management method, such as averaging, last-in, first-out, or first-in, first-out, recognized in the generally accepted accounting principles of the Party in which the production is performed, or otherwise accepted by the Party in which the production is performed.
Each Party shall provide that an inventory management method selected under paragraph 1 for particular fungible goods or materials shall continue to be used for those fungible goods or materials throughout the fiscal year of the Party that selected the inventory management method.
Article Article 3.15: Sets of Goods
Sets, as defined in General Rule 3 of the HS, shall be regarded as originating when all component goods are originating. However, when a set is composed of originating and non-originating products, the set as a whole shall be regarded as originating, provided that the value of non-originating products does not exceed 15% of the Ex-Works Price of the set.
Section B: Territoriality and Transit
Article Article 3.16: Principle of Territoriality
The conditions for acquiring originating status set out in Article 3.2 must be fulfilled without interruption in the territory of the Party concerned.
Where originating goods exported from the territory of a Party to a non-Party, return to the exporting Party, they must be considered as non-originating, unless it can be demonstrated to the satisfaction of the customs authorities that:
the returning goods are the same as those exported; and
they have not undergone any operation beyond that necessary to preserve them in good condition while in that non-Party or while being exported.
The acquisition of originating status set out in Article 3.2 shall not be affected by working or processing done outside a Party on materials exported from this Party and subsequently re-imported there, provided:
the said materials are wholly obtained in the exporting Party or have undergone working or processing beyond the operations referred to in Article 3.8 prior to being exported; and
it can be demonstrated to the satisfaction of the customs authorities that:
the re-imported goods have been obtained by working or processing the exported materials; and
the total added value acquired outside a Party by applying this Article does not exceed 15% of the Ex-Works Price of the end product for which originating status is claimed.
For purposes of paragraph 3, the conditions for obtaining originating status set out in Section A shall not apply to working or processing done outside the exporting Party. However, where a QVC rule is applied in determining the originating status of the end product, the total added value acquired in the territory of the exporting Party shall not be less than the stated QVC percentage for the end product.
Paragraphs 3 and 4 shall not apply to products which do not fulfil the conditions set out in Article 3.4 or which can be considered sufficiently worked or processed only if the general tolerance of Article 3.7 is applied.
Factual information relevant to this Article will be indicated in the Certificate of Origin, in accordance with Annex 3-B.
For the purposes of applying paragraph 3(b)(ii), “total added value” shall be taken to mean all costs arising outside the exporting Party, including the value of the materials incorporated there.
Any working or processing of the kind covered by this Article and done outside the exporting Party shall be done under the Inward and Outward Processing Procedures in line with the guidelines of the World Customs Organization (WCO).
Upon the request of a Party, the Parties shall enter into discussions on the treatment for certain goods under this Article through the Joint Committee and conclude such discussions within three years from the start of the discussions.
Article Article 3.17: Transit and Transshipment
Each Party shall provide that an originating good retains its originating status if the good has been transported directly to the importing Party without passing through the territory of a non-Party.
Notwithstanding paragraph 1, each Party shall provide that an originating good retains its originating status if transited or stored in a temporary warehousing through one or more intermediate non-Parties, provided that the good:
remained under customs control in the territory of the non-
Party(ies) of transit or storage; and