Chapter 3. RULES OF ORIGIN
Article 3.1. Definitions
For the purposes of this Chapter:
(a) Aquaculture refers to the fanning of aquatic organisms including fish, molluscs, 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;
(b) Competent authority refers to:
(i) for Serbia, the Ministry of Finance, Customs Administration or any other agency notified from time to time; and
(ii) for the UAE, the Ministry of Economy or any other agency notified from time to time;
(c) 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;
(d) Customs authority refers to:
(i) for Serbia, the Ministry of Finance, Customs Administration; and
(ii) for the UAE, the Federal Authority of Identity, Citizenship, Customs and Port Security;
(e) Customs value refers to the value as determined in accordance with the Customs Valuation Agreement;
(f) Generally accepted accounting principles refers to the recognised 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 infonnation and the preparation of financial statements. These standards may encompass broad guidelines of general application as well as detailed standards, practices and procedures;
(g) Goods refers to any article of trade including materials and products;
(h) Indirect material refers to a material used in the production, testing, or inspection of goods but not physically incorporated into the goods, or the operation of equipment associated with the production of goods, including:
(i) fuel and energy;
(ii) tools, dies, and molds;
(iii) spare parts and materials used in the maintenance of equipment;
(iv) lubricants, greases, compounding materials, and other materials used m production or used to operate equipment;
(v) gloves, glasses, footwear, clothing, and safety equipment and supplies;
(vi) equipment, devices, and supplies used for testing or inspecting the goods; (vii) catalysts and solvents; and
(viii) any other material that is not incorporated into the goods but for which the use in the production of the goods can reasonably be demonstrated to be a part of that production;
(i) Manufacture refers to any kind of working or processing, including assembly or specific operations;
(j) Material refers to any ingredient, raw material, compound or part, etc., used in the production of goods;
(k) Non-originating goods or non-originating materials refers to goods or materials that do not qualify as originating under this Chapter;
(l) Originating goods or originating materials refers to goods or materials that qualify as originating under this Chapter;
(m) Product refers to 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
(n) Production refers to growing, raising, mining, harvesting, fishing, aquaculture, trapping, hunting, manufacturing, working, processing, or assembling goods.
Section A. ORIGIN DETERMINATION
Article 3.2. Originating Goods
For the purpose of implementing this Agreement, goods shall be considered as originating in the territory of a Party, if:
(a) goods are wholly obtained or produced there according to Article 3.3; or
(b) goods are not wholly obtained or produced entirely there, provided that the goods have undergone sufficient working or processing according to Article 3.4; or
(c) goods are produced entireiy there exclusively from originating materials and the goods satisfied all other applicable requirements of this Chapter.
Article 3.3. Wholly Obtained or Produced Goods
For the purposes of Article 3.2 (a) the following goods shall be deemed to be wholly obtained or produced in the territory of a Party:
(a) plants, including aquatic plants, and plant products grown, collected and harvested there;
(b) live animals born and raised there;
(c) products obtained from live animals there;
(d) mineral products and natural resources extracted or taken from that Party's soil, subsoil, waters, seabed, or beneath the seabed;
(e) products obtained from hunting, trapping, collecting, capturing, fishing, or aquaculture conducted there;
(f) products of aquaculture where the fish, crustaceans, molluscs and other aquatic invertebrates are born or raised there from eggs, larvae, fry of fingerling;
(g) product of sea fishing and other marine products taken from outside the territorial waters of the Parties by a vessel and/or produced or obtained by a factory ship registered, recorded, listed, or licensed with a Party and flying its flag;
(h) product, 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 Person has the right to exploit such seabed, ocean floor, or subsoil in accordance to international law;
(i) raw materials recovered from used goods collected there;
(j) waste or scrap resulting from utilisation, consumption or manufacturing operations conducted there, fit only for recovery of raw materials; and
(k) 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 3.4. Sufficient Working or Processing
1. For the purposes of Article 3.2 (b), goods shall be deemed to be originating if the goods satisfy any of the following:
(a) a Change in Tariff Heading (CTH), which means that all non-originating materials used in the production of the goods have undergone a change in HS tariff classification at the 4-digit level;
(b) a Qualifying Value Content (QVC) not less than 35% of the Ex-Works value; or
(c) if the goods fall under an HS Code listed in the Product Specific Rules of Origin (hereinafter referred to as PSR) set out in Appendix 3A of this Agreement, then the goods shall fulfill the specific rule detailed therein.
2. For the purposes of paragraph 1, the QVC shall be calculated as follows:
QVC = ExWorks Value - V.N.M / ExWorks Value * 100
where:
QVC is the qualifying value content of goods expressed as a percentage;
Ex-Works price is the price paid for the goods ex-works to the manufacturer in the Parties in whose undertaking the last working or processing is carried out, provided the price includes the value of all the materials used and all other costs related to its production, minus any internal taxes which are, or may be, repaid when the goods obtained is exported.
Where the last working or processing has been subcontracted to a manufacturer, the term "manufacturer" refers to the enterprises that has employed the subcontractors; Where the actual price paid does not reflect all costs related to the manufacturing of the product which are actually incurred in the Party, the ex-works price means the sum of all those costs, minus any internal taxes which are, or may be, repaid when the product obtained is exported;
V.N.M is the customs value of the non-originating materials at the time of importation, inclusive freight and insurance costs incurred in transporting the material to the importation port or place in the territory of the Party where the producer of the goods is located or the earliest ascertained price paid or payable in the Party where the production of the goods takes place for all non-originating materials that are acquired by the producer in the production of the goods. When the producer of goods acquires non-originating materials within that Party 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.
Article 3.5. Intermediate Goods
When the originating intermediate goods are used in the production of other goods, no account shall be taken of the non-originating materials contained in such �intermediate goods for the purposes of determining the originating status of the later goods.
Article 3.6. Accumulation
1. Originating goods of a Party which is used in the production in the territory of the other Party as material for finished goods shall be deemed as a material originating in the territory of the latter Party where the working or processing of the finished goods has taken place.
2. Notwithstanding paragraph l, an -originating material from a Party that does not undergo working or processing beyond the minimal or insufficient operations listed in Article 3.8 in the other Party shall retain its originating status of the former Party.
Article 3.7. Tolerance
1. Notwithstanding Article 3.4, goods 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 goods that do not undergo the applicable change in tariff classification does not exceed 20% of the Ex-Works price of the goods.
2. However, 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 value added content requirement.
Article 3.8. Insufficient Operations
1. Whether or not the requirements of Article 3.4 are satisfied, goods 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:
(a) slaughter of animals, cutting of meat, or fish;
(b) operations to ensure the preservation of products in good condition during transport and storage such as drying, freezing, ventilation, chilling, and like operations;
(c) sifting, simple classifying or sorting, washing, cutting, slitting, bending, coiling or uncoiling, sharpening, simple grinding, or slicing;
(d) cleaning, including removal of oxide, oil, paint, or other coverings;
(e) ironing or pressing the textiles;
(f) simple painting and polishing operations;
(g) testing or calibration;
(h) placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards, or boards and all other simple packaging operations;
(i) simple mixing of goods, whether or not of different kinds;
(j) simple assembly of parts of products to constitute complete goods or disassembly of products into parts ;
(k) changes of packing, unpacking or repacking operations, and breaking up and assembly of consignments;
(l) engraving, affixing or printing marks, labels, logos, and other like distinguishing signs on goods or their packaging;
(m) husking, partial or total bleaching, polishing, and glazing of cereals and rice;
(n) peeling, removing seeds, stones, shells or cutting of fruit, nuts, and vegetables;
(o) mere dilution with water or another substance that does not materially alter the characteristics of the goods; and
(p) a combination of two or more operations specified above.
2. For the purposes of paragraph 1, the term "simple" will be defined as the following:
(a) "Simple"' generally describes an activity which does not need special skills, machines, apparatus, or equipment especially produced or installed for carrying out the activity; and
"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.
Article 3.9. Indirect Materials
Any indirect materials used in the production of goods shall be treated as originating materials, irrespective of the origin of such indirect materials.
Article 3.10. Accessories, Spare Parts, and Tools
1. Accessories, spare parts, tools, and instructional or other information materials delivered with the goods that form part of the goods standard accessories, spare parts, tools, and instructional or other information materials shall be regarded as a part of the goods, 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:
(a) The accessories, spare parts, tools, and instructional or other information materials are classified with and not invoiced separately from the goods; and
(b) The quantities and value of the accessories, spare parts, tools, and instructional or other information materials presented with the goods are customary for the goods.
2. Notwithstanding paragraph 1, if the goods 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 qualifying value content of the goods.
Article 3.11. Packaging Materials and Containers for Retail Sale
1. Each Party shall provide that packaging materials and containers in which goods are packaged for retail sale if classified with the goods according to Rule 5 of U1e 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 goods undergo the applicable change in tariff classification.
2. If the goods are 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 qualifying value content of the goods.
Article 3.12. Packaging Materials and Containers for Shipment
Each Party shall provide that packing materials and containers for shipment are disregarded in determining whether goods are originating.
Article 3.13. Fungible Goods and Materials
1. Each Party shall provide that the determination of whether fungible goods or materials are originating shall be made through physical segregation of each product 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, recognised 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.
2. 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 3.14. 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 25% of the Ex-works price of the set.
Section B. TERRITORIALITY AND TRANSIT
Article 3.15. Principle of Territoriality
1. The conditions for acquiring originating status set out in Article 3.2 must be fulfilled without interruption in the territory of the Party.
2. Where originating goods exported from the territory ofa 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:
(a) are the same as those exported; and
(b) have not undergone any operation beyond that necessary to preserve them in good condition while in that non-Party or while being exported.
3. Notwithstanding paragraphs 1 through 2, 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 a Party and subsequently re-imported there, provided:
(a) the said materials are wholly obtained in any of the exporting Party or have undergone working or processing beyond the operations referred to in Article 3.8 prior to being exported; and
(b) it can be demonstrated to the satisfaction of the customs authorities that:
(i) the re-imported goods have been obtained by working or processing the exported materials; and
(ii) the total added value acquired outside the exporting Party by applying the provisions of this Article does not exceed 20% of the Ex-works price of the end product for which originating status is claimed;
(c) the conditions set out in Article 3.2 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 QVC achieved in the territory of the exporting Party, taken together with the total added value acquired outside this Party by applying this Article, shall not exceed the stated percentage for the QVC; and
(d) factual information relevant to this Article will be indicated in the ProofofOrigin, in accordance with Appendix 3B of this Agreement.
4. For the purposes of applying the provisions of paragraph I, "total added value" shall be taken to mean all costs arising outside the exporting Party, including the value of the materials incorporated there.
5. Any working or processing of the kind covered by the provisions of this Article and done outside the Party shall be done under the outward processing arrangements or similar arrangements.
Article 3.16. Transit and Transshipment
1. The preferential treatment provided for under this Agreement shall apply only to products satisfying the requirements of this Chapter and declared for importation in a Party provided that those products are the same as those exported from exporting Party. They shall not have been altered, transformed in any way or subjected to operations other than to preserve them in good condition or than adding or affixing marks, labels, seals, or any documentation to ensure compliance with specific domestic requirements of the importing Party carried out under customs supervision in the third country(ies) of transit or splitting prior to being declared for home use.
2. Storage of products or consignment may take place provided they remain under customs supervision in the third country(ies) of transit.
3. Without prejudice to Section C of this Chapter, the splitting of consignment may take place, provided they remain under customs supervision in the third country(ies) of splitting.
4. In the case of doubt, the importing Party may request the importer or its representative to submit at any time all appropriate documents to provide evidence of compliance with this Article, which may be given by any documentary evidence, and notably by:
(a) contractual transport documents such as bills of lading;
(b) factual or concrete evidence based on marking or numbering of packages; (c) a certificate of non-manipulation provided by the customs authorities of the country(ies) of transit or splitting or any other documents demonstrating that the goods remained under customs supervision in the country(ies) of transit or splitting; or
(d) any evidence related to the goods themselves.
Article 3.17. Free Economic Zones or Free Zones
1. Both Parties shall take all necessary steps to ensure that originating goods traded under cover of a proof of origin which in the course of transport use a free zone situated in their territory, are not substituted by other goods and do not undergo hand I ing other than normal operations designed to prevent their deterioration.
2. Goods produced or manufactured in a free zone situated within a Party, shall be considered as originating goods in that Party when exported to the other Party provided that the treatment or processing is in conformity with the provisions of this Chapter and supported by a proof or origin.
Article 3.18. Third Party Invoicing
1. The customs authority in the importing Party shall not reject a certificate of origin only for the reason that the invoice was not issued by the exporter or producer of the goods provided that the goods meet the requirements in this Chapter.
2. If the invoice is made out by a third party different than the approved exporter, the origin declaration established in Article 3.23 can appear on any other commercial document issued by the approved exporter in the territory of the exporting Party, which describes the goods concerned in sufficient detail to enable them to be identified.
3. Other than in cases where the third party invoice was not issued at the time of issuance of the certificate of origin, the exporter of the goods shall indicate "third party invoicing" and such information as name and country of the company issuing the invoice shall appear in the appropriate field as detailed in Appendix 38 of this Agreement.
4. For greater certainty, "third party" means a person other than the exporter or producer of the goods.
Section C. ORIGIN CERTIFICATION
Article 3.19. Proof of Origin
1. Goods originating in a Party shall, on importation into the other Party, benefit from preferential tariff treatment under this Agreement on the basis of a Proof of Origin.
2. Any of the following shall be considered as a Proof of Origin:
(a) a paper format certificate of origin issued by a competent authority as per Article 3.20;
(b) an Electronic Certificate of Origin (E-Certificate) made by a competent authority and exchanged by a mutually developed electronic system as per Article 3.21; and
(c) an origin declaration made out by an approved exporter as per Article 3.22.
3. Each Party shall provide that a ProofofOrigin shall be completed in the English language and shall remain valid for one year from the date on which it is issued.
Article 3.20. Certificate of Origin In Paper Format
1. A Certificate of Origin in paper format shall:
(a) be in standard A4 white paper as per the attached Form set out in Appendix 38 of this Agreement;
(b) comprise one original and two copies. The original shall be forwarded by the producer or exporter to the importer for submission to the customs authority of the importing Party. The duplicate shall be retained by the competent authority of the exporting Party. The triplicate shall be retained by the producer or exporter;
(c) may cover one or more goods under one consignment; and
(d) be in a printed format or such other medium including electronic format.