Goods sufficiently transformed
A product can also be originating in the EU or a partner country although it was produced with materials of other countries, or was partially processed abroad, i.e. not in the partner country. This is the case if the product has been sufficiently transformed.
The criteria when a product has been sufficiently transformed are described in product-specific lists in the EU’s preferential rules of origin in each preferential regime. In most agreements the criteria are described in the following format
- column 1: the product as listed in the EU product classification system
- column 2: a product description
- column 3: description of the needed processing to be carried out in the EU or in the trade partner country to consider the product as originating
- column 4: you may find another processing described in column 4. If this is the case, you may choose between column 3 or 4 which rule to follow
The 3 rules for sufficient transformation
There are three basic rules used in the product-specific lists (column 3 and 4) that determine if a product was sufficiently transformed in the EU or in a trade partner country.
A) The 'value added' rule
You may find a rule in which the value of all the non-originating materials used by the producer/exporter in the EU or a trade partner country cannot exceed a certain percentage of the (ex-work) price of the product.
It will be stated as Manufacture in which the value of all the materials used does not exceed [X]% of the ex-work price of the product
In this case, you must compare
- the customs value of all the non-originating materials used in the production of the good (i.e. based on the value that is declared at the customs office of the EU or the trade partner country for those materials when imported there)
- the ex-works price of the good (i.e. the value of the good when leaving the facility where it was produced)
The rule is satisfied if the value of the non-originating materials does not exceed the percentage stated by the rule.
B) Change of tariff classification
You may find a rule that states that you cannot have a good that has the same tariff classification as any of the non-originating materials, which were imported from a third country by the producer/exporter and used in the product.
It will be stated as Manufacture from materials of any heading except that of the product
In this case, you must compare
- the tariff classification of the non-originating materials used (4 digits)
- the tariff classification of the good you want to export or import
The rule is satisfied if the tariff classification of both are not identical.
C) Manufacture from certain products
You may find a rule that permits the producer/exporter to use specific non-originating material from third countries (other than the EU or the trade partner country) in the manufacture of the product and it will still qualify as originating in the EU or a trade partner country.
It will be stated as Manufacture from type of good eg/ [yarn] [meat], etc.
The producer/exporter may also import the material in a previous state of production (e.g. for yarn, you may import fibres). However, the producer/exporter may not import a material in a later stage of production (e.g. for yarn, you may not import fabric).
For the complete list see the Rules of origin annex on each preferential agreement. (link to the markets section?) Be aware that in some cases the rule may be a combination of criteria a), b) and/or c).