Third Country Invoicing (TCI) refers to the arrangement,
where an invoice that accompanies the Preferential Certificate of Origin (CO)
and used for the clearance of goods in  the importing Party, is not issued
from the exporting Party but from another  country who may not necessarily
be a Party to the same FTA.
In some FTAs, TCI is commonly referred to as Third Party Invoicing.

 

Case study

Retrieved from:Handbook on Rules of Origin for Preferential Certificates of Origin

An originating good is exported from Thailand to Singapore with a Form D
(i.e. Preferential CO under ATIGA).
However, the invoice billed to Singapore is issued from Switzerland
(i.e. any countries except Thailand and Singapore).
Singapore can still accept the Form D and grant preferential access to the
good indicated in the Form D even though the invoice is not issued from
Thailand but another country that is not a Party to ATIGA.

Under such circumstances, the applicant of the Preferential CO would
have to indicate details of the invoice issued from a third country in the
Preferential CO.

Procedural Provisions are the course of action to be followed when applying the
preferential tariff rates.
Origin procedures include the claim for the preferential tariff treatment at the
time of importation by the importer.

Retrieved from: Outline of Rules of Origin for EPA in Japan

The preferences granted under a free trade agreement are limited to products
fulfilling the origin rules of the respective agreement.

All origin legislations contain provisions on how the preferential origin of a good
can be proven and certified.

There are various ways to certify the preferential origin of goods with different
approaches for certification of the preferential origin in the ATIGA, the NAFTA,
the PAN-EURO-MED and the TPP Origin Systems.

 

Third Party Certification System

Under the third party certification system, the exporter applies for a certificate
of origin (CO) to the CO issuing authority of the exporting country and sends the
CO to the importer.
The importer makes the claim for the preferential tariff treatment with the CO
issued by the CO issuing authority of the exporting country.
If the exporter is not the producer of the exported goods, the exporter may apply
for a CO with the information from the producer on the originating status of the goods.

Retrieved from: OUTLINE OF RULES OF ORIGIN

Self-Certification System

Under the self-certification system, the importer declares that the goods are
originating goods by submitting an origin declaration document which may be
completed by either the importer, exporter, or producer of the goods.
It is introduced under the JapanAustralia EPA, along with the third party certification
system above.
When claiming preferential tariff treatment with the selfcertification, submission of an
explanatory sheet on the originating status of the good is generally required in addition
to the origin declaration document.

Retrieved from: OUTLINE OF RULES OF ORIGIN

Approved Exporter Self-Certification System

Under the approved exporter self-certification system, the importer presents to
Customs the origin of the good by submitting an origin declaration made by an
approved exporter on an invoice or other commercial document.
The exporting country certifies their exporters as eligible to make an origin
declaration and informs the importing country (i.e. Japan) of the approved exporters.

 

Comparison of Origin Certification System

Comparison of Origin Certification System in the ATIGA, the NAFTA,
the PAN-EURO-MED and the TPP origin systems

Retrieved from:Comparative Study on Preferential Rules of Origin

In the PAN-EURO-MED Origin System 16 articles are dealing with the certification
of the originating status of goods. There are different kinds of proofs of origin
available for traders with different issuing procedures.
There are also exemptions possible where there is no obligation to certify the
originating status of a good.

The NAFTA origin legislation contains 4 articles regarding the certification of
origin in Section A (“Certification of Origin”) under Chapter Five: Customs
Procedures requiring that NAFTA parties establish a certificate of origin.
The NAFTA provisions on certification distinguish obligations for importers and
exporters and contain exceptions to prove the originating status by a certificate of origin.

The ATIGA Origin System has 31 rules (under Annex 8) regarding the certification
of origin of goods and other related administrative matters.
The ATIGA origin legislation contains a simple form (Form D in Annex 7) of
proofs of origin and certification requirements. It also contains exceptions to prove
the originating status by a certificate of origin.

In the TPP Origin System the certification of origin is regulated in Chapter 3,
Section B: Origin Procedures. The certification of origin must be in writing
(including electronic format) but need not follow a prescribed format as long as
it contains a set of minimum data requirements set out in Annex 3-B (Chapter 3)
to the Agreement.

In addition, there are various ways how government authorities are involved in
the issuing of certificates of origin.

The competent authorities of the Parties to the PAN-EURO MED Agreement are
directly or indirectly involved in the issuing of certificates of origin through the
authentication of certificates or the approval of exporters who can be authorized
by the customs authorities of the exporting country to issue proofs of origin
themselves without former authentication by the customs authorities
(invoice declarations irrespective of the value of the consignments).

The NAFTA certificates of origin are issued on the basis of self-certification by the
exporter/producer and the NAFTA certificates do not need to be authenticated by
a competent authority.

The government authorities in the ATIGA Origin System are directly involved in the
issuing of certificate of origin.
The ATIGA Origin System does not contain any approved exporter system.

Under the TPP Agreement the importer can make a claim for preferential treatment
based on a certification of origin completed by the exporter,
producer or importer (self-certification).
Thus there is no need for the certification of origin to be authenticated by a
government authority.

“Consignment Criteria” is the criteria to judge whether the goods maintain
originating status for preferential tariff treatment while transportation
from a Party to the other Party.

Retrieved from: Outline of Rules of Origin for EPA in Japan

To retain the originating status of the good in the exporting Party, it is required for
the good to be directly transported to the importing Party.

This is to ensure that the good is not manipulated during the transportation and
retained its originating status so that it is still eligible for preferential treatment.

If the originating good is transited through a country which is not a Party of the
same Free Trade Agreement (FTA), the good may still be able to retain its
originating status provided this is justified as a transport requirement and that the
goods have not entered into the commerce of the transit country and have not
undergone any operation other than loading and unloading there.

For some FTAs, the importing authority would also require documentation
(e.g. Certificate of Non-Manipulation or through Bill of Lading issued in the exporting Party)
to prove that the goods are not manipulated or further processed while transiting
before the granting of preferential treatment.

Comparison of “Non-qualifying operations”

Most preferential trade arrangements contain requirements for the transportation
of originating goods which will benefit from trade preferences upon importation.
However, in certain circumstances, there are derogations to the direct transport rule.

The direct transport rules may be in certain instances very strict, requiring direct
transportation of consignments between exporting and importing countries.

In other origin systems, rules on transportation are less restrictive – mainly due to
geographical factors in cases where direct transport is not always possible or
economically not opportune due to exigencies of trade.
Thus, indirect transportation or transportation through non-contracting parties of a
preferential trade arrangement is allowed under certain conditions.

In fact, the NAFTA provisions in Article 411 (Trans-shipment) and the TPP provision
Article 3.18 (Transit and transshipment) contain requirements that all origin conferring
operations have to be carried out in the territories of the contracting parties similar to
the “Principle of territoriality” of Article 11 in the PAN-EURO-MED context with elements
regulating transportation.
However, the NAFTA, the ASEAN and the TPP origin provisions do not require the strict
the obligation of direct transportation with additional customs surveillance requirements.

There are in fact no provisions on direct transport in the NAFTA system, whereas the
PANEURO-MED origin provisions contain strict requirements for direct transport.
The ASEAN system has less restrictive conditions for direct transport than the
PAN-EURO-MED origin system.

Retrieved from:Comparative Study on Preferential Rules of Origin

 

 

 

 

 

A good shall not be considered to satisfy the requirement of CTC rule or
process rule set out in PSR by having undergone specific operations.

Retrieved from: Outline of Rules of Origin for EPA in Japan

Some processes are recognized as simple/minimal and cannot be counted towards meeting
the Rules of Origin (ROO) regardless of the origin criteria of the Free Trade Agreement.

Even if these processes are undertaken as a combination with each other, it does not
confer origin to a good. Examples of such processes are:
a) Ensuring the preservation of goods in good condition for the purposes of transport or storage;
b) Facilitating shipment or transportation;
c) Packaging or presenting goods for sale; and
d) Washing, cleaning, removal of dust.

Applicants are advised to refer to the Minimal Operations and Processes list indicated in the
specific FTA for more information.

Retrieved from:Comparative Study on Preferential Rules of Origin

In order to ensure that only manufacturing processes that fall within the range of substantial
transformation count as origin conferring processes, most origin legislations contain
provisions outlining lists of operations which are considered to have only minor effects on
the final goods;

these minor operations do not confer origin even where the applicable origin rule would have
been satisfied by fulfilling of a change of tariff classification rule or an ad valorem rule
included in the list of product specific origin rules.

Insufficient operations carried out individually, or even in combination,
will never confer origin to a final product.
However, if a manufactured product achieves its originating status through the
operations that go beyond the insufficient operations, it does not matter if the product is,
in addition, subjected to one or more minimal operations.

Most origin provisions offer fairly similar structures for operations which are considered not
substantial in terms of conferring origin, based on the recommendation contained in the
Kyoto Convention.
However, the list of such operations may differ from agreement to agreement, although
by and large the same kinds of operations can be found in many origin legislations.

Rules on insufficient transformation/minimal operations are generally outlined in
specific articles found in the regime-wide origin provisions.

In some origin models, these rules are described under the general origin criteria of
the sufficient transformation requirement. Normally, the operations deemed
insufficient are listed with more or less precise indications to identify their nature.
In certain agreements there is also a definition of the term “simple”,
as in “simple mixing”, “simple assembly”, etc.

 

Revised Kyoto Convention, Specific Annex K, Chapter 1

Operations which do not contribute or which contribute to only a small
extent to the essential characteristics or properties of the goods,
and in particular operations confined to one or more of those listed below,
should not be regarded as constituting substantial manufacturing or processing:

(a) operations necessary for the preservation of goods during transportation or storage;
(b) operations to improve the packaging or the marketable quality of the goods or to
prepare them for shipment, such as breaking bulk, grouping of packages, sorting and
grading, repacking;
(c) simple assembly operations;
(d) mixing of goods of different origin, provided that the characteristics of the resulting
product are not essentially different from the characteristics of the goods which have
been mixed.

These operations may be called insufficient working or processing, non-qualifying operations,
minimal operations and processes or simply operations that do not confer origin, or minor
processing treatment.
Some origin legislations contain very comprehensive lists of insufficient
transformation/minimal operations, whereas others contain less exhaustive lists,
or no list at all.

This is due to the fact that in certain legislations many of the product specific rules are
based on value added criteria, whereas in other legislations the product specific list
rules are more detailed and are adjusted to the individual products, and each
specific list rule may describe more precisely the required sufficient transformation
requirement in terms of that specific product.

 

Japan/Thailand EPA “Non-qualifying operations” (Art.31)

(a) operations to ensure the preservation of products in good
condition during transport and storage (such as drying, freezing,
keeping in brine) and other similar operations;
(b) changes of packaging and breaking up and assembly of packages;
(c) disassembly;
(d) placing in bottles, cases, boxes and other simple packaging
operations;
(e) collection of parts and components classified as a good pursuant
to Rule 2(a) of the General Rules for the Interpretation of the Harmonized System;
(f) mere making
(f) mere making-up of sets of articles; or up of sets of articles; or
(g) any combination of operations referred to in subparagraphs (a)
through (f) above.

Comparison of “Non-qualifying operations”

In order to ensure that only manufacturing processes that fall within the range of substantial
transformation count as origin conferring processes, most origin legislations contain
provisions outlining lists of operations which are considered to have only minor
effects on the final goods;

these minor operations do not confer origin even where the applicable origin rule would
have been satisfied by fulfilling of a change of tariff classification rule or an ad valorem rule
included in the list of product specific origin rules.

Insufficient operations carried out individually, or even in combination, will never confer
origin to a final good. However, if a manufactured good achieves its originating status
through the operations that go beyond the insufficient operations, it does not matter if
the product is, in addition, subjected to one or more minimal operations.

In the PAN-EURO-MED context such operations are called
“insufficient working or processing”, whereas in the NAFTA context they are called
“non-qualifying operations” and in the ATIGA context they are called
“minimal operations and processes”. Operations which are considered not to confer
origin may also be called “minimal operations” or “minimal processing” or simply
“operations that do not confer origin” or “minor processing treatment”.

In the TPP origin provisions there is no list of operations that do not confer origin to
a manufactured product.
However in cases where an importing party applies a different tariff treatment to
other parties for the same originating good at the time a claim for preferential
treatment is made, the concept of minimal operations for such goods applies in order to
determine the applicable rate of the customs duty.

The most comprehensive lists on insufficient transformation/minimal operations are
found in the PAN-EURO-MED origin rules.
The ATIGA origin legislation contains less exhaustive lists on minimal operations than
the PAN-EURO-MED origin rules. The NAFTA model on the other hand, only contains
a small description of non-qualifying operations, while the TPP has no list for minimal
processes at all. This is due to the fact that in the PAN-EURO-MED origin systems,
many of the product specific rules are based on value added criteria whereas the product
specific list rules in the NAFTA and TPP systems are more detailed and adjusted to the
individual products where each specific list rule may describe more precisely the required
sufficient transformation requirement adjusted to the specific product.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrieved from:Comparative Study on Preferential Rules of Origin

Goods that do not satisfy the CTC requirement can still be considered as an
originating good provided those non-originating materials that did not undergo
the required CTC satisfy the de minimis rule.

The De Minimis/tolerance rule varies among the different FTAs.
For example, the de minimis rule in ATIGA allows for a 10% FOB tolerance level of
non-originating materials that do not meet the CTC requirement for all goods.

 

 

 

Retrieved from: Outline of Rules of Origin for EPA in Japan

Non-originating materials used in the production of a good that do not satisfy
Product-Specific Rule(PSR) for the good shall be disregard, provided that the
totality of such materials does not exceed “specific percentages” in value, etc.

Note: “Specific percentage” and “goods applicable for de minimis/tolerance” differs in
accordance with each EPA.

Note: The de minimis/tolerance rule only applies to Change in Tariff Classification (CTC).
Specifically, it applies to non-originating materials that do not meet the CTC requirement.

The difference in each FTA

The use of the de minimis/tolerance rules may be based on the value or the weight of the
goods; sometimes the rules do not apply for specific product categories or are only applied
under certain restrictions.
This rule is called “de minimis” rule in the ATIGA, the NAFTA and the TPP contexts and
“tolerance” rule in the PAN-EURO-MED origin system.

The meaning of the “tolerance” rule in the PAN-EURO-MED context and “de minimis” rule
in the ATIGA, the NAFTA and the TPP origin systems is in fact the same.

“De Minimis”, a Latin expression meaning “about minimal things” stems from the locution
“de minimis non-curat praetor” meaning “The praetor (government official) does not concern
himself with trifles” or “de minimis non curat lex” meaning “the law does not concern itself
with trifles”.

De minimis/tolerance rules alleviate the origin determination requirement in the ATIGA, the
NAFTA, the PAN-EURO-MED and the TPP origin systems are applied in a similar way, but with
different percentages and calculation bases (e.g., ex-works price, FOB price or total cost).

* For some products such as agricultural products, machinery or mineral the de minimis rule is not applied.
** For some agricultural products, the percentage is 7%.
*** For some agricultural products, the percentage is 10%.

Retrieved from:Comparative Study on Preferential Rules of Origin

 

Example of “JTEPA” De Minimis

FTA: Japan-Thailand EPA
Good: Tomato ketchup(HS:2103.20)
PSR: Change in Chapter(CC) except from chapter 7 or 20
De minimis Rule under JTEPA: The total value of non-originating materials
used in the production of the good that have not undergone the required CTC does
not exceed 7% of the FOB.

Tomato ketchup produced through the manufacturing process as the chart in this slide,
it can not be qualified as an originating good of Thailand because onion is classified in
“Chapter 7”. Therefore it does not satisfy CTC rule.

But if the value of onion is lower than the designated percentage
(7 % for JapanThailand EPA) comparing with the value of tomato ketchup, it can be
qualified as an originating good of Thailand by applying De Minims.

Retrieved from: Outline of Rules of Origin for EPA in Japan

Example of “AJCEP” De Minimis

FTA: ASEAN-Japan Comprehensive Economic Partnership (AJCEP)
Good: Solar paste (HS 3207.30)
PSR: A Change in tariff classification at the 4-digit level of Harmonized System(CTH)
De minimis Rule under AJCEP: The total value of non-originating materials
used in the production of the good that have not undergone the required CTC does
not exceed 10% of the FOB.

Assessment: The glass powder is the only non-originating material that does not meet the
CTC requirement under AJCEP. The glass powder used is 5% of the FOB value (less than
10% of the FOB). As such, the solar paste is an originating good under AJCEP upon
applying the de minimis rule.

Retrieved from:Handbook on Rules of Origin for Preferential Certificates of Origin

The basic concept of accumulation is to consider an originating material of
other Party as an originating material of the Party in which production
of a good takes place.

Retrieved from: Outline of Rules of Origin for EPA in Japan

The accumulation concept applies to both Change in Tariff Classification (CTC) and
Regional Value Content (RVC). With accumulation, an applicant is encouraged to procure
originating raw materials from within the Party(ies) of the same Free Trade Agreement (FTA)
since these materials will be treated as though they are locally produced.

Example of “JTEPA” accumulation

Under the accumulation provision of The Japan–Thailand Economic Partnership
Agreement (JTEPA),a producer in Thailand is able to treat imported materials that
are of Japan origin as though they are of Thailand origin when determining whether the
good meets the Rules of Origin (ROO) requirements to be considered as an
originating good.

To use this provision, the producer would have to prove that the imported materials from
Japan are originating materials under JTEPA. She would have to obtain the Preferential
Certificate of Origin (CO) under JTEPA to demonstrate that they are originating materials
under JTEPA.

Retrieved from: Outline of Rules of Origin for EPA in Japan

An originating material of Japan which is used for the production of a good in
Thailand may be considered as an originating material of Thailand.

Example of “ATIGA” accumulation

Under the accumulation provision of the ASEAN Trade In Goods Agreement
(ATIGA), a producer in Singapore is able to treat imported materials that are of Malaysia
origin as though they are of Singapore origin when determining whether the good meets the
Rules of Origin (ROOs) requirements to be considered as an originating good. To use this
provision, the producer would have to prove that the imported materials from Malaysia are
originating materials under ATIGA. She would have to obtain the Preferential Certificate of
Origin (CO) under ATIGA (i.e. Form D) to demonstrate that they are originating materials
under ATIGA.

Case study in Accumulation

Biscuit case (HS 1905.31)

FTA: the ASEAN Trade In Goods Agreement (ATIGA)

Malaysia is a Party of ATIGA but Australia is not. As such, the producer of biscuit in
Singapore can now accumulate the imported flour and eggs and treat them as though they
are of Singapore origin.

Assessment: The RVC of the biscuit is 83% (more than 40%). As the biscuit now meets
the ROO requirement under ATIGA, it is an originating good.

 

Solar paste case (HS 3207.30)

FTA: ASEAN-Japan Comprehensive Economic Partnership (AJCEP)

Since the Glass powder used is actually more than 10% of the FOB value of Solar
paste. The Solar paste would have become a non-originating good under AJCEP since it
has failed the CTC and de minimis requirement.
However, since Malaysia is a Party of AJCEP, the producer of Solar Paste in Singapore
can now accumulate the imported Glass powder and treat them as though it is of
Singapore origin.

Assessment: The Solar paste now meets the CTC requirement under AJCEP, it is an
originating good.

Images Retrieved from:Handbook on Rules of Origin for Preferential Certificates of Origin