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Ref: TRA CR 1340/3

30 August 2012

Dear Sirs,

Certificate of Origin Circular No. 6/2012

Commercial Information Circular No. 693/2012

Certificate of Preference Circular No. 3/2012

Notice to Exporters :

Series 1 (USA) No. 3/2012

Series 2 (EU) No. 5/2012

Series 3 (Countries other than USA & EU) No. 4/2012

Textiles Trader Registration Circular No. 3/2012

Free Trade Agreement between Hong Kong, China and the Member States of the European Free Trade Association (EFTA)

Exporting Goods Originating in Hong Kong to the EFTA States

Introduction

This circular outlines the rules of origin, document requirements, record keeping requirements and other relevant issues for exporting goods originating in Hong Kong to the EFTA States, namely Iceland, Liechtenstein, Norway and Switzerland, under the Free Trade Agreement between Hong Kong, China and the Member States of the EFTA ("Agreement").

The Agreement

2. Signed on 21 June 2011, the Agreement between Hong Kong, Switzerland and Liechtenstein will enter into force on 1 October 2012. Subject to completion of all necessary internal procedures of each relevant party, the Agreement between Hong Kong, Iceland and Norway shall enter into force on a date to be separately announced. The full text and other details of the Agreement are available from the following webpage: https://www.tid.gov.hk/english/ita/fta/hkefta/text_agreement.html.

3. In respect of industrial products as well as fish and certain marine products that qualify as originating goods of Hong Kong, the Agreement provides for tariff-free entry into the EFTA States, subject to the relevant rules of origin being met and the relevant operational procedures being complied with. Tariff-free or tariff concessions are also accorded to Hong Kong's agricultural products by the EFTA States.

4. Details of the product coverage are set out in Article 2.1 of Chapter 2 (Trade in Goods) and Annexes I to III of the Agreement as well as the Agreements on Agriculture with individual EFTA States.

Rules of Origin under the Agreement

5. The rules of origin for the purpose of preferential tariff treatment under the Agreement are set out in Annex IV (Rules of Origin) of the Agreement and its Appendices, which provide that a product will be considered as originating in a Party¹ if:

1. it has been wholly obtained in that Party in accordance with conditions set out in paragraph 7 below;
2. the non-originating materials used in the working or processing of that product have undergone sufficient working or processing in a Party, in accordance with conditions set out in paragraphs 8 to 12 below; or
3. it has been produced in a Party exclusively from materials originating in one or more Parties.

 

6. A product originating in Liechtenstein shall, due to the customs union between Switzerland and Liechtenstein, be considered as originating in Switzerland.

Wholly Obtained Products

7. Under the Agreement, the following products are considered as wholly obtained in a Party:

1. mineral products and other non-living natural resources extracted or taken from their soil, waters or from their seabed;
2. plants, vegetables, fruits and other vegetable products grown, harvested, picked or gathered there;
3. live animals born and raised there;
4. products from live animals raised there;
5. products obtained by hunting, trapping, fishing, aquaculture, gathering or capturing conducted there;
6. products of sea fishing and other marine products taken from outside the waters of Hong Kong, China and outside the territorial sea of any country by a vessel registered in a Party and flying its flag or by a vessel licensed in a Party;
7. products manufactured on board a factory ship flying the flag of a Party, exclusively from products referred to in subparagraph 7(f);
8. products extracted from marine soil or sub-soil outside the waters of Hong Kong, China, outside the territorial sea of the EFTA States and outside the territorial sea of any non-party, provided that the Party has the exclusive rights to exploit that soil or sub-soil under exploitation rights granted in accordance with international law;
9. products obtained there by the use of plant or animal cell structures;
10. waste and scrap resulting from manufacturing operations conducted there;
11. used products collected there fit only for the recovery of raw materials;
12. products manufactured there exclusively from those specified in subparagraphs 7(a) to 7(k).

Sufficient Working or Processing

8. Without prejudice to paragraphs 13 to 15 below, a product listed in Appendix 1 (Product Specific Rules) to Annex on Rules of Origin of the Agreement ("Appendix 1") shall be considered to have undergone sufficient working or processing if the product specific rules (PSR) of that Appendix are fulfilled. Appendix 1 is available at the following webpage:
https://www.tid.gov.hk/english/ita/fta/hkefta/files/product_specific_rules.pdf

9. To allow more flexibility for manufacturers, the Agreement allows "value-based" rules of origin. "Value-based" rules mean goods may claim Hong Kong origin on the basis of the proportion (which may be different for individual categories of goods) of the value of non-originating materials used in their manufacture as against the total value of the goods not exceeding a ceiling specified in the PSR as illustrated below:

(VNM / EXW) x 100% ≤ percentage specified in the PSR

where

EXW is the Ex-works price paid for a product to the manufacturer in the Party where the last working or processing was carried out, in accordance with the international commercial terms (incoterms), excluding internal taxes which may be repaid when the product is exported; and

VNM is the value of non-originating materials used in the manufacture of the goods according to the specified conditions stated in the PSR.

10. If a product, which has acquired originating status in Hong Kong, in accordance with paragraph 8, is further processed in Hong Kong and used as material in the manufacture of another product, no account shall be taken of the non-originating components of that material.

11. Where a rule set out in Appendix 1 is based on compliance with a sufficient processing threshold or a maximum content of non-originating materials, the value of non-originating materials may be calculated on an average basis over a period of three months in order to take into account the fluctuations in costs or currency rates.

12. Notwithstanding paragraph 8, non-originating materials do not have to fulfil the conditions set out in Appendix 1 to be considered to have undergone sufficient working or processing, provided that:

1. their total value does not exceed 20 per cent of the ex-works price of the product; and
2. the percentages set out in Appendix 1 as maximum value of non-originating materials are not exceeded by application of subparagraph 12(a).

Insufficient Working or Processing

13. Under the Agreement, the following operations shall be considered insufficient to confer originating status:

1. preserving operations to ensure that a product remains in good condition during transport and storage;
2. freezing or thawing;
3. packaging and re-packaging;
4. washing, cleaning, removal of dust, oxide, oil, paint or other coverings;
5. ironing or pressing of textiles;
6. simple painting and polishing;
7. husking, partial or total bleaching, polishing and glazing of cereals and rice;
8. operations to colour sugar or form sugar lumps;
9. peeling and removal of stones and shells from fruits, nuts and vegetables;
10. sharpening, simple grinding or simple cutting;
11. sifting, screening, sorting, classifying, grading, matching;
12. simple placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards and all other simple packaging operations;
13. affixing or printing marks, labels, logos and other like distinguishing signs on products or their packaging;
14. simple mixing of products, whether or not of different kinds;
15. simple assembly of parts of articles to constitute a complete article or disassembly of products into parts;
16. a combination of two or more operations specified in 13(a) to 13(o); or
17. slaughter of animals.

 

14. For the purposes of paragraph 13, "simple" describes activities which need neither special skills nor machines, apparatus or equipment especially produced or installed to carry out the activity.

15. All operations carried out in a Party on a given product shall be taken into account when determining whether the working or processing undergone by that product is considered as insufficient working or processing.

Accumulation of Origin

16. Without prejudice to paragraphs 5 and 6, a product originating in a Party, which is used as material in the production of a product in another Party, shall be considered as originating in the last Party where an operation beyond those referred to in paragraph 13 has been carried out.

17. A product originating in a Party, which is exported from one Party to another and does not undergo working or processing beyond those referred to in paragraph 13, shall retain its origin.

18. Where materials originating in two or more Parties are used in the production of a product and these materials have not undergone any working or processing beyond the operations referred to in paragraphs 13 to 15, the origin of the product is determined by the material with the highest customs value², or if this cannot be ascertained, with the highest first ascertainable price paid for that material in that Party.

Unit of Qualification

19. For the purpose of determining the originating status, the unit of qualification of a product or material shall be determined in accordance with the Harmonized Commodity Description and Coding System (HS) and the following:

1. packaging shall be included with the product if it is included with that product in accordance with General Interpretative Rule 5 of the HS;
2. where a set of articles, in accordance with General Interpretative Rule 3 of the HS, is classified under a single heading, it shall constitute the unit of qualification; and;
3. where a consignment consists of a number of identical products classified under a single heading or subheading of the HS, each product shall be considered separately.

20. Accessories, spare parts, tools and instructional or information materials dispatched with a piece of equipment, machine, apparatus or vehicle, which are part of the normal equipment and included in its ex-works price, or which are not separately invoiced, shall be considered as part of the product in question.

Neutral Elements

21. In order to determine whether a product originates in a Party, it shall not be necessary to determine the origin of the following which might be used in its manufacture:

1. energy and fuel;
2. plant and equipment, including goods to be used for their manufacture;
3. machines, tools, dies and moulds; and
4. any other goods which do not enter into and which are not intended to enter into the final composition of the product.

Accounting Segregation

22. If originating and non-originating fungible materials (materials that are of the same kind and commercial quality, with the same technical and physical characteristics, and which cannot be distinguished from one another once they are incorporated into the final product) are used in the working or processing of a product, the determination of whether the materials used are originating may be determined on the basis of an inventory management system.

23. The inventory management system shall be based on generally accepted accounting principles applicable in the Party in which the product is manufactured and ensure that no more final products receive originating status than would have been the case if the materials had been physically segregated.

24. A producer using an inventory management system mentioned above shall keep records of the operation of the system that are necessary for the Hong Kong Customs and Excise Department (C&ED) to verify compliance with the provisions of the Annex on Rules of Origin of the Agreement.

Conditions for Acquiring Originating Status in a Party

25. The conditions for acquiring originating status set out in the preceding paragraphs must be fulfilled without any interruption in Hong Kong.

26. If an originating product is returned to Hong Kong after having been exported to a non-party without having undergone any operation there, beyond those necessary to preserve it in good condition, that product shall retain its origin.

27. Notwithstanding paragraph 25, the acquisition of originating status of a product in accordance with the provisions stated shall not be affected by operations carried out in a non-party, under an outward processing procedure or a similar arrangement, if:

1. the re-imported product has been obtained from the exported materials;
2. the total added value (all costs arising outside Hong Kong, including transport costs and the value of materials incorporated there) acquired in the non-party does not exceed 20 per cent of the ex-works price of the product; and
3. the total value of the non-originating materials incorporated in Hong Kong and the total added value acquired outside Hong Kong, taken together, do not exceed the value allowed in accordance with Appendix 1

Direct Transport

28. Preferential treatment in accordance with the Agreement shall only be granted to originating products that are transported directly between the Parties.

29. Notwithstanding paragraph 28, an originating product may be transported through non-parties, provided that it:

1. does not undergo operations other than unloading, reloading, splitting-up of consignments or any operation designed to preserve it in good condition; and;
2. remains under customs surveillance in those non-parties.

30. It is understood that an originating product may be transported by pipeline across non-parties.

31. An importer shall upon request supply appropriate evidence to the customs authorities of the Party of import that the conditions set out in paragraph 29 have been fulfilled.

Self-declaration of Origin

Origin Declaration

32. For the purpose of obtaining preferential tariff treatment in the EFTA States, an exporter established in Hong Kong may complete an origin declaration in accordance with Appendix 2 (Origin Declaration) to the Annex on Rules of Origin of the Agreement ("Appendix 2") for products originating in Hong Kong and fulfilling the other requirements of the Annex on Rules of Origin of the Agreement. A copy of Appendix 2 is attached with the circular (Attachment) (pdf format) for reference and it is also available at the following webpage:
https://www.tid.gov.hk/english/ita/fta/hkefta/files/origin_declaration.pdf

33. The origin declaration shall be completed in English, in a legible and permanent form. It may be provided on an invoice or any other commercial document that identifies the exporter, the originating products of Hong Kong preferential origin, and bear the original signature of the exporter. In addition, the name of the person signing the declaration has to be indicated in clear script.

34. An origin declaration may be completed when the products to which it relates are exported, or after exportation. An origin declaration shall be valid for 12 months, from the date of completion.

Representation

35. For the purposes of origin declaration, a person, company or enterprise such as a forwarding agent, customs broker or the like shall not be entitled to complete origin declarations on behalf of an exporter, unless that person, company or enterprise has been authorised in writing by the exporter. Such authorised person, company or enterprise must submit the authorisation to the competent customs authorities at their request.

Preferential Treatment

Importation Requirements

36. Each of the EFTA States shall grant preferential tariff treatment to originating products imported from Hong Kong in accordance with the Agreement, on the basis of an origin declaration as specified above.

37. In order to obtain preferential tariff treatment, the importer must, in accordance with the procedures applicable in the EFTA States, request preferential tariff treatment at the time of importation of an originating product, whether or not the importer is in possession of an origin declaration.

38. If the importer is not in possession of an origin declaration at the time of importation, the importer may, in accordance with the domestic law of the EFTA States, present the origin declaration and, if required, other documentation relating to the importation, at a later stage.

39. An origin declaration shall be submitted to the customs authorities of the EFTA States within 12 months. The expiration of this period may be suspended as long as the products covered by that origin declaration remain under customs surveillance of the EFTA States. After this period, an origin declaration may be accepted only in exceptional circumstances.

Importation by Instalments

40. Where, at the request of an importer and on the conditions laid down by the customs authorities of the EFTA States, dismantled or non-assembled products within the meaning of General Rule 2 (a) of the HS are imported by instalments, a single proof of origin for such products shall be submitted to the customs authorities upon importation of the first instalment.

Exemption from Origin Declarations

41. Notwithstanding the importation requirements stated above, each of the EFTA States may, in accordance with its domestic law, waive the requirements to request preferential tariff treatment on the basis of an origin declaration and grant preferential tariff treatment to non-commercial low value shipments of originating products and originating products for personal use forming part of the personal luggage of a traveller.

Denial of Preferential Treatment

42. The EFTA States may deny preferential tariff treatment or recover unpaid customs duties in accordance with the domestic law where a product does not meet the requirements of the Annex on Rules of Origin of the Agreement or where the importer or exporter fails to demonstrate compliance with the relevant requirements of the Annex on Rules of Origin of the Agreement.

43. In the event preferential tariff treatment is denied, the customs authorities of the EFTA States shall inform the importer of the reasons. In addition, the customs authorities of the EFTA States may impose the applied non-preferential import customs duty or require payment of a deposit on that product, where applicable.

44. Slight discrepancies between the statements made in the origin declaration and those made in other documents submitted to the customs office for customs clearance or obvious formal errors, such as typing errors in an origin declaration, shall not as such render the origin declaration invalid.

Obligations of Importers, Exporters and Producers

Requirements to Maintain Records and Verification of Origin

45. Under the Agreement, exporters, importers or producers, as appropriate, are required to co-operate with their customs authorities. An exporter in Hong Kong who has completed an origin declaration must keep an electronic or hard copy of the origin declaration and all documents supporting the originating status of the product, for three years from the date of completion. Exporters must keep a copy reflecting the signature of the person who signed the origin declaration.

46. For the purposes of the Agreement, the "documents supporting the originating status" include, inter alia, the following:

1. direct evidence of the processes carried out by the exporter or supplier to obtain the product, contained, for example, in his accounts or internal bookkeeping;
2. documents proving the originating status of materials, used or issued in a Party in accordance with its domestic law;
3. documents proving the working or processing of materials in a Party, issued in that Party in accordance with its domestic law;
4. origin declarations proving the originating status of materials used or issued in a Party in accordance with the Annex on Rules of Origin of the Agreement; and
5. evidence concerning working or processing undergone outside the Parties in accordance with paragraphs 28 to 31, proving the fulfillment of the requirements of those paragraphs.

47. C&ED may, at any time, request evidence from, carry out inspections at premises of, and verify the accounts of exporters who have completed an origin declaration or producers who have contributed to origin conferring processes. They may also take other appropriate measures to verify compliance with the Annex on Rules of Origin of the Agreement. Upon request of C&ED, the exporters or producers must submit all relevant documents listed in paragraphs 45 and 46. In this connection, exporters and producers in Hong Kong are informed by this Circular that they should keep all relevant documents for at least three years from the date of completion.

48. The customs authorities of the Party of import may, subject to the domestic law, suspend preferential tariff treatment to a product covered by an origin declaration until the verification procedure has been finalised.

49. When becoming aware of or having reason to believe that an origin declaration contains incorrect information affecting the originating status of a product covered by that origin declaration:

1. an exporter must immediately notify the importer; and
2. an importer must immediately notify the customs authorities of the Party of import.

Products in Transit or Storage

50. The provisions of the Agreement may be applied to products which, on the date of entry into force of the Agreement, are either in transit or in temporary storage in a customs warehouse or free zone under customs surveillance. For such products, an origin declaration may be completed retrospectively up to six months after the entry into force of the Agreement, provided that the provisions of the Annex on Rules of Origin of the Agreement and in particular those on direct transport have been fulfilled.

Enquiries

51. For enquiries, please contact us through the following channels -

Address	:	Factory Registration and Origin Certification Branch 3/F, Trade and Industry Department Tower 700 Nathan Road, Kowloon
Telephone No.	:	3403 6432
Fax No.	:	2787 6048
E-mail Address	:	cepaco@tid.gov.hk

Yours faithfully,

(Paul Shen)

for Director-General of Trade and Industry

1. The word Party refers to a contracting party of the Agreement, i.e. either Hong Kong or any of the EFTA States.

2. "Customs value" means the value as determined in accordance with the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (WTO Agreement on customs valuation).