Framework Agreement with Thailand, Interim Rules of Origin

INTERIM RULES OF ORIGIN
FOR PRODUCTS ELIGIBLE FOR PREFERENTIAL TARIFF FOR THE EARLY HARVEST SCHEME UNDER THE FRAMEWORK AGREEMENT FOR ESTABLISHING FREE TRADE AREA BETWEEN
THE REPUBLIC OF INDIA AND THE KINGDOM OF THAILAND

Title/ Commencement

These rules may be called the ‘Interim Rules of Origin’. In determining the origin of products eligible for the preferential tariff concessions for the Early Harvest Scheme pursuant to the Framework Agreement between the Republic of India and the Kingdom of Thailand (hereinafter referred to as "the Agreement"), the following rules shall apply:

Rule 1. Application

These rules shall apply to products consigned from the territory of either of the Parties. These rules shall be superseded and replaced by the Rules of Origin to be negotiated and implemented by the Parties under Article 3(6)(ii) of the Agreement for FTA in goods.

Rule 2. Definitions

For the purpose of the interim rules of origin:

"A Party" means the individual parties to the Agreement, that is either the Republic of India or the Kingdom of Thailand;

"CIF value means the price paid to the exporter for the product when it arrives at the port of importation. The exporter must pay the costs, freight, and insurance necessary to deliver the product to the named port of destination. The valuation shall be made in accordance with the Agreement on the implementation of Article VII of GATT 1994.

"FOB value means the free-on-board price paid to the exporter for the product when it leaves the named port of shipment. Thereafter, the importer will assume the costs including the necessary expenses for the shipment. The valuation shall be made in accordance with the Agreement on the implementation of Article VII of GATT 1994.

"Harmonized system" means the nomenclature of the Harmonized Commodity Description and Coding System defined in the International Convention on the Harmonized Commodity Description and Coding System (done at Brussels on 14 June 1983) including all legal notes thereto, as in force and as amended from time to time;

"Identical and interchangeable materials" means materials being of the same kind and commercial quality, possessing the same technical and physical characteristics, and which once they are incorporated into the finished product cannot be distinguished from one another for origin purposes by virtue of any markings etc. ;

"Indirect material" means goods used in the production, testing or inspection of goods but not physically incorporated into the goods, or goods used in the maintenance of buildings or the operation of equipment associated with the production of goods, including:

1. fuel and energy;
   
2. tools, dies and moulds;
   
3. parts and materials used in the maintenance of equipment and buildings;
   
4. lubricants, greases, compounding materials and other materials used in production or used to operate equipment and buildings;
   
5. gloves, glasses, footwear, clothing, safety equipment and supplies;
   
6. equipment, devices, and supplies used for testing or inspecting the goods;
   
7. catalysts and solvents; and
   
8. any other goods that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production.

"Material" means raw materials, ingredients, parts, components, subassembly and/or goods that are physically incorporated into another good or are subject to a process in the production of another good;

"Originating goods" means products that qualify as originating in accordance with the provisions of Rule 4;

"Packing" means the goods used to protect a good during its transportation and also packaging material and containers in which a good is packaged for retail sale;

"Preferential tariff treatment" means the preferential customs duty rate and treatment available over the applied Most-Favoured-Nation customs duty to originating goods pursuant to the rules of origin;

"Product" means the product being manufactured, even if it is intended for later use in another manufacturing operation;

"Production" means methods of obtaining goods such as growing, mining, harvesting, raising, breeding, extracting, gathering, collecting, capturing, fishing, trapping, hunting, manufacturing, producing, processing or assembling etc.;

"Product Specific Rules" means the rules that specify that the non originating materials have undergone a change in tariff classification or a specific manufacturing or processing operation, or satisfy an ad valorem criterion or a combination of any of these criteria;

"Non-originating material" means any material whose country of origin is other than the Parties (imported non-originating) and any material whose origin cannot be determined (undetermined origin);

The "territory of India" means the territory of the Republic of India including its territorial waters and the air space above its territorial waters and the air space above it, and the other maritime zones including the Exclusive Economic Zone and Continental Shelf over which Republic of India has sovereignty, sovereign rights or exclusive jurisdiction in accordance with its laws in force, the 1982 United Nations Convention on the law of the sea and international law;

The "territory of Thailand" means the territory of the Kingdom of Thailand including its territorial waters and the air space above its territorial waters and the air space above it, and the other maritime zones including the Exclusive Economic Zone and Continental Shelf over which Kingdom of Thailand has sovereignty, sovereign rights or exclusive jurisdiction in accordance with its laws in force, the 1982 United Nations Convention on the law of the sea and international law;

Rule 3. Determination of Origin

No product shall be deemed to be originating in either Party unless the conditions specified in these rules are complied with in relation to such products and to the satisfaction of the respective Government Authorities designated to issue the Certificate of Origin.

Rule 4. Originating Goods

For the purposes of these rules, products imported by a Party shall be deemed to be originating and eligible for preferential tariff concessions if they conform to the origin requirements under any one of the following :

1. Products which are wholly obtained or produced in the territory of the exporting Party as set out and defined in Rule 5; or
   
2. Products not wholly produced or obtained in the territory of the exporting Party provided that the said products are eligible under Rule 6 or Rule 7, and Rule 8.

Rule 5. Wholly produced or obtained

Within the meaning of Rule 4 (a), the following shall be considered as wholly produced or obtained in a Party:

1. Plant and plant products harvested or grown, there;
   
2. Live animals born and raised there;
   
3. Products obtained from live animals referred to in paragraph (b) above;
   
4. Products obtained by hunting, trapping, fishing, or aquaculture, conducted there;
   
5. Minerals and other naturally occurring substances, not included in paragraph (a) to (d), extracted or taken from its soil, waters, seabed or beneath their seabed;
   
6. Products taken from the water, seabed or beneath the seabed outside the territorial waters of a Party, provided that the Party has the rights to exploit such water, seabed and beneath the seabed in accordance with the United Nations Convention on the Law of the sea;
   
7. Products of sea fishing and other marine products taken from outside its territory , by its vessels5,6;
   
8. Products processed and/or made on board its factory ships6,7 , exclusively from products referred to in paragraph (g) above;
   
9. Articles collected there which can no longer perform their original purpose nor are capable of being restored or repaired and are fit only for disposal or recovery of parts of raw materials, or for recycling purposes8; and
   
10. Products obtained or produced in a Party solely from products referred to in paragraphs (a) to (i) above.
    

Rule 6. Not-wholly produced or obtained

1. For the purposes of Rule 4(b), the following general criteria should be applied, provided that the final process of the manufacture is performed within the territory of the exporting Party and subject to Rule 8:
   
   
   1. local value added content criterion,
   
   
   2. a change in tariff classification criterion between the export product and all non-originating materials used in its production.
   
   
2. Products specified in Annexure-A which fulfill one or a combination of the above criteria shall be considered as originating from the exporting Party provided that the final process of the manufacture is performed within the territory of the exporting Party and subject to Rule 8.
   
3. For the products not specified in Annexure- A as per Rule 6(b), the following
   Criteria shall be applied in determining the origin of not-wholly produced or obtained products provided that the final process of the manufacture is performed within the territory of the exporting Party and subject to Rule 8:
   
   i. local value added content of 40% meaning thereby that the total value of materials originating from the countries other than the Parties or of undetermined origin (that is non-originating materials) used does not exceed 60% of the FOB value of the product so produced or obtained; and
   
   ii. change in tariff heading at the 4 digit level of Harmonised System where the final export product is classified differently from all the non-originating materials used in its production.
   
   
4. The formula for calculation of local value added content is as follows :
   
   

   FOB value of the  export product	–	Value of non originating  materials	x 100 = % of Local  Value Added Content (LVAC)
   FOB value of the export product

   
   
5. The value of the non-originating materials shall be :
   i. the CIF value at the time of importation of the materials, parts or produce; and/or
   
   ii. the earliest ascertained price paid for the materials, parts or produce of undetermined origin in the territory of the Party where the working or processing takes place.

RuleRule 7. Cumulative Rule Of Origin

Unless otherwise provided for, products which comply with origin requirements provided for in Rule 4 and which are used in the territory of a Party as materials for a finished product eligible for preferential treatment under the Agreement shall be considered as products originating in the territory of the Party where working or processing of the finished product has taken place subject to fulfillment of conditions of Rule 8 and that the aggregate India-Thailand value added content on the final product is not less than 40% or a the local value added content specified for products in Annexure - A.

Rule 8. Minimal Operation and Processes

The following operations or processes are considered to be insufficient to confer the status of originating products, whether or not there is a change in tariff classification:

1. Operations to ensure the preservation of products in good condition during transport and storage (such as drying, freezing, keeping in brine, ventilation, spreading out, chilling, placing in salt, sulphur dioxide or other aqueous solutions, removal of damaged parts, and like operations);
   
2. Simple operations consisting of removal of dust, sifting or screening, sorting, classifying, matching (including the making-up of sets of articles), washing, painting, cutting;
   
3. Changes of packing and breaking up and assembly of consignments;
   
4. Simple slicing, and repacking or placing in bottles, flasks, bags, boxes, fixing on cards or boards, etc.;
   
5. The affixing of marks, labels or other like distinguishing signs on products or their packaging;
   
6. Simple mixing of products, provided the characteristics of the obtained products are not essentially different from those of mixed products;
   
7. Simple assembly of parts of products to constitute a complete product;
   
8. Disassembly;
   
9. Slaughter of animals;
   
10. Mere dilution with water or another substance that does not materially alter the characteristics of the goods;
    
11. Simple cleaning, including removal of oxide, oil, paint or other coverings;
    
12. Oil application; and
    
13. A combination of any of the two operations referred to in (a) to (l).

Rule 9. Direct Consignment

The following shall be considered to be directly consigned from the exporting Party to all custom points of the importing Party:

1. if the products are transported without passing through the territory of any country other than the Parties;
   
2. the products whose transport involves transit through one or more intermediate country with or without tran-shipment or temporary storage in such countries, provided that:
   i. The transit entry is justified for geographical reason or by consideration related exclusively to transport requirements;
   
   ii. The products have not entered into trade or consumption there; and
   
   iii. The products have not undergone any operation there other than unloading and reloading or any operation required to keep them in good condition.

Rule 10. Treatment of Packing

(a) Packages and Packing Materials for retail sale:

i. The packages and packing materials for retail sale, when classified together with the packaged product, according to General Rule 5(b) of the Harmonised System, shall not be taken into account for considering whether all non-originating materials used in the manufacture of a product fulfil the criterion corresponding to a change of tariff classification of the said product.

ii. If the product is subject to an ad valorem percentage criterion, the value of the packages and packing materials for retail sale shall be taken into account in its origin assessment, in case they are treated as being one for customs purposes with the products in question.

(b) Containers and packing materials for transport

The containers and packing materials exclusively used for the transport of a product shall not be taken into account for determining the origin of any product, in accordance with General Rule 5(b) of the Harmonized System.

Rule 11. Accessories, Spare Parts and Tools

Each Party shall provide that accessories, spare parts and tools delivered with a product that form part of the product's standard accessories, spare parts and tools, shall be treated as originating products if the product is an originating product, and shall be disregarded in determining whether all the non-originating materials used in the production of the product undergo the applicable change in tariff classification, provided that:

1. The accessories, spare parts and/or tools are not invoiced separately from the product;
   
   
2. The quantities and value of the accessories, spare parts and/or tools are standard trade practice for the originating product in the domestic market of the exporting Party; and
   
   
3. If the product is subject to a local value added content criterion , the value of such accessories, spare parts and/or tools shall be taken into account as originating or non originating materials, as the case may be, in calculating the local value added content.

Rule 12. Indirect Materials

An indirect material shall be treated as an originating material without regard to where it is produced and its value shall be the cost registered in the accounting records of the producer of the export product.

Rule 13. Identical And Interchangeable Materials

For the purposes of determining origin of product utilizing identical and interchangeable originating and non originating materials, mixed or physically combined, the origin of such materials can be determined by generally accepted accounting principles of stock control applicable in the exporting Party .

Rule 14. Certification of Origin

A claim that products shall be accepted as eligible for preferential concessions in the importing Party shall be supported by a Certificate of Origin issued by a Government authority designated by the exporting Party and notified to the other Party to the Agreement in accordance with the Operational Certification Procedures, as set out in Annexure- B.

Rule 15. Review and Modification

These rules may be reviewed and modified as and when necessary upon request of a Party and may be open to such reviews and modifications as may be agreed upon.