Chinese Rules of Origin - The Basics to Lowering Costs and Ensuring Compliance

Companies doing business in China can lower the costs of cross-border trade and avoid compliance risks by ensuring that they have a sound understanding of China’s preferential and non-preferential rules of origin (ROO).

There are two types of rules of origin:
1. Most-favored-nation trade (non-preferential ROO)
2. Imports under bilateral and regional trade agreements (preferential ROO)

The World Trade Organization does not have an agreement on product-specific and detailed ROO, and international trade is governed by national laws and bilateral and multilateral international agreements.

Non-preferential ROO provide that if an imported good is wholly obtained in a particular country, that country is the country of origin. If, on the other hand, a good is produced or manufactured in two or more countries, the country in which the good is finally materially changed is the country of origin.

Preferential ROO under FTAs and CEPAs vary from agreement to agreement, but in each case there are key differences from non-preferential ROO, including in the areas of regional value content, product-specific rules and standards, content accumulation, direct transportation, and certificate verification cooperation.

To further understand Chinese Rules of Origin, please visit WorldTrade\Interactive.

US FTZs and Duty-Free Treatment

In the 110th Congress (2007-2008), Representative Bill Pascrell sponsored legislation that would have corrected an inequity currently faced by manufacturers operating in U.S. Foreign-Trade Zones (FTZs). Such manufacturers must compete in the US marketplace against duty-free imports manufactured abroad by firms in FTZ partner countries. This unequal treatment occurs even when the FTZ products meet the rules of
origin under NAFTA and other US Free Trade Agreements.

Pascrell’s bill (H.R.6415;110th Congress)would have provided that goods that are manufactured in a US-based FTZ and comply with the rules of origin under a trade agreement, to which the United States is a party, may enter the customs territory of the United States at the rate of duty applicable under that agreement.

Pascrell’s bill was not acted on during the last Congress, so it died at the end of the session. There is a renewed effort to reintroduce this bill, as part of an effort to boost the competitiveness and reduce costs of US based manufacturers who employ US workers. The initiative is being supported by a combination of public and private entities that recognize the importance of trade as an economic stimulus, and seek to increase the competitiveness of US-based manufacturers in the global marketplace.

Is your company interested in furthering the goals of this initiative? For further information or to learn more, please contact Megan Wilson, AAEI’s Director of Government Affairs at mwilson@aaei.org

US Implements FTA with Peru

President Bush issued Jan. 16 a proclamation implementing the U.S. free trade agreement with Peru. Effective Feb. 1 this proclamation will modify the Harmonized Tariff Schedule to reflect the duty benefits and rules of origin under this FTA, remove Peru as a beneficiary country under the Generalized System of Preferences, set forth special provisions concerning textiles and apparel, and make technical and conforming changes in the HTSUS general notes. The proclamation also makes certain technical changes to the HTSUS to properly implement the U.S. FTAs with Morocco, Bahrain and Costa Rica.

For the full article, visit WorldTrade\Interactive at http://www.strtrade.com/wti/wti.asp?pub=0&story=30061&date=1%2F20%2F2009&company