3. Non-preferential origin of product at the terminal
Introduction
The non-preferential origin of product leaving the terminal is required:
- For customs declarations, for example on release for free circulation from the customs warehouse or on export;
- For the application of commercial policy measures such as anti-dumping duties and sanctions; and
- Where a customer requests non-preferential origin documentation.
Non-preferential origin is determined under Articles 59 and 60 of the Union Customs Code (UCC) and Articles 31 to 36 of the UCC Delegated Regulation (UCC-DA):
- For goods listed in Annex 22-01 UCC-DA, the rules in that Annex apply.
- Other goods originate in the country where they underwent their last substantial, economically justified processing or working resulting in the manufacture of a new product or representing an important stage of manufacture (Article 60(2) UCC).
- For products of Chapter 27, VTTI applies the rules for that chapter in the European Commission's table of non-preferential list rules. To the extent these rules are not included in Annex 22-01 UCC-DA, they are not legally binding. They do, however, reflect the Commission's interpretation of Article 60(2) UCC and are applied in practice by customs authorities and chambers of commerce.
- According to the case law of the Court of Justice, substantial processing may also exist without a change of tariff heading, where the process results in a product with properties and a composition of its own that it did not have before the process (Case C-260/08, HEKO).
The approach depends on whether the product has undergone an operation at the terminal that may affect its origin:
- where the product leaves the terminal unchanged, its origin follows the origin recorded for the relevant inbound parcel(s);
- where the product has been blended or otherwise processed, its origin is established in accordance with the steps set out below.
Goods leaving the terminal unchanged
Where a product leaves the terminal without having undergone any processing or blending that may affect its non-preferential origin, VTTI relies on the country of non-preferential origin registered for the relevant parcel upon first registration.
Before the origin information is used for a customs declaration, origin document or other customs or compliance purpose, CS verifies that:
- the outbound product can be traced to the relevant inbound parcel(s); and
- no operation has taken place that may have affected its origin.
The following operations do not affect origin:
- operations limited to the storage and preservation of the product, such as circulation or heating in the tank; and
- for products of Chapter 27, the simple processes listed in the Commission's list rules: cleaning, decantation, desalination, water separation, filtering, colouring and marking (including the addition of dyes and markers), or any combination of these.
Any other operation, including the injection of additives, is referred to the terminal's customs specialist before the product is treated as unchanged.
Common storage of parcels
Storage of product of the same specification from different inbound parcels in a common tank is not a processing operation. The parcels retain their respective non-preferential origin administratively:
• The outbound quantity is attributed to the inbound parcels on the basis of the inventory records in VTTI's ERP system.
• The attribution method is applied consistently and documented.
• No more quantity may be attributed to a country of origin than has been received from parcels of that origin.
Where the outbound quantity cannot be attributed to parcels of a single origin, the origin documentation takes the form of a breakdown by origin (see "Non-preferential origin documentation" below).
Where a common tank contains product of an origin that is subject to anti-dumping duties, sanctions or other trade measures, CS involves the terminal's customs specialist before any origin information is used.
Non-preferential origin determination following blending or processing
Blending or processing at the terminal may affect the non-preferential origin of the product concerned. The origin of the resulting product must therefore be assessed separately. This applies whether the operation results in a new parcel in the ERP system or changes the composition of an existing parcel.
Pending this assessment, the country of origin of the resulting product is registered in VTTI's ERP system as "QU", meaning "countries and territories not specified". The use of "QU" reflects that no specific country of non-preferential origin has yet been established. It does not constitute an origin determination and must not be used as the country of origin in a customs declaration, origin document or other external communication.
Before the non-preferential origin is required for placing the product under a subsequent customs procedure, or for another customs or compliance purpose, the origin of the resulting product is established in the following steps. The steps are based on the information provided by the customer and checked by the terminal's customs specialist against the information available in VTTI's systems.
Step 1 – Does the operation confer origin?
For products of Chapter 27, an operation at the terminal confers origin where it consists of:
• a chemical reaction;
• atmospheric or vacuum distillation, or extraction by means of selective solvents (headings 27.07, 27.10 to 27.13 and 27.15);
• processing resulting in a change of tariff heading, where the heading rule so provides; or
• deliberate and proportionally controlled mixing or blending of materials to conform to predetermined specifications, resulting in a product with physical or chemical characteristics that are relevant to its purposes or uses and different from those of the input materials.
Blending at the terminal is performed on the instruction of the customer, and the assessment of its origin consequences takes place in close consultation between the terminal and the customer. The customer determines the composition and purpose of the blend. When instructing a blend, the customer therefore indicates:
• the components and the proportions to be used;
• whether the blend is performed to meet a predetermined specification and, if so, which specification (for example a grade or a limit value for RON, sulphur content or viscosity); and
• whether, in the customer's view, the blend confers origin, together with the supporting information on which that view is based.
The terminal's customs specialist performs a reasonableness check on the customer's information. The check compares it with the information available in VTTI's systems, such as:
• the blend order;
• the quantities, product descriptions and CN codes of the components and the resulting product; and
• where available, quality or analysis data of the components and the resulting product.
In performing this check, the customs specialist takes the following indicators into account:
• Blending towards a specification. Components are blended in controlled proportions to obtain a product that meets a specification the components did not meet individually. This indicates origin-conferring blending.
• Addition to a base product. Product is added to a base product that already meets the relevant specification, for example to optimise margin, and the resulting product still meets the same specification. No new product is created, so the operation does not confer origin.
• Change of product description or CN code. A resulting product with a different product description or CN code than the major part of the components (by quantity) is a strong indication of origin-conferring blending.
• Same CN code. The fact that the components and the resulting product fall under the same CN code does not exclude origin-conferring blending, provided the resulting product has technical characteristics it did not have before blending.
In line with the contractual arrangements between VTTI and the customer, the customer is responsible for the accuracy and completeness of the information provided in relation to the blend, including its specification and origin consequences. VTTI relies on this information, subject to the reasonableness check described above. Where the customer's information is incomplete or inconsistent with the information in VTTI's systems, the customs specialist requests clarification from the customer before the blend is treated as origin conferring. Where the matter remains unresolved, the blend is not treated as origin conferring.
Where the operation confers origin, the resulting product originates in the country where the blending took place. The origin of the input materials is then not decisive for the origin determination, but it remains relevant for Step 3.
Step 2 – Operation not origin conferring: residual rule
Where the operation does not confer origin and all input materials have the same non-preferential origin, the resulting product retains that origin.
Where the input materials have different origins, the origin is determined by the applicable chapter residual rule. For Chapter 27 products, this is the country in which the major portion of the materials originated, determined on the basis of weight:
• The calculation uses the quantities and recorded origins of the input parcels in VTTI's ERP system.
• In line with VTTI's practice, materials originating in different EU Member States are aggregated as EU origin.
• The origin of the components that determine the outcome must be substantiated by supporting documentation.
For products outside Chapter 27, such as biodiesel of heading 38.26 or chemicals of Chapter 29, the customs specialist determines the applicable rule as follows:
• Annex 22-01. The customs specialist first checks whether Annex 22-01 UCC-DA contains a rule for the relevant heading or subheading. If so, the operation is tested against the primary rule in that Annex. Where the primary rule is not met, the chapter residual rule in that Annex applies. Both are legally binding (Article 32 UCC-DA).
• Article 60(2) UCC and the list rules. Where the product is not covered by Annex 22-01, origin is determined under Article 60(2) UCC. The Commission's list rules for the relevant chapter are applied as guidance for interpreting that provision. The list rules are not legally binding and may not lead to an outcome that contradicts Article 60(2) UCC.
• Minimal operations. Operations listed in Article 34 UCC-DA, and the simple processes listed in the relevant chapter note of the list rules, never confer origin.
• Residual rule. Where the operation does not confer origin, whether because it is a minimal operation or because the primary rule is otherwise not met, the chapter residual rule of Annex 22-01 or of the list rules applies. This is in most cases the country in which the major portion of the materials originated, determined on the basis of weight or value depending on the chapter.
• Value-based rule. Where the applicable rule is based on value, the customer provides the value information required.
Step 3 – Anti-avoidance and trade measures
An operation whose purpose is to avoid the application of commercial policy measures does not confer origin (Article 33 UCC-DA).
Anti-dumping or countervailing duties, sanctions and other trade measures may also define the products covered by criteria other than the non-preferential origin of the final product. Examples are the origin or content of input materials in a blend, or the country of export or production. An origin determination under this procedure does not in itself establish that a trade measure does not apply.
Where the resulting product or any of its input materials may be subject to such measures, the case is always referred to CGT.
Completion
Once the determination has been completed, CS replaces "QU" with the determined country of non-preferential origin in the ERP system. The following are retained as part of the origin audit trail:
• the outcome and basis of the determination, together with the relevant supporting information;
• the customer's blend instruction;
• the information provided by the customer on the specification and origin consequences of the blend; and
• the outcome of the reasonableness check.
A work instruction for non-preferential origin determination at the terminal, including practical examples, is included here.
Non-preferential origin documentation
At the request of a customer, VTTI can provide or facilitate non-preferential origin documentation for an outbound shipment. Two types are used:
1. a certificate of origin issued by the competent authority (in the Netherlands, the Chamber of Commerce (KVK)) at the request of the exporter. VTTI provides the information and supporting documentation required for the application;
2. a Terminal Origin Declaration issued by VTTI.
Before providing or facilitating either document, CS verifies that the non-preferential origin has been properly established.
A Terminal Origin Declaration is issued in one of two forms:
• Single origin: it states the non-preferential origin of the outbound product as established under this section.
• Breakdown: where the outbound quantity consists of commingled parcels of different origin that cannot be attributed to a single origin, it lists the relevant parcels and quantities with their recorded country of origin. For each parcel, it indicates whether the origin is substantiated by origin documentation. Where it is not, the origin is stated as "as declared by the customer, not substantiated". A breakdown is not issued in place of an origin determined following blending.
A Terminal Origin Declaration:
• identifies the terminal, the outbound product, quantity and shipment;
• states that it concerns non-preferential origin determined in accordance with Articles 59 and 60 UCC, on the basis of information provided by the customer and VTTI's own records;
• states that it is not a proof of preferential origin and cannot be used to claim preferential tariff treatment;
• is signed by a person authorised to do so; and
• is never titled "statement on origin" or "certificate of origin", to avoid confusion with preferential proofs of origin and official certificates.
Where the origin is an EU Member State, the declaration may state "European Union", with the Member State where the product was blended where relevant (for example "European Union (blended in the Netherlands)").
A document proving origin may also be issued in accordance with the rules of origin of the country of destination (Article 61(3) UCC). Where a customer requests an origin statement under such rules, CS refers the request to the terminal's customs specialist.
Any document prepared or facilitated by VTTI must be consistent with the origin information recorded in the ERP system. VTTI will not provide, facilitate or support an origin document where the non-preferential origin has not been established or material concerns remain unresolved.
Follow-up and escalation
Any doubt concerning any of the following must be resolved before the origin is used for customs or compliance purposes:
• the origin of the input materials;
• the customs classification of the relevant products;
• the nature and purpose of the operations performed;
• the attribution of commingled product; or
• the applicable non-preferential origin rule.
The terminal's customs specialist requests any clarification or additional information required from CS, the relevant operational personnel or the customer. The customs specialist may request support from CGT where the matter involves:
• complex or unclear origin rules;
• a material financial or compliance impact;
• possible exposure to trade measures; or
• engagement with a competent authority.
VTTI will not use or communicate a country of non-preferential origin while material concerns regarding the determination remain unresolved.
Recording and retention
A copy of any origin document issued or facilitated, the underlying determination and the relevant supporting documentation are stored in the Document Management System and linked to the outbound parcel or shipment. CS records the relevant document data in the Cargo Documents module in ERP. Records are retained for at least seven years.
Storage of product of the same specification from different inbound parcels in a common tank is not a processing operation. The parcels retain their respective non-preferential origin administratively:
• The outbound quantity is attributed to the inbound parcels on the basis of the inventory records in VTTI's ERP system.
• The attribution method is applied consistently and documented.
• No more quantity may be attributed to a country of origin than has been received from parcels of that origin.
Where the outbound quantity cannot be attributed to parcels of a single origin, the origin documentation takes the form of a breakdown by origin (see "Non-preferential origin documentation" below).
Where a common tank contains product of an origin that is subject to anti-dumping duties, sanctions or other trade measures, CS involves the terminal's customs specialist before any origin information is used.
Non-preferential origin determination following blending or processing
Blending or processing at the terminal may affect the non-preferential origin of the product concerned. The origin of the resulting product must therefore be assessed separately. This applies whether the operation results in a new parcel in the ERP system or changes the composition of an existing parcel.
Pending this assessment, the country of origin of the resulting product is registered in VTTI's ERP system as "QU", meaning "countries and territories not specified". The use of "QU" reflects that no specific country of non-preferential origin has yet been established. It does not constitute an origin determination and must not be used as the country of origin in a customs declaration, origin document or other external communication.
Before the non-preferential origin is required for placing the product under a subsequent customs procedure, or for another customs or compliance purpose, the origin of the resulting product is established in the following steps. The steps are based on the information provided by the customer and checked by the terminal's customs specialist against the information available in VTTI's systems.
Step 1 – Does the operation confer origin?
For products of Chapter 27, an operation at the terminal confers origin where it consists of:
• a chemical reaction;
• atmospheric or vacuum distillation, or extraction by means of selective solvents (headings 27.07, 27.10 to 27.13 and 27.15);
• processing resulting in a change of tariff heading, where the heading rule so provides; or
• deliberate and proportionally controlled mixing or blending of materials to conform to predetermined specifications, resulting in a product with physical or chemical characteristics that are relevant to its purposes or uses and different from those of the input materials.
Blending at the terminal is performed on the instruction of the customer, and the assessment of its origin consequences takes place in close consultation between the terminal and the customer. The customer determines the composition and purpose of the blend. When instructing a blend, the customer therefore indicates:
• the components and the proportions to be used;
• whether the blend is performed to meet a predetermined specification and, if so, which specification (for example a grade or a limit value for RON, sulphur content or viscosity); and
• whether, in the customer's view, the blend confers origin, together with the supporting information on which that view is based.
The terminal's customs specialist performs a reasonableness check on the customer's information. The check compares it with the information available in VTTI's systems, such as:
• the blend order;
• the quantities, product descriptions and CN codes of the components and the resulting product; and
• where available, quality or analysis data of the components and the resulting product.
In performing this check, the customs specialist takes the following indicators into account:
• Blending towards a specification. Components are blended in controlled proportions to obtain a product that meets a specification the components did not meet individually. This indicates origin-conferring blending.
• Addition to a base product. Product is added to a base product that already meets the relevant specification, for example to optimise margin, and the resulting product still meets the same specification. No new product is created, so the operation does not confer origin.
• Change of product description or CN code. A resulting product with a different product description or CN code than the major part of the components (by quantity) is a strong indication of origin-conferring blending.
• Same CN code. The fact that the components and the resulting product fall under the same CN code does not exclude origin-conferring blending, provided the resulting product has technical characteristics it did not have before blending.
In line with the contractual arrangements between VTTI and the customer, the customer is responsible for the accuracy and completeness of the information provided in relation to the blend, including its specification and origin consequences. VTTI relies on this information, subject to the reasonableness check described above. Where the customer's information is incomplete or inconsistent with the information in VTTI's systems, the customs specialist requests clarification from the customer before the blend is treated as origin conferring. Where the matter remains unresolved, the blend is not treated as origin conferring.
Where the operation confers origin, the resulting product originates in the country where the blending took place. The origin of the input materials is then not decisive for the origin determination, but it remains relevant for Step 3.
Step 2 – Operation not origin conferring: residual rule
Where the operation does not confer origin and all input materials have the same non-preferential origin, the resulting product retains that origin.
Where the input materials have different origins, the origin is determined by the applicable chapter residual rule. For Chapter 27 products, this is the country in which the major portion of the materials originated, determined on the basis of weight:
• The calculation uses the quantities and recorded origins of the input parcels in VTTI's ERP system.
• In line with VTTI's practice, materials originating in different EU Member States are aggregated as EU origin.
• The origin of the components that determine the outcome must be substantiated by supporting documentation.
For products outside Chapter 27, such as biodiesel of heading 38.26 or chemicals of Chapter 29, the customs specialist determines the applicable rule as follows:
• Annex 22-01. The customs specialist first checks whether Annex 22-01 UCC-DA contains a rule for the relevant heading or subheading. If so, the operation is tested against the primary rule in that Annex. Where the primary rule is not met, the chapter residual rule in that Annex applies. Both are legally binding (Article 32 UCC-DA).
• Article 60(2) UCC and the list rules. Where the product is not covered by Annex 22-01, origin is determined under Article 60(2) UCC. The Commission's list rules for the relevant chapter are applied as guidance for interpreting that provision. The list rules are not legally binding and may not lead to an outcome that contradicts Article 60(2) UCC.
• Minimal operations. Operations listed in Article 34 UCC-DA, and the simple processes listed in the relevant chapter note of the list rules, never confer origin.
• Residual rule. Where the operation does not confer origin, whether because it is a minimal operation or because the primary rule is otherwise not met, the chapter residual rule of Annex 22-01 or of the list rules applies. This is in most cases the country in which the major portion of the materials originated, determined on the basis of weight or value depending on the chapter.
• Value-based rule. Where the applicable rule is based on value, the customer provides the value information required.
Step 3 – Anti-avoidance and trade measures
An operation whose purpose is to avoid the application of commercial policy measures does not confer origin (Article 33 UCC-DA).
Anti-dumping or countervailing duties, sanctions and other trade measures may also define the products covered by criteria other than the non-preferential origin of the final product. Examples are the origin or content of input materials in a blend, or the country of export or production. An origin determination under this procedure does not in itself establish that a trade measure does not apply.
Where the resulting product or any of its input materials may be subject to such measures, the case is always referred to CGT.
Completion
Once the determination has been completed, CS replaces "QU" with the determined country of non-preferential origin in the ERP system. The following are retained as part of the origin audit trail:
• the outcome and basis of the determination, together with the relevant supporting information;
• the customer's blend instruction;
• the information provided by the customer on the specification and origin consequences of the blend; and
• the outcome of the reasonableness check.
A work instruction for non-preferential origin determination at the terminal, including practical examples, is included here.
Non-preferential origin documentation
At the request of a customer, VTTI can provide or facilitate non-preferential origin documentation for an outbound shipment. Two types are used:
1. a certificate of origin issued by the competent authority (in the Netherlands, the Chamber of Commerce (KVK)) at the request of the exporter. VTTI provides the information and supporting documentation required for the application;
2. a Terminal Origin Declaration issued by VTTI.
Before providing or facilitating either document, CS verifies that the non-preferential origin has been properly established.
A Terminal Origin Declaration is issued in one of two forms:
• Single origin: it states the non-preferential origin of the outbound product as established under this section.
• Breakdown: where the outbound quantity consists of commingled parcels of different origin that cannot be attributed to a single origin, it lists the relevant parcels and quantities with their recorded country of origin. For each parcel, it indicates whether the origin is substantiated by origin documentation. Where it is not, the origin is stated as "as declared by the customer, not substantiated". A breakdown is not issued in place of an origin determined following blending.
A Terminal Origin Declaration:
• identifies the terminal, the outbound product, quantity and shipment;
• states that it concerns non-preferential origin determined in accordance with Articles 59 and 60 UCC, on the basis of information provided by the customer and VTTI's own records;
• states that it is not a proof of preferential origin and cannot be used to claim preferential tariff treatment;
• is signed by a person authorised to do so; and
• is never titled "statement on origin" or "certificate of origin", to avoid confusion with preferential proofs of origin and official certificates.
Where the origin is an EU Member State, the declaration may state "European Union", with the Member State where the product was blended where relevant (for example "European Union (blended in the Netherlands)").
A document proving origin may also be issued in accordance with the rules of origin of the country of destination (Article 61(3) UCC). Where a customer requests an origin statement under such rules, CS refers the request to the terminal's customs specialist.
Any document prepared or facilitated by VTTI must be consistent with the origin information recorded in the ERP system. VTTI will not provide, facilitate or support an origin document where the non-preferential origin has not been established or material concerns remain unresolved.
Follow-up and escalation
Any doubt concerning any of the following must be resolved before the origin is used for customs or compliance purposes:
• the origin of the input materials;
• the customs classification of the relevant products;
• the nature and purpose of the operations performed;
• the attribution of commingled product; or
• the applicable non-preferential origin rule.
The terminal's customs specialist requests any clarification or additional information required from CS, the relevant operational personnel or the customer. The customs specialist may request support from CGT where the matter involves:
• complex or unclear origin rules;
• a material financial or compliance impact;
• possible exposure to trade measures; or
• engagement with a competent authority.
VTTI will not use or communicate a country of non-preferential origin while material concerns regarding the determination remain unresolved.
Recording and retention
A copy of any origin document issued or facilitated, the underlying determination and the relevant supporting documentation are stored in the Document Management System and linked to the outbound parcel or shipment. CS records the relevant document data in the Cargo Documents module in ERP. Records are retained for at least seven years.