3. Non-preferential origin of product at the terminal

Introduction

The non-preferential origin of a product 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):

• The non-preferential origin of products at the terminal is to be determined on the basis of article 60, paragraph 2 UCC. This means that the product originates in the country where it underwent its last substantial, economically justified processing or working resulting in the manufacture of a new product or representing an important stage of manufacture.
• Based on article 32 UCC-DA, the rules of Annex 22-01 apply if the end-product is listed in that Annex. This means that if the product was processed at the terminal, that processing is deemed to confer EU origin to the product if the rule in Annex 22-01 is met.

• When the product concerned is not listed in Annex 22-01 UCC-DA, VTTI takes into account the European Commission's table of non-preferential origin rules. Although these rules are not legally binding, they reflect the European Commission's interpretation of Article 60(2) UCC and are commonly applied in practice by customs authorities and chambers of commerce. For example, the following rule applies to products classified under HS heading 2707:

• This means that processing carried out at the terminal is deemed to confer EU non-preferential origin on a product classified under HS heading 2707, provided that the non-EU originating materials undergo a change in tariff heading (CTH). In other words, the rule is satisfied where the non-EU originating input materials are classified under an HS heading other than 2707 and the resulting product is classified under HS heading 2707.
• According to the case law of the Court of Justice, substantial processing may also exist without a change of tariff heading, where the processing 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). This is explained in more detail later in this procedure.

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.

• the outbound product can be traced to the relevant inbound parcel(s); and
• no operation has taken place that may have affected its origin.

• operations limited to the storage and preservation of the product, such as circulation or heating in the tank; and
• "minimal operations" listed in article 34 UCC-DA, the following of which may be relevant for VTTI's business:
  • operations to ensure the preservation of products in good condition during transport and storage or operations facilitating shipment or transport of the product;
  • simple operations consisting of the removal of dust, sifting, screening or washing;
  • Changes of packing and the breaking-up of consignments, the simple placing in bottles, cans, flasks and all other simple packaging operations;
  • Marking;
  • Change of use;
  • A combination of two or more of the above operations.
• "simple processes" specified in the Commission's list rules. For example, for products of Chapter 27, the following operations are regarded as simple processes listednot inconferring theorigin: Commission's list rules: cleaning, decantation, desalination,
  • cleaning;
  • decantation;
  • desalination;
  • water separation, filtering, colouring and marking (including the addition of dyes and markers), separation;
  • filtering;
  • colouring;
  • marking;
  • or any combination of these.
    the above.
    

• The outbound quantity is attributed toof the inbound parcelsproduct on the basis of the inventorymajor recordsportion inrule: VTTI's ERP system.
• The attributionorigin methodof the final product is the country or territory where the major portion of the materials originated. Where the final product is classified under Chapter 1 to 29, or 31 to 40 (the majority of products handled by VTTI), the major portion rule is applied consistentlybased andon documented.
• Nothe more quantity may be attributed to a countryweight of originthe thaninput hasmaterials. been received from parcels of that origin.

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):

• The non-preferential origin of products at the terminal is to be determined on the basis of article 60, paragraph 2 UCC. This means that the product originates in the country where it underwent its last substantial, economically justified processing or working resulting in the manufacture of a new product or representing an important stage of manufacture.
• Based on article 32 UCC-DA, the rules of Annex 22-01 apply if the end-product is listed in that Annex. This means that if the product was processed at the terminal, that processing is deemed to confer EU origin to the product if the rule in Annex 22-01 is met.
• When the product concerned is not listed in Annex 22-01 UCC-DA, VTTI takes into account the European Commission's table of non-preferential origin rules. Although these rules are not legally binding, they reflect the European Commission's interpretation of Article 60(2) UCC and are commonly applied in practice by customs authorities and chambers of commerce. For example, the following rule applies to products classified under HS heading 2707:

• This means that processing carried out at the terminal is deemed to confer EU non-preferential origin on a product classified under HS heading 2707, provided that the non-EU originating materials undergo a change in tariff heading (CTH). In other words, the rule is satisfied where the non-EU originating input materials are classified under an HS heading other than 2707 and the resulting product is classified under HS heading 2707.
• According to the case law of the Court of Justice, substantial processing may also exist without a change of tariff heading, where the processing 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). This is explained in more detail later in this procedure.

• 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.

• 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 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.

• 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.

• 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.

• 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.

• 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.

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. Terminal Origin Declaration issued by VTTI.

• 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.

• 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.

• 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.

• complex or unclear origin rules;
• a material financial or compliance impact;
• possible exposure to trade measures; or
• engagement with a competent authority.