RESTRICTEDWORLD TRADE
ORGANIZATIONG/RO/W/39
23 November 1998
(98-4679)
Committee on Rules of Origin Original:  English
SYSTEM OF EUROPEAN CUMULATION OF ORIGIN
Questions raised by the UNITED STATES
The following communication, dated 17 November 1998, has been received from the
Permanent Mission of the United States.
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Please find attached questions from the United States to the European Communities, Bulgaria,
the Czech Republic, Hungary, Iceland, Liechtenstein, Norway, Poland, Romania, the Slovak
Republic, Slovenia and Switzerland regarding the “joint notification” submitted to the Committee on
Rules of Origin on 1 July 1998.  I would appreciate your assistance in circulating these questions to
the Chairman and Members of the Committee.  Thes e questions have also been submitted to the
Committee on Regional Trade Agreements.G/RO/W/39
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The United States respectfully submits questions concerning the “joint notification” provided
to the Committee on Rules of Origin on 1 July 1998, under Paragraph 4 of Annex II of the Agreement
on Rules of Origin, by the European Communities, Bulgaria, the Czech Republic, Hungary, Iceland,
Liechtenstein, Norway, Poland, Romania, the Sl ovak Republic, Slovenia and Switzerland (also
circulated to the Committee on Regional Trade Agreements; WT/REG1, 2, 12, 13, 15, 16/n/1,WT/REG7-9, 20. 28-30, 32-35N/2, WT/REG 37, 41, 42, 45-48, 62/N/2, WT/REG18/N/3,
WT/REG11/N/4; 20 August 1998).
The joint notification to the Committee on Rules of Origin makes reference to 12 Origin
Protocols, which are described as entering into force “during the first half of 1997,” implementing
what is referred to as a “system of European Cumulation of Origin.”
The United States invites individual responses from the European Communities, Bulgaria, the
Czech Republic, Hungary, Iceland, Liechtenstein, Norway, Poland, Romania, the Slovak Republic,
Slovenia and Switzerland.
Question 1
For Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein, Norway, Poland, Romania, the
Slovak Republic, Slovenia, and Switzerland:
1a. Please provide the method and date of domestic publication of the subject protocols relating
to preferential rules of origin, undertaken in accordance with paragraph 3(c) of Annex II of the
Agreement on Rules of Origin, and therefore in a manner “as to enable governments and traders to
become acquainted with them” as described in paragraph 1 of Article X of GATT 1994.
1b. Please provide the date or dates that the sy stem of cumulation of origin was implemented.
Question 2
For the European Communities:
In addition to certain WTO members, the notification includes a reference to the Origin
Protocols concerning Estonia,  Latvia, Lithuania and “EEA.”
2a. Does the introduction of the “system of European cumulation of Origin” concern any
countries other than those which are identified in the notification?
2b. Please explain the meaning of the reference in the notification to “EEA,” given that the
notification also refers individually  to Iceland, Norway, and Liechtenstein.
For the European Communities, Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein,
Norway, Poland, Romania, the Slovak Republic, Slovenia, and Switzerland:
2c. Please confirm that, to the extent that implementation of the protocols resulted in changes to
preferential rules of origin or new preferential rules of origin, such changes have not been applied
retroactively, in accordance with paragraph 3 (e) of Annex II of the Agreement on Rules of Origin.G/RO/W/39
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Question 3
For the European Communities, Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein,
Norway, Poland, Romania, the Slovak Republic, Slovenia, and Switzerland:
The protocols state that the “cumulation” ma y only be applied where the requirements for
non-originating materials to obtain originating status are identical between protocols.
3a  In view of the notification, is it now the situation that the requirements for non-originating
materials to obtain originating status (i.e., the preferential rules of origin) are identical for all trade
between each of the following WTO members: the European Communities, Bulgaria, the CzechRepublic, Hungary, Iceland, Liechtenstein, Norway, Poland, Romania, the Slovak Republic, Slovenia,
and Switzerland?
3b. Please identify the products, if any, in terms of HS heading or subheading, where the
requirements for non-originating materials to obtain originating status for preferential trade between
any of the above-cited members are not identical.
3c. Please identify any products, if any, in terms of HS heading or subheading, which are not
covered under each specific individual preferential trade agreement subject to the “cumulation
system.”
Question 4
For the European Communities:
According to the notification, the date of publication in the Official Journal for providing
notice of implementation of the “cumulation system” to traders and governments was as follows:
Country Publication Implementation Number of Days
Advance Notice
Czech Republic 31 Dec. 1996 1 January 1997 1 Day
Slovak Republic 5 Aug. 1997 1 January 1997 No Advance Notice
Hungary 7 April 1997 1 July 1997 84 DaysPoland 11 Aug 1997 1 July 1997 No Advance Notice
Bulgaria 24 May 1997 1 January 1997 No Advance Notice
Romania 24 Feb 1997 31 January 1997 No Advance Notice
Estonia 28 April 1997 1 April 1997 No Advance Notice
Latvia 28 April 1997 1 April 1997 No Advance NoticeLithuania 27 May 1997 1 April 1997 No Advance Notice
“EEA” 23 January 1997 1 December 1996 No Advance Notice
Switzerland 23 July 1997 1 January 1997 No Advance Notice
Iceland 23 July 1997 1 January 1997 No Advance Notice
Norway 23 July 1997 1 January 1997 No Advance Notice
4a. Please confirm that the degree of advance notice of the implementation of the “cumulation
system” provided to traders and governments as indicated in the notification is correct.
For Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein, Norway, Poland, Romania, the
Slovak Republic, Slovenia, and Switzerland:
4b. Please indicate the number of days advance notice of the implementation of “cumulation”
that was provided, through publication, to traders and governments.G/RO/W/39
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Question 5
For the European Communities, Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein,
Norway, Poland, Romania, the Slovak Republic, Slovenia, and Switzerland:
5a. Please confirm that you are not a party to a single Agreement, involving all of the members to
whom this question is directed, which is an Agr eement in accordance with ANNEX II, Paragraph 2 of
the Agreement on Rules of Origin (i.e., a “contractual or autonomous trade regime leading to the
granting of tariff preferences going beyond the application of paragraph 1 of  Article 1 of
GATT 1994”).
5b. Please confirm that you are not a party to a single Agreement under Article XXIV of
GATT 1994 which involves all of the members to whom this question is directed.  If there is such an
Agreement under Article XXIV, please indicate when this Agreement was notified.
Question 6
For the European Communities, Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein,
Norway, Poland, Romania, the Slovak Republic, Slovenia, and Switzerland:
According to the notification, diagonal cumulation of origin allows products of certain third
countries to be considered as “originating” under various bilateral preferential trade agreements, eventhough such third countries are not parties to the individual agreements which provides for the
preferential treatment.
6a. Is it true that, under the “cumulation system,”  inputs that originate in certain third countries
that are not  a party to individual preferential  trade Agreements but are participants in the
“cumulation system” - will be treated differently than inputs that originate in other third countries
that are also not a party to such individual preferential trade Agreements - but are also not
participating in the “cumulation system?”  If this understanding is not correct, please provide an
explanation.
6b. Is it true, for example, that semi-finished auto parts originating in any country participating
in the “cumulation system,” which are further processed or assembled in any other countryparticipating in the “cumulation system,” may always be considered as originating auto parts by
countries in the “cumulation system” - and that such auto parts can be traded as subject to
preferential treatment between any of the countries involved in the system – even though there is no
single individual preferential trade agreement am ong all participants of the “cumulation system” that
provides for such preferential treatment?  If this understanding is not correct, please provide anexplanation.
Question 7
For the European Communities, Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein,
Norway, Poland, Romania, the Slovak Republic, Slovenia, and Switzerland:
Under the terms of certain product-specific prefer ential rules of origin set forth as an Annex
to the protocols (e.g., Annex II of the protocol for the Norway/EC Agreement), certain
non-originating materials cannot be used in the manufacture of product if that product is to achieve“originating” status and preferential treatment.  However, in Article 6.2 of the Norway/EC protocol
(an article which is presumed to exist in every notified protocol), it is stated that non-originating
materials may nevertheless be used, provided that their total value does not exceed 10 per cent of the
ex-works price of the final product.G/RO/W/39
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7a  This provision appears to allow for the use of a certain “de minimis” amount of
non-originating content as a general exception to whatever prohibition or limitation that may exist in
a product-specific rule of origin with regard to the use of non-originating material.  Is this correct?  If
this understanding is not correct, please provide an explanation.
7b. Does the 10 percent ceiling of the “de minimis” rule (which allows the use of a certain level
of non-originating materials in the production of an originating product) apply to all third countries
that are not participants to the EC/Norway Agreement, or only to third countries except the
participants in the “cumulation system.”?
7c. For purposes of example, under the EC/Norway Agreement, can the value of materials
produced in the third countries not a party to the Agreement exceed the 10 percent “de minimis”
without rendering the final product non-originating - if those materials originate in a third country
that is a participant in the “cumulation system?”
Question 8
Hypothetical Fact Scenario No. I
An automobile engine is assembled in the Norw ay and exported to the EU.  It is assumed for
this scenario that, in order for the engines to recei ve preferential tariff treatment under the EC/Norway
Agreement, the value of non-originating inputs may not exceed 40 percent of the ex works  price of the
automobile engine.  It is also assumed for purposes of this question that the preferential tariff rate,
applicable to the relevant automobile engines and inputs under each of the individual EFTA
preferential trade agreements with the Czech Republic, Hungary, Poland, Romania, Slovak republic,
and Slovenia, is not at zero.
In this hypothetical fact scenario, the engine will meet the applicable value content
requirement only if a particular steel forging for the en gine “originates” (i.e., is forged) - in either the
EU or Norway.  If the steel forging for the engine  is “non-originating,” the value of non-originating
inputs for the engine will exceed 40 percent of the ex works  price paid for the engine.
For the European Communities and Norway, please confirm that the following statements are true, or
explain otherwise:
Prior to implementation of “cumulation”
8a. Is it true that, if the steel forging for the automobile engine assembled in Norway had been
forged in Poland, or the United States, or any other member not a party to the Norway-EC
Agreement, the content requirement for the engine would not have been met (because the steel forging
would not have “originated” in either Norway or  the EC), and that the engine would not have been
eligible for a preferential tariff treatment when exported from Norway to the EU?  If thisunderstanding is not correct, please provide an explanation.
After implementation of “cumulation”
8b. Is it true that, if the steel forging for the engine assembled in Norway is forged in Poland (or
any other participant in the “cumulation system”), the content requirement for the engine would be
met (because the steel forging originating in Poland would be deemed to “originate” in either
Norway or the EC), and the engine would be eligible  for a preferential tariff treatment when exported
from Norway to the EU?  If this understanding is not correct, please provide an explanation.G/RO/W/39
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Hypothetical Fact Scenario No. II
Automobile engines are assembled in Norway and exported to the EC.  In this hypothetical
fact scenario, the assembly method results in the engine meeting the value content requirement for
preferential tariff treatment, even though the stee l forging used as an input for the engine does not
originate in either Norway or the EC.
For the European Communities and Norway, please confirm that the following statements are true, or
explain otherwise:
Prior to implementation of “cumulation”
8c. Is it true that, upon export of the automobile engine from Norway to the EC, drawback would
have been available for a refund of the duties paid on the steel forging used as an input for the engine
if it had been imported into Norway as originating in the United States or any other country that is
not a party to the EC/Norway Agreement?  If th is understanding is not correct, please provide an
explanation.
After implementation of “cumulation ”
8d. Is it true that, under the “cumulation system ,” drawback would not be available for a refund
of the duties paid on the steel forging used as an input for the engine if it had been imported intoNorway as originating in the United States or any other country that is not a party to the EC/Norway
Agreement - unless such country is a participant in the “cumulation system”?  In other words, is it
true that, upon export of the engine from Norway to  the EC, drawback is available for a refund of the
duties paid on the steel forging only if it was imported into Norway as an originating product of any
other participant in the “cumulation system”?  If this understanding is not correct, please provide an
explanation.
8e. Please substitute Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein, Poland,
Romania, the Slovak Republic, Slovenia, and Switze rland for “Norway” in the above two hypothetical
fact scenarios and, respectively, confirm that the understandings set forth in 8a through 8d are true,
or explain otherwise.
8f. Under each of the respective individual preferential agreements for which protocols have
been submitted by participants of the “cumula tion system,” does the distinction in drawback
treatment of inputs - based on whether inputs have as their origin one of participants in the
“cumulation system” - also apply to inputs used in “preparations” that are classified in HS Chapters
16 through 21?
8g.  Please identify the products, if any (in terms of HS heading or subheading), within Chapters
16 through 21 these HS Chapters for which there is no differentiation of drawback treatment between
goods originating in participants in the “cumulation system” and other members.
QUESTION 9
The protocols published in the Official Journal and submitted by the European Communities
in the “joint notification” address the treatment of “sets” (as defined in General Rule 3 of the
Harmonized System).  For example, Article 10 of the amendment of the protocol to the EC/NorwayAgreement states that when a “set” is composed of originating and non-originating products, the set as
a whole shall be regarded as originating, provided that the value of the non-originating products does
not exceed 15 percent of the ex-works price of the set.G/RO/W/39
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For the European Communities, Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein,
Norway, Poland, Romania, the Slovak Republic, Slovenia, and Switzerland:
9a. For purposes of determining whether a “set ” originates (and is therefore subject to
preferential tariff treatment), can the value of products that originate in participants in the“cumulation system” exceed 15 percent?  For example, Is it true that preferential treatment will be
accorded to a “set” that is exported from the EC  to Norway which includes products of which 55
percent of the value originates in the EC and 45 percent originates in the Czech Republic?  If this
understanding is not correct, please provide an explanation.
Question 10
For the European Communities, Bulgaria, the Czech Republic, Hungary, Iceland, Liechtenstein,
Norway, Poland, Romania, the Slovak Republic, Slovenia, and Switzerland:
According to the notification, the “cumulation system” appears to allow for production
operations to take place in a limited number of third countries that are not parties to the particulartrade agreement under which originating status and preferential treatment are being conferred.
Reference is again made, for purposes of example, to the protocol to the EC/Norway
Agreement.  Article 12 paragraph 1 (“Principle of Territoriality”) which states that achieving
originating status must be fulfilled “without inte rruption” in the European Community or Norway,
except as provided in Article 4 (“Diagonal cumulation of origin”).  It is assumed that provisions
similar to Articles 12 and 4 exist in each of the relevant protocols included in the notification.
Hypothetical Fact Scenario No. III
An automobile engine and its parts are manufactured in Norway and the European
Communities.  It is assumed for this scenario that , in order for the automobile engine to receive
preferential tariff treatment when exported from Norway to the European Communities under the
EC/Norway Agreement, the value of non-origina ting inputs may not exceed 40 percent of the ex
works  price of the engine.
However, before the engine is exported from Norway to the EC, most of the assembly and
testing of the engine takes place in Poland.  The en gine is then returned to Norway for some final
assembly, undergoes commercial markings and is shipped as a final product to the EC.  The
value-added by the operation in Poland is 35 percent of the ex works  price, which does not exceed the
value of the materials, used in the production of the automobile engine, which therefore originated in
Norway and the EC for purposes  of the EC/Norway Agreement.
10a. Is it true that the operations in Poland performed on the engine would not be viewed as
violating the normal requirement that originating st atus must be achieved “without interruption” in
the Community or Norway.  If this understanding is not correct, please provide an explanation.
10b. Is it true that the final engine, assembled in Poland, would be “originating” and receive
preferential tariff treatment under the Agreement between the EC and Norway?  If this understanding
is not correct, please provide an explanation.
10c. Is it true that if the operations described as taking place in Poland would have taken place in
the United States or another country that is not a party to the EC/Norway Agreement -- but not a
participant in the “cumulation system” -- the en gine would be “non-originating” and therefore
ineligible for preferential tariff treatment under the Agreement between the EC and Norway.  If this
understanding is not correct, please provide an explanation.G/RO/W/39
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10d. Please confirm that the exception to the “principle of territoriality” provided to participants
in the “cumulation system” is in place and opera tional for all members that have submitted the
notification -- for each of their respective individual agreements with other participants in the
“cumulation system.”  If there are products that ar e not covered by the exception to the “principle of
territoriality” please indicate, in terms of HS heading or subheading.
Question 11
Reference is again made, for purpose of example, to the protocol for the EC/Norway
Agreement.  Article 13,  paragraph 1 (“Direct Transport”) states that preferential treatment provided
for under the Agreement between Norway and the EC “applies only to products, satisfying the
requirements of this Protocol, which are transpor ted directly between the Community and Norway or
through the territories of the other countries referred to in Article 4.”
Hypothetical Fact Scenario No. IV
An automobile engine, and its inputs, are the product of manufacturing operations in Norway
and the European Community.  It is assumed for this scenario that, in order for the automobile engine
to receive preferential tariff treatment under th e EC/Norway Agreement, the value of non-originating
inputs may not exceed 40 percent of the ex works  price of the engine.
As a last step in the production operations, the product is exported from European
Community to Poland, where final assembly and testing of the engine takes place, as well as
commercial marking and final packing.  The value-added by the operation in Poland is 35 percent of
the ex works  price, which does not exceed the value of the materials used in the production of the
engine, which originates in Norway and the EC.  Th e engine is then shipped from Poland to Norway.
11. Is it true that the automobile engine exported to Norway from Poland would receive
preferential treatment under the Agreement betwee n Norway and the EC, by virtue of the exceptions
with regard to “direct transport” and “principle of territoriality that are provided under
“cumulation” to Poland and other countries referre d to in Article 4 of the Protocol?  If this
understanding is not correct, please provide an explanation.
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