What Are China’s Rules of Origin?
The origin of goods refers to the country where the goods are produced, which can be considered the “nationality” of the goods.
The criteria for determining the origin of goods are known as rules of origin. Like other countries, China divides its rules of origin into two main categories, including preferential rules of origin and non-preferential rules of origin.
1. Preferential rules of origin
Such rules are usually set out in bilateral or multilateral agreements and apply only among the member states of such agreements. At present, China has signed 19 free trade agreements with corresponding preferential rules of origin.
Preferential rules of origin contain are based on two criteria:
(1) Wholly obtained criterion
This means that the imported goods are entirely obtained or produced in a member state of the agreement, such as agricultural and mineral products harvested within the territory of a member state.
(2) Substantial transformation criterion
This covers three main scenarios:
First, materials originating from a non-member state are manufactured and processed within the exporting member state, which may also affect the tariff classification of the goods.
Second, the value-added portion of the goods resulting from processing and production in a member state meets a certain percentage of the goods’ Free on Board (FOB) value.
Third, the main manufacturing processes that give the essential features of the goods take place within the territory of a member state.
2. Non-preferential rules of origin
Non-preferential rules of origin are rules of origin determined by a country itself and specified through its domestic law.
The “WTO Harmonized Non-Preferential Rules of Origin” is currently under negotiations. Once it is implemented, WTO members will adopt harmonized non-preferential rules of origin, which will replace the non-preferential rules of origin established by each country’s domestic legislation.
Contributor: Zhao Jing
Agency/Firm: Hylands Law Firm