Where is the RCEP Rules of Origin Cumulative?

The regional comprehensive economic partnership agreement (hereinafter referred to as the "RCEP") signed in the current political and economic situation is really inspiring and meaningful, but if from a legal perspective to explore the RCEP agreement rules of origin, after accumulation rules of origin for everyone concerned, on the whole, or in the country of origin of the common international rules under the framework of optimization and improvement. Through the study of the accumulation rules, it can be seen that the "brilliance" of the RCEP origin accumulation rules may lie more in the economic and strategic benefits. The difference between RCEP and other FTA signed by China is not the system subversion in the final analysis, but the individual differences between different FTA. With this understanding, this paper will introduce the current general rules of origin accumulation in China (Article 6 of the Regulations on the Administration of Preferential Origin of Import and Export Goods by Customs), and at the same time, elaborate the meaning, highlights and effects of RCEP accumulation rules. If you want to know: What are the rules of accumulation of origin? What are the RCEP Accumulation Rules? What are the highlights of RCEP accumulation rules and their impact on foreign trade enterprises in China? Come and have a look.

For the convenience of understanding and writing, the author refers to the general rules of origin in China as "classic rules of origin", which is different from "RCEP rules of origin".

What does the Classic Cumulative Rule look like?

According to the regulations on customs import and export goods preferential origin of article 6 of the regulation: native to preferential trade agreements a member states or regions of goods or materials in the same preferential trade agreement within the territory of another member states or regions for the production of other goods, and the other part of the goods, the goods or materials shall be deemed to be native to another within the territory of member states or regions.

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1. Overview of China's rules of origin

According to current international trade and customs laws and regulations, the country of origin of goods is an important basis for whether the goods can enjoy tax preferences in bilateral or multilateral free trade agreements and whether they need to bear some trade sanctions. At present, China's rules of origin are divided into non-preferential rules of origin and preferential rules of origin. Among them, the preferential rules of origin are formulated for the implementation of the country preferential policies, and the specific standards need to be determined in accordance with the corresponding free trade agreements. The RCEP rules of origin, which have aroused much discussion at present, are preferential rules of origin.

Whether it is preferential or non-preferential rules of origin, the main criteria for judging the origin of goods are the full access standard and the incomplete access standard. In addition, there are additional rules for determining the origin of goods, such as the accumulation rule. The emergence of cumulative rules provides criteria for determining which raw materials or processes can be included in the value component of the country of production or processing of goods when the production or processing of goods involves multiple countries. The application of cumulative rules undoubtedly has an important impact on the determination of the origin of goods.

2. Meaning of cumulative rules

Popular, cumulative rule is when the goods production process involving different member states or regions on the same preferential trade agreements, in determining the origin of the goods, can put under the same preferential trade agreements of a number of countries (regions) as an economic zone, in the economic area of the value of the goods are produced during the production, processing components, can be seen as its value composition and accumulation. That is to say, in determining whether a substantial change, the cumulative rules can be used to determine origin of other member in the area of materials can be the origin of goods of the country where it is included in the final production materials, once can be included in, when the value composition accumulation to the proportion of the free trade agreement, the goods production or processing location countries will eventually got the certificate of origin of the goods.

For example:

A, B and C are members of the same preferential trade agreement. Country B imports XI from Country A, processes and produces goods X2 in Country B, and then exports it to Country C. According to the rules of accumulation of origin, raw material XI is regarded as originating in Country B, and is accumulated into the raw material value of X2.

3. Accumulation rules can be used to transform productivity

When companies lock in the cumulative rules of a specific preferential trade agreement, remember to actively apply the rules to translate into productivity. For example, making full use of resources in the same economic region for production makes it easier for goods to qualify as countries of origin and ultimately enjoy more favourable tax rates and trade treatment.

2. What does the RCEP Cumulative Rule look like?

Accumulative rules as set out in Article 4 of RCEP

1. Except as otherwise provided in this Agreement, materials that meet the requirements of origin set out in Chapter III, Article 2 (Goods of Origin) and are used in another Contracting Party for the production of another good or material shall be deemed to have originated in the Contracting Party in which the finished goods or materials are processed or treated.

The Parties shall consider this Article from the date on which this Agreement enters into force for all signatory States. This consideration will consider extending the cumulative scope of application in paragraph 1 to all production and value added in goods within Parties. Unless otherwise agreed by the Parties, the Parties shall conclude the review within five years from the date of commencement.

(above cited from RCEP Chapter III Rules of Origin Article IV Accumulation)

As can be seen from the above RCEP version of the cumulative rules:

1. The RCEP "Article IV One" is essentially a classic version of the cumulative rule

The two versions seem to be quite different in language and style. For example, it can be found that both the classic version and the RCEP version of the cumulative rules say the same thing.

Here's an example:

Materials [XI] that meet the requirements of country of origin specified in Article 2 (Goods of Origin) of Chapter III and are used in another Contracting Party [B] for the production of another good or material [X2] shall be deemed to have originated in the Contracting Party [B] in which the finished product or material [X2] is processed or treated. ([] for the convenience of understanding)

We can also adjust the above statement without affecting the meaning:

If A material 1 originating in Country A complies with the RCEP requirements of origin and is used by Party B in the production of another good or material X2, the material X1 shall be deemed to have originated in Party B in which the finished product or material X2 is processed or treated.

Convert the statement again:

If Party B imports from Party A A material XI originating in Party A and processes in Party B to produce another good or material X2, the material XI shall be deemed to have originated in Party B, the processing or treatment of the finished product or material X2.

By comparing the classic version of the cumulative rule in the first part of this article, you can see that the two versions say the same thing.

2.RCEP "Article IV II" is a supplement to the classic version of the Cumulative Rules

Although they are cumulative rules, the RCEP version has its differences from the classic version, mainly reflected in "Article 4 (2)" of RCEP -- "the scope of application of cumulative extension to all production and value added of goods within each Contracting Party". Quietly appeared to be in a word, in the light of the 15 member states "DaTiLiang", the economic region formed in the 15 member states and unified accumulation rules of origin, compared with the classic version of the cumulative rules are under the same preferential trade agreements "one of the member states or regions" and "the other member states or regions between the accumulation of RCEP" 14 + 1 "unified accumulation rules, its economic benefits and strategic income. We will elaborate the details in the third part of this paper.

3. What are the highlights of the RCEP cumulative rules and their impact on China's foreign trade enterprises?

Through the study of the cumulative rules of the classic version and the RCEP version, it can be seen that the "brilliance" of the cumulative rules of origin of RCEP may be more due to economic benefits and strategic benefits. The differences between RCEP and other FTA agreements signed by China are not institutional subversion in the final analysis, but can be roughly classified as individual differences among different FTA agreements. So, what are the highlights and implications of the RCEP version of the cumulative rules?

1. The unified accumulation rules of "14+1" will enable enterprises to obtain more economic benefits

According to the rules of the RCEP to determine goods country of origin, 15 member states under the RCEP agreement being treated as an economic area, as long as it is RCEP members on other members of the materials or goods for processing, the material can be seen as originating in processing, so when the goods production process involves a number of members, the production or processing the final goods member states when calculating the goods value of raw materials, can accumulate before other member states the origin of the material value, This means that the material value component previously from any member of the RCEP will be taken into account in the final production or processing of the raw material value of the member, which will significantly increase the utilization of preferential rates under the agreement.

Here's an example:

If L, M, N are the RCEP members, L countries on M materials made after machining or processing semi-finished products Y2 Y1, Y2 and N the kingdom as raw materials, production of finished goods Y3, according to the RCEP accumulation rules of origin, Y1, Y2 can accumulate included in the production of raw materials value Y3, eventually as originating in N China.

Rules of origin actually affect the cost of trade. RCEP's more uniform rules of origin facilitate freer movement of goods within the region. Goods that would not otherwise be recognized as originating goods are more likely to be recognized as originating goods after the agreement enters into force, thus enjoying the benefits of tariff concessions.

2. Companies will enjoy more benefits from the strategic gains of the RCEP cumulative rules

Before the RCEP is signed, the area of relevant countries have signed trade agreements about the terms of the rules of origin is not unified, the RCEP accumulation rules system will help to enhance the level of east Asian regional economic integration and promote regional industrial chain, supply chain and value chain integration, help area national industrial complementary advantages, further optimize the industrial chain and division of labor system, and more flexible to industry layout.

China is the largest part in the whole east Asian economic dimension, the cumulative production network can make the whole area of rules of origin on the semi-finished parts of transfers of trade more conveniently, also means that China's raw materials and semi-finished products can be use more, a number of important industry in China will get the benefit, especially the textile garments, light industry, electronic equipment, agricultural products, etc. For China's foreign trade enterprises, on the one hand, it helps to export more products, better enjoy preferential tax measures, on the other hand, it also helps to avoid some trade barriers.