A Practical Guide for Philippine Exporters
Doing Business in Free Trade Areas
(DBFTA) II
A Sectoral Approach
Philippine Trade Training Center (PTTC)
31 March 2011
Taking advantage of Philippine FTAs
DETERMINATION of ORIGIN
RULES OF ORIGIN
 Are regulations to determine the Country of Origin
“nationality of the goods”
• PREFERENTIAL
Determine whether imported products shall be
subjected to a most-favored nation (MFN) treatment
or preferential treatment
e.g. ATIGA, ACFTA, AKFTA, AANZFTA, PJEPA, AJCEP
• NON-PREFERENTIAL
Implement measures and instruments of
commercial policy
e.g. anti-dumping, countervailing, safeguards
Why do we need the
Rules of Origin in FTA?
 To determine whether goods can be
considered as originating goods of the
contracting countries.
 To implement trade and industry
policies related to EPAs.
 To promote trade by eliminating/
reducing tariff rates.
OBJECTIVES
 To guide the exporter on the step-by-step
processes in securing a Certificate of Origin
from BOC
 To guide Importer in claiming Preferential
Tariff Treatment for products covered by
Certificate of Origin under Bilateral and
Multilateral Trade Agreements
ROLE OF THE
BUREAU OF CUSTOMS
Implementing Agency for the
Rules of Origin
1) Issuing Authority
2) Granting and Receiving Authority for
Preferential Tariff Treatment
Issuing Authority
 Conducts pre-exportation evaluation
of products
 Issue ruling on the qualification of
the product
 Issue Certificate of Origin
 Conducts retro-verification procedure
Granting Authority
 Evaluates application for availment of
Tariff preferences on products covered
by FTA
 Grants Preferential Tariff concessions
for qualified products
 Request for retro-verification
ORGANIZATIONAL STRUCTURE
COMMISSIONER OF CUSTOMS
INTERNAL
ADMINISTRATION
GROUP
ASSESSMENT &
OPERATIONS
COORDINATIO
N GROUP
REVENUE
COLLECTION &
MONITORING
GROUP
ADMINISTRATION
OFFICE
• Human Resource
Management Division
• Public Information &
Assistance Division
• Central Records &
Management Division
• General Services
Division
• Medical & Dental
Division
• Training &
Development Division
• Interim Internal
Control Office
IMPORT &
ASSESSMENT
SERVICE
• Valuation &
Classification
Division
• Assessment
Coordination &
Monitoring Division
• Warehouse
Coordination
Division
FINANCIAL SERVICE
• Statistical Analysis
Division
• Revenue
Accounting Division
FINANCIAL
MANAGEMENT
OFFICE
• Accounting Division
• Budget Division
• Planning & Policy
Research Division
PORT OPERATIONS
SERVICE
• Auction & Cargo
Monitoring &
Disposal Division
• Export
Coordination
Division
• Port Operations &
Coordination
Division
COLLECTION
DIVISION
• Collection
Performance
Evaluation Division
• Liquidation &
Assessment Audit
Division
• Bonds Audit
Division
LEGAL SERVICE
• Ruling & Research
Division
• Appellate Division
• Prosecution &
Litigation Division
• Tax-Exempt
Division
MANAGEMENT
INFORMATION
SYSTEM &
TECHNOLOGY
GROUP
PLANNING &
SYSTEMS
DEVELOPMENT
SERVICE
• Planning &
Management
Information Division
• Systems
Development
Division
TECHNOLOGY
MANAGEMENT
SERVICE
• Systems
Management
Division
• Technology
Support Division
INTELLIGENCE
GROUP
CUSTOMS
INTELLIGENCE &
INVESTIGATION
SERVICE
• Intelligence
Division
• Investigation &
Prosecution Division
• Internal Inquiry &
Prosecution Division
 Intellectual
Property Unit
ENFORCEMENT
GROUP
ENFORCEMENT &
SECURITY SERVICE
•Customs Police
Division
•Warehouse Audit
& Monitoring Unit
• Risk Management
Group
17 District Collection Ports
POST ENTRY
AUDIT
GROUP
TRADE
INFORMATION &
RISK ANALYSIS
OFFICE
• Trade Information
Analysis Division I
• Trade Information
Analysis Division II
COMPLIANCE
ASSESSSMENT
OFFICE
• Audit Division I
• Audit Division II
• Audit Division III
• Audit Division IV
• Audit Division V
CUSTOMS COLLECTION DISTRICTS
3 Major Ports
Port of Manila
14 Provincial Ports
Port of Clark
Int’l. Airport
33 Sub Ports
Port of
Subic
Ninoy Aquino
International Airport
Manila International
Container Port
Port of
Legaspi
Port of
Iloilo
Port of
San Fernando
Port of
Batangas
Port of
Tacloban
Port of
Surigao
Port of
Cebu
Port of
Cagayan de Oro
Port of
Davao
Port of
Zamboanga
ORGANIZATIONAL CHART
COLLECTION DISTRICT II-A: PORT OF MANILA
KINDS OF CERTIFICATE OF ORIGIN
GSP Form A :
Form D
:
Form E
:
Form AK :
Form JP :
Generalized System of Preference
ASEAN Trade in Goods Agreement
ASEAN China Free Trade Area
ASEAN Korea Free Trade Area
JAPAN PHILIPPINES Economic
Partnership Agreement
Form AANZ : ASEAN-AUSTRALIA-NEW ZEALAND
Form AJ
:
White CO :
Free Trade Area
ASEAN-JAPAN Comprehensive
Economic Agreement
CO for General Merchandise (non-preferential)
What are the Main Elements of
RULES OF ORIGIN?
I.
Origin criteria
A. Wholly-Obtained Product
B. Product that have undergone substantial
Transformation
1. Change in Tariff Classification (CTC)
2. Value-added
3. Specific Process
C. Accumulation
D. Specific Concepts
II. Direct Consignment
IIl. Documentary evidence
Basic Concepts of Rules of Origin
Origin Criteria : A rule needed to determine the
country of origin of the product at the
time of exporting of the goods.
Consignment : A rule is needed to determine whether
the goods have lost the status as
product of that country or not
Procedural Provisions : A rule is needed to specify the
procedure whereby the importers
prove to the Party that the declared
goods qualify as “Produced” in the
Party at the time of import
Conditions to Receive
Preferential Treatment
1. Products shall be specified as eligible for
Preferential Treatment
(items in concession schedule)
2. Products shall satisfy the substantive
conditions on Origin Criteria,
Consignment Criteria and Procedural
Provisions
What are Origin Criteria?
 Means of determining HOW and
WHEN a product can be considered
as ORIGINATING from a specific
country
 The core of the Rules of Origin
“ORIGINATING” GOODS
1. Wholly-obtained and produced goods
Goods made entirely in the
exporting FTA Party (e.g. the
Philippines) from materials
produced in that same country
(e.g. goods grown, born and
raised, gathered, or extracted
in the Philippines)
 Example: The Philippines’
agricultural exports including
seafood harvested within the
country, and mineral goods
“ORIGINATING” GOODS
2. Goods underwent substantial
transformation process
Products manufactured from exporting country
wholly or partly from imported materials or
components,
including
materials
of
undetermined or of unknown origin, are
considered as ORIGINATING in that country if
its materials, parts or components have
undergone
SUBSTANTIAL
WORKING
OR
PROCESSING there.
Types of Goods Underwent
Substantial Transformation
1. Change in Tariff Classification Rule
(CTC Rule)
2. Value-added rule (VA Rule)
3. Specific Manufacturing or Processing
Rule (Process Rule)
4. Co – equal Rule
2. VALUE-ADDED RULE (VA Rule)
ROO based on value-added (i.e., value-added rule) measure the
extent of manufacturing or processing undertaken in a country by
reference to the value added to the good.
There are two requirements:
1. the final processing must be performed in a country; and
2. the value added in the country, calculated using a given formula,
must satisfy the required threshold
 The formula may measure local content based on the FOB
value, the ex-factory price or the ex-factory cost. Certain cost
adjustments may be required.
 Packaging materials and containers for retail sale, if classified
with the good, are included in the calculation of value-added
while packing materials and shipping containers are excluded.
3. SPECIFIC MANUFACTURING or PROCESSING
OPERATION RULE (Process Rule)
 ROO based on process ascertain the
critical process or element in the
manufacture of a good.
 The country where such a critical process
is done or where a critical element is
obtained would be the country of origin of
the good.
4. CO-EQUAL RULE
 In
any case that a Rule of Origin is a
combination of CTC Rule, Regional Value
Content Rule or Specific Process Rule,
these three criteria are the co equal
rule; therefore, any one of these criteria
must be satisfied (no priority) is
established among the three.
COCONUT SECTOR
1 1513.1910 Refined Oil
2 5608.9090 Knotted netting of twine
CC = Change in Chapter
AANZFTA
ATIGA
AKFTA
ACFTA
AJCEP
RVC (40)
or CC
RVC (40) or
CTSH
WO
RVC (40) CTH
RVC (40)
CC
RVC (40) or
Textile Rule
or CC
RVC (40) or CC
RVC (40)
RVC (40)
CC, provided that, where
non-originating
materials of heading
50.04 through 50.06,
51.06 through 51.10,
52.04 through 52.07,
53.06 through 53.08,
54.01 through 54.06,
55.08 through 55.11 are
used, each of the nonoriginating materials is
spun entirely in one or
more of the Parties.
PJEPA
CTH except Chapter 8
and 12
CC, provided that, where
non-originating materials
of heading 50.04 through
50.06, 51.06 through
51.10, 52.04 through
52.07, 53.06 through
53.08, 54.01 through
54.06, 55.08 through 55.11
are used, each of the nonoriginating materials is
spun entirely in either
Party or a non-Party which
is a member country of
the ASEAN
COCONUT SECTOR
H.S.
DESCRIPTION
ATIGA AKFTA
2009 Top
EXPORTS OFAANSFTA
COCONUT SECTOR
CODE
ACFTA
AJCEP
CC
1203.0000 COPRA
WO
WO
WO
RVC (40)
1404.9090 COCONUT SHELL
POWDER
RVC (40) or CC
RVC (40)
or CTSH
WO
RVC (40) CC, provided that,
1513.1910 REFINED OIL
RVC (40) or CC
4402.0000 OF COCONUT
SHELL NOT
AGGLOMERA
RVC (40) or CTH
5305.1100 BALES COIR RAW
COCONUT
5305.1900 COCO PEAT
OTHER COCONUT
RVC (40) or CC
RVC (40)
or CTSH
RVC (40)
or CTSH
RVC (40)
or CTH
RVC (40)
or CTH
RVC (40) or CC
where nonoriginating
materials of
heading 50.04
through 50.06,
51.06 through
51.10, 52.04
through 52.07,
53.06 through
53.08, 54.01
through 54.06,
55.08 through
55.11 are used,
each of the nonoriginating
materials is spun
entirely in one or
more of the
Parties.
Change in Tariff Classification

CC – Change of Chapter –
Change to this Chapter from any
other Chapter

CTH – Change of Tariff Heading –
Change to this heading from any
other heading

CTSH – Change of Tariff Subheading –
Change to this subheading from any
other subheading
 Based on HARMONIZED SYSTEM (HS)
1. Change in – tariff classification
Rule (CTC Rule)
Philippines
Coconut / Copra
H.S. 801.19
Exported
Refined Oil
H.S. 1513.19
Australia
A Philippine oil factory buys copra from various
farmers as a raw material for the production of a
refined oil to be exported to Australia.
Continued…
Continued…
For purposes of determining origin of the
refined oil:
• The coconut (801.19) is an originating material.
The heading of the finished product (refined oil)
1513.19 is different from that of the coconut. The
required change has occurred.
The product refined oil is an ”originating goods”
of the Philippines, hence this qualify for
PREFERENTIAL TARIFF TREATMENT.
Continued…
The HS code of refined oil is
1513.19 and its origin rule under
ATIGA
is “A regional value
content of not less than 40
percent; or
A change to subheading 1513.19
from any other. The rule requires
that the 6-digit (i.e. subheading)
code of the refined oil be different
from those of the materials used
in
its
production
in
the
Philippines.
For purposes of determining the Regional Value Content of
the refined oil:
• The COCONUT is originating material.
• The FOB price of the refined oil is $ 140.
Using the formula,
• R.V.C. of Refined oil = FOB $140 — 0 (Non Originating Material)
FOB $140
(Local materials)
= 1 x 100 = 100 %
• The “refined oil” as manufactured in the Philippines using
originating materials satisfies the regional value content as
mandated under the Rules of Origin thus it is an “originating”
good of the Philippines.
RULES OF ORIGIN
OPERATIONAL PROCEDURES
OPERATIONAL CERTIFICATION PROCEDURES (OCP) FOR ROO
Step 1:
APPLICATION FOR
PRE EXPORT VERIFICATION
Step 2:
PRE-EXPORT
VERIFICATION
Step 3:
CO APPLICATION
MANUFACTURER / EXPORTER
Applies for the pre-export verification of the origin of goods
ISSUING AUTHORITY / BODY
Conducts the pre-export examination
MANUFACTURER / EXPORTER
Applies for a CO. Submits the result of pre-export
verification and appropriate requirements.
ISSUING AUTHORITY / BODY
Step 4:
CO ISSUANCE
Issues the CO. Retains duplicate copy of the CO.
MANUFACTURER / EXPORTER
Sends original CO to the IMPORTER. Retains the triplicate
copy of the CO.
The Requirements for PRE-EXPORT EVALUATION
1. Written request for evaluation to be submitted at least 5 days
prior to exportation
2. Complete list of all materials (local and imported) used in the
production
3. Breakdown of cost element
4. Import and Export declaration
5. Production Flowcharts
6. Company profile
7. Other documents to support originating status of the product
8. Photo of production process
REQUIREMENTS FOR THE
ISSUANCE OF CO
1.
2.
3.
4.
Copy of approved Export Declaration
Copy of Bill Lading / Airway Bill
Commercial Invoice
Copy of Export Permit for regulated
products
PROCEDURES FOR THE
ISSUANCE OF CERTIFICATE OF ORIGIN
1. Exporter presents CO Declaration to the Export
Division
2. Trade Control Examiner conducts evaluation and
verification documents
3. Trade Control Examiner checks if the product is
included in the list covered by the Preferential
Tariff
4. Trade Control Examiner submits findings to the
Chief, Export Division
5. Chief, Export Division signs Certificate of Origin
Import Clearance Procedure for shipment
covered by
Certificate of Origin
FORM D/E/AK/JP/AANZ/AJ
Check by Preferential Rate Unit (PRU),
Formal Entry Division (FED) for:
 Formal Compliance
 Presentation Time Compliance
 Origin Criteria Compliance
Retroactive Verification of Certificate
of Origin FORM D/E/AK/JP/AANZ/AJ
Verification of Form D/E/AK/JP/AANZ/AJ
with issuing office abroad
Reasonable doubt exists:
 authenticity of the documents
 accuracy of the information regarding
the origin of products or certain parts
ON-SITE VERIFICATION
Customs Authorities in the importing country
can conduct verification in the exporting Party:
If not satisfied with the verification conducted by the
issuing authority in the exporting party under
exceptional cases.
a. Systematic Fraud
b. Cost of the verification is less than the
revenue that can be recovered as a result of
the verification
Pending result of verification of
the CO:
The shipment may be granted provisional
release under the following term:
 Importer to post a guarantee in the form of either a
manager /cashier check or a company postdated
check
 Amount equivalent to the difference of the duties
and taxes due based on MFN rates and the
preferential rates
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
JCEP
I. ISSUING AUTHORITIES
Government
authorities:
Customs–PHI,SGP
Ministry of
Commerce- THA,
KH, LA and MM
Ministry of Trade –
IDN, MAL, VN
Ministry of Foreign
Affairs & Trade BRU
Government
authorities
China – Customs
Authority
designated by
the
governmentKorea
Chamber of
Commerce
Korean
Customs
Service
Australia
Chamber of
Commerce
and Industry
New Zealand
Chamber of
Commerce
and Industry
Japan Chamber of
Commerce and
Industry
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
II. PRE EXPORT EXAMINATION
Yes, Exporter to
Same as in
submit
ATIGA
documents as
basis for
supporting
evidence of origin
Same as in
ATIGA
Same as in
ATIGA
Yes, as provided in
the Implementing
Regulations
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
III. EXPORTER APPLICATION
Written
application to
issuing
authorities with
prescribed
minimum data
Same as in
ATIGA
Same as in
ATIGA
Same as in
ATIGA
Written
application to
issuing
authorities with
prescribed
minimum data
and proof of
origin of the
goods
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
IV. CERTIFICATE OF ORIGIN
Unique Certificate
number Origin
plus two copies
Official Seal /
signature of
issuing body
Specified
minimum data
requirements
Issued within 3
days of export
Unique
Certificate
number Origin
plus three copies
Unique
Same as in
Certificate
ATIGA
number Origin
plus two copies
Official Seal /
signature of
issuing body
Official Seal /
signature of
issuing body
Dedicated form / Specified
data
minimum data
requirements
requirements
Issued within 3
days of export
Same as in
AKFTA
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
V. PERIOD OF VALIDITY
12 Months
Normally 4
months
6 months when
transhipped
through a nonParty
6 months
12 Months
12 Months
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
VI. RETROACTIVE ISSUANCE
Yes, up to 12
Months
Same as in
ATIGA
Same as in
ATIGA
Same as in
ATIGA
Same as in
ATIGA
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
VII. ACTION BY IMPORTER
Submit original
copy of
Certificate at
time of import
declaration
Submit original
Same as in
copy of
ATIGA
Certificate plus
triplicate copy at
time of import
declaration
Triplicate copy
sent back to
issuing authority
in exporting
country
Same as in
ATIGA
Same as in ATIGA
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
VIII. NO CERTIFICATE REQUIRED
No
Same as in Same as in
certificate
ATIGA
ATIGA
required for
goods valued
at less than
$200 FOB
Same as
in ATIGA
Same as in
ATIGA
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
IX. BACK TO BACK CERTIFICATE
Yes, required in
transhipment
cases
Movement
Certificate
Effectivity
Jan 2011
Same as in
ATIGA
Same as in
ATIGA
Same as in
ATIGA
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
X. VERIFICATION PROCEDURE
Request shall be Same as in
made in writing ATIGA
and
accompanied
with the CO also
specify the
reason for retro
verification
Same as in
ATIGA
Same as in
ATIGA
Same As in
ATIGA
.
MATRIX OF OPERATIONAL PROCEDURES OF
VARIOUS FTA-ROO
ATIGA
ACFTA
AKFTA
AANZFTA
AJCEP
XI. RECORD KEEPING
Issuing body,
Same as in
exporter and
ATIGA
importer to keep
relevant record
for 3 years
Same as in
ATIGA
Same as in
ATIGA
Same as in
ATIGA
SAMPLE CO FORM
Reminder:
The Certificate of Origin, once duly
certified by an authorized official of the
Philippine Government, becomes a public
document. Anyone who furnishes or causes
to be furnished false information in any
material particular shall be liable and
punishable under the Revised Penal Code of
the Philippines and other related laws.