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Annex 2
2. Goods which are entitled to zero tariff under the "CEPA" and directly imported by one side from the other side will have the origin determined in accordance with the principles set out below: (1) goods wholly obtained in one side are regarded as originating in that side; or (2) goods not wholly obtained in one side are considered as originating in that side only if they have undergone substantial transformation in that side. 3. The term "goods wholly obtained in one side" as set out in Article 2(1) of this Annex refers to: (1) mineral products mined or extracted in that side; (2) plants or vegetable products harvested or collected in that side; (3) live animals born and raised in that side; (4) products obtained in that side from live animals specified in paragraph (3) of this Article; (5) products obtained from hunting or fishing in that side; (6) fish and other marine products obtained by fishing conducted in the high seas by vessels holding a licence issued by that side and flying the national flag (for Mainland vessels) or the Macao Special Administrative Region flag (for Macao vessels); (7) products obtained from the processing of products set out in paragraph (6) of this Article aboard vessels holding a licence issued by that side and flying the national flag (for Mainland vessels) or the Macao Special Administrative Region flag (for Macao vessels); (8) waste and scrap articles collected in that side which are produced from consumption in that side and fit only for the recovery of raw materials; (9) waste and scrap which are produced from processing or manufacturing operations in that side and fit only for the recovery of raw materials; (10) goods obtained through processing in that side of products set out in paragraphs (1) to (9) of this Article. 4. Processes or treatment for the following specified purposes, whether undertaken individually or collectively, is regarded as minor processing treatment. Such treatment will not be taken into account in determining whether the goods are wholly obtained or not: (1) processing or treatment for transportation or storage of goods; (2) processing or treatment to facilitate packaging and delivery of goods; (3) processing or treatment such as packaging or display for distribution and sale of goods. 5. On the criteria for “substantial transformation” set out in Article 2 (2) of this Annex, the two sides agree on the following: (1) the criteria for determining "substantial transformation" may include "manufacturing or processing operations", "change in tariff heading", "value-added content", "other criteria" or "mixed criteria"; (2) "manufacturing or processing operations" refers to the principal manufacturing or processing operations carried out in the area of one side which confer essential characteristics to the goods derived after the operations; (3) "change in tariff heading" refers to the processing and manufacturing operations of non-originating materials carried out in the area of one side and resulting in a product of a different four-digit tariff heading under the "Product Description and Harmonised System Codes". Moreover, no production, processing or manufacturing operations will be carried out in countries or territories other than that side which will result in a change in the four-digit tariff heading; (4) "value-added content" refers to the total value of raw materials, component parts, labour costs and product development costs exclusively incurred in one side being greater than or equal to 30% of the FOB value of the exporting goods, and that the final manufacturing or processing operations should be completed in the area of that side. The formula for calculation is as follows: value of raw materials + value of component parts + (i) "product development" refers to product development carried out in the area of one side for the purposes of producing or processing the exporting goods. Development expenses incurred should be related to the exporting goods. These expenses include fees payable for the development of designs, patents, patented technologies, trademarks or copyrights (collectively "these rights") carried out by the manufacturer himself, fees payable to a natural or legal person in the area of one side for undertaking development of these rights, and fees payable for purchasing these rights owned by a natural or legal person in the area of one side. The fees payable should be clearly identifiable under generally accepted accounting principles and the requirements of "Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994"; (ii) calculation of the above "value-added content" will be consistent with generally accepted accounting principles and the "Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994"; (5) "other criteria" refers to methods agreed by both sides in determining origin, other than "manufacturing or processing operations", "change in tariff heading" and "value-added content" as set out above; (6) "mixed criteria" refers to the use of two or more of the above criteria in determining origin. 6. Simple diluting, mixing, packaging, bottling, drying, assembling, sorting or decorating will not be regarded as substantial transformation. Enterprises adopting production or pricing practices with the purpose of circumventing provisions in this Annex will also not be regarded as substantial transformation. 7. In determining the origin of the goods, the origin of energy, factory premises, facilities, machinery and equipment, and tools for production of the goods will not be taken into account; origin of the materials used in the production process but not constituting the composition or the component parts of the goods will also not be taken into account. 8. The following factors will not be taken into account in determining origin: (1) package, packaging materials and repository accompanying the goods for import customs declaration and classified as the same item with the goods in the "Customs Import and Export Tariff of the People's Republic of China"; (2) parts, spare parts, tools and explanatory materials accompanying the goods for import customs declaration classified as the same item with the goods in the "Customs Import and Export Tariff of the People's Republic of China". 9. The two sides have drawn up the "Schedule on Rules of Origin for Macao Goods Benefiting from Tariff Preference for Trade in Goods" (Table 1 of this Annex) in accordance with the eight-digit tariff headings of the "Customs Import and Export Tariff of the People's Republic of China" and the criteria prescribed in this Annex. Table 1 forms an integral part of this Annex. Under the "CEPA", goods which meet the origin requirements of Table 1 of this Annex are regarded as having undertaken substantial transformation in Macao. For goods of Macao origin and goods proposed to be produced in Macao, which are entitled to zero tariff under Article 5 of Annex 1, their rules of origin will be supplemented in Table 1 of this Annex. 10. The goods seeking zero tariff under the “CEPA” should conform to the direct transportation rules. The following situations are considered conform to the direct transportation rules: (1) goods are directly transported from the port of one side to the port of the other side; (i) transshipped only for the purposes of geographical or transportation needs; (ii) not yet entered Hong Kong for trade or consumption; (iii) not put through any processing operations in Hong Kong, except loading and unloading or work necessary to maintain the good conditions of the goods. (3) goods transporting via Hong Kong should submit to the Customs of the arriving port the following documents: (i) combined transport bill of lading issued by the exporting side; (ii) certificate of origin issued by the competent authority of the exporting side; (iii) invoice of the goods issued by the original factory; (iv) documents that prove conformity to the three conditions set out in Paragraph 2(2) of this Article. 12. This Annex will come into effect on the day of signature by the representatives of the two sides. Signed in duplicate in Macao, this 17th day of October 2003 in the Chinese language. Vice Minister of Commerce Secretary for (Signature) (Signature) |
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