REGULATIONS OF ECFA'S PROVISIONAL RULES OF ORIGIN

05/01/2011

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The early harvest plan of the Cross-Straits Economic Cooperation Framework Agreement (the "ECFA") took effect on January 1 this year. In order to determine the origin of a product and whether the early harvest plan is applicable, Annex II of the ECFA sets forth the Provisional Rules of Origin Applicable to Products under the Early Harvest Plan for Trade in Goods (the "Provisional Rules of Origin"). According to Article 2 of the Provisional Rules of Origin, the basic rules of determining the origin of a product are:
l	the good is wholly obtained in one Party in accordance with Article 3 of the Provisional Rules of Origin;
l	the good is produced entirely in one or both Parties, exclusively from originating materials; or
l	the good is produced in one or both Parties, using non-originating materials, and conforms to the product specific rules provided in Article 4 of the Provisional Rules of Origin.
Pursuant to the Provisional Rules of Origin, the governments of both sides of the Taiwan Strait may issue origin certificates to products complying with the Provisional Rules of Origin and promulgate administrative rules. Consequently, the Ministry of Finance issued Ruling Tai-Cai-Guan-09905911570 on 27 December 2010, which contains the "Administrative Procedure for the Provisional Rules of Origin Applicable to Products under the Early Harvest Plan for Trade in Goods" and "Product-Specific Rules of Origin Applicable to Products under the Early Harvest Plan for Trade in Goods." Both rules became effective on 1 January 2011.
Paragraph 1, Article 2 of the Administrative Procedure for the Provisional Rules of Origin Applicable to Products under the Early Harvest Plan for Trade in Goods (the "Administrative Procedure") reads: "In order for the products originating from one party to enjoy preferential tariff treatment, the exporting party shall issue origin certificates." The Administrative Procedure also contain detailed rules on the format of the ECFA origin certificates, the application procedure, the conditions of their issuance and the verification methods.
Generally speaking, an exporter or manufacturer shall obtain an origin certificate before reporting to customs. However, in the exceptional situations set forth in Paragraph 4, Article 2 of the Administrative Procedure, it may apply for an origin certificate ninety days after reporting to customs. The exceptional situations are:
l	force majeure events or justifiable reasons acceptable to the exporting party in accordance with rules;
l	the certifying party has issued an origin certificate but due to technical errors in the making of the certificate, the exporter has to apply for certificate cancelation and reissue of certificate;
l	the origin certificate is lost or destroyed.
It is noteworthy that although a product not included in the early harvest plan or does not comply with the Provisional Rules of Origin may not enjoy the early harvest benefits of the ECFA, a general origin certificate may still be issued for it.
The Product-Specific Rules of Origin Applicable to Products under the Early Harvest Plan for Trade in Goods specifies the origin rules applicable to each product in the early harvest plan on the Taiwan side, including changes in tariff classification or regional value content. The requirements vary from product to product. For example, the tariff classification of bicycles processed in Taiwan has to be changed from another heading to 87120010 and the regional value content shall not be less than 40%; the tariff classification of cutting machines for paper processed in Taiwan has to be changed from another heading to 84411000 and the regional value content shall be no less than 50%.