circular economy,  compliance e AEO,  made in

CBAM and made in: some explanations

Ottobre 12, 2023 /

CBAM (carbon border adjustment mechanism) obligations require the good knowledge of the non-preferential origin.

The first questions that can arise is: what is “non-preferential origin” or “made in”? The non-preferential origin is the economic nationality of a good; for istance: “made in EU, made USA”.

In other words, the mentioned status is obtained where goods are “wholly obtained” in one country or, when two or more countries are involved in the manufacture of a product, origin is obtained where goods underwent their last, substantial, economically-justified processing or working, in an undertaking equipped for that purpose, resulting in the manufacture of a new product or representing an important stage of manufacture.

According to both the Guidance on non-preferential rules of origin (March 2022) TAXUD and   the regulations currently  in force (EU regulation 952/2013, EU Commission delegated regulation 2015/2446, EU Commission implementing regulation).

The non-preferential origin plays a double role:

  1. Element for calculation the duty taxation;
  2. Enforcement of non-fiscal policy like the CBAM.

It is possible to distinguish two different scenarios.

  • The first one: the product wholly obtained whose origin is determined based on the following categories of rules: “…(a) mineral products extracted within that country or territory; (b) vegetable products grown and harvested only there; (c) live animals born and raised there; (d) products derived from live animals raised there; (e) products of hunting or fishing carried on there; (f) products of sea fishing and other products taken by vessels registered in the country or territory concerned and flying the flag of that country or territory from the sea outside any country’s territorial waters; (g) goods obtained or produced on board factory ships from the products referred to in point(f) originating in that country or territory, provided that such factory ships are registered in that country or territory and fly its flag; (h) products taken from the seabed or subsoil beneath the seabed outside the territorial waters provided that that country or territory has exclusive rights to exploit that seabed or subsoil; (i) waste and scrap products derived from manufacturing operations and used articles, if they were collected there and are fit only for recovery of raw materials; (j) goods produced there exclusively from products specified in points (a) to (i)…”. In a circular economy perspective, the rule “…waste and scrap products derived from manufacturing operations and used articles, if they were collected there and are fit only for recovery of raw materials…” is very crucial.
  • The second one: two or more countries are involved in the manufacture of the product. For this hypothesis we have to consider the compliance with the following elements:
  • last substantial processing or working which, essentially, means compliance with the non-originating rules set up either by the EU or by WTO;
  • the economic justification;
  • production plant;
  • result of transformation;

In general, the rules of non-preferential origin are:

  1. the change of tariff heading, subheading or split subheading;
  2. the criterion of the specific processing;
  3. the value added criterion.

Finally, it is important to repeat that a good management of the internal company processes (like the non-preferential origin one) required by the AEO can foster and support the obligations arising from the CBAM regulations.