REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART I:
any other type of economic integration, is not based on their origin status but on the fact
that they have to comply with provisions for their free circulation within the integration.
Products in trade with the countries outside economic integration (third countries) not fall
within the scope of the customs union free movement but remain subject to a preferential
or non preferential treatment based on origin and declaration of the importing countries
members of the economic integration.
Non-preferential rules are applied together with all kinds of trade policy measures like, for
instance, in cases of using anti-dumping duties and countervailing duties, trade embargoes,
safeguard, retaliation measures and quantitative restrictions. The non-preferential status of
goods is additionally often used in cases of tariff quotas, for trade statistics purposes, for
public tenders, for origin marking, and similar. In addition, the EU’s export refunds in the
framework of the Common Agricultural Policy are often based on non-preferential origin.
There are two basic concepts to determine the origin of goods namely ‘wholly obtained’
products and products having undergone a “last substantial transformation”. On bases of
these two concepts the origin of product (economic nationality of product) defines whether
according to tariff schedule of a country or of economic integration is going to have
preferential or non-preferential treatment when crossing the border of a state or of economic
integration. The last case refers to situation where countries implemented customs union or
higher level of economic integration among them.
If only one country is involved the “wholly obtained” concept will be applied. In practice
this will be restricted to mostly products obtained in their natural state and products derived
from wholly obtained products. If two or more countries are involved in the production of
goods, the concept of “last, substantial transformation” determines the origin of the goods.
In general the criterion of last substantial transformation is expressed in three ways:
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by a rule requiring a change of tariff (sub) heading in the tariff schedule
nomenclature (according to WTO this is Harmonized nomenclature system- HS
or in the case of EU it is Combined Nomenclature system – CN);
by a list of manufacturing or processing operations that do or do not confer on the
goods the origin of the country in which these operations were carried out;
by a value added rule, where the increase of value due to assembly operations and
incorporation of originating materials represents a specified level of the ex-works
price of the product.
When two or more countries are involved in the production of a good – that was wished
to be part of CEFTA integration environment till 2009 - , the origin of the good must
be determined (case of the EU) in accordance with Article 24 of Council Regulation
No 2013/92 (CC). Articles 24 CC states: “Goods whose production involved more than
one country shall be deemed to originate in the country where they underwent their last,
substantial, economically justified processing or working in an undertaking equipped for
that purpose and resulting in the manufacture of a new product or representing an important
stage of manufacture”. This provision might cause a problem with free access to the EU
market. Goods coming from the country with which EU wants to establish specific (free)
trade relations could be denied preferential origin and free entry on EU market when they
are result of different transformation stages in other countries before their final exporter to
the EU. If rules of origin are not properly adjusted than the above EU rule could restrict
trade with CEFTA countries. When products were subsequently transformed in a number
of countries in the region and not substantially enough in the last one – in country exporting
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