(Re)Defining "Substantial processing or working" in the rules of Origin

28 January 2010

Case C-260/08 Heko

The ECJ clarifies the situation once more

The ECJ was recently faced with another case regarding the origin of goods, this time regarding steel cables manufactured in North Korea using stranded steel wire originating in China. Once again the ECJ was asked just how much processing of a raw material was necessary in order to convey origin on a product.

The Facts

In May 2005, HEKO requested binding origin information (BOI) from the German customs authority regarding various types of steel cables imported under CN code 7312 manufactured in North Korea using stranded wire originating in China also classifiable under CN 7312. The German authorities responded that the cables in question “originated” in China because insufficient working or processing had been carried out in North Korea to convey origin on the goods as required under Article 24 of the Customs Code. The German authorities argued that they relied on rules known as “list rules” drawn up by the European Commission which states that goods under CN code 7312 cannot be regarded to have been “sufficiently processed” unless there has been a change in Tariff heading.

HEKO appealed against the ruling which was subsequently overturned by the Dusseldorf Finance Court. The German customs authorities then counter-appealed and the matter was referred to the ECJ.

The Judgement

The ECJ looked at two aspects during the judgement- firstly they looked at the “list rules” and just what force they have in the first place and then they looked at the goods in question and whether a tariff heading change was necessary for origin to be conferred on the processed products.

The list rules

The ECJ argued that EC Member States may refer to the list rules when interpreting Article 24CC provided that the rules were an aid of interpretation and didn’t actually change the meaning of Article 24. It suggested that it is not sufficient to seek criteria defining the origin of goods in the tariff classification of processed products as the tariff was there for a different purpose.

The act of processing in question

In the present circumstances, the ECJ stated that a change of tariff heading is not based on a real and objective distinction between the basic product (the stranded steel wire) and the processed product (the steel cable). It further argued that a change in tariff heading did not look at the specific material qualities of each of those products and does not take account of the specific processing or working that resulted in the manufacture of the processed product. The Court recognised that a change in tariff heading of a product, caused by a processing operation constitutes an indication of the substantial nature of that processing but recognised that processing or working may be substantial in nature even if there is no change of tariff heading.

What does this mean?

The ECJ has once again reinforced that Article 24 of the Customs Code must not be construed narrowly. The Customs Tariff was not designed to confer origin on goods and the court has thankfully maintained its common-sense approach that acts of processing should be examined on their merit to determine whether products “achieve” origin or not.

How can ITS help?

ITS has a wealth of experience in complex origin issues. We have access to advanced materials such as a database of previously decided cases and explanatory notes to legislation as well as significant experience of successful origin projects.

If you have any queries please email us at: mail@internationaltradesolutions.co.uk or call us today on 01905 619229 to arrange a free of charge discussion and high-level assessment of your customs risks and opportunities.


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