CEFTA

Cumulation

Under cumulation rules, contracting parties to a preferential trade agreement may source non-originating raw materials or components from specified trading partners and consider them as originating. 

 

There are three different types of cumulation: 

  • Bilateral cumulation - Bilateral cumulation refers to a situation where raw materials or components in the preference-granting trading partner are considered as originating. For example, Article 3.1 of Annex 4 to the CEFTA 2006on “Cumulation of origin” notes that “working and processing carried out in one of the CEFTA Parties shall be considered as having been carried out in any other CEFTA Party when the products obtained undergo subsequent working or processing in the CEFTA Party concerned”. 
  • Diagonal cumulation - Diagonal cumulation refers to a situation where more than two parties apply identical rules of origin and agree that materials originating in defined third origins, as referenced in the relevant provisions on cumulation, may be used as originating materials. For example, Article 3.2 of Annex 4 to the CEFTA 2006 on “Cumulation of origin” notes that “working or processing carried out in the European Union, the Faroe Islands, Iceland, Norway, Switzerland (including Liechtenstein) and Turkey shall be considered as having been carried out in a CEFTA Parties, when the products obtained undergo subsequent working or processing in one of the CEFTA Parties concerned”. In this context, if a trader in Albania imports raw materials from Iceland and processes them into a final product, this product can be exported to the other CEFTA Parties and still be considered as originating from Albania 
  • Full cumulation - Full cumulation refers to a situation where raw materials from all origins, as referenced in the relevant provision on cumulation, are considered as originating. Full cumulation allows the working or processing carried out in a preferential trading partner to be considered as operations carried out in another preferential trading partner, regardless of whether the processing is sufficient to confer the origin. Example of full cumulation between a CEFTA Party, Morocco, and the EU under the Regional Convention on Pan-Euro-Mediterranean preferential rules of origin (see HYPERLINK). For example, a CEFTA Party imports yarns from China and the yarns are manufactured into fabric in this CEFTA Party. The fabric does not qualify for preferential origin if exported to the EU, as the product-specific rule for fabric requires manufacture from fibre (double transformation, which means, in this case, from fibre to yarn and yarn to fabric). The non-originating fabric is exported from this CEFTA Party to Morocco based on a supplier’s declaration. The declaration states that the goods have undergone working in the CEFTA Party without having obtained preferential originating status. In Morocco, the fabric is used to manufacture garments. The finished garments obtain preferential origin status because the work done in Morocco is combined with the work done in the CEFTA Party to produce originating garments. The double transformation requirement is then fulfilled in the territory of the PEM Contracting Parties benefiting from full cumulation. The final product obtains Moroccan origin and may be exported to the EU under preferential conditions. More information on full cumulation is available here.