Further to Our Dispute with OLAF regarding seamless stainless steel tubes – a case in which Armella law firm defended a number of our Italian members’ interests at national level – the European Court of Justice has clarified its stance in a preliminary ruling.

Italian press reported in an in-depth article, edited by the Armella law firm, that the ruling of 21 September 2023, C-210/22 established that the Court of Justice can annul the rule of origin if it is not consistent with the principle of equal treatment of similar situations. In recent years – explains the law firm –, many European companies have been affected by an investigation by OLAF (the European Anti-Fraud Office) who considered the processing carried out in India on cold-rolled tubes to be insufficient.

Relying on the conclusions of OLAF, the Italian Customs Agency disputed the origin declared at the time of importation, believing that the imported tubes were not of Indian origin, but Chinese, as the envisaged rule of origin was not correctly integrated from annex 22-01 RD (EU Reg. 2446/2015). As is known, the customs origin of products identifies the country in which the goods came to existence or has been achieved. The origin therefore represents an intrinsic characteristic of the product, a sort of “nationality” or DNA, because it is closely linked to the place and the way in which it was created.

According to customs legislation, a product made with components having different origins are considered to be of “non-preferential origin” in the country in which they were last processed or substantial and economically justified processing, carried out at a company equipped for this purpose, which ended with the manufacturing of a new product or has represented an important phase of the manufacturing process (art. 60, par. 2, CDU). The rules of origin are established by the European Commission: the delegated regulation of the Customs Code associates each customs heading with one specific rule of origin, which provides the conditions under which processing carried out in a foreign country is considered suitable for determining the origin of the product.

The new ruling changes the scenario. With the sentence in question – continue Armella’s lawyers –, the Court of Justice has clarified that in providing these rules the European Commission is required to respect the fundamental principle provided for by the Code customs, approved by Parliament and the Council, which establishes the concept of substantial processing (art. 60, par. 2, EU Reg. 952/2013). The origin must, in fact, be determined exclusively according to the discriminating criterion constituted by the latter substantial transformation.

In the case examined, the Court of Justice censured the rule of origin envisaged by the European Commission, sanctioning the provision of different conditions in the presence of similar situations and reiterating the need for consistent treatment in similar situations. There the matter examined by the European judge originated from the request for binding information on the origin of cold rolled seamless stainless steel tubes, which received the final processing in South Korea, based on blanks originating in the People Republic of China. The referring judge asks whether the processing can be considered suitable for the goods to acquire the “passport” of South Korea.

For these products, classified under customs heading 7304 41, the rule of origin established by the European Commission (indicated in Annex 22-01 of delegated regulation 2446/2015) establishes that the goods can be said to originate from a specific country only if all the materials used have undergone a change in tariff heading (at the level of the first 4 digits of the classification) or, alternatively, if the products were made from hollow profiles of heading 7304 49.

According to the Court of Justice, this rule of origin must be considered illegitimate. On the one hand, it is necessary to consider, in fact, that it is possible that there is substantial processing, suitable for determining the origin of the goods, even in the absence of a change of tariff heading. Furthermore, according to the European judge, the criterion relating to hollow profiles determines an unjustified difference in treatment compared to processes carried out starting from a tube blank. According to the current formulation of the rule of origin, in fact, the cold rolling made from hollow profiles allows the product to be of Korean origin. Applying the same type of processing carried out on the tubes, however, the goods do not acquire South Korean origin”.

A ruling destined to set a precedent and create an important precedent also for the ongoing disputes that would actually arise without a fundamental basis. The Armella law firm concludes by saying that: “The Court of Justice has finally clarified that cold working involves irreversible changes on the physical, mechanical and metallurgical properties of the goods and is therefore suitable to determine the origin.”

Translated from Italian, click here for the original article.

5 October 2023