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EXPLANATORY NOTES Note 1: Articles 1 and 2 The terms 'the Community' and 'Israel' shall also cover the territorial waters of the Member States of the Community and of Israel respectively. Vessels operating on the high seas, including factory ships, on which fish caught are worked or processed, shall be considered as part of the territory of the State to which they belong provided that they satisfy the conditions set out in Explanatory Note 4. Note 2 - Article 1 The conditions set out in Article 1 relative to the acquisition of originating status must be fulfilled without interruption in the Community or Israel. If originating products exported from the Community or Israel to another country are returned, they must be considered as non-originating unless it can be demonstrated to the satisfaction of the customs authorities that: - the goods returned are the same goods as those exported, and -they have not undergone any operations beyond that necessary to preserve them in good condition while in that country. Note 3 - Article 1

In order to determine whether goods originate in the Community or in Israel it shall not be necessary to establish whether the power and fuel, plant and equipment, and machines and tools used to obtain such goods originate in third countries or not. Note 4 - Article 2 (f) The terms 'their vessels' shall apply only to vessels: - which are registered or recorded in a Member State or in Israel, -which sail under the flag of a Member State or of Israel, -at least 50 % of which are owned by nationals of the Member States and of Israel or by a company which has its head office in a Member State or in Israel, of which the manager, managers, chairman of the board, and the majority of the members of such board are nationals of the Member States or of Israel and of which, in addition, in the case of partnerships or limited companies, at least half the capital belongs to the Member States or to Israel or to public bodies or nationals of the Member States or of Israel, -of which the captain and officers are all nationals of the Member States or of Israel, -of which at least 75 % of the crew are nationals of the Member States or of Israel. Note 5 - Articles 2 and 3

1. The unit of qualification for the application of the origin rules shall be the particular product which is considered as the basic unit when determining classification using the nomenclature of the harmonized system. In the case of sets of products which are classified by virtue of General Rule 3, the unit of qualification shall be determined in respect of each item in the set; this also applies to the sets of heading Nos 6308, 8206 and 9605. Accordingly, it follows that: - when a product composed of a group or assembly of articles is classified under the terms of the harmonized system in a single heading, the whole constitutes the unit of qualification, -when a consignment consists of a number of identical products classified under the same heading of the harmonized system, each products must be taken individually when applying the origin rules. 2.Where, under General Rule 5 of the harmonized system, packing is included with the product for classification purposes, it shall be included for purposes of determining origin. Note 6 - Article 3 (1)

The Introductory Notes to Annex III shall also apply where appropriate to all products manufactured using non-originating materials even if they are not subject to a specific condition contained in the list in Annex III but are subject instead to the change of heading rule set out in Article 3 (1). Note 7 - Article 4 'Ex-works price' shall mean the price paid to the manufacturer in whose undertaking the last working or processing is carried out, provided the price includes the value of all the products used in manufacture. 'Customs value' shall be understood as meaning the customs value laid down in the Convention concerning the valuation of goods for customs purposes signed in Brussels on 15 December 1950.