Future of Preferential Rules of Origin Commission Communication

Future of Preferential Rules of Origin Commission Communication The Rules of Origin in Preferential Trade Arrangements Orientations for the future COM(2005)100 final 16 March 2005 Presentation DG TAXUD/C/2 1 13/05/2005

Future of Preferential Rules of Origin WHY? l A Communication? - to involve other relevant institutions in the process - to inform stakeholders and allow them to react l General orientations for PRO? - to give a follow up to the Green Paper consultation - to define a coherent approach of origin in individual arrangements and pave the way for specific changes DG TAXUD/C/2 2 13/05/2005

Future of Preferential Rules of Origin WHAT? A package of three pillars l Simpler and more development-friendly rules for the determination of preferential origin and cumulation l More efficient procedures based on a better balance of responsibilities between trade and customs l Secured environment for legitimate trade through enforced rules DG TAXUD/C/2 3 13/05/2005

Future of Preferential Rules of Origin HOW? l Legislative actions l Operational actions WHEN? l First application to GSP l Orientations to be used in ACP-EPAs negotiations l Progressive application to other arrangements DG TAXUD/C/2 4 13/05/2005

Future of Preferential Rules of Origin Simpler and more Developmentfriendly Rules DG TAXUD/C/2 5 13/05/2005

Future of Preferential Rules of Origin Determination of origin l Simplification of concepts and methods l Adjustment of origin requirements to development and market access needs l Clarification, simplification, appropriate relaxation of conditions and possible extension of cumulation facilities DG TAXUD/C/2 6 13/05/2005

Future of Preferential Rules of Origin Wholly obtained fishery products l Simplified conditions for fishing vessels and factory-ships: - registration/recording and flag maintained - property maintained but appropriately simplified l Deletion of the crew condition l 'Cumulation' of conditions within a group of countries belonging to the same cumulation zone DG TAXUD/C/2 7 13/05/2005

Future of Preferential Rules of Origin Sufficiently worked or processed products A Single Value Added Method l Need to replace the current complex rules by simpler ones l Value Added Method is at the same time: - Simpler and across-the-board - Transparent - Flexible l Impact assessment and simulations to 'test' the method and the SPT for certain products DG TAXUD/C/2 8 13/05/2005

Future of Preferential Rules of Origin Value Added Method is based on: l Net Production Cost = Costs involved in the production of the exported product l Local Value Content = Value added to materials imported in a country l Sufficient Processing Threshold = Minimum % of NPC required to consider a product as sufficiently processed DG TAXUD/C/2 9 13/05/2005

Future of Preferential Rules of Origin Sufficient Processing – Local value Content If (GSP) Sufficient Processing Threshold = 50% NPC Mexico VNOM=45 Costa Rica LVC in Costa Rica = (120 -45)/120 x 100 = Processing EC DG TAXUD/C/2 62, 5% NPC > 50% Product is originating in Costa Rica NPC=120 10 13/05/2005

Future of Preferential Rules of Origin Cumulation l Scope and possible extension of cumulation: support to economic integration of coherent regional groupings, subject to identical Ro. O and appropriate legal framework for administrative co-operation l Regional conventions on origin: a single international instrument for countries belonging to the same cumulation zone but under separate FTAs l Possible extension of full cumulation with an ‘origin of the zone’ (not applicable to GSP) DG TAXUD/C/2 11 13/05/2005

Future of Preferential Rules of Origin Cumulation – Allocation of Origin l Single Value-Added Method based on: - Net Production Cost of the exported product - Value Added in the country - Cumulation Thresholds expressed in % of NPC (in principle lower than the Sufficient Processing Threshold) Cumulation Thresholds can be established for Bilateral, Regional or Diagonal cumulation l Impact assessment and simulations to 'test' the cumulation thresholds for certain products DG TAXUD/C/2 12 13/05/2005

Future of Preferential Rules of Origin Regional Cumulation - Allocation of Origin (VA) If (GSP) Regional Cumulation Threshold = 25% NPC GSP Regional Cumulation Group II Panama VOMC=55 Value Added in Costa Rica = (120 -55)/120 x 100 = Costa Rica 54% NPC > 25% Processing EC DG TAXUD/C/2 Product is originating in Costa Rica NPC=120 13 13/05/2005

Future of Preferential Rules of Origin Efficient Procedures DG TAXUD/C/2 14 13/05/2005

Future of Preferential Rules of Origin Procedures to manage and control preferential origin A new breakdown of responsibilities l Declaration of origin by the Importer claiming the preference l Determination and Statement on origin by Registered Exporters l Control of the economic operators and of the origin of products by the Customs Authorities DG TAXUD/C/2 15 13/05/2005

Future of Preferential Rules of Origin Summary of Procedures EX Authorities • Is registered • Complies with rules • Accepts controls • Provides statements on origin • Register and monitor exporter • Open and update register • Exclude exporter if failure • Assist IM Customs in controls commercial relation Importer • Verifies registration and statements • Claims preference/declares origin • Provides additional evidence on request DG TAXUD/C/2 relations authorities-economic operators Exporter 16 administrative co-operation IM Authorities • Accept claim for preference • Select declarations for control • Request additional evidence • Request subsequent verification to EX Customs 13/05/2005

Future of Preferential Rules of Origin Secured Environment DG TAXUD/C/2 17 13/05/2005

Future of Preferential Rules of Origin Conditions for Compliance l Prior evaluation of administrative capacity: - Organisation/structures - Legal framework - Operational capacity to manage, control and assist the partner country l Information and training l Technical assistance DG TAXUD/C/2 18 13/05/2005

Future of Preferential Rules of Origin Monitoring Compliance in Partnership l Monitoring compliance by the authorities with their obligations - Information and reporting system on the functioning of preferential arrangements - Targeted Monitoring Action Plan l Ensuring compliance by the economic operators: fight and mutual assistance against fraud on origin DG TAXUD/C/2 19 13/05/2005

Future of Preferential Rules of Origin Precautionary Measures and Safeguard Mechanisms l Notice to importers l Suspension/withdrawal of preferences l Financial responsibility DG TAXUD/C/2 20 13/05/2005