Preferential rules of origin: Proposal from the Commission (DG TAXUD) and views of the import trade sector Pascale Rouhier Secretary General FRUCOM Outline The current system of preferential rules of origin The proposal of the Commission: - The issue of responsibilities of deliverance of certificate of origin - The issue of value added criteria to grant preferential origin The EU Decision-making procedure: where do we stand? FRUCOM actions so far Agenda for further action Conclusion The current rules governing preferential trade Preferential trade agreements (GSP, EBA, future EPAs) Trade preferences . Preferential rules of origin (reduction of ad valorem duties) . Cumulation of origin Decision taken through comitology procedure Current rules of origin for GSP Current rules to grant preferential origin for a product, if - Wholly obtained in a country Art. 68 of GSP: exhaustive list of what is “wholly obtained” For fishery products, detailed requirements (registration of the vessel, nationality of crew and captain, ownership of the vessel). - Sufficiently worked or processed there Defined by GSP Reg. / List of ‘insufficient working” to confer origin ‘Sufficient’ processing if - change of CN Code for the processed final product - value of ad valorem criterion, where the value of the non-originating material used may not exceed a given % of the ex-works price of a product - specific process criterion (when specific manufacturing process has to be carried out) Current rules regarding responsibilities: - Proof of origin: - Form A, as a proof of origin at import but also in more specific cases: - Invoice Declaration for low value GSP exports - Movement Certificate EUR1 for bilateral cumulation (exports from EU to GSP country, process, re-export to EU) Role of competent authorities in exporting countries: - Verification of Form A and that goods concerned are originating ones - Exporter submit Form A to competent certifying authorities – Form to be accompanied by a written application in a manner prescribed by CA - Certifying authorities examine the application, supporting documents and Form A to ensure the veracity of information - If in order, stamp and sign the Form A certificates → Role of competent authorities in exporting countries : control and verification - Goods cannot obtain the benefit of tariff preferences until the beneficiary country has complied with the administrative cooperation requirements (i.e. information to EU with respect to official stamps and signatures, etc) Role of EU importers: - “should check as far as you can that any proof of origin presented to customs is valid and that goods covered by it are entitled to the reduce rate” (quote: “GSP, a guide for users”- nov. 2003). → Role of importers: due diligence when imports Proposal from Commission to amend preferential rules of origin Communication of the Commission of March 2005: “Orientations for the future” → Objective: to simplify and appropriately relax the concept of origin → Adaptation of rules to be achieved through: - A revision of the basic rules imposed on products, in order to be considered as originating because they are ‘wholly obtained’ in a country or ‘sufficiently processed’ there from external output - A revision of the conditions for the cumulation of origin between countries belonging to economically-integrated regional entities → The Commission favours using a method of evaluation of sufficient Processing based on a ‘value added test’ as the starting point Responsibilities in establishing certificates of origin - Declaration of origin to be made by registered exporters - A wrong statement would be part of the commercial risk borne by the importers - Prior registration by the authorities of the exporting countries - Customs authorities in exporting countries to maintain up- to- date the list of registered exporters Current situation: In future? Private operators in Competent authorities exporting countries will deliver responsible for delivering certificates of origin → certificates → risk for European Importers - Competent authorities in exporting countries could apply sanctions if no respect of the rules (temporary withdrawal from the list, definitive exclusion, etc) - Control by importing countries/ exporting countries through risk analysis - Prior-evaluation of the exporting countries’ competent authorities to administer the system - Commission Action Plan for the monitoring of preferential arrangements - Precautionary measures and safeguard mechanisms when insufficient control or fraud Value - added criterion -- - Preferential origin if value - added amounts to a certain threshold, expressed as a % of the net production cost of final product - Different % could be fixed in different sectors - Some sectors (agri, fish, textile) should be evaluated; other approach could be adopted → team of consultant to assess the approach / report by end 2005 Import Trade views On shift of responsibilities for the deliverance of certificate On value - added criterion Shift of responsibilities Importers’ view: - To receive maximum guarantees that rules are respected- if recovery of duties, outweigh the potential benefice of preferential trade - To receive relevant documents before shipment → Impossible for importers to take legal actions against exporters in case wrong/ false certificates of origin to recover duties- introduction of specific clauses in commercial contracts as suggested by COM cannot provide any real guarantees. → lack of legal security due to disengagement of competent authorities in exporting countries → Unjustified and inadequate additional burden for EU importers – to check the certificates, end-responsible Position of FRUCOM Reinforcement of the role of competent authorities instead of decrease of responsibility: - Prior verification of statement through control of Form A should be maintained - Control by competent authorities of the conditions for granting form A should be reinforced - Competent authorities have legal means of control and pressure that importers cannot possibly have - In case a custom debt is later claimed, the competent authorities in importing countries should directly contact the competent authorities in exporting countries, which have legal means on the concerned exporters that importers do not have Registration of exporters in exporting country: - Clarification needed as regards criteria to be used for the registration and the practical enforcement - FRUCOM would support the approach adopted by DG SANCO in terms of sanitary controls (i.e. to monitor the competent authorities of exporting countries- system of withdrawal of preferences if no enforcement) Access to the list of exporters: - Need to have access to the list - Need of accurate and up-to-date information (i.e. early warning if an exporter is de-listed) The value-added criterion Single value-added criterion: not feasible for SMEs: - Practical limitation of control in the case of SMEs not linked to suppliers in third countries: - No direct control over the cost structure of the product bought → need to rely fully on the information provided by the supplier – obviously difficult to obtain any accurate information about production costs and margin (i.e. commercial confidential information) - Only the authorities in exporting countries able to obtain this kind of information → need to reinforce role of competent authorities Single value-added criterion: not feasible for certain products: - Agricultural and fishery products: canned tuna, etc The EU Decision-making procedure: where do we stand? Communication of March 2005 → provides orientations and general approach Before summer break, draft text of DG TAXUD → failed at inter-services consultation Nov 2005: team of consultants → report to be finalised end 2005/ consultations with the sector end 05/ beginning 06 DG TAXUD in consultation with other DGs to adopt a draft Reg. at inter-services consultation Once draft Reg., discussions and submission for approval to MS Next steps: beginning of 2006 FRUCOM’s actions so far Position paper after Communication- spring 2005 Position paper before inter-services consultations- before summer 2005 Meetings with other DGs (AGRI, ENTER, SANCO, informal discussions with OLAF, etc)- spring and autumn 2005 Meetings with Delegations MS- spring 2005 FRUCOM as ‘rapporteur’ for Eurocommerce → to familiarise other lobbies with the dossier and to foster action- September 05 Organisation of presentation/ exchange of views with delegations of MS attending comitology meeting- december 05 To contact consultants- beginning 06 Agenda for further action If other criteria accepted for certain products, chances of success of DG Taxud proposal at inter-services consultation → need to lobby MS to ensure our views are taken on board Already FR, BE, PL and other in line with our views Agenda for action: - Presentation of the sector’s views to MS on 13 December - Need for further action at national level → role of national associations - Contact consultants to expose our views on VA criterion - Need for further actions towards DGs once the report of the consultant available, on responsibilities for the deliverance of certificates of origin → objective: secure a blocking minority from MS Conclusion Need for a simplification of preferential rules of origin in order to better use trade preferences in both exporting and importing countries … But not at any costs for European Importers!