Preferential rules of origin

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					  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!

				
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Description: Preferential rules of origin