Novas regras do SGP Europeu: Robert light

7 June 2010 FIESP seminar about EC-GSP 1

European CommissionTaxation and Customs Union

GSP rules of origin and their reform

FIESP seminar about the EC-GSP in the framework of the Strategic Partnership on Cooperation between the EU and Brazil

São Paulo, Brazil, 7 June 2010


European Commission /Taxation and Customs Union

Presentation

• Robert Light, working for the European Commission in DG Taxation and Customs Union for over 20 years and specifically responsible for GSP rules of origin from 2001 until 2008.

• Presentation focuses on GSP rules of origin and theirreform.



GSP regulation

• GSP regulation lays down the tariff preferences applicable – the rules of origin are a separate legal text

• GSP regulation must be renewed periodically (usually every 3 years).• Current regulation: Regulation (EC) No 732/2008 (EU OJ L 211, 6.8.2008, p. 1).• Public consultation - ended on 31 May - sought comments from interested

parties to help the Commission to prepare a proposal for the successor Regulation.

• Commission should present its proposal to the Council and the European Parliament in early 2011.

• Because of duration of legislative procedures, current regulation, due to expire on 31/12/2011, will be prolonged temporarily (until 31/12/2013 at the latest, or a date to be specified in the successor regulation).



GSP rules of origin: what and where are they?

• The key to the preferences on offer

• Aim to ensure a genuine economic link between the exportingcountry and the goods

• Contained in Regulation (EEC) No 2454/93 (implementingprovisions of the Community Customs Code), as amended, Articles 66 to 97 and Annexes 15 to 18, 21 and 22

• Unlike GSP regulation, rules of origin are not subject to periodic renewal – only when considered necessary



GSP rules of origin: why reform? (1)

• Preferences are not fully used– rules sometimes too complex (problems of

interpretation), sometimes too stringent.

– high compliance costs with the rules.

– exporters in many countries, especially the poorest, lack complete production chains and investment opportunities.

• The rules are old– Developed in the 1970s.

– Rise of globalisation.



GSP rules of origin: why reform? (2)

• Difficulties in applying cumulation

– stringent rules for GSP regional cumulation, resulting in limited use and reduced incentive to economic cooperation.

• Non-appropriate control system

– burdensome for both operators and administrations.

– weak in terms of breakdown of responsibilities.

– Impossible for the authorities in the exporting country to check every single consignment.

– false sense of security for importers.



GSP rules of origin: why reform (3)?

•• Difficulties in managing administrative cooperationDifficulties in managing administrative cooperation

– Outdated, inefficient paper-based procedures.

– Poor co-operation from certain countries:

� information not updated in time;

� Resulting difficulties on import

� Need for reminders for notifications and verifications

•• Problems in securing compliance with obligationsProblems in securing compliance with obligations

– Lack of systematic means for monitoring.

– Lack of appropriate remedial actions.



Steps to reform

• Green Paper COM(2003) 787 final18 December 2003: launched a debate.

• Communication COM(2005)100 final16 March 2005: indicated the orientations favoured by the Commission for reform.

• Communication was a horizontal document but indicated that GSP should be the first concrete application.

• Commission’s impact assessment and draft regulation.



The communication: aims of the reform

• Three pillars of Communication COM(2005) 100:

– Simpler and more development-friendly rules for the determination of preferential origin.

– More efficient procedures based on a better balance of responsibilities between trade and customs.

– Secured environment for legitimate trade through enforced rules.



The draft regulation

• Published at the end of 2008, after Commission’s initial proposal for a single method for determining origin, based on value added, failed to find favour with MS or other stakeholders

• Now in the final stages of the decision-making process



The structure of the draft regulation

�� A new, more logical and clearer structureA new, more logical and clearer structure

� Begins with general conditions to benefit from the

arrangements (not new, but less evident at present).

� Specific sub-sections on procedures at export; procedures

at release for free circulation; control of origin.

� Roles and responsibilities of all concerned, plus

consequences of actions, made more apparent.



The general conditions

� Beneficiary countries must be listed as a beneficiary country in the GSP

Regulation.

� They must undertake to comply with the administrative cooperation

provisions of rules of origin:

- set up and manage a data-base of registered exporters (“REX”);

- communicate required information to the Commission;

- assist the Commission and the Member States with verification requests

and monitoring actions

� No new undertakings until 2016 (prior to REX applicability).



Rules for determining origin

• Goods must be either:– Wholly obtained in the beneficiary country (mined,

grown, etc); or

– Sufficiently worked or processed there.

• Cumulation of origin possible in certain cases



Minimal operations (1)

• List of operations which, either on their own or in combination with others of the same type, can never confer origin (“minimal operations”).

• Dual purpose of list:– In context of “sufficient working or processing”

– In context of cumulation



Minimal operations (2)

• (a) preserving operations to ensure that the products remain in good condition during transport and storage;

• (b) breaking-up and assembly of packages;• (c) washing, cleaning; removal of dust, oxide, oil, paint or other coverings;• (d) ironing or pressing of textiles and textile articles;• (e) simple painting and polishing operations;• (f) husking and partial or total milling of rice; polishing and glazing of cereals and rice;• (g) operations to colour or flavour sugar or form sugar lumps; partial or total milling of crystal sugar;• (h) peeling, stoning and shelling, of fruits, nuts and vegetables;• (i) sharpening, simple grinding or simple cutting;• (j) sifting, screening, sorting, classifying, grading, matching (including the making-up of sets of articles);• (k) simple placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards and all other

simple packaging operations;• (l) affixing or printing marks, labels, logos and other like distinguishing signs on products or their

packaging;• (m) simple mixing of products, whether or not of different kinds; mixing of sugar with any material;• (n) simple addition of water or dilution or dehydratation or denaturation of products;• (o) simple assembly of parts of articles to constitute a complete article or disassembly of products into

parts;• (p) a combination of two or more of the operations specified in points (a) to (o);• (q) slaughter of animals.



Sufficient working or processing (“list rules”) (1)

� Various simple criteria, according to what is most appropriate for the sector concerned:

• Maximum content of non-originating materials (value or weight);

• Change of tariff heading or sub-heading;

• Specific processing requirement;

• Use of wholly obtained materials.

� Where a value rule applies, normally 70% of non-originating materials for goods originating

in LDCs; may be more demanding (50%) for goods originating in other beneficiary

countries

� In some cases, alternative value-based rules (operator free to choose).




� List of insufficient working or processing operations which can never

confer origin (minimal operations) maintained

� Tolerance rule: percentage of non-originating materials which do not

satisfy the rule may be used:

(a) 15% of the weight of the product for products falling within Chapters 2 and 4 to 24, other than processed fishery products of chapter 16;

(b) 15% of the ex-works price of the product for other products, except for products falling within Chapters 50 to 63 of the Harmonized System, for which the tolerances mentioned in Notes 5 and 6 of Part I of Annex 13a shall apply.




Reasons for choice of rules:

- To support development by encouraging local sourcing.

- To avoid circumvention.

- For industrial products originating in non-LDCs,

differentiated rules are a reflection of their higher industrial

capacity.

- .



Sufficient working or processing (3)

• How to calculate compliance with a rule based on maximum content of

non-originating materials:

Value of non-originating materials x 100

Ex-works price 1

• New provision: Reference periods may be used to smooth out

fluctuations in prices and exchange rates at choice of exporter – usually

over the previous fiscal year, but not less than three months.

.

- .



Wholly obtained fisheries products: conditions for fisheries vessels outside the territorial

waters

• Definition of territorial waters (12 miles).

• Rules simplified and clarified.

• Crew condition remains.

• New possibility to cumulate the conditions between members of the same regional cumulation group.



Cumulation of origin: list of types

• Bilateral cumulation (with EU).

• Cumulation with Norway, Switzerland and Turkey

• Regional cumulation

• Extended cumulation with countries with which the Community has concluded an FTA



Bilateral cumulation

• Materials originating in the EU in accordance with GSP rules and which undergo a more than minimal operation in a beneficiary country, are considered to originate in that beneficiary country



Cumulation with Norway, Switzerland and Turkey

• The present arrangements with Norway and Switzerland will continue but a new exchange of letters is being negotiated.

• Turkey should join this cumulation, once an agreement is reached (exchange of letters).

• Materials originating in the Norway, Switzerland or Turkey in accordance with GSP rules and which undergo a more than minimal operation in a beneficiary country, are considered to originate in that beneficiary country

• Certificates may be replaced on import, so that the goods can be forwarded to one of the other parties and preference claimed there.



Regional cumulation (1)

• Four groups:

– Three current ones: Groups I, II and III – ASEAN, CACM and Andean Community, SAARC; also possibilty of cumulation between countries in groups I and III;

– New Mercosur group (Argentina, Brazil, Paraguay andUruguay – Group IV).

• Before group IV cumulation can begin, undertakings on administrative cooperation must be submitted




• Present double condition removed – origin of last country is acquired provided only that a more than minimal operation takes place

• If a less than minimal operation, origin of the country accounting for the highest customs value of the originating materials used.




• Example 1:

– Uruguay material exported to Brazil: Uruguay provides proof of Uruguay origin;

– More than minimal operation in Brazil: Brazil origin acquired, Brazil issues proof of origin indicating Brazil origin

• Example 2:

– Uruguay material exported to Brazil: Uruguay provides proof of Uruguay origin;

– Less than minimal operation in Brazil: origin belongs to the country accounting for the highest customs value of the originating materials. Brazil issues proof of origin indicating Uruguay origin




� Limitations:

- Cumulation possible where different rules apply in the countries

concerned: but when sending materials to another member of the group,

a country must apply the rule it applies for exports to the EU

- Specific agricultural or processed agricultural products where the market

access conditions applicable (e.g. a general arrangement country and an

EBA country) are different may be excluded – list in annex

- Additional list of excluded specific operations in the case of textiles

(Annex 16).



Extended cumulation

• New possibility

• Any beneficiary country may ask Commission to be allowed to cumulate with a country with which the EU has concluded an FTA (e.g. Mexico, Chile)

• Commission will decide on applications and on the goods which may be covered.

• Chapters 1 to 24 always excluded.

• Materials originating in a country with which the EU has concluded an FTA will be considered to originate in the beneficiary country if a more than minimal operation is performed there.

• The countries concerned must agree to comply with provisions on administrative cooperation



“Non-manipulation” clause

• Current direct transport rule abolished.

• Instead, a general requirement that goods shall not have been altered or transformed in any way en route (“non-manipulation” clause).

• Authorities in the EU will ask the importer for supporting evidence only in cases of doubt

• Storage or splitting of consignments in country of transit permitted, provided goods under customs supervision.



Evidence of origin: new system from 2017 (1)

• Further development needed (legal, technical).• Authorities set up and maintain a data-base of traders registered to

export under GSP.• Registration not the same as prior approval or authorisation. It

consists of gathering basic information about the trader to facilitate subsequent controls.

• Once registered, exporters make out statements on origin themselves and send them to their customer in the Community. Statements maybe in electronic format.

• Authorities in beneficiary countries concentrate on keeping the record of registered exporters up to date and carrying out controls. Traders who commit fraud should be withdrawn from the register – no readmission until they put their hose in order.

• Controls to be carried out on these authorities’ own initiative, or at the request of authorities in the Community. Risk analysis should be used.



Evidence of origin : new system from 2017 (2)

• Importers submit the statement on origin to the customs authorities in the Community.

• It is a fundamental principle of customs law that importers should be responsible for the declarations they make – this should also be the case as regards evidence of origin.

• Importers should take reasonable steps to protect themselves in case something goes wrong (e.g. a clause in the commercial contract).



Evidence of origin : new system from 2017 (3)

• An amending regulation will lay down further specifications

• Commission will decide by mid-2016 who is ready

• Will apply from 2017 only (and 2020 for countries not ready by then)

• Until 2017 (or 2020), present system (Form A) continues to apply.



Monitoring

• Monitoring actions (checks by the Commission that the authorities of beneficiary countries are able to comply with their obligations in terms of management and control, as a basis for improved cooperation between customs authorities) have already begun but should become more systematic.

• Monitoring actions are not just in the interest of the Community – they are in the interest of beneficiary countries also: if we are aware of a problem early, we can offer help to correct it.



Derogations

• The possibility of granting derogations is no longer limited to LDCs and the circumstances in which they may be granted are re-defined.



Implications for other arrangements

• The regulation has no direct effect on other arrangements.

• However, the Communication of 2005 was a horizontal document, concerning all preferential trade arrangements.

• The Community will approach negotiations for new agreements in a constructive and open manner.



The timetable for the new GSP rules of origin

• Member States must give a favourable opinion: vote now expected to take place in September 2010

• After this, Commission will formally adopt the text and publish it in the EU Official Journal

• Rules on determination of origin, cumulation, non-manipulation: should apply from 1 January 2011

• New procedures on proof of origin: from 1 January 2017 (or 1 January 2020 for beneficiary countries not ready by then)

• Nothing is definitive until the regulation is published. Watch the web-site!



Further information

• GSP rules of origin: http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/article_781_en.htm

• Guide for users on GSP rules of origin: http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/article_839_en.htm

• Latest news on the reform of GSP rules of origin: http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/article_777_en.htm

• GSP regulation: http://ec.europa.eu/trade/wider-agenda/development/generalised-system-of-preferences/index_en.htm



Whom to contact

• European Commission, DG Taxation and Customs Union, Unit B3 (Rules of Origin), 1049 Brussels, Belgium

• Mr Pierre-Jacques Larrieu (head of unit)

• Mrs Oksana Zikuna, [email protected] or functional mailbox [email protected].

Novas regras do SGP Europeu: Robert light

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