Revision of the PEM Convention List rules – Chapters 1 to 24 PEM revision workshop Brussels 7-9 October 2015

 11 Chapters closed so far: 1 to 10 and 22  Horizontal changes made following PEM WG of /10/2014 and discussed at the meeting of 10-11/6/2015: Thresholds (sugar; cereals) moved from Chapter to Heading rules (Ch. 4, 13, 19, 20, 21, 22) → Agreed Heading rules which were more flexible than proposed Chapter rules have been re-inserted (Headings 1702, 1903, 2103) → Agreed Thresholds for Chapter 4 (dairy products) proposed by EU removed for Heading 1704 and Ch. 18 and 22. EU suggests keeping them for 1901, 2105 and 2309 → Agreement to be confirmed (IL reserve) 2 Follow-up of PEM WG of June 2015

1.Sugar  Proposal Level generally increased to 40% of weight (  30% of ex-works price) Threshold removed in rules for Heading 0403 and Ch. 8 and 22 (agreed) Open issue: express as a % of weight or value of the product?  Weight: more stable; level-playing field  Value: more flexible for exporters  PEM WG of June 2015: MA, TN, IL, EFTA oppose sugar thresholds in weight MA: questions equivalence (30% of the weight = 40% of the value): cannot simply be applied to all products 3 Horizontal question: thresholds for sugar and other materials

 A sugar threshold in weight is proposed for headings: Ex1302:pectic substances, pectinates and pectates 1702:other sugars (30%) 1704:sugar confectionery (including white chocolate) 18:cocoa and cocoa preparations 1901:food preparations from flour, groats, meal, starch, etc. 1904:corn flakes, etc. 2006:vegetables, fruits, etc. preserved by sugar 2007:jams, marmalades, etc. ex2008:fruits, etc. preserved by added sugar 2009:fruit juices 2105:ice cream 2106:food preparations not elsewhere specified (incl. sugar syrups) 2309:animal feeding 4

2.Chapter 4 (Dairy produce)  Proposal  PEM WG of June 2015 IL, TN: oppose thresholds for 1901 and 2105, which are new TN: combined sugar – milk threshold is too complex 5 HeadingDescriptionThreshold 1901contains food preparations of headings 0401 to 0404) 30% by weight 2105ice cream40% by weight 60% (combined sugar/Ch. 4) 2309animal feeding40% by weight 60% (combined sugar/Ch. 4)

6 3.Other materials (mainly cereals)  PEM WG of June 2015 EFTA: increase above thresholds for 1902, 1904, 1905 and 2309 to 30% TN, DZ: Chapters 19 and 23: combination of different thresholds too complex (  keep current rules) Ch./Hea ding DescriptionThresholdLevel (of the weight) 1702Other sugars1101 to % (including sugar) 1902Pasta1006, 1101 to 1108,20% 1904Corn flakes, etc.1006, 1101 to 1108,20% 1905Bread, pastry, etc.1006, 1101 to 1108,20% 2309Animal feedingCh. 10 and 11, 2302, %

7 4.Link with general tolerance for non-originating materials  Decision on how to express thresholds in list rules may impact on how to express the general tolerance for products of Chapters 2 and 4 to 24  Proposal on the table:  [15]% of the net weight for products of Ch. 2 and 4 to 24, other than processed fishery products of Ch. 16 [15]% of the ex-works price of the product, for other products

Open issues chapter by chapter 8

 PEM WG of June 2015  IL: reserve on use of Chapter/heading numbers instead of description of materials (may make the rule stricter)  TN: proposed CTH for the whole Chapter  No opposition to include Materials of Ch. 8 in the rule  COM reply:  The use of Chapter/heading numbers does not seem to make the rule stricter  Addition Ch. 11; 2302/2303 = application introductory note 3.2  For Ch. 7, only relevant materials are included (not all edible vegetables)  Most of the CPs support a rule based on 'wholly obtained'  Proposal:Keep a rule base on 'wholly obtained' 9 Chapter 11 Products of milling

 PEM WG of June 2015  MA proposes a rule based on 'wholly obtained' for headings 1201 (soya beans), 1206 (sunflower seeds) and 1208 (flours and meals of oil seeds), which is consistent with its proposals for Ch. 15  MA: in general, from a technical point of view, applying a rule 'Change of tariff heading'(CTH) does not make sense for Ch. 12. Hence, MA proposed keeping a rule based on 'wholly obtained for the whole Chapter  COM reply  CTH is the rule applicable in the EU GSP  CTH may be relevant for heading 1208 (flours and meals of oil seeds), produced from other headings of Ch. 12  No trade flows between the EU and other PEM Parties  Proposal :  Adopt the proposed rule: CTH for the whole Chapter 10 Chapter 12 Oil seed and oleaginous fruits

 PEM WG of June 2015: The only open issue concerns the level of the sugar threshold and how to express it (in value or weight)  Proposal :  sugar threshold of 40% of the weight for Chapter 13 Lac; gums and resins, other vegetable saps and extracts

 PEM WG of June 2015  MA: from a technical point of view, applying a rule 'Manufacture from products of any heading' does not make sense as products of Ch. 14 are not made from products of any other heading  COM reply  The rule is relevant, as the products concerned may be raw, split in strips, peeled, bleached, dyed, rendered inflammable, etc. (see WCO explanatory notes to the HS)  Hence, they may be subject to certain manufacturing operations and remain classified in the same heading.  Proposal :  Keep the rule 'Manufacture from products of any heading' 12 Chapter 14 Vegetable plaiting material

 PEM WG of June 2015  Chapter rule:  TN proposed CT sub-H instead of CTH for headings 1507, 1508, 1511, 1515  MA insists on keeping 'wholly obtained' for soya and sunflower oil (1507 and 1512)  DZ favours CT sub-H  1504 (fish oils): EFTA requests 'manufacture from materials of any heading' for the whole heading (not only solid fractions)  Open issues  Chapter rule to be decided  Change of rule for 1504 to be decided  Proposal :  As a compromise, keep CTH for Chapter rule  1504: apply a single rule: 'manufacture from materials of any heading' 13 Chapter 15 Fats and oils

 PEM WG of June 2015: TN: proposes CTH or to exclude materials of Ch. 3 of the 'wholly obtained' criterion. MA: will make a proposal for products containing materials of Ch. 3 IL: requests clarification about the effect of removing of the amended wording (reference to Ch. 1 removed).  COM reply:  EU has a strict position as regards the use of materials of Ch. 3  Cumulation possibilities and use of general tolerance provide flexibility  Reference to Ch. 1: current rule means that non-or. animals can be used and that non-originating meat of Ch. 2 cannot be used (intr. Note 3.2). The proposed rule (ref. to Ch. 2) is equivalent but more logical  Proposal :  Keep the proposal: materials of Ch. 2, 3 and 16 should be wholly obtained 14 Chapter 16 Preparations of meat, fish, etc.

 PEM WG of June 2015: Chapter rule: DZ: CT sub-H COM: Chapter rule already agreed TN: If CT sub-H not possible, keep current rules for whole Chapter Specific rule for heading 1702 (chemically-pure maltose and fructose) re-inserted (agreed)  Open issue: Level of sugar threshold and move to 'weight' to be discussed for headings 1702 and 1704  Proposal :  Sugar threshold of 30% (1702) and 40% (1704) of the weight 15 Chapter 17 Sugars and sugar confectionary

 Open issue: Level of sugar threshold and move to 'weight' to be discussed for Chapter 18  Proposal :  Sugar threshold of 40% of the weight 16 Chapter 18 Cocoa and cocoa preparations

 PEM WG of June 2015: IL: keep current rule for malt extract (1901) TN, DZ: proposed rules are too complex and propose keeping current rules for the whole Chapter EFTA: increase thresholds for materials of Ch. 10/11 in 1902 to 1905  COM reply 1)Revert to current rule for malt extract (1901) 2)Level of thresholds and move to 'weight' to be discussed for headings 1901 and 1904  Proposal : 1)Keep current rule for malt extract (1901) 2)Further discussion needed on thresholds 17 Chapter 19 Preparations of cereals, flours, starch or milk; pastry products

 PEM WG of June 2015  IL: wording of rule for 2002 and 2003 too restrictive  DZ: still has to examine move to CTH for headings other than 2002  MA: requests rule based on 'wholly obtained' for 2001, 2004, 2005  Opposition to sugar threshold in weight (MA, TN, EFTA, IL) for 2006 to 2009  COM reply:  2002 and 2003: reference to materials of Ch. 7 could be replaced by the words 'tomatoes, mushrooms and truffles'  Current rule only requires 'wholly obtained' for some headings It was already agreed to keep such rule only for 2002 and 2003  Proposal : 1)sugar threshold of 40% of the weight (2006 to 2009) 2)Keep agreed convergence: CTH except for 2002 and Chapter 20 Preparations of vegetables, fruits, nuts

 PEM WG of June 2015 IL, EFTA, MA, TN oppose expressing sugar thresholds in weight + combined Ch.4/sugar threshold (2105) too complex IL, EFTA: opposes rule for 2105 (stricter than current rule) Agreement to keep the current rule for 2103  Open issues: 1)Level of sugar threshold and move to 'weight' in 2105 and 2106) 2)Introduce a sugar/Ch. 4 threshold for 2105 (ice cream)?  Main ingredients are milk, cream, sugar  Sugar in ice cream generally well below 40% by weight  No thresholds in current PEM rule  Many CPs opposed to combined sugar/Ch. 4 threshold  Proposal : 1)Sugar threshold of 40% of the weight 2)Introduce a Ch. 4 threshold, possible combined with sugar threshold 19 Chapter 21 Miscellaneous edible preparations

 PEM WG of June 2015  MA: 2304 and 2306: proposes 'wholly obtained', as for Ch.15 (tbc)  MA: 2309 (animal feeding): sugar threshold not relevant as mainly molasses are used  COM reply: 1)Chapter rule:  Heading 2301 to 2308 are residues and waste of food industry. Hence, simple rule needed (CTH – change in tariff heading) 2)Heading 2309 (animal feeding):need for sugar/Ch. 4 threshold?  Current PEM rule: based on 'wholly obtained'  Product of 2309 may contain high quantities of sugar or dairy products – use of sugar or molasses: still to be confirmed by industry  Proposal : 1)CTH as Chapter rule 2)Introduce a threshold for dairy and (possibly) for sugar for Chapter 23 Residues from food industries and animal fodder

 Open issue: proposed rule for cigarettes (ex 2402) : At least 10% of Ch. 24 materials used must be wholly obtained unmanufactured tobacco or tobacco refuse of heading 2401  Effect of change:  Substantial operations are carried out in the PEM zone, including the production of smoking tobacco from unmanufactured tobacco  The 10% rule creates an incentive to use unmanufactured tobacco originating in the PEM zone  A higher limit is not feasible:  The type of tobacco grown in the zone can only be used up to a limit of 10% in the production of cigarettes  It would thus remove the incentive to use unmanufactured tobacco from the PEM zone  PEM WG of June 2015:  MA: keep current rule; EFTA supports proposal; DZ is consulting  Proposal : Move to the 10% rule 21 Chapter 24 Tobacco products

THANK YOU ! 22