1 DG TAXUD/C/213/05/2005 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

2 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin A Communication? -to involve other relevant institutions in the process -to inform stakeholders and allow them to react 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 WHY?

3 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin A package of three pillars Simpler and more development-friendly rules for the determination of preferential origin and cumulation More efficient procedures based on a better balance of responsibilities between trade and customs Secured environment for legitimate trade through enforced rules WHAT?

4 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Legislative actions Operational actions HOW? WHEN? First application to GSP Orientations to be used in ACP-EPAs negotiations Progressive application to other arrangements

5 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Simpler and more Development- friendly Rules

6 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Simplification of concepts and methods Adjustment of origin requirements to development and market access needs Clarification, simplification, appropriate relaxation of conditions and possible extension of cumulation facilities Determination of origin

7 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Simplified conditions for fishing vessels and factory-ships: -registration/recording and flag maintained -property maintained but appropriately simplified Deletion of the crew condition 'Cumulation' of conditions within a group of countries belonging to the same cumulation zone Wholly obtained fishery products

8 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Need to replace the current complex rules by simpler ones Value Added Method is at the same time: -Simpler and across-the-board -Transparent -Flexible Impact assessment and simulations to 'test' the method and the SPT for certain products Sufficiently worked or processed products A Single Value Added Method

9 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Net Production Cost = Costs involved in the production of the exported product Local Value Content = Value added to materials imported in a country Sufficient Processing Threshold = Minimum % of NPC required to consider a product as sufficiently processed Value Added Method is based on:

10 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Sufficient Processing – Local value Content Mexico Costa Rica VNOM=45 NPC=120 Processing EC LVC in Costa Rica = (120-45)/120x100 = 62,5% NPC > 50% If (GSP) Sufficient Processing Threshold = 50% NPC Product is originating in Costa Rica

11 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Scope and possible extension of cumulation: support to economic integration of coherent regional groupings, subject to identical RoO and appropriate legal framework for administrative co-operation Regional conventions on origin: a single international instrument for countries belonging to the same cumulation zone but under separate FTAs Possible extension of full cumulation with an origin of the zone (not applicable to GSP) Cumulation

12 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin 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 Impact assessment and simulations to 'test' the cumulation thresholds for certain products Cumulation – Allocation of Origin

13 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Regional Cumulation - Allocation of Origin (VA) EC Value Added in Costa Rica = (120-55)/120x100 = 54% NPC > 25% If (GSP) Regional Cumulation Threshold = 25% NPC Product is originating in Costa Rica Costa Rica Processing NPC=120 GSP Regional Cumulation Group II Panama VOMC=55

14 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Efficient Procedures

15 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin A new breakdown of responsibilities Declaration of origin by the Importer claiming the preference Determination and Statement on origin by Registered Exporters Control of the economic operators and of the origin of products by the Customs Authorities Procedures to manage and control preferential origin

16 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Summary of Procedures Exporter Is registered Complies with rules Accepts controls Provides statements on origin IM Authorities Accept claim for preference Select declarations for control Request additional evidence Request subsequent verification to EX Customs Importer Verifies registration and statements Claims preference/declares origin Provides additional evidence on request EX Authorities Register and monitor exporter Open and update register Exclude exporter if failure Assist IM Customs in controls commercial relation administrative co-operation relations authorities-economic operators

17 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Secured Environment

18 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Prior evaluation of administrative capacity: -Organisation/structures -Legal framework -Operational capacity to manage, control and assist the partner country Information and training Technical assistance Conditions for Compliance

19 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Monitoring compliance by the authorities with their obligations -Information and reporting system on the functioning of preferential arrangements -Targeted Monitoring Action Plan Ensuring compliance by the economic operators: fight and mutual assistance against fraud on origin Monitoring Compliance in Partnership

20 DG TAXUD/C/213/05/2005 Future of Preferential Rules of Origin Notice to importers Suspension/withdrawal of preferences Financial responsibility Precautionary Measures and Safeguard Mechanisms