Reform of EC GSP rules
   of origin:
   a Product- specific
   analysis
             Emanuela Balestrieri


             S...
Overview: EU Preferential
Trading Arrangements
 January 1 2009 – December 31,
 2011: Generalised System of
 Preferences (G...
EU-Brazil Trade
The EU is Brazil's biggest trading partner,
accounting for 22.5% of its total trade (2008).
Brazil is the ...
EU-Brazil Trade

  Brazil is the 2nd largest user of GSP – €4.4 billion
  in 2007

  4th largest Beneficiary in terms of M...
However:
99% preferential tariff utilization rate for
products such as selected automobiles,
compressors and engines

70% ...
GRADUATION - Performance on the EU market
exceeds set threshold over 3 years: preferential tariff
suspended
  Council Regu...
EU-MERCOSUR Trade
The EU is Mercosur's largest trading partner,
representing 20.7% of total Mercosur trade
(2008)
Mercosur...
Why does it matter                      and
what is at stake?
 Scope and conditions for regional cumulation
 as envisaged ...
Official link


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




  ...
GSP: first concrete application of the
reform of rules of origin (RoO)
Simplification and development-friendliness:
leadin...
Key issues of proposed RoO Regulation
  General tolerance rule: relaxed. Amount of non-
  originating materials permitted ...
The main changes at
                 horizontal level
The RoO are product specific instead of the single
method based on v...
Changes in the
                     calculation of the
                     percentage requirement
Before: Maximum amount ...
Current EU-GSP Rules of Origin:
Non-Originating Materials
GENERAL RULE: To qualify for GSP entry any non-originating
mater...
Please note
Comparative analysis of “old” and “new”
systems carried out at chapter level

Further analysis required at the...
Changed rules of origin for
                    Fisheries - Chapter 3
 Relaxation of the crew and officers requirement for...
Confront current EU-GSP Rules
 of Origin for Fishery Products
Product caught within territorial waters, i.e. within
12-mil...
The changes in raw hides and
leather (HS41 and 42)
 Chapter rule 41 introduced flexibility as CTH or 30 % of
local content...
Changes in selected textiles and
  clothing - Chapter 61 and 62 (1)
Old rules: stringent
Chapter 61 knitted/crocheted garm...
Changes in selected
           textiles and clothing                (2)
Old rules
Chapter 62 - Not knitted/crocheted garme...
No Changes in Footwear
Chapter 64
Manufacture from materials of any
heading, except from assemblies of
uppers affixed to i...
Changes in selected
                machineries HS 84
Old chapter rule HS 84
 CTH and not more than 40 % of non- originati...
Changes in selected
               Electric machineries
               HS85
Old chapter rule HS 85
CTH and not more than 4...
Changes in selected
             machineries (motor
             vehicles HS87)
Old chapter rules HS 87
Not more than 40 %...
Preliminary conclusions
 In terms of the product specific
 rules of origin of the main exports
 of Brazil to the EC it app...
Official Link
http://ec.europa.eu/taxation_customs/customs/cu
stoms_duties/rules_origin/preferential/article_777
_en.htmI
...
Grazie
Muito obrigada



                 27
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Novas regras do SGP Europeu: Emanuela Balestrieri

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Novas regras do SGP Europeu: Emanuela Balestrieri

  1. 1. Reform of EC GSP rules of origin: a Product- specific analysis Emanuela Balestrieri Sao Paulo, 7 Junho 2010 09/06/2010 1
  2. 2. Overview: EU Preferential Trading Arrangements January 1 2009 – December 31, 2011: Generalised System of Preferences (GSP) -- Brazil GSP+ -- Paraguay Everything But Arms (EBA) -- Duty-Free, Quota-Free access for products of the 49 Least Developed Countries (LDCs).
  3. 3. EU-Brazil Trade The EU is Brazil's biggest trading partner, accounting for 22.5% of its total trade (2008). Brazil is the single biggest exporter of agricultural products to the EU, accounting for 13% of total EU imports. Manufactured products such as machinery and transport equipment represent almost one third of Brazilian exports to the EU. EU runs a deficit in trade in goods with Brazil: EU goods exports to Brazil 2007: €21.2 billion EU goods imports from Brazil 2007: €32.3 billion
  4. 4. EU-Brazil Trade Brazil is the 2nd largest user of GSP – €4.4 billion in 2007 4th largest Beneficiary in terms of MFN duties otherwise due Estimated savings to Brazilian exporters of €142 million in 2007 [http://trade.ec.europa.eu/doclib/docs/2009/march/tradoc_142658 .pdf]
  5. 5. However: 99% preferential tariff utilization rate for products such as selected automobiles, compressors and engines 70% motor vehicle parts and 65% footwear with rubber a matter of origin compliance? 5
  6. 6. GRADUATION - Performance on the EU market exceeds set threshold over 3 years: preferential tariff suspended Council Regulation (EC) No 732/2008 of 22 July 2008 applying a scheme of generalized tariff preferences for 1 Jan 2009-31 Dec 2011 period, graduation is applied to Brazil for - HS chapters 16 to 24: prepared foodstuff, beverages, spirits and vinegar, tobacco and manufactured tobacco substitutes - HS chapters 44 to 46: wood and wood articles, wood charcoal, cork and cork articles, manufactures of straw, of esparto or of other plating materials, baskets ware and wickerwork 6
  7. 7. EU-MERCOSUR Trade The EU is Mercosur's largest trading partner, representing 20.7% of total Mercosur trade (2008) Mercosur ranks 8th among EU trading partners, accounting for 2.7% of total EU trade(2009) The EU is Mercosur's largest market for its agricultural exports, accounting for 19.8% of total EU agricultural imports (2009) EU runs a deficit in trade in goods with Mercosur: EU goods exports to Mercosur €27.2 billion (2009) EU goods imports from Mercosur €35.1 billion (2009)
  8. 8. Why does it matter and what is at stake? Scope and conditions for regional cumulation as envisaged by the reform of the GSP rules of Origin: extended cumulation with creation of a new regional cumulation group = group IV comprising the 4 Mercosur MSs and cumulation with Turkey Current Mercosur rules of origin regime indicates a move from across-the-board RoO approach to product-specific approach 8
  9. 9. Official link http://ec.europa.eu/trade/wider- agenda/development/generalised-system-of- preferences/index_en.htm 9
  10. 10. GSP: first concrete application of the reform of rules of origin (RoO) Simplification and development-friendliness: leading principles of the reform Single method for determining origin based on value added in the beneficiary country abandoned in favor of a sector-based approach = list rules (value added, CTHs and specific processing requirements) Less dramatically streamlined RoO system than the “net cost” across-the-board criterion, yet simplified and including targeted relaxation for the LDCs 10
  11. 11. Key issues of proposed RoO Regulation General tolerance rule: relaxed. Amount of non- originating materials permitted increased from 10% to 15% of ex-works price of final product. Exception: agricultural and processed agricultural products: 15% tolerance in weight Cumulation: relaxed. Value added criterion eliminated, only requirement “more than a minimal operation must be performed in the country where cumulation takes place on materials originating in the other MCs of a cumulation group” 11
  12. 12. The main changes at horizontal level The RoO are product specific instead of the single method based on value added previously envisaged (opposed by many stakeholders). The proposed RoO are based on the 3 methods: percentage criteria, change of tariff heading or a specific processing requirement. There are many simplifications, plus targeted relaxation, in particular for the least developed countries. Cumulation of origin: Regional cumulation of origin is expanded to Mercosur and some conditions are relaxed. Efficient procedures in establishing and controlling origin: The current certification of origin by the authorities of the beneficiary country is replaced by statements on origin to 12 be given directly by registered exporters. (*2013)
  13. 13. Changes in the calculation of the percentage requirement Before: Maximum amount of non-originating material value of non -originating material X 100 < 40% Ex -works price Proposed (July 2009) : the “build down method” Value added /local value content = Ex- works price - value of non-originating material X 100 > 50% Ex -works price Current proposal (June 2010) not official: Back to the old system ! percentage of 40% at times increased tp 50%, even 70% (see chapter 84, Nuclear reactors, boilers, machinery and mechanical appliances ) 13
  14. 14. Current EU-GSP Rules of Origin: Non-Originating Materials GENERAL RULE: To qualify for GSP entry any non-originating materials in the product must have been sufficiently processed in the beneficiary exporting country so that the final product meets at least ONE of the following tests: Product has undergone operations beyond mere preservation, washing, assembly, and other processes considered insufficient to give the product Brazilian origin Original product undergoes a change in tariff heading or sub- heading prior to exportation Specified percentage in value has been added to the product so that the value of any non-originating material used does not exceed a given percentage of the ex-works price of a product
  15. 15. Please note Comparative analysis of “old” and “new” systems carried out at chapter level Further analysis required at the level of headings as alternative approach to the chapter rule may be pointed out – e.g.: Chapter 84 and 8401 15
  16. 16. Changed rules of origin for Fisheries - Chapter 3 Relaxation of the crew and officers requirement for the vessels definitions in the wholly obtained category Requirements are now limited to: Registration of the Vessel in Brazil, Sail under the Brazilian flag, 0wned by Brazilian nationals or Companies, Cumulation applicable Introduction of the 15% value tolerance rule for specific headings of Chapter 3 The 15% value tolerance is also applicable to HS Chapter 16, Preserved and prepared fish 16
  17. 17. Confront current EU-GSP Rules of Origin for Fishery Products Product caught within territorial waters, i.e. within 12-mile zone of shores, are wholly obtained; Product caught on the “high seas” or produced in factory ships are wholly obtained if: Vessel registered and flagged to Brazil/EC member Captain and officers are all nationals of country/EC At least 75% of crew are Brazilian nationals; AND Can establish ownership of vessel according to specified criteria.
  18. 18. The changes in raw hides and leather (HS41 and 42) Chapter rule 41 introduced flexibility as CTH or 30 % of local content (leather) Introduced flexibilities for headings 4101 to 4103, Raw hides and skins of bovine(including buffalo) or equine animals : Manufacture from any heading Liberal: it means that all manufacturing operations carried out within the heading are origin conferring excluding insufficient working or processing operations – for ex. salting. Tanned or crust hides and skins: CTH or re-tanning = unchanged rule Chapter 42 Leather products - Introduction of alternative rule to CTH : the local value content is at least 30% of the 18 ex-works price of the product= 70% of non-originating.
  19. 19. Changes in selected textiles and clothing - Chapter 61 and 62 (1) Old rules: stringent Chapter 61 knitted/crocheted garments product grouping: Assembled: manufacture from yarn Other: manufacture from natural fibres New rules Assembled: knitting and making-up(including cutting) Other : spinning of fibers and knitting or dyeing of yarn of natural fibers and knitting = flexibility 19
  20. 20. Changes in selected textiles and clothing (2) Old rules Chapter 62 - Not knitted/crocheted garments: Manufacture from yarn New rules Weaving accompanied by making-up and cutting Or making- up preceeded by printing and accompained by at least 2 preparatory or finishing operations provided that the unprinted fabric does not exceed 47,5 % of the ex-works price of the product 20
  21. 21. No Changes in Footwear Chapter 64 Manufacture from materials of any heading, except from assemblies of uppers affixed to inner soles or to other sole components of heading 6406 Parts of footwear of heading 6406: CTH Still very liberal/flexible 21
  22. 22. Changes in selected machineries HS 84 Old chapter rule HS 84 CTH and not more than 40 % of non- originating materials of the ex-works price or not more than 30 % of non- originating materials New chapter rule HS 84 (July 2009) CTH or manufacture in which the local value is at least 30 % of the ex-works price More flexibility as CTH alone is origin conferring and up to 70% of non-originating materials can be used with respect to the old rules Engines HS 8407, 8408: local value content of 50% 22
  23. 23. Changes in selected Electric machineries HS85 Old chapter rule HS 85 CTH and not more than 40 % of non –originating materials of the ex-works price or not more than 30% of non-originating materials. New rule (July 2009 ) CTH or Manufacture in which the local value content is at least 30 % of the ex-works price(70% of non originating materials) Conclusion: more flexibility since requirements are not cumulative. Increased threshold for use of non- originating materials. 23
  24. 24. Changes in selected machineries (motor vehicles HS87) Old chapter rules HS 87 Not more than 40 % of non-originating materials of the ex-works price New chapter rule HS 87(July 2009 ) Manufacture in which the local value content is at least 50 % of the ex-works price Conclusion: more flexibility since 10 % more allowance of non-originating materials 24
  25. 25. Preliminary conclusions In terms of the product specific rules of origin of the main exports of Brazil to the EC it appears that, at first glance: 1)The proposed RoO are more liberal 2)More in depth analysis may be needed to identify changes for selected tariff headings of export interest to Brazil 25
  26. 26. Official Link http://ec.europa.eu/taxation_customs/customs/cu stoms_duties/rules_origin/preferential/article_777 _en.htmI In the meantime, the existing rules of origin remain applicable As regards procedure, 1st January 2013 is the target 26
  27. 27. Grazie Muito obrigada 27
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